SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 2020

Commission file number   0-7818

INDEPENDENT BANK CORPORATION
(Exact name of registrant as specified in its charter)

Michigan
  
38-2032782
(State or jurisdiction of Incorporation or Organization)
  
(I.R.S. Employer Identification Number)

4200 East Beltline, Grand Rapids, Michigan  49525
(Address of principal executive offices)

(616) 527-5820
(Registrant’s telephone number, including area code)

NONE
Former name, address and fiscal year, if changed since last report.

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

Title of each Class
  
Trading Symbol
  
Name of each exchange which registered
Common stock, no par value
  
IBCP
  
The Nasdaq Stock Market LLC

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

Indicate by check mark whether the registrant has submitted electronically 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  ☒  NO ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, non-accelerated filer, smaller reporting company or an emerging growth company.
Large accelerated filer  ☐  Accelerated filer  ☒  Non-accelerated filer  ☐  Smaller reporting company  ☐  Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act.  Yes  ☐  No  ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES ☐  NO  ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: common stock, no par value, 21,884,495 as of November 4, 2020.



INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

INDEX

  
Number(s)
PART I -
Financial Information
  
Item 1.
3
 
4
 
5
 
6
 
7
 
8-65
Item 2.
66-92
Item 3.
93
Item 4.
93
     
PART II -
Other Information
  
Item 1A
94
Item 2.
97
Item 6.
98

1
Index
FORWARD-LOOKING STATEMENTS

Statements in this report that are not statements of historical fact, including statements that include terms such as ‘‘will,’’ ‘‘may,’’ ‘‘should,’’ ‘‘believe,’’ ‘‘expect,’’ ‘‘forecast,’’ ‘‘anticipate,’’ ‘‘estimate,’’ ‘‘project,’’ ‘‘intend,’’ ‘‘likely,’’ ‘‘optimistic’’ and ‘‘plan’’ and statements about future or projected financial and operating results, plans, projections, objectives, expectations, and intentions, are forward-looking statements. Forward-looking statements include, but are not limited to, descriptions of plans and objectives for future operations, products or services; projections of our future revenue, earnings or other measures of economic performance; forecasts of credit losses and other asset quality trends; statements about our business and growth strategies; and expectations about economic and market conditions and trends. These forward-looking statements express our current expectations, forecasts of future events, or long-term goals. They are based on assumptions, estimates, and forecasts that, although believed to be reasonable, may turn out to be incorrect. Actual results could differ materially from those discussed in the forward-looking statements for a variety of reasons, including:

•
economic, market, operational, liquidity, credit, and interest rate risks associated with our business including the impact of the ongoing COVID-19 pandemic on each of these items;
•
economic conditions generally and in the financial services industry, particularly economic conditions within Michigan and the regional and local real estate markets in which our bank operates including the economic impact of the ongoing COVID-19 pandemic in each of these areas;
•
the failure of assumptions underlying the establishment of, and provisions made to, our allowance for loan losses;
•
increased competition in the financial services industry, either nationally or regionally;
•
our ability to achieve loan and deposit growth;
•
volatility and direction of market interest rates;
•
the continued services of our management team; and
•
implementation of new legislation, which may have significant effects on us and the financial services industry.

This list provides examples of factors that could affect the results described by forward-looking statements contained in this report, but the list is not intended to be all-inclusive.  The risk factors disclosed in Part I – Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019, as updated by any new or modified risk factors disclosed in Part II – Item 1A of any subsequently filed Quarterly Report on Form 10-Q, include the known risks our management believes could materially affect the results described by forward-looking statements in this report. However, those risks may not be the only risks we face. Our results of operations, cash flows, financial position, and prospects could also be materially and adversely affected by additional factors that are not presently known to us that we currently consider to be immaterial, or that develop after the date of this report. We cannot assure you that our future results will meet expectations. While we believe the forward-looking statements in this report are reasonable, you should not place undue reliance on any forward-looking statement. In addition, these statements speak only as of the date made. We do not undertake, and expressly disclaim, any obligation to update or alter any statements, whether as a result of new information, future events, or otherwise, except as required by applicable law.
 

2
Index


Part I - Item 1.
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Financial Condition

  
September 30,
2020
    
December 31,
2019
  
   
(unaudited)
  
   
(In thousands, except share amounts)
  
Assets
  
Cash and due from banks
  
$
42,435
    
$
53,295
  
Interest bearing deposits
    
4,121
      
12,009
  
Cash and Cash Equivalents
    
46,556
      
65,304
  
Interest bearing deposits - time
    
-
      
350
  
Securities available for sale
    
985,050
      
518,400
  
Federal Home Loan Bank and Federal Reserve Bank stock, at cost
    
18,427
      
18,359
  
Loans held for sale, carried at fair value
    
99,747
      
69,800
  
Loans
                
Commercial
    
1,351,790
      
1,166,695
  
Mortgage
    
1,024,036
      
1,098,911
  
Installment
    
479,653
      
459,417
  
Total Loans
    
2,855,479
      
2,725,023
  
Allowance for loan losses
    
(35,771
)
    
(26,148
)
Net Loans
    
2,819,708
      
2,698,875
  
Other real estate and repossessed assets, net
    
1,487
      
1,865
  
Property and equipment, net
    
36,538
      
38,411
  
Bank-owned life insurance
    
55,019
      
55,710
  
Deferred tax assets, net
    
1,572
      
2,072
  
Capitalized mortgage loan servicing rights, carried at fair value
    
15,403
      
19,171
  
Other intangibles
    
4,561
      
5,326
  
Goodwill
    
28,300
      
28,300
  
Accrued income and other assets
    
56,576
      
42,751
  
Total Assets
  
$
4,168,944
    
$
3,564,694
  
                 
Liabilities and Shareholders' Equity
  
Deposits
                
Non-interest bearing
  
$
1,152,072
    
$
852,076
  
Savings and interest-bearing checking
    
1,431,841
      
1,186,745
  
Reciprocal
    
557,551
      
431,027
  
Time
    
303,392
      
376,877
  
Brokered time
    
152,889
      
190,002
  
Total Deposits
    
3,597,745
      
3,036,727
  
Other borrowings
    
30,005
      
88,646
  
Subordinated debt
    
39,261
      
-
  
Subordinated debentures
    
39,507
      
39,456
  
Accrued expenses and other liabilities
    
89,334
      
49,696
  
Total Liabilities
    
3,795,852
      
3,214,525
  
Commitments and contingent liabilities
                
 Shareholders’ Equity
                
Preferred stock, no par value, 200,000 shares authorized;  none issued or outstanding
    
-
      
-
  
Common stock, no par value, 500,000,000 shares authorized; issued and outstanding: 21,885,368 shares at September 30, 2020 and 22,481,643 shares at December 31, 2019
    
339,408
      
352,344
  
Retained earnings
    
27,538
      
1,611
  
Accumulated other comprehensive income (loss)
    
6,146
      
(3,786
)
Total Shareholders’ Equity
    
373,092
      
350,169
  
Total Liabilities and Shareholders’ Equity
  
$
4,168,944
    
$
3,564,694
  

See notes to interim condensed consolidated financial statements (unaudited)

3
Index

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations

 
  
Three months ended
September 30,
    
Nine months ended
September 30,
  
 
  
2020
    
2019
    
2020
    
2019
  
 
  
(unaudited)
    
(unaudited)
  
 
  
(In thousands, except per share amounts)
  
Interest Income
                        
Interest and fees on loans
  
$
30,393
    
$
34,226
    
$
92,020
    
$
100,743
  
Interest on securities available for sale
                                
Taxable
    
3,450
      
2,771
      
9,356
      
8,811
  
Tax-exempt
    
954
      
319
      
2,137
      
1,017
  
Other investments
    
237
      
495
      
854
      
1,449
  
Total Interest Income
    
35,034
      
37,811
      
104,367
      
112,020
  
Interest Expense
                                
Deposits
    
2,062
      
6,236
      
9,150
      
17,938
  
Other borrowings and subordinated debt and debentures
    
1,006
      
703
      
2,598
      
2,211
  
Total Interest Expense
    
3,068
      
6,939
      
11,748
      
20,149
  
Net Interest Income
    
31,966
      
30,872
      
92,619
      
91,871
  
Provision for loan losses
    
975
      
(271
)
    
12,884
      
1,045
  
Net Interest Income After Provision for Loan Losses
    
30,991
      
31,143
      
79,735
      
90,826
  
Non-interest Income
                                
Interchange income
    
3,428
      
2,785
      
8,411
      
7,744
  
Service charges on deposit accounts
    
2,085
      
2,883
      
6,299
      
8,323
  
Net gains on assets
                                
Mortgage loans
    
20,205
      
5,677
      
46,687
      
13,590
  
Securities available for sale
    
-
      
-
      
253
      
304
  
Mortgage loan servicing, net
    
(644
)
    
(1,562
)
    
(8,966
)
    
(4,684
)
Other
    
1,937
      
2,492
      
5,698
      
6,862
  
Total Non-interest Income
    
27,011
      
12,275
      
58,382
      
32,139
  
Non-interest Expense
                                
Compensation and employee benefits
    
21,954
      
16,673
      
54,742
      
48,955
  
Occupancy, net
    
2,199
      
2,161
      
6,818
      
6,797
  
Data processing
    
2,215
      
2,282
      
6,160
      
6,597
  
Furniture, fixtures and equipment
    
999
      
1,023
      
3,125
      
3,058
  
Interchange expense
    
831
      
891
      
2,416
      
2,332
  
Communications
    
806
      
733
      
2,409
      
2,219
  
Loan and collection
    
768
      
714
      
2,329
      
1,976
  
Advertising
    
589
      
636
      
1,636
      
1,935
  
Legal and professional
    
566
      
541
      
1,427
      
1,281
  
FDIC deposit insurance
    
411
      
13
      
1,211
      
723
  
Other
    
2,303
      
2,181
      
7,433
      
6,557
  
Total Non-interest Expense
    
33,641
      
27,848
      
89,706
      
82,430
  
Income Before Income Tax
    
24,361
      
15,570
      
48,411
      
40,535
  
Income tax expense
    
4,777
      
3,125
      
9,245
      
7,979
  
Net Income
  
$
19,584
    
$
12,445
    
$
39,166
    
$
32,556
  
Net Income Per Common Share
                                
Basic
  
$
0.90
    
$
0.55
    
$
1.78
    
$
1.41
  
Diluted
  
$
0.89
    
$
0.55
    
$
1.76
    
$
1.40
  

See notes to interim condensed consolidated financial statements (unaudited)

4
Index

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income

 
  
Three months ended
September 30,
    
Nine months ended
September 30,
  
 
  
2020
    
2019
    
2020
    
2019
  
 
  
(unaudited - In thousands)
  
                         
Net income
  
$
19,584
    
$
12,445
    
$
39,166
    
$
32,556
  
Other comprehensive income
                                
Securities available for sale
                                
Unrealized gains arising during period
    
2,675
      
1,567
      
12,599
      
10,851
  
Change in unrealized gains and losses for which a portion of other than temporary impairment has been recognized in earnings
    
15
      
(53
)
    
(66
)
    
(55
)
Reclassification adjustments for gains included in earnings
    
-
      
-
      
(253
)
    
(137
)
Unrealized gains recognized in other comprehensive income on securities available for sale
    
2,690
      
1,514
      
12,280
      
10,659
  
Income tax expense
    
565
      
318
      
2,579
      
2,238
  
Unrealized gains recognized in other comprehensive income on securities available for sale, net of tax
    
2,125
      
1,196
      
9,701
      
8,421
  
Derivative instruments
                                
Unrealized loss arising during period
    
(26
)
    
(72
)
    
(354
)
    
(1,740
)
Reclassification adjustment for (income) expense recognized in earnings
    
310
      
(102
)
    
646
      
(393
)
Unrealized gains (losses) recognized in other comprehensive income on derivative instruments
    
284
      
(174
)
    
292
      
(2,133
)
Income tax expense (benefit)
    
59
      
(36
)
    
61
      
(447
)
Unrealized gains (losses) recognized in other comprehensive income on derivative instruments, net of tax
    
225
      
(138
)
    
231
      
(1,686
)
                                 
Other comprehensive income
    
2,350
      
1,058
      
9,932
      
6,735
  
Comprehensive income
  
$
21,934
    
$
13,503
    
$
49,098
    
$
39,291
  

See notes to interim condensed consolidated financial statements (unaudited)

5
Index


INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows

  
Nine months ended September 30,
  
   
2020
    
2019
  
   
(unaudited - In thousands)
  
Net Income
  
$
39,166
    
$
32,556
  
Adjustments to Reconcile Net Income to Net Cash From Operating Activities
                
Proceeds from the sale of equity securities at fair value
    
-
      
560
  
Proceeds from sales of loans held for sale
    
1,074,284
      
422,557
  
Disbursements for loans held for sale
    
(1,057,544
)
    
(451,572
)
Provision for loan losses
    
12,884
      
1,045
  
Deferred income tax expense (benefit)
    
(2,140
)
    
1,216
  
Net deferred loan fees (costs)
    
5,227
      
(3,122
)
Net depreciation, amortization of intangible assets and premiums and accretion of discounts on securities, loans and interest bearing deposits - time
    
5,962
      
4,427
  
Net gains on mortgage loans
    
(46,687
)
    
(13,590
)
Net gains on securities available for sale
    
(253
)
    
(304
)
Share based compensation
    
1,506
      
1,348
  
Increase in accrued income and other assets
    
(1,564
)
    
(2,149
)
Increase in accrued expenses and other liabilities
    
7,397
      
13,088
  
Total Adjustments
    
(928
)
    
(26,496
)
Net Cash From Operating Activities
    
38,238
      
6,060
  
Cash Flow Used in Investing Activities
                
Proceeds from the sale of securities available for sale
    
36,593
      
44,305
  
Proceeds from maturities, prepayments and calls of securities available for sale
    
197,098
      
110,517
  
Purchases of securities available for sale
    
(639,166
)
    
(123,238
)
Proceeds from the maturity of interest bearing deposits - time
    
350
      
100
  
Purchase of Federal Home Loan Bank stock
    
(68
)
    
-
  
Net increase in portfolio loans (loans originated, net of principal payments)
    
(167,506
)
    
(213,116
)
Proceeds from the sale of portfolio loans
    
2,395
      
50,516
  
Proceeds from bank-owned life insurance
    
1,441
      
470
  
Proceeds from the sale of other real estate and repossessed assets
    
564
      
1,438
  
Capital expenditures
    
(2,603
)
    
(2,587
)
Net Cash Used in Investing Activities
    
(570,902
)
    
(131,595
)
Cash Flow From Financing Activities
                
Net increase in total deposits
    
561,018
      
138,884
  
Net increase (decrease) in other borrowings
    
(25,001
)
    
18,355
  
Proceeds from Federal Home Loan Bank Advances
    
239,254
      
57,000
  
Payments of Federal Home Loan Bank Advances
    
(272,910
)
    
(37,143
)
Proceeds from issuance of subordinated debt, net of issuance costs
    
39,236
      
-
  
Dividends paid
    
(13,239
)
    
(12,507
)
Proceeds from issuance of common stock
    
11
      
282
  
Repurchase of common stock
    
(13,784
)
    
(26,284
)
Share based compensation withholding obligation
    
(669
)
    
(879
)
Net Cash From Financing Activities
    
513,916
      
137,708
  
Net Increase (Decrease) in Cash and Cash Equivalents
    
(18,748
)
    
12,173
  
Cash and Cash Equivalents at Beginning of Period
    
65,304
      
70,244
  
Cash and Cash Equivalents at End of Period
  
$
46,556
    
$
82,417
  
Cash paid during the period for
                
Interest
  
$
11,636
    
$
20,185
  
Income taxes
    
10,500
      
5,934
  
Operating leases
    
1,357
      
1,692
  
Transfers to other real estate and repossessed assets
    
332
      
1,901
  
Purchase of securities available for sale not yet settled
    
23,844
      
3,075
  
Securitization of portfolio loans
    
26,325
      
29,790
  
Right of use assets obtained in exchange for lease obligations
    
279
      
7,767
  
Transfer of loans to held for sale
    
-
      
36,622
  

See notes to interim condensed consolidated financial statements (unaudited)

6
Index

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Shareholders’ Equity

  
Common
Stock
    
Retained
Earnings
(Accumulated
Deficit)
    
Accumulated
Other
Comprehensive
Income (Loss)
    
Total
Shareholders’
Equity
  
 
  
(Dollars in thousands, except per share amounts)
  
Balances at July 1, 2020
  
$
338,989
    
$
12,338
    
$
3,796
    
$
355,123
  
Net income, three months ended September 30, 2020
    
-
      
19,584
      
-
      
19,584
  
Cash dividends declared, $0.20 per share
    
-
      
(4,384
)
    
-
      
(4,384
)
Repurchase of zero shares of common stock
    
-
      
-
      
-
      
-
  
Issuance of zero shares of common stock
    
-
      
-
      
-
      
-
  
Share based compensation (issuance of 10,583 shares of common stock)
    
497
      
-
      
-
      
497
  
Share based compensation withholding obligation (withholding of 5,398 shares of common stock)
    
(78
)
    
-
      
-
      
(78
)
Other comprehensive income
    
-
      
-
      
2,350
      
2,350
  
Balances at September 30, 2020
  
$
339,408
    
$
27,538
    
$
6,146
    
$
373,092
  
                                 
Balances at July 1, 2019
  
$
351,894
    
$
(16,617
)
  
$
(4,431
)
  
$
330,846
  
Net income, three months ended September 30, 2019
    
-
      
12,445
      
-
      
12,445
  
Cash dividends declared, $0.18 per share
    
-
      
(4,049
)
    
-
      
(4,049
)
Repurchase of 25,000 shares of common stock
    
(502
)
    
-
      
-
      
(502
)
Issuance of 1,900 shares of common stock
    
-
      
-
      
-
      
-
  
Share based compensation (issuance of 5,991 shares of common stock)
    
460
      
-
      
-
      
460
  
Share based compensation withholding obligation (withholding of 919 shares of common stock)
    
(13
)
    
-
      
-
      
(13
)
Other comprehensive income
    
-
      
-
      
1,058
      
1,058
  
Balances at September 30, 2019
  
$
351,839
    
$
(8,221
)
  
$
(3,373
)
  
$
340,245
  
                                 
Balances at January 1, 2020
  
$
352,344
    
$
1,611
    
$
(3,786
)
  
$
350,169
  
Net income, nine months ended September 30, 2020
    
-
      
39,166
      
-
      
39,166
  
Cash dividends declared, $0.60 per share
    
-
      
(13,239
)
    
-
      
(13,239
)
Repurchase of 678,929 shares of common stock
    
(13,784
)
    
-
      
-
      
(13,784
)
Issuance of 11,917 shares of common stock
    
11
      
-
      
-
      
11
  
Share based compensation (issuance of 104,465 shares of common stock)
    
1,506
      
-
      
-
      
1,506
  
Share based compensation withholding obligation (withholding of 33,728 shares of common stock)
    
(669
)
    
-
      
-
      
(669
)
Other comprehensive income
    
-
      
-
      
9,932
      
9,932
  
Balances at September 30, 2020
  
$
339,408
    
$
27,538
    
$
6,146
    
$
373,092
  
                                 
Balances at January 1, 2019
  
$
377,372
    
$
(28,270
)
  
$
(10,108
)
  
$
338,994
  
Net income, nine months ended September 30, 2019
    
-
      
32,556
      
-
      
32,556
  
Cash dividends declared, $0.54 per share
    
-
      
(12,507
)
    
-
      
(12,507
)
Repurchase of 1,204,688 shares of common stock
    
(26,284
)
    
-
      
-
      
(26,284
)
Issuance of 70,299 shares of common stock
    
282
      
-
      
-
      
282
  
Share based compensation (issuance of 92,617 shares of common stock)
    
1,348
      
-
      
-
      
1,348
  
Share based compensation withholding obligation (withholding of 57,205 shares of common stock)
    
(879
)
    
-
      
-
      
(879
)
Other comprehensive income
    
-
      
-
      
6,735
      
6,735
  
Balances at September 30, 2019
  
$
351,839
    
$
(8,221
)
  
$
(3,373
)
  
$
340,245
  

See notes to interim condensed consolidated financial statements (unaudited)

7
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1.
Preparation of Financial Statements

The condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading.  The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes for the year ended December 31, 2019 included in our Annual Report on Form 10-K.

In our opinion, the accompanying unaudited condensed consolidated financial statements contain all the adjustments necessary to present fairly our consolidated financial condition as of September 30, 2020 and December 31, 2019, and the results of operations for the three and nine-month periods ended September 30, 2020 and 2019.  The results of operations for the three and nine-month periods ended September 30, 2020, are not necessarily indicative of the results to be expected for the full year.  Certain reclassifications have been made in the prior period condensed consolidated financial statements to conform to the current period presentation.  Our critical accounting policies include the determination of the allowance for loan losses and the valuation of capitalized mortgage loan servicing rights.  Refer to our 2019 Annual Report on Form 10-K for a disclosure of our accounting policies.

2.
New Accounting Standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, ‘‘Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments’’. This ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.

This ASU:

•
Replaces the existing incurred loss impairment guidance and establishes a single allowance framework for financial assets carried at amortized cost, which will reflect our estimate of credit losses over the full remaining expected life of the financial assets and will consider expected future changes in macroeconomic conditions.
•
Eliminates existing guidance for purchase credit impaired (‘‘PCI’’) loans, and requires recognition of the nonaccretable difference as an increase to the allowance for expected credit losses on financial assets purchased with more than insignificant credit deterioration since origination, which will be offset by an increase in the recorded investment of the related loans.
•
Requires inclusion of expected recoveries, limited to the cumulative amount of prior write-offs, when estimating the allowance for credit losses for in scope financial assets (including collateral dependent assets).
•
Amends existing impairment guidance for securities available for sale to incorporate an allowance, which will allow for reversals of credit impairments in the event that the credit of an issuer improves. Credit losses on securities available for sale are limited to the amount of the decline in fair value regardless of what the credit loss model would show for impairment.
•
Generally requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption.

8
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
We began evaluating this ASU in 2016 and established a company-wide, cross-discipline governance structure, which provides implementation oversight. We continued to test and refine our current expected credit loss models that satisfied the requirements of this ASU. Oversight and testing, as well as efforts to meet expanded disclosure requirements, extended through the end of 2019.  We currently expect to estimate losses over approximately a two year forecast period using the Federal Open Market Committee median economic projections and other economic forecast sources, and then revert to longer term historical loss experience to estimate losses over more extended periods.  We were originally required to adopt this ASU on January 1, 2020 but section 4014 of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act allows for temporary relief from applying this ASU.  Under the CARES Act we may delay the adoption of this ASU until the earlier of the termination of the national emergency that President Trump declared on March 13, 2020, or December 31, 2020.  As such, we have chosen to delay the adoption of this ASU and continue to utilize the existing incurred loss impairment methodology to calculate our allowance for loan losses and our provision for loan losses as required under Accounting Standards Codification 310 (Receivables). When we adopt this ASU as required under the CARES act we will do so retrospectively to January 1, 2020.

We expect to recognize a one-time cumulative effect adjustment to beginning retained earnings at January 1, 2020 increasing the allowance for loan losses.  We are estimating an increase to the allowance for loan losses at that time to be in the range of $8.0 million to $10.0 million primarily driven by the longer contractual maturities of our mortgage and consumer installment loan portfolio segments. In addition, we currently expect this ASU to increase the allowance for losses related to unfunded loan commitments between $1.0 million and $2.0 million. The ultimate impact of adopting this ASU, and at each subsequent reporting period, is highly dependent on credit quality, economic forecasts and conditions, composition of our loan portfolios and securities available for sale, along with other management judgements. The transition adjustment to record the allowance for credit losses may fall outside of our estimated increase based on the finalization of assumptions including qualitative adjustments and the economic forecast used in calculating the allowance for credit losses upon the adoption of CECL.

We do not expect a material allowance for credit losses to be recorded on securities available for sale upon adoption of this ASU.

In August 2018, the FASB issued ASU 2018-13, ‘‘Fair Value Measurement (Topic 820), Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement’’. This new ASU amends disclosure requirements in Topic 820 to eliminate, add and modify certain disclosure requirements for fair value measurements as part of its disclosure framework project. The amended guidance eliminates the requirements to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the entity’s policy for the timing of transfers between levels of the fair value hierarchy and the entity’s valuation processes for Level 3 fair value measurements. The amended guidance adds the requirements to disclose the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements of instruments held at the end of the reporting period and for recurring and nonrecurring Level 3 fair value measurements, the range and weighted average used to develop significant unobservable inputs and how the weighted average was calculated, with certain exceptions. This amended guidance was effective for us on January 1, 2020, and did not have a material impact on our consolidated operating results or financial condition.

9
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
In March 2020, the FASB issued ASU 2020-04, ‘‘Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting’’. This new ASU provides temporary optional expedients and exceptions to GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. Entities can elect not to apply certain modification accounting requirements to contracts affected by reference rate reform, if certain criteria are met. Entities that make such elections would not have to remeasure contracts at the modification date or reassess a previous accounting determination.  Entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met.  This amended guidance and our ability to elect its temporary optional expedients and exceptions are effective for us as of March 12, 2020 through December 31, 2022.

3.
Securities

Securities available for sale consist of the following:

 
Amortized
    
Unrealized
        
   
Cost
    
Gains
    
Losses
    
Fair Value
  
   
(In thousands)
  
September 30, 2020
                        
U.S. agency
  
$
10,820
    
$
332
    
$
22
    
$
11,130
  
U.S. agency residential mortgage-backed
    
330,914
      
5,167
      
521
      
335,560
  
U.S. agency commercial mortgage-backed
    
8,039
      
382
      
-
      
8,421
  
Private label mortgage-backed
    
43,190
      
1,415
      
320
      
44,285
  
Other asset backed
    
262,435
      
1,392
      
456
      
263,371
  
Obligations of states and political subdivisions
    
238,479
      
6,635
      
136
      
244,978
  
Corporate
    
71,691
      
3,558
      
232
      
75,017
  
Trust preferred
    
1,970
      
-
      
200
      
1,770
  
Foreign government
    
500
      
18
      
-
      
518
  
Total
  
$
968,038
    
$
18,899
    
$
1,887
    
$
985,050
  
                                 
December 31, 2019
                                
U.S. agency
  
$
14,591
    
$
89
    
$
19
    
$
14,661
  
U.S. agency residential mortgage-backed
    
226,130
      
1,910
      
278
      
227,762
  
U.S. agency commercial mortgage-backed
    
10,671
      
113
      
28
      
10,756
  
Private label mortgage-backed
    
39,248
      
544
      
99
      
39,693
  
Other asset backed
    
94,158
      
103
      
375
      
93,886
  
Obligations of states and political subdivisions
    
94,499
      
1,724
      
121
      
96,102
  
Corporate
    
31,904
      
1,296
      
5
      
33,195
  
Trust preferred
    
1,968
      
-
      
125
      
1,843
  
Foreign government
    
499
      
3
      
-
      
502
  
Total
  
$
513,668
    
$
5,782
    
$
1,050
    
$
518,400
  


10
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Our investments’ gross unrealized losses and fair values aggregated by investment type and length of time that individual securities have been at a continuous unrealized loss position follows:

 
Less Than Twelve Months
    
Twelve Months or More
    
Total
  
   
Fair Value
    
Unrealized
Losses
    
Fair Value
    
Unrealized
Losses
    
Fair Value
    
Unrealized
Losses
  
   
(In thousands)
  
                                     
September 30, 2020
                                    
U.S. agency
  
$
1,788
    
$
5
    
$
2,262
    
$
17
    
$
4,050
    
$
22
  
U.S. agency residential mortgage-backed
    
81,400
      
519
      
1,298
      
2
      
82,698
      
521
  
Private label mortgage-backed
    
14,269
      
268
      
749
      
52
      
15,018
      
320
  
Other asset backed
    
28,630
      
129
      
22,210
      
327
      
50,840
      
456
  
Obligations of states and political subdivisions
    
19,075
      
110
      
2,003
      
26
      
21,078
      
136
  
Corporate
    
10,628
      
232
      
-
      
-
      
10,628
      
232
  
Trust preferred
    
-
      
-
      
1,770
      
200
      
1,770
      
200
  
Total
  
$
155,790
    
$
1,263
    
$
30,292
    
$
624
    
$
186,082
    
$
1,887
  
                                                 
December 31, 2019
                                                
U.S. agency
  
$
2,782
    
$
8
    
$
2,712
    
$
11
    
$
5,494
    
$
19
  
U.S. agency residential mortgage-backed
    
56,377
      
126
      
13,551
      
152
      
69,928
      
278
  
U.S. agency commercial mortgage-backed
    
3,284
      
24
      
659
      
4
      
3,943
      
28
  
Private label mortgage-backed
    
16,387
      
55
      
343
      
44
      
16,730
      
99
  
Other asset backed
    
34,027
      
233
      
13,839
      
142
      
47,866
      
375
  
Obligations of states and political subdivisions
    
15,666
      
84
      
5,396
      
37
      
21,062
      
121
  
Corporate
    
2,125
      
5
      
-
      
-
      
2,125
      
5
  
Trust preferred
    
-
      
-
      
1,843
      
125
      
1,843
      
125
  
Total
  
$
130,648
    
$
535
    
$
38,343
    
$
515
    
$
168,991
    
$
1,050
  

Our portfolio of securities available for sale is reviewed quarterly for impairment in value. In performing this review management considers (1) the length of time and extent that fair value has been less than cost, (2) the financial condition and near term prospects of the issuer, (3) the impact of changes in market interest rates on the market value of the security and (4) an assessment of whether we intend to sell, or it is more likely than not that we will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. For securities that do not meet the aforementioned recovery criteria, the amount of impairment recognized in earnings is limited to the amount related to credit losses, while impairment related to other factors is recognized in other comprehensive income.

11
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
U.S. agency and U.S. agency residential mortgage-backed securities — at September 30, 2020, we had 27 U.S. agency and 39 U.S. agency residential mortgage-backed securities whose fair value is less than amortized cost. The  unrealized losses are largely attributed to widening spreads to Treasury bonds since acquisition.

Private label mortgage backed, other asset backed and corporate securities — at September 30, 2020, we had 20 private label mortgage backed, 55 other asset backed and 12 corporate securities whose fair value is less than amortized cost. The unrealized losses are primarily due to credit spread widening since acquisition.

Two private label mortgage-backed securities (discussed further below) were reviewed for other than temporary impairment (‘‘OTTI’’) utilizing a cash flow projection. The cash flow analysis forecasts cash flow from the underlying loans in each transaction and then applies these cash flows to the bonds in the securitization.

Obligations of states and political subdivisions — at September 30, 2020, we had 26 municipal securities whose fair value is less than amortized cost. The unrealized losses are primarily due to wider benchmark pricing spreads since acquisition.

Trust preferred securities — at September 30, 2020, we had two trust preferred securities whose fair value is less than amortized cost. Both of our trust preferred securities are single issue securities issued by a trust subsidiary of a bank holding company. The pricing of trust preferred securities has suffered from credit spread widening. One of the securities is rated by a major rating agency as investment grade while the other one is non-rated. The non-rated issue is a relatively small bank and was never rated. The issuer of this non-rated trust preferred security, which had a total amortized cost of $1.0 million and total fair value of $0.85 million as of September 30, 2020, continues to have satisfactory credit metrics and make interest payments.

As management does not intend to liquidate any of the securities discussed above and it is more likely than not that we will not be required to sell these securities prior to recovery of these unrealized losses, no declines discussed above (other than certain declines related to the two private label mortgage-backed securities currently being reviewed for OTTI) are deemed to be other than temporary.

We recorded no credit related OTTI charges in our Condensed Consolidated Statements of Operations related to securities available for sale during the three and nine month periods ended September 30, 2020 and 2019, respectively.

At September 30, 2020, two private label mortgage-backed securities had credit related OTTI and are summarized as follows:

 
Senior
Security
    
Super
Senior
Security
    
Total
  
   
(In thousands)
  
                   
Fair value
  
$
403
    
$
536
    
$
939
  
Amortized cost
    
386
      
368
      
754
  
Non-credit unrealized loss
    
-
      
-
      
-
  
Unrealized gain
    
17
      
168
      
185
  
Cumulative credit related OTTI
    
757
      
457
      
1,214
  


12
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Both of these securities are receiving principal and interest payments similar to principal reductions in the underlying collateral and have unrealized gains at September 30, 2020. The original amortized cost (current amortized cost excluding cumulative credit related OTTI) for each of these securities has been permanently adjusted downward for previously recorded credit related OTTI. The unrealized loss (based on original amortized cost) for both of these securities is now less than previously recorded credit related OTTI amounts.

A roll forward of credit losses recognized in earnings on securities available for sale follows:

 
Three months ended
September 30,
    
Nine months ended
September 30,
  
   
2020
    
2019
    
2020
    
2019
  
   
(In thousands)
    
(In thousands)
  
Balance at beginning of period
  
$
1,214
    
$
1,594
    
$
1,214
    
$
1,594
  
Additions to credit losses on securities for which no previous OTTI was recognized
    
-
      
-
      
-
      
-
  
Increases to credit losses on securities for which OTTI was previously recognized
    
-
      
-
      
-
      
-
  
Reduction (1)
    
-
      
(380
)
    
-
      
(380
)
Balance at end of period
  
$
1,214
    
$
1,214
    
$
1,214
    
$
1,214
  
 
(1)During the third quarter of 2019 one security with previously recorded OTTI was settled and balance is now zero.

The amortized cost and fair value of securities available for sale at September 30, 2020, by contractual maturity, follow:

 
Amortized
Cost
    
Fair
Value
  
   
(In thousands)
  
Maturing within one year
  
$
18,967
    
$
19,048
  
Maturing after one year but within five years
    
80,229
      
83,042
  
Maturing after five years but within ten years
    
63,308
      
66,592
  
Maturing after ten years
    
160,956
      
164,731
  
     
323,460
      
333,413
  
U.S. agency residential mortgage-backed
    
330,914
      
335,560
  
U.S. agency commercial mortgage-backed
    
8,039
      
8,421
  
Private label mortgage-backed
    
43,190
      
44,285
  
Other asset backed
    
262,435
      
263,371
  
Total
  
$
968,038
    
$
985,050
  

The actual maturity may differ from the contractual maturity because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Gains and losses realized on the sale of securities available for sale are determined using the specific identification method and are recognized on a trade-date basis.  A summary of proceeds from the sale of securities available for sale and gains and losses for the nine month periods ending September 30, follows:

       
Realized
  
   
Proceeds
    
Gains
    
Losses
  
   
(In thousands)
  
2020
  
$
36,593
    
$
253
    
$
-
  
2019
    
44,305
      
169
      
32
  

13
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Certain preferred stocks which were all sold during the first quarter of 2019 had been classified as equity securities at fair value in our Condensed Consolidated Statement of Financial Condition.  During the nine months ended September 30, 2019 we recognized gains on these preferred stocks of $0.167 million that are included in net gains on securities available for sale in the Condensed Consolidated Statements of Operations.

4.
Loans

Our assessment of the allowance for loan losses is based on an evaluation of the loan portfolio, recent and historical loss experience, current economic conditions and other pertinent factors.

An analysis of the allowance for loan losses by portfolio segment for the three months ended September 30, follows:

 
Commercial
    
Mortgage
    
Installment
    
Subjective
Allocation
    
Total
  
   
(In thousands)
  
2020
                              
Balance at beginning of period
  
$
8,731
    
$
7,261
    
$
1,217
    
$
17,291
    
$
34,500
  
Additions (deductions)
                                        
Provision for loan losses
    
(875
)
    
(257
)
    
18
      
2,089
      
975
  
Recoveries credited to the allowance
    
297
      
157
      
196
      
-
      
650
  
Loans charged against the allowance
    
-
      
(162
)
    
(192
)
    
-
      
(354
)
Balance at end of period
  
$
8,153
    
$
6,999
    
$
1,239
    
$
19,380
    
$
35,771
  
                                         
2019
                                        
Balance at beginning of period
  
$
8,121
    
$
8,062
    
$
1,293
    
$
8,427
    
$
25,903
  
Additions (deductions)
                                        
Provision for loan losses
    
(810
)
    
83
      
289
      
167
      
(271
)
Recoveries credited to the allowance
    
1,215
      
235
      
202
      
-
      
1,652
  
Loans charged against the allowance
    
(303
)
    
(397
)
    
(436
)
    
-
      
(1,136
)
Balance at end of period
  
$
8,223
    
$
7,983
    
$
1,348
    
$
8,594
    
$
26,148
  

An analysis of the allowance for loan losses by portfolio segment for the nine months ended September 30, follows:

 
  
Commercial
    
Mortgage
    
Installment
    
Subjective
Allocation
    
Total
  
 
  
(In thousands)
  
2020
                              
Balance at beginning of period
  
$
7,922
    
$
8,216
    
$
1,283
    
$
8,727
    
$
26,148
  
Additions (deductions)
                                        
Provision for loan losses
    
2,804
      
(895
)
    
322
      
10,653
      
12,884
  
Recoveries credited to the allowance
    
1,463
      
364
      
577
      
-
      
2,404
  
Loans charged against the allowance
    
(4,036
)
    
(686
)
    
(943
)
    
-
      
(5,665
)
Balance at end of period
  
$
8,153
    
$
6,999
    
$
1,239
    
$
19,380
    
$
35,771
  
 
                                        
2019
                                        
Balance at beginning of period
  
$
7,090
    
$
7,978
    
$
895
    
$
8,925
    
$
24,888
  
Additions (deductions)
                                        
Provision for loan losses
    
85
      
270
      
1,021
      
(331
)
    
1,045
  
Recoveries credited to the allowance
    
1,720
      
786
      
603
      
-
      
3,109
  
Loans charged against the allowance
    
(672
)
    
(1,051
)
    
(1,171
)
    
-
      
(2,894
)
Balance at end of period
  
$
8,223
    
$
7,983
    
$
1,348
    
$
8,594
    
$
26,148
  

14
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Allowance for loan losses and recorded investment in loans by portfolio segment follows:

 
Commercial
    
Mortgage
    
Installment
    
Subjective
Allocation
    
Total
  
   
(In thousands)
  
September 30, 2020
                              
Allowance for loan losses:
                              
Individually evaluated for impairment
  
$
1,699
    
$
4,174
    
$
265
    
$
-
    
$
6,138
  
Collectively evaluated for impairment
    
6,454
      
2,825
      
974
      
19,380
      
29,633
  
Loans acquired with deteriorated credit quality
    
-
      
-
      
-
      
-
      
-
  
Total ending allowance for loan losses balance
  
$
8,153
    
$
6,999
    
$
1,239
    
$
19,380
    
$
35,771
  
                                         
Loans
                                        
Individually evaluated for impairment
  
$
10,543
    
$
40,573
    
$
2,404
            
$
53,520
  
Collectively evaluated for impairment
    
1,343,763
      
987,300
      
478,281
              
2,809,344
  
Loans acquired with deteriorated credit quality
    
906
      
560
      
143
              
1,609
  
Total loans recorded investment
    
1,355,212
      
1,028,433
      
480,828
              
2,864,473
  
Accrued interest included in recorded investment
    
3,422
      
4,397
      
1,175
              
8,994
  
Total loans
  
$
1,351,790
    
$
1,024,036
    
$
479,653
            
$
2,855,479
  
                                         
December 31, 2019
                                        
Allowance for loan losses:
                                        
Individually evaluated for impairment
  
$
1,031
    
$
4,863
    
$
261
    
$
-
    
$
6,155
  
Collectively evaluated for impairment
    
6,891
      
3,353
      
1,022
      
8,727
      
19,993
  
Loans acquired with deteriorated credit quality
    
-
      
-
      
-
      
-
      
-
  
Total ending allowance for loan losses balance
  
$
7,922
    
$
8,216
    
$
1,283
    
$
8,727
    
$
26,148
  
                                         
Loans
                                        
Individually evaluated for impairment
  
$
9,393
    
$
43,574
    
$
2,925
            
$
55,892
  
Collectively evaluated for impairment
    
1,158,906
      
1,058,917
      
457,370
              
2,675,193
  
Loans acquired with deteriorated credit quality
    
1,394
      
575
      
316
              
2,285
  
Total loans recorded investment
    
1,169,693
      
1,103,066
      
460,611
              
2,733,370
  
Accrued interest included in recorded investment
    
2,998
      
4,155
      
1,194
              
8,347
  
Total loans
  
$
1,166,695
    
$
1,098,911
    
$
459,417
            
$
2,725,023
  

15
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Loans on non-accrual status and past due more than 90 days (“Non-performing Loans”) follow(1):

 
90+ and
Still
Accruing
    
Non-
Accrual
    
Total Non-
Performing
Loans
  
   
(In thousands)
  
September 30, 2020
                  
Commercial
                  
Commercial and industrial (2)
  
$
266
    
$
1,615
    
$
1,881
  
Commercial real estate
    
-
      
554
      
554
  
Mortgage
                        
1-4 family owner occupied - jumbo
    
-
      
1,207
      
1,207
  
1-4 family owner occupied - non-jumbo (3)
    
-
      
2,364
      
2,364
  
1-4 family non-owner occupied
    
-
      
1,304
      
1,304
  
1-4 family - 2nd lien
    
-
      
1,548
      
1,548
  
Resort lending
    
-
      
699
      
699
  
Installment
                        
Boat lending
    
-
      
206
      
206
  
Recreational vehicle lending
    
-
      
96
      
96
  
Other
    
-
      
378
      
378
  
Total recorded investment
  
$
266
    
$
9,971
    
$
10,237
  
Accrued interest included in recorded investment
  
$
-
    
$
-
    
$
-
  
                         
December 31, 2019
                        
Commercial
                        
Commercial and industrial (2)
  
$
-
    
$
565
    
$
565
  
Commercial real estate
    
-
      
735
      
735
  
Mortgage
                        
1-4 family owner occupied - jumbo
    
-
      
1,179
      
1,179
  
1-4 family owner occupied - non-jumbo (3)
    
-
      
3,540
      
3,540
  
1-4 family non-owner occupied
    
-
      
1,039
      
1,039
  
1-4 family - 2nd lien
    
-
      
979
      
979
  
Resort lending
    
-
      
690
      
690
  
Installment
                        
Boat lending
    
-
      
332
      
332
  
Recreational vehicle lending
    
-
      
3
      
3
  
Other
    
-
      
470
      
470
  
Total recorded investment
  
$
-
    
$
9,532
    
$
9,532
  
Accrued interest included in recorded investment
  
$
-
    
$
-
    
$
-
  

(1)
Non-performing loans exclude purchase credit impaired loans.
(2)
Non-performing commercial and industrial loans exclude $0.052 million and $0.077 million of government guaranteed loans at September 30, 2020 and December 31, 2019, respectively.
(3)
Non-performing 1-4 family owner occupied – non jumbo loans exclude $0.458 million and $0.569 million of government guaranteed loans at September 30, 2020 and December 31, 2019, respectively.
16
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
An aging analysis of loans by class follows:

 
Loans Past Due
    
Loans not
    
Total
  
   
30-59 days
    
60-89 days
    
90+ days
    
Total
    
Past Due
    
Loans
  
   
(In thousands)
  
September 30, 2020
                                    
Commercial
                                    
Commercial and industrial
  
$
-
    
$
-
    
$
495
    
$
495
    
$
763,757
    
$
764,252
  
Commercial real estate
    
130
      
-
      
-
      
130
      
590,830
      
590,960
  
Mortgage
                                                
1-4 family owner occupied - jumbo
    
1,312
      
-
      
632
      
1,944
      
437,294
      
439,238
  
1-4 family owner occupied - non-jumbo
    
1,053
      
372
      
610
      
2,035
      
247,086
      
249,121
  
1-4 family non-owner occupied
    
1,336
      
60
      
367
      
1,763
      
177,101
      
178,864
  
1-4 family - 2nd lien
    
472
      
251
      
545
      
1,268
      
99,427
      
100,695
  
Resort lending
    
273
      
443
      
391
      
1,107
      
59,408
      
60,515
  
Installment
                                                
Boat lending
    
213
      
38
      
132
      
383
      
211,353
      
211,736
  
Recreational vehicle lending
    
364
      
19
      
58
      
441
      
168,211
      
168,652
  
Other
    
281
      
166
      
225
      
672
      
99,768
      
100,440
  
Total recorded investment
  
$
5,434
    
$
1,349
    
$
3,455
    
$
10,238
    
$
2,854,235
    
$
2,864,473
  
Accrued interest included in recorded investment
  
$
102
    
$
17
    
$
-
    
$
119
    
$
8,875
    
$
8,994
  
                                                 
December 31, 2019
                                                
Commercial
                                                
Commercial and industrial
  
$
-
    
$
289
    
$
102
    
$
391
    
$
564,480
    
$
564,871
  
Commercial real estate
    
177
      
-
      
735
      
912
      
603,910
      
604,822
  
Mortgage
                                                
1-4 family owner occupied - jumbo
    
1,757
      
1,037
      
-
      
2,794
      
398,759
      
401,553
  
1-4 family owner occupied - non-jumbo
    
2,672
      
852
      
1,387
      
4,911
      
342,349
      
347,260
  
1-4 family non-owner occupied
    
695
      
136
      
623
      
1,454
      
168,083
      
169,537
  
1-4 family - 2nd lien
    
909
      
90
      
386
      
1,385
      
115,157
      
116,542
  
Resort lending
    
364
      
53
      
565
      
982
      
67,192
      
68,174
  
Installment
                                                
Boat lending
    
337
      
107
      
88
      
532
      
202,750
      
203,282
  
Recreational vehicle lending
    
161
      
97
      
3
      
261
      
153,184
      
153,445
  
Other
    
377
      
275
      
202
      
854
      
103,030
      
103,884
  
Total recorded investment
  
$
7,449
    
$
2,936
    
$
4,091
    
$
14,476
    
$
2,718,894
    
$
2,733,370
  
Accrued interest included in recorded investment
  
$
74
    
$
34
    
$
-
    
$
108
    
$
8,239
    
$
8,347
  

17
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Impaired loans are as follows:

 
September 30,
2020
    
December 31,
2019
  
Impaired loans with no allocated allowance for loan losses
  
(In thousands)
  
Troubled debt restructurings ("TDR")
  
$
336
    
$
337
  
Non - TDR
    
1,562
      
1,550
  
Impaired loans with an allocated allowance for loan losses
                
TDR - allowance based on collateral
    
9,412
      
1,587
  
TDR - allowance based on present value cash flow
    
38,934
      
48,798
  
Non - TDR - allowance based on collateral
    
2,963
      
3,365
  
Total impaired loans
  
$
53,207
    
$
55,637
  
                 
Amount of allowance for loan losses allocated
                
TDR - allowance based on collateral
  
$
1,104
    
$
542
  
TDR - allowance based on present value cash flow
    
3,838
      
4,641
  
Non - TDR - allowance based on collateral
    
1,196
      
972
  
Total amount of allowance for loan losses allocated
  
$
6,138
    
$
6,155
  

18
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Impaired loans by class  are as follows:

 
September 30, 2020
    
December 31, 2019
  
   
Recorded
Investment
    
Unpaid
Principal
Balance
    
Related
Allowance
For Loan
Losses
    
Recorded
Investment
    
Unpaid
Principal
Balance
    
Related
Allowance
For Loan
Losses
  
With no related allowance for loan losses recorded:
  
(In thousands)
        
Commercial
                                    
Commercial and industrial
  
$
122
    
$
124
    
$
-
    
$
257
    
$
257
    
$
-
  
Commercial real estate
    
-
      
-
      
-
      
796
      
796
      
-
  
Mortgage
                                                
1-4 family owner occupied - jumbo
    
632
      
632
      
-
      
-
      
-
      
-
  
1-4 family owner occupied - non-jumbo
    
237
      
314
      
-
      
212
      
217
      
-
  
1-4 family non-owner occupied
    
311
      
475
      
-
      
214
      
366
      
-
  
1-4 family - 2nd lien
    
442
      
442
      
-
      
407
      
438
      
-
  
Resort lending
    
154
      
379
      
-
      
-
      
-
      
-
  
Installment
                                                
Boat lending
    
-
      
-
      
-
      
-
      
-
      
-
  
Recreational vehicle lending
    
-
      
-
      
-
      
-
      
-
      
-
  
Other
    
-
      
-
      
-
      
1
      
41
      
-
  
     
1,898
      
2,366
      
-
      
1,887
      
2,115
      
-
  
With an allowance for loan losses recorded:
                                                
Commercial
                                                
Commercial and industrial
    
2,452
      
2,572
      
855
      
1,655
      
1,706
      
453
  
Commercial real estate
    
7,969
      
7,980
      
844
      
6,685
      
6,661
      
578
  
Mortgage
                                                
1-4 family owner occupied - jumbo
    
1,091
      
1,458
      
126
      
1,447
      
1,445
      
91
  
1-4 family owner occupied - non-jumbo
    
21,805
      
22,414
      
2,300
      
10,163
      
10,695
      
1,031
  
1-4 family non-owner occupied
    
4,473
      
4,810
      
470
      
4,962
      
5,542
      
572
  
1-4 family - 2nd lien
    
620
      
629
      
133
      
14,059
      
15,243
      
1,695
  
Resort lending
    
10,808
      
10,972
      
1,145
      
12,110
      
12,263
      
1,474
  
Installment
                                                
Boat lending
    
139
      
172
      
49
      
-
      
-
      
-
  
Recreational vehicle lending
    
101
      
114
      
23
      
-
      
-
      
-
  
Other
    
2,164
      
2,295
      
193
      
2,924
      
3,153
      
261
  
     
51,622
      
53,416
      
6,138
      
54,005
      
56,708
      
6,155
  
Total
                                                
Commercial
                                                
Commercial and industrial
    
2,574
      
2,696
      
855
      
1,912
      
1,963
      
453
  
Commercial real estate
    
7,969
      
7,980
      
844
      
7,481
      
7,457
      
578
  
Mortgage
                                                
1-4 family owner occupied - jumbo
    
1,723
      
2,090
      
126
      
1,447
      
1,445
      
91
  
1-4 family owner occupied - non-jumbo
    
22,042
      
22,728
      
2,300
      
10,375
      
10,912
      
1,031
  
1-4 family non-owner occupied
    
4,784
      
5,285
      
470
      
5,176
      
5,908
      
572
  
1-4 family - 2nd lien
    
1,062
      
1,071
      
133
      
14,466
      
15,681
      
1,695
  
Resort lending
    
10,962
      
11,351
      
1,145
      
12,110
      
12,263
      
1,474
  
Installment
                                                
Boat lending
    
139
      
172
      
49
      
-
      
-
      
-
  
Recreational vehicle lending
    
101
      
114
      
23
      
-
      
-
      
-
  
Other
    
2,164
      
2,295
      
193
      
2,925
      
3,194
      
261
  
Total
  
$
53,520
    
$
55,782
    
$
6,138
    
$
55,892
    
$
58,823
    
$
6,155
  
                                                 
Accrued interest included in recorded investment
  
$
313
                    
$
255
                  

19
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Average recorded investment in and interest income earned on impaired loans by class for the three month periods ending September 30, follows:

 
2020
    
2019
  
   
Average
Recorded
Investment
    
Interest
Income
Recognized
    
Average
Recorded
Investment
    
Interest
Income
Recognized
  
With no related allowance for loan losses recorded:
  
(In thousands)
  
Commercial
                        
Commercial and industrial
  
$
103
    
$
2
    
$
-
    
$
-
  
Commercial real estate
    
-
      
-
      
327
      
5
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
632
      
-
      
-
      
-
  
1-4 family owner occupied - non-jumbo
    
331
      
-
      
352
      
1
  
1-4 family non-owner occupied
    
316
      
2
      
200
      
6
  
1-4 family - 2nd lien
    
403
      
-
      
-
      
-
  
Resort lending
    
77
      
-
      
-
      
-
  
Installment
                                
Boat lending
    
-
      
-
      
-
      
-
  
Recreational vehicle lending
    
-
      
-
      
-
      
-
  
Other
    
-
      
-
      
-
      
1
  
     
1,862
      
4
      
879
      
13
  
With an allowance for loan losses recorded:
                                
Commercial
                                
Commercial and industrial
    
2,431
      
38
      
1,534
      
16
  
Commercial real estate
    
12,195
      
130
      
6,069
      
71
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
808
      
11
      
1,003
      
9
  
1-4 family owner occupied - non-jumbo
    
22,070
      
277
      
23,674
      
336
  
1-4 family non-owner occupied
    
4,708
      
52
      
5,447
      
76
  
1-4 family - 2nd lien
    
598
      
3
      
601
      
8
  
Resort lending
    
11,186
      
125
      
12,067
      
171
  
Installment
                                
Boat lending
    
106
      
-
      
86
      
2
  
Recreational vehicle lending
    
96
      
1
      
50
      
1
  
Other
    
2,324
      
33
      
3,105
      
50
  
     
56,522
      
670
      
53,636
      
740
  
Total
                                
Commercial
                                
Commercial and industrial
    
2,534
      
40
      
1,534
      
16
  
Commercial real estate
    
12,195
      
130
      
6,396
      
76
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
1,440
      
11
      
1,003
      
9
  
1-4 family owner occupied - non-jumbo
    
22,401
      
277
      
24,026
      
337
  
1-4 family non-owner occupied
    
5,024
      
54
      
5,647
      
82
  
1-4 family - 2nd lien
    
1,001
      
3
      
601
      
8
  
Resort lending
    
11,263
      
125
      
12,067
      
171
  
Installment
                                
Boat lending
    
106
      
-
      
86
      
2
  
Recreational vehicle lending
    
96
      
1
      
50
      
1
  
Other
    
2,324
      
33
      
3,105
      
51
  
Total
  
$
58,384
    
$
674
    
$
54,515
    
$
753
  

20
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Average recorded investment in and interest income earned on impaired loans by class for the nine month periods ending September 30, follows:

 
  
2020
    
2019
  
 
  
Average
Recorded
Investment
    
Interest
Income
Recognized
    
Average
Recorded
Investment
    
Interest
Income
Recognized
  
With no related allowance for loan losses recorded:
  
(In thousands)
  
Commercial
                        
Commercial and industrial
  
$
137
    
$
4
    
$
-
    
$
-
  
Commercial real estate
    
199
      
-
      
164
      
5
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
316
      
-
      
-
      
-
  
1-4 family owner occupied - non-jumbo
    
353
      
4
      
265
      
3
  
1-4 family non-owner occupied
    
309
      
5
      
100
      
6
  
1-4 family - 2nd lien
    
399
      
-
      
-
      
-
  
Resort lending
    
77
      
-
      
-
      
-
  
Installment
                                
Boat lending
    
-
      
-
      
-
      
-
  
Recreational vehicle lending
    
-
      
-
      
-
      
-
  
Other
    
-
      
-
      
-
      
1
  
 
    
1,790
      
13
      
529
      
15
  
With an allowance for loan losses recorded:
                                
Commercial
                                
Commercial and industrial
    
2,231
      
105
      
2,406
      
52
  
Commercial real estate
    
11,657
      
641
      
5,552
      
221
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
1,228
      
39
      
1,248
      
26
  
1-4 family owner occupied - non-jumbo
    
19,116
      
901
      
24,110
      
1,031
  
1-4 family non-owner occupied
    
4,746
      
170
      
6,040
      
227
  
1-4 family - 2nd lien
    
4,017
      
9
      
479
      
14
  
Resort lending
    
11,506
      
358
      
12,607
      
493
  
Installment
                                
Boat lending
    
72
      
-
      
68
      
2
  
Recreational vehicle lending
    
80
      
2
      
65
      
2
  
Other
    
2,545
      
109
      
3,211
      
145
  
 
    
57,198
      
2,334
      
55,786
      
2,213
  
Total
                                
Commercial
                                
Commercial and industrial
    
2,368
      
109
      
2,406
      
52
  
Commercial real estate
    
11,856
      
641
      
5,716
      
226
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
1,544
      
39
      
1,248
      
26
  
1-4 family owner occupied - non-jumbo
    
19,469
      
905
      
24,375
      
1,034
  
1-4 family non-owner occupied
    
5,055
      
175
      
6,140
      
233
  
1-4 family - 2nd lien
    
4,416
      
9
      
479
      
14
  
Resort lending
    
11,583
      
358
      
12,607
      
493
  
Installment
                                
Boat lending
    
72
      
-
      
68
      
2
  
Recreational vehicle lending
    
80
      
2
      
65
      
2
  
Other
    
2,545
      
109
      
3,211
      
146
  
Total
  
$
58,988
    
$
2,347
    
$
56,315
    
$
2,228
  

21
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Cash receipts on impaired loans on non-accrual status are generally applied to the principal balance.

TDRs follow:

 
September 30, 2020
  
   
Commercial
    
Retail (1)
    
Total
  
   
(In thousands)
  
Performing TDRs
  
$
8,292
    
$
37,337
    
$
45,629
  
Non-performing TDRs (2)
    
1,203
      
1,850
(3) 
    
3,053
  
Total
  
$
9,495
    
$
39,187
    
$
48,682
  

 
December 31, 2019
  
   
Commercial
    
Retail (1)
    
Total
  
   
(In thousands)
  
Performing TDRs
  
$
7,974
    
$
39,601
    
$
47,575
  
Non-performing TDRs (2)
    
540
      
2,607
(3) 
    
3,147
  
Total
  
$
8,514
    
$
42,208
    
$
50,722
  

(1)
Retail loans include mortgage and installment loan portfolio segments.
(2)
Included in non-performing loans table above.
(3)
Also includes loans on non-accrual at the time of modification until six payments are received on a timely basis.

We allocated $4.9 million and $5.2 million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings (“TDR”) at September 30, 2020 and December 31, 2019, respectively.

During the nine months ended September 30, 2020 and 2019, the terms of certain loans were modified as TDRs. The modification of the terms of such loans generally included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for a new loan with similar risk; or a permanent reduction of the recorded investment in the loan.

Modifications involving a reduction of the stated interest rate of the loan have generally been for periods ranging from 9 months to 36 months but have extended to as much as 480 months in certain circumstances. Modifications involving an extension of the maturity date have generally been for periods ranging from 1 month to 60 months but have extended to as much as 360 months in certain circumstances.
22
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Loans that have been classified as TDRs during the three-month periods ended September 30 follow:

 
Number of
Contracts
    
Pre-modification
Recorded
Balance
    
Post-modification
Recorded
Balance
  
   
(Dollars in thousands)
  
2020
                  
Commercial
                  
Commercial and industrial
    
-
    
$
-
    
$
-
  
Commercial real estate
    
-
      
-
      
-
  
Mortgage
                        
1-4 family owner occupied - jumbo
    
-
      
-
      
-
  
1-4 family owner occupied - non-jumbo
    
1
      
92
      
95
  
1-4 family non-owner occupied
    
1
      
52
      
54
  
1-4 family - 2nd lien
    
-
      
-
      
-
  
Resort lending
    
-
      
-
      
-
  
Installment
                        
Boat lending
    
-
      
-
      
-
  
Recreational vehicle lending
    
-
      
-
      
-
  
Other
    
1
      
19
      
19
  
Total
    
3
    
$
163
    
$
168
  
                         
2019
                        
Commercial
                        
Commercial and industrial
    
2
    
$
137
    
$
137
  
Commercial real estate
    
-
      
-
      
-
  
Mortgage
                        
1-4 family owner occupied - jumbo
    
-
      
-
      
-
  
1-4 family owner occupied - non-jumbo
    
1
      
198
      
202
  
1-4 family non-owner occupied
    
-
      
-
      
-
  
1-4 family - 2nd lien
    
3
      
75
      
75
  
Resort lending
    
-
      
-
      
-
  
Installment
                        
Boat lending
    
-
      
-
      
-
  
Recreational vehicle lending
    
-
      
-
      
-
  
Other
    
1
      
28
      
28
  
Total
    
7
    
$
438
    
$
442
  
23
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Loans that have been classified as TDRs during the nine-month periods ended September 30 follow:

 
  
Number of
Contracts
    
Pre-modification
Balance
    
Post-modification
Balance
  
 
  
(Dollars in thousands)
  
2020
                  
Commercial
                  
Commercial and industrial
    
7
    
$
1,207
    
$
1,207
  
Commercial real estate
    
4
      
7,012
      
7,012
  
Mortgage
                        
1-4 family owner occupied - jumbo
    
-
      
-
      
-
  
1-4 family owner occupied - non-jumbo
    
3
      
195
      
203
  
1-4 family non-owner occupied
    
2
      
111
      
116
  
1-4 family - 2nd lien
    
2
      
45
      
46
  
Resort lending
    
-
      
-
      
-
  
Installment
                        
Boat lending
    
-
      
-
      
-
  
Recreational vehicle lending
    
-
      
-
      
-
  
Other
    
2
      
52
      
53
  
Total
    
20
    
$
8,622
    
$
8,637
  
 
                        
2019
                        
Commercial
                        
Commercial and industrial
    
3
    
$
186
    
$
186
  
Commercial real estate
    
2
      
1,329
      
1,329
  
Mortgage
                        
1-4 family owner occupied - jumbo
    
-
      
-
      
-
  
1-4 family owner occupied - non-jumbo
    
2
      
479
      
483
  
1-4 family non-owner occupied
    
1
      
506
      
505
  
1-4 family - 2nd lien
    
3
      
75
      
75
  
Resort lending
    
-
      
-
      
-
  
Installment
                        
Boat lending
    
-
      
-
      
-
  
Recreational vehicle lending
    
-
      
-
      
-
  
Other
    
7
      
188
      
191
  
Total
    
18
    
$
2,763
    
$
2,769
  

The troubled debt restructurings described above for 2020 decreased the allowance for loan losses by $1.44 million and resulted in zero charge offs during the three months ended September 30, 2020, and increased the allowance for loan losses by $0.09 million and resulted in zero charge offs during the nine months ended September 30, 2020.

The troubled debt restructurings described above for 2019 increased the allowance for loan losses by $0.04 million and resulted in zero charge offs during the three months ended September 30, 2019, and increased the allowance for loan losses by $0.09 million and resulted in zero charge offs during the nine months ended September 30, 2019.

There were no troubled debt restructurings that subsequently defaulted within twelve months following the modification during the three and nine months periods ended September 30, 2020 and 2019.

A loan is considered to be in payment default generally once it is 90 days contractually past due under the modified terms.

24
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
In order to determine whether a borrower is experiencing financial difficulty, we perform an evaluation of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under our internal underwriting policy.

Non-TDR Loan Modifications and Paycheck Protection Program (“PPP”) due to COVID-19 - On March 22, 2020, the federal banking agencies issued an “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus”.  This guidance encourages financial institutions to work prudently with borrowers that may be unable to meet their contractual obligations because of the effects of COVID-19.  The guidance goes on to explain that in consultation with the Financial Accounting Standards Board staff that the federal banking agencies conclude that short-term modifications (e.g. six months or less) made on a good faith basis to borrowers who were current as of the implementation date of a relief program are not TDRs.  In addition, on March 27, 2020, President Trump signed the CARES Act.  Section 4013 of the CARES Act also addressed COVID-19 related modifications and specified that COVID-19 related modifications on loans that were current as of December 31, 2019 are not TDRs.  We are assisting both commercial and retail (mortgage and installment) borrowers with reduced or suspended payments. Commercial loan accommodations are typically a three month interest-only period while retail loan  (mortgage and installment) forbearances have primarily been payment suspensions for three months. For loans subject to these forbearance agreements  each borrower is required to resume making regularly scheduled loan payments at the end of the forbearance period.  The deferred principal and interest will be repaid based upon individualized agreements.  Options for repayment include separate repayment plans, extending the term of the loan or re-amortizing the loan based upon the affordability of the payment in relationship to a reduced income.  While some borrowers may elect to make a lump sum payment, we anticipate the majority will require some type of repayment plan.  During the forbearance period, the loan will not be reported as past due in keeping with the guidance discussed previously.

A summary of accommodations entered into under this guidance as of September 30, 2020 follows:

Commercial and Retail Loan COVID-19 Accomodations

 
Covid-19 Accomodations
    
Total
    
% of Total
  
Loan Category
  
Loans (#)
    
Loans ($)
    
Loans
    
Loans
  
                         
Commercial
    
17
    
$
25,105
    
$
1,351,790
      
1.9
%
Mortgage
    
197
      
32,091
      
1,024,036
      
3.1
%
Installment
    
97
      
2,631
      
479,653
      
0.5
%
Total
    
311
    
$
59,827
    
$
2,855,479
      
2.1
%
Mortgage loans serviced for others(1)
    
416
    
$
66,279
    
$
2,873,153
      
2.3
%

1)
We have delegated authority from all investors to grant these deferrals on their behalf.
25
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Information on subsequent accommodation extensions follows:

Commercial and Retail Loan COVID-19 Subsequent Accomodations

Loan Category
  
Loans (#)
    
Loans ($)
  
             
Commercial
    
6
    
$
5,726
  
Mortgage
    
125
      
22,571
  
Installment
    
51
      
1,583
  
Total
    
182
    
$
29,880
  


The CARES Act also included an initial $349 billion loan program administered through the U.S. Small Business Administration (“SBA”) referred to as the PPP. Under the PPP, small businesses and other entities and individuals can apply for loans from existing SBA lenders and other approved regulated lenders that enroll in the program, subject to numerous limitations and eligibility criteria. We are participating as a lender in the PPP. The PPP opened on April 3, 2020 intending to provide American small businesses with eight weeks of cash-flow assistance through 100 percent federally guaranteed loans through the SBA. In late April 2020 the Paycheck Protection Program and Health Care Enhancement Act, added another $310 billion in funding while the Paycheck Protection Program Flexibility Act made certain changes to the program, by allowing for more time to spend the funds, and making it easier to get a loan fully forgiven.  The PPP closed on August 8, 2020. Most recently, the SBA released a simpler loan forgiveness application for PPP loans of $50,000 or less that streamlines the PPP forgiveness process for such loans. As of September 30, 2020, we had 2,117 PPP loans outstanding with a total balance of $261.1 million.  PPP loans are included in the commercial and industrial class of the commercial loan portfolio segment.  As these loans are 100% guaranteed through the SBA the allowance for loan losses recorded on these loans is zero.  As of September 30, 2020, we have submitted 197 forgiveness applications for loans totaling $37.2 million.  Interest and fees on loans in our condensed consolidated statement of operations includes $1.3 million and $2.3 million for the three and nine month periods of 2020, related to the accretion of net loan fees on PPP loans. No such accretion is included in the comparable prior year periods.  At September 30, 2020 we had $6.5 million of remaining unaccreted net fees related to PPP loans.

Credit Quality Indicators – As part of our on-going monitoring of the credit quality of our loan portfolios, we track certain credit quality indicators including (a) weighted-average risk grade of commercial loans, (b) the level of classified commercial loans, (c) credit scores of mortgage and installment loan borrowers, and (d) delinquency history and non-performing loans.

For commercial loans, we use a loan rating system that is similar to those employed by state and federal banking regulators. Loans are graded on a scale of 1 to 12. A description of the general characteristics of the ratings follows:

Rating 1 through 6: These loans are generally referred to as our “non-watch” commercial credits that include very high or exceptional credit fundamentals through acceptable credit fundamentals.

Rating 7 and 8: These loans are generally referred to as our “watch” commercial credits. These ratings include loans to borrowers that exhibit potential credit weakness or downward trends. If not checked or cured these trends could weaken our asset or credit position. While potentially weak, no loss of principal or interest is envisioned with these ratings.

26
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Rating 9: These loans are generally referred to as our “substandard accruing” commercial credits. This rating includes loans to borrowers that exhibit a well-defined weakness where payment default is probable and loss is possible if deficiencies are not corrected. Generally, loans with this rating are considered collectible as to both principal and interest primarily due to collateral coverage.

Rating 10 and 11: These loans are generally referred to as our ‘‘substandard - non-accrual’’ and ‘‘doubtful’’ commercial credits. Our doubtful rating includes a sub classification for a loss rate other than 50% (which is the standard doubtful loss rate).  These ratings include loans to borrowers with weaknesses that make collection of the loan in full, on the basis of current facts, conditions and values at best questionable and at worst improbable. All of these loans are placed in non-accrual.

Rating 12: These loans are generally referred to as our “loss” commercial credits. This rating includes loans to borrowers that are deemed incapable of repayment and are charged-off.

The following table summarizes loan ratings by loan class for our commercial portfolio loan segment:

 
Commercial
  
   
Non-watch
1-6
    
Watch
7-8
    
Substandard
Accrual
9
    
Non-
Accrual
10-11
    
Total
  
               
(In thousands)
              
September 30, 2020
                              
Commercial and industrial
  
$
715,810
    
$
42,153
    
$
4,674
    
$
1,615
    
$
764,252
  
Commercial real estate
    
579,547
      
8,187
      
2,672
      
554
      
590,960
  
Total
  
$
1,295,357
    
$
50,340
    
$
7,346
    
$
2,169
    
$
1,355,212
  
Accrued interest included in total
  
$
3,267
    
$
116
    
$
39
    
$
-
    
$
3,422
  
                                         
December 31, 2019
                                        
Commercial and industrial
  
$
515,955
    
$
44,384
    
$
3,967
    
$
565
    
$
564,871
  
Commercial real estate
    
580,516
      
23,036
      
535
      
735
      
604,822
  
Total
  
$
1,096,471
    
$
67,420
    
$
4,502
    
$
1,300
    
$
1,169,693
  
Accrued interest included in total
  
$
2,763
    
$
205
    
$
30
    
$
-
    
$
2,998
  

For each of our mortgage and installment portfolio segment classes, we generally monitor credit quality based on the credit scores of the borrowers. These credit scores are generally updated semi-annually.

27
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The following tables summarize credit scores by loan class for our mortgage and installment loan portfolio segments:

 
Mortgage (1)
  
   
1-4 Family
Owner
Occupied -
Jumbo
    
1-4 Family
Owner
Occupied -
Non-jumbo
    
1-4 Family
Non-owner
Occupied
    
1-4 Family
2nd Lien
    
Resort
Lending
    
Total
  
   
(In thousands)
  
September 30, 2020
                                    
_800 and above
  
$
49,057
    
$
35,243
    
$
28,557
    
$
13,443
    
$
10,433
    
$
136,733
  
_750-799
    
219,844
      
64,957
      
78,503
      
42,292
      
28,294
      
433,890
  
_700-749
    
110,981
      
74,914
      
48,228
      
26,334
      
11,557
      
272,014
  
_650-699
    
41,101
      
36,963
      
14,511
      
11,982
      
7,277
      
111,834
  
_600-649
    
12,387
      
17,032
      
4,986
      
2,954
      
2,064
      
39,423
  
_550-599
    
3,477
      
12,270
      
1,908
      
2,214
      
494
      
20,363
  
_500-549
    
2,391
      
6,062
      
1,475
      
1,134
      
243
      
11,305
  
_Under 500
    
-
      
1,680
      
696
      
342
      
153
      
2,871
  
_Unknown
    
-
      
-
      
-
      
-
      
-
      
-
  
_Total
  
$
439,238
    
$
249,121
    
$
178,864
    
$
100,695
    
$
60,515
    
$
1,028,433
  
Accrued interest included in total
  
$
1,288
    
$
1,891
    
$
590
    
$
363
    
$
265
    
$
4,397
  
                                                 
December 31, 2019
                                                
_800 and above
  
$
48,486
    
$
43,848
    
$
24,315
    
$
13,905
    
$
11,076
    
$
141,630
  
_750-799
    
198,491
      
111,521
      
84,656
      
50,012
      
29,364
      
474,044
  
_700-749
    
106,609
      
95,064
      
34,839
      
30,697
      
14,626
      
281,835
  
_650-699
    
31,553
      
51,174
      
13,995
      
14,267
      
8,063
      
119,052
  
_600-649
    
13,230
      
21,938
      
5,897
      
4,097
      
2,074
      
47,236
  
_550-599
    
514
      
12,308
      
1,863
      
1,703
      
673
      
17,061
  
_500-549
    
1,519
      
7,940
      
1,870
      
1,281
      
889
      
13,499
  
_Under 500
    
641
      
2,208
      
533
      
511
      
79
      
3,972
  
_Unknown
    
510
      
1,259
      
1,569
      
69
      
1,330
      
4,737
  
_Total
  
$
401,553
    
$
347,260
    
$
169,537
    
$
116,542
    
$
68,174
    
$
1,103,066
  
Accrued interest included in total
  
$
1,139
    
$
1,662
    
$
586
    
$
502
    
$
266
    
$
4,155
  

(1)
Credit scores have been updated within the last twelve months.

28
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
 
Installment (1)
  
   
Boat
Lending
    
Recreational
Vehicle
Lending
    
Other
    
Total
  
   
(In thousands)
  
September 30, 2020
                        
_800 and above
  
$
33,385
    
$
29,085
    
$
8,466
    
$
70,936
  
_750-799
    
124,751
      
94,666
      
36,373
      
255,790
  
_700-749
    
38,729
      
34,236
      
26,833
      
99,798
  
_650-699
    
11,557
      
8,059
      
21,998
      
41,614
  
_600-649
    
2,089
      
1,668
      
3,738
      
7,495
  
_550-599
    
632
      
449
      
1,394
      
2,475
  
_500-549
    
242
      
465
      
755
      
1,462
  
_Under 500
    
351
      
24
      
180
      
555
  
_Unknown
    
-
      
-
      
703
      
703
  
_Total
  
$
211,736
    
$
168,652
    
$
100,440
    
$
480,828
  
Accrued interest included in total
  
$
471
    
$
381
    
$
323
    
$
1,175
  
                                 
December 31, 2019
                                
_800 and above
  
$
28,041
    
$
24,470
    
$
7,611
    
$
60,122
  
_750-799
    
118,380
      
88,164
      
37,583
      
244,127
  
_700-749
    
41,490
      
31,055
      
27,204
      
99,749
  
_650-699
    
11,485
      
7,267
      
22,517
      
41,269
  
_600-649
    
2,254
      
1,411
      
4,470
      
8,135
  
_550-599
    
946
      
592
      
1,884
      
3,422
  
_500-549
    
377
      
464
      
1,127
      
1,968
  
_Under 500
    
309
      
22
      
284
      
615
  
_Unknown
    
-
      
-
      
1,204
      
1,204
  
_Total
  
$
203,282
    
$
153,445
    
$
103,884
    
$
460,611
  
Accrued interest included in total
  
$
490
    
$
378
    
$
326
    
$
1,194
  

(1)
Credit scores have been updated within the last twelve months.

Foreclosed residential real estate properties included in other real estate and repossessed assets on our Condensed Consolidated Statements of Financial Condition totaled $1.0 million and $1.2 million at September 30, 2020 and December 31, 2019, respectively.  Retail mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process according to local requirements totaled $0.04 million and $0.70 million at September 30, 2020 and December 31, 2019, respectively.

During the first quarter of 2020, we securitized $26.3 million of portfolio residential fixed rate mortgage loans servicing retained with Freddie Mac and recognized a gain on sale of $0.72 million.  We also sold $2.4 million of portfolio residential fixed rate mortgage loans servicing retained into the secondary market and recognized a gain on sale of $0.07 million.  These transactions were done primarily for asset/liability management purposes.

29
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
During the first quarter of 2019, we sold $40.6 million of residential adjustable rate mortgage loans servicing released (classified on the Condensed Consolidated Statements of Financial Condition as held for sale, carried at the lower of cost or fair value at December 31, 2018) to another financial institution and recognized a gain on sale of $0.01 million.  During the first quarter of 2019 we also securitized $29.8 million, of portfolio residential fixed rate mortgage loans servicing retained with Freddie Mac and recognized a gain on sale of $0.53 million. During the third quarter of 2019, we sold $9.9 million of residential fixed and adjustable rate portfolio mortgage loans servicing retained to another financial institution and recognized a gain on sale of $0.07 million.  During the third quarter of 2019 we also transferred $36.6 million, of portfolio residential fixed rate mortgage loans to loans held for sale, carried at the lower of cost or fair value.  At the time of transfer and at September 30, 2019 the fair value of these loans exceeded their cost.  During the fourth quarter of 2019 these loans were securitized servicing retained with Freddie Mac and we recognized a gain on sale of approximately $1.0 million.These transactions were done primarily for asset/liability management purposes.

PCI Loans

Loans acquired in a business combination are recorded at estimated fair value on their purchase date with no carryover of the related allowance for loan losses. In determining the estimated fair value of purchased loans, we consider a number of factors including, among others, the remaining life of the acquired loans, estimated prepayments, estimated loss ratios, estimated value of the underlying collateral, and net present value of cash flows expected to be received. Purchased loans are accounted for in accordance with guidance for certain loans acquired in a transfer (ASC 310-30), when the loans have evidence of credit deterioration since origination and it is probable at the date of acquisition that the acquirer will not collect all contractually required principal and interest payments. The difference between contractually required payments and the cash flows expected to be collected at acquisition is referred to as the non-accretable difference. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in expected cash flows will result in a reversal of the provision for loan losses to the extent of prior charges and then an adjustment to accretable yield, which would have a positive impact on interest income.

As a result of our acquisition of TCSB Bancorp, Inc. in the second quarter of 2018 we purchased loans for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. For these loans that meet the criteria of ASC 310-30 treatment, the carrying amount was as follows:

 
September 30,
2020
    
December 31,
2019
  
   
(In thousands)
  
Commercial
  
$
906
    
$
1,394
  
Mortgage
    
560
      
575
  
Installment
    
143
      
316
  
Total carrying amount
    
1,609
      
2,285
  
Allowance for loan losses
    
-
      
-
  
Carrying amount, net of allowance for loan losses
  
$
1,609
    
$
2,285
  
30
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The accretable difference on PCI loans is the difference between the expected cash flows and the net present value of expected cash flows with such difference accreted into earnings using the effective yield method over the term of the loans. Accretion recorded as loan interest income is included in the table below.  Accretable yield of PCI loans, or income expected to be collected follows:

 
Three months ended
September 30,
    
Nine months ended
September 30,
  
   
2020
    
2019
    
2020
    
2019
  
   
(unaudited)
    
(unaudited)
  
   
(In thousands)
    
(In thousands)
  
                         
Balance at beginning of period
  
$
573
    
$
749
    
$
640
    
$
462
  
New loans purchased
    
-
      
-
      
-
      
-
  
Accretion recorded as loan interest income
    
(156
)
    
(56
)
    
(223
)
    
(134
)
Reclassification from (to) nonaccretable difference
    
-
      
-
      
-
      
365
  
Displosals/other adjustments
    
-
      
-
      
-
      
-
  
Balance at end of period
  
$
417
    
$
693
    
$
417
    
$
693
  


5.
Shareholders’ Equity and Earnings Per Common Share

On December 17, 2019, our Board of Directors authorized a share repurchase plan (the “Repurchase Plan”) to buy back up to 1,120,000 shares of our outstanding common stock through December 31, 2020.  Shares would be repurchased through open market transactions, though we could execute repurchases through other means, such as privately negotiated transactions.  The timing and amount of any share repurchases will depend on a variety of factors, including, among others, securities law restrictions, the trading price of our common stock, regulatory requirements, potential alternative uses for capital, and our financial performance. Due primarily to the economic uncertainty brought on by the COVID-19, we have not purchased any of our shares since March 2020. However, primarily as a result of our financial performance and improved economic conditions, and dependent upon market and other factors, we may begin to purchase our shares under the 2020 share repurchase plan during the last two months of the year. During the nine month periods ended September 30, 2020 and 2019 repurchases were made totaling 678,929 shares and 1,204,688 shares of common stock, respectively, for an aggregate purchase price of $13.8 million and $26.3 million, respectively.

31
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

A reconciliation of basic and diluted net income per common share follows:

 
  
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
 
  
2020
    
2019
    
2020
    
2019
  
 
  
(In thousands, except per share data)
  
Net income
  
$
19,584
    
$
12,445
    
$
39,166
    
$
32,556
  
 
                                
Weighted average shares outstanding (1)
    
21,881
      
22,486
      
22,014
      
23,033
  
Stock units for deferred compensation plan for non-employee directors
    
117
      
132
      
119
      
131
  
Effect of stock options
    
85
      
110
      
90
      
116
  
Performance share units
    
32
      
42
      
33
      
39
  
Weighted average shares outstanding for calculation of diluted earnings per share
    
22,115
      
22,770
      
22,256
      
23,319
  
 
                                
Net income per common share
                                
Basic (1)
  
$
0.90
    
$
0.55
    
$
1.78
    
$
1.41
  
Diluted
  
$
0.89
    
$
0.55
    
$
1.76
    
$
1.40
  
 
(1)
Basic net income per common share includes weighted average common shares outstanding during the period and participating share awards.

Weighted average stock options outstanding that were not considered in computing diluted net income per common share because they were anti-dilutive were zero for the three and nine month periods ended September 30, 2020 and 2019, respectively.


6.
Derivative Financial Instruments

We are required to record derivatives on our Condensed Consolidated Statements of Financial Condition as assets and liabilities measured at their fair value.  The accounting for increases and decreases in the value of derivatives depends upon the use of derivatives and whether the derivatives qualify for hedge accounting.

32
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Our derivative financial instruments according to the type of hedge in which they are designated follows:

 
September 30, 2020
  
   
Notional
Amount
    
Average
Maturity
(years)
    
Fair
Value
  
   
(Dollars in thousands)
  
                   
Fair value hedge designation - Pay-fixed interest rate swap agreements
  
$
7,117
      
8.6
    
$
(860
)
                         
No hedge designation
                        
Rate-lock mortgage loan commitments
  
$
196,646
      
0.1
    
$
8,356
  
Mandatory commitments to sell mortgage loans
    
232,948
      
0.1
      
(580
)
Pay-fixed interest rate swap agreements - commercial
    
144,787
      
4.7
      
(10,811
)
Pay-variable interest rate swap agreements - commercial
    
144,787
      
4.7
      
10,811
  
Pay-fixed interest rate swap agreements
    
25,000
      
0.8
      
(409
)
Interest rate cap agreements
    
150,000
      
1.8
      
5
  
Purchased options
    
2,908
      
0.8
      
30
  
Written options
    
2,848
      
0.8
      
(30
)
Total
  
$
899,924
      
1.9
    
$
7,372
  

 
December 31, 2019
  
   
Notional
Amount
    
Average
Maturity
(years)
    
Fair
Value
  
   
(Dollars in thousands)
  
Fair value hedge designation - Pay-fixed interest rate swap agreements
  
$
7,117
      
9.4
    
$
(242
)
                         
Cash flow hedge designation
                        
Pay-fixed interest rate swap agreements
  
$
25,000
      
1.6
    
$
(174
)
Interest rate cap agreements
    
150,000
      
2.6
      
214
  
Total
  
$
175,000
      
2.5
    
$
40
  
                         
No hedge designation
                        
Rate-lock mortgage loan commitments
  
$
49,268
      
0.1
    
$
1,412
  
Mandatory commitments to sell mortgage loans
    
95,363
      
0.1
      
(150
)
Pay-fixed interest rate swap agreements - commercial
    
153,946
      
5.5
      
(3,641
)
Pay-variable interest rate swap agreements - commercial
    
153,946
      
5.5
      
3,641
  
Purchased options
    
2,908
      
1.5
      
141
  
Written options
    
2,848
      
1.5
      
(139
)
Total
  
$
458,279
      
3.7
    
$
1,264
  

33
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
We use variable-rate and short-term fixed-rate (less than 12 months) debt obligations to fund a portion of our Condensed Consolidated Statements of Financial Condition, which exposes us to variability in interest rates. To meet our asset/liability management objectives, we may periodically enter into derivative financial instruments to mitigate exposure to fluctuations in cash flows resulting from changes in interest rates (“Cash Flow Hedges”).  Cash Flow Hedges included certain pay-fixed interest rate swaps and interest rate cap agreements.  Pay-fixed interest rate swaps convert the variable-rate cash flows on debt obligations to fixed-rates.  Under interest-rate cap agreements, we will receive cash if interest rates rise above a predetermined level. As a result, we effectively have variable-rate debt with an established maximum rate. We paid an upfront premium on interest rate caps which was recognized in earnings in the same period in which the hedged item affected earnings. During the first and third quarters of 2020 we transferred all of our Cash Flow Hedge interest rate cap agreements and pay-fixed interest rate swaps, respectively to a no hedge designation. The $2.0 million and $0.5 million unrealized loss on our Cash Flow Hedge interest rate cap agreements and pay-fixed interest rate swaps, respectively which were included as a component of accumulated other comprehensive income (loss) at the time of the transfers will be reclassified into earnings over the remaining life of the interest rate cap agreements and pay-fixed interest rate swaps.  The interest rate cap agreements and pay-fixed interest rate swaps are classified as a no hedge designation at September 30, 2020 and any changes in fair value since the transfers to the no hedge designation are recorded in earnings.

 Prior to moving all of our Cash Flow Hedges to a no hedge designation as discussed above, we had recorded the fair value of these hedges in accrued income and other assets and accrued expenses and other liabilities on our Condensed Consolidated Statements of Financial Condition.  On an ongoing basis, we adjusted our Condensed Consolidated Statements of Financial Condition to reflect the then current fair value of Cash Flow Hedges.  The related gains or losses were reported in other comprehensive income or loss and were subsequently reclassified into earnings as a yield adjustment in the same period in which the related interest on the hedged items (variable-rate debt obligations) affected earnings.  It is anticipated that approximately $1.1 million, of unrealized losses from the previously classified Cash Flow Hedges (all a result of the unrealized losses discussed in the previous paragraph) at September 30, 2020 will be reclassified to earnings over the next twelve months.

Beginning in the second quarter of 2019 we entered into a pay-fixed interest rate swap to protect a portion of the fair value of a certain fixed rate commercial loan commitment (“Fair Value Hedge”).  As a result, changes in the fair value of the pay-fixed interest rate swap is expected to offset changes in the fair value of the fixed rate commercial loan commitment due to fluctuations in interest rates.  We record the fair value of Fair Value Hedges in accrued income and other assets and accrued expenses and other liabilities on our Condensed Consolidated Statements of Financial Condition.  The hedged item (fixed rate commercial loan commitment) is also recorded at fair value which offsets the adjustment to the Fair Value Hedge.  On an ongoing basis, we adjust our Condensed Consolidated Statements of Financial Condition to reflect the then current fair value of both the Fair Value Hedge and the hedged item.  The related gains or losses are reported in non-interest income – other in our Condensed Consolidated Statements of Operations.

Certain financial derivative instruments have not been designated as hedges. The fair value of these derivative financial instruments has been recorded on our Condensed Consolidated Statements of Financial Condition and is adjusted on an ongoing basis to reflect their then current fair value. The changes in fair value of derivative financial instruments not designated as hedges are recognized in our Condensed Consolidated Statements of Operations.

34
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
In the ordinary course of business, we enter into rate-lock mortgage loan commitments with customers (“Rate-Lock Commitments”).  These commitments expose us to interest rate risk.  We also enter into mandatory commitments to sell mortgage loans (“Mandatory Commitments”) to reduce the impact of price fluctuations of mortgage loans held for sale and Rate-Lock Commitments.  Mandatory Commitments help protect our loan sale profit margin from fluctuations in interest rates. The changes in the fair value of Rate-Lock Commitments and Mandatory Commitments are recognized currently as part of net gains on mortgage loans in our Condensed Consolidated Statements of Operations.  We obtain market prices on Mandatory Commitments and Rate-Lock Commitments.  Net gains on mortgage loans, as well as net income may be more volatile as a result of these derivative instruments, which are not designated as hedges.

In prior periods we offered to our deposit customers an equity linked time deposit product (“Altitude CD”).  The Altitude CD was a time deposit that provides the customer a guaranteed return of principal at maturity plus a potential equity return (a written option), while we receive a like stream of funds based on the equity return (a purchased option).  The written and purchased options will generally move in opposite directions resulting in little or no net impact on our Condensed Consolidated Statements of Operations.  All of the written and purchased options in the table above relate to this Altitude CD product.

We have a program that allows commercial loan customers to lock in a fixed rate for a longer period of time than we would normally offer for interest rate risk reasons.  We will enter into a variable rate commercial loan and an interest rate swap agreement with a customer and then enter into an offsetting interest rate swap agreement with an unrelated party.  The interest rate swap agreement fair values will generally move in opposite directions resulting in little or no net impact on our Condensed Consolidated Statements of Operations.  All of the interest rate swap agreements noted as commercial in the table above with no hedge designation relate to this program.

35
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The following tables illustrate the impact that the derivative financial instruments discussed above have on individual line items in the Condensed Consolidated Statements of Financial Condition for the periods presented:

Fair Values of Derivative Instruments

 
Asset Derivatives
    
Liability Derivatives
  
   
September 30,
2020
    
December 31,
2019
    
September 30,
2020
    
December 31,
2019
  
   
Balance
Sheet
Location
    
Fair
Value
    
Balance
Sheet
Location
    
Fair
Value
    
Balance
Sheet
Location
    
Fair
Value
    
Balance
Sheet
Location
    
Fair
Value
  
   
(In thousands)
  
Derivatives designated as hedging instruments
    
-
            
-
            
-
            
-
        
Pay-fixed interest rate swap agreements
  
Other assets
    
$
-
    
Other assets
    
$
-
    
Other liabilities
    
$
860
    
Other liabilities
    
$
416
  
Interest rate cap agreements
  
Other assets
      
-
    
Other assets
      
214
    
Other liabilities
      
-
    
Other liabilities
      
-
  
             
-
              
214
              
860
              
416
  
                                                                 
Derivatives not designated as hedging instruments
                                                                
Rate-lock mortgage loan commitments
  
Other assets
      
8,356
    
Other assets
      
1,412
    
Other liabilities
      
-
    
Other liabilities
      
-
  
Mandatory commitments to sell mortgage loans
  
Other assets
      
-
    
Other assets
      
-
    
Other liabilities
      
580
    
Other liabilities
      
150
  
Pay-fixed interest rate swap agreements - commercial
  
Other assets
      
-
    
Other assets
      
28
    
Other liabilities
      
10,811
    
Other liabilities
      
3,669
  
Pay-variable interest rate swap agreements - commercial
  
Other assets
      
10,811
    
Other assets
      
3,669
    
Other liabilities
      
-
    
Other liabilities
      
28
  
Pay-fixed interest rate swap agreements
  
Other assets
      
-
    
Other assets
      
-
    
Other liabilities
      
409
    
Other liabilities
      
-
  
Interest rate cap agreements
  
Other assets
      
5
    
Other assets
      
-
    
Other liabilities
      
-
    
Other liabilities
      
-
  
Purchased options
  
Other assets
      
30
    
Other assets
      
141
    
Other liabilities
      
-
    
Other liabilities
      
-
  
Written options
  
Other assets
      
-
    
Other assets
      
-
    
Other liabilities
      
30
    
Other liabilities
      
139
  
             
19,202
              
5,250
              
11,830
              
3,986
  
Total derivatives
          
$
19,202
            
$
5,464
            
$
12,690
            
$
4,402
  

36
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The effect of derivative financial instruments on the Condensed Consolidated Statements of Operations follows:

Three Month Periods Ended September 30,
  
   
Loss
Recognized in
Other
Comprehensive
Income
(Effective Portion)
  
Location of
Gain (Loss)
Reclassified
from
Accumulated
Other
Comprehensive
 Income (Loss) into
Income
(Effective
  
Gain (Loss)
Reclassified from
Accumulated Other
Comprehensive
Income (Loss)
into Income
(Effective Portion)
  
Location of
Gain (Loss)
Recognized
  
Gain (Loss)
Recognized
in Income
  
   
2020
    
2019
  
Portion)
  
2020
    
2019
  
 in Income
  
2020
    
2019
  
   
(In thousands)
  
Fair Value Hedges
                                        
Pay-fixed interest rate swap agreements
                          
Non-interest income-other
  
$
6
    
$
(188
)
Cash Flow Hedges
                                            
Interest rate cap agreements
  
$
-
    
$
(37
)
Interest expense
  
$
(180
)
  
$
88
                    
Pay-fixed interest rate swap agreements
    
(26
)
    
(35
)
Interest expense
    
(130
)
    
14
                    
Total
  
$
(26
)
  
$
(72
)
    
$
(310
)
  
$
102
                    
                                                     
No hedge designation
                                                    
Rate-lock mortgage loan commitments
                                  
Net gains on mortgage loans
  
$
1,096
    
$
(96
)
Mandatory commitments to sell mortgage loans
                                  
Net gains on mortgage loans
    
52
      
307
  
Pay-fixed interest rate swap agreements -  commercial
                                  
Interest income
    
688
      
(1,670
)
Pay-variable interest rate swap agreements - commercial
                                  
Interest income
    
(688
)
    
1,670
  
Pay-fixed interest rate swap agreements
                                  
Interest expense
    
117
      
-
  
Interest rate cap agreements
                                  
Interest expense
    
(14
)
    
-
  
Purchased options
                                  
Interest expense
    
(10
)
    
(46
)
Written options
                                  
Interest expense
    
10
      
46
  
Total
                                           
$
1,251
    
$
211
  

37
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Nine Month Periods Ended September 30,
  
 
  
Gain (Loss)
Recognized in
Other
Comprehensive
Income
(Effective Portion)
  
 Location of
 Gain (Loss)
 Reclassified
 from
 Accumulated
 Other
 Comprehensive
Income (Loss)
 into
 Income
 (Effective
  
Gain (Loss)
Reclassified from
Accumulated Other
Comprehensive
Income (Loss)
into Income
(Effective Portion)
  
 Location of
 Gain (Loss)
 Recognized
  
Gain (Loss)
Recognized
in Income
  
 
  
2020
    
2019
  
 Portion)
  
2020
    
2019
  
 in Income
  
2020
    
2019
  
 
  
(In thousands)
  
Fair Value Hedges
            
 
            
 
            
Pay-fixed interest rate swap agreements
            
 
            
Non-interest income-other
  
$
(618
)
  
$
(391
)
Cash Flow Hedges
Interest rate cap agreements
  
$
126
    
$
(1,311
)
Interest expense
  
$
(413
)
  
$
321
                    
Pay-fixed interest rate swap agreements
    
(480
)
    
(429
)
Interest expense
    
(233
)
    
72
                    
Total
  
$
(354
)
  
$
(1,740
)
 
  
$
(646
)
  
$
393
  
 
                
 
                
 
                
 
                
No hedge designation
                
 
                
 
                
Rate-lock mortgage loan commitments
                
 
                
Net gains on mortgage loans
  
$
6,944
    
$
1,364
  
Mandatory commitments to sell mortgage loans
                
 
                
Net gains on mortgage loans
    
(430
)
    
356
  
Pay-fixed interest rate swap agreements - commercial
                
 
                
Interest income
    
(7,170
)
    
(5,254
)
Pay-variable interest rate swap agreements - commercial
                
 
                
Interest income
    
7,170
      
5,254
  
Pay-fixed interest rate swap agreements
                                  
Interest expense
    
117
      
-
  
Interest rate cap agreements
                                  
Interest expense
    
(56
)
    
-
  
Purchased options
                
 
                
Interest expense
    
(111
)
    
9
  
Written options
                
 
                
Interest expense
    
109
      
(8
)
Total
                
 
                
           
  
$
6,573
    
$
1,721
  


38
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

7.
Goodwill and Other Intangibles

The following table summarizes intangible assets, net of amortization:

 
September 30, 2020
    
December 31, 2019
  
   
Gross
Carrying
Amount
    
Accumulated
Amortization
    
Gross
Carrying
Amount
    
Accumulated
Amortization
  
   
(In thousands)
  
                         
Amortized intangible assets - core deposits
  
$
11,916
    
$
7,355
    
$
11,916
    
$
6,590
  
Unamortized intangible assets - goodwill
  
$
28,300
            
$
28,300
          

We performed our required annual goodwill impairment test as of December 31, 2019 and there was no impairment.  Since the first quarter of 2020 bank stocks in general as well as our market capitalization have declined as a result of events surrounding the current COVID-19 pandemic outbreak.  As a result, we completed a qualitative goodwill impairment test as of March 31, 2020, June 30, 2020 and September 30, 2020. This qualitative analysis included a review of our earnings and asset quality trends as well as capital levels and the economic conditions of our markets. In addition, this qualitative analysis looked at merger and acquisition analytics for banks in general . Finally, our common stock traded over book value for several days during the second quarter. Based on this qualitative analysis we do not believe this decline is indicative of a permanent deterioration of the fundamental value of our bank. As such we do not believe that it is more likely than not goodwill impairment exists at September 30, 2020. See note 13, Contingencies, for additional information on COVID-19 and its potential impact to us.

A summary of estimated core deposit intangible amortization at September 30, 2020 follows:

 
(In thousands)
  
       
Three months ending December 31, 2020
  
$
255
  
2021
    
970
  
2022
    
785
  
2023
    
547
  
2024
    
516
  
2025 and thereafter
    
1,488
  
Total
  
$
4,561
  

8.
Share Based Compensation

We maintain share based payment plans that include a non-employee director stock purchase plan and a long-term incentive plan that permits the issuance of share based compensation, including stock options and non-vested share awards. The long-term incentive plan, which is shareholder approved, permits the grant of additional share based awards for up to 0.4 million shares of common stock as of September 30, 2020.  The non-employee director stock purchase plan permits the issuance of additional share based payments for up to 0.2 million shares of common stock as of September 30, 2020. Share based awards and payments are measured at fair value at the date of grant and are expensed over the requisite service period. Common shares issued upon exercise of stock options come from currently authorized but unissued shares.
39
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
A summary of restricted stock and performance stock units (“PSU”) granted pursuant to our long-term incentive plan follows:

 
  
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
 
  
2020
    
2019
    
2020
    
2019
  
 
      
Restricted stock
    
3,000
      
8,000
      
55,996
      
64,267
  
PSU
    
-
      
-
      
20,897
      
22,016
  

Except for 0.008 million shares of restricted stock issued during the third quarter of 2019 and 0.002 million shares of restricted stock issued during the first quarter of 2019 that vest ratably over three years, the shares of restricted stock and PSUs shown in the above table cliff vest after a period of three years.  The performance feature of the PSUs is based on a comparison of our total shareholder return over the three year period starting on the grant date to the total shareholder return over that period for an index of our banking peers.

Our directors may elect to receive a portion of their quarterly cash retainer fees in the form of common stock (either on a current basis or on a deferred basis pursuant to the non-employee director stock purchase plan referenced above). Shares equal in value to that portion of each director’s fees that he or she has elected to receive in stock on a current basis are issued each quarter and vest immediately. Shares issued on a deferred basis are credited at the rate of 90%of the current value and vest immediately.  During the nine month periods ended September 30, 2020 and 2019 we issued 0.016 million and 0.008 million shares, respectively and expensed their value during those same periods.

Total compensation expense recognized for grants pursuant to our long-term incentive plan was $0.4 million and $1.2 million during the three and nine month periods ended September 30, 2020, respectively, and was $0.4 million and $1.2 million during the same periods in 2019, respectively.  The corresponding tax benefit relating to this expense was $0.1 million and $0.3 million for the three and nine month periods ended September 30, 2020, respectively and $0.1 million and $0.2 million for the same periods in 2019. Total expense recognized for non-employee director share based payments was $0.09 million and $0.26 million during the three and nine month periods ended September 30, 2020, respectively, and was $0.06 million and $0.18 million during the same periods in 2019, respectively.  The corresponding tax benefit relating to this expense was $0.02 million and $0.05 million for the three and nine month periods ended September 30, 2020, respectively and $0.01 million and $0.04 million during the same periods in 2019.

At September 30, 2020, the total expected compensation cost related to non-vested restricted stock and PSUs not yet recognized was $2.1 million.  The weighted-average period over which this amount will be recognized is 1.8 years.

40
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
A summary of outstanding stock option grants and related transactions follows:

 
Number of
Shares
    
Average
Exercise
Price
    
Weighted-
Average
Remaining
Contractual
Term (Years)
    
Aggregated
Intrinsic
Value
  
                     
(In thousands)
  
Outstanding at January 1, 2020
    
138,506
    
$
4.62
              
Granted
    
-
                      
Exercised
    
(13,117
)
    
3.50
              
Forfeited
    
-
                      
Expired
    
-
                      
Outstanding at September 30, 2020
    
125,389
    
$
4.73
      
2.3
    
$
993
  
                                 
Vested and expected to vest at September 30, 2020
    
125,389
    
$
4.73
      
2.3
    
$
993
  
Exercisable at September 30, 2020
    
125,389
    
$
4.73
      
2.3
    
$
993
  


A summary of outstanding non-vested restricted stock and PSUs and related transactions follows:

 
Number
of Shares
    
Weighted-
Average
Grant Date
Fair Value
  
Outstanding at January 1, 2020
    
245,726
    
$
21.72
  
Granted
    
76,893
      
22.46
  
Vested
    
(77,092
)
    
20.61
  
Forfeited
    
(20,869
)
    
22.64
  
Outstanding at September 30, 2020
    
224,658
    
$
22.26
  

Certain information regarding options exercised during the periods follows:

 
  
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
 
  
2020
    
2019
    
2020
    
2019
  
   
(In thousands)
    
(In thousands)
  
Intrinsic value
  
$
11
    
$
32
    
$
224
    
$
868
  
Cash proceeds received
  
$
4
    
$
6
    
$
46
    
$
701
  
Tax benefit realized
  
$
2
    
$
6
    
$
47
    
$
182
  

41
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

9.
Income Tax

Income tax expense was $4.8 million and $3.1 million during the three month periods ended September 30, 2020 and 2019, respectively and $9.2 million and $8.0 million during the nine months ended September 30, 2020 and 2019, respectively.  Our actual federal income tax expense is different than the amount computed by applying our statutory income tax rate to our income before income tax primarily due to tax-exempt interest income and tax-exempt income from the increase in the cash surrender value on life insurance.  In addition, the three and nine month periods ending September 30, 2020 include increases (reductions) of $0.01 million and ($0.19) million, respectively, of income tax expense related to the impact of the excess value of stock awards that vested and stock options that were exercised as compared to the initial fair values that were expensed.  These amounts during the same periods in 2019 were reductions of $0.01 million and $0.18 million, respectively.

We assess whether a valuation allowance should be established against our deferred tax assets based on the consideration of all available evidence using a “more likely than not” standard.  The ultimate realization of this asset is primarily based on generating future income.  We concluded at September 30, 2020, September 30, 2019 and December 31, 2019 that the realization of substantially all of our deferred tax assets continues to be more likely than not.

At both September 30, 2020 and December 31, 2019, we had approximately $0.4 million, of gross unrecognized tax benefits.  We do not expect the total amount of unrecognized tax benefits to significantly increase or decrease during the balance of 2020.

10.
Regulatory Matters

Capital guidelines adopted by federal and state regulatory agencies and restrictions imposed by law limit the amount of cash dividends our Bank can pay to us. Under these guidelines, the amount of dividends that may be paid in any calendar year is limited to the Bank’s current year net profits, combined with the retained net profits of the preceding two years. Further, the Bank cannot pay a dividend at any time that it has negative undivided profits.  As of September 30, 2020, the Bank had positive undivided profits of $68.3 million.  It is not our intent to have dividends paid in amounts that would reduce the capital of our Bank to levels below those which we consider prudent and in accordance with guidelines of regulatory authorities.

We are also subject to various regulatory capital requirements. The prompt corrective action regulations establish quantitative measures to ensure capital adequacy and require minimum amounts and ratios of total, Tier 1, and common equity Tier 1 capital to risk-weighted assets and Tier 1 capital to average assets. Failure to meet minimum capital requirements can result in certain mandatory, and possibly discretionary, actions by regulators that could have a material effect on our interim condensed consolidated financial statements. In addition, capital adequacy rules include a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets that applies to all supervised financial institutions. To avoid limits on capital distributions and certain discretionary bonus payments we must meet the minimum ratio for adequately capitalized institutions plus the buffer. Under capital adequacy guidelines, we must meet specific capital requirements that involve quantitative measures as well as qualitative judgments by the regulators. The most recent regulatory filings as of September 30, 2020 and December 31, 2019, categorized our Bank as well capitalized. Management is not aware of any conditions or events that would have changed the most recent Federal Deposit Insurance Corporation (“FDIC”) categorization.
42
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Our actual capital amounts and ratios follow (1):

 
Actual
    
Minimum for
Adequately Capitalized
Institutions
    
Minimum for
Well-Capitalized
Institutions
  
   
Amount
    
Ratio
    
Amount
    
Ratio
    
Amount
    
Ratio
  
   
(Dollars in thousands)
  
                                     
September 30, 2020
                                    
Total capital to risk-weighted assets
                                    
Consolidated
  
$
441,969
      
15.62
%
  
$
226,378
      
8.00
%
  
NA
    
NA
  
Independent Bank
    
391,033
      
13.82
      
226,310
      
8.00
    
$
282,888
      
10.00
%
                                                 
Tier 1 capital to risk-weighted assets
                                                
Consolidated
  
$
366,571
      
12.95
%
  
$
169,783
      
6.00
%
  
NA
    
NA
  
Independent Bank
    
355,645
      
12.57
      
169,733
      
6.00
    
$
226,310
      
8.00
%
                                                 
Common equity tier 1 capital to risk-weighted assets
                                                
Consolidated
  
$
328,288
      
11.60
%
  
$
127,338
      
4.50
%
  
NA
    
NA
  
Independent Bank
    
355,645
      
12.57
      
127,299
      
4.50
    
$
183,877
      
6.50
%
                                                 
Tier 1 capital to average assets
                                                
Consolidated
  
$
366,571
      
9.05
%
  
$
162,103
      
4.00
%
  
NA
    
NA
  
Independent Bank
    
355,645
      
8.78
      
162,020
      
4.00
    
$
202,525
      
5.00
%
                                                 
December 31, 2019
                                                
Total capital to risk-weighted assets
                                                
Consolidated
  
$
380,454
      
13.74
%
  
$
221,562
      
8.00
%
  
NA
    
NA
  
Independent Bank
    
358,914
      
12.96
      
221,482
      
8.00
    
$
276,852
      
10.00
%
                                                 
Tier 1 capital to risk-weighted assets
                                                
Consolidated
  
$
352,764
      
12.74
%
  
$
166,171
      
6.00
%
  
NA
    
NA
  
Independent Bank
    
331,224
      
11.96
      
166,111
      
6.00
    
$
221,482
      
8.00
%
                                                 
Common equity tier 1 capital to risk-weighted assets
                                                
Consolidated
  
$
314,532
      
11.36
%
  
$
124,628
      
4.50
%
  
NA
    
NA
  
Independent Bank
    
331,224
      
11.96
      
124,583
      
4.50
    
$
179,954
      
6.50
%
                                                 
Tier 1 capital to average assets
                                                
Consolidated
  
$
352,764
      
10.11
%
  
$
139,632
      
4.00
%
  
NA
    
NA
  
Independent Bank
    
331,224
      
9.49
      
139,615
      
4.00
    
$
174,519
      
5.00
%

(1)
These ratios do not reflect a capital conservation buffer of 2.50% at September 30, 2020 and December 31, 2019.

NA - Not applicable
43
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The components of our regulatory capital are as follows:

 
Consolidated
    
Independent Bank
  
   
September 30,
2020
    
December 31,
2019
    
September 30,
2020
    
December 31,
2019
  
   
(In thousands)
  
Total shareholders' equity
  
$
373,092
    
$
350,169
    
$
400,449
    
$
366,861
  
Add (deduct)
                                
Accumulated other comprehensive income for regulatory purposes
    
(11,943
)
    
(2,011
)
    
(11,943
)
    
(2,011
)
Goodwill and other intangibles
    
(32,861
)
    
(33,626
)
    
(32,861
)
    
(33,626
)
Common equity tier 1 capital
    
328,288
      
314,532
      
355,645
      
331,224
  
Qualifying trust preferred securities
    
38,283
      
38,232
      
-
      
-
  
Tier 1 capital
    
366,571
      
352,764
      
355,645
      
331,224
  
Subordinated debt
    
40,000
      
-
      
-
      
-
  
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets
    
35,398
      
27,690
      
35,388
      
27,690
  
Total risk-based capital
  
$
441,969
    
$
380,454
    
$
391,033
    
$
358,914
  

11.
Fair Value Disclosures

FASB ASC topic 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. FASB ASC topic 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Valuation is based upon quoted prices for identical instruments traded in active markets. Level 1 instruments include securities traded on active exchange markets, such as the New York Stock Exchange, as well as U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets.

Level 2:  Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. Level 2 instruments include securities traded in less active dealer or broker markets.

Level 3:  Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

44
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
We used the following methods and significant assumptions to estimate fair value:

Securities:  Where quoted market prices are available in an active market, securities available for sale are classified as Level 1 of the valuation hierarchy.  We currently do not have any Level 1 securities. If quoted market prices are not available for the specific security, then fair values are estimated by (1) using quoted market prices of securities with similar characteristics, (2) matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices, or (3) a discounted cash flow analysis whose significant fair value inputs can generally be verified and do not typically involve judgment by management. These securities are classified as Level 2 of the valuation hierarchy and primarily include agency securities, private label mortgage-backed securities, other asset backed securities, obligations of states and political subdivisions, trust preferred securities, corporate securities and foreign government securities.

Loans held for sale:  The fair value of mortgage loans held for sale, carried at fair value is based on agency cash window loan pricing for comparable assets (recurring Level 2).

Impaired loans with specific loss allocations based on collateral value:  From time to time, certain loans are considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. When the fair value of the collateral is based on an appraised value or when an appraised value is not available we record the impaired loan as nonrecurring Level 3.  These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments can be significant and thus will typically result in a Level 3 classification of the inputs for determining fair value.

Other real estate:  At the time of acquisition, other real estate is recorded at fair value, less estimated costs to sell, which becomes the property’s new basis. Subsequent write-downs to reflect declines in value since the time of acquisition may occur from time to time and are recorded in net (gains) losses on other real estate and repossessed assets, which is part of non-interest expense - other in the Condensed Consolidated Statements of Operations. The fair value of the property used at and subsequent to the time of acquisition is typically determined by a third party appraisal of the property. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments can be significant and typically result in a Level 3 classification of the inputs for determining fair value.

45
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Appraisals for both collateral-dependent impaired loans and other real estate  are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by us. Once received, an independent third party, or a member of our Collateral Evaluation Department (for commercial properties), or a member of our Special Assets Group (for residential properties) reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. We compare the actual selling price of collateral that has been sold to the most recent appraised value of our properties to determine what additional adjustment, if any, should be made to the appraisal value to arrive at fair value. For commercial and residential properties we typically discount an appraisal to account for various factors that the appraisal excludes in its assumptions. These additional discounts generally do not result in material adjustments to the appraised value.

Capitalized mortgage loan servicing rights:  The fair value of capitalized mortgage loan servicing rights is based on a valuation model used by an independent third party that calculates the present value of estimated net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income. Certain model assumptions are generally unobservable and are based upon the best information available including data relating to our own servicing portfolio, reviews of mortgage servicing assumption and valuation surveys and input from various mortgage servicers and, therefore, are recorded as Level 3.  Management evaluates the third party valuation for reasonableness each quarter as part of our financial reporting control processes.

Derivatives:  The fair value of rate-lock mortgage loan commitments is based on agency cash window loan pricing for comparable assets and the fair value of mandatory commitments to sell mortgage loans is based on mortgage backed security pricing for comparable assets (recurring Level 2). The fair value of interest rate swap and interest rate cap agreements are derived from proprietary models which utilize current market data.  The significant fair value inputs can generally be observed in the market place and do not typically involve judgment by management (recurring Level 2). The fair value of purchased and written options is based on prices of financial instruments with similar characteristics and do not typically involve judgment by management (recurring Level 2).
46
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Assets and liabilities measured at fair value, including financial assets for which we have elected the fair value option, were as follows:

       
Fair Value Measurements Using
  
   
Fair Value
Measure-
ments
    
Quoted
Prices
in Active
Markets
for
Identical
Assets
(Level 1)
    
Significant
Other
Observable
Inputs
(Level 2)
    
Significant
Un-
observable
Inputs
(Level 3)
  
   
(In thousands)
  
September 30, 2020:
                        
Measured at Fair Value on a Recurring Basis
                        
Assets
                        
Securities available for sale
                        
U.S. agency
  
$
11,130
    
$
-
    
$
11,130
    
$
-
  
U.S. agency residential mortgage-backed
    
335,560
      
-
      
335,560
      
-
  
U.S. agency commercial mortgage-backed
    
8,421
      
-
      
8,421
      
-
  
Private label mortgage-backed
    
44,285
      
-
      
44,285
      
-
  
Other asset backed
    
263,371
      
-
      
263,371
      
-
  
Obligations of states and political subdivisions
    
244,978
      
-
      
244,978
      
-
  
Corporate
    
75,017
      
-
      
75,017
      
-
  
Trust preferred
    
1,770
      
-
      
1,770
      
-
  
Foreign government
    
518
      
-
      
518
      
-
  
Loans held for sale, carried at fair value
    
99,747
      
-
      
99,747
      
-
  
Capitalized mortgage loan servicing rights
    
15,403
      
-
      
-
      
15,403
  
Derivatives (1)
    
19,202
      
-
      
19,202
      
-
  
Liabilities
                                
Derivatives (2)
    
12,690
      
-
      
12,690
      
-
  
                                 
Measured at Fair Value on a Non-recurring Basis:
                                
Assets
                                
Impaired loans (3)
                                
Commercial
                                
Commercial and industrial
    
1,591
      
-
      
-
      
1,591
  
Commercial real estate
    
7,098
      
-
      
-
      
7,098
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
500
      
-
      
-
      
500
  
1-4 family owner occupied - non-jumbo
    
284
      
-
      
-
      
284
  
1-4 family non-owner occupied
    
58
      
-
      
-
      
58
  
1-4 family - 2nd lien
    
200
      
-
      
-
      
200
  
Resort lending
    
77
      
-
      
-
      
77
  
Installment
                                
Boat lending
    
90
      
-
      
-
      
90
  
Recreational vehicle lending
    
38
      
-
      
-
      
38
  
Other
    
139
      
-
      
-
      
139
  
Other real estate (4)
                                
Commercial - commercial real estate
    
474
      
474
      
-
      
-
  

(1)
Included in accrued income and other assets
(2)
Included in accrued expenses and other liabilities
(3)
Only includes impaired loans with specific loss allocations based on collateral value.

(4) Only includes other real estate with subsequent write downs to fair value. The fair value of the commercial real estate property included in this table was based on a purchase agreement executed during the third quarter of 2020 that closed during the fourth quarter of 2020.
47
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
       
Fair Value Measurements Using
  
   
Fair Value
Measure-
ments
    
Quoted
Prices
in Active
Markets
for
Identical
Assets
(Level 1)
    
Significant
Other
Observable
Inputs
(Level 2)
    
Significant
Un-
observable
Inputs
(Level 3)
  
   
(In thousands)
  
December 31, 2019:
                        
Measured at Fair Value on a Recurring Basis
                        
Assets
                        
Securities available for sale
                        
U.S. agency
  
$
14,661
    
$
-
    
$
14,661
    
$
-
  
U.S. agency residential mortgage-backed
    
227,762
      
-
      
227,762
      
-
  
U.S. agency commercial mortgage-backed
    
10,756
      
-
      
10,756
      
-
  
Private label mortgage-backed
    
39,693
      
-
      
39,693
      
-
  
Other asset backed
    
93,886
      
-
      
93,886
      
-
  
Obligations of states and political subdivisions
    
96,102
      
-
      
96,102
      
-
  
Corporate
    
33,195
      
-
      
33,195
      
-
  
Trust preferred
    
1,843
      
-
      
1,843
      
-
  
Foreign government
    
502
      
-
      
502
      
-
  
Loans held for sale, carried at fair value
    
69,800
      
-
      
69,800
      
-
  
Capitalized mortgage loan servicing rights
    
19,171
      
-
      
-
      
19,171
  
Derivatives (1)
    
5,464
      
-
      
5,464
      
-
  
Liabilities
                                
Derivatives (2)
    
4,402
      
-
      
4,402
      
-
  
                                 
Measured at Fair Value on a Non-recurring Basis:
                                
Assets
                                
Impaired loans (3)
                                
Commercial
                                
Commercial and industrial
    
655
      
-
      
-
      
655
  
Commercial real estate
    
316
      
-
      
-
      
316
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
987
      
-
      
-
      
987
  
1-4 family owner occupied - non-jumbo
    
470
      
-
      
-
      
470
  
1-4 family non-owner occupied
    
281
      
-
      
-
      
281
  
1-4 family - 2nd lien
    
294
      
-
      
-
      
294
  
Resort lending
    
245
      
-
      
-
      
245
  
Installment
                                
Boat lending
    
67
      
-
      
-
      
67
  
Recreational vehicle lending
    
2
      
-
      
-
      
2
  
Other
    
121
      
-
      
-
      
121
  
Other real estate (4)
                                
Mortgage - 1-4 family owner occupied - non-jumbo
    
31
      
-
      
-
      
31
  
Installment - other
    
28
      
-
      
-
      
28
  

(1)
Included in accrued income and other assets
(2)
Included in accrued expenses and other liabilities
(3)
Only includes impaired loans with specific loss allocations based on collateral value.
(4)
Only includes other real estate with subsequent write downs to fair value.
48
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Changes in fair values for financial assets which we have elected the fair value option for the periods presented were as follows:

 
Changes in Fair Values for the Nine-Month Periods
Ended September 30 for Items Measured at Fair Value
Pursuant to Election of the Fair Value Option
  
   
Net Gains
on Assets
    
Mortgage
    
Total
Change
in Fair
Values
Included
in Current
  
   
Securities Available For Sale
    
Mortgage
Loans
    
Loan
Servicing, net
    
Period
Earnings
  
   
(In thousands)
  
2020
                        
Loans held for sale
    
-
      
2,081
      
-
      
2,081
  
Capitalized mortgage loan servicing rights
    
-
      
-
      
(14,028
)
    
(14,028
)
                                 
2019
                                
Equity securities at fair value
  
$
167
    
$
-
    
$
-
    
$
167
  
Loans held for sale
    
-
      
822
      
-
      
822
  
Capitalized mortgage loan servicing rights
    
-
      
-
      
(9,258
)
    
(9,258
)

For those items measured at fair value pursuant to our election of the fair value option, interest income is recorded within the Condensed Consolidated Statements of Operations based on the contractual amount of interest income earned on these financial assets and dividend income is recorded based on cash dividends received.

The following represent impairment charges recognized during the three and nine month periods ended September 30, 2020 and 2019 relating to assets measured at fair value on a non-recurring basis:

•
Loans which are measured for impairment using the fair value of collateral for collateral dependent loans had a carrying amount of $10.1 million, which is net of a valuation allowance of $2.3 million at September 30, 2020, and had a carrying amount of $3.4 million, which is net of a valuation allowance of  $1.5  million  at December 31, 2019.  The provision for loan losses included in our results of operations relating to impaired loans was a net expense of $0.2 million and $0.5 million for the three month periods ending September 30, 2020 and 2019, respectively, and a net expense of $1.1 million and $0.8 million for the nine month periods ending September 30, 2020 and 2019, respectively.
•
Other real estate, which is measured using the fair value of the property, had a carrying amount of 0.47 million which is net of a valuation allowance of $0.15 million at September 30, 2020, and a carrying amount of $0.06 million which is net of a valuation allowance of $0.09 million, at December 31, 2019. Charges included in our results of operations relating to other real estate measured at fair value were zero and $0.09 million during the three and nine month periods ended September 30, 2020, and were $0.07 million and $0.08 million during the three and nine month periods ended September 30, 2019.
49
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
A reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) follows:

 
  
Capitalized Mortgage Loan Servicing Rights
  
 
  
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
 
  
2020
    
2019
    
2020
    
2019
  
 
  
(In thousands)
    
(In thousands)
  
Beginning balance
  
$
13,773
    
$
17,894
    
$
19,171
    
$
21,400
  
Total gains (losses) realized and unrealized:
                                
Included in results of operations
    
(2,387
)
    
(3,145
)
    
(14,028
)
    
(9,258
)
Included in other comprehensive income
    
-
      
-
      
-
      
-
  
Purchases, issuances, settlements, maturities and calls
    
4,017
      
2,157
      
10,260
      
4,764
  
Transfers in and/or out of Level 3
    
-
      
-
      
-
      
-
  
Ending balance
  
$
15,403
    
$
16,906
    
$
15,403
    
$
16,906
  
                                 
Amount of total losses for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at September 30
  
$
(2,387
)
  
$
(3,145
)
  
$
(14,028
)
  
$
(9,258
)

The fair value of our capitalized mortgage loan servicing rights has been determined based on a valuation model used by an independent third party as discussed above.  The significant unobservable inputs used in the fair value measurement of the capitalized mortgage loan servicing rights are discount rate, cost to service, ancillary income, float rate and prepayment rate.  Significant changes in all five of these assumptions in isolation would result in significant changes to the value of our capitalized mortgage loan servicing rights.  Quantitative information about our Level 3 fair value measurements measured on a recurring basis follows:

 
Asset
Fair
Value
    
Valuation
Technique
    
Unobservable
Inputs
    
Range
    
Weighted
Average
  
   
(In thousands)
      
-
      
-
      
-
        
September 30, 2020
                                    
Capitalized mortgage loan servicing rights
  
$
15,403
    
Present value of net
    
Discount rate
    
10.00% to 13.00%
      
10.10
%
           
servicing revenue
    
Cost to service
    
$
58 to $215
    
$
79
  
                   
Ancillary income
    
20 to 37
      
22
  
                   
Float rate
      
0.35
%
    
0.35
%
                   
Prepayment rate
    
7.34% to 40.16%
      
22.01
%
December 31, 2019
                                        
Capitalized mortgage loan servicing rights
  
$
19,171
    
Present value of net
    
Discount rate
    
10.00% to 13.00%
      
10.14
%
           
servicing revenue
    
Cost to service
    
$
66 to $316
    
$
81
  
                   
Ancillary income
    
20 to 37
      
22
  
                   
Float rate
      
1.73
%
    
1.73
%
                   
Prepayment rate
    
7.01% to 69.34%
      
14.96
%

50
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Quantitative information about Level 3 fair value measurements measured on a non-recurring basis follows:

 
Asset
Fair
Value
    
Valuation
Technique
    
Unobservable
Inputs
    
Range
    
Weighted
Average
  
   
(In thousands)
      
-
      
-
              
September 30, 2020
                                  
Impaired loans
                                  
Commercial
  
$
8,689
    
Sales comparison approach
    
Adjustment for differences between comparable sales
    
(40.0)% to 75.0%
      
4.5
%
           
Income approach
    
Capitalization rate
      
9.5
%
    
9.5
%
                                         
Mortgage and Installment(1)
    
1,386
    
Sales comparison approach
    
Adjustment for differences between comparable sales
    
(12.0)% to 104.6%
      
4.0
%
                                         
December 31, 2019
                                        
Impaired loans
                                        
Commercial
  
$
971
    
Sales comparison approach
    
Adjustment for differences between comparable sales
    
(48.0)% to 19.2%
      
(5.6
)%
                                         
Mortgage and Installment(1)
    
2,467
    
Sales comparison approach
    
Adjustment for differences between comparable sales
    
(25.2)% to 49.2%%
      
11.5%
%
                                         
Other real estate
                                        
Mortgage and Installment
    
59
    
Sales comparison approach
    
Adjustment for differences between comparable sales
    
(11.6)% to 5.0%%
      
(5.1%
)%

(1)
In addition to the valuation techniques and unobservable inputs discussed above, at September 30, 2020 and December 31, 2019 certain impaired collateral dependent installment loans totaling approximately $0.27 million and $0.14 million, respectively are secured by collateral other than real estate.  For the majority of these loans, we apply internal discount rates to industry valuation guides.

The following table reflects the difference between the aggregate fair value and the aggregate remaining contractual principal balance outstanding for loans held for sale for which the fair value option has been elected for the periods presented.

 
Aggregate
Fair Value
    
Difference
    
Contractual
Principal
  
   
(In thousands)
  
Loans held for sale
                  
September 30, 2020
  
$
99,747
    
$
3,975
    
$
95,772
  
December 31, 2019
    
69,800
      
1,894
      
67,906
  

51
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

12.
Fair Values of Financial Instruments

Most of our assets and liabilities are considered financial instruments. Many of these financial instruments lack an available trading market and it is our general practice and intent to hold the majority of our financial instruments to maturity. Significant estimates and assumptions were used to determine the fair value of financial instruments. These estimates are subjective in nature, involving uncertainties and matters of judgment, and therefore, fair values may not be a precise estimate. Changes in assumptions could significantly affect the estimates.

Estimated fair values have been determined using available data and methodologies that are considered suitable for each category of financial instrument. For instruments with adjustable interest rates which reprice frequently and without significant credit risk, it is presumed that estimated fair values approximate the recorded book balances.
52
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The estimated recorded book balances and fair values follow:

             
Fair Value Using
  
   
Recorded
Book
Balance
    
Fair Value
    
Quoted
Prices
in Active
Markets
for
Identical
Assets
(Level 1)
    
Significant
Other
Observable
Inputs
(Level 2)
    
Significant
Un-
observable
Inputs
(Level 3)
  
                               
   
(In thousands)
  
September 30, 2020
                              
Assets
                              
Cash and due from banks
  
$
42,435
    
$
42,435
    
$
42,435
    
$
-
    
$
-
  
Interest bearing deposits
    
4,121
      
4,121
      
4,121
      
-
      
-
  
Securities available for sale
    
985,050
      
985,050
      
-
      
985,050
      
-
  
Federal Home Loan Bank and Federal
                                        
Reserve Bank Stock
    
18,427
    
NA
    
NA
    
NA
    
NA
  
Net loans and loans held for sale
    
2,919,455
      
2,915,489
      
-
      
99,747
      
2,815,742
  
Accrued interest receivable
    
12,402
      
12,402
      
1
      
3,409
      
8,992
  
Derivative financial instruments
    
19,202
      
19,202
      
-
      
19,202
      
-
  
                                         
Liabilities
                                        
Deposits with no stated maturity (1)
  
$
3,105,019
    
$
3,105,019
    
$
3,105,019
    
$
-
    
$
-
  
Deposits with stated maturity (1)
    
492,726
      
495,694
      
-
      
495,694
      
-
  
Other borrowings
    
30,005
      
31,477
      
-
      
31,477
      
-
  
Subordinated debt
    
39,261
      
40,999
      
-
      
40,999
      
-
  
Subordinated debentures
    
39,507
      
28,941
      
-
      
28,941
      
-
  
Accrued interest payable
    
1,408
      
1,408
      
62
      
1,346
      
-
  
Derivative financial instruments
    
12,690
      
12,690
      
-
      
12,690
      
-
  
                                         
December 31, 2019
                                        
Assets
                                        
Cash and due from banks
  
$
53,295
    
$
53,295
    
$
53,295
    
$
-
    
$
-
  
Interest bearing deposits
    
12,009
      
12,009
      
12,009
      
-
      
-
  
Interest bearing deposits - time
    
350
      
350
      
-
      
350
      
-
  
Securities available for sale
    
518,400
      
518,400
      
-
      
518,400
      
-
  
Federal Home Loan Bank and Federal
                                        
Reserve Bank Stock
    
18,359
    
NA
    
NA
    
NA
    
NA
  
Net loans and loans held for sale
    
2,768,675
      
2,768,817
      
-
      
69,800
      
2,699,017
  
Accrued interest receivable
    
10,108
      
10,108
      
8
      
1,752
      
8,348
  
Derivative financial instruments
    
5,464
      
5,464
      
-
      
5,464
      
-
  
                                         
Liabilities
                                        
Deposits with no stated maturity (1)
  
$
2,427,190
    
$
2,427,190
    
$
2,427,190
    
$
-
    
$
-
  
Deposits with stated maturity (1)
    
609,537
      
610,235
      
-
      
610,235
      
-
  
Other borrowings
    
88,646
      
88,680
      
-
      
88,680
      
-
  
Subordinated debentures
    
39,456
      
33,149
      
-
      
33,149
      
-
  
Accrued interest payable
    
1,296
      
1,296
      
97
      
1,199
      
-
  
Derivative financial instruments
    
4,402
      
4,402
      
-
      
4,402
      
-
  

(1)
Deposits with no stated maturity include reciprocal deposits with a recorded book balance of $521.106 million and $388.369 million at September 30, 2020 and December 31, 2019, respectively. Deposits with a stated maturity include reciprocal deposits with a recorded book balance of $36.445 million and $42.658 million at September 30, 2020 and December 31, 2019, respectively.
53
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The fair values for commitments to extend credit and standby letters of credit are estimated to approximate their aggregate book balance, which is nominal and therefore are not disclosed.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale the entire holdings of a particular financial instrument.

Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business, the value of future earnings attributable to off-balance sheet activities and the value of assets and liabilities that are not considered financial instruments.

Fair value estimates for deposit accounts do not include the value of the core deposit intangible asset resulting from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market.


13. Contingencies

COVID-19 Pandemic

On March 11, 2020, the World Health Organization declared COVID-19, the disease caused by the novel coronavirus, a pandemic as a result of the global spread of the coronavirus illness. In response to the outbreak, federal and state authorities in the U.S. introduced various measures to try to limit or slow the spread of the virus, including travel restrictions, nonessential business closures, stay-at-home orders, and strict social distancing. The Governor of Michigan issued her first "stay home, stay safe" executive order effective March 24, 2020.  In general, that order and subsequent modifications required individuals in Michigan to stay at home or their place of residence, except for certain specified activities that were deemed necessary to sustain or protect life. That original executive order was amended several times and was later rescinded and replaced entirely by a series of "Safer at Home" executive orders, which generally extended certain social distancing restrictions, but lifted the requirement that individuals remain in their homes.  The series of "Safer at Home" orders, along with all other executive orders relating to the pandemic issued by Michigan's Governor after April 30, 2020, were then deemed unconstitutional by the Michigan Supreme Court on October 2, 2020.  Since then, the Michigan Department of Health and Human Services (MDHHS) has issued orders similar to the Governor's executive orders under authority granted to the MDHHS by the Michigan Public Health Code – a different statute than the law on which the Governor based her executive orders. Under the MDHHS' orders, social distancing restrictions remain in place; however, certain retail operations, restaurants and bars, and other businesses are permitted to conduct in-person operations, subject to capacity limitations and other workplace safety requirements. The degree to which businesses may resume operations varies based on the region of the state in which they are located. It is currently expected that various forms of state and local government restrictions similar to those described above will continue through the fourth quarter and perhaps beyond. As a result of these events, Michigan has experienced a significant increase in unemployment.

54
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The COVID-19 pandemic, the related executive orders, and other government restrictions and guidance have had and continue to have a significant effect on us, our customers and the markets we serve. Our business, results of operations and financial condition may be adversely affected by a number of factors that could impact us and our customers, including but not limited to:

•
restrictions on activity and high levels of unemployment may cause increases in loan delinquencies, foreclosures and defaults;
•
increases in allowance for loan losses may be necessary;
•
declines in collateral values may occur;
•
third party disruptions, including outages at network providers, on-line banking vendors and other suppliers;
•
increased cyber and payment fraud risk, as cybercriminals attempt to profit from the disruption, given increased online and remote activity;
•
operational failures due to changes in our normal business practices necessitated by the pandemic and related governmental actions; and/or
•
key personnel or significant numbers of our employees being unable to work effectively, including because of illness or restrictions in connection with COVID-19.

These factors may continue for a significant period of time.

The extent to which the COVID-19 pandemic will impact our business, results of operations and financial condition will depend on future developments, which are highly uncertain and difficult to predict.  Those developments and factors include, the duration and spread of the pandemic, its severity, the actions to contain the pandemic or address its impact, and how quickly and to what extent normal economic and operating conditions can resume. We do not yet know the full extent of the impact.   However, the effects could have a material adverse impact on our business, asset valuations, financial condition and results of operations. Material adverse impacts may include all or a combination of valuation impairments on our intangible assets, securities available for sale, loans, capitalized mortgage loan servicing rights or deferred tax assets.

Certain industries (such as hotels and restaurants) have been more adversely impacted by the COVID-19 pandemic and related periodic shut downs of our economy.  We believe that the following industry concentrations within our commercial loan portfolio represent greater potential risk in the current economic environment.  The balances below are as of September 30, 2020.

Commercial and industrial portfolio segment:

•
Retail - $99 million
•
Food service - $59 million
•
Hotel - $45 million

Commercial real estate portfolio segment:

•
Retail - $94 million
•
Office - $53 million
•
Multifamily - $62 million

We are closely monitoring these industry concentrations and at present do not foresee any significant losses relative to this portion of our loan portfolio given the current economic conditions in Michigan and the fact that many businesses have reopened. However, a high degree of uncertainty still exists with respect to the impact of the COVID-19 pandemic and the related economic disruptions on the future performance of our loan portfolio, including these concentrations.
55
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Litigation

We are involved in various litigation matters in the ordinary course of business. At the present time, we do not believe any of these matters will have a significant impact on our consolidated financial position or results of operations. The aggregate amount we have accrued for losses we consider probable as a result of these litigation matters is immaterial. However, because of the inherent uncertainty of outcomes from any litigation matter, we believe it is reasonably possible we may incur losses in addition to the amounts we have accrued.  At this time, we estimate the maximum amount of additional losses that are reasonably possible is insignificant.  However, because of a number of factors, including the fact that certain of these litigation matters are still in their early stages, this maximum amount may change in the future.

The litigation matters described in the preceding paragraph primarily include claims that have been brought against us for damages, but do not include litigation matters where we seek to collect amounts owed to us by third parties (such as litigation initiated to collect delinquent loans). These excluded, collection-related matters may involve claims or counterclaims by the opposing party or parties, but we have excluded such matters from the disclosure contained in the preceding paragraph in all cases where we believe the possibility of us paying damages to any opposing party is remote.

Loss Reimbursement Obligations

The provision for loss reimbursement on sold loans represents our estimate of incurred losses related to mortgage loans that we have sold to investors (primarily Fannie Mae, Freddie Mac, Ginnie Mae and the Federal Home Loan Bank of Indianapolis). Since we sell mortgage loans without recourse, loss reimbursements only occur in those instances where we have breached a representation or warranty or other contractual requirement related to the loan sale. The provision for loss reimbursement on sold loans was an expense of $0.05 million and $0.03 million for the three month periods ended September 30, 2020 and 2019 and an expense of $0.16 million and $0.18 million for the nine month periods ended September 30, 2020 and 2019, respectively. The reserve for loss reimbursements on sold mortgage loans totaled $0.98 million and $0.88 million at September 30, 2020 and December 31, 2019, respectively. This reserve is included in accrued expenses and other liabilities in our Condensed Consolidated Statements of Financial Condition. This reserve is based on an analysis of mortgage loans that we have sold which are further categorized by delinquency status, loan to value, and year of origination. The calculation includes factors such as probability of default, probability of loss reimbursement (breach of representation or warranty) and estimated loss severity. We believe that the amounts that we have accrued for incurred losses on sold mortgage loans are appropriate given our analyses. However, future losses could exceed our current estimate.

Visa Stock

We own 12,566 shares of VISA Class B common stock. At the present time, these shares can only be sold to other Class B shareholders. As a result, there has generally been limited transfer activity in private transactions between buyers and sellers. Given the limited activity that we have become aware of  and the continuing uncertainty regarding the likelihood, ultimate timing and eventual exchange rate for Class B shares into Class A shares, we continue to carry these shares at zero, representing cost basis less impairment. However, given the current conversion ratio of 1.6228 Class A shares for every 1 Class B share and the closing price of VISA Class A shares on October 28, 2020 of $180.87 per share, our 12,566 Class B shares would have a current “value” of approximately $3.7 million. We continue to monitor Class B trading activity and the status of the resolution of certain litigation matters at VISA that would trigger the conversion of Class B common shares into Class A common shares, which would not have any trading restrictions.

56
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)


14. Accumulated Other Comprehensive Income (Loss) (“AOCIL”)

A summary of changes in AOCIL follows:

 
Unrealized
Gains
(Losses) on
Securities
Available
for Sale
    
Dispropor-
tionate
Tax Effects
from
Securities
Available
for Sale
    
Unrealized
Losses on
Cash Flow
Hedges
    
Total
  
   
(In thousands)
  
                         
For the three months ended September 30,
                        
2020
                        
Balances at beginning of period
  
$
11,315
    
$
(5,798
)
  
$
(1,721
)
  
$
3,796
  
Other comprehensive income (loss) before reclassifications
    
2,125
      
-
      
(20
)
    
2,105
  
Amounts reclassified from AOCIL
    
-
      
-
      
245
      
245
  
Net current period other comprehensive income
    
2,125
      
-
      
225
      
2,350
  
Balances at end of period
  
$
13,440
    
$
(5,798
)
  
$
(1,496
)
  
$
6,146
  
                                 
2019
                                
Balances at beginning of period
  
$
3,040
    
$
(5,798
)
  
$
(1,673
)
  
$
(4,431
)
Other comprehensive income (loss) before reclassifications
    
1,196
      
-
      
(58
)
    
1,138
  
Amounts reclassified from AOCIL
    
-
      
-
      
(80
)
    
(80
)
Net current period other comprehensive income (loss)
    
1,196
      
-
      
(138
)
    
1,058
  
Balances at end of period
  
$
4,236
    
$
(5,798
)
  
$
(1,811
)
  
$
(3,373
)
                                 
For the nine months ended September 30,
                                
2020
                                
Balances at beginning of period
  
$
3,739
    
$
(5,798
)
  
$
(1,727
)
  
$
(3,786
)
Other comprehensive income (loss) before reclassifications
    
9,901
      
-
      
(279
)
    
9,622
  
Amounts reclassified from AOCIL
    
(200
)
    
-
      
510
      
310
  
Net current period other comprehensive income
    
9,701
      
-
      
231
      
9,932
  
Balances at end of period
  
$
13,440
    
$
(5,798
)
  
$
(1,496
)
  
$
6,146
  
                                 
2019
                                
Balances at beginning of period
  
$
(4,185
)
  
$
(5,798
)
  
$
(125
)
  
$
(10,108
)
Other comprehensive income (loss) before reclassifications
    
8,529
      
-
      
(1,376
)
    
7,153
  
Amounts reclassified from AOCIL
    
(108
)
    
-
      
(310
)
    
(418
)
Net current period other comprehensive income (loss)
    
8,421
      
-
      
(1,686
)
    
6,735
  
Balances at end of period
  
$
4,236
    
$
(5,798
)
  
$
(1,811
)
  
$
(3,373
)

The disproportionate tax effects from securities available for sale arose due to tax effects of other comprehensive income (“OCI”) in the presence of a valuation allowance against our deferred tax assets and a pretax loss from operations.  Generally, the amount of income tax expense or benefit allocated to operations is determined without regard to the tax effects of other categories of income or loss, such as OCI. However, an exception to the general rule is provided when, in the presence of a valuation allowance against deferred tax assets, there is a pretax loss from operations and pretax income from other categories in the current period.  In such instances, income from other categories must offset the current loss from operations, the tax benefit of such offset being reflected in operations. Release of material disproportionate tax effects from other comprehensive income to earnings is done by the portfolio method whereby the effects will remain in AOCIL as long as we carry a more than inconsequential portfolio of securities available for sale.
57
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
A summary of reclassifications out of each component of AOCIL for the three months ended September 30 follows:

AOCIL Component
  
Amount
Reclassified
From
AOCIL
  
 Affected Line Item in Condensed
 Consolidated Statements of Operations
 
  
(In thousands)
  
 
2020
      
   
Unrealized gains on securities available for sale
      
   
 
  
$
-
  
 Net gains on securities available for sale
 
    
-
  
 Net impairment loss recognized in earnings
 
    
-
  
 Total reclassifications before tax
 
    
-
  
 Income tax expense
 
  
$
-
  
 Reclassifications, net of tax
 
        
     
Unrealized losses on cash flow hedges
        
   
 
  
$
310
  
 Interest expense
 
    
65
  
 Income tax expense
 
  
$
245
  
 Reclassification, net of tax
 
        
     
 
  
$
(245
)
 Total reclassifications for the period, net of tax
 
        
     
2019
        
   
Unrealized gains on securities available for sale
        
   
 
  
$
-
  
 Net gains on securities available for sale
 
    
-
  
 Net impairment loss recognized in earnings
 
    
-
  
 Total reclassifications before tax
 
    
-
  
 Income tax expense
 
  
$
-
  
 Reclassifications, net of tax
 
        
     
Unrealized losses on cash flow hedges
        
   
 
  
$
(102
)
 Interest expense
 
    
(22
)
 Income tax expense
 
  
$
(80
)
 Reclassification, net of tax
 
        
     
 
  
$
80
  
 Total reclassifications for the period, net of tax

58
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
A summary of reclassifications out of each component of AOCIL for the nine months ended September 30 follows:

AOCIL Component
  
Amount
Reclassified
From
AOCIL
  
 Affected Line Item in Condensed
 Consolidated Statements of Operations
 
  
(In thousands)
  
 
2020
      
   
Unrealized gains on securities available for sale
      
   
 
  
$
253
  
 Net gains on securities available for sale
 
    
-
  
 Net impairment loss recognized in earnings
 
    
253
  
 Total reclassifications before tax
 
    
53
  
 Income tax expense
 
  
$
200
  
 Reclassifications, net of tax
 
        
     
Unrealized losses on cash flow hedges
        
   
 
  
$
646
  
 Interest expense
 
    
136
  
 Income tax expense
 
  
$
510
  
 Reclassification, net of tax
 
        
     
 
  
$
(310
)
 Total reclassifications for the period, net of tax
 
        
     
2019
        
   
Unrealized gains on securities available for sale
        
   
 
  
$
137
  
 Net gains on securities available for sale
 
    
-
  
 Net impairment loss recognized in earnings
 
    
137
  
 Total reclassifications before tax
 
    
29
  
 Income tax expense
 
  
$
108
  
 Reclassifications, net of tax
 
        
     
Unrealized losses on cash flow hedges
        
   
 
  
$
(393
)
 Interest expense
 
    
(83
)
 Income tax expense
 
  
$
(310
)
 Reclassification, net of tax
 
        
     
 
  
$
418
  
 Total reclassifications for the period, net of tax

59
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)


15. Revenue from Contracts with Customers

We account for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. We derive the majority of our revenue from financial instruments and their related contractual rights and obligations which for the most part are excluded from the scope of this topic.  These sources of revenue that are excluded from the scope of this topic include interest income, net gains on mortgage loans, net gains on securities available for sale, mortgage loan servicing, net and bank owned life insurance and were approximately 87.9% and 84.7% of total revenues for the nine month periods ending September 30, 2020 and 2019, respectively.

Material sources of revenue that are included in the scope of this topic include service charges on deposit accounts, other deposit related income, interchange income and investment and insurance commissions and are discussed in the following paragraphs.  Generally these sources of revenue are earned at the time the service is delivered or over the course of a monthly period and do not result in any contract asset or liability balance at any given period end.  As a result, there were no contract assets or liabilities recorded as of September 30, 2020 and December 31, 2019.

Service charges on deposit accounts and other deposit related income: Revenues are earned on depository accounts for commercial and retail customers and include fees for transaction-based, account maintenance and overdraft services. Transaction-based fees, which includes services such as ATM use fees, stop payment charges and ACH fees are recognized at the time the transaction is executed as that is the time we fulfill our customer’s request.  Account maintenance fees, which includes monthly maintenance services are earned over the course of a month representing the period over which the performance obligation is satisfied. Our obligation for overdraft services is satisfied at the time of the overdraft.

Interchange income: Interchange income primarily includes debit card interchange and network revenues.  Debit card interchange and network revenues are earned on debit card transactions conducted through payment networks such as MasterCard and NYCE. Interchange income is recognized concurrently with the delivery of services on a daily basis. Interchange and network revenues are presented gross of interchange expenses, which are presented separately as a component of non-interest expense.

Investment and insurance commissions:  Investment and insurance commissions include fees and commissions from asset management, custody, recordkeeping, investment advisory and other services provided to our customers. Revenue is recognized on an accrual basis at the time the services are performed and is generally based on either the market value of the assets managed or the services provided.  We have an agent relationship with a third party provider of these services and net certain direct costs charged by the third party provider associated with providing these services to our customers.

Net (gains) losses on other real estate and repossessed assets:  We record a gain or loss from the sale of other real estate when control of the property transfers to the buyer, which generally occurs at the time of an executed deed.  If we were to finance the sale of other real estate to the buyer, we would assess whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction is probable.  Once these criteria are met, the other real estate asset would be derecognized and the gain or loss on sale would be recorded upon the transfer of control of the property to the buyer.  There were no other real estate properties sold during the nine month periods ending September 30, 2020 and 2019 that were financed by us.
60
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Disaggregation of our revenue sources by attribute follows:

Three months ending September 30, 2020
                              
 
Service
Charges
on Deposit
Accounts
    
Other
Deposit
Related
Income
    
Interchange
Income
    
Investment
and
Insurance
Commissions
    
Total
  
   
(In thousands)
  
Retail
                              
Overdraft fees
  
$
1,371
    
$
-
    
$
-
    
$
-
    
$
1,371
  
Account service charges
    
544
      
-
      
-
      
-
      
544
  
ATM fees
    
-
      
320
      
-
      
-
      
320
  
Other
    
-
      
184
      
-
      
-
      
184
  
Business
                                        
Overdraft fees
    
170
      
-
      
-
      
-
      
170
  
ATM fees
    
-
      
7
      
-
      
-
      
7
  
Other
    
-
      
89
      
-
      
-
      
89
  
Interchange income
    
-
      
-
      
3,428
      
-
      
3,428
  
Asset management revenue
    
-
      
-
      
-
      
335
      
335
  
Transaction based revenue
    
-
      
-
      
-
      
195
      
195
  
                                         
Total
  
$
2,085
    
$
600
    
$
3,428
    
$
530
    
$
6,643
  
                                         
Reconciliation to Condensed Consolidated Statement of Operations:
                  
Non-interest income - other:
                                        
Other deposit related income
                                  
$
600
  
Investment and insurance commissions
                              
530
  
Bank owned life insurance
                                    
215
  
Other
                                    
592
  
Total
                                  
$
1,937
  
61
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Three months ending September 30, 2019
                              
 
Service
Charges
on Deposit
Accounts
    
Other
Deposit
Related
Income
    
Interchange
Income
    
Investment
and
Insurance
Commissions
    
Total
  
   
(In thousands)
  
Retail
                              
Overdraft fees
  
$
1,970
    
$
-
    
$
-
    
$
-
    
$
1,970
  
Account service charges
    
552
      
-
      
-
      
-
      
552
  
ATM fees
    
-
      
373
      
-
      
-
      
373
  
Other
    
-
      
240
      
-
      
-
      
240
  
Business
                                        
Overdraft fees
    
361
      
-
      
-
      
-
      
361
  
ATM fees
    
-
      
9
      
-
      
-
      
9
  
Other
    
-
      
91
      
-
      
-
      
91
  
Interchange income
    
-
      
-
      
2,785
      
-
      
2,785
  
Asset management revenue
    
-
      
-
      
-
      
292
      
292
  
Transaction based revenue
    
-
      
-
      
-
      
158
      
158
  
                                         
Total
  
$
2,883
    
$
713
    
$
2,785
    
$
450
    
$
6,831
  
                                         
Reconciliation to Condensed Consolidated Statement of Operations:
                  
Non-interest income - other:
                                        
Other deposit related income
                                  
$
713
  
Investment and insurance commissions
                              
450
  
Bank owned life insurance
                                    
301
  
Other
                                    
1,028
  
Total
                                  
$
2,492
  
62
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Nine months ending September 30, 2020
                              
 
  
Service
Charges
on Deposit
Accounts
    
Other
Deposit
Related
Income
    
Interchange
Income
    
Investment
and
Insurance
Commissions
    
Total
  
 
  
(In thousands)
  
Retail
                              
Overdraft fees
  
$
4,130
    
$
-
    
$
-
    
$
-
    
$
4,130
  
Account service charges
    
1,501
      
-
      
-
      
-
      
1,501
  
ATM fees
    
-
      
896
      
-
      
-
      
896
  
Other
    
-
      
577
      
-
      
-
      
577
  
Business
                                        
Overdraft fees
    
668
      
-
      
-
      
-
      
668
  
ATM fees
    
-
      
18
      
-
      
-
      
18
  
Other
    
-
      
252
      
-
      
-
      
252
  
Interchange income
    
-
      
-
      
8,411
      
-
      
8,411
  
Asset management revenue
    
-
      
-
      
-
      
937
      
937
  
Transaction based revenue
    
-
      
-
      
-
      
541
      
541
  
 
                                        
Total
  
$
6,299
    
$
1,743
    
$
8,411
    
$
1,478
    
$
17,931
  
 
                                        
Reconciliation to Condensed Consolidated Statement of Operations:
                  
Non-interest income - other:
                                        
Other deposit related income
                                  
$
1,743
  
Investment and insurance commissions
                              
1,478
  
Bank owned life insurance
                                    
750
  
Other
                                    
1,727
  
Total
                                  
$
5,698
  
63
Index

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Nine months ending September 30, 2019
                              
 
  
Service
Charges
on Deposit
Accounts
    
Other
Deposit
Related
Income
    
Interchange
Income
    
Investment
and
Insurance
Commissions
    
Total
  
 
  
(In thousands)
  
Retail
                              
Overdraft fees
  
$
5,582
    
$
-
    
$
-
    
$
-
    
$
5,582
  
Account service charges
    
1,618
      
-
      
-
      
-
      
1,618
  
ATM fees
    
-
      
1,041
      
-
      
-
      
1,041
  
Other
    
-
      
703
      
-
      
-
      
703
  
Business
                                        
Overdraft fees
    
1,123
      
-
      
-
      
-
      
1,123
  
ATM fees
    
-
      
26
      
-
      
-
      
26
  
Other
    
-
      
309
      
-
      
-
      
309
  
Interchange income
    
-
      
-
      
7,744
      
-
      
7,744
  
Asset management revenue
    
-
      
-
      
-
      
823
      
823
  
Transaction based revenue
    
-
      
-
      
-
      
374
      
374
  
 
                                        
Total
  
$
8,323
    
$
2,079
    
$
7,744
    
$
1,197
    
$
19,343
  
 
                                        
Reconciliation to Condensed Consolidated Statement of Operations:
                  
Non-interest income - other:
                                        
Other deposit related income
                                  
$
2,079
  
Investment and insurance commissions
                              
1,197
  
Bank owned life insurance
                                    
813
  
Other
                                    
2,773
  
Total
                                  
$
6,862
  


16. Leases

We have entered into leases in the normal course of business primarily for office facilities, some of which include renewal options and escalation clauses.  Certain leases also include both lease components (fixed payments including rent, taxes and insurance costs) and non-lease components (common area or other maintenance costs) which are accounted for as a single lease component as we have elected the practical expedient to group lease and non-lease components together for all leases.  We have also elected not to recognize leases with original lease terms of 12 months or less (short-term leases) on our Condensed Consolidated Statements of Financial Condition.  Most of our leases include one or more options to renew. The exercise of lease renewal options is typically at our sole discretion and are included in our right of use (“ROU”) assets and lease liabilities if they are reasonably certain of exercise.

Leases are classified as operating or finance leases at the lease commencement date (we did not have any finance leases as of September 30, 2020).  Lease expense for operating leases and short-term leases is recognized on a straight-line basis over the lease term.  The ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of the lease payment over the lease term.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments.
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NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The cost components of our operating leases follows:

 
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
   
2020
    
2019
    
2020
    
2019
  
   
(In thousands)
    
(In thousands)
  
Operating lease cost
  
$
395
    
$
565
    
$
1,357
    
$
1,692
  
Variable lease cost
    
16
      
43
      
52
      
115
  
Short-term lease cost
    
10
      
4
      
26
      
14
  
Total
  
$
421
    
$
612
    
$
1,435
    
$
1,821
  

Variable lease costs consist primarily of taxes, insurance, and common area or other maintenance costs for our leased facilities.

Supplemental balance sheet information related to our operating leases follows:

 
September 30,
2020
    
December 31,
2019
  
   
(Dollars in thousands)
  
Lease right of use asset (1)
  
$
6,713
    
$
8,282
  
Lease liabilities (2)
  
$
6,945
    
$
8,304
  
                 
Weighted average remaining lease term (years)
    
6.84
      
7.47
  
Weighted average discount rate
    
2.6
%
    
2.8
%

(1)
Included in Accrued income and other assets in our Condensed Consolidated Statements of Financial Condition.
(2)
Included in Accrued expenses and other liabilities in our Condensed Consolidated Statements of Financial Condition.

Maturity analysis of our lease liabilities at September 30, 2020 based on required contractual payments follows:

 
(In thousands)
  
       
Three months ending December 31, 2020
  
$
408
  
2021
    
1,505
  
2022
    
1,324
  
2023
    
1,101
  
2024
    
692
  
2025 and thereafter
    
2,576
  
Total lease payments
    
7,606
  
Less imputed interest
    
(661
)
Total
  
$
6,945
  

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Index


ITEM 2.

Management’s Discussion and Analysis
of Financial Condition and Results of Operations

Introduction. The following section presents additional information to assess the financial condition and results of operations of Independent Bank Corporation (“IBCP”), its wholly-owned bank, Independent Bank (the "Bank"), and their subsidiaries. This section should be read in conjunction with the Condensed Consolidated Financial Statements. We also encourage you to read our 2019 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission ("SEC"). That report includes a list of risk factors that you should consider in connection with any decision to buy or sell our securities.

Overview. We provide banking services to customers located primarily in Michigan’s Lower Peninsula.  We also have two loan production offices in Ohio (Columbus and Fairlawn).  As a result, our success depends to a great extent upon  the economic conditions in Michigan’s Lower Peninsula.

Recent Developments. On March 11, 2020, the World Health Organization declared COVID-19, the disease caused by the novel coronavirus, a pandemic as a result of the global spread of the coronavirus illness. In response to the outbreak, federal and state authorities in the U.S. introduced various measures to try to limit or slow the spread of the virus, including travel restrictions, nonessential business closures, stay-at-home orders, and strict social distancing. The Governor of Michigan issued her first "stay home, stay safe" executive order effective March 24, 2020.  In general, that order and subsequent modifications required individuals in Michigan to stay at home or their place of residence, except for certain specified activities that were deemed necessary to sustain or protect life. That original executive order was amended several times and was later rescinded and replaced entirely by a series of "Safer at Home" executive orders, which generally extended certain social distancing restrictions, but lifted the requirement that individuals remain in their homes.  The series of "Safer at Home" orders, along with all other executive orders relating to the pandemic issued by Michigan's Governor after April 30, 2020, were then deemed unconstitutional by the Michigan Supreme Court on October 2, 2020.  Since then, the Michigan Department of Health and Human Services (MDHHS) has issued orders similar to the Governor's executive orders under authority granted to the MDHHS by the Michigan Public Health Code – a different statute than the law on which the Governor based her executive orders. Under the MDHHS' orders, social distancing restrictions remain in place; however, certain retail operations, restaurants and bars, and other businesses are permitted to conduct in-person operations, subject to capacity limitations and other workplace safety requirements. The degree to which businesses may resume operations varies based on the region of the state in which they are located. It is currently expected that various forms of state and local government restrictions similar to those described above will continue through the fourth quarter and perhaps beyond. As a result of these events, Michigan has experienced a significant increase in unemployment.

The COVID-19 pandemic, the related executive orders, and other government restrictions and guidance have had and continue to have a significant effect on us, our customers and the markets we serve. Our business, results of operations and financial condition may be adversely affected by a number of factors that could impact us and our customers, including but not limited to:
∙
restrictions on activity and high levels of unemployment may cause increases in loan delinquencies, foreclosures and defaults;
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∙
increases in allowance for loan losses may be necessary;
∙
declines in collateral values may occur;
∙
third party disruptions, including outages at network providers, on-line banking vendors and other suppliers;
∙
increased cyber and payment fraud risk, as cybercriminals attempt to profit from the disruption, given increased online and remote activity;
∙
operational failures due to changes in our normal business practices necessitated by the pandemic and related governmental actions; and/or
∙
key personnel or significant numbers of our employees being unable to work effectively, including because of illness or restrictions in connection with COVID-19.

These factors may continue for a significant period of time.  See note #13 to the Condensed Consolidated Financial Statements included within this report.

The spread of COVID-19 has caused us to modify many of our business practices.  Currently, approximately 38% of our total employees work remotely.  We have also expanded sick and vacation time for certain employees.  We may take further actions as may be required or as we determine to be prudent.  There is no certainty that such measures will be sufficient to mitigate the risks posed by COVID-19.

The extent to which the COVID-19 pandemic will impact our business, results of operations and financial condition will depend on future developments, which are highly uncertain and difficult to predict.  Those developments and factors include, the duration and spread of the pandemic, its severity, the actions to contain the pandemic or address its impact, and how quickly and to what extent normal economic and operating conditions can resume. We do not yet know the full extent of the impact.   However, the effects could have a material adverse impact on our business, financial condition and results of operations.

It is against this backdrop that we discuss our results of operations and financial condition in the third quarter and first nine months of 2020 as compared to 2019.

Results of Operations

Summary.  We recorded net income of $19.6 million and $12.4 million during the three months ended September 30, 2020 and 2019, respectively.  The increase in 2020 third quarter results as compared to 2019 primarily reflects increases in net interest income and non-interest income that were partially offset by increases in the provision for loan losses, non-interest expense and income tax expense.

We recorded net income of $39.2 million and $32.6 million during the nine months ended September 30, 2020 and 2019, respectively. The increase in 2020 year-to-date results as compared to 2019 is primarily due to increases in net interest income and non-interest income that were partially offset by increases in the provision for loan losses, non-interest expense and income tax expense.
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Key performance ratios

   
Three months ended
September 30,
    
Nine months ended
September 30,
  
   
2020
    
2019
    
2020
    
2019
  
Net income (annualized) to
                        
Average assets
    
1.90
%
    
1.42
%
    
1.36
%
    
1.28
%
Average shareholders’ equity
    
21.36
%
    
14.64
%
    
14.87
%
    
12.84
%
                                 
Net income per common share
                                
Basic
  
$
0.90
    
$
0.55
    
$
1.78
    
$
1.41
  
Diluted
    
0.89
      
0.55
      
1.76
      
1.40
  

Net interest income. Net interest income is the most important source of our earnings and thus is critical in evaluating our results of operations. Changes in our net interest income are primarily influenced by our level of interest-earning assets and the income or yield that we earn on those assets and the manner and cost of funding our interest-earning assets. Certain macro-economic factors can also influence our net interest income such as the level and direction of interest rates, the difference between short-term and long-term interest rates (the steepness of the yield curve) and the general strength of the economies in which we are doing business. Finally, risk management plays an important role in our level of net interest income. The ineffective management of credit risk and interest-rate risk in particular can adversely impact our net interest income.

Our net interest income totaled $32.0 million during the third quarter of 2020, an increase of $1.1 million, or 3.5% from the year-ago period.  This increase primarily reflects a $602.4 million increase in average interest-earning assets that was partially offset by a 45 basis point decrease in our tax equivalent net interest income as a percent of average interest-earning assets (the “net interest margin”).

For the first nine months of 2020, net interest income totaled $92.6 million, an increase of $0.7 million, or 0.8% from 2019.  This increase primarily reflects a $423.6 million increase in average interest-earning assets that was partially offset by a 41 basis point decrease in our net interest margin.

Due to the economic impact of COVID-19, the Federal Reserve Bank has taken a variety of actions to stimulate the economy, including lowering short-term interest rates.  These actions, along with lower long-term interest rates as well, have placed pressure on our net interest margin.

The significant increases in average interest-earning assets for the three- and nine-month periods ending September 30, 2020 versus the comparable year earlier periods is primarily due to the deployment of funds from a substantial increase in deposits.

Interest and fees on loans include $1.3 million and $2.3 million for the third quarter and first nine months of 2020, of accretion of net loan fees on PPP loans.  No such accretion is included in the comparable prior year periods.  Interest and fees on loans also include $0.3 million and $0.9 million for the third quarter and first nine months of 2020, respectively, and include $0.4 million and $1.1 million for the third quarter and first nine months of 2019, respectively, of accretion of the discount recorded on loans acquired in the April 2018 acquisition of Traverse City State Bank (“TCSB”).  In addition, the third quarter and first nine months of 2020 include $0.5 million of discount accretion on a purchased commercial loan that was paid off during the quarter.
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Our net interest income is also adversely impacted by our level of non-accrual loans. In the third quarter and first nine months of 2020, non-accrual loans averaged $10.4 million and $12.4 million, respectively. In the third quarter and first nine months of 2019, non-accrual loans averaged $6.9 million and $8.1 million, respectively.  In addition, in the third quarter and first nine months of 2020, we had net recoveries of $0.44 million and $0.85 million, respectively, of unpaid interest on loans placed on or taken off non-accrual during each period or on loans previously charged-off compared to net recoveries of $0.23 million and $0.66 million, respectively, during the same periods in 2019.


Average Balances and Tax Equivalent Rates

   
Three Months Ended
September 30,
  
   
2020
    
2019
  
   
Average
Balance
    
Interest
    
Rate (2)
    
Average
Balance
    
Interest
    
Rate (2)
  
   
(Dollars in thousands)
  
Assets
                                    
Taxable loans
  
$
2,918,946
    
$
30,323
      
4.14
%
  
$
2,779,132
    
$
34,151
      
4.89
%
Tax-exempt loans (1)
    
6,926
      
88
      
5.05
      
7,412
      
94
      
5.03
  
Taxable securities
    
733,977
      
3,450
      
1.88
      
371,157
      
2,771
      
2.99
  
Tax-exempt securities (1)
    
157,998
      
1,194
      
3.02
      
52,098
      
400
      
3.07
  
Interest bearing cash
    
51,181
      
14
      
0.11
      
56,923
      
229
      
1.60
  
Other investments
    
18,427
      
223
      
4.81
      
18,359
      
266
      
5.75
  
Interest Earning Assets
    
3,887,455
      
35,292
      
3.62
      
3,285,081
      
37,911
      
4.60
  
Cash and due from banks
    
52,676
                      
34,598
                  
Other assets, net
    
162,187
                      
163,617
                  
Total Assets
  
$
4,102,318
                    
$
3,483,296
                  
                                                 
Liabilities
                                                
Savings and interest-
                                                
bearing checking
  
$
1,922,971
      
686
      
0.14
    
$
1,487,820
      
2,818
      
0.75
  
Time deposits
    
498,796
      
1,376
      
1.10
      
658,426
      
3,418
      
2.06
  
Other borrowings
    
110,714
      
1,006
      
3.61
      
72,887
      
703
      
3.83
  
Interest Bearing Liabilities
    
2,532,481
      
3,068
      
0.48
      
2,219,133
      
6,939
      
1.24
  
Non-interest bearing deposits
    
1,137,303
                      
877,088
                  
Other liabilities
    
67,820
                      
49,913
                  
Shareholders’ equity
    
364,714
                      
337,162
                  
Total liabilities and shareholders’ equity
  
$
4,102,318
                    
$
3,483,296
                  
                                                 
Net Interest Income
          
$
32,224
                    
$
30,972
          
                                                 
Net Interest Income as a Percent of Average Interest
Earning Assets
                    
3.31
%
                    
3.76
%


(1)
Interest on tax-exempt loans and securities is presented on a fully tax equivalent basis assuming a marginal tax rate of 21%.
(2)
Annualized
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Index


Average Balances and Tax Equivalent Rates


   
Nine Months Ended
September 30,
  
   
2020
    
2019
  
   
Average
Balance
    
Interest
    
Rate (2)
    
Average
Balance
    
Interest
    
Rate (2)
  
   
(Dollars in thousands)
  
Assets
                                    
Taxable loans
  
$
2,861,776
    
$
91,804
      
4.28
%
  
$
2,695,435
    
$
100,513
      
4.98
%
Tax-exempt loans (1)
    
7,266
      
273
      
5.02
      
7,856
      
291
      
4.95
  
Taxable securities
    
579,704
      
9,356
      
2.15
      
384,291
      
8,811
      
3.06
  
Tax-exempt securities (1)
    
114,187
      
2,682
      
3.13
      
52,794
      
1,275
      
3.22
  
Interest bearing cash
    
52,265
      
160
      
0.41
      
51,260
      
655
      
1.71
  
Other investments
    
18,404
      
694
      
5.04
      
18,359
      
794
      
5.78
  
Interest Earning Assets
    
3,633,602
      
104,969
      
3.85
      
3,209,995
      
112,339
      
4.67
  
Cash and due from banks
    
49,345
                      
34,032
                  
Other assets, net
    
163,503
                      
166,037
                  
Total Assets
  
$
3,846,450
                    
$
3,410,064
                  
                                                 
Liabilities
                                                
Savings and interest-
                                                
bearing checking
  
$
1,764,933
      
3,121
      
0.24
    
$
1,421,114
      
7,787
      
0.73
  
Time deposits
    
529,248
      
6,029
      
1.52
      
670,479
      
10,151
      
2.02
  
Other borrowings
    
121,195
      
2,598
      
2.86
      
72,233
      
2,211
      
4.09
  
Interest Bearing Liabilities
    
2,415,376
      
11,748
      
0.65
      
2,163,826
      
20,149
      
1.24
  
Non-interest bearing deposits
    
1,016,286
                      
862,929
                  
Other liabilities
    
62,984
                      
44,323
                  
Shareholders’ equity
    
351,804
                      
338,986
                  
Total liabilities and shareholders’ equity
  
$
3,846,450
                    
$
3,410,064
                  
                                                 
Net Interest Income
          
$
93,221
                    
$
92,190
          
                                                 
Net Interest Income as a Percent of Average Interest
Earning Assets
                    
3.42
%
                    
3.83
%

(1)
Interest on tax-exempt loans and securities is presented on a fully tax equivalent basis assuming a marginal tax rate of 21%.
(2)
Annualized
70
Index


Reconciliation of Non-GAAP Financial Measures

   
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
   
2020
    
2019
    
2020
    
2019
  
   
(Dollars in thousands)
  
Net Interest Margin, Fully Taxable Equivalent ("FTE")
                        
                         
Net interest income
  
$
31,966
    
$
30,872
    
$
92,619
    
$
91,871
  
Add:  taxable equivalent adjustment
    
258
      
100
      
602
      
319
  
Net interest income - taxable equivalent
  
$
32,224
    
$
30,972
    
$
93,221
    
$
92,190
  
Net interest margin (GAAP) (1)
    
3.28
%
    
3.74
%
    
3.40
%
    
3.82
%
Net interest margin (FTE) (1)
    
3.31
%
    
3.76
%
    
3.42
%
    
3.83
%
(1)
Annualized.

Provision for loan losses.  We have elected to delay the adoption of the Current Expected Credit Losses (“CECL”) accounting standard as permitted by Section 4014 of the CARES Act and continue to utilize the existing incurred loss impairment methodology to calculate our allowance for loan losses (“AFLL”) and our provision for loan losses.  See note #2 to the Condensed Consolidated Financial Statements included within this report for our discussion on CECL implementation.

The provision for loan losses was an expense of $1.0 million and a credit of $0.3 million for the three months ended September 30, 2020 and 2019, respectively. During the nine-month periods ended September 30, 2020 and 2019, the provision was an expense of $12.9 million and $1.0 million, respectively. The provision reflects our assessment of the AFLL taking into consideration factors such as loan growth, loan mix, levels of non-performing and classified loans and loan net charge-offs.  While we use relevant information to recognize losses on loans, additional provisions for related losses may be necessary based on changes in economic conditions, customer circumstances and other credit risk factors.  In particular, the credit impact of the COVID-19 pandemic, and more specifically the periodic closing of various segments of the economy in order to contain it, may have a negative impact on our level of non-performing loans and assets in the future, but as of yet, the magnitude of that impact is undeterminable.  As a result of this potential adverse impact, we have increased the subjective portion of our AFLL by $10.7 million (or 122.1%) during the first nine months of 2020.  See “Portfolio Loans and asset quality” for a discussion of the various components of the AFLL and their impact on the provision for loan losses in 2020. See note #13 to the Condensed Consolidated Financial Statements included within this report for a discussion on industry concentrations.

Non-interest income.  Non-interest income is a significant element in assessing our results of operations. Non-interest income totaled $27.0 million during the third quarter of 2020 compared to $12.3 million in the third quarter of 2019.  For the first nine months of 2020, non-interest income totaled $58.4 million compared to $32.1 million for the first nine months of 2019.
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Index


The components of non-interest income are as follows:

Non-Interest Income

   
Three months ended
September 30,
    
Nine months ended
September 30,
  
   
2020
    
2019
    
2020
    
2019
  
   
(In thousands)
  
Interchange income
  
$
3,428
    
$
2,785
    
$
8,411
    
$
7,744
  
Service charges on deposit accounts
    
2,085
      
2,883
      
6,299
      
8,323
  
Net gains on assets
                                
Mortgage loans
    
20,205
      
5,677
      
46,687
      
13,590
  
Securities available for sale
    
-
      
-
      
253
      
304
  
Mortgage loan servicing, net
    
(644
)
    
(1,562
)
    
(8,966
)
    
(4,684
)
Investment and insurance commissions
    
530
      
450
      
1,478
      
1,197
  
Bank owned life insurance
    
215
      
301
      
750
      
813
  
Other
    
1,192
      
1,741
      
3,470
      
4,852
  
Total non-interest income
  
$
27,011
    
$
12,275
    
$
58,382
    
$
32,139
  

Interchange income increased  on a comparative quarterly basis and on a year-to-date basis in 2020 as compared to 2019, due to an increase in transaction volume and an increase in our annual volume incentive under our debit brand agreement.

Service charges on deposit accounts decreased on both a comparative quarterly and year-to-date basis in 2020 as compared to 2019.  These decreases were principally due to a decrease in non-sufficient funds occurrences (and related fees) caused in part by the COVID-19 pandemic and reduced checking account activity.

Net gains on mortgage loans increased substantially in 2020 from 2019 on both a quarterly and a year to date basis. Mortgage loan activity is summarized as follows:

Mortgage Loan Activity

   
Three months ended
September 30,
    
Nine months ended
September 30,
  
   
2020
    
2019
    
2020
    
2019
  
   
(Dollars in thousands)
  
Mortgage loans originated
  
$
536,502
    
$
329,461
    
$
1,318,206
    
$
708,621
  
Mortgage loans sold
    
417,092
      
204,058
      
1,058,400
      
490,219
  
Net gains on mortgage loans
    
20,205
      
5,677
      
46,687
      
13,590
  
Net gains as a percent of mortgage loans sold  ("Loan Sales Margin")
    
4.84
%
    
2.78
%
    
4.41
%
    
2.77
%
Fair value adjustments included in the Loan Sales Margin
    
0.50
      
0.22
      
0.81
      
0.48
  

The comparative increase in mortgage loans originated is due primarily to lower interest rates in 2020 that have spurred a significant increase in refinance volumes.  Mortgage loans sold increased due to a higher mix of salable loans in our origination volumes and some portfolio mortgage loan sales that were completed during the first quarter of 2020. Net gains on mortgage loans also increased in 2020 as compared to 2019 due to fair value adjustments as discussed below.
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Index


The volume of loans sold is dependent upon our ability to originate mortgage loans as well as the demand for fixed-rate obligations and other loans that we choose to not put into portfolio because of our established interest-rate risk parameters. (See “Portfolio Loans and asset quality.”) Net gains on mortgage loans are also dependent upon economic and competitive factors as well as our ability to effectively manage exposure to changes in interest rates and thus can often be a volatile part of our overall revenues.

Our Loan Sales Margin is impacted by several factors including competition and the manner in which the loan is sold. Net gains on mortgage loans are also impacted by recording fair value accounting adjustments.  Excluding these fair value accounting adjustments, the Loan Sales Margin would have been 4.34% and 2.56% in the third quarters of 2020 and 2019, respectively and 3.60% and 2.29% for the comparative 2020 and 2019 year-to-date periods, respectively.  The increase in the Loan Sales Margin (excluding fair value adjustments) in 2020 was generally due to a substantial widening of primary-to-secondary market pricing spreads as market interest rates fell during this period and mortgage loan refinance volumes dramatically increased.  Once mortgage loan refinance volumes abate, we would expect our Loan Sales Margin to decline to more normal levels. The changes in the fair value accounting adjustments are primarily due to changes in the amount of commitments to originate mortgage loans for sale.

We recorded no net gains (losses) on securities in the comparative quarterly periods.  We recorded a net gain of $0.3 million on securities for both the first nine months of 2020 and 2019.  We recorded no net impairment losses in either 2020 or 2019 for other than temporary impairment of securities available for sale.  See “Securities” below and note #3 to the Condensed Consolidated Financial Statements.

Mortgage loan servicing, net, generated a loss of $0.6 million and $1.6 million in the third quarters of 2020 and 2019, respectively. For the first nine months of 2020 and 2019, mortgage loan servicing, net, generated a loss of $9.0 million and $4.7 million, respectively.  The significant variances in mortgage loan servicing, net are primarily due to changes in the fair value of capitalized mortgage loan servicing rights associated with changes in mortgage loan interest rates and expected future prepayment levels. Mortgage loan servicing, net activity is summarized in the following table:

Mortgage Servicing Revenue

   
Three months ended
September 30,
    
Nine months ended
September 30,
  
   
2020
    
2019
    
2020
    
2019
  
Mortgage loan servicing
  
(In thousands)
  
Revenue, net
  
$
1,743
    
$
1,583
    
$
5,062
    
$
4,574
  
Fair value change due to price
    
(1,089
)
    
(2,163
)
    
(9,941
)
    
(7,036
)
Fair value change due to pay-downs
    
(1,298
)
    
(982
)
    
(4,087
)
    
(2,222
)
Total
  
$
(644
)
  
$
(1,562
)
  
$
(8,966
)
  
$
(4,684
)
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Index


Activity related to capitalized mortgage loan servicing rights is as follows:

Capitalized Mortgage Loan Servicing Rights

   
Three months ended
September 30,
    
Nine months ended
September 30,
  
   
2020
    
2019
    
2020
    
2019
  
   
(In thousands)
  
Balance at beginning of period
  
$
13,773
    
$
17,894
    
$
19,171
    
$
21,400
  
Originated servicing rights capitalized
    
4,017
      
2,157
      
10,260
      
4,764
  
Change in fair value
    
(2,387
)
    
(3,145
)
    
(14,028
)
    
(9,258
)
Balance at end of period
  
$
15,403
    
$
16,906
    
$
15,403
    
$
16,906
  

At September 30, 2020 we were servicing approximately $2.87 billion in mortgage loans for others on which servicing rights have been capitalized. This servicing portfolio had a weighted average coupon rate of 3.90% and a weighted average service fee of approximately 25.7 basis points. Capitalized mortgage loan servicing rights at September 30, 2020 totaled $15.4 million, representing approximately 53.6 basis points on the related amount of mortgage loans serviced for others.

Investment and insurance commissions represent revenues generated on the sale or management of investments and insurance for our customers.  These revenues were relatively comparable on a quarterly basis, and increased on a year-to-date basis in 2020 as compared to 2019.  The year-to-date comparative increase in 2020 was primarily due to slower sales in the first quarter of 2019.

Income from bank owned life insurance (“BOLI”) declined slightly on both a comparative quarterly and year-to-date basis in 2020 compared to 2019 reflecting a lower crediting rate on our cash surrender value. Our BOLI separate account is primarily invested in agency mortgage-backed securities. The crediting rate (on which the earnings are based) reflects the performance of the separate account.  The total cash surrender value of our BOLI was $55.0 million and $55.7 million at September 30, 2020 and December 31, 2019, respectively.

Other non-interest income decreased significantly on both a comparative quarterly and year-to-date basis in 2020 as compared to 2019.  Several categories of fees have been reduced in 2020 due to the impact of the COVID-19 pandemic on transaction volumes, including ATM fees.  In addition, we have elected to suspend certain electronic banking fees because of the COVID-19 pandemic and the increased need for our customers to access these channels.  Commercial loan swap fee income is also lower in 2020 as customers have not felt the need to execute such transactions given the low interest rate environment.  Finally, the first quarter of 2019 included $0.4 million of recoveries on TCSB loans that had been charged-off prior to our acquisition of TCSB.

Non-interest expense.  Non-interest expense is an important component of our results of operations. We strive to efficiently manage our cost structure.

Non-interest expense increased by $5.8 million to $33.6 million and increased by $7.3 million to $89.7 million during the three- and nine-month periods ended September 30, 2020, respectively, compared to the same periods in 2019.
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Index


The components of non-interest expense are as follows:

Non-Interest Expense

   
Three months ended
September 30,
    
Nine months ended
September 30,
  
   
2020
    
2019
    
2020
    
2019
  
   
(In thousands)
  
Compensation
  
$
10,294
    
$
10,327
    
$
30,665
    
$
30,993
  
Performance-based compensation
    
8,310
      
3,214
      
14,240
      
7,730
  
Payroll taxes and employee benefits
    
3,350
      
3,132
      
9,837
      
10,232
  
Compensation and employee benefits
    
21,954
      
16,673
      
54,742
      
48,955
  
Occupancy, net
    
2,199
      
2,161
      
6,818
      
6,797
  
Data processing
    
2,215
      
2,282
      
6,160
      
6,597
  
Furniture, fixtures and equipment
    
999
      
1,023
      
3,125
      
3,058
  
Interchange expense
    
831
      
891
      
2,416
      
2,332
  
Communications
    
806
      
733
      
2,409
      
2,219
  
Loan and collection
    
768
      
714
      
2,329
      
1,976
  
Advertising
    
589
      
636
      
1,636
      
1,935
  
Legal and professional
    
566
      
541
      
1,427
      
1,281
  
FDIC deposit insurance
    
411
      
13
      
1,211
      
723
  
Conversion related expenses
    
643
      
-
      
1,045
      
-
  
Amortization of intangible assets
    
255
      
272
      
765
      
817
  
Supplies
    
126
      
163
      
513
      
474
  
Branch closure costs
    
-
      
-
      
417
      
-
  
Correspondent bank service fees
    
101
      
100
      
294
      
300
  
Costs related to unfunded lending commitments
    
41
      
154
      
271
      
341
  
Provision for loss reimbursement on sold loans
    
46
      
33
      
160
      
179
  
Net (gains) losses on other real estate and repossessed assets
    
46
      
52
      
146
      
(27
)
Other
    
1,045
      
1,407
      
3,822
      
4,473
  
Total non-interest expense
  
$
33,641
    
$
27,848
    
$
89,706
    
$
82,430
  

Compensation and employee benefits expenses, in total, increased $5.3 million on a quarterly comparative basis and increased $5.8 million for the first nine months of 2020 compared to the same periods in 2019.

Compensation expense decreased by $0.03 million and $0.3 million in the third quarter and first nine months of 2020, respectively, compared to the same periods in 2019.  These comparative decreases in 2020 were primarily due to an increased level of compensation that was deferred as direct loan origination costs (due to higher loan origination volumes) that was partially offset by salary increases that were predominantly effective on January 1, 2020.

Performance-based compensation increased by $5.1 million and $6.5 million in the third quarter and first nine months of 2020, respectively, versus the same periods in 2019.  The increases reflect the changes in the accrual for anticipated incentive compensation based on our estimated full-year performance as compared to goals as well as $0.4 million in bonuses paid during the second quarter of 2020 to front-line personnel due to their extraordinary efforts during the COVID-19 pandemic.
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Index


Payroll taxes and employee benefits increased by $0.2 million in the third quarter and decreased by $0.4 million in the first nine months of 2020, respectively, compared to the same periods in 2019.  The quarterly comparative increase is due primarily to higher payroll taxes and our employer 401(k) match reflecting higher overall compensation levels in 2020.  The year-to-date comparative decrease is due primarily to a decline in health care costs (due to decreased claims in 2020) as well as a $0.3 million prescription drug rebate received and recorded in the second quarter of 2020 that related to our 2019 plan year.  The decrease in year to date health care claims is due in part to the COVID-19 pandemic that resulted in the closing of many medical and dental facilities except for emergency care during Michigan’s “stay home, stay safe” period.

Occupancy, net, furniture, fixtures and equipment, supplies and correspondent bank service fees expenses were all relatively unchanged on a comparative quarterly and year-to-date basis in 2020 as compared to 2019.  We have been incurring some additional expenses in 2020 related to the COVID-19 pandemic for more frequent cleaning of our facilities, the installation of safety related fixtures (such as plexiglass shields) and certain supplies (hand sanitizer for example).

Data processing expense decreased by $0.1 million and $0.4 million in the third quarter and first nine months of 2020, respectively, compared to the same periods in 2019.  These comparative decreases in 2020 are primarily due to a cost savings agreement related to core data processing services that was executed in the second quarter of 2020.  This expense reduction was partially offset by new software product additions and increased mobile banking costs.

Interchange expense primarily represents our third-party cost to process debit card transactions.  The changes in this expense in 2020 on both a comparative quarterly and year-to-date basis as compared to 2019 are due principally to changes in transaction volume and transaction channel mix.

Communications expense increased by $0.1 million and $0.2 million in the third quarter and first nine months of 2020, respectively, compared to the same periods in 2019, due primarily to mailing costs related to the issuance of new contactless debit cards.

Loan and collection expense reflects costs related to new lending activity as well as the management and collection of non-performing loans and other problem credits.  These costs increased in 2020 on both a comparative quarterly and year-to-date basis as compared to 2019 due primarily to higher loan origination activity.

Advertising expense decreased by approximately $0.05 million and $0.3 million in 2020 on both a comparative quarterly and year-to-date basis as compared to 2019.  The year-to-date comparative decrease is due primarily to the receipt of a $0.2 million reimbursement from our debit card provider for certain eligible marketing costs that we incurred.

Legal and professional fees were essentially unchanged and increased by approximately $0.1 million in 2020 on a comparative quarterly and year-to-date basis, respectively, as compared to 2019.  This year-to-date increase is due primarily to an increase in title search fees and bank examination fees (due to an increase in our asset size).

FDIC deposit insurance expense increased in 2020 on both a comparative quarterly and year-to-date basis as compared to 2019 due to a combination of an increase in our assessment rate and growth in our total assets.  In addition, the quarterly and year-to-date 2019 periods included a $0.3 million small bank assessment credit that reduced this expense.
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Index


Conversion related expenses totaled $0.6 million and $1.0 million for the third quarter and first nine months of 2020, respectively.  We are at the middle stages of a process to convert our core data processing system to a new system hosted by a different vendor.  These 2020 expenses represent costs incurred for assistance from our existing vendor and fees from consultants who are assisting us in this conversion.  Also see Part II, Item 1A. Risk Factors below for further information on this conversion.

The amortization of intangible assets relates to the TCSB acquisition and prior branch acquisitions and the amortization of the deposit customer relationship value, including core deposit value, which was acquired in connection with those acquisitions. We had remaining unamortized intangible assets of $4.6 million and $5.3 million at September 30, 2020 and December 31, 2019, respectively. See note #7 to the Condensed Consolidated Financial Statements for a schedule of future amortization of intangible assets.

Branch closure costs totaled $0.4 million for the first nine months of 2020.  We have closed eight Bank branches in 2020 (two on June 26, 2020 and six on July 31, 2020).  These costs primarily represent write-downs of fixed assets (buildings, furniture and equipment) and lease assets.

The changes in costs related to unfunded lending commitments are primarily impacted by changes in the amounts of such commitments to originate portfolio loans as well as (for commercial loan commitments) the grade (pursuant to our loan rating system) of such commitments.

The provision for loss reimbursement on sold loans was an expense of $0.05 million and $0.16 million in the third quarter and first nine months of 2020, respectively, compared to an expense of $0.03 million and $0.18 million in the third quarter and first nine months of 2019, respectively. This provision represents our estimate of incurred losses related to mortgage loans that we have sold to investors (primarily Fannie Mae, Freddie Mac, Ginnie Mae and the Federal Home Loan Bank of Indianapolis).  The small expense provisions in 2020 and 2019 are primarily due to growth in the balance of loans serviced for investors.  Since we sell mortgage loans without recourse, loss reimbursements only occur in those instances where we have breached a representation or warranty or other contractual requirement related to the loan sale.  The reserve for loss reimbursements on sold mortgage loans totaled $0.98 million and $0.88 million at September 30, 2020 and December 31, 2019, respectively. This reserve is included in accrued expenses and other liabilities in our Condensed Consolidated Statements of Financial Condition.

Net (gains) losses on other real estate and repossessed assets primarily represent the gain or loss on the sale or additional write downs on these assets subsequent to the transfer of the asset from our loan portfolio. This transfer occurs at the time we acquire the collateral that secured the loan. At the time of acquisition, the other real estate or repossessed asset is valued at fair value, less estimated costs to sell, which becomes the new basis for the asset. Any write-downs at the time of acquisition are charged to the allowance for loan losses.

Other non-interest expenses decreased by $0.4 million in the third quarter and $0.7 million for the first nine months of 2020, compared to the same periods in 2019.  These decreases in 2020 are primarily due to a decline in travel and entertainment costs due to COVID-19 pandemic related travel restrictions as well as a reduction in deposit account and debit card related fraud costs.
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Index


Income tax expense.  We recorded an income tax expense of $4.8 million and $9.2 million in the third quarter and the first nine months of 2020, respectively. This compares to an income tax expense of $3.1 million and $8.0 million in the third quarter and the first nine months of 2019, respectively.

Our actual income tax expense is different than the amount computed by applying our statutory income tax rate to our income before income tax primarily due to tax-exempt interest income, tax-exempt income from the increase in the cash surrender value on life insurance, and differences in the value of stock awards that vest and stock options that are exercised as compared to the initial fair values that were expensed.

We assess whether a valuation allowance should be established against our deferred tax assets based on the consideration of all available evidence using a “more likely than not” standard.  The ultimate realization of this asset is primarily based on generating future income.  We concluded at September 30, 2020 and 2019 and at December 31, 2019, that the realization of substantially all of our deferred tax assets continues to be more likely than not.

Financial Condition

Summary.  Our total assets increased by $604.3 million during the first nine months of 2020.  Loans, excluding loans held for sale, (“Portfolio Loans”) were $2.86 billion at September 30, 2020, compared to $2.73 billion at December 31, 2019.  Growth in commercial loans of $185.1 million and installment loans of $20.2 million were partially offset by a decline in mortgage loans of $74.9 million.  The decline in mortgage loans was due in part to a securitization and/or sale of $28.7 million of portfolio mortgage loans during the first quarter of 2020.  (See "Portfolio Loans and asset quality.")

Deposits totaled $3.60 billion at September 30, 2020, an increase of $561.0 million from December 31, 2019.  The increase in deposits is primarily due to growth in non-interest bearing deposits, savings and interest bearing checking deposits and reciprocal deposits that were partially offset by a decline in time and brokered time deposits.

The increase in commercial loans in the first nine months of 2020 is due primarily to loans extended under the Paycheck Protection Program (“PPP”) administered by the U.S. Small Business Administration (“SBA”).  The increase in deposits is due in part to the significant liquidity that has been injected into the economy through government programs, such as the PPP, as well as by monetary actions by the Federal Reserve Bank, all in response to the COVID-19 pandemic.

It is unclear as to when these various government stimulus programs may end and when ended, what the impact will be on our levels of Portfolio Loans and deposits.  However, our liquidity and funding contingency plans take into account the possibility of significant reductions in commercial loans and deposits during 2021.

Securities.  We maintain diversified securities portfolios, which include obligations of U.S. government-sponsored agencies, securities issued by states and political subdivisions, residential and commercial mortgage-backed securities, asset-backed securities, corporate securities, trust preferred securities and foreign government securities (that are denominated in U.S. dollars). We regularly evaluate asset/liability management needs and attempt to maintain a portfolio structure that provides sufficient liquidity and cash flow. Except as discussed below, we believe that the unrealized losses on securities available for sale are temporary in nature and are expected to be recovered within a reasonable time period. We believe that we have the ability to hold securities with unrealized losses to maturity or until such time as the unrealized losses reverse. (See “Asset/liability management.”)
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Index


Securities

   
Amortized
    
Unrealized
    
Fair
  
   
Cost
    
Gains
    
Losses
    
Value
  
Securities available for sale
  
(in thousands)
  
September 30, 2020
  
$
968,038
    
$
18,899
    
$
1,887
    
$
985,050
  
December 31, 2019
    
513,668
      
5,782
      
1,050
      
518,400
  

Securities available for sale increased $466.7 million during the first nine months of 2020.   This significant increase reflects the deployment of funds from growth in our total deposits. Our portfolio of securities available for sale is reviewed quarterly for impairment in value. In performing this review, management considers (1) the length of time and extent that fair value has been less than cost, (2) the financial condition and near term prospects of the issuer, (3) the impact of changes in market interest rates on the market value of the security and (4) an assessment of whether we intend to sell, or it is more likely than not that we will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. For securities that do not meet these recovery criteria, the amount of impairment recognized in earnings is limited to the amount related to credit losses, while impairment related to other factors is recognized in other comprehensive income.  We recorded no impairment losses related to other than temporary impairment on securities available for sale during the first nine months or third quarters of 2020 or 2019.
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Index


Sales of securities were as follows (See “Non-interest income.”):

Sales of Securities

   
Nine months ended
September 30,
  
   
2020
    
2019
  
   
(in thousands)
  
Proceeds
  
$
36,593
    
$
44,305
  
                 
Gross gains
    
253
      
169
  
Gross losses
    
-
      
(32
)
Net impairment charges
    
-
      
-
  
Fair value adjustments
    
-
      
167
  
Net gains
  
$
253
    
$
304
  

Portfolio Loans and asset quality. In addition to the communities served by our Bank branch and loan production office network, our principal lending markets also include nearby communities and metropolitan areas. Subject to established underwriting criteria, we also may participate in commercial lending transactions with certain non-affiliated banks and make whole loan purchases from other financial institutions.

The senior management and board of directors of our Bank retain authority and responsibility for credit decisions and we have adopted uniform underwriting standards. Our loan committee structure and the loan review process attempt to provide requisite controls and promote compliance with such established underwriting standards. However, there can be no assurance that our lending procedures and the use of uniform underwriting standards will prevent us from incurring significant credit losses in our lending activities.

We generally retain loans that may be profitably funded within established risk parameters. (See “Asset/liability management.”) As a result, we may hold adjustable-rate conventional and fixed rate jumbo mortgage loans as Portfolio Loans, while 15- and 30-year fixed-rate non-jumbo mortgage loans are generally sold to mitigate exposure to changes in interest rates. (See “Non-interest income.”) Due primarily to the expansion of our mortgage-banking activities and a change in mix in our mortgage loan originations, we are now originating and putting into Portfolio Loans more fixed rate mortgage loans as compared to past periods.  These fixed rate mortgage loans generally have terms from 15 to 30 years, do not have prepayment penalties and expose us to more interest rate risk.  To date, our interest rate risk profile has not changed significantly.  However, we are carefully monitoring this change in the composition of our Portfolio Loans and the impact of potential future changes in interest rates on our changes in market value of portfolio equity and changes in net interest income. (See “Asset/liability management.”).  As a result, we have added and may continue to add some longer-term borrowings, may utilize derivatives (interest rate swaps and interest rate caps) to manage interest rate risk and may continue to sell some fixed rate jumbo and other portfolio mortgage loans in the future.

The PPP, is a short-term, forgivable loan program primarily intended to help businesses impacted by COVID-19 to continue paying their employees.  Also see Part II, Item 1A. Risk Factors below regarding the PPP.
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Index


A short summary of the Payment Protection Program (PPP) is as follows:

•
Terms of two years (five years for loans originated after June 5, 2020) with payments automatically deferred to the date the SBA remits the borrower’s loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period);
•
One percent interest rate;
•
No collateral or personal guarantees required;
•
No fees paid by the borrower, rather lenders are paid a fee through the SBA according to a set schedule based on loan size;
•
Loans are forgivable if at least 60% of the loan proceeds are used for payroll with the remainder being used for rent, mortgage interest and/or utilities; and
•
Streamlined forgiveness application process for PPP loans of $50,000 or less.

A summary of our participation in the PPP follows:

Paycheck Protection Program Volume

   
As of September 30, 2020
  
   
Amount (#)
    
Amount
  
   
(Dollars in thousands)
  
Closed and outstanding
    
2,117
    
$
261,182
  
Loans $50,000 and under
    
1,214
      
25,106
  
Forgiveness applications submitted to the SBA
    
197
      
37,223
  
Fees accreted into interest income during the quarter
    
n/a
      
1,321
  
Unaccreted fees remaining at quarter-end
    
n/a
      
6,494
  
Average loan yield for the quarter
    
n/a
      
3.04
%

Congress and the major bank regulatory agencies have encouraged banks to work with their borrowers to provide short-term loan payment relief during the COVID-19 national emergency.  On March 22, 2020, an interagency statement was released by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau, the Conference of State Bank Supervisors, and the National Credit Union Administration that contained guidance regarding loan modifications made in response to the pandemic. In general, in order for a loan modification made in response to the pandemic to avoid being classified as a troubled debt restructuring ("TDR"):

•
The modified loan must be current when the modification is made;
•
The modification must be short term in nature (up to six months); and
•
Modifications may include payment deferrals, fee waivers, extensions of repayment terms or other delays in payment that are insignificant.

In addition, Section 4013 of the CARES Act provides temporary relief from the accounting and reporting requirements for TDRs regarding certain loan modifications for our customers. Section 4013 specified that COVID-19 related modifications on loans that were current as of December 31, 2019 are not TDRs.
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Index


In response to our customers’ needs during this time of economic uncertainty, we have initiated forbearance programs for our retail (mortgage and installment loans) and our commercial customers.  We also have similar programs for mortgage loans that we service for others. Commercial loan accommodations are typically a three month interest-only period while retail loan (mortgage and installment) forbearances have primarily been payment suspensions for three months. To date, there have not been a significant number of requests for additional modifications. See note #4 to the Condensed Consolidated Financial Statements included within this report.

A summary of accommodations as of September 30, 2020 follows:

Commercial and Retail Loan COVID-19 Accomodations

   
Covid-19 Accomodations
    
Total
    
% of Total
  
Loan Category
  
Loans (#)
    
Loans ($)
    
Loans
    
Loans
  
                         
Commercial
    
17
    
$
25,105
    
$
1,351,790
      
1.9
%
Mortgage
    
197
      
32,091
      
1,024,036
      
3.1
%
Installment
    
97
      
2,631
      
479,653
      
0.5
%
Total
    
311
    
$
59,827
    
$
2,855,479
      
2.1
%
                                 
Mortgage loans serviced for others(1)
    
416
    
$
66,279
    
$
2,873,153
      
2.3
%

(1)
We have delegated authority from all investors to grant these deferrals on their behalf.

A summary of our Portfolio Loans follows:

   
September 30,
2020
    
December 31,
2019
  
   
(In thousands)
  
Real estate(1)
            
Residential first mortgages
  
$
793,691
    
$
843,746
  
Residential home equity and other junior mortgages
    
145,929
      
166,735
  
Construction and land development
    
266,081
      
249,747
  
Other(2)
    
646,656
      
693,580
  
Consumer
    
471,372
      
448,297
  
Commercial
    
527,854
      
318,504
  
Agricultural
    
3,896
      
4,414
  
Total loans
  
$
2,855,479
    
$
2,725,023
  


(1) Includes both residential and non-residential commercial loans secured by real estate.
(2) Includes loans secured by multi-family residential and non-farm, non-residential property.
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Index


A summary of our non-performing assets follows:

Non-performing assets (1)

   
September 30,
2020
    
December 31,
2019
  
   
(Dollars in thousands)
  
Non-accrual loans
  
$
10,481
    
$
10,178
  
Loans 90 days or more past due and still accruing interest
    
266
      
-
  
Subtotal
    
10,747
      
10,178
  
Less:  Government guaranteed loans
    
510
      
646
  
Total non-performing loans
    
10,237
      
9,532
  
Other real estate and repossessed assets
    
1,487
      
1,865
  
Total non-performing assets
  
$
11,724
    
$
11,397
  
                 
As a percent of Portfolio Loans
                
Non-performing loans
    
0.36
%
    
0.35
  
Allowance for loan losses
    
1.25
      
0.96
  
Non-performing assets to total assets
    
0.28
      
0.32
  
Allowance for loan losses as a percent of non-performing loans
    
349.43
      
274.32
  

(1)
Excludes loans classified as "trouble debt restructured" that are not past due.
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Index


A summary of our troubled debt restructurings follows:

Troubled debt restructurings ("TDR")

   
September 30, 2020
  
   
Commercial
    
Retail (1)
          
Total
  
   
(In thousands)
  
Performing TDR's
  
$
8,292
    
$
37,337
          
$
45,629
  
Non-performing TDR's (2)
    
1,203
      
1,850
        
(3) 
    
3,053
  
Total
  
$
9,495
    
$
39,187
            
$
48,682
  

   
December 31, 2019
  
   
Commercial
    
Retail (1)
          
Total
  
   
(In thousands)
  
Performing TDR's
  
$
7,974
    
$
39,601
          
$
47,575
  
Non-performing TDR's (2)
    
540
      
2,607
        
(3) 
    
3,147
  
Total
  
$
8,514
    
$
42,208
            
$
50,722
  

(1)
Retail loans include mortgage and installment loan portfolio segments.
(2)
Included in non-performing assets table above.
(3)
Also includes loans on non-accrual at the time of modification until six payments are received on a timely basis.

Non-performing loans increased by $0.7 million since year-end 2019 due to an increase in non-performing commercial loans.  Our collection and resolution efforts have generally resulted in a stable trend in non-performing loans. However, the credit impact of the COVID-19 pandemic, and more specifically the periodic, government-mandated closing of various segments of the economy in order to contain it, may have a negative impact on the level of non-performing loans and assets in the future, but as yet, the magnitude of that impact is undeterminable.  As a result of this potential adverse impact, we have increased the subjective portion of our allowance for loan losses (“AFLL”) by $10.7 million (or 122.1%) during the first nine months of 2020.  (See the further discussion of our AFLL below.)

Non-performing loans exclude performing loans that are classified as TDRs. Performing TDRs totaled $45.6 million, or 1.6% of total Portfolio Loans, and $47.6 million, or 1.7% of total Portfolio Loans, at September 30, 2020 and December 31, 2019, respectively. The decrease in the amount of performing TDRs in 2020 primarily reflects the pay down of retail performing TDRs.

Other real estate and repossessed assets totaled $1.5 million and $1.9 million at September 30, 2020 and December 31, 2019, respectively.

We will place a loan that is 90 days or more past due on non-accrual, unless we believe the loan is both well secured and in the process of collection. Accordingly, we have determined that the collection of the accrued and unpaid interest on any loans that are 90 days or more past due and still accruing interest is probable.
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The following tables reflect activity in and the allocation of the AFLL.

Allowance for loan losses

   
Nine months ended
September 30,
  
   
2020
    
2019
  
   
Loans
    
Unfunded
Commitments
    
Loans
    
Unfunded
Commitments
  
   
(Dollars in thousands)
  
Balance at beginning of period
  
$
26,148
    
$
1,542
    
$
24,888
    
$
1,296
  
Additions (deductions)
                                
Provision for loan losses
    
12,884
      
-
      
1,045
      
-
  
Recoveries credited to allowance
    
2,404
      
-
      
3,109
      
-
  
Loans charged against the allowance
    
(5,665
)
    
-
      
(2,894
)
    
-
  
Additions included in non-interest expense
    
-
      
271
      
-
      
341
  
Balance at end of period
  
$
35,771
    
$
1,813
    
$
26,148
    
$
1,637
  
                                 
Net loans charged (recovered) against the allowance to average Portfolio Loans
    
0.16
%
            
(0.01
)%
        

Allocation of the Allowance for Loan Losses

   
September 30,
2020
    
December 31,
2019
  
   
(Dollars in thousands)
  
Specific allocations
  
$
6,138
    
$
6,155
  
Other adversely rated commercial loans
    
2,097
      
2,502
  
Historical loss allocations
    
8,156
      
8,764
  
Additional allocations based on subjective factors
    
19,380
      
8,727
  
Total
  
$
35,771
    
$
26,148
  

Some loans will not be repaid in full. Therefore, an AFLL is maintained at a level which represents our best estimate of losses incurred. In determining the AFLL and the related provision for loan losses, we consider four principal elements: (i) specific allocations based upon probable losses identified during the review of the loan portfolio, (ii) allocations established for other adversely rated commercial loans, (iii) allocations based principally on historical loan loss experience, and (iv) additional allowances based on subjective factors, including local and general economic business factors and trends, portfolio concentrations and changes in the size and/or the general terms of the loan portfolios.

The first AFLL element (specific allocations) reflects our estimate of probable incurred losses based upon our systematic review of specific loans. These estimates are based upon a number of factors, such as payment history, financial condition of the borrower, discounted collateral exposure and discounted cash flow analysis. Impaired commercial, mortgage and installment loans are allocated AFLL amounts using this first element. The second AFLL element (other adversely rated commercial loans) reflects the application of our commercial loan rating system. This rating system is similar to those employed by state and federal banking regulators. Commercial loans that are rated below a certain predetermined classification are assigned a loss allocation factor for each loan classification category that is based upon a historical analysis of both the probability of default and the expected loss rate (“loss given default”). The lower the rating assigned to a loan or category, the greater the allocation percentage that is applied. The third AFLL element (historical loss allocations) is determined by assigning allocations to higher rated (“non-watch credit”) commercial loans using a probability of default and loss given default similar to the second AFLL element and to homogenous mortgage and installment loan groups based upon borrower credit score and portfolio segment.  For homogenous mortgage and installment loans a probability of default for each homogenous pool is calculated by way of credit score migration.  Historical loss data for each homogenous pool coupled with the associated probability of default is utilized to calculate an expected loss allocation rate.  The fourth AFLL element (additional allocations based on subjective factors) is based on factors that cannot be associated with a specific credit or loan category and reflects our attempt to ensure that the overall AFLL appropriately reflects a margin for the imprecision necessarily inherent in the estimates of expected credit losses. We consider a number of subjective factors when determining this fourth element, including local and general economic business factors and trends, portfolio concentrations and changes in the size, mix and the general terms of the overall loan portfolio.
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Index


Increases in the AFLL are recorded by a provision for loan losses charged to expense. Although we periodically allocate portions of the AFLL to specific loans and loan portfolios, the entire AFLL is available for incurred losses. We generally charge-off commercial, homogenous residential mortgage and installment loans when they are deemed uncollectible or reach a predetermined number of days past due based on product, industry practice and other factors. Collection efforts may continue and recoveries may occur after a loan is charged against the AFLL.

While we use relevant information to recognize losses on loans, additional provisions for related losses may be necessary based on changes in economic conditions, customer circumstances and other credit risk factors.

The AFLL increased $9.6 million to $35.7 million at September 30, 2020 from $26.1 million at December 31, 2019 and was equal to 1.25% and 0.96% of total Portfolio Loans at September 30, 2020 and December 31, 2019, respectively.

Three of the four components of the AFLL outlined above decreased through the first nine months of 2020. The AFLL related to specific loans decreased $0.02 million during the first nine months of 2020.  The AFLL related to other adversely rated commercial loans decreased $0.4 million during the first three quarters of 2020, primarily due to a decrease in the balance of such loans included in this component.  The AFLL related to historical losses decreased $0.6 million through the first nine months of 2020, and the AFLL related to subjective factors increased $10.7 million through the first nine months of 2020.  The significant increase in the AFLL related to subjective factors is due principally to the economic shock of COVID-19, various executive orders suspending or restricting businesses and operations that are not necessary to sustain or protect life, or involved in critical infrastructure, the significant increase in unemployment claims, especially in the State of Michigan, and elevated requests for payment relief from our borrowers.

Deposits and borrowings.  Historically, the loyalty of our customer base has allowed us to price deposits competitively, contributing to a net interest margin that compares favorably to our peers. However, we still face a significant amount of competition for deposits within many of the markets served by our branch network, which limits our ability to materially increase deposits without adversely impacting the weighted-average cost of core deposits.
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Index


To attract new core deposits, we have implemented various account acquisition strategies as well as branch staff sales training. Account acquisition initiatives have historically generated increases in customer relationships. Over the past several years, we have also expanded our treasury management products and services for commercial businesses and municipalities or other governmental units and have also increased our sales calling efforts in order to attract additional deposit relationships from these sectors. We view long-term core deposit growth as an important objective. Core deposits generally provide a more stable and lower cost source of funds than alternative sources such as short-term borrowings. (See “Liquidity and capital resources.”)

Deposits totaled $3.60 billion and $3.04 billion at September 30, 2020 and December 31, 2019, respectively.  The increase in deposits is primarily due to growth in non-interest bearing deposits, savings and interest bearing checking deposits and reciprocal deposits that were partially offset by a decline in time and brokered time deposits.  Reciprocal deposits totaled $557.6 million and $431.0 million at September 30, 2020 and December 31, 2019, respectively.  These deposits represent demand, money market and time deposits from our customers that have been placed through Promontory Interfinancial Network’s Insured Cash Sweep® service and Certificate of Deposit Account Registry Service®.  These services allow our customers to access multi-million dollar FDIC deposit insurance on deposit balances greater than the standard FDIC insurance maximum.  The continued increase in reciprocal deposits is due in part to an automated sweep product that we introduced in mid-2018 as well as the marketing and sales efforts of our treasury management team.

We cannot be sure that we will be able to maintain our current level of core deposits. In particular, those deposits that are uninsured may be susceptible to outflow. At September 30, 2020, we had approximately $741.2 million of uninsured deposits. A reduction in core deposits would likely increase our need to rely on wholesale funding sources.

We have also implemented strategies that incorporate using federal funds purchased, other borrowings and Brokered CDs to fund a portion of our interest-earning assets. The use of such alternate sources of funds supplements our core deposits and is also an integral part of our asset/liability management efforts.

Other borrowings, comprised primarily of advances from the FHLB and federal funds sold, totaled $30.0 million and $88.6 million at September 30, 2020 and December 31, 2019, respectively.

As described above, we utilize wholesale funding, including federal funds purchased, FHLB and FRB borrowings and Brokered CDs to augment our core deposits and fund a portion of our assets. At September 30, 2020, our use of such wholesale funding sources (including reciprocal deposits) amounted to approximately $740.4 million, or 20.4% of total funding (deposits and all borrowings, excluding subordinated debt and subordinated debentures). Because wholesale funding sources are affected by general market conditions, the availability of such funding may be dependent on the confidence these sources have in our financial condition and operations. The continued availability to us of these funding sources is not certain, and Brokered CDs may be difficult for us to retain or replace at attractive rates as they mature. Our liquidity may be constrained if we are unable to renew our wholesale funding sources or if adequate financing is not available in the future at acceptable rates of interest or at all.  Our financial performance could also be affected if we are unable to maintain our access to funding sources or if we are required to rely more heavily on more expensive funding sources. In such case, our net interest income and results of operations could be adversely affected.
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Index


We historically employed derivative financial instruments to manage our exposure to changes in interest rates.  During the first nine months of 2020 and 2019, we entered into $12.2 million and $17.6 million (aggregate notional amounts), respectively, of interest rate swaps with commercial loan customers, which were offset with interest rate swaps that the Bank entered into with a broker-dealer. We recorded $0.2 million and $0.7 million of fee income related to these transactions during the first nine months of 2020 and 2019, respectively. See note #6 to the Condensed Consolidated Financial Statements included within this report for more information on our derivative financial instruments.

Liquidity and capital resources. Liquidity risk is the risk of being unable to timely meet obligations as they come due at a reasonable funding cost or without incurring unacceptable losses. Our liquidity management involves the measurement and monitoring of a variety of sources and uses of funds. Our Condensed Consolidated Statements of Cash Flows categorize these sources and uses into operating, investing and financing activities. We primarily focus our liquidity management on maintaining adequate levels of liquid assets (primarily funds on deposit with the FRB and certain securities available for sale) as well as developing access to a variety of borrowing sources to supplement our deposit gathering activities and provide funds for purchasing securities available for sale or originating Portfolio Loans as well as to be able to respond to unforeseen liquidity needs.

Our primary sources of funds include our deposit base, secured advances from the FHLB and FRB, federal funds purchased borrowing facilities with other banks, and access to the capital markets (for Brokered CDs).

At September 30, 2020, we had $414.2 million of time deposits that mature in the next 12 months. Historically, a majority of these maturing time deposits are renewed by our customers. Additionally, $3.11 billion of our deposits at September 30, 2020, were in account types from which the customer could withdraw the funds on demand. Changes in the balances of deposits that can be withdrawn upon demand are usually predictable and the total balances of these accounts have generally grown or have been stable over time as a result of our marketing and promotional activities. However, there can be no assurance that historical patterns of renewing time deposits or overall growth or stability in deposits will continue in the future. 

We have developed contingency funding plans that stress test our liquidity needs that may arise from certain events such as an adverse change in our financial metrics (for example, credit quality or regulatory capital ratios). Our liquidity management also includes periodic monitoring that measures quick assets (defined generally as highly liquid or short-term assets) to total assets, short-term liability dependence and basic surplus (defined as quick assets less volatile liabilities to total assets). Policy limits have been established for our various liquidity measurements and are monitored on a quarterly basis. In addition, we also prepare cash flow forecasts that include a variety of different scenarios.

We believe that we currently have adequate liquidity at our Bank because of our cash and cash equivalents, our portfolio of securities available for sale, our access to secured advances from the FHLB and FRB and our ability to issue Brokered CDs.

We also believe that the available cash on hand at the parent company (including time deposits) of approximately $48.3 million as of September 30, 2020 provides sufficient liquidity resources at the parent company to meet operating expenses, to make interest payments on the subordinated debt and the subordinated debentures, and, along with dividends from the Bank, to pay cash dividends on our common stock.
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Index


Effective management of capital resources is critical to our mission to create value for our shareholders. In addition to common stock, our capital structure also currently includes subordinated debt (qualifies as Tier 2 capital) and cumulative trust preferred securities.

Capitalization

   
September 30,
2020
    
December 31,
2019
  
   
(In thousands)
  
Subordinated debt
  
$
39,261
    
$
-
  
Subordinated debentures
    
39,507
      
39,456
  
Amount not qualifying as regulatory capital
    
(485
)
    
(1,224
)
Amount qualifying as regulatory capital
    
78,283
      
38,232
  
Shareholders’ equity
                
Common stock
    
339,408
      
352,344
  
Retained earnings
    
27,538
      
1,611
  
Accumulated other comprehensive income (loss)
    
6,146
      
(3,786
)
Total shareholders’ equity
    
373,092
      
350,169
  
Total capitalization
  
$
451,375
    
$
388,401
  

In May 2020, we issued $40.0 million of fixed to floating subordinated notes with a ten year maturity and a five year call option.  The initial coupon rate is 5.95% fixed for five years and then floats at the Secured Overnight Financing Rate (“SOFR”) plus 5.825%.  These notes are presented in the Condensed Consolidated Statement of Financial Condition under the caption “Subordinated debt” and the September 30, 2020 balance of $39.3 million is net of remaining unamortized deferred issuance costs of approximately $0.7 million that are being amortized through the maturity date into interest expense on other borrowings and subordinated debt and debentures in our Condensed Consolidated Statement of Operations.

We currently have four special purpose entities with $39.5 million of outstanding cumulative trust preferred securities as of September 30, 2020.  These special purpose entities issued common securities and provided cash to our parent company that in turn issued subordinated debentures to these special purpose entities equal to the trust preferred securities and common securities. The subordinated debentures represent the sole asset of the special purpose entities. The common securities and subordinated debentures are included in our Condensed Consolidated Statements of Financial Condition.

The FRB has issued rules regarding trust preferred securities as a component of the Tier 1 capital of bank holding companies. The aggregate amount of trust preferred securities (and certain other capital elements) are limited to 25 percent of Tier 1 capital elements, net of goodwill (net of any associated deferred tax liability). The amount of trust preferred securities and certain other elements in excess of the limit can be included in Tier 2 capital, subject to restrictions. At the parent company, all of these securities qualified as Tier 1 capital at September 30, 2020 and December 31, 2019.
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Index


Common shareholders’ equity increased to $373.1 million at September 30, 2020, from $350.2 million at December 31, 2019, due primarily to our net income and an increase in accumulated other comprehensive income that was partially offset by share repurchases and cash dividend payments. Our tangible common equity (“TCE”) totaled $340.2 million and $316.5 million, respectively, at those same dates. Our ratio of TCE to tangible assets was 8.23% and 8.96% at September 30, 2020, and December 31, 2019, respectively.  TCE and the ratio of TCE to tangible assets are non-GAAP measures.  TCE represents total common equity less goodwill and other intangible assets.

In December 2019, our Board of Directors authorized a 2020 share repurchase plan.  Under the terms of the 2020 share repurchase plan, we were authorized to buy back 1,120,000 shares, or approximately 5%, of our outstanding common stock.  During the first three months of 2020, we repurchased 678,929 shares at a weighted average purchase price of $20.30 per share.  Due primarily to the economic uncertainty brought on by the COVID-19 pandemic, we suspended share repurchase activity on March 16, 2020. However, primarily as a result of the Company’s strong financial performance and improved economic conditions, and dependent upon market and other factors, we may begin to purchase shares under the 2020 repurchase plan during the last two months of the year.

We pay a quarterly cash dividend on our common stock.  These quarterly dividends totaled $0.60 per share and $0.54 per share in the first nine months of 2020 and 2019, respectively. We generally favor a dividend payout ratio between 30% and 50% of net income.

As of September 30, 2020 and December 31, 2019, our Bank (and holding company) continued to meet the requirements to be considered “well-capitalized” under federal regulatory standards (also see note #10 to the Condensed Consolidated Financial Statements included within this report).

Asset/liability management.  Interest-rate risk is created by differences in the cash flow characteristics of our assets and liabilities. Options embedded in certain financial instruments, including caps on adjustable-rate loans as well as borrowers’ rights to prepay fixed-rate loans, also create interest-rate risk.

Our asset/liability management efforts identify and evaluate opportunities to structure our assets and liabilities in a manner that is consistent with our mission to maintain profitable financial leverage within established risk parameters. We evaluate various opportunities and alternate asset/liability management strategies carefully and consider the likely impact on our risk profile as well as the anticipated contribution to earnings. The marginal cost of funds is a principal consideration in the implementation of our asset/liability management strategies, but such evaluations further consider interest-rate and liquidity risk as well as other pertinent factors. We have established parameters for interest-rate risk. We regularly monitor our interest-rate risk and report at least quarterly to our board of directors.

We employ simulation analyses to monitor our interest-rate risk profile and evaluate potential changes in our net interest income and market value of portfolio equity that result from changes in interest rates. The purpose of these simulations is to identify sources of interest-rate risk. The simulations do not anticipate any actions that we might initiate in response to changes in interest rates and, accordingly, the simulations do not provide a reliable forecast of anticipated results. The simulations are predicated on immediate, permanent and parallel shifts in interest rates and generally assume that current loan and deposit pricing relationships remain constant. The simulations further incorporate assumptions relating to changes in customer behavior, including changes in prepayment rates on certain assets and liabilities.
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Index


CHANGES IN MARKET VALUE OF PORTFOLIO EQUITY AND NET INTEREST INCOME

Change in Interest Rates
  
Market
Value of
Portfolio
Equity(1)
    
Percent
Change
    
Net
Interest
Income(2)
    
Percent
Change
  
   
(Dollars in thousands)
  
September 30, 2020
                        
200 basis point rise
  
$
478,200
      
21.12
%
  
$
130,400
      
4.40
%
100 basis point rise
    
456,400
      
15.60
      
128,500
      
2.88
  
Base-rate scenario
    
394,800
      
-
      
124,900
      
-
  
100 basis point decline
    
360,300
      
(8.74
)
    
119,200
      
(4.56
)
                                 
December 31, 2019
                                
200 basis point rise
  
$
472,500
      
1.13
%
  
$
123,900
      
1.23
%
100 basis point rise
    
478,800
      
2.48
      
123,300
      
0.74
  
Base-rate scenario
    
467,200
      
-
      
122,400
      
-
  
100 basis point decline
    
412,100
      
(11.79
)
    
118,100
      
(3.51
)


(1)
Simulation analyses calculate the change in the net present value of our assets and liabilities, including debt and related financial derivative instruments, under parallel shifts in interest rates by discounting the estimated future cash flows using a market-based discount rate. Cash flow estimates incorporate anticipated changes in prepayment speeds and other embedded options.
(2)
Simulation analyses calculate the change in net interest income under immediate parallel shifts in interest rates over the next twelve months, based upon a static statement of financial condition, which includes debt and related financial derivative instruments, and do not consider loan fees.

Accounting standards update. See note #2  to  the Condensed Consolidated Financial Statements included elsewhere in this report for details on recently issued accounting pronouncements and their impact on our interim condensed consolidated financial statements.

Fair valuation of financial instruments. Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) topic 820 - “Fair Value Measurements and Disclosures” (“FASB ASC topic 820”) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

We utilize fair value measurements to record fair value adjustments to certain financial instruments and to determine fair value disclosures. FASB ASC topic 820 differentiates between those assets and liabilities required to be carried at fair value at every reporting period (“recurring”) and those assets and liabilities that are only required to be adjusted to fair value under certain circumstances (“nonrecurring”). Securities available for sale, loans held for sale, carried at fair value, derivatives and capitalized mortgage loan servicing rights are financial instruments recorded at fair value on a recurring basis. Additionally, from time to time, we may be required to record at fair value other financial assets on a nonrecurring basis, such as loans held for investment and certain other assets. These nonrecurring fair value adjustments typically involve application of lower of cost or fair value accounting or write-downs of individual assets. See note #11 to the Condensed Consolidated Financial Statements included within this report for a complete discussion on our use of fair valuation of financial instruments and the related measurement techniques.
91
Index


Litigation Matters

The aggregate amount we have accrued for losses we consider probable as a result of litigation matters is immaterial. However, because of the inherent uncertainty of outcomes from any litigation matter, we believe it is reasonably possible we may incur losses in addition to the amounts we have accrued.  At this time, we estimate the maximum amount of additional losses that are reasonably possible is insignificant.  However, because of a number of factors, including the fact that certain of these litigation matters are still in their early stages, this maximum amount may change in the future.

The litigation matters described in the preceding paragraph primarily include claims that have been brought against us for damages, but do not include litigation matters where we seek to collect amounts owed to us by third parties (such as litigation initiated to collect delinquent loans). These excluded, collection-related matters may involve claims or counterclaims by the opposing party or parties, but we have excluded such matters from the disclosure contained in the preceding paragraph in all cases where we believe the possibility of us paying damages to any opposing party is remote.

 Critical Accounting Policies

Our accounting and reporting policies are in accordance with accounting principles generally accepted in the United States of America and conform to general practices within the banking industry. Accounting and reporting policies for the AFLL and capitalized mortgage loan servicing rights are deemed critical since they involve the use of estimates and require significant management judgments. Application of assumptions different than those that we have used could result in material changes in our consolidated financial position or results of operations.  There have been no material changes to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019.
92
Index


Item 3.

Quantitative and Qualitative Disclosures about Market Risk

See applicable disclosures set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 under the caption “Asset/liability management.”

Item 4.

Controls and Procedures

(a)
Evaluation of Disclosure Controls and Procedures.

With the participation of management, our chief executive officer and chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a – 15(e) and 15d – 15(e)) for the period ended September 30, 2020, have concluded that, as of such date, our disclosure controls and procedures were effective.

(b)
Changes in Internal Controls.

During the quarter ended September 30, 2020, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
93
Index


Part II

Item 1A.
Risk Factors

In addition to the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, the following risk factors apply to the Company:

The ongoing COVID-19 pandemic and measures intended to prevent its spread could have a material adverse effect on our business, results of operations and financial condition, and such effects will depend on future developments, which are highly uncertain and are difficult to predict.

Global health concerns relating to the COVID-19 pandemic and related government actions have resulted in significant disruptions and increased economic uncertainty. Government restrictions and recommendations designed to contain the virus and limit its effects have substantially limited the activities of individuals and the operations of businesses in the markets we serve.

The Governor of Michigan issued her first "stay home, stay safe" executive order effective March 24, 2020.  In general, that order and subsequent modifications required individuals in Michigan to stay at home or their place of residence, except for certain specified activities that were deemed necessary to sustain or protect life. That original executive order was amended several times and was later rescinded and replaced entirely by a series of "Safer at Home" executive orders, which generally extended certain social distancing restrictions, but lifted the requirement that individuals remain in their homes.  The series of "Safer at Home" orders, along with all other executive orders relating to the pandemic issued by Michigan's Governor after April 30, 2020, were then deemed unconstitutional by the Michigan Supreme Court on October 2, 2020.  Since then, the Michigan Department of Health and Human Services (MDHHS) has issued orders similar to the Governor's executive orders under authority granted to the MDHHS by the Michigan Public Health Code – a different statute than the law on which the Governor based her executive orders. Under the MDHHS' orders, social distancing restrictions remain in place; however, certain retail operations, restaurants and bars, and other businesses are permitted to conduct in-person operations, subject to capacity limitations and other workplace safety requirements. The degree to which businesses may resume operations varies based on the region of the state in which they are located. It is currently expected that various forms of state and local government restrictions similar to those described above will continue through the fourth quarter and perhaps beyond. As a result of these events, Michigan has experienced a significant increase in unemployment.

The COVID-19 pandemic, the related executive orders, and other government restrictions and guidance have had and continue to have a significant effect on us, our customers and the markets we serve. Our business, results of operations and financial condition may be adversely affected by a number of factors that could impact us and our customers, including but not limited to:

∙
restrictions on activity and high levels of unemployment may cause increases in loan delinquencies, foreclosures and defaults;
∙
increases in allowance for loan losses may be necessary;
∙
declines in collateral values may occur;
∙
third party disruptions, including outages at network providers, on-line banking vendors and other suppliers;
94
Index


∙
increased cyber and payment fraud risk, as cybercriminals attempt to profit from the disruption, given increased online and remote activity;
∙
operational failures due to changes in our normal business practices necessitated by the pandemic and related governmental actions; and/or
∙
key personnel or significant numbers of our employees being unable to work effectively, including because of illness or restrictions in connection with COVID-19.

These factors may continue for a significant period of time.

The spread of COVID-19 has caused us to modify many of our business practices.  Currently, approximately 38% of our total employees are working remotely.  We have also expanded sick and vacation time for certain employees.  We may take further actions as may be required or as we determine to be prudent.  There is no certainty that such measures will be sufficient to mitigate the risks posed by COVID-19.

The extent to which the COVID-19 pandemic will impact our business, results of operations and financial condition will depend on future developments, which are highly uncertain and difficult to predict.  Those developments and factors include the duration and spread of the pandemic, its severity, the actions to contain the pandemic or address its impact, and how quickly and to what extent normal economic and operating conditions can resume. We do not yet know the full extent of the impact.   However, the effects could have a material adverse impact on our business, financial condition and results of operations. Material adverse impacts may include valuation impairments on our intangible assets, securities available for sale, loans, capitalized mortgage loan servicing rights and deferred tax assets.

As a participating lender in the U.S. Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”), the Company and the Bank are subject to additional risks regarding the Bank’s processing of loans for the PPP and risks that the SBA may not fund some or all PPP loan guaranties.

On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which included a $349 billion loan program administered through the SBA referred to as the PPP. Under the PPP, small businesses and other entities and individuals can apply for loans from existing SBA lenders and other approved regulated lenders that enroll in the program, subject to numerous limitations and eligibility criteria. The Bank is participating as a lender in the PPP. The PPP opened on April 3, 2020; however, because of the short timeframe between the passing of the CARES Act and the opening of the PPP, there is some ambiguity in the laws, rules and guidance regarding the operation of the PPP, which exposes us to potential risks relating to noncompliance with the PPP. Since then, the SBA and U.S. Department of Treasury have provided additional guidance and clarity on the PPP through the issuance of over 20 interim final rules implementing the PPP.  On or about April 16, 2020, the SBA notified lenders that the $349 billion earmarked for the PPP was exhausted. The PPP was then expanded by the Paycheck Protection Program and Health Care Enhancement Act in late April 2020, adding an additional $310 billion in funding while the Paycheck Protection Program Flexibility Act made certain changes to the PPP by allowing for more time to spend the funds and making it easier to get a loan fully forgiven.  The PPP closed on August 8, 2020.  Most recently, the SBA released a simpler loan forgiveness application for PPP loans of $50,000 or less that streamlines the PPP forgiveness process for such loans.  As of September 30, 2020, we had 2,117 PPP loans outstanding with a total balance of $261.1 million.  We have submitted 197 forgiveness applications for loans totaling $37.2 million.
95
Index


Since the initiation of the PPP, several larger banks have been subject to litigation regarding the protocols and procedures that they used in processing applications for the PPP. We may be exposed to the risk of similar litigation, from both customers and non‑customers that approached us regarding PPP loans, regarding our policies and procedures used in processing applications for the PPP. If any such litigation is filed against the Company or the Bank and is not resolved in a manner favorable to us, it could result in financial liability or adversely affect our reputation. In addition, litigation can be costly, regardless of outcome. Any financial liability, litigation costs or reputational damage caused by PPP related litigation could have an adverse impact on our business, financial condition and results of operations.

We also have credit risk on PPP loans if a determination is made by the SBA that there is a deficiency in the manner in which the loan was originated, funded, or serviced by the Bank, such as an issue with the eligibility of a borrower to receive a PPP loan, which may or may not be related to the ambiguity in the laws, rules and guidance regarding the operation of the PPP. In the event of a loss resulting from a default on a PPP loan and a determination by the SBA that there was a deficiency in the manner in which the PPP loan was originated, funded, or serviced by us, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of any loss related to the deficiency from us.

Our business is subject to additional risks in the near term related to our plan to complete a core data processing systems conversion.

We are in the process of converting our core data processing system to a new system hosted by a different vendor. A systems conversion of this nature is extremely complicated, time-consuming, and resource intensive. The process will be even more challenging in light of the COVID-19 pandemic, including the challenges presented as a result of a portion of our workforce working remotely. The timing and success of this systems conversion is also heavily dependent on the reliability of the vendors for both our existing and new systems. If either or both of these vendors experience workforce shortages due to the pandemic or otherwise, it could impact our ability to complete the systems conversion on the timeline and budget currently expected. Difficulties in completing the conversion could also negatively impact our operations and financial performance.  We expect to complete this conversion in the second quarter of 2021.
96
Index



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

The Company maintains a Deferred Compensation and Stock Purchase Plan for Non-Employee Directors (the "Plan") pursuant to which non-employee directors can elect to receive shares of the Company's common stock in lieu of fees otherwise payable to the director for his or her service as a director.  A director can elect to receive shares on a current basis or to defer receipt of the shares, in which case the shares are issued to a trust to be held for the account of the director and then generally distributed to the director after his or her retirement from the Board.  Pursuant to this Plan, during the third quarter of 2020, the Company issued 555 shares of common stock to non-employee directors on a current basis and 5,274 shares of common stock to the trust for distribution to directors on a deferred basis.  These shares were issued on July 1, 2020 representing aggregate fees of $0.08 million. The shares on a current basis were issued at a price of $14.85 per share and the shares on a deferred basis were issued at a price of $13.37 per share, representing 90% of the fair value of the shares on the credit date.   The price per share was the consolidated closing bid price per share of the Company's common stock as of the date of issuance, as determined in accordance with NASDAQ Marketplace Rules.  The Company issued the shares pursuant to an exemption from registration under Section 4(2) of the Securities Act of 1933 due to the fact that the issuance of the shares was made on a private basis pursuant to the Plan.

The following table shows certain information relating to repurchases of common stock for the three-months ended September 30, 2020:

Period
  
Total Number of
Shares Purchased (1)
    
Average Price
Paid Per Share
    
Total Number of
Shares Purchased
as Part of a
Publicly
Announced Plan
    
Remaining
Number of
Shares Authorized
for Purchase
Under the Plan
  
July 2020
    
225
    
$
13.97
      
-
      
441,071
  
August 2020
    
4,499
      
14.88
      
-
      
441,071
  
September 2020
    
674
      
12.57
      
-
      
441,071
  
Total
    
5,398
    
$
14.55
      
-
      
441,071
  

(1)
These amounts represent shares withheld from the shares that would otherwise have been issued to an officer in order to satisfy tax withholding obligations resulting from the vesting of restricted stock.
97
Index



Item 6.
Exhibits

(a)
The following exhibits (listed by number corresponding to the Exhibit Table as Item 601 in Regulation S-K) are filed with this report:

 
Certificate of the Chief Executive Officer of Independent Bank Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
 
Certificate of the Chief Financial Officer of Independent Bank Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
 
Certificate of the Chief Executive Officer of Independent Bank Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
 
Certificate of the Chief Financial Officer of Independent Bank Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
 
101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
 
101.SCH Inline XBRL Taxonomy Extension Schema Document
 
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
 
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
 
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
 
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
 
104 Cover page interactive data file (formatted as inline XBRL and contained in Exhibit 101)
98
Index

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.

Date
November 5, 2020
    
By
  
/s/ Gavin A. Mohr
         
Gavin A. Mohr, Principal Financial Officer
         
Date
November 5, 2020
    
By
  
/s/ James J. Twarozynski
         
James J. Twarozynski, Principal Accounting Officer


99
EXHIBIT 31.1

CERTIFICATION

I, William B. Kessel, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Independent Bank Corporation;
2.
Based on my knowledge, this quarterly 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 quarterly report;
3.
Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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 we 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 quarterly 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 quarterly 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;
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 controls over financial reporting.


INDEPENDENT BANK CORPORATION
   
Date:  November 5, 2020
 /s/ 
William B. Kessel
  
 
William B. Kessel  
 

President and Chief Executive Officer


EXHIBIT 31.2

CERTIFICATION

I, Gavin A. Mohr, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Independent Bank Corporation;
2.
Based on my knowledge, this quarterly 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 quarterly report;
3.
Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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 we 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 quarterly 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 quarterly 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;
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 controls over financial reporting.


INDEPENDENT BANK CORPORATION
   
Date:  November 5, 2020
 /s/ 
Gavin A. Mohr
  
 
Gavin A. Mohr   
 

Chief Financial Officer 


EXHIBIT 32.1

CERTIFICATE OF THE
CHIEF EXECUTIVE OFFICER OF
INDEPENDENT BANK CORPORATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350):

I, William B. Kessel, President and Chief Executive Officer of Independent Bank Corporation, certify, to the best of my knowledge and belief, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) that:

(1)          The quarterly report on Form 10-Q for the quarterly period ended September 30, 2020, which this statement accompanies, fully complies with requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and;

(2)           The information contained in this quarterly report on Form 10-Q for the quarterly period ended September 30, 2020, fairly presents, in all material respects, the financial condition and results of operations of Independent Bank Corporation.
INDEPENDENT BANK CORPORATION
   
Date:  November 5, 2020
 /s/ 
William B. Kessel
  
 
William B. Kessel  
 

President and Chief Executive Officer

The signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Independent Bank Corporation and will be retained by Independent Bank Corporation and furnished to the Securities and Exchange Commission or its staff upon request.


EXHIBIT 32.2

CERTIFICATE OF THE
CHIEF FINANCIAL OFFICER OF
INDEPENDENT BANK CORPORATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350):

I, Gavin A. Mohr, Chief Financial Officer of Independent Bank Corporation, certify, to the best of my knowledge and belief, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) that:

(1)          The quarterly report on Form 10-Q for the quarterly period ended September 30, 2020, which this statement accompanies, fully complies with requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and;

(2)          The information contained in this quarterly report on Form 10-Q for the quarterly period ended September 30, 2020, fairly presents, in all material respects, the financial condition and results of operations of Independent Bank Corporation.
INDEPENDENT BANK CORPORATION
   
Date:  November 5, 2020
 /s/ 
Gavin A. Mohr
  
 
Gavin A. Mohr   
 

Chief Financial Officer 

The signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Independent Bank Corporation and will be retained by Independent Bank Corporation and furnished to the Securities and Exchange Commission or its staff upon request.


v3.20.2
Document and Entity Information - shares
 9 Months Ended
Sep. 30, 2020
Nov. 04, 2020
Cover [Abstract]    
Entity Registrant Name INDEPENDENT BANK CORPORATION  
Entity Central Index Key 0000039311  
Current Fiscal Year End Date --12-31  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Shell Company false  
Entity Filer Category Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Common Stock, Shares Outstanding   21,884,495
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Sep. 30, 2020  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q3  
Document Quarterly Report true  
Document Transition Report false  
Entity File Number 0-7818  
Entity Tax Identification Number 38-2032782  
Entity Incorporation, State or Country Code MI  
Entity Address, Address Line One 4200 East Beltline  
Entity Address, City or Town Grand Rapids  
Entity Address, State or Province MI  
Entity Address, Postal Zip Code 49525  
City Area Code 616  
Local Phone Number 527-5820  
Title of 12(b) Security Common stock, no par value  
Trading Symbol IBCP  
Security Exchange Name NASDAQ  
v3.20.2
Condensed Consolidated Statements of Financial Condition (unaudited) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Assets    
Cash and due from banks $ 42,435 $ 53,295
Interest bearing deposits 4,121 12,009
Cash and Cash Equivalents 46,556 65,304
Interest bearing deposits - time 0 350
Securities available for sale 985,050 518,400
Federal Home Loan Bank and Federal Reserve Bank stock, at cost 18,427 18,359
Loans held for sale, carried at fair value 99,747 69,800
Loans    
Loans 2,855,479 2,725,023
Allowance for loan losses (35,771) (26,148)
Net Loans 2,819,708 2,698,875
Other real estate and repossessed assets, net 1,487 1,865
Property and equipment, net 36,538 38,411
Bank-owned life insurance 55,019 55,710
Deferred tax assets, net 1,572 2,072
Capitalized mortgage loan servicing rights, carried at fair value 15,403 19,171
Other intangibles 4,561 5,326
Goodwill 28,300 28,300
Accrued income and other assets 56,576 42,751
Total Assets 4,168,944 3,564,694
Deposits    
Non-interest bearing 1,152,072 852,076
Savings and interest-bearing checking 1,431,841 1,186,745
Reciprocal 557,551 431,027
Time 303,392 376,877
Brokered time 152,889 190,002
Total Deposits 3,597,745 3,036,727
Other borrowings 30,005 88,646
Subordinated debt 39,261 0
Subordinated debentures 39,507 39,456
Accrued expenses and other liabilities 89,334 49,696
Total Liabilities 3,795,852 3,214,525
Commitments and contingent liabilities
Shareholders' Equity    
Preferred stock, no par value, 200,000 shares authorized; none issued or outstanding 0 0
Common stock, no par value, 500,000,000 shares authorized; issued and outstanding: 21,885,368 shares at September 30, 2020 and 22,481,643 shares at December 31, 2019 339,408 352,344
Retained earnings 27,538 1,611
Accumulated other comprehensive income (loss) 6,146 (3,786)
Total Shareholders' Equity 373,092 350,169
Total Liabilities and Shareholders' Equity 4,168,944 3,564,694
Commercial [Member]    
Loans    
Loans 1,351,790 1,166,695
Allowance for loan losses (8,153) (7,922)
Mortgage [Member]    
Loans    
Loans 1,024,036 1,098,911
Allowance for loan losses (6,999) (8,216)
Installment [Member]    
Loans    
Loans 479,653 459,417
Allowance for loan losses $ (1,239) $ (1,283)
v3.20.2
Condensed Consolidated Statements of Financial Condition (unaudited) (Parenthetical) - $ / shares
Sep. 30, 2020
Dec. 31, 2019
Shareholders' Equity    
Preferred stock, par value (in dollars per share) $ 0 $ 0
Preferred stock, shares authorized (in shares) 200,000 200,000
Preferred stock, shares issued (in shares) 0 0
Preferred stock, shares outstanding (in shares) 0 0
Common stock, par value (in dollars per share) $ 0 $ 0
Common stock, shares authorized (in shares) 500,000,000 500,000,000
Common stock, shares issued (in shares) 21,885,368 22,481,643
Common stock, shares outstanding (in shares) 21,885,368 22,481,643
v3.20.2
Condensed Consolidated Statements of Operations (unaudited) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Interest Income        
Interest and fees on loans $ 30,393 $ 34,226 $ 92,020 $ 100,743
Interest on securities available for sale        
Taxable 3,450 2,771 9,356 8,811
Tax-exempt 954 319 2,137 1,017
Other investments 237 495 854 1,449
Total Interest Income 35,034 37,811 104,367 112,020
Interest Expense        
Deposits 2,062 6,236 9,150 17,938
Other borrowings and subordinated debt and debentures 1,006 703 2,598 2,211
Total Interest Expense 3,068 6,939 11,748 20,149
Net Interest Income 31,966 30,872 92,619 91,871
Provision for loan losses 975 (271) 12,884 1,045
Net Interest Income After Provision for Loan Losses 30,991 31,143 79,735 90,826
Non-interest Income        
Interchange income 3,428 2,785 8,411 7,744
Service charges on deposit accounts 2,085 2,883 6,299 8,323
Net gains on assets        
Mortgage loans 20,205 5,677 46,687 13,590
Securities available for sale 0 0 253 304
Mortgage loan servicing, net (644) (1,562) (8,966) (4,684)
Other 1,937 2,492 5,698 6,862
Total Non-Interest Income 27,011 12,275 58,382 32,139
Non-interest Expense        
Compensation and employee benefits 21,954 16,673 54,742 48,955
Occupancy, net 2,199 2,161 6,818 6,797
Data processing 2,215 2,282 6,160 6,597
Furniture, fixtures and equipment 999 1,023 3,125 3,058
Interchange expense 831 891 2,416 2,332
Communications 806 733 2,409 2,219
Loan and collection 768 714 2,329 1,976
Advertising 589 636 1,636 1,935
Legal and professional 566 541 1,427 1,281
FDIC deposit insurance 411 13 1,211 723
Other 2,303 2,181 7,433 6,557
Total Non-interest Expense 33,641 27,848 89,706 82,430
Income Before Income Tax 24,361 15,570 48,411 40,535
Income tax expense 4,777 3,125 9,245 7,979
Net Income $ 19,584 $ 12,445 $ 39,166 $ 32,556
Net Income Per Common Share        
Basic (in dollars per share) [1] $ 0.90 $ 0.55 $ 1.78 $ 1.41
Diluted (in dollars per share) $ 0.89 $ 0.55 $ 1.76 $ 1.40
[1] Basic net income per common share includes weighted average common shares outstanding during the period and participating share awards.
v3.20.2
Condensed Consolidated Statements of Comprehensive Income (unaudited) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Condensed Consolidated Statements of Comprehensive Income (unaudited) [Abstract]        
Net income $ 19,584 $ 12,445 $ 39,166 $ 32,556
Securities available for sale        
Unrealized gains arising during period 2,675 1,567 12,599 10,851
Change in unrealized gains and losses for which a portion of other than temporary impairment has been recognized in earnings 15 (53) (66) (55)
Reclassification adjustments for gains included in earnings 0 0 (253) (137)
Unrealized gains recognized in other comprehensive income on securities available for sale 2,690 1,514 12,280 10,659
Income tax expense 565 318 2,579 2,238
Unrealized gains recognized in other comprehensive income on securities available for sale, net of tax 2,125 1,196 9,701 8,421
Derivative instruments        
Unrealized loss arising during period (26) (72) (354) (1,740)
Reclassification adjustment for (income) expense recognized in earnings 310 (102) 646 (393)
Unrealized gains (losses) recognized in other comprehensive income on derivative instruments 284 (174) 292 (2,133)
Income tax expense (benefit) 59 (36) 61 (447)
Unrealized gains (losses) recognized in other comprehensive income on derivative instruments, net of tax 225 (138) 231 (1,686)
Other comprehensive income 2,350 1,058 9,932 6,735
Comprehensive income $ 21,934 $ 13,503 $ 49,098 $ 39,291
v3.20.2
Condensed Consolidated Statements of Cash Flows (unaudited) - USD ($)
$ in Thousands
 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Condensed Consolidated Statements of Cash Flows (unaudited) [Abstract]    
Net Income $ 39,166 $ 32,556
Adjustments to Reconcile Net Income to Net Cash From Operating Activities    
Proceeds from the sale of equity securities at fair value 0 560
Proceeds from sales of loans held for sale 1,074,284 422,557
Disbursements for loans held for sale (1,057,544) (451,572)
Provision for loan losses 12,884 1,045
Deferred income tax expense (benefit) (2,140) 1,216
Net deferred loan fees (costs) 5,227 (3,122)
Net depreciation, amortization of intangible assets and premiums and accretion of discounts on securities, loans and interest bearing deposits - time 5,962 4,427
Net gains on mortgage loans (46,687) (13,590)
Net gains on securities available for sale (253) (304)
Share based compensation 1,506 1,348
Increase in accrued income and other assets (1,564) (2,149)
Increase in accrued expenses and other liabilities 7,397 13,088
Total Adjustments (928) (26,496)
Net Cash From Operating Activities 38,238 6,060
Cash Flow Used in Investing Activities    
Proceeds from the sale of securities available for sale 36,593 44,305
Proceeds from maturities, prepayments and calls of securities available for sale 197,098 110,517
Purchases of securities available for sale (639,166) (123,238)
Proceeds from the maturity of interest bearing deposits - time 350 100
Purchase of Federal Reserve Bank stock (68) 0
Net increase in portfolio loans (loans originated, net of principal payments) (167,506) (213,116)
Proceeds from the sale of portfolio loans 2,395 50,516
Proceeds from bank-owned life insurance 1,441 470
Proceeds from the sale of other real estate and repossessed assets 564 1,438
Capital expenditures (2,603) (2,587)
Net Cash Used in Investing Activities (570,902) (131,595)
CASH FLOW FROM FINANCING ACTIVITIES    
Net increase in total deposits 561,018 138,884
Net increase (decrease) in other borrowings (25,001) 18,355
Proceeds from Federal Home Loan Bank advances 239,254 57,000
Payments of Federal Home Loan Bank advances (272,910) (37,143)
Proceeds from issuance of subordinated debt, net of issuance costs 39,236 0
Dividends paid (13,239) (12,507)
Proceeds from issuance of common stock 11 282
Repurchase of common stock (13,784) (26,284)
Share based compensation withholding obligation (669) (879)
Net Cash From Financing Activities 513,916 137,708
Net Increase (Decrease) in Cash and Cash Equivalents (18,748) 12,173
Cash and Cash Equivalents at Beginning of Period 65,304 70,244
Cash and Cash Equivalents at End of Period 46,556 82,417
Cash paid during the period for    
Interest 11,636 20,185
Income taxes 10,500 5,934
Operating leases 1,357 1,692
Transfers to other real estate and repossessed assets 332 1,901
Purchase of securities available for sale not yet settled 23,844 3,075
Securitization of portfolio loans 26,325 29,790
Right of use assets obtained in exchange for lease obligations 279 7,767
Transfer of loans to held for sale $ 0 $ 36,622
v3.20.2
Condensed Consolidated Statements of Shareholders' Equity (unaudited) - USD ($)
$ in Thousands
Common Stock [Member]
Retained Earnings (Accumulated Deficit) [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Total
Balance at beginning of period at Dec. 31, 2018 $ 377,372 $ (28,270) $ (10,108) $ 338,994
Increase (Decrease) in Stockholders' Equity [Roll Forward]        
Net income 0 32,556 0 32,556
Cash dividends declared 0 (12,507) 0 (12,507)
Repurchase of common stock (26,284) 0 0 (26,284)
Issuance of common stock 282 0 0 282
Share based compensation 1,348 0 0 1,348
Share based compensation withholding obligation (879) 0 0 (879)
Other comprehensive income 0 0 6,735 6,735
Balances at end of period at Sep. 30, 2019 351,839 (8,221) (3,373) 340,245
Balance at beginning of period at Jun. 30, 2019 351,894 (16,617) (4,431) 330,846
Increase (Decrease) in Stockholders' Equity [Roll Forward]        
Net income 0 12,445 0 12,445
Cash dividends declared 0 (4,049) 0 (4,049)
Repurchase of common stock (502) 0 0 (502)
Issuance of common stock 0 0 0 0
Share based compensation 460 0 0 460
Share based compensation withholding obligation (13) 0 0 (13)
Other comprehensive income 0 0 1,058 1,058
Balances at end of period at Sep. 30, 2019 351,839 (8,221) (3,373) 340,245
Balance at beginning of period at Dec. 31, 2019 352,344 1,611 (3,786) 350,169
Increase (Decrease) in Stockholders' Equity [Roll Forward]        
Net income 0 39,166 0 39,166
Cash dividends declared 0 (13,239) 0 (13,239)
Repurchase of common stock (13,784) 0 0 (13,784)
Issuance of common stock 11 0 0 11
Share based compensation 1,506 0 0 1,506
Share based compensation withholding obligation (669) 0 0 (669)
Other comprehensive income 0 0 9,932 9,932
Balances at end of period at Sep. 30, 2020 339,408 27,538 6,146 373,092
Balance at beginning of period at Jun. 30, 2020 338,989 12,338 3,796 355,123
Increase (Decrease) in Stockholders' Equity [Roll Forward]        
Net income 0 19,584 0 19,584
Cash dividends declared 0 (4,384) 0 (4,384)
Repurchase of common stock 0 0 0 0
Issuance of common stock 0 0 0 0
Share based compensation 497 0 0 497
Share based compensation withholding obligation (78) 0 0 (78)
Other comprehensive income 0 0 2,350 2,350
Balances at end of period at Sep. 30, 2020 $ 339,408 $ 27,538 $ 6,146 $ 373,092
v3.20.2
Condensed Consolidated Statements of Shareholders' Equity (unaudited) (Parenthetical) - $ / shares
 3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Condensed Consolidated Statements of Shareholders' Equity (unaudited) [Abstract]        
Cash dividends declared (in dollars per share) $ 0.20 $ 0.18 $ 0.60 $ 0.54
Repurchase of shares of common stock (in shares) 0 25,000 678,929 1,204,688
Issuance of shares of common stock (in shares) 0 1,900 11,917 70,299
Share based compensation, common stock (in shares) 10,583 5,991 104,465 92,617
Share based compensation withholding obligation, common stock (in shares) 5,398 919 33,728 57,205
v3.20.2
Preparation of Financial Statements
 9 Months Ended
Sep. 30, 2020
Preparation of Financial Statements [Abstract]  
Preparation of Financial Statements
1.
Preparation of Financial Statements

The condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading.  The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes for the year ended December 31, 2019 included in our Annual Report on Form 10-K.

In our opinion, the accompanying unaudited condensed consolidated financial statements contain all the adjustments necessary to present fairly our consolidated financial condition as of September 30, 2020 and December 31, 2019, and the results of operations for the three and nine-month periods ended September 30, 2020 and 2019.  The results of operations for the three and nine-month periods ended September 30, 2020, are not necessarily indicative of the results to be expected for the full year.  Certain reclassifications have been made in the prior period condensed consolidated financial statements to conform to the current period presentation.  Our critical accounting policies include the determination of the allowance for loan losses and the valuation of capitalized mortgage loan servicing rights.  Refer to our 2019 Annual Report on Form 10-K for a disclosure of our accounting policies.
v3.20.2
New Accounting Standards
 9 Months Ended
Sep. 30, 2020
New Accounting Standards [Abstract]  
New Accounting Standards
2.
New Accounting Standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, ‘‘Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments’’. This ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.

This ASU:

•
Replaces the existing incurred loss impairment guidance and establishes a single allowance framework for financial assets carried at amortized cost, which will reflect our estimate of credit losses over the full remaining expected life of the financial assets and will consider expected future changes in macroeconomic conditions.
•
Eliminates existing guidance for purchase credit impaired (‘‘PCI’’) loans, and requires recognition of the nonaccretable difference as an increase to the allowance for expected credit losses on financial assets purchased with more than insignificant credit deterioration since origination, which will be offset by an increase in the recorded investment of the related loans.
•
Requires inclusion of expected recoveries, limited to the cumulative amount of prior write-offs, when estimating the allowance for credit losses for in scope financial assets (including collateral dependent assets).
•
Amends existing impairment guidance for securities available for sale to incorporate an allowance, which will allow for reversals of credit impairments in the event that the credit of an issuer improves. Credit losses on securities available for sale are limited to the amount of the decline in fair value regardless of what the credit loss model would show for impairment.
•
Generally requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption.

We began evaluating this ASU in 2016 and established a company-wide, cross-discipline governance structure, which provides implementation oversight. We continued to test and refine our current expected credit loss models that satisfied the requirements of this ASU. Oversight and testing, as well as efforts to meet expanded disclosure requirements, extended through the end of 2019.  We currently expect to estimate losses over approximately a two year forecast period using the Federal Open Market Committee median economic projections and other economic forecast sources, and then revert to longer term historical loss experience to estimate losses over more extended periods.  We were originally required to adopt this ASU on January 1, 2020 but section 4014 of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act allows for temporary relief from applying this ASU.  Under the CARES Act we may delay the adoption of this ASU until the earlier of the termination of the national emergency that President Trump declared on March 13, 2020, or December 31, 2020.  As such, we have chosen to delay the adoption of this ASU and continue to utilize the existing incurred loss impairment methodology to calculate our allowance for loan losses and our provision for loan losses as required under Accounting Standards Codification 310 (Receivables). When we adopt this ASU as required under the CARES act we will do so retrospectively to January 1, 2020.

We expect to recognize a one-time cumulative effect adjustment to beginning retained earnings at January 1, 2020 increasing the allowance for loan losses.  We are estimating an increase to the allowance for loan losses at that time to be in the range of $8.0 million to $10.0 million primarily driven by the longer contractual maturities of our mortgage and consumer installment loan portfolio segments. In addition, we currently expect this ASU to increase the allowance for losses related to unfunded loan commitments between $1.0 million and $2.0 million. The ultimate impact of adopting this ASU, and at each subsequent reporting period, is highly dependent on credit quality, economic forecasts and conditions, composition of our loan portfolios and securities available for sale, along with other management judgements. The transition adjustment to record the allowance for credit losses may fall outside of our estimated increase based on the finalization of assumptions including qualitative adjustments and the economic forecast used in calculating the allowance for credit losses upon the adoption of CECL.

We do not expect a material allowance for credit losses to be recorded on securities available for sale upon adoption of this ASU.

In August 2018, the FASB issued ASU 2018-13, ‘‘Fair Value Measurement (Topic 820), Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement’’. This new ASU amends disclosure requirements in Topic 820 to eliminate, add and modify certain disclosure requirements for fair value measurements as part of its disclosure framework project. The amended guidance eliminates the requirements to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the entity’s policy for the timing of transfers between levels of the fair value hierarchy and the entity’s valuation processes for Level 3 fair value measurements. The amended guidance adds the requirements to disclose the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements of instruments held at the end of the reporting period and for recurring and nonrecurring Level 3 fair value measurements, the range and weighted average used to develop significant unobservable inputs and how the weighted average was calculated, with certain exceptions. This amended guidance was effective for us on January 1, 2020, and did not have a material impact on our consolidated operating results or financial condition.

In March 2020, the FASB issued ASU 2020-04, ‘‘Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting’’. This new ASU provides temporary optional expedients and exceptions to GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. Entities can elect not to apply certain modification accounting requirements to contracts affected by reference rate reform, if certain criteria are met. Entities that make such elections would not have to remeasure contracts at the modification date or reassess a previous accounting determination.  Entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met.  This amended guidance and our ability to elect its temporary optional expedients and exceptions are effective for us as of March 12, 2020 through December 31, 2022.
v3.20.2
Securities
 9 Months Ended
Sep. 30, 2020
Securities [Abstract]  
Securities
3.
Securities

Securities available for sale consist of the following:

  
Amortized
    
Unrealized
        
   
Cost
    
Gains
    
Losses
    
Fair Value
  
   
(In thousands)
  
September 30, 2020
                        
U.S. agency
  
$
10,820
    
$
332
    
$
22
    
$
11,130
  
U.S. agency residential mortgage-backed
    
330,914
      
5,167
      
521
      
335,560
  
U.S. agency commercial mortgage-backed
    
8,039
      
382
      
-
      
8,421
  
Private label mortgage-backed
    
43,190
      
1,415
      
320
      
44,285
  
Other asset backed
    
262,435
      
1,392
      
456
      
263,371
  
Obligations of states and political subdivisions
    
238,479
      
6,635
      
136
      
244,978
  
Corporate
    
71,691
      
3,558
      
232
      
75,017
  
Trust preferred
    
1,970
      
-
      
200
      
1,770
  
Foreign government
    
500
      
18
      
-
      
518
  
Total
  
$
968,038
    
$
18,899
    
$
1,887
    
$
985,050
  
                                 
December 31, 2019
                                
U.S. agency
  
$
14,591
    
$
89
    
$
19
    
$
14,661
  
U.S. agency residential mortgage-backed
    
226,130
      
1,910
      
278
      
227,762
  
U.S. agency commercial mortgage-backed
    
10,671
      
113
      
28
      
10,756
  
Private label mortgage-backed
    
39,248
      
544
      
99
      
39,693
  
Other asset backed
    
94,158
      
103
      
375
      
93,886
  
Obligations of states and political subdivisions
    
94,499
      
1,724
      
121
      
96,102
  
Corporate
    
31,904
      
1,296
      
5
      
33,195
  
Trust preferred
    
1,968
      
-
      
125
      
1,843
  
Foreign government
    
499
      
3
      
-
      
502
  
Total
  
$
513,668
    
$
5,782
    
$
1,050
    
$
518,400
  


Our investments’ gross unrealized losses and fair values aggregated by investment type and length of time that individual securities have been at a continuous unrealized loss position follows:

  
Less Than Twelve Months
    
Twelve Months or More
    
Total
  
   
Fair Value
    
Unrealized
Losses
    
Fair Value
    
Unrealized
Losses
    
Fair Value
    
Unrealized
Losses
  
   
(In thousands)
  
                                     
September 30, 2020
                                    
U.S. agency
  
$
1,788
    
$
5
    
$
2,262
    
$
17
    
$
4,050
    
$
22
  
U.S. agency residential mortgage-backed
    
81,400
      
519
      
1,298
      
2
      
82,698
      
521
  
Private label mortgage-backed
    
14,269
      
268
      
749
      
52
      
15,018
      
320
  
Other asset backed
    
28,630
      
129
      
22,210
      
327
      
50,840
      
456
  
Obligations of states and political subdivisions
    
19,075
      
110
      
2,003
      
26
      
21,078
      
136
  
Corporate
    
10,628
      
232
      
-
      
-
      
10,628
      
232
  
Trust preferred
    
-
      
-
      
1,770
      
200
      
1,770
      
200
  
Total
  
$
155,790
    
$
1,263
    
$
30,292
    
$
624
    
$
186,082
    
$
1,887
  
                                                 
December 31, 2019
                                                
U.S. agency
  
$
2,782
    
$
8
    
$
2,712
    
$
11
    
$
5,494
    
$
19
  
U.S. agency residential mortgage-backed
    
56,377
      
126
      
13,551
      
152
      
69,928
      
278
  
U.S. agency commercial mortgage-backed
    
3,284
      
24
      
659
      
4
      
3,943
      
28
  
Private label mortgage-backed
    
16,387
      
55
      
343
      
44
      
16,730
      
99
  
Other asset backed
    
34,027
      
233
      
13,839
      
142
      
47,866
      
375
  
Obligations of states and political subdivisions
    
15,666
      
84
      
5,396
      
37
      
21,062
      
121
  
Corporate
    
2,125
      
5
      
-
      
-
      
2,125
      
5
  
Trust preferred
    
-
      
-
      
1,843
      
125
      
1,843
      
125
  
Total
  
$
130,648
    
$
535
    
$
38,343
    
$
515
    
$
168,991
    
$
1,050
  

Our portfolio of securities available for sale is reviewed quarterly for impairment in value. In performing this review management considers (1) the length of time and extent that fair value has been less than cost, (2) the financial condition and near term prospects of the issuer, (3) the impact of changes in market interest rates on the market value of the security and (4) an assessment of whether we intend to sell, or it is more likely than not that we will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. For securities that do not meet the aforementioned recovery criteria, the amount of impairment recognized in earnings is limited to the amount related to credit losses, while impairment related to other factors is recognized in other comprehensive income.

U.S. agency and U.S. agency residential mortgage-backed securities — at September 30, 2020, we had 27 U.S. agency and 39 U.S. agency residential mortgage-backed securities whose fair value is less than amortized cost. The  unrealized losses are largely attributed to widening spreads to Treasury bonds since acquisition.

Private label mortgage backed, other asset backed and corporate securities — at September 30, 2020, we had 20 private label mortgage backed, 55 other asset backed and 12 corporate securities whose fair value is less than amortized cost. The unrealized losses are primarily due to credit spread widening since acquisition.

Two private label mortgage-backed securities (discussed further below) were reviewed for other than temporary impairment (‘‘OTTI’’) utilizing a cash flow projection. The cash flow analysis forecasts cash flow from the underlying loans in each transaction and then applies these cash flows to the bonds in the securitization.

Obligations of states and political subdivisions — at September 30, 2020, we had 26 municipal securities whose fair value is less than amortized cost. The unrealized losses are primarily due to wider benchmark pricing spreads since acquisition.

Trust preferred securities — at September 30, 2020, we had two trust preferred securities whose fair value is less than amortized cost. Both of our trust preferred securities are single issue securities issued by a trust subsidiary of a bank holding company. The pricing of trust preferred securities has suffered from credit spread widening. One of the securities is rated by a major rating agency as investment grade while the other one is non-rated. The non-rated issue is a relatively small bank and was never rated. The issuer of this non-rated trust preferred security, which had a total amortized cost of $1.0 million and total fair value of $0.85 million as of September 30, 2020, continues to have satisfactory credit metrics and make interest payments.

As management does not intend to liquidate any of the securities discussed above and it is more likely than not that we will not be required to sell these securities prior to recovery of these unrealized losses, no declines discussed above (other than certain declines related to the two private label mortgage-backed securities currently being reviewed for OTTI) are deemed to be other than temporary.

We recorded no credit related OTTI charges in our Condensed Consolidated Statements of Operations related to securities available for sale during the three and nine month periods ended September 30, 2020 and 2019, respectively.

At September 30, 2020, two private label mortgage-backed securities had credit related OTTI and are summarized as follows:

  
Senior
Security
    
Super
Senior
Security
    
Total
  
   
(In thousands)
  
                   
Fair value
  
$
403
    
$
536
    
$
939
  
Amortized cost
    
386
      
368
      
754
  
Non-credit unrealized loss
    
-
      
-
      
-
  
Unrealized gain
    
17
      
168
      
185
  
Cumulative credit related OTTI
    
757
      
457
      
1,214
  


Both of these securities are receiving principal and interest payments similar to principal reductions in the underlying collateral and have unrealized gains at September 30, 2020. The original amortized cost (current amortized cost excluding cumulative credit related OTTI) for each of these securities has been permanently adjusted downward for previously recorded credit related OTTI. The unrealized loss (based on original amortized cost) for both of these securities is now less than previously recorded credit related OTTI amounts.

A roll forward of credit losses recognized in earnings on securities available for sale follows:

  
Three months ended
September 30,
    
Nine months ended
September 30,
  
   
2020
    
2019
    
2020
    
2019
  
   
(In thousands)
    
(In thousands)
  
Balance at beginning of period
  
$
1,214
    
$
1,594
    
$
1,214
    
$
1,594
  
Additions to credit losses on securities for which no previous OTTI was recognized
    
-
      
-
      
-
      
-
  
Increases to credit losses on securities for which OTTI was previously recognized
    
-
      
-
      
-
      
-
  
Reduction (1)
    
-
      
(380
)
    
-
      
(380
)
Balance at end of period
  
$
1,214
    
$
1,214
    
$
1,214
    
$
1,214
  
 
(1)During the third quarter of 2019 one security with previously recorded OTTI was settled and balance is now zero.

The amortized cost and fair value of securities available for sale at September 30, 2020, by contractual maturity, follow:

  
Amortized
Cost
    
Fair
Value
  
   
(In thousands)
  
Maturing within one year
  
$
18,967
    
$
19,048
  
Maturing after one year but within five years
    
80,229
      
83,042
  
Maturing after five years but within ten years
    
63,308
      
66,592
  
Maturing after ten years
    
160,956
      
164,731
  
     
323,460
      
333,413
  
U.S. agency residential mortgage-backed
    
330,914
      
335,560
  
U.S. agency commercial mortgage-backed
    
8,039
      
8,421
  
Private label mortgage-backed
    
43,190
      
44,285
  
Other asset backed
    
262,435
      
263,371
  
Total
  
$
968,038
    
$
985,050
  

The actual maturity may differ from the contractual maturity because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Gains and losses realized on the sale of securities available for sale are determined using the specific identification method and are recognized on a trade-date basis.  A summary of proceeds from the sale of securities available for sale and gains and losses for the nine month periods ending September 30, follows:

        
Realized
  
   
Proceeds
    
Gains
    
Losses
  
   
(In thousands)
  
2020
  
$
36,593
    
$
253
    
$
-
  
2019
    
44,305
      
169
      
32
  

Certain preferred stocks which were all sold during the first quarter of 2019 had been classified as equity securities at fair value in our Condensed Consolidated Statement of Financial Condition.  During the nine months ended September 30, 2019 we recognized gains on these preferred stocks of $0.167 million that are included in net gains on securities available for sale in the Condensed Consolidated Statements of Operations.
v3.20.2
Loans
 9 Months Ended
Sep. 30, 2020
Loans [Abstract]  
Loans
4.
Loans

Our assessment of the allowance for loan losses is based on an evaluation of the loan portfolio, recent and historical loss experience, current economic conditions and other pertinent factors.

An analysis of the allowance for loan losses by portfolio segment for the three months ended September 30, follows:

  
Commercial
    
Mortgage
    
Installment
    
Subjective
Allocation
    
Total
  
   
(In thousands)
  
2020
                              
Balance at beginning of period
  
$
8,731
    
$
7,261
    
$
1,217
    
$
17,291
    
$
34,500
  
Additions (deductions)
                                        
Provision for loan losses
    
(875
)
    
(257
)
    
18
      
2,089
      
975
  
Recoveries credited to the allowance
    
297
      
157
      
196
      
-
      
650
  
Loans charged against the allowance
    
-
      
(162
)
    
(192
)
    
-
      
(354
)
Balance at end of period
  
$
8,153
    
$
6,999
    
$
1,239
    
$
19,380
    
$
35,771
  
                                         
2019
                                        
Balance at beginning of period
  
$
8,121
    
$
8,062
    
$
1,293
    
$
8,427
    
$
25,903
  
Additions (deductions)
                                        
Provision for loan losses
    
(810
)
    
83
      
289
      
167
      
(271
)
Recoveries credited to the allowance
    
1,215
      
235
      
202
      
-
      
1,652
  
Loans charged against the allowance
    
(303
)
    
(397
)
    
(436
)
    
-
      
(1,136
)
Balance at end of period
  
$
8,223
    
$
7,983
    
$
1,348
    
$
8,594
    
$
26,148
  

An analysis of the allowance for loan losses by portfolio segment for the nine months ended September 30, follows:

 
  
Commercial
    
Mortgage
    
Installment
    
Subjective
Allocation
    
Total
  
 
  
(In thousands)
  
2020
                              
Balance at beginning of period
  
$
7,922
    
$
8,216
    
$
1,283
    
$
8,727
    
$
26,148
  
Additions (deductions)
                                        
Provision for loan losses
    
2,804
      
(895
)
    
322
      
10,653
      
12,884
  
Recoveries credited to the allowance
    
1,463
      
364
      
577
      
-
      
2,404
  
Loans charged against the allowance
    
(4,036
)
    
(686
)
    
(943
)
    
-
      
(5,665
)
Balance at end of period
  
$
8,153
    
$
6,999
    
$
1,239
    
$
19,380
    
$
35,771
  
 
                                        
2019
                                        
Balance at beginning of period
  
$
7,090
    
$
7,978
    
$
895
    
$
8,925
    
$
24,888
  
Additions (deductions)
                                        
Provision for loan losses
    
85
      
270
      
1,021
      
(331
)
    
1,045
  
Recoveries credited to the allowance
    
1,720
      
786
      
603
      
-
      
3,109
  
Loans charged against the allowance
    
(672
)
    
(1,051
)
    
(1,171
)
    
-
      
(2,894
)
Balance at end of period
  
$
8,223
    
$
7,983
    
$
1,348
    
$
8,594
    
$
26,148
  

Allowance for loan losses and recorded investment in loans by portfolio segment follows:

  
Commercial
    
Mortgage
    
Installment
    
Subjective
Allocation
    
Total
  
   
(In thousands)
  
September 30, 2020
                              
Allowance for loan losses:
                              
Individually evaluated for impairment
  
$
1,699
    
$
4,174
    
$
265
    
$
-
    
$
6,138
  
Collectively evaluated for impairment
    
6,454
      
2,825
      
974
      
19,380
      
29,633
  
Loans acquired with deteriorated credit quality
    
-
      
-
      
-
      
-
      
-
  
Total ending allowance for loan losses balance
  
$
8,153
    
$
6,999
    
$
1,239
    
$
19,380
    
$
35,771
  
                                         
Loans
                                        
Individually evaluated for impairment
  
$
10,543
    
$
40,573
    
$
2,404
            
$
53,520
  
Collectively evaluated for impairment
    
1,343,763
      
987,300
      
478,281
              
2,809,344
  
Loans acquired with deteriorated credit quality
    
906
      
560
      
143
              
1,609
  
Total loans recorded investment
    
1,355,212
      
1,028,433
      
480,828
              
2,864,473
  
Accrued interest included in recorded investment
    
3,422
      
4,397
      
1,175
              
8,994
  
Total loans
  
$
1,351,790
    
$
1,024,036
    
$
479,653
            
$
2,855,479
  
                                         
December 31, 2019
                                        
Allowance for loan losses:
                                        
Individually evaluated for impairment
  
$
1,031
    
$
4,863
    
$
261
    
$
-
    
$
6,155
  
Collectively evaluated for impairment
    
6,891
      
3,353
      
1,022
      
8,727
      
19,993
  
Loans acquired with deteriorated credit quality
    
-
      
-
      
-
      
-
      
-
  
Total ending allowance for loan losses balance
  
$
7,922
    
$
8,216
    
$
1,283
    
$
8,727
    
$
26,148
  
                                         
Loans
                                        
Individually evaluated for impairment
  
$
9,393
    
$
43,574
    
$
2,925
            
$
55,892
  
Collectively evaluated for impairment
    
1,158,906
      
1,058,917
      
457,370
              
2,675,193
  
Loans acquired with deteriorated credit quality
    
1,394
      
575
      
316
              
2,285
  
Total loans recorded investment
    
1,169,693
      
1,103,066
      
460,611
              
2,733,370
  
Accrued interest included in recorded investment
    
2,998
      
4,155
      
1,194
              
8,347
  
Total loans
  
$
1,166,695
    
$
1,098,911
    
$
459,417
            
$
2,725,023
  


Loans on non-accrual status and past due more than 90 days (“Non-performing Loans”) follow(1):

  
90+ and
Still
Accruing
    
Non-
Accrual
    
Total Non-
Performing
Loans
  
   
(In thousands)
  
September 30, 2020
                  
Commercial
                  
Commercial and industrial (2)
  
$
266
    
$
1,615
    
$
1,881
  
Commercial real estate
    
-
      
554
      
554
  
Mortgage
                        
1-4 family owner occupied - jumbo
    
-
      
1,207
      
1,207
  
1-4 family owner occupied - non-jumbo (3)
    
-
      
2,364
      
2,364
  
1-4 family non-owner occupied
    
-
      
1,304
      
1,304
  
1-4 family - 2nd lien
    
-
      
1,548
      
1,548
  
Resort lending
    
-
      
699
      
699
  
Installment
                        
Boat lending
    
-
      
206
      
206
  
Recreational vehicle lending
    
-
      
96
      
96
  
Other
    
-
      
378
      
378
  
Total recorded investment
  
$
266
    
$
9,971
    
$
10,237
  
Accrued interest included in recorded investment
  
$
-
    
$
-
    
$
-
  
                         
December 31, 2019
                        
Commercial
                        
Commercial and industrial (2)
  
$
-
    
$
565
    
$
565
  
Commercial real estate
    
-
      
735
      
735
  
Mortgage
                        
1-4 family owner occupied - jumbo
    
-
      
1,179
      
1,179
  
1-4 family owner occupied - non-jumbo (3)
    
-
      
3,540
      
3,540
  
1-4 family non-owner occupied
    
-
      
1,039
      
1,039
  
1-4 family - 2nd lien
    
-
      
979
      
979
  
Resort lending
    
-
      
690
      
690
  
Installment
                        
Boat lending
    
-
      
332
      
332
  
Recreational vehicle lending
    
-
      
3
      
3
  
Other
    
-
      
470
      
470
  
Total recorded investment
  
$
-
    
$
9,532
    
$
9,532
  
Accrued interest included in recorded investment
  
$
-
    
$
-
    
$
-
  

(1)
Non-performing loans exclude purchase credit impaired loans.
(2)
Non-performing commercial and industrial loans exclude $0.052 million and $0.077 million of government guaranteed loans at September 30, 2020 and December 31, 2019, respectively.
(3)
Non-performing 1-4 family owner occupied – non jumbo loans exclude $0.458 million and $0.569 million of government guaranteed loans at September 30, 2020 and December 31, 2019, respectively.

An aging analysis of loans by class follows:

  
Loans Past Due
    
Loans not
    
Total
  
   
30-59 days
    
60-89 days
    
90+ days
    
Total
    
Past Due
    
Loans
  
   
(In thousands)
  
September 30, 2020
                                    
Commercial
                                    
Commercial and industrial
  
$
-
    
$
-
    
$
495
    
$
495
    
$
763,757
    
$
764,252
  
Commercial real estate
    
130
      
-
      
-
      
130
      
590,830
      
590,960
  
Mortgage
                                                
1-4 family owner occupied - jumbo
    
1,312
      
-
      
632
      
1,944
      
437,294
      
439,238
  
1-4 family owner occupied - non-jumbo
    
1,053
      
372
      
610
      
2,035
      
247,086
      
249,121
  
1-4 family non-owner occupied
    
1,336
      
60
      
367
      
1,763
      
177,101
      
178,864
  
1-4 family - 2nd lien
    
472
      
251
      
545
      
1,268
      
99,427
      
100,695
  
Resort lending
    
273
      
443
      
391
      
1,107
      
59,408
      
60,515
  
Installment
                                                
Boat lending
    
213
      
38
      
132
      
383
      
211,353
      
211,736
  
Recreational vehicle lending
    
364
      
19
      
58
      
441
      
168,211
      
168,652
  
Other
    
281
      
166
      
225
      
672
      
99,768
      
100,440
  
Total recorded investment
  
$
5,434
    
$
1,349
    
$
3,455
    
$
10,238
    
$
2,854,235
    
$
2,864,473
  
Accrued interest included in recorded investment
  
$
102
    
$
17
    
$
-
    
$
119
    
$
8,875
    
$
8,994
  
                                                 
December 31, 2019
                                                
Commercial
                                                
Commercial and industrial
  
$
-
    
$
289
    
$
102
    
$
391
    
$
564,480
    
$
564,871
  
Commercial real estate
    
177
      
-
      
735
      
912
      
603,910
      
604,822
  
Mortgage
                                                
1-4 family owner occupied - jumbo
    
1,757
      
1,037
      
-
      
2,794
      
398,759
      
401,553
  
1-4 family owner occupied - non-jumbo
    
2,672
      
852
      
1,387
      
4,911
      
342,349
      
347,260
  
1-4 family non-owner occupied
    
695
      
136
      
623
      
1,454
      
168,083
      
169,537
  
1-4 family - 2nd lien
    
909
      
90
      
386
      
1,385
      
115,157
      
116,542
  
Resort lending
    
364
      
53
      
565
      
982
      
67,192
      
68,174
  
Installment
                                                
Boat lending
    
337
      
107
      
88
      
532
      
202,750
      
203,282
  
Recreational vehicle lending
    
161
      
97
      
3
      
261
      
153,184
      
153,445
  
Other
    
377
      
275
      
202
      
854
      
103,030
      
103,884
  
Total recorded investment
  
$
7,449
    
$
2,936
    
$
4,091
    
$
14,476
    
$
2,718,894
    
$
2,733,370
  
Accrued interest included in recorded investment
  
$
74
    
$
34
    
$
-
    
$
108
    
$
8,239
    
$
8,347
  


Impaired loans are as follows:

  
September 30,
2020
    
December 31,
2019
  
Impaired loans with no allocated allowance for loan losses
  
(In thousands)
  
Troubled debt restructurings ("TDR")
  
$
336
    
$
337
  
Non - TDR
    
1,562
      
1,550
  
Impaired loans with an allocated allowance for loan losses
                
TDR - allowance based on collateral
    
9,412
      
1,587
  
TDR - allowance based on present value cash flow
    
38,934
      
48,798
  
Non - TDR - allowance based on collateral
    
2,963
      
3,365
  
Total impaired loans
  
$
53,207
    
$
55,637
  
                 
Amount of allowance for loan losses allocated
                
TDR - allowance based on collateral
  
$
1,104
    
$
542
  
TDR - allowance based on present value cash flow
    
3,838
      
4,641
  
Non - TDR - allowance based on collateral
    
1,196
      
972
  
Total amount of allowance for loan losses allocated
  
$
6,138
    
$
6,155
  

Impaired loans by class  are as follows:

  
September 30, 2020
    
December 31, 2019
  
   
Recorded
Investment
    
Unpaid
Principal
Balance
    
Related
Allowance
For Loan
Losses
    
Recorded
Investment
    
Unpaid
Principal
Balance
    
Related
Allowance
For Loan
Losses
  
With no related allowance for loan losses recorded:
  
(In thousands)
        
Commercial
                                    
Commercial and industrial
  
$
122
    
$
124
    
$
-
    
$
257
    
$
257
    
$
-
  
Commercial real estate
    
-
      
-
      
-
      
796
      
796
      
-
  
Mortgage
                                                
1-4 family owner occupied - jumbo
    
632
      
632
      
-
      
-
      
-
      
-
  
1-4 family owner occupied - non-jumbo
    
237
      
314
      
-
      
212
      
217
      
-
  
1-4 family non-owner occupied
    
311
      
475
      
-
      
214
      
366
      
-
  
1-4 family - 2nd lien
    
442
      
442
      
-
      
407
      
438
      
-
  
Resort lending
    
154
      
379
      
-
      
-
      
-
      
-
  
Installment
                                                
Boat lending
    
-
      
-
      
-
      
-
      
-
      
-
  
Recreational vehicle lending
    
-
      
-
      
-
      
-
      
-
      
-
  
Other
    
-
      
-
      
-
      
1
      
41
      
-
  
     
1,898
      
2,366
      
-
      
1,887
      
2,115
      
-
  
With an allowance for loan losses recorded:
                                                
Commercial
                                                
Commercial and industrial
    
2,452
      
2,572
      
855
      
1,655
      
1,706
      
453
  
Commercial real estate
    
7,969
      
7,980
      
844
      
6,685
      
6,661
      
578
  
Mortgage
                                                
1-4 family owner occupied - jumbo
    
1,091
      
1,458
      
126
      
1,447
      
1,445
      
91
  
1-4 family owner occupied - non-jumbo
    
21,805
      
22,414
      
2,300
      
10,163
      
10,695
      
1,031
  
1-4 family non-owner occupied
    
4,473
      
4,810
      
470
      
4,962
      
5,542
      
572
  
1-4 family - 2nd lien
    
620
      
629
      
133
      
14,059
      
15,243
      
1,695
  
Resort lending
    
10,808
      
10,972
      
1,145
      
12,110
      
12,263
      
1,474
  
Installment
                                                
Boat lending
    
139
      
172
      
49
      
-
      
-
      
-
  
Recreational vehicle lending
    
101
      
114
      
23
      
-
      
-
      
-
  
Other
    
2,164
      
2,295
      
193
      
2,924
      
3,153
      
261
  
     
51,622
      
53,416
      
6,138
      
54,005
      
56,708
      
6,155
  
Total
                                                
Commercial
                                                
Commercial and industrial
    
2,574
      
2,696
      
855
      
1,912
      
1,963
      
453
  
Commercial real estate
    
7,969
      
7,980
      
844
      
7,481
      
7,457
      
578
  
Mortgage
                                                
1-4 family owner occupied - jumbo
    
1,723
      
2,090
      
126
      
1,447
      
1,445
      
91
  
1-4 family owner occupied - non-jumbo
    
22,042
      
22,728
      
2,300
      
10,375
      
10,912
      
1,031
  
1-4 family non-owner occupied
    
4,784
      
5,285
      
470
      
5,176
      
5,908
      
572
  
1-4 family - 2nd lien
    
1,062
      
1,071
      
133
      
14,466
      
15,681
      
1,695
  
Resort lending
    
10,962
      
11,351
      
1,145
      
12,110
      
12,263
      
1,474
  
Installment
                                                
Boat lending
    
139
      
172
      
49
      
-
      
-
      
-
  
Recreational vehicle lending
    
101
      
114
      
23
      
-
      
-
      
-
  
Other
    
2,164
      
2,295
      
193
      
2,925
      
3,194
      
261
  
Total
  
$
53,520
    
$
55,782
    
$
6,138
    
$
55,892
    
$
58,823
    
$
6,155
  
                                                 
Accrued interest included in recorded investment
  
$
313
                    
$
255
                  


Average recorded investment in and interest income earned on impaired loans by class for the three month periods ending September 30, follows:

  
2020
    
2019
  
   
Average
Recorded
Investment
    
Interest
Income
Recognized
    
Average
Recorded
Investment
    
Interest
Income
Recognized
  
With no related allowance for loan losses recorded:
  
(In thousands)
  
Commercial
                        
Commercial and industrial
  
$
103
    
$
2
    
$
-
    
$
-
  
Commercial real estate
    
-
      
-
      
327
      
5
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
632
      
-
      
-
      
-
  
1-4 family owner occupied - non-jumbo
    
331
      
-
      
352
      
1
  
1-4 family non-owner occupied
    
316
      
2
      
200
      
6
  
1-4 family - 2nd lien
    
403
      
-
      
-
      
-
  
Resort lending
    
77
      
-
      
-
      
-
  
Installment
                                
Boat lending
    
-
      
-
      
-
      
-
  
Recreational vehicle lending
    
-
      
-
      
-
      
-
  
Other
    
-
      
-
      
-
      
1
  
     
1,862
      
4
      
879
      
13
  
With an allowance for loan losses recorded:
                                
Commercial
                                
Commercial and industrial
    
2,431
      
38
      
1,534
      
16
  
Commercial real estate
    
12,195
      
130
      
6,069
      
71
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
808
      
11
      
1,003
      
9
  
1-4 family owner occupied - non-jumbo
    
22,070
      
277
      
23,674
      
336
  
1-4 family non-owner occupied
    
4,708
      
52
      
5,447
      
76
  
1-4 family - 2nd lien
    
598
      
3
      
601
      
8
  
Resort lending
    
11,186
      
125
      
12,067
      
171
  
Installment
                                
Boat lending
    
106
      
-
      
86
      
2
  
Recreational vehicle lending
    
96
      
1
      
50
      
1
  
Other
    
2,324
      
33
      
3,105
      
50
  
     
56,522
      
670
      
53,636
      
740
  
Total
                                
Commercial
                                
Commercial and industrial
    
2,534
      
40
      
1,534
      
16
  
Commercial real estate
    
12,195
      
130
      
6,396
      
76
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
1,440
      
11
      
1,003
      
9
  
1-4 family owner occupied - non-jumbo
    
22,401
      
277
      
24,026
      
337
  
1-4 family non-owner occupied
    
5,024
      
54
      
5,647
      
82
  
1-4 family - 2nd lien
    
1,001
      
3
      
601
      
8
  
Resort lending
    
11,263
      
125
      
12,067
      
171
  
Installment
                                
Boat lending
    
106
      
-
      
86
      
2
  
Recreational vehicle lending
    
96
      
1
      
50
      
1
  
Other
    
2,324
      
33
      
3,105
      
51
  
Total
  
$
58,384
    
$
674
    
$
54,515
    
$
753
  

Average recorded investment in and interest income earned on impaired loans by class for the nine month periods ending September 30, follows:

 
  
2020
    
2019
  
 
  
Average
Recorded
Investment
    
Interest
Income
Recognized
    
Average
Recorded
Investment
    
Interest
Income
Recognized
  
With no related allowance for loan losses recorded:
  
(In thousands)
  
Commercial
                        
Commercial and industrial
  
$
137
    
$
4
    
$
-
    
$
-
  
Commercial real estate
    
199
      
-
      
164
      
5
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
316
      
-
      
-
      
-
  
1-4 family owner occupied - non-jumbo
    
353
      
4
      
265
      
3
  
1-4 family non-owner occupied
    
309
      
5
      
100
      
6
  
1-4 family - 2nd lien
    
399
      
-
      
-
      
-
  
Resort lending
    
77
      
-
      
-
      
-
  
Installment
                                
Boat lending
    
-
      
-
      
-
      
-
  
Recreational vehicle lending
    
-
      
-
      
-
      
-
  
Other
    
-
      
-
      
-
      
1
  
 
    
1,790
      
13
      
529
      
15
  
With an allowance for loan losses recorded:
                                
Commercial
                                
Commercial and industrial
    
2,231
      
105
      
2,406
      
52
  
Commercial real estate
    
11,657
      
641
      
5,552
      
221
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
1,228
      
39
      
1,248
      
26
  
1-4 family owner occupied - non-jumbo
    
19,116
      
901
      
24,110
      
1,031
  
1-4 family non-owner occupied
    
4,746
      
170
      
6,040
      
227
  
1-4 family - 2nd lien
    
4,017
      
9
      
479
      
14
  
Resort lending
    
11,506
      
358
      
12,607
      
493
  
Installment
                                
Boat lending
    
72
      
-
      
68
      
2
  
Recreational vehicle lending
    
80
      
2
      
65
      
2
  
Other
    
2,545
      
109
      
3,211
      
145
  
 
    
57,198
      
2,334
      
55,786
      
2,213
  
Total
                                
Commercial
                                
Commercial and industrial
    
2,368
      
109
      
2,406
      
52
  
Commercial real estate
    
11,856
      
641
      
5,716
      
226
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
1,544
      
39
      
1,248
      
26
  
1-4 family owner occupied - non-jumbo
    
19,469
      
905
      
24,375
      
1,034
  
1-4 family non-owner occupied
    
5,055
      
175
      
6,140
      
233
  
1-4 family - 2nd lien
    
4,416
      
9
      
479
      
14
  
Resort lending
    
11,583
      
358
      
12,607
      
493
  
Installment
                                
Boat lending
    
72
      
-
      
68
      
2
  
Recreational vehicle lending
    
80
      
2
      
65
      
2
  
Other
    
2,545
      
109
      
3,211
      
146
  
Total
  
$
58,988
    
$
2,347
    
$
56,315
    
$
2,228
  


Cash receipts on impaired loans on non-accrual status are generally applied to the principal balance.

TDRs follow:

  
September 30, 2020
  
   
Commercial
    
Retail (1)
    
Total
  
   
(In thousands)
  
Performing TDRs
  
$
8,292
    
$
37,337
    
$
45,629
  
Non-performing TDRs (2)
    
1,203
      
1,850
(3) 
    
3,053
  
Total
  
$
9,495
    
$
39,187
    
$
48,682
  

 
December 31, 2019
  
   
Commercial
    
Retail (1)
    
Total
  
   
(In thousands)
  
Performing TDRs
  
$
7,974
    
$
39,601
    
$
47,575
  
Non-performing TDRs (2)
    
540
      
2,607
(3) 
    
3,147
  
Total
  
$
8,514
    
$
42,208
    
$
50,722
  

(1)
Retail loans include mortgage and installment loan portfolio segments.
(2)
Included in non-performing loans table above.
(3)
Also includes loans on non-accrual at the time of modification until six payments are received on a timely basis.

We allocated $4.9 million and $5.2 million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings (“TDR”) at September 30, 2020 and December 31, 2019, respectively.

During the nine months ended September 30, 2020 and 2019, the terms of certain loans were modified as TDRs. The modification of the terms of such loans generally included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for a new loan with similar risk; or a permanent reduction of the recorded investment in the loan.

Modifications involving a reduction of the stated interest rate of the loan have generally been for periods ranging from 9 months to 36 months but have extended to as much as 480 months in certain circumstances. Modifications involving an extension of the maturity date have generally been for periods ranging from 1 month to 60 months but have extended to as much as 360 months in certain circumstances.

Loans that have been classified as TDRs during the three-month periods ended September 30 follow:

  
Number of
Contracts
    
Pre-modification
Recorded
Balance
    
Post-modification
Recorded
Balance
  
   
(Dollars in thousands)
  
2020
                  
Commercial
                  
Commercial and industrial
    
-
    
$
-
    
$
-
  
Commercial real estate
    
-
      
-
      
-
  
Mortgage
                        
1-4 family owner occupied - jumbo
    
-
      
-
      
-
  
1-4 family owner occupied - non-jumbo
    
1
      
92
      
95
  
1-4 family non-owner occupied
    
1
      
52
      
54
  
1-4 family - 2nd lien
    
-
      
-
      
-
  
Resort lending
    
-
      
-
      
-
  
Installment
                        
Boat lending
    
-
      
-
      
-
  
Recreational vehicle lending
    
-
      
-
      
-
  
Other
    
1
      
19
      
19
  
Total
    
3
    
$
163
    
$
168
  
                         
2019
                        
Commercial
                        
Commercial and industrial
    
2
    
$
137
    
$
137
  
Commercial real estate
    
-
      
-
      
-
  
Mortgage
                        
1-4 family owner occupied - jumbo
    
-
      
-
      
-
  
1-4 family owner occupied - non-jumbo
    
1
      
198
      
202
  
1-4 family non-owner occupied
    
-
      
-
      
-
  
1-4 family - 2nd lien
    
3
      
75
      
75
  
Resort lending
    
-
      
-
      
-
  
Installment
                        
Boat lending
    
-
      
-
      
-
  
Recreational vehicle lending
    
-
      
-
      
-
  
Other
    
1
      
28
      
28
  
Total
    
7
    
$
438
    
$
442
  

Loans that have been classified as TDRs during the nine-month periods ended September 30 follow:

 
  
Number of
Contracts
    
Pre-modification
Balance
    
Post-modification
Balance
  
 
  
(Dollars in thousands)
  
2020
                  
Commercial
                  
Commercial and industrial
    
7
    
$
1,207
    
$
1,207
  
Commercial real estate
    
4
      
7,012
      
7,012
  
Mortgage
                        
1-4 family owner occupied - jumbo
    
-
      
-
      
-
  
1-4 family owner occupied - non-jumbo
    
3
      
195
      
203
  
1-4 family non-owner occupied
    
2
      
111
      
116
  
1-4 family - 2nd lien
    
2
      
45
      
46
  
Resort lending
    
-
      
-
      
-
  
Installment
                        
Boat lending
    
-
      
-
      
-
  
Recreational vehicle lending
    
-
      
-
      
-
  
Other
    
2
      
52
      
53
  
Total
    
20
    
$
8,622
    
$
8,637
  
 
                        
2019
                        
Commercial
                        
Commercial and industrial
    
3
    
$
186
    
$
186
  
Commercial real estate
    
2
      
1,329
      
1,329
  
Mortgage
                        
1-4 family owner occupied - jumbo
    
-
      
-
      
-
  
1-4 family owner occupied - non-jumbo
    
2
      
479
      
483
  
1-4 family non-owner occupied
    
1
      
506
      
505
  
1-4 family - 2nd lien
    
3
      
75
      
75
  
Resort lending
    
-
      
-
      
-
  
Installment
                        
Boat lending
    
-
      
-
      
-
  
Recreational vehicle lending
    
-
      
-
      
-
  
Other
    
7
      
188
      
191
  
Total
    
18
    
$
2,763
    
$
2,769
  

The troubled debt restructurings described above for 2020 decreased the allowance for loan losses by $1.44 million and resulted in zero charge offs during the three months ended September 30, 2020, and increased the allowance for loan losses by $0.09 million and resulted in zero charge offs during the nine months ended September 30, 2020.

The troubled debt restructurings described above for 2019 increased the allowance for loan losses by $0.04 million and resulted in zero charge offs during the three months ended September 30, 2019, and increased the allowance for loan losses by $0.09 million and resulted in zero charge offs during the nine months ended September 30, 2019.

There were no troubled debt restructurings that subsequently defaulted within twelve months following the modification during the three and nine months periods ended September 30, 2020 and 2019.

A loan is considered to be in payment default generally once it is 90 days contractually past due under the modified terms.

In order to determine whether a borrower is experiencing financial difficulty, we perform an evaluation of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under our internal underwriting policy.

Non-TDR Loan Modifications and Paycheck Protection Program (“PPP”) due to COVID-19 - On March 22, 2020, the federal banking agencies issued an “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus”.  This guidance encourages financial institutions to work prudently with borrowers that may be unable to meet their contractual obligations because of the effects of COVID-19.  The guidance goes on to explain that in consultation with the Financial Accounting Standards Board staff that the federal banking agencies conclude that short-term modifications (e.g. six months or less) made on a good faith basis to borrowers who were current as of the implementation date of a relief program are not TDRs.  In addition, on March 27, 2020, President Trump signed the CARES Act.  Section 4013 of the CARES Act also addressed COVID-19 related modifications and specified that COVID-19 related modifications on loans that were current as of December 31, 2019 are not TDRs.  We are assisting both commercial and retail (mortgage and installment) borrowers with reduced or suspended payments. Commercial loan accommodations are typically a three month interest-only period while retail loan  (mortgage and installment) forbearances have primarily been payment suspensions for three months. For loans subject to these forbearance agreements  each borrower is required to resume making regularly scheduled loan payments at the end of the forbearance period.  The deferred principal and interest will be repaid based upon individualized agreements.  Options for repayment include separate repayment plans, extending the term of the loan or re-amortizing the loan based upon the affordability of the payment in relationship to a reduced income.  While some borrowers may elect to make a lump sum payment, we anticipate the majority will require some type of repayment plan.  During the forbearance period, the loan will not be reported as past due in keeping with the guidance discussed previously.

A summary of accommodations entered into under this guidance as of September 30, 2020 follows:

Commercial and Retail Loan COVID-19 Accomodations

  
Covid-19 Accomodations
    
Total
    
% of Total
  
Loan Category
  
Loans (#)
    
Loans ($)
    
Loans
    
Loans
  
                         
Commercial
    
17
    
$
25,105
    
$
1,351,790
      
1.9
%
Mortgage
    
197
      
32,091
      
1,024,036
      
3.1
%
Installment
    
97
      
2,631
      
479,653
      
0.5
%
Total
    
311
    
$
59,827
    
$
2,855,479
      
2.1
%
Mortgage loans serviced for others(1)
    
416
    
$
66,279
    
$
2,873,153
      
2.3
%

1)
We have delegated authority from all investors to grant these deferrals on their behalf.

Information on subsequent accommodation extensions follows:

Commercial and Retail Loan COVID-19 Subsequent Accomodations

Loan Category
  
Loans (#)
    
Loans ($)
  
             
Commercial
    
6
    
$
5,726
  
Mortgage
    
125
      
22,571
  
Installment
    
51
      
1,583
  
Total
    
182
    
$
29,880
  


The CARES Act also included an initial $349 billion loan program administered through the U.S. Small Business Administration (“SBA”) referred to as the PPP. Under the PPP, small businesses and other entities and individuals can apply for loans from existing SBA lenders and other approved regulated lenders that enroll in the program, subject to numerous limitations and eligibility criteria. We are participating as a lender in the PPP. The PPP opened on April 3, 2020 intending to provide American small businesses with eight weeks of cash-flow assistance through 100 percent federally guaranteed loans through the SBA. In late April 2020 the Paycheck Protection Program and Health Care Enhancement Act, added another $310 billion in funding while the Paycheck Protection Program Flexibility Act made certain changes to the program, by allowing for more time to spend the funds, and making it easier to get a loan fully forgiven.  The PPP closed on August 8, 2020. Most recently, the SBA released a simpler loan forgiveness application for PPP loans of $50,000 or less that streamlines the PPP forgiveness process for such loans. As of September 30, 2020, we had 2,117 PPP loans outstanding with a total balance of $261.1 million.  PPP loans are included in the commercial and industrial class of the commercial loan portfolio segment.  As these loans are 100% guaranteed through the SBA the allowance for loan losses recorded on these loans is zero.  As of September 30, 2020, we have submitted 197 forgiveness applications for loans totaling $37.2 million.  Interest and fees on loans in our condensed consolidated statement of operations includes $1.3 million and $2.3 million for the three and nine month periods of 2020, related to the accretion of net loan fees on PPP loans. No such accretion is included in the comparable prior year periods.  At September 30, 2020 we had $6.5 million of remaining unaccreted net fees related to PPP loans.

Credit Quality Indicators – As part of our on-going monitoring of the credit quality of our loan portfolios, we track certain credit quality indicators including (a) weighted-average risk grade of commercial loans, (b) the level of classified commercial loans, (c) credit scores of mortgage and installment loan borrowers, and (d) delinquency history and non-performing loans.

For commercial loans, we use a loan rating system that is similar to those employed by state and federal banking regulators. Loans are graded on a scale of 1 to 12. A description of the general characteristics of the ratings follows:

Rating 1 through 6: These loans are generally referred to as our “non-watch” commercial credits that include very high or exceptional credit fundamentals through acceptable credit fundamentals.

Rating 7 and 8: These loans are generally referred to as our “watch” commercial credits. These ratings include loans to borrowers that exhibit potential credit weakness or downward trends. If not checked or cured these trends could weaken our asset or credit position. While potentially weak, no loss of principal or interest is envisioned with these ratings.


Rating 9: These loans are generally referred to as our “substandard accruing” commercial credits. This rating includes loans to borrowers that exhibit a well-defined weakness where payment default is probable and loss is possible if deficiencies are not corrected. Generally, loans with this rating are considered collectible as to both principal and interest primarily due to collateral coverage.

Rating 10 and 11: These loans are generally referred to as our ‘‘substandard - non-accrual’’ and ‘‘doubtful’’ commercial credits. Our doubtful rating includes a sub classification for a loss rate other than 50% (which is the standard doubtful loss rate).  These ratings include loans to borrowers with weaknesses that make collection of the loan in full, on the basis of current facts, conditions and values at best questionable and at worst improbable. All of these loans are placed in non-accrual.

Rating 12: These loans are generally referred to as our “loss” commercial credits. This rating includes loans to borrowers that are deemed incapable of repayment and are charged-off.

The following table summarizes loan ratings by loan class for our commercial portfolio loan segment:

  
Commercial
  
   
Non-watch
1-6
    
Watch
7-8
    
Substandard
Accrual
9
    
Non-
Accrual
10-11
    
Total
  
               
(In thousands)
              
September 30, 2020
                              
Commercial and industrial
  
$
715,810
    
$
42,153
    
$
4,674
    
$
1,615
    
$
764,252
  
Commercial real estate
    
579,547
      
8,187
      
2,672
      
554
      
590,960
  
Total
  
$
1,295,357
    
$
50,340
    
$
7,346
    
$
2,169
    
$
1,355,212
  
Accrued interest included in total
  
$
3,267
    
$
116
    
$
39
    
$
-
    
$
3,422
  
                                         
December 31, 2019
                                        
Commercial and industrial
  
$
515,955
    
$
44,384
    
$
3,967
    
$
565
    
$
564,871
  
Commercial real estate
    
580,516
      
23,036
      
535
      
735
      
604,822
  
Total
  
$
1,096,471
    
$
67,420
    
$
4,502
    
$
1,300
    
$
1,169,693
  
Accrued interest included in total
  
$
2,763
    
$
205
    
$
30
    
$
-
    
$
2,998
  

For each of our mortgage and installment portfolio segment classes, we generally monitor credit quality based on the credit scores of the borrowers. These credit scores are generally updated semi-annually.

The following tables summarize credit scores by loan class for our mortgage and installment loan portfolio segments:

  
Mortgage (1)
  
   
1-4 Family
Owner
Occupied -
Jumbo
    
1-4 Family
Owner
Occupied -
Non-jumbo
    
1-4 Family
Non-owner
Occupied
    
1-4 Family
2nd Lien
    
Resort
Lending
    
Total
  
   
(In thousands)
  
September 30, 2020
                                    
_800 and above
  
$
49,057
    
$
35,243
    
$
28,557
    
$
13,443
    
$
10,433
    
$
136,733
  
_750-799
    
219,844
      
64,957
      
78,503
      
42,292
      
28,294
      
433,890
  
_700-749
    
110,981
      
74,914
      
48,228
      
26,334
      
11,557
      
272,014
  
_650-699
    
41,101
      
36,963
      
14,511
      
11,982
      
7,277
      
111,834
  
_600-649
    
12,387
      
17,032
      
4,986
      
2,954
      
2,064
      
39,423
  
_550-599
    
3,477
      
12,270
      
1,908
      
2,214
      
494
      
20,363
  
_500-549
    
2,391
      
6,062
      
1,475
      
1,134
      
243
      
11,305
  
_Under 500
    
-
      
1,680
      
696
      
342
      
153
      
2,871
  
_Unknown
    
-
      
-
      
-
      
-
      
-
      
-
  
_Total
  
$
439,238
    
$
249,121
    
$
178,864
    
$
100,695
    
$
60,515
    
$
1,028,433
  
Accrued interest included in total
  
$
1,288
    
$
1,891
    
$
590
    
$
363
    
$
265
    
$
4,397
  
                                                 
December 31, 2019
                                                
_800 and above
  
$
48,486
    
$
43,848
    
$
24,315
    
$
13,905
    
$
11,076
    
$
141,630
  
_750-799
    
198,491
      
111,521
      
84,656
      
50,012
      
29,364
      
474,044
  
_700-749
    
106,609
      
95,064
      
34,839
      
30,697
      
14,626
      
281,835
  
_650-699
    
31,553
      
51,174
      
13,995
      
14,267
      
8,063
      
119,052
  
_600-649
    
13,230
      
21,938
      
5,897
      
4,097
      
2,074
      
47,236
  
_550-599
    
514
      
12,308
      
1,863
      
1,703
      
673
      
17,061
  
_500-549
    
1,519
      
7,940
      
1,870
      
1,281
      
889
      
13,499
  
_Under 500
    
641
      
2,208
      
533
      
511
      
79
      
3,972
  
_Unknown
    
510
      
1,259
      
1,569
      
69
      
1,330
      
4,737
  
_Total
  
$
401,553
    
$
347,260
    
$
169,537
    
$
116,542
    
$
68,174
    
$
1,103,066
  
Accrued interest included in total
  
$
1,139
    
$
1,662
    
$
586
    
$
502
    
$
266
    
$
4,155
  

(1)
Credit scores have been updated within the last twelve months.


 
Installment (1)
  
   
Boat
Lending
    
Recreational
Vehicle
Lending
    
Other
    
Total
  
   
(In thousands)
  
September 30, 2020
                        
_800 and above
  
$
33,385
    
$
29,085
    
$
8,466
    
$
70,936
  
_750-799
    
124,751
      
94,666
      
36,373
      
255,790
  
_700-749
    
38,729
      
34,236
      
26,833
      
99,798
  
_650-699
    
11,557
      
8,059
      
21,998
      
41,614
  
_600-649
    
2,089
      
1,668
      
3,738
      
7,495
  
_550-599
    
632
      
449
      
1,394
      
2,475
  
_500-549
    
242
      
465
      
755
      
1,462
  
_Under 500
    
351
      
24
      
180
      
555
  
_Unknown
    
-
      
-
      
703
      
703
  
_Total
  
$
211,736
    
$
168,652
    
$
100,440
    
$
480,828
  
Accrued interest included in total
  
$
471
    
$
381
    
$
323
    
$
1,175
  
                                 
December 31, 2019
                                
_800 and above
  
$
28,041
    
$
24,470
    
$
7,611
    
$
60,122
  
_750-799
    
118,380
      
88,164
      
37,583
      
244,127
  
_700-749
    
41,490
      
31,055
      
27,204
      
99,749
  
_650-699
    
11,485
      
7,267
      
22,517
      
41,269
  
_600-649
    
2,254
      
1,411
      
4,470
      
8,135
  
_550-599
    
946
      
592
      
1,884
      
3,422
  
_500-549
    
377
      
464
      
1,127
      
1,968
  
_Under 500
    
309
      
22
      
284
      
615
  
_Unknown
    
-
      
-
      
1,204
      
1,204
  
_Total
  
$
203,282
    
$
153,445
    
$
103,884
    
$
460,611
  
Accrued interest included in total
  
$
490
    
$
378
    
$
326
    
$
1,194
  

(1)
Credit scores have been updated within the last twelve months.

Foreclosed residential real estate properties included in other real estate and repossessed assets on our Condensed Consolidated Statements of Financial Condition totaled $1.0 million and $1.2 million at September 30, 2020 and December 31, 2019, respectively.  Retail mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process according to local requirements totaled $0.04 million and $0.70 million at September 30, 2020 and December 31, 2019, respectively.

During the first quarter of 2020, we securitized $26.3 million of portfolio residential fixed rate mortgage loans servicing retained with Freddie Mac and recognized a gain on sale of $0.72 million.  We also sold $2.4 million of portfolio residential fixed rate mortgage loans servicing retained into the secondary market and recognized a gain on sale of $0.07 million.  These transactions were done primarily for asset/liability management purposes.


During the first quarter of 2019, we sold $40.6 million of residential adjustable rate mortgage loans servicing released (classified on the Condensed Consolidated Statements of Financial Condition as held for sale, carried at the lower of cost or fair value at December 31, 2018) to another financial institution and recognized a gain on sale of $0.01 million.  During the first quarter of 2019 we also securitized $29.8 million, of portfolio residential fixed rate mortgage loans servicing retained with Freddie Mac and recognized a gain on sale of $0.53 million. During the third quarter of 2019, we sold $9.9 million of residential fixed and adjustable rate portfolio mortgage loans servicing retained to another financial institution and recognized a gain on sale of $0.07 million.  During the third quarter of 2019 we also transferred $36.6 million, of portfolio residential fixed rate mortgage loans to loans held for sale, carried at the lower of cost or fair value.  At the time of transfer and at September 30, 2019 the fair value of these loans exceeded their cost.  During the fourth quarter of 2019 these loans were securitized servicing retained with Freddie Mac and we recognized a gain on sale of approximately $1.0 million.These transactions were done primarily for asset/liability management purposes.

PCI Loans

Loans acquired in a business combination are recorded at estimated fair value on their purchase date with no carryover of the related allowance for loan losses. In determining the estimated fair value of purchased loans, we consider a number of factors including, among others, the remaining life of the acquired loans, estimated prepayments, estimated loss ratios, estimated value of the underlying collateral, and net present value of cash flows expected to be received. Purchased loans are accounted for in accordance with guidance for certain loans acquired in a transfer (ASC 310-30), when the loans have evidence of credit deterioration since origination and it is probable at the date of acquisition that the acquirer will not collect all contractually required principal and interest payments. The difference between contractually required payments and the cash flows expected to be collected at acquisition is referred to as the non-accretable difference. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in expected cash flows will result in a reversal of the provision for loan losses to the extent of prior charges and then an adjustment to accretable yield, which would have a positive impact on interest income.

As a result of our acquisition of TCSB Bancorp, Inc. in the second quarter of 2018 we purchased loans for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. For these loans that meet the criteria of ASC 310-30 treatment, the carrying amount was as follows:

  
September 30,
2020
    
December 31,
2019
  
   
(In thousands)
  
Commercial
  
$
906
    
$
1,394
  
Mortgage
    
560
      
575
  
Installment
    
143
      
316
  
Total carrying amount
    
1,609
      
2,285
  
Allowance for loan losses
    
-
      
-
  
Carrying amount, net of allowance for loan losses
  
$
1,609
    
$
2,285
  

The accretable difference on PCI loans is the difference between the expected cash flows and the net present value of expected cash flows with such difference accreted into earnings using the effective yield method over the term of the loans. Accretion recorded as loan interest income is included in the table below.  Accretable yield of PCI loans, or income expected to be collected follows:

  
Three months ended
September 30,
    
Nine months ended
September 30,
  
   
2020
    
2019
    
2020
    
2019
  
   
(unaudited)
    
(unaudited)
  
   
(In thousands)
    
(In thousands)
  
                         
Balance at beginning of period
  
$
573
    
$
749
    
$
640
    
$
462
  
New loans purchased
    
-
      
-
      
-
      
-
  
Accretion recorded as loan interest income
    
(156
)
    
(56
)
    
(223
)
    
(134
)
Reclassification from (to) nonaccretable difference
    
-
      
-
      
-
      
365
  
Displosals/other adjustments
    
-
      
-
      
-
      
-
  
Balance at end of period
  
$
417
    
$
693
    
$
417
    
$
693
  
v3.20.2
Shareholders' Equity and Earnings Per Common Share
 9 Months Ended
Sep. 30, 2020
Shareholders' Equity and Earnings Per Common Share [Abstract]  
Shareholders' Equity and Earnings Per Common Share
5.
Shareholders’ Equity and Earnings Per Common Share

On December 17, 2019, our Board of Directors authorized a share repurchase plan (the “Repurchase Plan”) to buy back up to 1,120,000 shares of our outstanding common stock through December 31, 2020.  Shares would be repurchased through open market transactions, though we could execute repurchases through other means, such as privately negotiated transactions.  The timing and amount of any share repurchases will depend on a variety of factors, including, among others, securities law restrictions, the trading price of our common stock, regulatory requirements, potential alternative uses for capital, and our financial performance. Due primarily to the economic uncertainty brought on by the COVID-19, we have not purchased any of our shares since March 2020. However, primarily as a result of our financial performance and improved economic conditions, and dependent upon market and other factors, we may begin to purchase our shares under the 2020 share repurchase plan during the last two months of the year. During the nine month periods ended September 30, 2020 and 2019 repurchases were made totaling 678,929 shares and 1,204,688 shares of common stock, respectively, for an aggregate purchase price of $13.8 million and $26.3 million, respectively.



A reconciliation of basic and diluted net income per common share follows:

 
  
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
 
  
2020
    
2019
    
2020
    
2019
  
 
  
(In thousands, except per share data)
  
Net income
  
$
19,584
    
$
12,445
    
$
39,166
    
$
32,556
  
 
                                
Weighted average shares outstanding (1)
    
21,881
      
22,486
      
22,014
      
23,033
  
Stock units for deferred compensation plan for non-employee directors
    
117
      
132
      
119
      
131
  
Effect of stock options
    
85
      
110
      
90
      
116
  
Performance share units
    
32
      
42
      
33
      
39
  
Weighted average shares outstanding for calculation of diluted earnings per share
    
22,115
      
22,770
      
22,256
      
23,319
  
 
                                
Net income per common share
                                
Basic (1)
  
$
0.90
    
$
0.55
    
$
1.78
    
$
1.41
  
Diluted
  
$
0.89
    
$
0.55
    
$
1.76
    
$
1.40
  
 
(1)
Basic net income per common share includes weighted average common shares outstanding during the period and participating share awards.

Weighted average stock options outstanding that were not considered in computing diluted net income per common share because they were anti-dilutive were zero for the three and nine month periods ended September 30, 2020 and 2019, respectively.
v3.20.2
Derivative Financial Instruments
 9 Months Ended
Sep. 30, 2020
Derivative Financial Instruments [Abstract]  
Derivative Financial Instruments
6.
Derivative Financial Instruments

We are required to record derivatives on our Condensed Consolidated Statements of Financial Condition as assets and liabilities measured at their fair value.  The accounting for increases and decreases in the value of derivatives depends upon the use of derivatives and whether the derivatives qualify for hedge accounting.


Our derivative financial instruments according to the type of hedge in which they are designated follows:

  
September 30, 2020
  
   
Notional
Amount
    
Average
Maturity
(years)
    
Fair
Value
  
   
(Dollars in thousands)
  
                   
Fair value hedge designation - Pay-fixed interest rate swap agreements
  
$
7,117
      
8.6
    
$
(860
)
                         
No hedge designation
                        
Rate-lock mortgage loan commitments
  
$
196,646
      
0.1
    
$
8,356
  
Mandatory commitments to sell mortgage loans
    
232,948
      
0.1
      
(580
)
Pay-fixed interest rate swap agreements - commercial
    
144,787
      
4.7
      
(10,811
)
Pay-variable interest rate swap agreements - commercial
    
144,787
      
4.7
      
10,811
  
Pay-fixed interest rate swap agreements
    
25,000
      
0.8
      
(409
)
Interest rate cap agreements
    
150,000
      
1.8
      
5
  
Purchased options
    
2,908
      
0.8
      
30
  
Written options
    
2,848
      
0.8
      
(30
)
Total
  
$
899,924
      
1.9
    
$
7,372
  

 
December 31, 2019
  
   
Notional
Amount
    
Average
Maturity
(years)
    
Fair
Value
  
   
(Dollars in thousands)
  
Fair value hedge designation - Pay-fixed interest rate swap agreements
  
$
7,117
      
9.4
    
$
(242
)
                         
Cash flow hedge designation
                        
Pay-fixed interest rate swap agreements
  
$
25,000
      
1.6
    
$
(174
)
Interest rate cap agreements
    
150,000
      
2.6
      
214
  
Total
  
$
175,000
      
2.5
    
$
40
  
                         
No hedge designation
                        
Rate-lock mortgage loan commitments
  
$
49,268
      
0.1
    
$
1,412
  
Mandatory commitments to sell mortgage loans
    
95,363
      
0.1
      
(150
)
Pay-fixed interest rate swap agreements - commercial
    
153,946
      
5.5
      
(3,641
)
Pay-variable interest rate swap agreements - commercial
    
153,946
      
5.5
      
3,641
  
Purchased options
    
2,908
      
1.5
      
141
  
Written options
    
2,848
      
1.5
      
(139
)
Total
  
$
458,279
      
3.7
    
$
1,264
  

We use variable-rate and short-term fixed-rate (less than 12 months) debt obligations to fund a portion of our Condensed Consolidated Statements of Financial Condition, which exposes us to variability in interest rates. To meet our asset/liability management objectives, we may periodically enter into derivative financial instruments to mitigate exposure to fluctuations in cash flows resulting from changes in interest rates (“Cash Flow Hedges”).  Cash Flow Hedges included certain pay-fixed interest rate swaps and interest rate cap agreements.  Pay-fixed interest rate swaps convert the variable-rate cash flows on debt obligations to fixed-rates.  Under interest-rate cap agreements, we will receive cash if interest rates rise above a predetermined level. As a result, we effectively have variable-rate debt with an established maximum rate. We paid an upfront premium on interest rate caps which was recognized in earnings in the same period in which the hedged item affected earnings. During the first and third quarters of 2020 we transferred all of our Cash Flow Hedge interest rate cap agreements and pay-fixed interest rate swaps, respectively to a no hedge designation. The $2.0 million and $0.5 million unrealized loss on our Cash Flow Hedge interest rate cap agreements and pay-fixed interest rate swaps, respectively which were included as a component of accumulated other comprehensive income (loss) at the time of the transfers will be reclassified into earnings over the remaining life of the interest rate cap agreements and pay-fixed interest rate swaps.  The interest rate cap agreements and pay-fixed interest rate swaps are classified as a no hedge designation at September 30, 2020 and any changes in fair value since the transfers to the no hedge designation are recorded in earnings.

 Prior to moving all of our Cash Flow Hedges to a no hedge designation as discussed above, we had recorded the fair value of these hedges in accrued income and other assets and accrued expenses and other liabilities on our Condensed Consolidated Statements of Financial Condition.  On an ongoing basis, we adjusted our Condensed Consolidated Statements of Financial Condition to reflect the then current fair value of Cash Flow Hedges.  The related gains or losses were reported in other comprehensive income or loss and were subsequently reclassified into earnings as a yield adjustment in the same period in which the related interest on the hedged items (variable-rate debt obligations) affected earnings.  It is anticipated that approximately $1.1 million, of unrealized losses from the previously classified Cash Flow Hedges (all a result of the unrealized losses discussed in the previous paragraph) at September 30, 2020 will be reclassified to earnings over the next twelve months.

Beginning in the second quarter of 2019 we entered into a pay-fixed interest rate swap to protect a portion of the fair value of a certain fixed rate commercial loan commitment (“Fair Value Hedge”).  As a result, changes in the fair value of the pay-fixed interest rate swap is expected to offset changes in the fair value of the fixed rate commercial loan commitment due to fluctuations in interest rates.  We record the fair value of Fair Value Hedges in accrued income and other assets and accrued expenses and other liabilities on our Condensed Consolidated Statements of Financial Condition.  The hedged item (fixed rate commercial loan commitment) is also recorded at fair value which offsets the adjustment to the Fair Value Hedge.  On an ongoing basis, we adjust our Condensed Consolidated Statements of Financial Condition to reflect the then current fair value of both the Fair Value Hedge and the hedged item.  The related gains or losses are reported in non-interest income – other in our Condensed Consolidated Statements of Operations.

Certain financial derivative instruments have not been designated as hedges. The fair value of these derivative financial instruments has been recorded on our Condensed Consolidated Statements of Financial Condition and is adjusted on an ongoing basis to reflect their then current fair value. The changes in fair value of derivative financial instruments not designated as hedges are recognized in our Condensed Consolidated Statements of Operations.

In the ordinary course of business, we enter into rate-lock mortgage loan commitments with customers (“Rate-Lock Commitments”).  These commitments expose us to interest rate risk.  We also enter into mandatory commitments to sell mortgage loans (“Mandatory Commitments”) to reduce the impact of price fluctuations of mortgage loans held for sale and Rate-Lock Commitments.  Mandatory Commitments help protect our loan sale profit margin from fluctuations in interest rates. The changes in the fair value of Rate-Lock Commitments and Mandatory Commitments are recognized currently as part of net gains on mortgage loans in our Condensed Consolidated Statements of Operations.  We obtain market prices on Mandatory Commitments and Rate-Lock Commitments.  Net gains on mortgage loans, as well as net income may be more volatile as a result of these derivative instruments, which are not designated as hedges.

In prior periods we offered to our deposit customers an equity linked time deposit product (“Altitude CD”).  The Altitude CD was a time deposit that provides the customer a guaranteed return of principal at maturity plus a potential equity return (a written option), while we receive a like stream of funds based on the equity return (a purchased option).  The written and purchased options will generally move in opposite directions resulting in little or no net impact on our Condensed Consolidated Statements of Operations.  All of the written and purchased options in the table above relate to this Altitude CD product.

We have a program that allows commercial loan customers to lock in a fixed rate for a longer period of time than we would normally offer for interest rate risk reasons.  We will enter into a variable rate commercial loan and an interest rate swap agreement with a customer and then enter into an offsetting interest rate swap agreement with an unrelated party.  The interest rate swap agreement fair values will generally move in opposite directions resulting in little or no net impact on our Condensed Consolidated Statements of Operations.  All of the interest rate swap agreements noted as commercial in the table above with no hedge designation relate to this program.

The following tables illustrate the impact that the derivative financial instruments discussed above have on individual line items in the Condensed Consolidated Statements of Financial Condition for the periods presented:

Fair Values of Derivative Instruments

  
Asset Derivatives
    
Liability Derivatives
  
   
September 30,
2020
    
December 31,
2019
    
September 30,
2020
    
December 31,
2019
  
   
Balance
Sheet
Location
    
Fair
Value
    
Balance
Sheet
Location
    
Fair
Value
    
Balance
Sheet
Location
    
Fair
Value
    
Balance
Sheet
Location
    
Fair
Value
  
   
(In thousands)
  
Derivatives designated as hedging instruments
    
-
            
-
            
-
            
-
        
Pay-fixed interest rate swap agreements
  
Other assets
    
$
-
    
Other assets
    
$
-
    
Other liabilities
    
$
860
    
Other liabilities
    
$
416
  
Interest rate cap agreements
  
Other assets
      
-
    
Other assets
      
214
    
Other liabilities
      
-
    
Other liabilities
      
-
  
             
-
              
214
              
860
              
416
  
                                                                 
Derivatives not designated as hedging instruments
                                                                
Rate-lock mortgage loan commitments
  
Other assets
      
8,356
    
Other assets
      
1,412
    
Other liabilities
      
-
    
Other liabilities
      
-
  
Mandatory commitments to sell mortgage loans
  
Other assets
      
-
    
Other assets
      
-
    
Other liabilities
      
580
    
Other liabilities
      
150
  
Pay-fixed interest rate swap agreements - commercial
  
Other assets
      
-
    
Other assets
      
28
    
Other liabilities
      
10,811
    
Other liabilities
      
3,669
  
Pay-variable interest rate swap agreements - commercial
  
Other assets
      
10,811
    
Other assets
      
3,669
    
Other liabilities
      
-
    
Other liabilities
      
28
  
Pay-fixed interest rate swap agreements
  
Other assets
      
-
    
Other assets
      
-
    
Other liabilities
      
409
    
Other liabilities
      
-
  
Interest rate cap agreements
  
Other assets
      
5
    
Other assets
      
-
    
Other liabilities
      
-
    
Other liabilities
      
-
  
Purchased options
  
Other assets
      
30
    
Other assets
      
141
    
Other liabilities
      
-
    
Other liabilities
      
-
  
Written options
  
Other assets
      
-
    
Other assets
      
-
    
Other liabilities
      
30
    
Other liabilities
      
139
  
             
19,202
              
5,250
              
11,830
              
3,986
  
Total derivatives
          
$
19,202
            
$
5,464
            
$
12,690
            
$
4,402
  


The effect of derivative financial instruments on the Condensed Consolidated Statements of Operations follows:

Three Month Periods Ended September 30,
  
   
Loss
Recognized in
Other
Comprehensive
Income
(Effective Portion)
  
Location of
Gain (Loss)
Reclassified
from
Accumulated
Other
Comprehensive
 Income (Loss) into
Income
(Effective
  
Gain (Loss)
Reclassified from
Accumulated Other
Comprehensive
Income (Loss)
into Income
(Effective Portion)
  
Location of
Gain (Loss)
Recognized
  
Gain (Loss)
Recognized
in Income
  
   
2020
    
2019
  
Portion)
  
2020
    
2019
  
 in Income
  
2020
    
2019
  
   
(In thousands)
  
Fair Value Hedges
                                        
Pay-fixed interest rate swap agreements
                          
Non-interest income-other
  
$
6
    
$
(188
)
Cash Flow Hedges
                                            
Interest rate cap agreements
  
$
-
    
$
(37
)
Interest expense
  
$
(180
)
  
$
88
                    
Pay-fixed interest rate swap agreements
    
(26
)
    
(35
)
Interest expense
    
(130
)
    
14
                    
Total
  
$
(26
)
  
$
(72
)
    
$
(310
)
  
$
102
                    
                                                     
No hedge designation
                                                    
Rate-lock mortgage loan commitments
                                  
Net gains on mortgage loans
  
$
1,096
    
$
(96
)
Mandatory commitments to sell mortgage loans
                                  
Net gains on mortgage loans
    
52
      
307
  
Pay-fixed interest rate swap agreements -  commercial
                                  
Interest income
    
688
      
(1,670
)
Pay-variable interest rate swap agreements - commercial
                                  
Interest income
    
(688
)
    
1,670
  
Pay-fixed interest rate swap agreements
                                  
Interest expense
    
117
      
-
  
Interest rate cap agreements
                                  
Interest expense
    
(14
)
    
-
  
Purchased options
                                  
Interest expense
    
(10
)
    
(46
)
Written options
                                  
Interest expense
    
10
      
46
  
Total
                                           
$
1,251
    
$
211
  


Nine Month Periods Ended September 30,
  
 
  
Gain (Loss)
Recognized in
Other
Comprehensive
Income
(Effective Portion)
  
 Location of
 Gain (Loss)
 Reclassified
 from
 Accumulated
 Other
 Comprehensive
Income (Loss)
 into
 Income
 (Effective
  
Gain (Loss)
Reclassified from
Accumulated Other
Comprehensive
Income (Loss)
into Income
(Effective Portion)
  
 Location of
 Gain (Loss)
 Recognized
  
Gain (Loss)
Recognized
in Income
  
 
  
2020
    
2019
  
 Portion)
  
2020
    
2019
  
 in Income
  
2020
    
2019
  
 
  
(In thousands)
  
Fair Value Hedges
            
 
            
 
            
Pay-fixed interest rate swap agreements
            
 
            
Non-interest income-other
  
$
(618
)
  
$
(391
)
Cash Flow Hedges
Interest rate cap agreements
  
$
126
    
$
(1,311
)
Interest expense
  
$
(413
)
  
$
321
                    
Pay-fixed interest rate swap agreements
    
(480
)
    
(429
)
Interest expense
    
(233
)
    
72
                    
Total
  
$
(354
)
  
$
(1,740
)
 
  
$
(646
)
  
$
393
  
 
                
 
                
 
                
 
                
No hedge designation
                
 
                
 
                
Rate-lock mortgage loan commitments
                
 
                
Net gains on mortgage loans
  
$
6,944
    
$
1,364
  
Mandatory commitments to sell mortgage loans
                
 
                
Net gains on mortgage loans
    
(430
)
    
356
  
Pay-fixed interest rate swap agreements - commercial
                
 
                
Interest income
    
(7,170
)
    
(5,254
)
Pay-variable interest rate swap agreements - commercial
                
 
                
Interest income
    
7,170
      
5,254
  
Pay-fixed interest rate swap agreements
                                  
Interest expense
    
117
      
-
  
Interest rate cap agreements
                                  
Interest expense
    
(56
)
    
-
  
Purchased options
                
 
                
Interest expense
    
(111
)
    
9
  
Written options
                
 
                
Interest expense
    
109
      
(8
)
Total
                
 
                
           
  
$
6,573
    
$
1,721
  
v3.20.2
Goodwill and Other Intangibles
 9 Months Ended
Sep. 30, 2020
Goodwill and Other Intangibles [Abstract]  
Goodwill and Other Intangibles
7.
Goodwill and Other Intangibles

The following table summarizes intangible assets, net of amortization:

  
September 30, 2020
    
December 31, 2019
  
   
Gross
Carrying
Amount
    
Accumulated
Amortization
    
Gross
Carrying
Amount
    
Accumulated
Amortization
  
   
(In thousands)
  
                         
Amortized intangible assets - core deposits
  
$
11,916
    
$
7,355
    
$
11,916
    
$
6,590
  
Unamortized intangible assets - goodwill
  
$
28,300
            
$
28,300
          

We performed our required annual goodwill impairment test as of December 31, 2019 and there was no impairment.  Since the first quarter of 2020 bank stocks in general as well as our market capitalization have declined as a result of events surrounding the current COVID-19 pandemic outbreak.  As a result, we completed a qualitative goodwill impairment test as of March 31, 2020, June 30, 2020 and September 30, 2020. This qualitative analysis included a review of our earnings and asset quality trends as well as capital levels and the economic conditions of our markets. In addition, this qualitative analysis looked at merger and acquisition analytics for banks in general . Finally, our common stock traded over book value for several days during the second quarter. Based on this qualitative analysis we do not believe this decline is indicative of a permanent deterioration of the fundamental value of our bank. As such we do not believe that it is more likely than not goodwill impairment exists at September 30, 2020. See note 13, Contingencies, for additional information on COVID-19 and its potential impact to us.

A summary of estimated core deposit intangible amortization at September 30, 2020 follows:

  
(In thousands)
  
       
Three months ending December 31, 2020
  
$
255
  
2021
    
970
  
2022
    
785
  
2023
    
547
  
2024
    
516
  
2025 and thereafter
    
1,488
  
Total
  
$
4,561
  
v3.20.2
Share Based Compensation
 9 Months Ended
Sep. 30, 2020
Share Based Compensation [Abstract]  
Share Based Compensation
8.
Share Based Compensation

We maintain share based payment plans that include a non-employee director stock purchase plan and a long-term incentive plan that permits the issuance of share based compensation, including stock options and non-vested share awards. The long-term incentive plan, which is shareholder approved, permits the grant of additional share based awards for up to 0.4 million shares of common stock as of September 30, 2020.  The non-employee director stock purchase plan permits the issuance of additional share based payments for up to 0.2 million shares of common stock as of September 30, 2020. Share based awards and payments are measured at fair value at the date of grant and are expensed over the requisite service period. Common shares issued upon exercise of stock options come from currently authorized but unissued shares.

A summary of restricted stock and performance stock units (“PSU”) granted pursuant to our long-term incentive plan follows:

 
  
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
 
  
2020
    
2019
    
2020
    
2019
  
 
      
Restricted stock
    
3,000
      
8,000
      
55,996
      
64,267
  
PSU
    
-
      
-
      
20,897
      
22,016
  

Except for 0.008 million shares of restricted stock issued during the third quarter of 2019 and 0.002 million shares of restricted stock issued during the first quarter of 2019 that vest ratably over three years, the shares of restricted stock and PSUs shown in the above table cliff vest after a period of three years.  The performance feature of the PSUs is based on a comparison of our total shareholder return over the three year period starting on the grant date to the total shareholder return over that period for an index of our banking peers.

Our directors may elect to receive a portion of their quarterly cash retainer fees in the form of common stock (either on a current basis or on a deferred basis pursuant to the non-employee director stock purchase plan referenced above). Shares equal in value to that portion of each director’s fees that he or she has elected to receive in stock on a current basis are issued each quarter and vest immediately. Shares issued on a deferred basis are credited at the rate of 90%of the current value and vest immediately.  During the nine month periods ended September 30, 2020 and 2019 we issued 0.016 million and 0.008 million shares, respectively and expensed their value during those same periods.

Total compensation expense recognized for grants pursuant to our long-term incentive plan was $0.4 million and $1.2 million during the three and nine month periods ended September 30, 2020, respectively, and was $0.4 million and $1.2 million during the same periods in 2019, respectively.  The corresponding tax benefit relating to this expense was $0.1 million and $0.3 million for the three and nine month periods ended September 30, 2020, respectively and $0.1 million and $0.2 million for the same periods in 2019. Total expense recognized for non-employee director share based payments was $0.09 million and $0.26 million during the three and nine month periods ended September 30, 2020, respectively, and was $0.06 million and $0.18 million during the same periods in 2019, respectively.  The corresponding tax benefit relating to this expense was $0.02 million and $0.05 million for the three and nine month periods ended September 30, 2020, respectively and $0.01 million and $0.04 million during the same periods in 2019.

At September 30, 2020, the total expected compensation cost related to non-vested restricted stock and PSUs not yet recognized was $2.1 million.  The weighted-average period over which this amount will be recognized is 1.8 years.


A summary of outstanding stock option grants and related transactions follows:

  
Number of
Shares
    
Average
Exercise
Price
    
Weighted-
Average
Remaining
Contractual
Term (Years)
    
Aggregated
Intrinsic
Value
  
                     
(In thousands)
  
Outstanding at January 1, 2020
    
138,506
    
$
4.62
              
Granted
    
-
                      
Exercised
    
(13,117
)
    
3.50
              
Forfeited
    
-
                      
Expired
    
-
                      
Outstanding at September 30, 2020
    
125,389
    
$
4.73
      
2.3
    
$
993
  
                                 
Vested and expected to vest at September 30, 2020
    
125,389
    
$
4.73
      
2.3
    
$
993
  
Exercisable at September 30, 2020
    
125,389
    
$
4.73
      
2.3
    
$
993
  


A summary of outstanding non-vested restricted stock and PSUs and related transactions follows:

  
Number
of Shares
    
Weighted-
Average
Grant Date
Fair Value
  
Outstanding at January 1, 2020
    
245,726
    
$
21.72
  
Granted
    
76,893
      
22.46
  
Vested
    
(77,092
)
    
20.61
  
Forfeited
    
(20,869
)
    
22.64
  
Outstanding at September 30, 2020
    
224,658
    
$
22.26
  

Certain information regarding options exercised during the periods follows:

 
  
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
 
  
2020
    
2019
    
2020
    
2019
  
   
(In thousands)
    
(In thousands)
  
Intrinsic value
  
$
11
    
$
32
    
$
224
    
$
868
  
Cash proceeds received
  
$
4
    
$
6
    
$
46
    
$
701
  
Tax benefit realized
  
$
2
    
$
6
    
$
47
    
$
182
  
v3.20.2
Income Tax
 9 Months Ended
Sep. 30, 2020
Income Tax [Abstract]  
Income Tax
9.
Income Tax

Income tax expense was $4.8 million and $3.1 million during the three month periods ended September 30, 2020 and 2019, respectively and $9.2 million and $8.0 million during the nine months ended September 30, 2020 and 2019, respectively.  Our actual federal income tax expense is different than the amount computed by applying our statutory income tax rate to our income before income tax primarily due to tax-exempt interest income and tax-exempt income from the increase in the cash surrender value on life insurance.  In addition, the three and nine month periods ending September 30, 2020 include increases (reductions) of $0.01 million and ($0.19) million, respectively, of income tax expense related to the impact of the excess value of stock awards that vested and stock options that were exercised as compared to the initial fair values that were expensed.  These amounts during the same periods in 2019 were reductions of $0.01 million and $0.18 million, respectively.

We assess whether a valuation allowance should be established against our deferred tax assets based on the consideration of all available evidence using a “more likely than not” standard.  The ultimate realization of this asset is primarily based on generating future income.  We concluded at September 30, 2020, September 30, 2019 and December 31, 2019 that the realization of substantially all of our deferred tax assets continues to be more likely than not.

At both September 30, 2020 and December 31, 2019, we had approximately $0.4 million, of gross unrecognized tax benefits.  We do not expect the total amount of unrecognized tax benefits to significantly increase or decrease during the balance of 2020.
v3.20.2
Regulatory Matters
 9 Months Ended
Sep. 30, 2020
Regulatory Matters [Abstract]  
Regulatory Matters
10.
Regulatory Matters

Capital guidelines adopted by federal and state regulatory agencies and restrictions imposed by law limit the amount of cash dividends our Bank can pay to us. Under these guidelines, the amount of dividends that may be paid in any calendar year is limited to the Bank’s current year net profits, combined with the retained net profits of the preceding two years. Further, the Bank cannot pay a dividend at any time that it has negative undivided profits.  As of September 30, 2020, the Bank had positive undivided profits of $68.3 million.  It is not our intent to have dividends paid in amounts that would reduce the capital of our Bank to levels below those which we consider prudent and in accordance with guidelines of regulatory authorities.

We are also subject to various regulatory capital requirements. The prompt corrective action regulations establish quantitative measures to ensure capital adequacy and require minimum amounts and ratios of total, Tier 1, and common equity Tier 1 capital to risk-weighted assets and Tier 1 capital to average assets. Failure to meet minimum capital requirements can result in certain mandatory, and possibly discretionary, actions by regulators that could have a material effect on our interim condensed consolidated financial statements. In addition, capital adequacy rules include a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets that applies to all supervised financial institutions. To avoid limits on capital distributions and certain discretionary bonus payments we must meet the minimum ratio for adequately capitalized institutions plus the buffer. Under capital adequacy guidelines, we must meet specific capital requirements that involve quantitative measures as well as qualitative judgments by the regulators. The most recent regulatory filings as of September 30, 2020 and December 31, 2019, categorized our Bank as well capitalized. Management is not aware of any conditions or events that would have changed the most recent Federal Deposit Insurance Corporation (“FDIC”) categorization.

Our actual capital amounts and ratios follow (1):

  
Actual
    
Minimum for
Adequately Capitalized
Institutions
    
Minimum for
Well-Capitalized
Institutions
  
   
Amount
    
Ratio
    
Amount
    
Ratio
    
Amount
    
Ratio
  
   
(Dollars in thousands)
  
                                     
September 30, 2020
                                    
Total capital to risk-weighted assets
                                    
Consolidated
  
$
441,969
      
15.62
%
  
$
226,378
      
8.00
%
  
NA
    
NA
  
Independent Bank
    
391,033
      
13.82
      
226,310
      
8.00
    
$
282,888
      
10.00
%
                                                 
Tier 1 capital to risk-weighted assets
                                                
Consolidated
  
$
366,571
      
12.95
%
  
$
169,783
      
6.00
%
  
NA
    
NA
  
Independent Bank
    
355,645
      
12.57
      
169,733
      
6.00
    
$
226,310
      
8.00
%
                                                 
Common equity tier 1 capital to risk-weighted assets
                                                
Consolidated
  
$
328,288
      
11.60
%
  
$
127,338
      
4.50
%
  
NA
    
NA
  
Independent Bank
    
355,645
      
12.57
      
127,299
      
4.50
    
$
183,877
      
6.50
%
                                                 
Tier 1 capital to average assets
                                                
Consolidated
  
$
366,571
      
9.05
%
  
$
162,103
      
4.00
%
  
NA
    
NA
  
Independent Bank
    
355,645
      
8.78
      
162,020
      
4.00
    
$
202,525
      
5.00
%
                                                 
December 31, 2019
                                                
Total capital to risk-weighted assets
                                                
Consolidated
  
$
380,454
      
13.74
%
  
$
221,562
      
8.00
%
  
NA
    
NA
  
Independent Bank
    
358,914
      
12.96
      
221,482
      
8.00
    
$
276,852
      
10.00
%
                                                 
Tier 1 capital to risk-weighted assets
                                                
Consolidated
  
$
352,764
      
12.74
%
  
$
166,171
      
6.00
%
  
NA
    
NA
  
Independent Bank
    
331,224
      
11.96
      
166,111
      
6.00
    
$
221,482
      
8.00
%
                                                 
Common equity tier 1 capital to risk-weighted assets
                                                
Consolidated
  
$
314,532
      
11.36
%
  
$
124,628
      
4.50
%
  
NA
    
NA
  
Independent Bank
    
331,224
      
11.96
      
124,583
      
4.50
    
$
179,954
      
6.50
%
                                                 
Tier 1 capital to average assets
                                                
Consolidated
  
$
352,764
      
10.11
%
  
$
139,632
      
4.00
%
  
NA
    
NA
  
Independent Bank
    
331,224
      
9.49
      
139,615
      
4.00
    
$
174,519
      
5.00
%

(1)
These ratios do not reflect a capital conservation buffer of 2.50% at September 30, 2020 and December 31, 2019.

NA - Not applicable

The components of our regulatory capital are as follows:

  
Consolidated
    
Independent Bank
  
   
September 30,
2020
    
December 31,
2019
    
September 30,
2020
    
December 31,
2019
  
   
(In thousands)
  
Total shareholders' equity
  
$
373,092
    
$
350,169
    
$
400,449
    
$
366,861
  
Add (deduct)
                                
Accumulated other comprehensive income for regulatory purposes
    
(11,943
)
    
(2,011
)
    
(11,943
)
    
(2,011
)
Goodwill and other intangibles
    
(32,861
)
    
(33,626
)
    
(32,861
)
    
(33,626
)
Common equity tier 1 capital
    
328,288
      
314,532
      
355,645
      
331,224
  
Qualifying trust preferred securities
    
38,283
      
38,232
      
-
      
-
  
Tier 1 capital
    
366,571
      
352,764
      
355,645
      
331,224
  
Subordinated debt
    
40,000
      
-
      
-
      
-
  
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets
    
35,398
      
27,690
      
35,388
      
27,690
  
Total risk-based capital
  
$
441,969
    
$
380,454
    
$
391,033
    
$
358,914
  
v3.20.2
Fair Value Disclosures
 9 Months Ended
Sep. 30, 2020
Fair Value Disclosures [Abstract]  
Fair Value Disclosures
11.
Fair Value Disclosures

FASB ASC topic 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. FASB ASC topic 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Valuation is based upon quoted prices for identical instruments traded in active markets. Level 1 instruments include securities traded on active exchange markets, such as the New York Stock Exchange, as well as U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets.

Level 2:  Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. Level 2 instruments include securities traded in less active dealer or broker markets.

Level 3:  Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

We used the following methods and significant assumptions to estimate fair value:

Securities:  Where quoted market prices are available in an active market, securities available for sale are classified as Level 1 of the valuation hierarchy.  We currently do not have any Level 1 securities. If quoted market prices are not available for the specific security, then fair values are estimated by (1) using quoted market prices of securities with similar characteristics, (2) matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices, or (3) a discounted cash flow analysis whose significant fair value inputs can generally be verified and do not typically involve judgment by management. These securities are classified as Level 2 of the valuation hierarchy and primarily include agency securities, private label mortgage-backed securities, other asset backed securities, obligations of states and political subdivisions, trust preferred securities, corporate securities and foreign government securities.

Loans held for sale:  The fair value of mortgage loans held for sale, carried at fair value is based on agency cash window loan pricing for comparable assets (recurring Level 2).

Impaired loans with specific loss allocations based on collateral value:  From time to time, certain loans are considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. When the fair value of the collateral is based on an appraised value or when an appraised value is not available we record the impaired loan as nonrecurring Level 3.  These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments can be significant and thus will typically result in a Level 3 classification of the inputs for determining fair value.

Other real estate:  At the time of acquisition, other real estate is recorded at fair value, less estimated costs to sell, which becomes the property’s new basis. Subsequent write-downs to reflect declines in value since the time of acquisition may occur from time to time and are recorded in net (gains) losses on other real estate and repossessed assets, which is part of non-interest expense - other in the Condensed Consolidated Statements of Operations. The fair value of the property used at and subsequent to the time of acquisition is typically determined by a third party appraisal of the property. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments can be significant and typically result in a Level 3 classification of the inputs for determining fair value.

Appraisals for both collateral-dependent impaired loans and other real estate  are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by us. Once received, an independent third party, or a member of our Collateral Evaluation Department (for commercial properties), or a member of our Special Assets Group (for residential properties) reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. We compare the actual selling price of collateral that has been sold to the most recent appraised value of our properties to determine what additional adjustment, if any, should be made to the appraisal value to arrive at fair value. For commercial and residential properties we typically discount an appraisal to account for various factors that the appraisal excludes in its assumptions. These additional discounts generally do not result in material adjustments to the appraised value.

Capitalized mortgage loan servicing rights:  The fair value of capitalized mortgage loan servicing rights is based on a valuation model used by an independent third party that calculates the present value of estimated net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income. Certain model assumptions are generally unobservable and are based upon the best information available including data relating to our own servicing portfolio, reviews of mortgage servicing assumption and valuation surveys and input from various mortgage servicers and, therefore, are recorded as Level 3.  Management evaluates the third party valuation for reasonableness each quarter as part of our financial reporting control processes.

Derivatives:  The fair value of rate-lock mortgage loan commitments is based on agency cash window loan pricing for comparable assets and the fair value of mandatory commitments to sell mortgage loans is based on mortgage backed security pricing for comparable assets (recurring Level 2). The fair value of interest rate swap and interest rate cap agreements are derived from proprietary models which utilize current market data.  The significant fair value inputs can generally be observed in the market place and do not typically involve judgment by management (recurring Level 2). The fair value of purchased and written options is based on prices of financial instruments with similar characteristics and do not typically involve judgment by management (recurring Level 2).

Assets and liabilities measured at fair value, including financial assets for which we have elected the fair value option, were as follows:

        
Fair Value Measurements Using
  
   
Fair Value
Measure-
ments
    
Quoted
Prices
in Active
Markets
for
Identical
Assets
(Level 1)
    
Significant
Other
Observable
Inputs
(Level 2)
    
Significant
Un-
observable
Inputs
(Level 3)
  
   
(In thousands)
  
September 30, 2020:
                        
Measured at Fair Value on a Recurring Basis
                        
Assets
                        
Securities available for sale
                        
U.S. agency
  
$
11,130
    
$
-
    
$
11,130
    
$
-
  
U.S. agency residential mortgage-backed
    
335,560
      
-
      
335,560
      
-
  
U.S. agency commercial mortgage-backed
    
8,421
      
-
      
8,421
      
-
  
Private label mortgage-backed
    
44,285
      
-
      
44,285
      
-
  
Other asset backed
    
263,371
      
-
      
263,371
      
-
  
Obligations of states and political subdivisions
    
244,978
      
-
      
244,978
      
-
  
Corporate
    
75,017
      
-
      
75,017
      
-
  
Trust preferred
    
1,770
      
-
      
1,770
      
-
  
Foreign government
    
518
      
-
      
518
      
-
  
Loans held for sale, carried at fair value
    
99,747
      
-
      
99,747
      
-
  
Capitalized mortgage loan servicing rights
    
15,403
      
-
      
-
      
15,403
  
Derivatives (1)
    
19,202
      
-
      
19,202
      
-
  
Liabilities
                                
Derivatives (2)
    
12,690
      
-
      
12,690
      
-
  
                                 
Measured at Fair Value on a Non-recurring Basis:
                                
Assets
                                
Impaired loans (3)
                                
Commercial
                                
Commercial and industrial
    
1,591
      
-
      
-
      
1,591
  
Commercial real estate
    
7,098
      
-
      
-
      
7,098
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
500
      
-
      
-
      
500
  
1-4 family owner occupied - non-jumbo
    
284
      
-
      
-
      
284
  
1-4 family non-owner occupied
    
58
      
-
      
-
      
58
  
1-4 family - 2nd lien
    
200
      
-
      
-
      
200
  
Resort lending
    
77
      
-
      
-
      
77
  
Installment
                                
Boat lending
    
90
      
-
      
-
      
90
  
Recreational vehicle lending
    
38
      
-
      
-
      
38
  
Other
    
139
      
-
      
-
      
139
  
Other real estate (4)
                                
Commercial - commercial real estate
    
474
      
474
      
-
      
-
  

(1)
Included in accrued income and other assets
(2)
Included in accrued expenses and other liabilities
(3)
Only includes impaired loans with specific loss allocations based on collateral value.

(4) Only includes other real estate with subsequent write downs to fair value. The fair value of the commercial real estate property included in this table was based on a purchase agreement executed during the third quarter of 2020 that closed during the fourth quarter of 2020.

        
Fair Value Measurements Using
  
   
Fair Value
Measure-
ments
    
Quoted
Prices
in Active
Markets
for
Identical
Assets
(Level 1)
    
Significant
Other
Observable
Inputs
(Level 2)
    
Significant
Un-
observable
Inputs
(Level 3)
  
   
(In thousands)
  
December 31, 2019:
                        
Measured at Fair Value on a Recurring Basis
                        
Assets
                        
Securities available for sale
                        
U.S. agency
  
$
14,661
    
$
-
    
$
14,661
    
$
-
  
U.S. agency residential mortgage-backed
    
227,762
      
-
      
227,762
      
-
  
U.S. agency commercial mortgage-backed
    
10,756
      
-
      
10,756
      
-
  
Private label mortgage-backed
    
39,693
      
-
      
39,693
      
-
  
Other asset backed
    
93,886
      
-
      
93,886
      
-
  
Obligations of states and political subdivisions
    
96,102
      
-
      
96,102
      
-
  
Corporate
    
33,195
      
-
      
33,195
      
-
  
Trust preferred
    
1,843
      
-
      
1,843
      
-
  
Foreign government
    
502
      
-
      
502
      
-
  
Loans held for sale, carried at fair value
    
69,800
      
-
      
69,800
      
-
  
Capitalized mortgage loan servicing rights
    
19,171
      
-
      
-
      
19,171
  
Derivatives (1)
    
5,464
      
-
      
5,464
      
-
  
Liabilities
                                
Derivatives (2)
    
4,402
      
-
      
4,402
      
-
  
                                 
Measured at Fair Value on a Non-recurring Basis:
                                
Assets
                                
Impaired loans (3)
                                
Commercial
                                
Commercial and industrial
    
655
      
-
      
-
      
655
  
Commercial real estate
    
316
      
-
      
-
      
316
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
987
      
-
      
-
      
987
  
1-4 family owner occupied - non-jumbo
    
470
      
-
      
-
      
470
  
1-4 family non-owner occupied
    
281
      
-
      
-
      
281
  
1-4 family - 2nd lien
    
294
      
-
      
-
      
294
  
Resort lending
    
245
      
-
      
-
      
245
  
Installment
                                
Boat lending
    
67
      
-
      
-
      
67
  
Recreational vehicle lending
    
2
      
-
      
-
      
2
  
Other
    
121
      
-
      
-
      
121
  
Other real estate (4)
                                
Mortgage - 1-4 family owner occupied - non-jumbo
    
31
      
-
      
-
      
31
  
Installment - other
    
28
      
-
      
-
      
28
  

(1)
Included in accrued income and other assets
(2)
Included in accrued expenses and other liabilities
(3)
Only includes impaired loans with specific loss allocations based on collateral value.
(4)
Only includes other real estate with subsequent write downs to fair value.

Changes in fair values for financial assets which we have elected the fair value option for the periods presented were as follows:

  
Changes in Fair Values for the Nine-Month Periods
Ended September 30 for Items Measured at Fair Value
Pursuant to Election of the Fair Value Option
  
   
Net Gains
on Assets
    
Mortgage
    
Total
Change
in Fair
Values
Included
in Current
  
   
Securities Available For Sale
    
Mortgage
Loans
    
Loan
Servicing, net
    
Period
Earnings
  
   
(In thousands)
  
2020
                        
Loans held for sale
    
-
      
2,081
      
-
      
2,081
  
Capitalized mortgage loan servicing rights
    
-
      
-
      
(14,028
)
    
(14,028
)
                                 
2019
                                
Equity securities at fair value
  
$
167
    
$
-
    
$
-
    
$
167
  
Loans held for sale
    
-
      
822
      
-
      
822
  
Capitalized mortgage loan servicing rights
    
-
      
-
      
(9,258
)
    
(9,258
)

For those items measured at fair value pursuant to our election of the fair value option, interest income is recorded within the Condensed Consolidated Statements of Operations based on the contractual amount of interest income earned on these financial assets and dividend income is recorded based on cash dividends received.

The following represent impairment charges recognized during the three and nine month periods ended September 30, 2020 and 2019 relating to assets measured at fair value on a non-recurring basis:

•
Loans which are measured for impairment using the fair value of collateral for collateral dependent loans had a carrying amount of $10.1 million, which is net of a valuation allowance of $2.3 million at September 30, 2020, and had a carrying amount of $3.4 million, which is net of a valuation allowance of  $1.5  million  at December 31, 2019.  The provision for loan losses included in our results of operations relating to impaired loans was a net expense of $0.2 million and $0.5 million for the three month periods ending September 30, 2020 and 2019, respectively, and a net expense of $1.1 million and $0.8 million for the nine month periods ending September 30, 2020 and 2019, respectively.
•
Other real estate, which is measured using the fair value of the property, had a carrying amount of 0.47 million which is net of a valuation allowance of $0.15 million at September 30, 2020, and a carrying amount of $0.06 million which is net of a valuation allowance of $0.09 million, at December 31, 2019. Charges included in our results of operations relating to other real estate measured at fair value were zero and $0.09 million during the three and nine month periods ended September 30, 2020, and were $0.07 million and $0.08 million during the three and nine month periods ended September 30, 2019.

A reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) follows:

 
  
Capitalized Mortgage Loan Servicing Rights
  
 
  
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
 
  
2020
    
2019
    
2020
    
2019
  
 
  
(In thousands)
    
(In thousands)
  
Beginning balance
  
$
13,773
    
$
17,894
    
$
19,171
    
$
21,400
  
Total gains (losses) realized and unrealized:
                                
Included in results of operations
    
(2,387
)
    
(3,145
)
    
(14,028
)
    
(9,258
)
Included in other comprehensive income
    
-
      
-
      
-
      
-
  
Purchases, issuances, settlements, maturities and calls
    
4,017
      
2,157
      
10,260
      
4,764
  
Transfers in and/or out of Level 3
    
-
      
-
      
-
      
-
  
Ending balance
  
$
15,403
    
$
16,906
    
$
15,403
    
$
16,906
  
                                 
Amount of total losses for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at September 30
  
$
(2,387
)
  
$
(3,145
)
  
$
(14,028
)
  
$
(9,258
)

The fair value of our capitalized mortgage loan servicing rights has been determined based on a valuation model used by an independent third party as discussed above.  The significant unobservable inputs used in the fair value measurement of the capitalized mortgage loan servicing rights are discount rate, cost to service, ancillary income, float rate and prepayment rate.  Significant changes in all five of these assumptions in isolation would result in significant changes to the value of our capitalized mortgage loan servicing rights.  Quantitative information about our Level 3 fair value measurements measured on a recurring basis follows:

  
Asset
Fair
Value
    
Valuation
Technique
    
Unobservable
Inputs
    
Range
    
Weighted
Average
  
   
(In thousands)
      
-
      
-
      
-
        
September 30, 2020
                                    
Capitalized mortgage loan servicing rights
  
$
15,403
    
Present value of net
    
Discount rate
    
10.00% to 13.00%
      
10.10
%
           
servicing revenue
    
Cost to service
    
$
58 to $215
    
$
79
  
                   
Ancillary income
    
20 to 37
      
22
  
                   
Float rate
      
0.35
%
    
0.35
%
                   
Prepayment rate
    
7.34% to 40.16%
      
22.01
%
December 31, 2019
                                        
Capitalized mortgage loan servicing rights
  
$
19,171
    
Present value of net
    
Discount rate
    
10.00% to 13.00%
      
10.14
%
           
servicing revenue
    
Cost to service
    
$
66 to $316
    
$
81
  
                   
Ancillary income
    
20 to 37
      
22
  
                   
Float rate
      
1.73
%
    
1.73
%
                   
Prepayment rate
    
7.01% to 69.34%
      
14.96
%

Quantitative information about Level 3 fair value measurements measured on a non-recurring basis follows:

  
Asset
Fair
Value
    
Valuation
Technique
    
Unobservable
Inputs
    
Range
    
Weighted
Average
  
   
(In thousands)
      
-
      
-
              
September 30, 2020
                                  
Impaired loans
                                  
Commercial
  
$
8,689
    
Sales comparison approach
    
Adjustment for differences between comparable sales
    
(40.0)% to 75.0%
      
4.5
%
           
Income approach
    
Capitalization rate
      
9.5
%
    
9.5
%
                                         
Mortgage and Installment(1)
    
1,386
    
Sales comparison approach
    
Adjustment for differences between comparable sales
    
(12.0)% to 104.6%
      
4.0
%
                                         
December 31, 2019
                                        
Impaired loans
                                        
Commercial
  
$
971
    
Sales comparison approach
    
Adjustment for differences between comparable sales
    
(48.0)% to 19.2%
      
(5.6
)%
                                         
Mortgage and Installment(1)
    
2,467
    
Sales comparison approach
    
Adjustment for differences between comparable sales
    
(25.2)% to 49.2%%
      
11.5%
%
                                         
Other real estate
                                        
Mortgage and Installment
    
59
    
Sales comparison approach
    
Adjustment for differences between comparable sales
    
(11.6)% to 5.0%%
      
(5.1%
)%

(1)
In addition to the valuation techniques and unobservable inputs discussed above, at September 30, 2020 and December 31, 2019 certain impaired collateral dependent installment loans totaling approximately $0.27 million and $0.14 million, respectively are secured by collateral other than real estate.  For the majority of these loans, we apply internal discount rates to industry valuation guides.

The following table reflects the difference between the aggregate fair value and the aggregate remaining contractual principal balance outstanding for loans held for sale for which the fair value option has been elected for the periods presented.

  
Aggregate
Fair Value
    
Difference
    
Contractual
Principal
  
   
(In thousands)
  
Loans held for sale
                  
September 30, 2020
  
$
99,747
    
$
3,975
    
$
95,772
  
December 31, 2019
    
69,800
      
1,894
      
67,906
  
v3.20.2
Fair Values of Financial Instruments
 9 Months Ended
Sep. 30, 2020
Fair Values of Financial Instruments [Abstract]  
Fair Values of Financial Instruments
12.
Fair Values of Financial Instruments

Most of our assets and liabilities are considered financial instruments. Many of these financial instruments lack an available trading market and it is our general practice and intent to hold the majority of our financial instruments to maturity. Significant estimates and assumptions were used to determine the fair value of financial instruments. These estimates are subjective in nature, involving uncertainties and matters of judgment, and therefore, fair values may not be a precise estimate. Changes in assumptions could significantly affect the estimates.

Estimated fair values have been determined using available data and methodologies that are considered suitable for each category of financial instrument. For instruments with adjustable interest rates which reprice frequently and without significant credit risk, it is presumed that estimated fair values approximate the recorded book balances.

The estimated recorded book balances and fair values follow:

              
Fair Value Using
  
   
Recorded
Book
Balance
    
Fair Value
    
Quoted
Prices
in Active
Markets
for
Identical
Assets
(Level 1)
    
Significant
Other
Observable
Inputs
(Level 2)
    
Significant
Un-
observable
Inputs
(Level 3)
  
                               
   
(In thousands)
  
September 30, 2020
                              
Assets
                              
Cash and due from banks
  
$
42,435
    
$
42,435
    
$
42,435
    
$
-
    
$
-
  
Interest bearing deposits
    
4,121
      
4,121
      
4,121
      
-
      
-
  
Securities available for sale
    
985,050
      
985,050
      
-
      
985,050
      
-
  
Federal Home Loan Bank and Federal
                                        
Reserve Bank Stock
    
18,427
    
NA
    
NA
    
NA
    
NA
  
Net loans and loans held for sale
    
2,919,455
      
2,915,489
      
-
      
99,747
      
2,815,742
  
Accrued interest receivable
    
12,402
      
12,402
      
1
      
3,409
      
8,992
  
Derivative financial instruments
    
19,202
      
19,202
      
-
      
19,202
      
-
  
                                         
Liabilities
                                        
Deposits with no stated maturity (1)
  
$
3,105,019
    
$
3,105,019
    
$
3,105,019
    
$
-
    
$
-
  
Deposits with stated maturity (1)
    
492,726
      
495,694
      
-
      
495,694
      
-
  
Other borrowings
    
30,005
      
31,477
      
-
      
31,477
      
-
  
Subordinated debt
    
39,261
      
40,999
      
-
      
40,999
      
-
  
Subordinated debentures
    
39,507
      
28,941
      
-
      
28,941
      
-
  
Accrued interest payable
    
1,408
      
1,408
      
62
      
1,346
      
-
  
Derivative financial instruments
    
12,690
      
12,690
      
-
      
12,690
      
-
  
                                         
December 31, 2019
                                        
Assets
                                        
Cash and due from banks
  
$
53,295
    
$
53,295
    
$
53,295
    
$
-
    
$
-
  
Interest bearing deposits
    
12,009
      
12,009
      
12,009
      
-
      
-
  
Interest bearing deposits - time
    
350
      
350
      
-
      
350
      
-
  
Securities available for sale
    
518,400
      
518,400
      
-
      
518,400
      
-
  
Federal Home Loan Bank and Federal
                                        
Reserve Bank Stock
    
18,359
    
NA
    
NA
    
NA
    
NA
  
Net loans and loans held for sale
    
2,768,675
      
2,768,817
      
-
      
69,800
      
2,699,017
  
Accrued interest receivable
    
10,108
      
10,108
      
8
      
1,752
      
8,348
  
Derivative financial instruments
    
5,464
      
5,464
      
-
      
5,464
      
-
  
                                         
Liabilities
                                        
Deposits with no stated maturity (1)
  
$
2,427,190
    
$
2,427,190
    
$
2,427,190
    
$
-
    
$
-
  
Deposits with stated maturity (1)
    
609,537
      
610,235
      
-
      
610,235
      
-
  
Other borrowings
    
88,646
      
88,680
      
-
      
88,680
      
-
  
Subordinated debentures
    
39,456
      
33,149
      
-
      
33,149
      
-
  
Accrued interest payable
    
1,296
      
1,296
      
97
      
1,199
      
-
  
Derivative financial instruments
    
4,402
      
4,402
      
-
      
4,402
      
-
  

(1)
Deposits with no stated maturity include reciprocal deposits with a recorded book balance of $521.106 million and $388.369 million at September 30, 2020 and December 31, 2019, respectively. Deposits with a stated maturity include reciprocal deposits with a recorded book balance of $36.445 million and $42.658 million at September 30, 2020 and December 31, 2019, respectively.

The fair values for commitments to extend credit and standby letters of credit are estimated to approximate their aggregate book balance, which is nominal and therefore are not disclosed.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale the entire holdings of a particular financial instrument.

Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business, the value of future earnings attributable to off-balance sheet activities and the value of assets and liabilities that are not considered financial instruments.

Fair value estimates for deposit accounts do not include the value of the core deposit intangible asset resulting from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market.
v3.20.2
Contingencies
 9 Months Ended
Sep. 30, 2020
Contingencies [Abstract]  
Contingencies

13. Contingencies

COVID-19 Pandemic

On March 11, 2020, the World Health Organization declared COVID-19, the disease caused by the novel coronavirus, a pandemic as a result of the global spread of the coronavirus illness. In response to the outbreak, federal and state authorities in the U.S. introduced various measures to try to limit or slow the spread of the virus, including travel restrictions, nonessential business closures, stay-at-home orders, and strict social distancing. The Governor of Michigan issued her first "stay home, stay safe" executive order effective March 24, 2020.  In general, that order and subsequent modifications required individuals in Michigan to stay at home or their place of residence, except for certain specified activities that were deemed necessary to sustain or protect life. That original executive order was amended several times and was later rescinded and replaced entirely by a series of "Safer at Home" executive orders, which generally extended certain social distancing restrictions, but lifted the requirement that individuals remain in their homes.  The series of "Safer at Home" orders, along with all other executive orders relating to the pandemic issued by Michigan's Governor after April 30, 2020, were then deemed unconstitutional by the Michigan Supreme Court on October 2, 2020.  Since then, the Michigan Department of Health and Human Services (MDHHS) has issued orders similar to the Governor's executive orders under authority granted to the MDHHS by the Michigan Public Health Code – a different statute than the law on which the Governor based her executive orders. Under the MDHHS' orders, social distancing restrictions remain in place; however, certain retail operations, restaurants and bars, and other businesses are permitted to conduct in-person operations, subject to capacity limitations and other workplace safety requirements. The degree to which businesses may resume operations varies based on the region of the state in which they are located. It is currently expected that various forms of state and local government restrictions similar to those described above will continue through the fourth quarter and perhaps beyond. As a result of these events, Michigan has experienced a significant increase in unemployment.

The COVID-19 pandemic, the related executive orders, and other government restrictions and guidance have had and continue to have a significant effect on us, our customers and the markets we serve. Our business, results of operations and financial condition may be adversely affected by a number of factors that could impact us and our customers, including but not limited to:

•
restrictions on activity and high levels of unemployment may cause increases in loan delinquencies, foreclosures and defaults;
•
increases in allowance for loan losses may be necessary;
•
declines in collateral values may occur;
•
third party disruptions, including outages at network providers, on-line banking vendors and other suppliers;
•
increased cyber and payment fraud risk, as cybercriminals attempt to profit from the disruption, given increased online and remote activity;
•
operational failures due to changes in our normal business practices necessitated by the pandemic and related governmental actions; and/or
•
key personnel or significant numbers of our employees being unable to work effectively, including because of illness or restrictions in connection with COVID-19.

These factors may continue for a significant period of time.

The extent to which the COVID-19 pandemic will impact our business, results of operations and financial condition will depend on future developments, which are highly uncertain and difficult to predict.  Those developments and factors include, the duration and spread of the pandemic, its severity, the actions to contain the pandemic or address its impact, and how quickly and to what extent normal economic and operating conditions can resume. We do not yet know the full extent of the impact.   However, the effects could have a material adverse impact on our business, asset valuations, financial condition and results of operations. Material adverse impacts may include all or a combination of valuation impairments on our intangible assets, securities available for sale, loans, capitalized mortgage loan servicing rights or deferred tax assets.

Certain industries (such as hotels and restaurants) have been more adversely impacted by the COVID-19 pandemic and related periodic shut downs of our economy.  We believe that the following industry concentrations within our commercial loan portfolio represent greater potential risk in the current economic environment.  The balances below are as of September 30, 2020.

Commercial and industrial portfolio segment:

•
Retail - $99 million
•
Food service - $59 million
•
Hotel - $45 million

Commercial real estate portfolio segment:

•
Retail - $94 million
•
Office - $53 million
•
Multifamily - $62 million

We are closely monitoring these industry concentrations and at present do not foresee any significant losses relative to this portion of our loan portfolio given the current economic conditions in Michigan and the fact that many businesses have reopened. However, a high degree of uncertainty still exists with respect to the impact of the COVID-19 pandemic and the related economic disruptions on the future performance of our loan portfolio, including these concentrations.

Litigation

We are involved in various litigation matters in the ordinary course of business. At the present time, we do not believe any of these matters will have a significant impact on our consolidated financial position or results of operations. The aggregate amount we have accrued for losses we consider probable as a result of these litigation matters is immaterial. However, because of the inherent uncertainty of outcomes from any litigation matter, we believe it is reasonably possible we may incur losses in addition to the amounts we have accrued.  At this time, we estimate the maximum amount of additional losses that are reasonably possible is insignificant.  However, because of a number of factors, including the fact that certain of these litigation matters are still in their early stages, this maximum amount may change in the future.

The litigation matters described in the preceding paragraph primarily include claims that have been brought against us for damages, but do not include litigation matters where we seek to collect amounts owed to us by third parties (such as litigation initiated to collect delinquent loans). These excluded, collection-related matters may involve claims or counterclaims by the opposing party or parties, but we have excluded such matters from the disclosure contained in the preceding paragraph in all cases where we believe the possibility of us paying damages to any opposing party is remote.

Loss Reimbursement Obligations

The provision for loss reimbursement on sold loans represents our estimate of incurred losses related to mortgage loans that we have sold to investors (primarily Fannie Mae, Freddie Mac, Ginnie Mae and the Federal Home Loan Bank of Indianapolis). Since we sell mortgage loans without recourse, loss reimbursements only occur in those instances where we have breached a representation or warranty or other contractual requirement related to the loan sale. The provision for loss reimbursement on sold loans was an expense of $0.05 million and $0.03 million for the three month periods ended September 30, 2020 and 2019 and an expense of $0.16 million and $0.18 million for the nine month periods ended September 30, 2020 and 2019, respectively. The reserve for loss reimbursements on sold mortgage loans totaled $0.98 million and $0.88 million at September 30, 2020 and December 31, 2019, respectively. This reserve is included in accrued expenses and other liabilities in our Condensed Consolidated Statements of Financial Condition. This reserve is based on an analysis of mortgage loans that we have sold which are further categorized by delinquency status, loan to value, and year of origination. The calculation includes factors such as probability of default, probability of loss reimbursement (breach of representation or warranty) and estimated loss severity. We believe that the amounts that we have accrued for incurred losses on sold mortgage loans are appropriate given our analyses. However, future losses could exceed our current estimate.

Visa Stock

We own 12,566 shares of VISA Class B common stock. At the present time, these shares can only be sold to other Class B shareholders. As a result, there has generally been limited transfer activity in private transactions between buyers and sellers. Given the limited activity that we have become aware of  and the continuing uncertainty regarding the likelihood, ultimate timing and eventual exchange rate for Class B shares into Class A shares, we continue to carry these shares at zero, representing cost basis less impairment. However, given the current conversion ratio of 1.6228 Class A shares for every 1 Class B share and the closing price of VISA Class A shares on October 28, 2020 of $180.87 per share, our 12,566 Class B shares would have a current “value” of approximately $3.7 million. We continue to monitor Class B trading activity and the status of the resolution of certain litigation matters at VISA that would trigger the conversion of Class B common shares into Class A common shares, which would not have any trading restrictions.
v3.20.2
Accumulated Other Comprehensive Income (Loss) ("AOCIL")
 9 Months Ended
Sep. 30, 2020
Accumulated Other Comprehensive Income (Loss) ("AOCIL") [Abstract]  
Accumulated Other Comprehensive Income (Loss) ("AOCIL")

14. Accumulated Other Comprehensive Income (Loss) (“AOCIL”)

A summary of changes in AOCIL follows:

  
Unrealized
Gains
(Losses) on
Securities
Available
for Sale
    
Dispropor-
tionate
Tax Effects
from
Securities
Available
for Sale
    
Unrealized
Losses on
Cash Flow
Hedges
    
Total
  
   
(In thousands)
  
                         
For the three months ended September 30,
                        
2020
                        
Balances at beginning of period
  
$
11,315
    
$
(5,798
)
  
$
(1,721
)
  
$
3,796
  
Other comprehensive income (loss) before reclassifications
    
2,125
      
-
      
(20
)
    
2,105
  
Amounts reclassified from AOCIL
    
-
      
-
      
245
      
245
  
Net current period other comprehensive income
    
2,125
      
-
      
225
      
2,350
  
Balances at end of period
  
$
13,440
    
$
(5,798
)
  
$
(1,496
)
  
$
6,146
  
                                 
2019
                                
Balances at beginning of period
  
$
3,040
    
$
(5,798
)
  
$
(1,673
)
  
$
(4,431
)
Other comprehensive income (loss) before reclassifications
    
1,196
      
-
      
(58
)
    
1,138
  
Amounts reclassified from AOCIL
    
-
      
-
      
(80
)
    
(80
)
Net current period other comprehensive income (loss)
    
1,196
      
-
      
(138
)
    
1,058
  
Balances at end of period
  
$
4,236
    
$
(5,798
)
  
$
(1,811
)
  
$
(3,373
)
                                 
For the nine months ended September 30,
                                
2020
                                
Balances at beginning of period
  
$
3,739
    
$
(5,798
)
  
$
(1,727
)
  
$
(3,786
)
Other comprehensive income (loss) before reclassifications
    
9,901
      
-
      
(279
)
    
9,622
  
Amounts reclassified from AOCIL
    
(200
)
    
-
      
510
      
310
  
Net current period other comprehensive income
    
9,701
      
-
      
231
      
9,932
  
Balances at end of period
  
$
13,440
    
$
(5,798
)
  
$
(1,496
)
  
$
6,146
  
                                 
2019
                                
Balances at beginning of period
  
$
(4,185
)
  
$
(5,798
)
  
$
(125
)
  
$
(10,108
)
Other comprehensive income (loss) before reclassifications
    
8,529
      
-
      
(1,376
)
    
7,153
  
Amounts reclassified from AOCIL
    
(108
)
    
-
      
(310
)
    
(418
)
Net current period other comprehensive income (loss)
    
8,421
      
-
      
(1,686
)
    
6,735
  
Balances at end of period
  
$
4,236
    
$
(5,798
)
  
$
(1,811
)
  
$
(3,373
)

The disproportionate tax effects from securities available for sale arose due to tax effects of other comprehensive income (“OCI”) in the presence of a valuation allowance against our deferred tax assets and a pretax loss from operations.  Generally, the amount of income tax expense or benefit allocated to operations is determined without regard to the tax effects of other categories of income or loss, such as OCI. However, an exception to the general rule is provided when, in the presence of a valuation allowance against deferred tax assets, there is a pretax loss from operations and pretax income from other categories in the current period.  In such instances, income from other categories must offset the current loss from operations, the tax benefit of such offset being reflected in operations. Release of material disproportionate tax effects from other comprehensive income to earnings is done by the portfolio method whereby the effects will remain in AOCIL as long as we carry a more than inconsequential portfolio of securities available for sale.

A summary of reclassifications out of each component of AOCIL for the three months ended September 30 follows:

AOCIL Component
  
Amount
Reclassified
From
AOCIL
  
 Affected Line Item in Condensed
 Consolidated Statements of Operations
 
  
(In thousands)
  
 
2020
      
   
Unrealized gains on securities available for sale
      
   
 
  
$
-
  
 Net gains on securities available for sale
 
    
-
  
 Net impairment loss recognized in earnings
 
    
-
  
 Total reclassifications before tax
 
    
-
  
 Income tax expense
 
  
$
-
  
 Reclassifications, net of tax
 
        
     
Unrealized losses on cash flow hedges
        
   
 
  
$
310
  
 Interest expense
 
    
65
  
 Income tax expense
 
  
$
245
  
 Reclassification, net of tax
 
        
     
 
  
$
(245
)
 Total reclassifications for the period, net of tax
 
        
     
2019
        
   
Unrealized gains on securities available for sale
        
   
 
  
$
-
  
 Net gains on securities available for sale
 
    
-
  
 Net impairment loss recognized in earnings
 
    
-
  
 Total reclassifications before tax
 
    
-
  
 Income tax expense
 
  
$
-
  
 Reclassifications, net of tax
 
        
     
Unrealized losses on cash flow hedges
        
   
 
  
$
(102
)
 Interest expense
 
    
(22
)
 Income tax expense
 
  
$
(80
)
 Reclassification, net of tax
 
        
     
 
  
$
80
  
 Total reclassifications for the period, net of tax

A summary of reclassifications out of each component of AOCIL for the nine months ended September 30 follows:

AOCIL Component
  
Amount
Reclassified
From
AOCIL
  
 Affected Line Item in Condensed
 Consolidated Statements of Operations
 
  
(In thousands)
  
 
2020
      
   
Unrealized gains on securities available for sale
      
   
 
  
$
253
  
 Net gains on securities available for sale
 
    
-
  
 Net impairment loss recognized in earnings
 
    
253
  
 Total reclassifications before tax
 
    
53
  
 Income tax expense
 
  
$
200
  
 Reclassifications, net of tax
 
        
     
Unrealized losses on cash flow hedges
        
   
 
  
$
646
  
 Interest expense
 
    
136
  
 Income tax expense
 
  
$
510
  
 Reclassification, net of tax
 
        
     
 
  
$
(310
)
 Total reclassifications for the period, net of tax
 
        
     
2019
        
   
Unrealized gains on securities available for sale
        
   
 
  
$
137
  
 Net gains on securities available for sale
 
    
-
  
 Net impairment loss recognized in earnings
 
    
137
  
 Total reclassifications before tax
 
    
29
  
 Income tax expense
 
  
$
108
  
 Reclassifications, net of tax
 
        
     
Unrealized losses on cash flow hedges
        
   
 
  
$
(393
)
 Interest expense
 
    
(83
)
 Income tax expense
 
  
$
(310
)
 Reclassification, net of tax
 
        
     
 
  
$
418
  
 Total reclassifications for the period, net of tax
v3.20.2
Revenue from Contracts with Customers
 9 Months Ended
Sep. 30, 2020
Revenue from Contracts with Customers [Abstract]  
Revenue from Contracts with Customers

15. Revenue from Contracts with Customers

We account for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. We derive the majority of our revenue from financial instruments and their related contractual rights and obligations which for the most part are excluded from the scope of this topic.  These sources of revenue that are excluded from the scope of this topic include interest income, net gains on mortgage loans, net gains on securities available for sale, mortgage loan servicing, net and bank owned life insurance and were approximately 87.9% and 84.7% of total revenues for the nine month periods ending September 30, 2020 and 2019, respectively.

Material sources of revenue that are included in the scope of this topic include service charges on deposit accounts, other deposit related income, interchange income and investment and insurance commissions and are discussed in the following paragraphs.  Generally these sources of revenue are earned at the time the service is delivered or over the course of a monthly period and do not result in any contract asset or liability balance at any given period end.  As a result, there were no contract assets or liabilities recorded as of September 30, 2020 and December 31, 2019.

Service charges on deposit accounts and other deposit related income: Revenues are earned on depository accounts for commercial and retail customers and include fees for transaction-based, account maintenance and overdraft services. Transaction-based fees, which includes services such as ATM use fees, stop payment charges and ACH fees are recognized at the time the transaction is executed as that is the time we fulfill our customer’s request.  Account maintenance fees, which includes monthly maintenance services are earned over the course of a month representing the period over which the performance obligation is satisfied. Our obligation for overdraft services is satisfied at the time of the overdraft.

Interchange income: Interchange income primarily includes debit card interchange and network revenues.  Debit card interchange and network revenues are earned on debit card transactions conducted through payment networks such as MasterCard and NYCE. Interchange income is recognized concurrently with the delivery of services on a daily basis. Interchange and network revenues are presented gross of interchange expenses, which are presented separately as a component of non-interest expense.

Investment and insurance commissions:  Investment and insurance commissions include fees and commissions from asset management, custody, recordkeeping, investment advisory and other services provided to our customers. Revenue is recognized on an accrual basis at the time the services are performed and is generally based on either the market value of the assets managed or the services provided.  We have an agent relationship with a third party provider of these services and net certain direct costs charged by the third party provider associated with providing these services to our customers.

Net (gains) losses on other real estate and repossessed assets:  We record a gain or loss from the sale of other real estate when control of the property transfers to the buyer, which generally occurs at the time of an executed deed.  If we were to finance the sale of other real estate to the buyer, we would assess whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction is probable.  Once these criteria are met, the other real estate asset would be derecognized and the gain or loss on sale would be recorded upon the transfer of control of the property to the buyer.  There were no other real estate properties sold during the nine month periods ending September 30, 2020 and 2019 that were financed by us.

Disaggregation of our revenue sources by attribute follows:

Three months ending September 30, 2020
                              
 
Service
Charges
on Deposit
Accounts
    
Other
Deposit
Related
Income
    
Interchange
Income
    
Investment
and
Insurance
Commissions
    
Total
  
   
(In thousands)
  
Retail
                              
Overdraft fees
  
$
1,371
    
$
-
    
$
-
    
$
-
    
$
1,371
  
Account service charges
    
544
      
-
      
-
      
-
      
544
  
ATM fees
    
-
      
320
      
-
      
-
      
320
  
Other
    
-
      
184
      
-
      
-
      
184
  
Business
                                        
Overdraft fees
    
170
      
-
      
-
      
-
      
170
  
ATM fees
    
-
      
7
      
-
      
-
      
7
  
Other
    
-
      
89
      
-
      
-
      
89
  
Interchange income
    
-
      
-
      
3,428
      
-
      
3,428
  
Asset management revenue
    
-
      
-
      
-
      
335
      
335
  
Transaction based revenue
    
-
      
-
      
-
      
195
      
195
  
                                         
Total
  
$
2,085
    
$
600
    
$
3,428
    
$
530
    
$
6,643
  
                                         
Reconciliation to Condensed Consolidated Statement of Operations:
                  
Non-interest income - other:
                                        
Other deposit related income
                                  
$
600
  
Investment and insurance commissions
                              
530
  
Bank owned life insurance
                                    
215
  
Other
                                    
592
  
Total
                                  
$
1,937
  

Three months ending September 30, 2019
                              
 
Service
Charges
on Deposit
Accounts
    
Other
Deposit
Related
Income
    
Interchange
Income
    
Investment
and
Insurance
Commissions
    
Total
  
   
(In thousands)
  
Retail
                              
Overdraft fees
  
$
1,970
    
$
-
    
$
-
    
$
-
    
$
1,970
  
Account service charges
    
552
      
-
      
-
      
-
      
552
  
ATM fees
    
-
      
373
      
-
      
-
      
373
  
Other
    
-
      
240
      
-
      
-
      
240
  
Business
                                        
Overdraft fees
    
361
      
-
      
-
      
-
      
361
  
ATM fees
    
-
      
9
      
-
      
-
      
9
  
Other
    
-
      
91
      
-
      
-
      
91
  
Interchange income
    
-
      
-
      
2,785
      
-
      
2,785
  
Asset management revenue
    
-
      
-
      
-
      
292
      
292
  
Transaction based revenue
    
-
      
-
      
-
      
158
      
158
  
                                         
Total
  
$
2,883
    
$
713
    
$
2,785
    
$
450
    
$
6,831
  
                                         
Reconciliation to Condensed Consolidated Statement of Operations:
                  
Non-interest income - other:
                                        
Other deposit related income
                                  
$
713
  
Investment and insurance commissions
                              
450
  
Bank owned life insurance
                                    
301
  
Other
                                    
1,028
  
Total
                                  
$
2,492
  

Nine months ending September 30, 2020
                              
 
  
Service
Charges
on Deposit
Accounts
    
Other
Deposit
Related
Income
    
Interchange
Income
    
Investment
and
Insurance
Commissions
    
Total
  
 
  
(In thousands)
  
Retail
                              
Overdraft fees
  
$
4,130
    
$
-
    
$
-
    
$
-
    
$
4,130
  
Account service charges
    
1,501
      
-
      
-
      
-
      
1,501
  
ATM fees
    
-
      
896
      
-
      
-
      
896
  
Other
    
-
      
577
      
-
      
-
      
577
  
Business
                                        
Overdraft fees
    
668
      
-
      
-
      
-
      
668
  
ATM fees
    
-
      
18
      
-
      
-
      
18
  
Other
    
-
      
252
      
-
      
-
      
252
  
Interchange income
    
-
      
-
      
8,411
      
-
      
8,411
  
Asset management revenue
    
-
      
-
      
-
      
937
      
937
  
Transaction based revenue
    
-
      
-
      
-
      
541
      
541
  
 
                                        
Total
  
$
6,299
    
$
1,743
    
$
8,411
    
$
1,478
    
$
17,931
  
 
                                        
Reconciliation to Condensed Consolidated Statement of Operations:
                  
Non-interest income - other:
                                        
Other deposit related income
                                  
$
1,743
  
Investment and insurance commissions
                              
1,478
  
Bank owned life insurance
                                    
750
  
Other
                                    
1,727
  
Total
                                  
$
5,698
  

Nine months ending September 30, 2019
                              
 
  
Service
Charges
on Deposit
Accounts
    
Other
Deposit
Related
Income
    
Interchange
Income
    
Investment
and
Insurance
Commissions
    
Total
  
 
  
(In thousands)
  
Retail
                              
Overdraft fees
  
$
5,582
    
$
-
    
$
-
    
$
-
    
$
5,582
  
Account service charges
    
1,618
      
-
      
-
      
-
      
1,618
  
ATM fees
    
-
      
1,041
      
-
      
-
      
1,041
  
Other
    
-
      
703
      
-
      
-
      
703
  
Business
                                        
Overdraft fees
    
1,123
      
-
      
-
      
-
      
1,123
  
ATM fees
    
-
      
26
      
-
      
-
      
26
  
Other
    
-
      
309
      
-
      
-
      
309
  
Interchange income
    
-
      
-
      
7,744
      
-
      
7,744
  
Asset management revenue
    
-
      
-
      
-
      
823
      
823
  
Transaction based revenue
    
-
      
-
      
-
      
374
      
374
  
 
                                        
Total
  
$
8,323
    
$
2,079
    
$
7,744
    
$
1,197
    
$
19,343
  
 
                                        
Reconciliation to Condensed Consolidated Statement of Operations:
                  
Non-interest income - other:
                                        
Other deposit related income
                                  
$
2,079
  
Investment and insurance commissions
                              
1,197
  
Bank owned life insurance
                                    
813
  
Other
                                    
2,773
  
Total
                                  
$
6,862
  
v3.20.2
Leases
 9 Months Ended
Sep. 30, 2020
Leases [Abstract]  
Leases

16. Leases

We have entered into leases in the normal course of business primarily for office facilities, some of which include renewal options and escalation clauses.  Certain leases also include both lease components (fixed payments including rent, taxes and insurance costs) and non-lease components (common area or other maintenance costs) which are accounted for as a single lease component as we have elected the practical expedient to group lease and non-lease components together for all leases.  We have also elected not to recognize leases with original lease terms of 12 months or less (short-term leases) on our Condensed Consolidated Statements of Financial Condition.  Most of our leases include one or more options to renew. The exercise of lease renewal options is typically at our sole discretion and are included in our right of use (“ROU”) assets and lease liabilities if they are reasonably certain of exercise.

Leases are classified as operating or finance leases at the lease commencement date (we did not have any finance leases as of September 30, 2020).  Lease expense for operating leases and short-term leases is recognized on a straight-line basis over the lease term.  The ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of the lease payment over the lease term.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments.

The cost components of our operating leases follows:

  
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
   
2020
    
2019
    
2020
    
2019
  
   
(In thousands)
    
(In thousands)
  
Operating lease cost
  
$
395
    
$
565
    
$
1,357
    
$
1,692
  
Variable lease cost
    
16
      
43
      
52
      
115
  
Short-term lease cost
    
10
      
4
      
26
      
14
  
Total
  
$
421
    
$
612
    
$
1,435
    
$
1,821
  

Variable lease costs consist primarily of taxes, insurance, and common area or other maintenance costs for our leased facilities.

Supplemental balance sheet information related to our operating leases follows:

  
September 30,
2020
    
December 31,
2019
  
   
(Dollars in thousands)
  
Lease right of use asset (1)
  
$
6,713
    
$
8,282
  
Lease liabilities (2)
  
$
6,945
    
$
8,304
  
                 
Weighted average remaining lease term (years)
    
6.84
      
7.47
  
Weighted average discount rate
    
2.6
%
    
2.8
%

(1)
Included in Accrued income and other assets in our Condensed Consolidated Statements of Financial Condition.
(2)
Included in Accrued expenses and other liabilities in our Condensed Consolidated Statements of Financial Condition.

Maturity analysis of our lease liabilities at September 30, 2020 based on required contractual payments follows:

  
(In thousands)
  
       
Three months ending December 31, 2020
  
$
408
  
2021
    
1,505
  
2022
    
1,324
  
2023
    
1,101
  
2024
    
692
  
2025 and thereafter
    
2,576
  
Total lease payments
    
7,606
  
Less imputed interest
    
(661
)
Total
  
$
6,945
  
v3.20.2
New Accounting Standards (Policies)
 9 Months Ended
Sep. 30, 2020
New Accounting Standards [Abstract]  
New Accounting Standards
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, ‘‘Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments’’. This ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.

This ASU:

•
Replaces the existing incurred loss impairment guidance and establishes a single allowance framework for financial assets carried at amortized cost, which will reflect our estimate of credit losses over the full remaining expected life of the financial assets and will consider expected future changes in macroeconomic conditions.
•
Eliminates existing guidance for purchase credit impaired (‘‘PCI’’) loans, and requires recognition of the nonaccretable difference as an increase to the allowance for expected credit losses on financial assets purchased with more than insignificant credit deterioration since origination, which will be offset by an increase in the recorded investment of the related loans.
•
Requires inclusion of expected recoveries, limited to the cumulative amount of prior write-offs, when estimating the allowance for credit losses for in scope financial assets (including collateral dependent assets).
•
Amends existing impairment guidance for securities available for sale to incorporate an allowance, which will allow for reversals of credit impairments in the event that the credit of an issuer improves. Credit losses on securities available for sale are limited to the amount of the decline in fair value regardless of what the credit loss model would show for impairment.
•
Generally requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption.

We began evaluating this ASU in 2016 and established a company-wide, cross-discipline governance structure, which provides implementation oversight. We continued to test and refine our current expected credit loss models that satisfied the requirements of this ASU. Oversight and testing, as well as efforts to meet expanded disclosure requirements, extended through the end of 2019.  We currently expect to estimate losses over approximately a two year forecast period using the Federal Open Market Committee median economic projections and other economic forecast sources, and then revert to longer term historical loss experience to estimate losses over more extended periods.  We were originally required to adopt this ASU on January 1, 2020 but section 4014 of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act allows for temporary relief from applying this ASU.  Under the CARES Act we may delay the adoption of this ASU until the earlier of the termination of the national emergency that President Trump declared on March 13, 2020, or December 31, 2020.  As such, we have chosen to delay the adoption of this ASU and continue to utilize the existing incurred loss impairment methodology to calculate our allowance for loan losses and our provision for loan losses as required under Accounting Standards Codification 310 (Receivables). When we adopt this ASU as required under the CARES act we will do so retrospectively to January 1, 2020.

We expect to recognize a one-time cumulative effect adjustment to beginning retained earnings at January 1, 2020 increasing the allowance for loan losses.  We are estimating an increase to the allowance for loan losses at that time to be in the range of $8.0 million to $10.0 million primarily driven by the longer contractual maturities of our mortgage and consumer installment loan portfolio segments. In addition, we currently expect this ASU to increase the allowance for losses related to unfunded loan commitments between $1.0 million and $2.0 million. The ultimate impact of adopting this ASU, and at each subsequent reporting period, is highly dependent on credit quality, economic forecasts and conditions, composition of our loan portfolios and securities available for sale, along with other management judgements. The transition adjustment to record the allowance for credit losses may fall outside of our estimated increase based on the finalization of assumptions including qualitative adjustments and the economic forecast used in calculating the allowance for credit losses upon the adoption of CECL.

We do not expect a material allowance for credit losses to be recorded on securities available for sale upon adoption of this ASU.

In August 2018, the FASB issued ASU 2018-13, ‘‘Fair Value Measurement (Topic 820), Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement’’. This new ASU amends disclosure requirements in Topic 820 to eliminate, add and modify certain disclosure requirements for fair value measurements as part of its disclosure framework project. The amended guidance eliminates the requirements to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the entity’s policy for the timing of transfers between levels of the fair value hierarchy and the entity’s valuation processes for Level 3 fair value measurements. The amended guidance adds the requirements to disclose the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements of instruments held at the end of the reporting period and for recurring and nonrecurring Level 3 fair value measurements, the range and weighted average used to develop significant unobservable inputs and how the weighted average was calculated, with certain exceptions. This amended guidance was effective for us on January 1, 2020, and did not have a material impact on our consolidated operating results or financial condition.

In March 2020, the FASB issued ASU 2020-04, ‘‘Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting’’. This new ASU provides temporary optional expedients and exceptions to GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. Entities can elect not to apply certain modification accounting requirements to contracts affected by reference rate reform, if certain criteria are met. Entities that make such elections would not have to remeasure contracts at the modification date or reassess a previous accounting determination.  Entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met.  This amended guidance and our ability to elect its temporary optional expedients and exceptions are effective for us as of March 12, 2020 through December 31, 2022.
v3.20.2
Securities (Tables)
 9 Months Ended
Sep. 30, 2020
Securities [Abstract]  
Securities Available for Sale
Securities available for sale consist of the following:

  
Amortized
    
Unrealized
        
   
Cost
    
Gains
    
Losses
    
Fair Value
  
   
(In thousands)
  
September 30, 2020
                        
U.S. agency
  
$
10,820
    
$
332
    
$
22
    
$
11,130
  
U.S. agency residential mortgage-backed
    
330,914
      
5,167
      
521
      
335,560
  
U.S. agency commercial mortgage-backed
    
8,039
      
382
      
-
      
8,421
  
Private label mortgage-backed
    
43,190
      
1,415
      
320
      
44,285
  
Other asset backed
    
262,435
      
1,392
      
456
      
263,371
  
Obligations of states and political subdivisions
    
238,479
      
6,635
      
136
      
244,978
  
Corporate
    
71,691
      
3,558
      
232
      
75,017
  
Trust preferred
    
1,970
      
-
      
200
      
1,770
  
Foreign government
    
500
      
18
      
-
      
518
  
Total
  
$
968,038
    
$
18,899
    
$
1,887
    
$
985,050
  
                                 
December 31, 2019
                                
U.S. agency
  
$
14,591
    
$
89
    
$
19
    
$
14,661
  
U.S. agency residential mortgage-backed
    
226,130
      
1,910
      
278
      
227,762
  
U.S. agency commercial mortgage-backed
    
10,671
      
113
      
28
      
10,756
  
Private label mortgage-backed
    
39,248
      
544
      
99
      
39,693
  
Other asset backed
    
94,158
      
103
      
375
      
93,886
  
Obligations of states and political subdivisions
    
94,499
      
1,724
      
121
      
96,102
  
Corporate
    
31,904
      
1,296
      
5
      
33,195
  
Trust preferred
    
1,968
      
-
      
125
      
1,843
  
Foreign government
    
499
      
3
      
-
      
502
  
Total
  
$
513,668
    
$
5,782
    
$
1,050
    
$
518,400
  
Investments in a Continuous Unrealized Loss Position
Our investments’ gross unrealized losses and fair values aggregated by investment type and length of time that individual securities have been at a continuous unrealized loss position follows:

  
Less Than Twelve Months
    
Twelve Months or More
    
Total
  
   
Fair Value
    
Unrealized
Losses
    
Fair Value
    
Unrealized
Losses
    
Fair Value
    
Unrealized
Losses
  
   
(In thousands)
  
                                     
September 30, 2020
                                    
U.S. agency
  
$
1,788
    
$
5
    
$
2,262
    
$
17
    
$
4,050
    
$
22
  
U.S. agency residential mortgage-backed
    
81,400
      
519
      
1,298
      
2
      
82,698
      
521
  
Private label mortgage-backed
    
14,269
      
268
      
749
      
52
      
15,018
      
320
  
Other asset backed
    
28,630
      
129
      
22,210
      
327
      
50,840
      
456
  
Obligations of states and political subdivisions
    
19,075
      
110
      
2,003
      
26
      
21,078
      
136
  
Corporate
    
10,628
      
232
      
-
      
-
      
10,628
      
232
  
Trust preferred
    
-
      
-
      
1,770
      
200
      
1,770
      
200
  
Total
  
$
155,790
    
$
1,263
    
$
30,292
    
$
624
    
$
186,082
    
$
1,887
  
                                                 
December 31, 2019
                                                
U.S. agency
  
$
2,782
    
$
8
    
$
2,712
    
$
11
    
$
5,494
    
$
19
  
U.S. agency residential mortgage-backed
    
56,377
      
126
      
13,551
      
152
      
69,928
      
278
  
U.S. agency commercial mortgage-backed
    
3,284
      
24
      
659
      
4
      
3,943
      
28
  
Private label mortgage-backed
    
16,387
      
55
      
343
      
44
      
16,730
      
99
  
Other asset backed
    
34,027
      
233
      
13,839
      
142
      
47,866
      
375
  
Obligations of states and political subdivisions
    
15,666
      
84
      
5,396
      
37
      
21,062
      
121
  
Corporate
    
2,125
      
5
      
-
      
-
      
2,125
      
5
  
Trust preferred
    
-
      
-
      
1,843
      
125
      
1,843
      
125
  
Total
  
$
130,648
    
$
535
    
$
38,343
    
$
515
    
$
168,991
    
$
1,050
  
Private Label Mortgage Backed Securities Below Investment Grade
At September 30, 2020, two private label mortgage-backed securities had credit related OTTI and are summarized as follows:

  
Senior
Security
    
Super
Senior
Security
    
Total
  
   
(In thousands)
  
                   
Fair value
  
$
403
    
$
536
    
$
939
  
Amortized cost
    
386
      
368
      
754
  
Non-credit unrealized loss
    
-
      
-
      
-
  
Unrealized gain
    
17
      
168
      
185
  
Cumulative credit related OTTI
    
757
      
457
      
1,214
  
Credit Losses Recognized in Earnings on Securities Available for Sale
A roll forward of credit losses recognized in earnings on securities available for sale follows:

  
Three months ended
September 30,
    
Nine months ended
September 30,
  
   
2020
    
2019
    
2020
    
2019
  
   
(In thousands)
    
(In thousands)
  
Balance at beginning of period
  
$
1,214
    
$
1,594
    
$
1,214
    
$
1,594
  
Additions to credit losses on securities for which no previous OTTI was recognized
    
-
      
-
      
-
      
-
  
Increases to credit losses on securities for which OTTI was previously recognized
    
-
      
-
      
-
      
-
  
Reduction (1)
    
-
      
(380
)
    
-
      
(380
)
Balance at end of period
  
$
1,214
    
$
1,214
    
$
1,214
    
$
1,214
  
 
(1)During the third quarter of 2019 one security with previously recorded OTTI was settled and balance is now zero.
Amortized Cost and Fair Value of Securities Available for Sale by Contractual Maturity
The amortized cost and fair value of securities available for sale at September 30, 2020, by contractual maturity, follow:

  
Amortized
Cost
    
Fair
Value
  
   
(In thousands)
  
Maturing within one year
  
$
18,967
    
$
19,048
  
Maturing after one year but within five years
    
80,229
      
83,042
  
Maturing after five years but within ten years
    
63,308
      
66,592
  
Maturing after ten years
    
160,956
      
164,731
  
     
323,460
      
333,413
  
U.S. agency residential mortgage-backed
    
330,914
      
335,560
  
U.S. agency commercial mortgage-backed
    
8,039
      
8,421
  
Private label mortgage-backed
    
43,190
      
44,285
  
Other asset backed
    
262,435
      
263,371
  
Total
  
$
968,038
    
$
985,050
  
Gains and Losses Realized on Sale of Securities Available for Sale
Gains and losses realized on the sale of securities available for sale are determined using the specific identification method and are recognized on a trade-date basis.  A summary of proceeds from the sale of securities available for sale and gains and losses for the nine month periods ending September 30, follows:

        
Realized
  
   
Proceeds
    
Gains
    
Losses
  
   
(In thousands)
  
2020
  
$
36,593
    
$
253
    
$
-
  
2019
    
44,305
      
169
      
32
  
v3.20.2
Loans (Tables)
 9 Months Ended
Sep. 30, 2020
Loans [Abstract]  
Analysis of Allowance for Loan Losses by Portfolio Segment
An analysis of the allowance for loan losses by portfolio segment for the three months ended September 30, follows:

  
Commercial
    
Mortgage
    
Installment
    
Subjective
Allocation
    
Total
  
   
(In thousands)
  
2020
                              
Balance at beginning of period
  
$
8,731
    
$
7,261
    
$
1,217
    
$
17,291
    
$
34,500
  
Additions (deductions)
                                        
Provision for loan losses
    
(875
)
    
(257
)
    
18
      
2,089
      
975
  
Recoveries credited to the allowance
    
297
      
157
      
196
      
-
      
650
  
Loans charged against the allowance
    
-
      
(162
)
    
(192
)
    
-
      
(354
)
Balance at end of period
  
$
8,153
    
$
6,999
    
$
1,239
    
$
19,380
    
$
35,771
  
                                         
2019
                                        
Balance at beginning of period
  
$
8,121
    
$
8,062
    
$
1,293
    
$
8,427
    
$
25,903
  
Additions (deductions)
                                        
Provision for loan losses
    
(810
)
    
83
      
289
      
167
      
(271
)
Recoveries credited to the allowance
    
1,215
      
235
      
202
      
-
      
1,652
  
Loans charged against the allowance
    
(303
)
    
(397
)
    
(436
)
    
-
      
(1,136
)
Balance at end of period
  
$
8,223
    
$
7,983
    
$
1,348
    
$
8,594
    
$
26,148
  

An analysis of the allowance for loan losses by portfolio segment for the nine months ended September 30, follows:

 
  
Commercial
    
Mortgage
    
Installment
    
Subjective
Allocation
    
Total
  
 
  
(In thousands)
  
2020
                              
Balance at beginning of period
  
$
7,922
    
$
8,216
    
$
1,283
    
$
8,727
    
$
26,148
  
Additions (deductions)
                                        
Provision for loan losses
    
2,804
      
(895
)
    
322
      
10,653
      
12,884
  
Recoveries credited to the allowance
    
1,463
      
364
      
577
      
-
      
2,404
  
Loans charged against the allowance
    
(4,036
)
    
(686
)
    
(943
)
    
-
      
(5,665
)
Balance at end of period
  
$
8,153
    
$
6,999
    
$
1,239
    
$
19,380
    
$
35,771
  
 
                                        
2019
                                        
Balance at beginning of period
  
$
7,090
    
$
7,978
    
$
895
    
$
8,925
    
$
24,888
  
Additions (deductions)
                                        
Provision for loan losses
    
85
      
270
      
1,021
      
(331
)
    
1,045
  
Recoveries credited to the allowance
    
1,720
      
786
      
603
      
-
      
3,109
  
Loans charged against the allowance
    
(672
)
    
(1,051
)
    
(1,171
)
    
-
      
(2,894
)
Balance at end of period
  
$
8,223
    
$
7,983
    
$
1,348
    
$
8,594
    
$
26,148
  
Allowance for Loan Losses and Recorded Investment in Loans by Portfolio Segment
Allowance for loan losses and recorded investment in loans by portfolio segment follows:

  
Commercial
    
Mortgage
    
Installment
    
Subjective
Allocation
    
Total
  
   
(In thousands)
  
September 30, 2020
                              
Allowance for loan losses:
                              
Individually evaluated for impairment
  
$
1,699
    
$
4,174
    
$
265
    
$
-
    
$
6,138
  
Collectively evaluated for impairment
    
6,454
      
2,825
      
974
      
19,380
      
29,633
  
Loans acquired with deteriorated credit quality
    
-
      
-
      
-
      
-
      
-
  
Total ending allowance for loan losses balance
  
$
8,153
    
$
6,999
    
$
1,239
    
$
19,380
    
$
35,771
  
                                         
Loans
                                        
Individually evaluated for impairment
  
$
10,543
    
$
40,573
    
$
2,404
            
$
53,520
  
Collectively evaluated for impairment
    
1,343,763
      
987,300
      
478,281
              
2,809,344
  
Loans acquired with deteriorated credit quality
    
906
      
560
      
143
              
1,609
  
Total loans recorded investment
    
1,355,212
      
1,028,433
      
480,828
              
2,864,473
  
Accrued interest included in recorded investment
    
3,422
      
4,397
      
1,175
              
8,994
  
Total loans
  
$
1,351,790
    
$
1,024,036
    
$
479,653
            
$
2,855,479
  
                                         
December 31, 2019
                                        
Allowance for loan losses:
                                        
Individually evaluated for impairment
  
$
1,031
    
$
4,863
    
$
261
    
$
-
    
$
6,155
  
Collectively evaluated for impairment
    
6,891
      
3,353
      
1,022
      
8,727
      
19,993
  
Loans acquired with deteriorated credit quality
    
-
      
-
      
-
      
-
      
-
  
Total ending allowance for loan losses balance
  
$
7,922
    
$
8,216
    
$
1,283
    
$
8,727
    
$
26,148
  
                                         
Loans
                                        
Individually evaluated for impairment
  
$
9,393
    
$
43,574
    
$
2,925
            
$
55,892
  
Collectively evaluated for impairment
    
1,158,906
      
1,058,917
      
457,370
              
2,675,193
  
Loans acquired with deteriorated credit quality
    
1,394
      
575
      
316
              
2,285
  
Total loans recorded investment
    
1,169,693
      
1,103,066
      
460,611
              
2,733,370
  
Accrued interest included in recorded investment
    
2,998
      
4,155
      
1,194
              
8,347
  
Total loans
  
$
1,166,695
    
$
1,098,911
    
$
459,417
            
$
2,725,023
  
Loans on Non-Accrual Status and Past Due More than 90 Days
Loans on non-accrual status and past due more than 90 days (“Non-performing Loans”) follow(1):

  
90+ and
Still
Accruing
    
Non-
Accrual
    
Total Non-
Performing
Loans
  
   
(In thousands)
  
September 30, 2020
                  
Commercial
                  
Commercial and industrial (2)
  
$
266
    
$
1,615
    
$
1,881
  
Commercial real estate
    
-
      
554
      
554
  
Mortgage
                        
1-4 family owner occupied - jumbo
    
-
      
1,207
      
1,207
  
1-4 family owner occupied - non-jumbo (3)
    
-
      
2,364
      
2,364
  
1-4 family non-owner occupied
    
-
      
1,304
      
1,304
  
1-4 family - 2nd lien
    
-
      
1,548
      
1,548
  
Resort lending
    
-
      
699
      
699
  
Installment
                        
Boat lending
    
-
      
206
      
206
  
Recreational vehicle lending
    
-
      
96
      
96
  
Other
    
-
      
378
      
378
  
Total recorded investment
  
$
266
    
$
9,971
    
$
10,237
  
Accrued interest included in recorded investment
  
$
-
    
$
-
    
$
-
  
                         
December 31, 2019
                        
Commercial
                        
Commercial and industrial (2)
  
$
-
    
$
565
    
$
565
  
Commercial real estate
    
-
      
735
      
735
  
Mortgage
                        
1-4 family owner occupied - jumbo
    
-
      
1,179
      
1,179
  
1-4 family owner occupied - non-jumbo (3)
    
-
      
3,540
      
3,540
  
1-4 family non-owner occupied
    
-
      
1,039
      
1,039
  
1-4 family - 2nd lien
    
-
      
979
      
979
  
Resort lending
    
-
      
690
      
690
  
Installment
                        
Boat lending
    
-
      
332
      
332
  
Recreational vehicle lending
    
-
      
3
      
3
  
Other
    
-
      
470
      
470
  
Total recorded investment
  
$
-
    
$
9,532
    
$
9,532
  
Accrued interest included in recorded investment
  
$
-
    
$
-
    
$
-
  

(1)
Non-performing loans exclude purchase credit impaired loans.
(2)
Non-performing commercial and industrial loans exclude $0.052 million and $0.077 million of government guaranteed loans at September 30, 2020 and December 31, 2019, respectively.
(3)
Non-performing 1-4 family owner occupied – non jumbo loans exclude $0.458 million and $0.569 million of government guaranteed loans at September 30, 2020 and December 31, 2019, respectively.
Aging Analysis of Loans by Class
An aging analysis of loans by class follows:

  
Loans Past Due
    
Loans not
    
Total
  
   
30-59 days
    
60-89 days
    
90+ days
    
Total
    
Past Due
    
Loans
  
   
(In thousands)
  
September 30, 2020
                                    
Commercial
                                    
Commercial and industrial
  
$
-
    
$
-
    
$
495
    
$
495
    
$
763,757
    
$
764,252
  
Commercial real estate
    
130
      
-
      
-
      
130
      
590,830
      
590,960
  
Mortgage
                                                
1-4 family owner occupied - jumbo
    
1,312
      
-
      
632
      
1,944
      
437,294
      
439,238
  
1-4 family owner occupied - non-jumbo
    
1,053
      
372
      
610
      
2,035
      
247,086
      
249,121
  
1-4 family non-owner occupied
    
1,336
      
60
      
367
      
1,763
      
177,101
      
178,864
  
1-4 family - 2nd lien
    
472
      
251
      
545
      
1,268
      
99,427
      
100,695
  
Resort lending
    
273
      
443
      
391
      
1,107
      
59,408
      
60,515
  
Installment
                                                
Boat lending
    
213
      
38
      
132
      
383
      
211,353
      
211,736
  
Recreational vehicle lending
    
364
      
19
      
58
      
441
      
168,211
      
168,652
  
Other
    
281
      
166
      
225
      
672
      
99,768
      
100,440
  
Total recorded investment
  
$
5,434
    
$
1,349
    
$
3,455
    
$
10,238
    
$
2,854,235
    
$
2,864,473
  
Accrued interest included in recorded investment
  
$
102
    
$
17
    
$
-
    
$
119
    
$
8,875
    
$
8,994
  
                                                 
December 31, 2019
                                                
Commercial
                                                
Commercial and industrial
  
$
-
    
$
289
    
$
102
    
$
391
    
$
564,480
    
$
564,871
  
Commercial real estate
    
177
      
-
      
735
      
912
      
603,910
      
604,822
  
Mortgage
                                                
1-4 family owner occupied - jumbo
    
1,757
      
1,037
      
-
      
2,794
      
398,759
      
401,553
  
1-4 family owner occupied - non-jumbo
    
2,672
      
852
      
1,387
      
4,911
      
342,349
      
347,260
  
1-4 family non-owner occupied
    
695
      
136
      
623
      
1,454
      
168,083
      
169,537
  
1-4 family - 2nd lien
    
909
      
90
      
386
      
1,385
      
115,157
      
116,542
  
Resort lending
    
364
      
53
      
565
      
982
      
67,192
      
68,174
  
Installment
                                                
Boat lending
    
337
      
107
      
88
      
532
      
202,750
      
203,282
  
Recreational vehicle lending
    
161
      
97
      
3
      
261
      
153,184
      
153,445
  
Other
    
377
      
275
      
202
      
854
      
103,030
      
103,884
  
Total recorded investment
  
$
7,449
    
$
2,936
    
$
4,091
    
$
14,476
    
$
2,718,894
    
$
2,733,370
  
Accrued interest included in recorded investment
  
$
74
    
$
34
    
$
-
    
$
108
    
$
8,239
    
$
8,347
  
Impaired Loans
Impaired loans are as follows:

  
September 30,
2020
    
December 31,
2019
  
Impaired loans with no allocated allowance for loan losses
  
(In thousands)
  
Troubled debt restructurings ("TDR")
  
$
336
    
$
337
  
Non - TDR
    
1,562
      
1,550
  
Impaired loans with an allocated allowance for loan losses
                
TDR - allowance based on collateral
    
9,412
      
1,587
  
TDR - allowance based on present value cash flow
    
38,934
      
48,798
  
Non - TDR - allowance based on collateral
    
2,963
      
3,365
  
Total impaired loans
  
$
53,207
    
$
55,637
  
                 
Amount of allowance for loan losses allocated
                
TDR - allowance based on collateral
  
$
1,104
    
$
542
  
TDR - allowance based on present value cash flow
    
3,838
      
4,641
  
Non - TDR - allowance based on collateral
    
1,196
      
972
  
Total amount of allowance for loan losses allocated
  
$
6,138
    
$
6,155
  

Impaired loans by class  are as follows:

  
September 30, 2020
    
December 31, 2019
  
   
Recorded
Investment
    
Unpaid
Principal
Balance
    
Related
Allowance
For Loan
Losses
    
Recorded
Investment
    
Unpaid
Principal
Balance
    
Related
Allowance
For Loan
Losses
  
With no related allowance for loan losses recorded:
  
(In thousands)
        
Commercial
                                    
Commercial and industrial
  
$
122
    
$
124
    
$
-
    
$
257
    
$
257
    
$
-
  
Commercial real estate
    
-
      
-
      
-
      
796
      
796
      
-
  
Mortgage
                                                
1-4 family owner occupied - jumbo
    
632
      
632
      
-
      
-
      
-
      
-
  
1-4 family owner occupied - non-jumbo
    
237
      
314
      
-
      
212
      
217
      
-
  
1-4 family non-owner occupied
    
311
      
475
      
-
      
214
      
366
      
-
  
1-4 family - 2nd lien
    
442
      
442
      
-
      
407
      
438
      
-
  
Resort lending
    
154
      
379
      
-
      
-
      
-
      
-
  
Installment
                                                
Boat lending
    
-
      
-
      
-
      
-
      
-
      
-
  
Recreational vehicle lending
    
-
      
-
      
-
      
-
      
-
      
-
  
Other
    
-
      
-
      
-
      
1
      
41
      
-
  
     
1,898
      
2,366
      
-
      
1,887
      
2,115
      
-
  
With an allowance for loan losses recorded:
                                                
Commercial
                                                
Commercial and industrial
    
2,452
      
2,572
      
855
      
1,655
      
1,706
      
453
  
Commercial real estate
    
7,969
      
7,980
      
844
      
6,685
      
6,661
      
578
  
Mortgage
                                                
1-4 family owner occupied - jumbo
    
1,091
      
1,458
      
126
      
1,447
      
1,445
      
91
  
1-4 family owner occupied - non-jumbo
    
21,805
      
22,414
      
2,300
      
10,163
      
10,695
      
1,031
  
1-4 family non-owner occupied
    
4,473
      
4,810
      
470
      
4,962
      
5,542
      
572
  
1-4 family - 2nd lien
    
620
      
629
      
133
      
14,059
      
15,243
      
1,695
  
Resort lending
    
10,808
      
10,972
      
1,145
      
12,110
      
12,263
      
1,474
  
Installment
                                                
Boat lending
    
139
      
172
      
49
      
-
      
-
      
-
  
Recreational vehicle lending
    
101
      
114
      
23
      
-
      
-
      
-
  
Other
    
2,164
      
2,295
      
193
      
2,924
      
3,153
      
261
  
     
51,622
      
53,416
      
6,138
      
54,005
      
56,708
      
6,155
  
Total
                                                
Commercial
                                                
Commercial and industrial
    
2,574
      
2,696
      
855
      
1,912
      
1,963
      
453
  
Commercial real estate
    
7,969
      
7,980
      
844
      
7,481
      
7,457
      
578
  
Mortgage
                                                
1-4 family owner occupied - jumbo
    
1,723
      
2,090
      
126
      
1,447
      
1,445
      
91
  
1-4 family owner occupied - non-jumbo
    
22,042
      
22,728
      
2,300
      
10,375
      
10,912
      
1,031
  
1-4 family non-owner occupied
    
4,784
      
5,285
      
470
      
5,176
      
5,908
      
572
  
1-4 family - 2nd lien
    
1,062
      
1,071
      
133
      
14,466
      
15,681
      
1,695
  
Resort lending
    
10,962
      
11,351
      
1,145
      
12,110
      
12,263
      
1,474
  
Installment
                                                
Boat lending
    
139
      
172
      
49
      
-
      
-
      
-
  
Recreational vehicle lending
    
101
      
114
      
23
      
-
      
-
      
-
  
Other
    
2,164
      
2,295
      
193
      
2,925
      
3,194
      
261
  
Total
  
$
53,520
    
$
55,782
    
$
6,138
    
$
55,892
    
$
58,823
    
$
6,155
  
                                                 
Accrued interest included in recorded investment
  
$
313
                    
$
255
                  
Average Recorded Investment in and Interest Income Earned on Impaired Loans by Class
Average recorded investment in and interest income earned on impaired loans by class for the three month periods ending September 30, follows:

  
2020
    
2019
  
   
Average
Recorded
Investment
    
Interest
Income
Recognized
    
Average
Recorded
Investment
    
Interest
Income
Recognized
  
With no related allowance for loan losses recorded:
  
(In thousands)
  
Commercial
                        
Commercial and industrial
  
$
103
    
$
2
    
$
-
    
$
-
  
Commercial real estate
    
-
      
-
      
327
      
5
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
632
      
-
      
-
      
-
  
1-4 family owner occupied - non-jumbo
    
331
      
-
      
352
      
1
  
1-4 family non-owner occupied
    
316
      
2
      
200
      
6
  
1-4 family - 2nd lien
    
403
      
-
      
-
      
-
  
Resort lending
    
77
      
-
      
-
      
-
  
Installment
                                
Boat lending
    
-
      
-
      
-
      
-
  
Recreational vehicle lending
    
-
      
-
      
-
      
-
  
Other
    
-
      
-
      
-
      
1
  
     
1,862
      
4
      
879
      
13
  
With an allowance for loan losses recorded:
                                
Commercial
                                
Commercial and industrial
    
2,431
      
38
      
1,534
      
16
  
Commercial real estate
    
12,195
      
130
      
6,069
      
71
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
808
      
11
      
1,003
      
9
  
1-4 family owner occupied - non-jumbo
    
22,070
      
277
      
23,674
      
336
  
1-4 family non-owner occupied
    
4,708
      
52
      
5,447
      
76
  
1-4 family - 2nd lien
    
598
      
3
      
601
      
8
  
Resort lending
    
11,186
      
125
      
12,067
      
171
  
Installment
                                
Boat lending
    
106
      
-
      
86
      
2
  
Recreational vehicle lending
    
96
      
1
      
50
      
1
  
Other
    
2,324
      
33
      
3,105
      
50
  
     
56,522
      
670
      
53,636
      
740
  
Total
                                
Commercial
                                
Commercial and industrial
    
2,534
      
40
      
1,534
      
16
  
Commercial real estate
    
12,195
      
130
      
6,396
      
76
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
1,440
      
11
      
1,003
      
9
  
1-4 family owner occupied - non-jumbo
    
22,401
      
277
      
24,026
      
337
  
1-4 family non-owner occupied
    
5,024
      
54
      
5,647
      
82
  
1-4 family - 2nd lien
    
1,001
      
3
      
601
      
8
  
Resort lending
    
11,263
      
125
      
12,067
      
171
  
Installment
                                
Boat lending
    
106
      
-
      
86
      
2
  
Recreational vehicle lending
    
96
      
1
      
50
      
1
  
Other
    
2,324
      
33
      
3,105
      
51
  
Total
  
$
58,384
    
$
674
    
$
54,515
    
$
753
  

Average recorded investment in and interest income earned on impaired loans by class for the nine month periods ending September 30, follows:

 
  
2020
    
2019
  
 
  
Average
Recorded
Investment
    
Interest
Income
Recognized
    
Average
Recorded
Investment
    
Interest
Income
Recognized
  
With no related allowance for loan losses recorded:
  
(In thousands)
  
Commercial
                        
Commercial and industrial
  
$
137
    
$
4
    
$
-
    
$
-
  
Commercial real estate
    
199
      
-
      
164
      
5
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
316
      
-
      
-
      
-
  
1-4 family owner occupied - non-jumbo
    
353
      
4
      
265
      
3
  
1-4 family non-owner occupied
    
309
      
5
      
100
      
6
  
1-4 family - 2nd lien
    
399
      
-
      
-
      
-
  
Resort lending
    
77
      
-
      
-
      
-
  
Installment
                                
Boat lending
    
-
      
-
      
-
      
-
  
Recreational vehicle lending
    
-
      
-
      
-
      
-
  
Other
    
-
      
-
      
-
      
1
  
 
    
1,790
      
13
      
529
      
15
  
With an allowance for loan losses recorded:
                                
Commercial
                                
Commercial and industrial
    
2,231
      
105
      
2,406
      
52
  
Commercial real estate
    
11,657
      
641
      
5,552
      
221
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
1,228
      
39
      
1,248
      
26
  
1-4 family owner occupied - non-jumbo
    
19,116
      
901
      
24,110
      
1,031
  
1-4 family non-owner occupied
    
4,746
      
170
      
6,040
      
227
  
1-4 family - 2nd lien
    
4,017
      
9
      
479
      
14
  
Resort lending
    
11,506
      
358
      
12,607
      
493
  
Installment
                                
Boat lending
    
72
      
-
      
68
      
2
  
Recreational vehicle lending
    
80
      
2
      
65
      
2
  
Other
    
2,545
      
109
      
3,211
      
145
  
 
    
57,198
      
2,334
      
55,786
      
2,213
  
Total
                                
Commercial
                                
Commercial and industrial
    
2,368
      
109
      
2,406
      
52
  
Commercial real estate
    
11,856
      
641
      
5,716
      
226
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
1,544
      
39
      
1,248
      
26
  
1-4 family owner occupied - non-jumbo
    
19,469
      
905
      
24,375
      
1,034
  
1-4 family non-owner occupied
    
5,055
      
175
      
6,140
      
233
  
1-4 family - 2nd lien
    
4,416
      
9
      
479
      
14
  
Resort lending
    
11,583
      
358
      
12,607
      
493
  
Installment
                                
Boat lending
    
72
      
-
      
68
      
2
  
Recreational vehicle lending
    
80
      
2
      
65
      
2
  
Other
    
2,545
      
109
      
3,211
      
146
  
Total
  
$
58,988
    
$
2,347
    
$
56,315
    
$
2,228
  
Troubled Debt Restructurings
Cash receipts on impaired loans on non-accrual status are generally applied to the principal balance.

TDRs follow:

  
September 30, 2020
  
   
Commercial
    
Retail (1)
    
Total
  
   
(In thousands)
  
Performing TDRs
  
$
8,292
    
$
37,337
    
$
45,629
  
Non-performing TDRs (2)
    
1,203
      
1,850
(3) 
    
3,053
  
Total
  
$
9,495
    
$
39,187
    
$
48,682
  

 
December 31, 2019
  
   
Commercial
    
Retail (1)
    
Total
  
   
(In thousands)
  
Performing TDRs
  
$
7,974
    
$
39,601
    
$
47,575
  
Non-performing TDRs (2)
    
540
      
2,607
(3) 
    
3,147
  
Total
  
$
8,514
    
$
42,208
    
$
50,722
  

(1)
Retail loans include mortgage and installment loan portfolio segments.
(2)
Included in non-performing loans table above.
(3)
Also includes loans on non-accrual at the time of modification until six payments are received on a timely basis.
Troubled Debt Restructuring During the Period
Loans that have been classified as TDRs during the three-month periods ended September 30 follow:

  
Number of
Contracts
    
Pre-modification
Recorded
Balance
    
Post-modification
Recorded
Balance
  
   
(Dollars in thousands)
  
2020
                  
Commercial
                  
Commercial and industrial
    
-
    
$
-
    
$
-
  
Commercial real estate
    
-
      
-
      
-
  
Mortgage
                        
1-4 family owner occupied - jumbo
    
-
      
-
      
-
  
1-4 family owner occupied - non-jumbo
    
1
      
92
      
95
  
1-4 family non-owner occupied
    
1
      
52
      
54
  
1-4 family - 2nd lien
    
-
      
-
      
-
  
Resort lending
    
-
      
-
      
-
  
Installment
                        
Boat lending
    
-
      
-
      
-
  
Recreational vehicle lending
    
-
      
-
      
-
  
Other
    
1
      
19
      
19
  
Total
    
3
    
$
163
    
$
168
  
                         
2019
                        
Commercial
                        
Commercial and industrial
    
2
    
$
137
    
$
137
  
Commercial real estate
    
-
      
-
      
-
  
Mortgage
                        
1-4 family owner occupied - jumbo
    
-
      
-
      
-
  
1-4 family owner occupied - non-jumbo
    
1
      
198
      
202
  
1-4 family non-owner occupied
    
-
      
-
      
-
  
1-4 family - 2nd lien
    
3
      
75
      
75
  
Resort lending
    
-
      
-
      
-
  
Installment
                        
Boat lending
    
-
      
-
      
-
  
Recreational vehicle lending
    
-
      
-
      
-
  
Other
    
1
      
28
      
28
  
Total
    
7
    
$
438
    
$
442
  

Loans that have been classified as TDRs during the nine-month periods ended September 30 follow:

 
  
Number of
Contracts
    
Pre-modification
Balance
    
Post-modification
Balance
  
 
  
(Dollars in thousands)
  
2020
                  
Commercial
                  
Commercial and industrial
    
7
    
$
1,207
    
$
1,207
  
Commercial real estate
    
4
      
7,012
      
7,012
  
Mortgage
                        
1-4 family owner occupied - jumbo
    
-
      
-
      
-
  
1-4 family owner occupied - non-jumbo
    
3
      
195
      
203
  
1-4 family non-owner occupied
    
2
      
111
      
116
  
1-4 family - 2nd lien
    
2
      
45
      
46
  
Resort lending
    
-
      
-
      
-
  
Installment
                        
Boat lending
    
-
      
-
      
-
  
Recreational vehicle lending
    
-
      
-
      
-
  
Other
    
2
      
52
      
53
  
Total
    
20
    
$
8,622
    
$
8,637
  
 
                        
2019
                        
Commercial
                        
Commercial and industrial
    
3
    
$
186
    
$
186
  
Commercial real estate
    
2
      
1,329
      
1,329
  
Mortgage
                        
1-4 family owner occupied - jumbo
    
-
      
-
      
-
  
1-4 family owner occupied - non-jumbo
    
2
      
479
      
483
  
1-4 family non-owner occupied
    
1
      
506
      
505
  
1-4 family - 2nd lien
    
3
      
75
      
75
  
Resort lending
    
-
      
-
      
-
  
Installment
                        
Boat lending
    
-
      
-
      
-
  
Recreational vehicle lending
    
-
      
-
      
-
  
Other
    
7
      
188
      
191
  
Total
    
18
    
$
2,763
    
$
2,769
  
Commercial and Retail Loan COVID-19 Accomodations
A summary of accommodations entered into under this guidance as of September 30, 2020 follows:

Commercial and Retail Loan COVID-19 Accomodations

  
Covid-19 Accomodations
    
Total
    
% of Total
  
Loan Category
  
Loans (#)
    
Loans ($)
    
Loans
    
Loans
  
                         
Commercial
    
17
    
$
25,105
    
$
1,351,790
      
1.9
%
Mortgage
    
197
      
32,091
      
1,024,036
      
3.1
%
Installment
    
97
      
2,631
      
479,653
      
0.5
%
Total
    
311
    
$
59,827
    
$
2,855,479
      
2.1
%
Mortgage loans serviced for others(1)
    
416
    
$
66,279
    
$
2,873,153
      
2.3
%

1)
We have delegated authority from all investors to grant these deferrals on their behalf.

Information on subsequent accommodation extensions follows:

Commercial and Retail Loan COVID-19 Subsequent Accomodations

Loan Category
  
Loans (#)
    
Loans ($)
  
             
Commercial
    
6
    
$
5,726
  
Mortgage
    
125
      
22,571
  
Installment
    
51
      
1,583
  
Total
    
182
    
$
29,880
  
Loan Ratings by Loan Class
The following table summarizes loan ratings by loan class for our commercial portfolio loan segment:

  
Commercial
  
   
Non-watch
1-6
    
Watch
7-8
    
Substandard
Accrual
9
    
Non-
Accrual
10-11
    
Total
  
               
(In thousands)
              
September 30, 2020
                              
Commercial and industrial
  
$
715,810
    
$
42,153
    
$
4,674
    
$
1,615
    
$
764,252
  
Commercial real estate
    
579,547
      
8,187
      
2,672
      
554
      
590,960
  
Total
  
$
1,295,357
    
$
50,340
    
$
7,346
    
$
2,169
    
$
1,355,212
  
Accrued interest included in total
  
$
3,267
    
$
116
    
$
39
    
$
-
    
$
3,422
  
                                         
December 31, 2019
                                        
Commercial and industrial
  
$
515,955
    
$
44,384
    
$
3,967
    
$
565
    
$
564,871
  
Commercial real estate
    
580,516
      
23,036
      
535
      
735
      
604,822
  
Total
  
$
1,096,471
    
$
67,420
    
$
4,502
    
$
1,300
    
$
1,169,693
  
Accrued interest included in total
  
$
2,763
    
$
205
    
$
30
    
$
-
    
$
2,998
  

For each of our mortgage and installment portfolio segment classes, we generally monitor credit quality based on the credit scores of the borrowers. These credit scores are generally updated semi-annually.

The following tables summarize credit scores by loan class for our mortgage and installment loan portfolio segments:

  
Mortgage (1)
  
   
1-4 Family
Owner
Occupied -
Jumbo
    
1-4 Family
Owner
Occupied -
Non-jumbo
    
1-4 Family
Non-owner
Occupied
    
1-4 Family
2nd Lien
    
Resort
Lending
    
Total
  
   
(In thousands)
  
September 30, 2020
                                    
_800 and above
  
$
49,057
    
$
35,243
    
$
28,557
    
$
13,443
    
$
10,433
    
$
136,733
  
_750-799
    
219,844
      
64,957
      
78,503
      
42,292
      
28,294
      
433,890
  
_700-749
    
110,981
      
74,914
      
48,228
      
26,334
      
11,557
      
272,014
  
_650-699
    
41,101
      
36,963
      
14,511
      
11,982
      
7,277
      
111,834
  
_600-649
    
12,387
      
17,032
      
4,986
      
2,954
      
2,064
      
39,423
  
_550-599
    
3,477
      
12,270
      
1,908
      
2,214
      
494
      
20,363
  
_500-549
    
2,391
      
6,062
      
1,475
      
1,134
      
243
      
11,305
  
_Under 500
    
-
      
1,680
      
696
      
342
      
153
      
2,871
  
_Unknown
    
-
      
-
      
-
      
-
      
-
      
-
  
_Total
  
$
439,238
    
$
249,121
    
$
178,864
    
$
100,695
    
$
60,515
    
$
1,028,433
  
Accrued interest included in total
  
$
1,288
    
$
1,891
    
$
590
    
$
363
    
$
265
    
$
4,397
  
                                                 
December 31, 2019
                                                
_800 and above
  
$
48,486
    
$
43,848
    
$
24,315
    
$
13,905
    
$
11,076
    
$
141,630
  
_750-799
    
198,491
      
111,521
      
84,656
      
50,012
      
29,364
      
474,044
  
_700-749
    
106,609
      
95,064
      
34,839
      
30,697
      
14,626
      
281,835
  
_650-699
    
31,553
      
51,174
      
13,995
      
14,267
      
8,063
      
119,052
  
_600-649
    
13,230
      
21,938
      
5,897
      
4,097
      
2,074
      
47,236
  
_550-599
    
514
      
12,308
      
1,863
      
1,703
      
673
      
17,061
  
_500-549
    
1,519
      
7,940
      
1,870
      
1,281
      
889
      
13,499
  
_Under 500
    
641
      
2,208
      
533
      
511
      
79
      
3,972
  
_Unknown
    
510
      
1,259
      
1,569
      
69
      
1,330
      
4,737
  
_Total
  
$
401,553
    
$
347,260
    
$
169,537
    
$
116,542
    
$
68,174
    
$
1,103,066
  
Accrued interest included in total
  
$
1,139
    
$
1,662
    
$
586
    
$
502
    
$
266
    
$
4,155
  

(1)
Credit scores have been updated within the last twelve months.


 
Installment (1)
  
   
Boat
Lending
    
Recreational
Vehicle
Lending
    
Other
    
Total
  
   
(In thousands)
  
September 30, 2020
                        
_800 and above
  
$
33,385
    
$
29,085
    
$
8,466
    
$
70,936
  
_750-799
    
124,751
      
94,666
      
36,373
      
255,790
  
_700-749
    
38,729
      
34,236
      
26,833
      
99,798
  
_650-699
    
11,557
      
8,059
      
21,998
      
41,614
  
_600-649
    
2,089
      
1,668
      
3,738
      
7,495
  
_550-599
    
632
      
449
      
1,394
      
2,475
  
_500-549
    
242
      
465
      
755
      
1,462
  
_Under 500
    
351
      
24
      
180
      
555
  
_Unknown
    
-
      
-
      
703
      
703
  
_Total
  
$
211,736
    
$
168,652
    
$
100,440
    
$
480,828
  
Accrued interest included in total
  
$
471
    
$
381
    
$
323
    
$
1,175
  
                                 
December 31, 2019
                                
_800 and above
  
$
28,041
    
$
24,470
    
$
7,611
    
$
60,122
  
_750-799
    
118,380
      
88,164
      
37,583
      
244,127
  
_700-749
    
41,490
      
31,055
      
27,204
      
99,749
  
_650-699
    
11,485
      
7,267
      
22,517
      
41,269
  
_600-649
    
2,254
      
1,411
      
4,470
      
8,135
  
_550-599
    
946
      
592
      
1,884
      
3,422
  
_500-549
    
377
      
464
      
1,127
      
1,968
  
_Under 500
    
309
      
22
      
284
      
615
  
_Unknown
    
-
      
-
      
1,204
      
1,204
  
_Total
  
$
203,282
    
$
153,445
    
$
103,884
    
$
460,611
  
Accrued interest included in total
  
$
490
    
$
378
    
$
326
    
$
1,194
  

(1)
Credit scores have been updated within the last twelve months.
Purchase Credit Impaired (PCI) Loans
As a result of our acquisition of TCSB Bancorp, Inc. in the second quarter of 2018 we purchased loans for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. For these loans that meet the criteria of ASC 310-30 treatment, the carrying amount was as follows:

  
September 30,
2020
    
December 31,
2019
  
   
(In thousands)
  
Commercial
  
$
906
    
$
1,394
  
Mortgage
    
560
      
575
  
Installment
    
143
      
316
  
Total carrying amount
    
1,609
      
2,285
  
Allowance for loan losses
    
-
      
-
  
Carrying amount, net of allowance for loan losses
  
$
1,609
    
$
2,285
  

The accretable difference on PCI loans is the difference between the expected cash flows and the net present value of expected cash flows with such difference accreted into earnings using the effective yield method over the term of the loans. Accretion recorded as loan interest income is included in the table below.  Accretable yield of PCI loans, or income expected to be collected follows:

  
Three months ended
September 30,
    
Nine months ended
September 30,
  
   
2020
    
2019
    
2020
    
2019
  
   
(unaudited)
    
(unaudited)
  
   
(In thousands)
    
(In thousands)
  
                         
Balance at beginning of period
  
$
573
    
$
749
    
$
640
    
$
462
  
New loans purchased
    
-
      
-
      
-
      
-
  
Accretion recorded as loan interest income
    
(156
)
    
(56
)
    
(223
)
    
(134
)
Reclassification from (to) nonaccretable difference
    
-
      
-
      
-
      
365
  
Displosals/other adjustments
    
-
      
-
      
-
      
-
  
Balance at end of period
  
$
417
    
$
693
    
$
417
    
$
693
  
v3.20.2
Shareholders' Equity and Earnings Per Common Share (Tables)
 9 Months Ended
Sep. 30, 2020
Shareholders' Equity and Earnings Per Common Share [Abstract]  
Reconciliation of Basic and Diluted Net Income Per Share
A reconciliation of basic and diluted net income per common share follows:

 
  
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
 
  
2020
    
2019
    
2020
    
2019
  
 
  
(In thousands, except per share data)
  
Net income
  
$
19,584
    
$
12,445
    
$
39,166
    
$
32,556
  
 
                                
Weighted average shares outstanding (1)
    
21,881
      
22,486
      
22,014
      
23,033
  
Stock units for deferred compensation plan for non-employee directors
    
117
      
132
      
119
      
131
  
Effect of stock options
    
85
      
110
      
90
      
116
  
Performance share units
    
32
      
42
      
33
      
39
  
Weighted average shares outstanding for calculation of diluted earnings per share
    
22,115
      
22,770
      
22,256
      
23,319
  
 
                                
Net income per common share
                                
Basic (1)
  
$
0.90
    
$
0.55
    
$
1.78
    
$
1.41
  
Diluted
  
$
0.89
    
$
0.55
    
$
1.76
    
$
1.40
  
 
(1)
Basic net income per common share includes weighted average common shares outstanding during the period and participating share awards.
v3.20.2
Derivative Financial Instruments (Tables)
 9 Months Ended
Sep. 30, 2020
Derivative Financial Instruments [Abstract]  
Derivative Financial Instruments According to Type of Hedge Designation
Our derivative financial instruments according to the type of hedge in which they are designated follows:

  
September 30, 2020
  
   
Notional
Amount
    
Average
Maturity
(years)
    
Fair
Value
  
   
(Dollars in thousands)
  
                   
Fair value hedge designation - Pay-fixed interest rate swap agreements
  
$
7,117
      
8.6
    
$
(860
)
                         
No hedge designation
                        
Rate-lock mortgage loan commitments
  
$
196,646
      
0.1
    
$
8,356
  
Mandatory commitments to sell mortgage loans
    
232,948
      
0.1
      
(580
)
Pay-fixed interest rate swap agreements - commercial
    
144,787
      
4.7
      
(10,811
)
Pay-variable interest rate swap agreements - commercial
    
144,787
      
4.7
      
10,811
  
Pay-fixed interest rate swap agreements
    
25,000
      
0.8
      
(409
)
Interest rate cap agreements
    
150,000
      
1.8
      
5
  
Purchased options
    
2,908
      
0.8
      
30
  
Written options
    
2,848
      
0.8
      
(30
)
Total
  
$
899,924
      
1.9
    
$
7,372
  

 
December 31, 2019
  
   
Notional
Amount
    
Average
Maturity
(years)
    
Fair
Value
  
   
(Dollars in thousands)
  
Fair value hedge designation - Pay-fixed interest rate swap agreements
  
$
7,117
      
9.4
    
$
(242
)
                         
Cash flow hedge designation
                        
Pay-fixed interest rate swap agreements
  
$
25,000
      
1.6
    
$
(174
)
Interest rate cap agreements
    
150,000
      
2.6
      
214
  
Total
  
$
175,000
      
2.5
    
$
40
  
                         
No hedge designation
                        
Rate-lock mortgage loan commitments
  
$
49,268
      
0.1
    
$
1,412
  
Mandatory commitments to sell mortgage loans
    
95,363
      
0.1
      
(150
)
Pay-fixed interest rate swap agreements - commercial
    
153,946
      
5.5
      
(3,641
)
Pay-variable interest rate swap agreements - commercial
    
153,946
      
5.5
      
3,641
  
Purchased options
    
2,908
      
1.5
      
141
  
Written options
    
2,848
      
1.5
      
(139
)
Total
  
$
458,279
      
3.7
    
$
1,264
  
Fair Value of Derivative Instruments
Fair Values of Derivative Instruments

  
Asset Derivatives
    
Liability Derivatives
  
   
September 30,
2020
    
December 31,
2019
    
September 30,
2020
    
December 31,
2019
  
   
Balance
Sheet
Location
    
Fair
Value
    
Balance
Sheet
Location
    
Fair
Value
    
Balance
Sheet
Location
    
Fair
Value
    
Balance
Sheet
Location
    
Fair
Value
  
   
(In thousands)
  
Derivatives designated as hedging instruments
    
-
            
-
            
-
            
-
        
Pay-fixed interest rate swap agreements
  
Other assets
    
$
-
    
Other assets
    
$
-
    
Other liabilities
    
$
860
    
Other liabilities
    
$
416
  
Interest rate cap agreements
  
Other assets
      
-
    
Other assets
      
214
    
Other liabilities
      
-
    
Other liabilities
      
-
  
             
-
              
214
              
860
              
416
  
                                                                 
Derivatives not designated as hedging instruments
                                                                
Rate-lock mortgage loan commitments
  
Other assets
      
8,356
    
Other assets
      
1,412
    
Other liabilities
      
-
    
Other liabilities
      
-
  
Mandatory commitments to sell mortgage loans
  
Other assets
      
-
    
Other assets
      
-
    
Other liabilities
      
580
    
Other liabilities
      
150
  
Pay-fixed interest rate swap agreements - commercial
  
Other assets
      
-
    
Other assets
      
28
    
Other liabilities
      
10,811
    
Other liabilities
      
3,669
  
Pay-variable interest rate swap agreements - commercial
  
Other assets
      
10,811
    
Other assets
      
3,669
    
Other liabilities
      
-
    
Other liabilities
      
28
  
Pay-fixed interest rate swap agreements
  
Other assets
      
-
    
Other assets
      
-
    
Other liabilities
      
409
    
Other liabilities
      
-
  
Interest rate cap agreements
  
Other assets
      
5
    
Other assets
      
-
    
Other liabilities
      
-
    
Other liabilities
      
-
  
Purchased options
  
Other assets
      
30
    
Other assets
      
141
    
Other liabilities
      
-
    
Other liabilities
      
-
  
Written options
  
Other assets
      
-
    
Other assets
      
-
    
Other liabilities
      
30
    
Other liabilities
      
139
  
             
19,202
              
5,250
              
11,830
              
3,986
  
Total derivatives
          
$
19,202
            
$
5,464
            
$
12,690
            
$
4,402
  
Effect of Derivative Financial Instruments on Consolidated Statement of Operations
The effect of derivative financial instruments on the Condensed Consolidated Statements of Operations follows:

Three Month Periods Ended September 30,
  
   
Loss
Recognized in
Other
Comprehensive
Income
(Effective Portion)
  
Location of
Gain (Loss)
Reclassified
from
Accumulated
Other
Comprehensive
 Income (Loss) into
Income
(Effective
  
Gain (Loss)
Reclassified from
Accumulated Other
Comprehensive
Income (Loss)
into Income
(Effective Portion)
  
Location of
Gain (Loss)
Recognized
  
Gain (Loss)
Recognized
in Income
  
   
2020
    
2019
  
Portion)
  
2020
    
2019
  
 in Income
  
2020
    
2019
  
   
(In thousands)
  
Fair Value Hedges
                                        
Pay-fixed interest rate swap agreements
                          
Non-interest income-other
  
$
6
    
$
(188
)
Cash Flow Hedges
                                            
Interest rate cap agreements
  
$
-
    
$
(37
)
Interest expense
  
$
(180
)
  
$
88
                    
Pay-fixed interest rate swap agreements
    
(26
)
    
(35
)
Interest expense
    
(130
)
    
14
                    
Total
  
$
(26
)
  
$
(72
)
    
$
(310
)
  
$
102
                    
                                                     
No hedge designation
                                                    
Rate-lock mortgage loan commitments
                                  
Net gains on mortgage loans
  
$
1,096
    
$
(96
)
Mandatory commitments to sell mortgage loans
                                  
Net gains on mortgage loans
    
52
      
307
  
Pay-fixed interest rate swap agreements -  commercial
                                  
Interest income
    
688
      
(1,670
)
Pay-variable interest rate swap agreements - commercial
                                  
Interest income
    
(688
)
    
1,670
  
Pay-fixed interest rate swap agreements
                                  
Interest expense
    
117
      
-
  
Interest rate cap agreements
                                  
Interest expense
    
(14
)
    
-
  
Purchased options
                                  
Interest expense
    
(10
)
    
(46
)
Written options
                                  
Interest expense
    
10
      
46
  
Total
                                           
$
1,251
    
$
211
  


Nine Month Periods Ended September 30,
  
 
  
Gain (Loss)
Recognized in
Other
Comprehensive
Income
(Effective Portion)
  
 Location of
 Gain (Loss)
 Reclassified
 from
 Accumulated
 Other
 Comprehensive
Income (Loss)
 into
 Income
 (Effective
  
Gain (Loss)
Reclassified from
Accumulated Other
Comprehensive
Income (Loss)
into Income
(Effective Portion)
  
 Location of
 Gain (Loss)
 Recognized
  
Gain (Loss)
Recognized
in Income
  
 
  
2020
    
2019
  
 Portion)
  
2020
    
2019
  
 in Income
  
2020
    
2019
  
 
  
(In thousands)
  
Fair Value Hedges
            
 
            
 
            
Pay-fixed interest rate swap agreements
            
 
            
Non-interest income-other
  
$
(618
)
  
$
(391
)
Cash Flow Hedges
Interest rate cap agreements
  
$
126
    
$
(1,311
)
Interest expense
  
$
(413
)
  
$
321
                    
Pay-fixed interest rate swap agreements
    
(480
)
    
(429
)
Interest expense
    
(233
)
    
72
                    
Total
  
$
(354
)
  
$
(1,740
)
 
  
$
(646
)
  
$
393
  
 
                
 
                
 
                
 
                
No hedge designation
                
 
                
 
                
Rate-lock mortgage loan commitments
                
 
                
Net gains on mortgage loans
  
$
6,944
    
$
1,364
  
Mandatory commitments to sell mortgage loans
                
 
                
Net gains on mortgage loans
    
(430
)
    
356
  
Pay-fixed interest rate swap agreements - commercial
                
 
                
Interest income
    
(7,170
)
    
(5,254
)
Pay-variable interest rate swap agreements - commercial
                
 
                
Interest income
    
7,170
      
5,254
  
Pay-fixed interest rate swap agreements
                                  
Interest expense
    
117
      
-
  
Interest rate cap agreements
                                  
Interest expense
    
(56
)
    
-
  
Purchased options
                
 
                
Interest expense
    
(111
)
    
9
  
Written options
                
 
                
Interest expense
    
109
      
(8
)
Total
                
 
                
           
  
$
6,573
    
$
1,721
  
v3.20.2
Goodwill and Other Intangibles (Tables)
 9 Months Ended
Sep. 30, 2020
Goodwill and Other Intangibles [Abstract]  
Other Intangible Assets, Net of Amortization
The following table summarizes intangible assets, net of amortization:

  
September 30, 2020
    
December 31, 2019
  
   
Gross
Carrying
Amount
    
Accumulated
Amortization
    
Gross
Carrying
Amount
    
Accumulated
Amortization
  
   
(In thousands)
  
                         
Amortized intangible assets - core deposits
  
$
11,916
    
$
7,355
    
$
11,916
    
$
6,590
  
Unamortized intangible assets - goodwill
  
$
28,300
            
$
28,300
          
Estimated Core Deposit Intangible Amortization
A summary of estimated core deposit intangible amortization at September 30, 2020 follows:

  
(In thousands)
  
       
Three months ending December 31, 2020
  
$
255
  
2021
    
970
  
2022
    
785
  
2023
    
547
  
2024
    
516
  
2025 and thereafter
    
1,488
  
Total
  
$
4,561
  
v3.20.2
Share Based Compensation (Tables)
 9 Months Ended
Sep. 30, 2020
Share Based Compensation [Abstract]  
Restricted Stock and Performance Stock Units Granted
A summary of restricted stock and performance stock units (“PSU”) granted pursuant to our long-term incentive plan follows:

 
  
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
 
  
2020
    
2019
    
2020
    
2019
  
 
      
Restricted stock
    
3,000
      
8,000
      
55,996
      
64,267
  
PSU
    
-
      
-
      
20,897
      
22,016
  
Outstanding Stock Option Grants and Transactions
A summary of outstanding stock option grants and related transactions follows:

  
Number of
Shares
    
Average
Exercise
Price
    
Weighted-
Average
Remaining
Contractual
Term (Years)
    
Aggregated
Intrinsic
Value
  
                     
(In thousands)
  
Outstanding at January 1, 2020
    
138,506
    
$
4.62
              
Granted
    
-
                      
Exercised
    
(13,117
)
    
3.50
              
Forfeited
    
-
                      
Expired
    
-
                      
Outstanding at September 30, 2020
    
125,389
    
$
4.73
      
2.3
    
$
993
  
                                 
Vested and expected to vest at September 30, 2020
    
125,389
    
$
4.73
      
2.3
    
$
993
  
Exercisable at September 30, 2020
    
125,389
    
$
4.73
      
2.3
    
$
993
  
Non-Vested Restricted Stock, Restricted Stock Units and PSU's
A summary of outstanding non-vested restricted stock and PSUs and related transactions follows:

  
Number
of Shares
    
Weighted-
Average
Grant Date
Fair Value
  
Outstanding at January 1, 2020
    
245,726
    
$
21.72
  
Granted
    
76,893
      
22.46
  
Vested
    
(77,092
)
    
20.61
  
Forfeited
    
(20,869
)
    
22.64
  
Outstanding at September 30, 2020
    
224,658
    
$
22.26
  
Information Regarding Options Exercised
Certain information regarding options exercised during the periods follows:

 
  
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
 
  
2020
    
2019
    
2020
    
2019
  
   
(In thousands)
    
(In thousands)
  
Intrinsic value
  
$
11
    
$
32
    
$
224
    
$
868
  
Cash proceeds received
  
$
4
    
$
6
    
$
46
    
$
701
  
Tax benefit realized
  
$
2
    
$
6
    
$
47
    
$
182
  
v3.20.2
Regulatory Matters (Tables)
 9 Months Ended
Sep. 30, 2020
Regulatory Matters [Abstract]  
Actual Capital Amounts and Ratios
Our actual capital amounts and ratios follow (1):

  
Actual
    
Minimum for
Adequately Capitalized
Institutions
    
Minimum for
Well-Capitalized
Institutions
  
   
Amount
    
Ratio
    
Amount
    
Ratio
    
Amount
    
Ratio
  
   
(Dollars in thousands)
  
                                     
September 30, 2020
                                    
Total capital to risk-weighted assets
                                    
Consolidated
  
$
441,969
      
15.62
%
  
$
226,378
      
8.00
%
  
NA
    
NA
  
Independent Bank
    
391,033
      
13.82
      
226,310
      
8.00
    
$
282,888
      
10.00
%
                                                 
Tier 1 capital to risk-weighted assets
                                                
Consolidated
  
$
366,571
      
12.95
%
  
$
169,783
      
6.00
%
  
NA
    
NA
  
Independent Bank
    
355,645
      
12.57
      
169,733
      
6.00
    
$
226,310
      
8.00
%
                                                 
Common equity tier 1 capital to risk-weighted assets
                                                
Consolidated
  
$
328,288
      
11.60
%
  
$
127,338
      
4.50
%
  
NA
    
NA
  
Independent Bank
    
355,645
      
12.57
      
127,299
      
4.50
    
$
183,877
      
6.50
%
                                                 
Tier 1 capital to average assets
                                                
Consolidated
  
$
366,571
      
9.05
%
  
$
162,103
      
4.00
%
  
NA
    
NA
  
Independent Bank
    
355,645
      
8.78
      
162,020
      
4.00
    
$
202,525
      
5.00
%
                                                 
December 31, 2019
                                                
Total capital to risk-weighted assets
                                                
Consolidated
  
$
380,454
      
13.74
%
  
$
221,562
      
8.00
%
  
NA
    
NA
  
Independent Bank
    
358,914
      
12.96
      
221,482
      
8.00
    
$
276,852
      
10.00
%
                                                 
Tier 1 capital to risk-weighted assets
                                                
Consolidated
  
$
352,764
      
12.74
%
  
$
166,171
      
6.00
%
  
NA
    
NA
  
Independent Bank
    
331,224
      
11.96
      
166,111
      
6.00
    
$
221,482
      
8.00
%
                                                 
Common equity tier 1 capital to risk-weighted assets
                                                
Consolidated
  
$
314,532
      
11.36
%
  
$
124,628
      
4.50
%
  
NA
    
NA
  
Independent Bank
    
331,224
      
11.96
      
124,583
      
4.50
    
$
179,954
      
6.50
%
                                                 
Tier 1 capital to average assets
                                                
Consolidated
  
$
352,764
      
10.11
%
  
$
139,632
      
4.00
%
  
NA
    
NA
  
Independent Bank
    
331,224
      
9.49
      
139,615
      
4.00
    
$
174,519
      
5.00
%

(1)
These ratios do not reflect a capital conservation buffer of 2.50% at September 30, 2020 and December 31, 2019.

NA - Not applicable
Regulatory Capital
The components of our regulatory capital are as follows:

  
Consolidated
    
Independent Bank
  
   
September 30,
2020
    
December 31,
2019
    
September 30,
2020
    
December 31,
2019
  
   
(In thousands)
  
Total shareholders' equity
  
$
373,092
    
$
350,169
    
$
400,449
    
$
366,861
  
Add (deduct)
                                
Accumulated other comprehensive income for regulatory purposes
    
(11,943
)
    
(2,011
)
    
(11,943
)
    
(2,011
)
Goodwill and other intangibles
    
(32,861
)
    
(33,626
)
    
(32,861
)
    
(33,626
)
Common equity tier 1 capital
    
328,288
      
314,532
      
355,645
      
331,224
  
Qualifying trust preferred securities
    
38,283
      
38,232
      
-
      
-
  
Tier 1 capital
    
366,571
      
352,764
      
355,645
      
331,224
  
Subordinated debt
    
40,000
      
-
      
-
      
-
  
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets
    
35,398
      
27,690
      
35,388
      
27,690
  
Total risk-based capital
  
$
441,969
    
$
380,454
    
$
391,033
    
$
358,914
  
v3.20.2
Fair Value Disclosures (Tables)
 9 Months Ended
Sep. 30, 2020
Fair Value Disclosures [Abstract]  
Assets and Liabilities Measured at Fair Value
Assets and liabilities measured at fair value, including financial assets for which we have elected the fair value option, were as follows:

        
Fair Value Measurements Using
  
   
Fair Value
Measure-
ments
    
Quoted
Prices
in Active
Markets
for
Identical
Assets
(Level 1)
    
Significant
Other
Observable
Inputs
(Level 2)
    
Significant
Un-
observable
Inputs
(Level 3)
  
   
(In thousands)
  
September 30, 2020:
                        
Measured at Fair Value on a Recurring Basis
                        
Assets
                        
Securities available for sale
                        
U.S. agency
  
$
11,130
    
$
-
    
$
11,130
    
$
-
  
U.S. agency residential mortgage-backed
    
335,560
      
-
      
335,560
      
-
  
U.S. agency commercial mortgage-backed
    
8,421
      
-
      
8,421
      
-
  
Private label mortgage-backed
    
44,285
      
-
      
44,285
      
-
  
Other asset backed
    
263,371
      
-
      
263,371
      
-
  
Obligations of states and political subdivisions
    
244,978
      
-
      
244,978
      
-
  
Corporate
    
75,017
      
-
      
75,017
      
-
  
Trust preferred
    
1,770
      
-
      
1,770
      
-
  
Foreign government
    
518
      
-
      
518
      
-
  
Loans held for sale, carried at fair value
    
99,747
      
-
      
99,747
      
-
  
Capitalized mortgage loan servicing rights
    
15,403
      
-
      
-
      
15,403
  
Derivatives (1)
    
19,202
      
-
      
19,202
      
-
  
Liabilities
                                
Derivatives (2)
    
12,690
      
-
      
12,690
      
-
  
                                 
Measured at Fair Value on a Non-recurring Basis:
                                
Assets
                                
Impaired loans (3)
                                
Commercial
                                
Commercial and industrial
    
1,591
      
-
      
-
      
1,591
  
Commercial real estate
    
7,098
      
-
      
-
      
7,098
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
500
      
-
      
-
      
500
  
1-4 family owner occupied - non-jumbo
    
284
      
-
      
-
      
284
  
1-4 family non-owner occupied
    
58
      
-
      
-
      
58
  
1-4 family - 2nd lien
    
200
      
-
      
-
      
200
  
Resort lending
    
77
      
-
      
-
      
77
  
Installment
                                
Boat lending
    
90
      
-
      
-
      
90
  
Recreational vehicle lending
    
38
      
-
      
-
      
38
  
Other
    
139
      
-
      
-
      
139
  
Other real estate (4)
                                
Commercial - commercial real estate
    
474
      
474
      
-
      
-
  

(1)
Included in accrued income and other assets
(2)
Included in accrued expenses and other liabilities
(3)
Only includes impaired loans with specific loss allocations based on collateral value.

(4) Only includes other real estate with subsequent write downs to fair value. The fair value of the commercial real estate property included in this table was based on a purchase agreement executed during the third quarter of 2020 that closed during the fourth quarter of 2020.

        
Fair Value Measurements Using
  
   
Fair Value
Measure-
ments
    
Quoted
Prices
in Active
Markets
for
Identical
Assets
(Level 1)
    
Significant
Other
Observable
Inputs
(Level 2)
    
Significant
Un-
observable
Inputs
(Level 3)
  
   
(In thousands)
  
December 31, 2019:
                        
Measured at Fair Value on a Recurring Basis
                        
Assets
                        
Securities available for sale
                        
U.S. agency
  
$
14,661
    
$
-
    
$
14,661
    
$
-
  
U.S. agency residential mortgage-backed
    
227,762
      
-
      
227,762
      
-
  
U.S. agency commercial mortgage-backed
    
10,756
      
-
      
10,756
      
-
  
Private label mortgage-backed
    
39,693
      
-
      
39,693
      
-
  
Other asset backed
    
93,886
      
-
      
93,886
      
-
  
Obligations of states and political subdivisions
    
96,102
      
-
      
96,102
      
-
  
Corporate
    
33,195
      
-
      
33,195
      
-
  
Trust preferred
    
1,843
      
-
      
1,843
      
-
  
Foreign government
    
502
      
-
      
502
      
-
  
Loans held for sale, carried at fair value
    
69,800
      
-
      
69,800
      
-
  
Capitalized mortgage loan servicing rights
    
19,171
      
-
      
-
      
19,171
  
Derivatives (1)
    
5,464
      
-
      
5,464
      
-
  
Liabilities
                                
Derivatives (2)
    
4,402
      
-
      
4,402
      
-
  
                                 
Measured at Fair Value on a Non-recurring Basis:
                                
Assets
                                
Impaired loans (3)
                                
Commercial
                                
Commercial and industrial
    
655
      
-
      
-
      
655
  
Commercial real estate
    
316
      
-
      
-
      
316
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
987
      
-
      
-
      
987
  
1-4 family owner occupied - non-jumbo
    
470
      
-
      
-
      
470
  
1-4 family non-owner occupied
    
281
      
-
      
-
      
281
  
1-4 family - 2nd lien
    
294
      
-
      
-
      
294
  
Resort lending
    
245
      
-
      
-
      
245
  
Installment
                                
Boat lending
    
67
      
-
      
-
      
67
  
Recreational vehicle lending
    
2
      
-
      
-
      
2
  
Other
    
121
      
-
      
-
      
121
  
Other real estate (4)
                                
Mortgage - 1-4 family owner occupied - non-jumbo
    
31
      
-
      
-
      
31
  
Installment - other
    
28
      
-
      
-
      
28
  

(1)
Included in accrued income and other assets
(2)
Included in accrued expenses and other liabilities
(3)
Only includes impaired loans with specific loss allocations based on collateral value.
(4)
Only includes other real estate with subsequent write downs to fair value.
Changes in Fair Value for Financial Assets
Changes in fair values for financial assets which we have elected the fair value option for the periods presented were as follows:

  
Changes in Fair Values for the Nine-Month Periods
Ended September 30 for Items Measured at Fair Value
Pursuant to Election of the Fair Value Option
  
   
Net Gains
on Assets
    
Mortgage
    
Total
Change
in Fair
Values
Included
in Current
  
   
Securities Available For Sale
    
Mortgage
Loans
    
Loan
Servicing, net
    
Period
Earnings
  
   
(In thousands)
  
2020
                        
Loans held for sale
    
-
      
2,081
      
-
      
2,081
  
Capitalized mortgage loan servicing rights
    
-
      
-
      
(14,028
)
    
(14,028
)
                                 
2019
                                
Equity securities at fair value
  
$
167
    
$
-
    
$
-
    
$
167
  
Loans held for sale
    
-
      
822
      
-
      
822
  
Capitalized mortgage loan servicing rights
    
-
      
-
      
(9,258
)
    
(9,258
)
Reconciliation for all Assets Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)
A reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) follows:

 
  
Capitalized Mortgage Loan Servicing Rights
  
 
  
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
 
  
2020
    
2019
    
2020
    
2019
  
 
  
(In thousands)
    
(In thousands)
  
Beginning balance
  
$
13,773
    
$
17,894
    
$
19,171
    
$
21,400
  
Total gains (losses) realized and unrealized:
                                
Included in results of operations
    
(2,387
)
    
(3,145
)
    
(14,028
)
    
(9,258
)
Included in other comprehensive income
    
-
      
-
      
-
      
-
  
Purchases, issuances, settlements, maturities and calls
    
4,017
      
2,157
      
10,260
      
4,764
  
Transfers in and/or out of Level 3
    
-
      
-
      
-
      
-
  
Ending balance
  
$
15,403
    
$
16,906
    
$
15,403
    
$
16,906
  
                                 
Amount of total losses for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at September 30
  
$
(2,387
)
  
$
(3,145
)
  
$
(14,028
)
  
$
(9,258
)
Quantitative Information About Level 3 Fair Value Measurements Measured on a Recurring Basis and Non-recurring Basis
The fair value of our capitalized mortgage loan servicing rights has been determined based on a valuation model used by an independent third party as discussed above.  The significant unobservable inputs used in the fair value measurement of the capitalized mortgage loan servicing rights are discount rate, cost to service, ancillary income, float rate and prepayment rate.  Significant changes in all five of these assumptions in isolation would result in significant changes to the value of our capitalized mortgage loan servicing rights.  Quantitative information about our Level 3 fair value measurements measured on a recurring basis follows:

  
Asset
Fair
Value
    
Valuation
Technique
    
Unobservable
Inputs
    
Range
    
Weighted
Average
  
   
(In thousands)
      
-
      
-
      
-
        
September 30, 2020
                                    
Capitalized mortgage loan servicing rights
  
$
15,403
    
Present value of net
    
Discount rate
    
10.00% to 13.00%
      
10.10
%
           
servicing revenue
    
Cost to service
    
$
58 to $215
    
$
79
  
                   
Ancillary income
    
20 to 37
      
22
  
                   
Float rate
      
0.35
%
    
0.35
%
                   
Prepayment rate
    
7.34% to 40.16%
      
22.01
%
December 31, 2019
                                        
Capitalized mortgage loan servicing rights
  
$
19,171
    
Present value of net
    
Discount rate
    
10.00% to 13.00%
      
10.14
%
           
servicing revenue
    
Cost to service
    
$
66 to $316
    
$
81
  
                   
Ancillary income
    
20 to 37
      
22
  
                   
Float rate
      
1.73
%
    
1.73
%
                   
Prepayment rate
    
7.01% to 69.34%
      
14.96
%

Quantitative information about Level 3 fair value measurements measured on a non-recurring basis follows:

  
Asset
Fair
Value
    
Valuation
Technique
    
Unobservable
Inputs
    
Range
    
Weighted
Average
  
   
(In thousands)
      
-
      
-
              
September 30, 2020
                                  
Impaired loans
                                  
Commercial
  
$
8,689
    
Sales comparison approach
    
Adjustment for differences between comparable sales
    
(40.0)% to 75.0%
      
4.5
%
           
Income approach
    
Capitalization rate
      
9.5
%
    
9.5
%
                                         
Mortgage and Installment(1)
    
1,386
    
Sales comparison approach
    
Adjustment for differences between comparable sales
    
(12.0)% to 104.6%
      
4.0
%
                                         
December 31, 2019
                                        
Impaired loans
                                        
Commercial
  
$
971
    
Sales comparison approach
    
Adjustment for differences between comparable sales
    
(48.0)% to 19.2%
      
(5.6
)%
                                         
Mortgage and Installment(1)
    
2,467
    
Sales comparison approach
    
Adjustment for differences between comparable sales
    
(25.2)% to 49.2%%
      
11.5%
%
                                         
Other real estate
                                        
Mortgage and Installment
    
59
    
Sales comparison approach
    
Adjustment for differences between comparable sales
    
(11.6)% to 5.0%%
      
(5.1%
)%

(1)
In addition to the valuation techniques and unobservable inputs discussed above, at September 30, 2020 and December 31, 2019 certain impaired collateral dependent installment loans totaling approximately $0.27 million and $0.14 million, respectively are secured by collateral other than real estate.  For the majority of these loans, we apply internal discount rates to industry valuation guides.
Aggregate Fair Value and Aggregate Remaining Contractual Principal Balance for Loans Held for Sale
The following table reflects the difference between the aggregate fair value and the aggregate remaining contractual principal balance outstanding for loans held for sale for which the fair value option has been elected for the periods presented.

  
Aggregate
Fair Value
    
Difference
    
Contractual
Principal
  
   
(In thousands)
  
Loans held for sale
                  
September 30, 2020
  
$
99,747
    
$
3,975
    
$
95,772
  
December 31, 2019
    
69,800
      
1,894
      
67,906
  
v3.20.2
Fair Values of Financial Instruments (Tables)
 9 Months Ended
Sep. 30, 2020
Fair Values of Financial Instruments [Abstract]  
Estimated Recorded Book Balances and Fair Values
The estimated recorded book balances and fair values follow:

              
Fair Value Using
  
   
Recorded
Book
Balance
    
Fair Value
    
Quoted
Prices
in Active
Markets
for
Identical
Assets
(Level 1)
    
Significant
Other
Observable
Inputs
(Level 2)
    
Significant
Un-
observable
Inputs
(Level 3)
  
                               
   
(In thousands)
  
September 30, 2020
                              
Assets
                              
Cash and due from banks
  
$
42,435
    
$
42,435
    
$
42,435
    
$
-
    
$
-
  
Interest bearing deposits
    
4,121
      
4,121
      
4,121
      
-
      
-
  
Securities available for sale
    
985,050
      
985,050
      
-
      
985,050
      
-
  
Federal Home Loan Bank and Federal
                                        
Reserve Bank Stock
    
18,427
    
NA
    
NA
    
NA
    
NA
  
Net loans and loans held for sale
    
2,919,455
      
2,915,489
      
-
      
99,747
      
2,815,742
  
Accrued interest receivable
    
12,402
      
12,402
      
1
      
3,409
      
8,992
  
Derivative financial instruments
    
19,202
      
19,202
      
-
      
19,202
      
-
  
                                         
Liabilities
                                        
Deposits with no stated maturity (1)
  
$
3,105,019
    
$
3,105,019
    
$
3,105,019
    
$
-
    
$
-
  
Deposits with stated maturity (1)
    
492,726
      
495,694
      
-
      
495,694
      
-
  
Other borrowings
    
30,005
      
31,477
      
-
      
31,477
      
-
  
Subordinated debt
    
39,261
      
40,999
      
-
      
40,999
      
-
  
Subordinated debentures
    
39,507
      
28,941
      
-
      
28,941
      
-
  
Accrued interest payable
    
1,408
      
1,408
      
62
      
1,346
      
-
  
Derivative financial instruments
    
12,690
      
12,690
      
-
      
12,690
      
-
  
                                         
December 31, 2019
                                        
Assets
                                        
Cash and due from banks
  
$
53,295
    
$
53,295
    
$
53,295
    
$
-
    
$
-
  
Interest bearing deposits
    
12,009
      
12,009
      
12,009
      
-
      
-
  
Interest bearing deposits - time
    
350
      
350
      
-
      
350
      
-
  
Securities available for sale
    
518,400
      
518,400
      
-
      
518,400
      
-
  
Federal Home Loan Bank and Federal
                                        
Reserve Bank Stock
    
18,359
    
NA
    
NA
    
NA
    
NA
  
Net loans and loans held for sale
    
2,768,675
      
2,768,817
      
-
      
69,800
      
2,699,017
  
Accrued interest receivable
    
10,108
      
10,108
      
8
      
1,752
      
8,348
  
Derivative financial instruments
    
5,464
      
5,464
      
-
      
5,464
      
-
  
                                         
Liabilities
                                        
Deposits with no stated maturity (1)
  
$
2,427,190
    
$
2,427,190
    
$
2,427,190
    
$
-
    
$
-
  
Deposits with stated maturity (1)
    
609,537
      
610,235
      
-
      
610,235
      
-
  
Other borrowings
    
88,646
      
88,680
      
-
      
88,680
      
-
  
Subordinated debentures
    
39,456
      
33,149
      
-
      
33,149
      
-
  
Accrued interest payable
    
1,296
      
1,296
      
97
      
1,199
      
-
  
Derivative financial instruments
    
4,402
      
4,402
      
-
      
4,402
      
-
  

(1)
Deposits with no stated maturity include reciprocal deposits with a recorded book balance of $521.106 million and $388.369 million at September 30, 2020 and December 31, 2019, respectively. Deposits with a stated maturity include reciprocal deposits with a recorded book balance of $36.445 million and $42.658 million at September 30, 2020 and December 31, 2019, respectively.
v3.20.2
Accumulated Other Comprehensive Income (Loss) ("AOCIL") (Tables)
 9 Months Ended
Sep. 30, 2020
Accumulated Other Comprehensive Income (Loss) ("AOCIL") [Abstract]  
Accumulated Other Comprehensive Income (Loss) (AOCIL), Net of Tax
A summary of changes in AOCIL follows:

  
Unrealized
Gains
(Losses) on
Securities
Available
for Sale
    
Dispropor-
tionate
Tax Effects
from
Securities
Available
for Sale
    
Unrealized
Losses on
Cash Flow
Hedges
    
Total
  
   
(In thousands)
  
                         
For the three months ended September 30,
                        
2020
                        
Balances at beginning of period
  
$
11,315
    
$
(5,798
)
  
$
(1,721
)
  
$
3,796
  
Other comprehensive income (loss) before reclassifications
    
2,125
      
-
      
(20
)
    
2,105
  
Amounts reclassified from AOCIL
    
-
      
-
      
245
      
245
  
Net current period other comprehensive income
    
2,125
      
-
      
225
      
2,350
  
Balances at end of period
  
$
13,440
    
$
(5,798
)
  
$
(1,496
)
  
$
6,146
  
                                 
2019
                                
Balances at beginning of period
  
$
3,040
    
$
(5,798
)
  
$
(1,673
)
  
$
(4,431
)
Other comprehensive income (loss) before reclassifications
    
1,196
      
-
      
(58
)
    
1,138
  
Amounts reclassified from AOCIL
    
-
      
-
      
(80
)
    
(80
)
Net current period other comprehensive income (loss)
    
1,196
      
-
      
(138
)
    
1,058
  
Balances at end of period
  
$
4,236
    
$
(5,798
)
  
$
(1,811
)
  
$
(3,373
)
                                 
For the nine months ended September 30,
                                
2020
                                
Balances at beginning of period
  
$
3,739
    
$
(5,798
)
  
$
(1,727
)
  
$
(3,786
)
Other comprehensive income (loss) before reclassifications
    
9,901
      
-
      
(279
)
    
9,622
  
Amounts reclassified from AOCIL
    
(200
)
    
-
      
510
      
310
  
Net current period other comprehensive income
    
9,701
      
-
      
231
      
9,932
  
Balances at end of period
  
$
13,440
    
$
(5,798
)
  
$
(1,496
)
  
$
6,146
  
                                 
2019
                                
Balances at beginning of period
  
$
(4,185
)
  
$
(5,798
)
  
$
(125
)
  
$
(10,108
)
Other comprehensive income (loss) before reclassifications
    
8,529
      
-
      
(1,376
)
    
7,153
  
Amounts reclassified from AOCIL
    
(108
)
    
-
      
(310
)
    
(418
)
Net current period other comprehensive income (loss)
    
8,421
      
-
      
(1,686
)
    
6,735
  
Balances at end of period
  
$
4,236
    
$
(5,798
)
  
$
(1,811
)
  
$
(3,373
)
Reclassifications Out of Each Component of AOCIL
A summary of reclassifications out of each component of AOCIL for the three months ended September 30 follows:

AOCIL Component
  
Amount
Reclassified
From
AOCIL
  
 Affected Line Item in Condensed
 Consolidated Statements of Operations
 
  
(In thousands)
  
 
2020
      
   
Unrealized gains on securities available for sale
      
   
 
  
$
-
  
 Net gains on securities available for sale
 
    
-
  
 Net impairment loss recognized in earnings
 
    
-
  
 Total reclassifications before tax
 
    
-
  
 Income tax expense
 
  
$
-
  
 Reclassifications, net of tax
 
        
     
Unrealized losses on cash flow hedges
        
   
 
  
$
310
  
 Interest expense
 
    
65
  
 Income tax expense
 
  
$
245
  
 Reclassification, net of tax
 
        
     
 
  
$
(245
)
 Total reclassifications for the period, net of tax
 
        
     
2019
        
   
Unrealized gains on securities available for sale
        
   
 
  
$
-
  
 Net gains on securities available for sale
 
    
-
  
 Net impairment loss recognized in earnings
 
    
-
  
 Total reclassifications before tax
 
    
-
  
 Income tax expense
 
  
$
-
  
 Reclassifications, net of tax
 
        
     
Unrealized losses on cash flow hedges
        
   
 
  
$
(102
)
 Interest expense
 
    
(22
)
 Income tax expense
 
  
$
(80
)
 Reclassification, net of tax
 
        
     
 
  
$
80
  
 Total reclassifications for the period, net of tax

A summary of reclassifications out of each component of AOCIL for the nine months ended September 30 follows:

AOCIL Component
  
Amount
Reclassified
From
AOCIL
  
 Affected Line Item in Condensed
 Consolidated Statements of Operations
 
  
(In thousands)
  
 
2020
      
   
Unrealized gains on securities available for sale
      
   
 
  
$
253
  
 Net gains on securities available for sale
 
    
-
  
 Net impairment loss recognized in earnings
 
    
253
  
 Total reclassifications before tax
 
    
53
  
 Income tax expense
 
  
$
200
  
 Reclassifications, net of tax
 
        
     
Unrealized losses on cash flow hedges
        
   
 
  
$
646
  
 Interest expense
 
    
136
  
 Income tax expense
 
  
$
510
  
 Reclassification, net of tax
 
        
     
 
  
$
(310
)
 Total reclassifications for the period, net of tax
 
        
     
2019
        
   
Unrealized gains on securities available for sale
        
   
 
  
$
137
  
 Net gains on securities available for sale
 
    
-
  
 Net impairment loss recognized in earnings
 
    
137
  
 Total reclassifications before tax
 
    
29
  
 Income tax expense
 
  
$
108
  
 Reclassifications, net of tax
 
        
     
Unrealized losses on cash flow hedges
        
   
 
  
$
(393
)
 Interest expense
 
    
(83
)
 Income tax expense
 
  
$
(310
)
 Reclassification, net of tax
 
        
     
 
  
$
418
  
 Total reclassifications for the period, net of tax
v3.20.2
Revenue from Contracts with Customers (Tables)
 9 Months Ended
Sep. 30, 2020
Revenue from Contracts with Customers [Abstract]  
Disaggregation of Revenue Sources by Attribute
Disaggregation of our revenue sources by attribute follows:

Three months ending September 30, 2020
                              
 
Service
Charges
on Deposit
Accounts
    
Other
Deposit
Related
Income
    
Interchange
Income
    
Investment
and
Insurance
Commissions
    
Total
  
   
(In thousands)
  
Retail
                              
Overdraft fees
  
$
1,371
    
$
-
    
$
-
    
$
-
    
$
1,371
  
Account service charges
    
544
      
-
      
-
      
-
      
544
  
ATM fees
    
-
      
320
      
-
      
-
      
320
  
Other
    
-
      
184
      
-
      
-
      
184
  
Business
                                        
Overdraft fees
    
170
      
-
      
-
      
-
      
170
  
ATM fees
    
-
      
7
      
-
      
-
      
7
  
Other
    
-
      
89
      
-
      
-
      
89
  
Interchange income
    
-
      
-
      
3,428
      
-
      
3,428
  
Asset management revenue
    
-
      
-
      
-
      
335
      
335
  
Transaction based revenue
    
-
      
-
      
-
      
195
      
195
  
                                         
Total
  
$
2,085
    
$
600
    
$
3,428
    
$
530
    
$
6,643
  
                                         
Reconciliation to Condensed Consolidated Statement of Operations:
                  
Non-interest income - other:
                                        
Other deposit related income
                                  
$
600
  
Investment and insurance commissions
                              
530
  
Bank owned life insurance
                                    
215
  
Other
                                    
592
  
Total
                                  
$
1,937
  

Three months ending September 30, 2019
                              
 
Service
Charges
on Deposit
Accounts
    
Other
Deposit
Related
Income
    
Interchange
Income
    
Investment
and
Insurance
Commissions
    
Total
  
   
(In thousands)
  
Retail
                              
Overdraft fees
  
$
1,970
    
$
-
    
$
-
    
$
-
    
$
1,970
  
Account service charges
    
552
      
-
      
-
      
-
      
552
  
ATM fees
    
-
      
373
      
-
      
-
      
373
  
Other
    
-
      
240
      
-
      
-
      
240
  
Business
                                        
Overdraft fees
    
361
      
-
      
-
      
-
      
361
  
ATM fees
    
-
      
9
      
-
      
-
      
9
  
Other
    
-
      
91
      
-
      
-
      
91
  
Interchange income
    
-
      
-
      
2,785
      
-
      
2,785
  
Asset management revenue
    
-
      
-
      
-
      
292
      
292
  
Transaction based revenue
    
-
      
-
      
-
      
158
      
158
  
                                         
Total
  
$
2,883
    
$
713
    
$
2,785
    
$
450
    
$
6,831
  
                                         
Reconciliation to Condensed Consolidated Statement of Operations:
                  
Non-interest income - other:
                                        
Other deposit related income
                                  
$
713
  
Investment and insurance commissions
                              
450
  
Bank owned life insurance
                                    
301
  
Other
                                    
1,028
  
Total
                                  
$
2,492
  

Nine months ending September 30, 2020
                              
 
  
Service
Charges
on Deposit
Accounts
    
Other
Deposit
Related
Income
    
Interchange
Income
    
Investment
and
Insurance
Commissions
    
Total
  
 
  
(In thousands)
  
Retail
                              
Overdraft fees
  
$
4,130
    
$
-
    
$
-
    
$
-
    
$
4,130
  
Account service charges
    
1,501
      
-
      
-
      
-
      
1,501
  
ATM fees
    
-
      
896
      
-
      
-
      
896
  
Other
    
-
      
577
      
-
      
-
      
577
  
Business
                                        
Overdraft fees
    
668
      
-
      
-
      
-
      
668
  
ATM fees
    
-
      
18
      
-
      
-
      
18
  
Other
    
-
      
252
      
-
      
-
      
252
  
Interchange income
    
-
      
-
      
8,411
      
-
      
8,411
  
Asset management revenue
    
-
      
-
      
-
      
937
      
937
  
Transaction based revenue
    
-
      
-
      
-
      
541
      
541
  
 
                                        
Total
  
$
6,299
    
$
1,743
    
$
8,411
    
$
1,478
    
$
17,931
  
 
                                        
Reconciliation to Condensed Consolidated Statement of Operations:
                  
Non-interest income - other:
                                        
Other deposit related income
                                  
$
1,743
  
Investment and insurance commissions
                              
1,478
  
Bank owned life insurance
                                    
750
  
Other
                                    
1,727
  
Total
                                  
$
5,698
  

Nine months ending September 30, 2019
                              
 
  
Service
Charges
on Deposit
Accounts
    
Other
Deposit
Related
Income
    
Interchange
Income
    
Investment
and
Insurance
Commissions
    
Total
  
 
  
(In thousands)
  
Retail
                              
Overdraft fees
  
$
5,582
    
$
-
    
$
-
    
$
-
    
$
5,582
  
Account service charges
    
1,618
      
-
      
-
      
-
      
1,618
  
ATM fees
    
-
      
1,041
      
-
      
-
      
1,041
  
Other
    
-
      
703
      
-
      
-
      
703
  
Business
                                        
Overdraft fees
    
1,123
      
-
      
-
      
-
      
1,123
  
ATM fees
    
-
      
26
      
-
      
-
      
26
  
Other
    
-
      
309
      
-
      
-
      
309
  
Interchange income
    
-
      
-
      
7,744
      
-
      
7,744
  
Asset management revenue
    
-
      
-
      
-
      
823
      
823
  
Transaction based revenue
    
-
      
-
      
-
      
374
      
374
  
 
                                        
Total
  
$
8,323
    
$
2,079
    
$
7,744
    
$
1,197
    
$
19,343
  
 
                                        
Reconciliation to Condensed Consolidated Statement of Operations:
                  
Non-interest income - other:
                                        
Other deposit related income
                                  
$
2,079
  
Investment and insurance commissions
                              
1,197
  
Bank owned life insurance
                                    
813
  
Other
                                    
2,773
  
Total
                                  
$
6,862
  
v3.20.2
Leases (Tables)
 9 Months Ended
Sep. 30, 2020
Leases [Abstract]  
Components of Operating Leases
The cost components of our operating leases follows:

  
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
   
2020
    
2019
    
2020
    
2019
  
   
(In thousands)
    
(In thousands)
  
Operating lease cost
  
$
395
    
$
565
    
$
1,357
    
$
1,692
  
Variable lease cost
    
16
      
43
      
52
      
115
  
Short-term lease cost
    
10
      
4
      
26
      
14
  
Total
  
$
421
    
$
612
    
$
1,435
    
$
1,821
  
Supplemental Balance Sheet Information Related to Operating Leases
Supplemental balance sheet information related to our operating leases follows:

  
September 30,
2020
    
December 31,
2019
  
   
(Dollars in thousands)
  
Lease right of use asset (1)
  
$
6,713
    
$
8,282
  
Lease liabilities (2)
  
$
6,945
    
$
8,304
  
                 
Weighted average remaining lease term (years)
    
6.84
      
7.47
  
Weighted average discount rate
    
2.6
%
    
2.8
%

(1)
Included in Accrued income and other assets in our Condensed Consolidated Statements of Financial Condition.
(2)
Included in Accrued expenses and other liabilities in our Condensed Consolidated Statements of Financial Condition.
Maturity Analysis of Lease Liabilities
Maturity analysis of our lease liabilities at September 30, 2020 based on required contractual payments follows:

  
(In thousands)
  
       
Three months ending December 31, 2020
  
$
408
  
2021
    
1,505
  
2022
    
1,324
  
2023
    
1,101
  
2024
    
692
  
2025 and thereafter
    
2,576
  
Total lease payments
    
7,606
  
Less imputed interest
    
(661
)
Total
  
$
6,945
  
v3.20.2
New Accounting Standards (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Dec. 31, 2019
New Accounting Standards [Abstract]          
Expected increase in the allowance for loan losses $ (1,440) $ 40 $ 90 $ 90  
ASU 2016-13 [Member]          
New Accounting Standards [Abstract]          
Allowance for loan losses forecast period     2 years    
ASU 2016-13 [Member] | Minimum [Member]          
New Accounting Standards [Abstract]          
Expected increase to the allowance for losses related to unfunded loan commitments         $ 1,000
ASU 2016-13 [Member] | Maximum [Member]          
New Accounting Standards [Abstract]          
Expected increase to the allowance for losses related to unfunded loan commitments         2,000
ASU 2016-13 [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | Minimum [Member]          
New Accounting Standards [Abstract]          
Expected increase in the allowance for loan losses         8,000
ASU 2016-13 [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | Maximum [Member]          
New Accounting Standards [Abstract]          
Expected increase in the allowance for loan losses         $ 10,000
v3.20.2
Securities (Details)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
USD ($)
Security
Sep. 30, 2019
USD ($)
Security
Sep. 30, 2020
USD ($)
Security
Sep. 30, 2019
USD ($)
Dec. 31, 2019
USD ($)
Available-for-sale Securities, Amortized Cost Basis [Abstract]          
Amortized cost $ 968,038   $ 968,038   $ 513,668
Unrealized Gains 18,899   18,899   5,782
Unrealized Losses 1,887   1,887   1,050
Fair Value 985,050   985,050   518,400
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]          
Less Than Twelve Months, Fair Value 155,790   155,790   130,648
Less Than Twelve Months, Unrealized Losses 1,263   1,263   535
Twelve Months or More, Fair Value 30,292   30,292   38,343
Twelve Months or More, Unrealized Losses 624   624   515
Total, Fair Value 186,082   186,082   168,991
Total, Unrealized Losses 1,887   1,887   1,050
Private Label Mortgage Backed Securities Below Investment Grade [Abstract]          
Fair value 939   939    
Amortized cost 754   754    
Non-credit unrealized loss 0   0    
Unrealized gain 185   185    
Cumulative credit related OTTI 1,214   1,214    
Credit related OTTI recognized in earnings 0 $ 0 0 $ 0  
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Roll Forward]          
Balance at beginning of period 1,214 1,594 1,214 1,594  
Additions to credit losses on securities for which no previous OTTI was recognized 0 0 0 0  
Increases to credit losses on securities for which OTTI was previously recognized 0 0 0 0  
Reduction 0 (380) [1] 0 (380) [1]  
Balance at end of period 1,214 $ 1,214 1,214 $ 1,214  
Number of securities settled which were recorded under OTTI | Security   1      
U.S. Agency [Member]          
Available-for-sale Securities, Amortized Cost Basis [Abstract]          
Amortized cost 10,820   10,820   14,591
Unrealized Gains 332   332   89
Unrealized Losses 22   22   19
Fair Value 11,130   11,130   14,661
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]          
Less Than Twelve Months, Fair Value 1,788   1,788   2,782
Less Than Twelve Months, Unrealized Losses 5   5   8
Twelve Months or More, Fair Value 2,262   2,262   2,712
Twelve Months or More, Unrealized Losses 17   17   11
Total, Fair Value 4,050   4,050   5,494
Total, Unrealized Losses $ 22   $ 22   19
Number of securities with market fair value less than amortized cost | Security 27   27    
U.S. Agency Residential Mortgage-Backed [Member]          
Available-for-sale Securities, Amortized Cost Basis [Abstract]          
Amortized cost $ 330,914   $ 330,914   226,130
Unrealized Gains 5,167   5,167   1,910
Unrealized Losses 521   521   278
Fair Value 335,560   335,560   227,762
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]          
Less Than Twelve Months, Fair Value 81,400   81,400   56,377
Less Than Twelve Months, Unrealized Losses 519   519   126
Twelve Months or More, Fair Value 1,298   1,298   13,551
Twelve Months or More, Unrealized Losses 2   2   152
Total, Fair Value 82,698   82,698   69,928
Total, Unrealized Losses $ 521   $ 521   278
Number of securities with market fair value less than amortized cost | Security 39   39    
U.S. Agency Commercial Mortgage-Backed [Member]          
Available-for-sale Securities, Amortized Cost Basis [Abstract]          
Amortized cost $ 8,039   $ 8,039   10,671
Unrealized Gains 382   382   113
Unrealized Losses 0   0   28
Fair Value 8,421   8,421   10,756
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]          
Less Than Twelve Months, Fair Value         3,284
Less Than Twelve Months, Unrealized Losses         24
Twelve Months or More, Fair Value         659
Twelve Months or More, Unrealized Losses         4
Total, Fair Value         3,943
Total, Unrealized Losses         28
Private Label Mortgage-Backed [Member]          
Available-for-sale Securities, Amortized Cost Basis [Abstract]          
Amortized cost 43,190   43,190   39,248
Unrealized Gains 1,415   1,415   544
Unrealized Losses 320   320   99
Fair Value 44,285   44,285   39,693
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]          
Less Than Twelve Months, Fair Value 14,269   14,269   16,387
Less Than Twelve Months, Unrealized Losses 268   268   55
Twelve Months or More, Fair Value 749   749   343
Twelve Months or More, Unrealized Losses 52   52   44
Total, Fair Value 15,018   15,018   16,730
Total, Unrealized Losses $ 320   $ 320   99
Number of securities with market fair value less than amortized cost | Security 20   20    
Private Label Mortgage Backed Securities Below Investment Grade [Abstract]          
Number of private label mortgage backed securities currently with OTTI unrealized gains | Security 2   2    
Senior Security [Member]          
Private Label Mortgage Backed Securities Below Investment Grade [Abstract]          
Fair value $ 403   $ 403    
Amortized cost 386   386    
Non-credit unrealized loss 0   0    
Unrealized gain 17   17    
Cumulative credit related OTTI 757   757    
Super Senior Security [Member]          
Private Label Mortgage Backed Securities Below Investment Grade [Abstract]          
Fair value 536   536    
Amortized cost 368   368    
Non-credit unrealized loss 0   0    
Unrealized gain 168   168    
Cumulative credit related OTTI 457   457    
Other Asset Backed [Member]          
Available-for-sale Securities, Amortized Cost Basis [Abstract]          
Amortized cost 262,435   262,435   94,158
Unrealized Gains 1,392   1,392   103
Unrealized Losses 456   456   375
Fair Value 263,371   263,371   93,886
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]          
Less Than Twelve Months, Fair Value 28,630   28,630   34,027
Less Than Twelve Months, Unrealized Losses 129   129   233
Twelve Months or More, Fair Value 22,210   22,210   13,839
Twelve Months or More, Unrealized Losses 327   327   142
Total, Fair Value 50,840   50,840   47,866
Total, Unrealized Losses $ 456   $ 456   375
Number of securities with market fair value less than amortized cost | Security 55   55    
Obligations of States and Political Subdivisions [Member]          
Available-for-sale Securities, Amortized Cost Basis [Abstract]          
Amortized cost $ 238,479   $ 238,479   94,499
Unrealized Gains 6,635   6,635   1,724
Unrealized Losses 136   136   121
Fair Value 244,978   244,978   96,102
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]          
Less Than Twelve Months, Fair Value 19,075   19,075   15,666
Less Than Twelve Months, Unrealized Losses 110   110   84
Twelve Months or More, Fair Value 2,003   2,003   5,396
Twelve Months or More, Unrealized Losses 26   26   37
Total, Fair Value 21,078   21,078   21,062
Total, Unrealized Losses $ 136   $ 136   121
Number of securities with market fair value less than amortized cost | Security 26   26    
Corporate [Member]          
Available-for-sale Securities, Amortized Cost Basis [Abstract]          
Amortized cost $ 71,691   $ 71,691   31,904
Unrealized Gains 3,558   3,558   1,296
Unrealized Losses 232   232   5
Fair Value 75,017   75,017   33,195
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]          
Less Than Twelve Months, Fair Value 10,628   10,628   2,125
Less Than Twelve Months, Unrealized Losses 232   232   5
Twelve Months or More, Fair Value 0   0   0
Twelve Months or More, Unrealized Losses 0   0   0
Total, Fair Value 10,628   10,628   2,125
Total, Unrealized Losses $ 232   $ 232   5
Number of securities with market fair value less than amortized cost | Security 12   12    
Trust Preferred [Member]          
Available-for-sale Securities, Amortized Cost Basis [Abstract]          
Amortized cost $ 1,970   $ 1,970   1,968
Unrealized Gains 0   0   0
Unrealized Losses 200   200   125
Fair Value 1,770   1,770   1,843
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]          
Less Than Twelve Months, Fair Value 0   0   0
Less Than Twelve Months, Unrealized Losses 0   0   0
Twelve Months or More, Fair Value 1,770   1,770   1,843
Twelve Months or More, Unrealized Losses 200   200   125
Total, Fair Value 1,770   1,770   1,843
Total, Unrealized Losses $ 200   $ 200   125
Number of securities with market fair value less than amortized cost | Security 2   2    
Number of issues rated as investment grade | Security 1   1    
Number of securities not rated | Security 1   1    
Non-rated securities, amortized cost $ 1,000   $ 1,000    
Fair value of non-rated trust preferred securities 850   850    
Foreign Government [Member]          
Available-for-sale Securities, Amortized Cost Basis [Abstract]          
Amortized cost 500   500   499
Unrealized Gains 18   18   3
Unrealized Losses 0   0   0
Fair Value $ 518   $ 518   $ 502
[1] During the third quarter of 2019 one security with previously recorded OTTI was settled and balance is now zero.
v3.20.2
Securities, Amortized Cost and Fair Value Securities Available for Sale Contractual Maturities (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis, Fiscal Year Maturity [Abstract]    
Maturing within one year $ 18,967  
Maturing after one year but within five years 80,229  
Maturing after five years but within ten years 63,308  
Maturing after ten years 160,956  
Amortized cost 323,460  
U.S. agency residential mortgage-backed 330,914  
U.S. agency commercial mortgage-backed 8,039  
Private label mortgage-backed 43,190  
Other asset backed 262,435  
Amortized cost 968,038 $ 513,668
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]    
Maturing within one year 19,048  
Maturing after one year but within five years 83,042  
Maturing after five years but within ten years 66,592  
Maturing after ten years 164,731  
Total available-for-sale securities fair value 333,413  
U.S. agency residential mortgage-backed 335,560  
U.S. agency commercial mortgage-backed 8,421  
Private label mortgage-backed 44,285  
Other asset backed 263,371  
Total $ 985,050 $ 518,400
v3.20.2
Securities, Gains and Losses Realized on Sale of Securities Available for Sale (Details) - USD ($)
$ in Thousands
 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Gain and losses realized on sale of securities available for sale [Abstract]    
Proceeds $ 36,593 $ 44,305
Realized gains 253 169
Realized losses $ 0 32
Trading securities, realized gain (loss)   $ 167
v3.20.2
Loans, Allowance for Loan Losses (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Dec. 31, 2019
Analysis of allowance for loan losses by portfolio segment [Roll Forward]          
Balance at beginning of period $ 34,500 $ 25,903 $ 26,148 $ 24,888  
Additions (deductions) [Abstract]          
Provision for loan losses 975 (271) 12,884 1,045  
Recoveries credited to the allowance 650 1,652 2,404 3,109  
Loans charged against the allowance (354) (1,136) (5,665) (2,894)  
Balance at end of period 35,771 26,148 35,771 26,148  
Allowance for loan losses [Abstract]          
Individually evaluated for impairment 6,138   6,138   $ 6,155
Collectively evaluated for impairment 29,633   29,633   19,993
Total ending allowance for loan losses balance 35,771   35,771   26,148
Loans [Abstract]          
Individually evaluated for impairment 53,520   53,520   55,892
Collectively evaluated for impairment 2,809,344   2,809,344   2,675,193
Total loans recorded investment 2,864,473   2,864,473   2,733,370
Accrued interest included in recorded investment 8,994   8,994   8,347
Total loans 2,855,479   2,855,479   2,725,023
Loans Acquired with Deteriorated Credit Quality [Member]          
Allowance for loan losses [Abstract]          
Loans acquired with deteriorated credit quality 0   0   0
Loans [Abstract]          
Loans acquired with deteriorated credit quality 1,609   1,609   2,285
Commercial [Member]          
Analysis of allowance for loan losses by portfolio segment [Roll Forward]          
Balance at beginning of period 8,731 8,121 7,922 7,090  
Additions (deductions) [Abstract]          
Provision for loan losses (875) (810) 2,804 85  
Recoveries credited to the allowance 297 1,215 1,463 1,720  
Loans charged against the allowance 0 (303) (4,036) (672)  
Balance at end of period 8,153 8,223 8,153 8,223  
Allowance for loan losses [Abstract]          
Individually evaluated for impairment 1,699   1,699   1,031
Collectively evaluated for impairment 6,454   6,454   6,891
Total ending allowance for loan losses balance 8,153   8,153   7,922
Loans [Abstract]          
Individually evaluated for impairment 10,543   10,543   9,393
Collectively evaluated for impairment 1,343,763   1,343,763   1,158,906
Total loans recorded investment 1,355,212   1,355,212   1,169,693
Accrued interest included in recorded investment 3,422   3,422   2,998
Total loans 1,351,790   1,351,790   1,166,695
Commercial [Member] | Loans Acquired with Deteriorated Credit Quality [Member]          
Allowance for loan losses [Abstract]          
Loans acquired with deteriorated credit quality 0   0   0
Loans [Abstract]          
Loans acquired with deteriorated credit quality 906   906   1,394
Mortgage [Member]          
Analysis of allowance for loan losses by portfolio segment [Roll Forward]          
Balance at beginning of period 7,261 8,062 8,216 7,978  
Additions (deductions) [Abstract]          
Provision for loan losses (257) 83 (895) 270  
Recoveries credited to the allowance 157 235 364 786  
Loans charged against the allowance (162) (397) (686) (1,051)  
Balance at end of period 6,999 7,983 6,999 7,983  
Allowance for loan losses [Abstract]          
Individually evaluated for impairment 4,174   4,174   4,863
Collectively evaluated for impairment 2,825   2,825   3,353
Total ending allowance for loan losses balance 6,999   6,999   8,216
Loans [Abstract]          
Individually evaluated for impairment 40,573   40,573   43,574
Collectively evaluated for impairment 987,300   987,300   1,058,917
Total loans recorded investment 1,028,433   1,028,433   1,103,066
Accrued interest included in recorded investment [1] 4,397   4,397   4,155
Total loans 1,024,036   1,024,036   1,098,911
Mortgage [Member] | Loans Acquired with Deteriorated Credit Quality [Member]          
Allowance for loan losses [Abstract]          
Loans acquired with deteriorated credit quality 0   0   0
Loans [Abstract]          
Loans acquired with deteriorated credit quality 560   560   575
Installment [Member]          
Analysis of allowance for loan losses by portfolio segment [Roll Forward]          
Balance at beginning of period 1,217 1,293 1,283 895  
Additions (deductions) [Abstract]          
Provision for loan losses 18 289 322 1,021  
Recoveries credited to the allowance 196 202 577 603  
Loans charged against the allowance (192) (436) (943) (1,171)  
Balance at end of period 1,239 1,348 1,239 1,348  
Allowance for loan losses [Abstract]          
Individually evaluated for impairment 265   265   261
Collectively evaluated for impairment 974   974   1,022
Total ending allowance for loan losses balance 1,239   1,239   1,283
Loans [Abstract]          
Individually evaluated for impairment 2,404   2,404   2,925
Collectively evaluated for impairment 478,281   478,281   457,370
Total loans recorded investment 480,828   480,828   460,611
Accrued interest included in recorded investment [1] 1,175   1,175   1,194
Total loans 479,653   479,653   459,417
Installment [Member] | Loans Acquired with Deteriorated Credit Quality [Member]          
Allowance for loan losses [Abstract]          
Loans acquired with deteriorated credit quality 0   0   0
Loans [Abstract]          
Loans acquired with deteriorated credit quality 143   143   316
Subjective Allocation [Member]          
Analysis of allowance for loan losses by portfolio segment [Roll Forward]          
Balance at beginning of period 17,291 8,427 8,727 8,925  
Additions (deductions) [Abstract]          
Provision for loan losses 2,089 167 10,653 (331)  
Recoveries credited to the allowance 0 0 0 0  
Loans charged against the allowance 0 0 0 0  
Balance at end of period 19,380 $ 8,594 19,380 $ 8,594  
Allowance for loan losses [Abstract]          
Individually evaluated for impairment 0   0   0
Collectively evaluated for impairment 19,380   19,380   8,727
Total ending allowance for loan losses balance 19,380   19,380   8,727
Subjective Allocation [Member] | Loans Acquired with Deteriorated Credit Quality [Member]          
Allowance for loan losses [Abstract]          
Loans acquired with deteriorated credit quality $ 0   $ 0   $ 0
[1] Credit scores have been updated within the last twelve months.
v3.20.2
Loans, Receivables Past Due (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Non performing loans [Abstract]    
Accrued interest included in recorded investment $ 8,994 $ 8,347
Loans Past Due, 90+ days [Member]    
Non performing loans [Abstract]    
Accrued interest included in recorded investment 0 0
Commercial and Industrial [Member]    
Non performing loans [Abstract]    
Government guaranteed loans excluded from non-performing loans 52 77
1-4 Family Owner Occupied - Non-jumbo [Member]    
Non performing loans [Abstract]    
Government guaranteed loans excluded from non-performing loans 458 569
Commercial [Member]    
Non performing loans [Abstract]    
Accrued interest included in recorded investment 3,422 2,998
Mortgage [Member]    
Non performing loans [Abstract]    
Accrued interest included in recorded investment [1] 4,397 4,155
Mortgage [Member] | 1-4 Family Owner Occupied - Jumbo [Member]    
Non performing loans [Abstract]    
Accrued interest included in recorded investment [1] 1,288 1,139
Mortgage [Member] | 1-4 Family Owner Occupied - Non-jumbo [Member]    
Non performing loans [Abstract]    
Accrued interest included in recorded investment [1] 1,891 1,662
Mortgage [Member] | 1-4 Non-owner Occupied [Member]    
Non performing loans [Abstract]    
Accrued interest included in recorded investment [1] 590 586
Mortgage [Member] | 1-4 Family - 2nd Lien [Member]    
Non performing loans [Abstract]    
Accrued interest included in recorded investment [1] 363 502
Mortgage [Member] | Resort Lending [Member]    
Non performing loans [Abstract]    
Accrued interest included in recorded investment [1] 265 266
Installment [Member]    
Non performing loans [Abstract]    
Accrued interest included in recorded investment [1] 1,175 1,194
Installment [Member] | Boat Lending [Member]    
Non performing loans [Abstract]    
Accrued interest included in recorded investment [1] 471 490
Installment [Member] | Recreational Vehicle Lending [Member]    
Non performing loans [Abstract]    
Accrued interest included in recorded investment [1] 381 378
Installment [Member] | Other [Member]    
Non performing loans [Abstract]    
Accrued interest included in recorded investment [1] 323 326
Non-Performing Loans [Member]    
Non performing loans [Abstract]    
90+ and Still Accruing [2] 266 0
Non-Accrual [2] 9,971 9,532
Total Non-performing Loans [2] 10,237 9,532
Accrued interest included in recorded investment [2] 0 0
Non-Performing Loans [Member] | Loans Past Due, 90+ days [Member]    
Non performing loans [Abstract]    
Accrued interest included in recorded investment [2] 0 0
Non-Performing Loans [Member] | Commercial [Member] | Commercial and Industrial [Member]    
Non performing loans [Abstract]    
90+ and Still Accruing [2],[3] 266 0
Non-Accrual [2],[3] 1,615 565
Total Non-performing Loans [2],[3] 1,881 565
Non-Performing Loans [Member] | Commercial [Member] | Commercial Real Estate [Member]    
Non performing loans [Abstract]    
90+ and Still Accruing [2] 0 0
Non-Accrual [2] 554 735
Total Non-performing Loans [2] 554 735
Non-Performing Loans [Member] | Mortgage [Member] | 1-4 Family Owner Occupied - Jumbo [Member]    
Non performing loans [Abstract]    
90+ and Still Accruing [2] 0 0
Non-Accrual [2] 1,207 1,179
Total Non-performing Loans [2] 1,207 1,179
Non-Performing Loans [Member] | Mortgage [Member] | 1-4 Family Owner Occupied - Non-jumbo [Member]    
Non performing loans [Abstract]    
90+ and Still Accruing [2],[4] 0 0
Non-Accrual [2],[4] 2,364 3,540
Total Non-performing Loans [2],[4] 2,364 3,540
Non-Performing Loans [Member] | Mortgage [Member] | 1-4 Non-owner Occupied [Member]    
Non performing loans [Abstract]    
90+ and Still Accruing [2] 0 0
Non-Accrual [2] 1,304 1,039
Total Non-performing Loans [2] 1,304 1,039
Non-Performing Loans [Member] | Mortgage [Member] | 1-4 Family - 2nd Lien [Member]    
Non performing loans [Abstract]    
90+ and Still Accruing [2] 0 0
Non-Accrual [2] 1,548 979
Total Non-performing Loans [2] 1,548 979
Non-Performing Loans [Member] | Mortgage [Member] | Resort Lending [Member]    
Non performing loans [Abstract]    
90+ and Still Accruing [2] 0 0
Non-Accrual [2] 699 690
Total Non-performing Loans [2] 699 690
Non-Performing Loans [Member] | Installment [Member] | Boat Lending [Member]    
Non performing loans [Abstract]    
90+ and Still Accruing [2] 0 0
Non-Accrual [2] 206 332
Total Non-performing Loans [2] 206 332
Non-Performing Loans [Member] | Installment [Member] | Recreational Vehicle Lending [Member]    
Non performing loans [Abstract]    
90+ and Still Accruing [2] 0 0
Non-Accrual [2] 96 3
Total Non-performing Loans [2] 96 3
Non-Performing Loans [Member] | Installment [Member] | Other [Member]    
Non performing loans [Abstract]    
90+ and Still Accruing [2] 0 0
Non-Accrual [2] 378 470
Total Non-performing Loans [2] $ 378 $ 470
[1] Credit scores have been updated within the last twelve months.
[2] Non-performing loans exclude purchase credit impaired loans.
[3] Non-performing commercial and industrial loans exclude $0.052 million and $0.077 million of government guaranteed loans at September 30, 2020 and December 31, 2019, respectively.
[4] Non-performing 1-4 family owner occupied – non jumbo loans exclude $0.458 million and $0.569 million of government guaranteed loans at September 30, 2020 and December 31, 2019, respectively.
v3.20.2
Loans, Aging Analysis of Loans by Class (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Aging analysis of loans by class [Abstract]    
Total loans recorded investment $ 2,864,473 $ 2,733,370
Accrued interest included in recorded investment 8,994 8,347
Loans Past Due, 30-59 days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 5,434 7,449
Accrued interest included in recorded investment 102 74
Loans Past Due, 60-89 days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 1,349 2,936
Accrued interest included in recorded investment 17 34
Loans Past Due, 90+ days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 3,455 4,091
Accrued interest included in recorded investment 0 0
Loans Past Due Total [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 10,238 14,476
Accrued interest included in recorded investment 119 108
Loans Not Past Due [Member]    
Aging analysis of loans by class [Abstract]    
Loans not Past Due 2,854,235 2,718,894
Accrued interest included in recorded investment 8,875 8,239
Commercial [Member]    
Aging analysis of loans by class [Abstract]    
Total loans recorded investment 1,355,212 1,169,693
Accrued interest included in recorded investment 3,422 2,998
Commercial [Member] | Commercial and Industrial [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 495 391
Loans not Past Due 763,757 564,480
Total loans recorded investment 764,252 564,871
Commercial [Member] | Commercial and Industrial [Member] | Loans Past Due, 30-59 days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 0 0
Commercial [Member] | Commercial and Industrial [Member] | Loans Past Due, 60-89 days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 0 289
Commercial [Member] | Commercial and Industrial [Member] | Loans Past Due, 90+ days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 495 102
Commercial [Member] | Commercial Real Estate [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 130 912
Loans not Past Due 590,830 603,910
Total loans recorded investment 590,960 604,822
Commercial [Member] | Commercial Real Estate [Member] | Loans Past Due, 30-59 days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 130 177
Commercial [Member] | Commercial Real Estate [Member] | Loans Past Due, 60-89 days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 0 0
Commercial [Member] | Commercial Real Estate [Member] | Loans Past Due, 90+ days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 0 735
Mortgage [Member]    
Aging analysis of loans by class [Abstract]    
Total loans recorded investment 1,028,433 1,103,066
Accrued interest included in recorded investment [1] 4,397 4,155
Mortgage [Member] | 1-4 Family Owner Occupied - Jumbo [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 1,944 2,794
Loans not Past Due 437,294 398,759
Total loans recorded investment 439,238 401,553
Accrued interest included in recorded investment [1] 1,288 1,139
Mortgage [Member] | 1-4 Family Owner Occupied - Jumbo [Member] | Loans Past Due, 30-59 days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 1,312 1,757
Mortgage [Member] | 1-4 Family Owner Occupied - Jumbo [Member] | Loans Past Due, 60-89 days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 0 1,037
Mortgage [Member] | 1-4 Family Owner Occupied - Jumbo [Member] | Loans Past Due, 90+ days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 632 0
Mortgage [Member] | 1-4 Family Owner Occupied - Non-jumbo [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 2,035 4,911
Loans not Past Due 247,086 342,349
Total loans recorded investment 249,121 347,260
Accrued interest included in recorded investment [1] 1,891 1,662
Mortgage [Member] | 1-4 Family Owner Occupied - Non-jumbo [Member] | Loans Past Due, 30-59 days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 1,053 2,672
Mortgage [Member] | 1-4 Family Owner Occupied - Non-jumbo [Member] | Loans Past Due, 60-89 days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 372 852
Mortgage [Member] | 1-4 Family Owner Occupied - Non-jumbo [Member] | Loans Past Due, 90+ days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 610 1,387
Mortgage [Member] | 1-4 Non-owner Occupied [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 1,763 1,454
Loans not Past Due 177,101 168,083
Total loans recorded investment 178,864 169,537
Accrued interest included in recorded investment [1] 590 586
Mortgage [Member] | 1-4 Non-owner Occupied [Member] | Loans Past Due, 30-59 days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 1,336 695
Mortgage [Member] | 1-4 Non-owner Occupied [Member] | Loans Past Due, 60-89 days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 60 136
Mortgage [Member] | 1-4 Non-owner Occupied [Member] | Loans Past Due, 90+ days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 367 623
Mortgage [Member] | 1-4 Family - 2nd Lien [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 1,268 1,385
Loans not Past Due 99,427 115,157
Total loans recorded investment 100,695 116,542
Accrued interest included in recorded investment [1] 363 502
Mortgage [Member] | 1-4 Family - 2nd Lien [Member] | Loans Past Due, 30-59 days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 472 909
Mortgage [Member] | 1-4 Family - 2nd Lien [Member] | Loans Past Due, 60-89 days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 251 90
Mortgage [Member] | 1-4 Family - 2nd Lien [Member] | Loans Past Due, 90+ days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 545 386
Mortgage [Member] | Resort Lending [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 1,107 982
Loans not Past Due 59,408 67,192
Total loans recorded investment 60,515 68,174
Accrued interest included in recorded investment [1] 265 266
Mortgage [Member] | Resort Lending [Member] | Loans Past Due, 30-59 days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 273 364
Mortgage [Member] | Resort Lending [Member] | Loans Past Due, 60-89 days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 443 53
Mortgage [Member] | Resort Lending [Member] | Loans Past Due, 90+ days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 391 565
Installment [Member]    
Aging analysis of loans by class [Abstract]    
Total loans recorded investment 480,828 460,611
Accrued interest included in recorded investment [1] 1,175 1,194
Installment [Member] | Boat Lending [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 383 532
Loans not Past Due 211,353 202,750
Total loans recorded investment 211,736 203,282
Accrued interest included in recorded investment [1] 471 490
Installment [Member] | Boat Lending [Member] | Loans Past Due, 30-59 days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 213 337
Installment [Member] | Boat Lending [Member] | Loans Past Due, 60-89 days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 38 107
Installment [Member] | Boat Lending [Member] | Loans Past Due, 90+ days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 132 88
Installment [Member] | Recreational Vehicle Lending [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 441 261
Loans not Past Due 168,211 153,184
Total loans recorded investment 168,652 153,445
Accrued interest included in recorded investment [1] 381 378
Installment [Member] | Recreational Vehicle Lending [Member] | Loans Past Due, 30-59 days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 364 161
Installment [Member] | Recreational Vehicle Lending [Member] | Loans Past Due, 60-89 days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 19 97
Installment [Member] | Recreational Vehicle Lending [Member] | Loans Past Due, 90+ days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 58 3
Installment [Member] | Other [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 672 854
Loans not Past Due 99,768 103,030
Total loans recorded investment 100,440 103,884
Accrued interest included in recorded investment [1] 323 326
Installment [Member] | Other [Member] | Loans Past Due, 30-59 days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 281 377
Installment [Member] | Other [Member] | Loans Past Due, 60-89 days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment 166 275
Installment [Member] | Other [Member] | Loans Past Due, 90+ days [Member]    
Aging analysis of loans by class [Abstract]    
Total recorded investment $ 225 $ 202
[1] Credit scores have been updated within the last twelve months.
v3.20.2
Loans, Impaired Financing Receivables (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Dec. 31, 2019
Impaired loans with no allocated allowance for loan losses [Abstract]          
Troubled debt restructurings ("TDR") $ 336   $ 336   $ 337
Non - TDR 1,562   1,562   1,550
Impaired loans with an allocated allowance for loan losses [Abstract]          
TDR - allowance based on collateral 9,412   9,412   1,587
TDR - allowance based on present value cash flow 38,934   38,934   48,798
Non - TDR - allowance based on collateral 2,963   2,963   3,365
Total impaired loans 53,207   53,207   55,637
Amount of allowance for loan losses allocated [Abstract]          
TDR - allowance based on collateral 1,104   1,104   542
TDR - allowance based on present value cash flow 3,838   3,838   4,641
Non - TDR - allowance based on collateral 1,196   1,196   972
Total amount of allowance for loan losses allocated 6,138   6,138   6,155
Impaired Loans by class [Abstract]          
Recorded Investment, with no related allowance for loan losses recorded 1,898   1,898   1,887
Unpaid Principal Balance, with no related allowance for loan losses recorded 2,366   2,366   2,115
With no related allowance for loan losses recorded 0   0   0
Recorded Investment, with an allowance for loan losses recorded 51,622   51,622   54,005
Unpaid Principal Balance, with an allowance for loan losses recorded 53,416   53,416   56,708
Recorded Investment 53,520   53,520   55,892
Unpaid Principal Balance 55,782   55,782   58,823
Related Allowance 6,138   6,138   6,155
Accrued interest included in recorded investment 313   313   255
Average recorded investment in and interest income earned on impaired loans by class [Abstract]          
Average Recorded Investment, with no related allowance for loan losses recorded 1,862 $ 879 1,790 $ 529  
Interest Income Recognized, with no related allowance for loan losses recorded 4 13 13 15  
Average Recorded Investment, with an allowance for loan losses recorded 56,522 53,636 57,198 55,786  
Interest Income Recognized, with an allowance for loan losses recorded 670 740 2,334 2,213  
Average Recorded Investment 58,384 54,515 58,988 56,315  
Interest Income Recognized 674 753 2,347 2,228  
Commercial [Member] | Commercial and Industrial [Member]          
Impaired Loans by class [Abstract]          
Recorded Investment, with no related allowance for loan losses recorded 122   122   257
Unpaid Principal Balance, with no related allowance for loan losses recorded 124   124   257
With no related allowance for loan losses recorded 0   0   0
Recorded Investment, with an allowance for loan losses recorded 2,452   2,452   1,655
Unpaid Principal Balance, with an allowance for loan losses recorded 2,572   2,572   1,706
Recorded Investment 2,574   2,574   1,912
Unpaid Principal Balance 2,696   2,696   1,963
Related Allowance 855   855   453
Average recorded investment in and interest income earned on impaired loans by class [Abstract]          
Average Recorded Investment, with no related allowance for loan losses recorded 103 0 137 0  
Interest Income Recognized, with no related allowance for loan losses recorded 2 0 4 0  
Average Recorded Investment, with an allowance for loan losses recorded 2,431 1,534 2,231 2,406  
Interest Income Recognized, with an allowance for loan losses recorded 38 16 105 52  
Average Recorded Investment 2,534 1,534 2,368 2,406  
Interest Income Recognized 40 16 109 52  
Commercial [Member] | Commercial Real Estate [Member]          
Impaired Loans by class [Abstract]          
Recorded Investment, with no related allowance for loan losses recorded 0   0   796
Unpaid Principal Balance, with no related allowance for loan losses recorded 0   0   796
With no related allowance for loan losses recorded 0   0   0
Recorded Investment, with an allowance for loan losses recorded 7,969   7,969   6,685
Unpaid Principal Balance, with an allowance for loan losses recorded 7,980   7,980   6,661
Recorded Investment 7,969   7,969   7,481
Unpaid Principal Balance 7,980   7,980   7,457
Related Allowance 844   844   578
Average recorded investment in and interest income earned on impaired loans by class [Abstract]          
Average Recorded Investment, with no related allowance for loan losses recorded 0 327 199 164  
Interest Income Recognized, with no related allowance for loan losses recorded 0 5 0 5  
Average Recorded Investment, with an allowance for loan losses recorded 12,195 6,069 11,657 5,552  
Interest Income Recognized, with an allowance for loan losses recorded 130 71 641 221  
Average Recorded Investment 12,195 6,396 11,856 5,716  
Interest Income Recognized 130 76 641 226  
Mortgage [Member] | 1-4 Family Owner Occupied - Jumbo [Member]          
Impaired Loans by class [Abstract]          
Recorded Investment, with no related allowance for loan losses recorded 632   632   0
Unpaid Principal Balance, with no related allowance for loan losses recorded 632   632   0
With no related allowance for loan losses recorded 0   0   0
Recorded Investment, with an allowance for loan losses recorded 1,091   1,091   1,447
Unpaid Principal Balance, with an allowance for loan losses recorded 1,458   1,458   1,445
Recorded Investment 1,723   1,723   1,447
Unpaid Principal Balance 2,090   2,090   1,445
Related Allowance 126   126   91
Average recorded investment in and interest income earned on impaired loans by class [Abstract]          
Average Recorded Investment, with no related allowance for loan losses recorded 632 0 316 0  
Interest Income Recognized, with no related allowance for loan losses recorded 0 0 0 0  
Average Recorded Investment, with an allowance for loan losses recorded 808 1,003 1,228 1,248  
Interest Income Recognized, with an allowance for loan losses recorded 11 9 39 26  
Average Recorded Investment 1,440 1,003 1,544 1,248  
Interest Income Recognized 11 9 39 26  
Mortgage [Member] | 1-4 Family Owner Occupied - Non-jumbo [Member]          
Impaired Loans by class [Abstract]          
Recorded Investment, with no related allowance for loan losses recorded 237   237   212
Unpaid Principal Balance, with no related allowance for loan losses recorded 314   314   217
With no related allowance for loan losses recorded 0   0   0
Recorded Investment, with an allowance for loan losses recorded 21,805   21,805   10,163
Unpaid Principal Balance, with an allowance for loan losses recorded 22,414   22,414   10,695
Recorded Investment 22,042   22,042   10,375
Unpaid Principal Balance 22,728   22,728   10,912
Related Allowance 2,300   2,300   1,031
Average recorded investment in and interest income earned on impaired loans by class [Abstract]          
Average Recorded Investment, with no related allowance for loan losses recorded 331 352 353 265  
Interest Income Recognized, with no related allowance for loan losses recorded 0 1 4 3  
Average Recorded Investment, with an allowance for loan losses recorded 22,070 23,674 19,116 24,110  
Interest Income Recognized, with an allowance for loan losses recorded 277 336 901 1,031  
Average Recorded Investment 22,401 24,026 19,469 24,375  
Interest Income Recognized 277 337 905 1,034  
Mortgage [Member] | 1-4 Non-owner Occupied [Member]          
Impaired Loans by class [Abstract]          
Recorded Investment, with no related allowance for loan losses recorded 311   311   214
Unpaid Principal Balance, with no related allowance for loan losses recorded 475   475   366
With no related allowance for loan losses recorded 0   0   0
Recorded Investment, with an allowance for loan losses recorded 4,473   4,473   4,962
Unpaid Principal Balance, with an allowance for loan losses recorded 4,810   4,810   5,542
Recorded Investment 4,784   4,784   5,176
Unpaid Principal Balance 5,285   5,285   5,908
Related Allowance 470   470   572
Average recorded investment in and interest income earned on impaired loans by class [Abstract]          
Average Recorded Investment, with no related allowance for loan losses recorded 316 200 309 100  
Interest Income Recognized, with no related allowance for loan losses recorded 2 6 5 6  
Average Recorded Investment, with an allowance for loan losses recorded 4,708 5,447 4,746 6,040  
Interest Income Recognized, with an allowance for loan losses recorded 52 76 170 227  
Average Recorded Investment 5,024 5,647 5,055 6,140  
Interest Income Recognized 54 82 175 233  
Mortgage [Member] | 1-4 Family - 2nd Lien [Member]          
Impaired Loans by class [Abstract]          
Recorded Investment, with no related allowance for loan losses recorded 442   442   407
Unpaid Principal Balance, with no related allowance for loan losses recorded 442   442   438
With no related allowance for loan losses recorded 0   0   0
Recorded Investment, with an allowance for loan losses recorded 620   620   14,059
Unpaid Principal Balance, with an allowance for loan losses recorded 629   629   15,243
Recorded Investment 1,062   1,062   14,466
Unpaid Principal Balance 1,071   1,071   15,681
Related Allowance 133   133   1,695
Average recorded investment in and interest income earned on impaired loans by class [Abstract]          
Average Recorded Investment, with no related allowance for loan losses recorded 403 0 399 0  
Interest Income Recognized, with no related allowance for loan losses recorded 0 0 0 0  
Average Recorded Investment, with an allowance for loan losses recorded 598 601 4,017 479  
Interest Income Recognized, with an allowance for loan losses recorded 3 8 9 14  
Average Recorded Investment 1,001 601 4,416 479  
Interest Income Recognized 3 8 9 14  
Mortgage [Member] | Resort Lending [Member]          
Impaired Loans by class [Abstract]          
Recorded Investment, with no related allowance for loan losses recorded 154   154   0
Unpaid Principal Balance, with no related allowance for loan losses recorded 379   379   0
With no related allowance for loan losses recorded 0   0   0
Recorded Investment, with an allowance for loan losses recorded 10,808   10,808   12,110
Unpaid Principal Balance, with an allowance for loan losses recorded 10,972   10,972   12,263
Recorded Investment 10,962   10,962   12,110
Unpaid Principal Balance 11,351   11,351   12,263
Related Allowance 1,145   1,145   1,474
Average recorded investment in and interest income earned on impaired loans by class [Abstract]          
Average Recorded Investment, with no related allowance for loan losses recorded 77 0 77 0  
Interest Income Recognized, with no related allowance for loan losses recorded 0 0 0 0  
Average Recorded Investment, with an allowance for loan losses recorded 11,186 12,067 11,506 12,607  
Interest Income Recognized, with an allowance for loan losses recorded 125 171 358 493  
Average Recorded Investment 11,263 12,067 11,583 12,607  
Interest Income Recognized 125 171 358 493  
Installment [Member] | Boat Lending [Member]          
Impaired Loans by class [Abstract]          
Recorded Investment, with no related allowance for loan losses recorded 0   0   0
Unpaid Principal Balance, with no related allowance for loan losses recorded 0   0   0
With no related allowance for loan losses recorded 0   0   0
Recorded Investment, with an allowance for loan losses recorded 139   139   0
Unpaid Principal Balance, with an allowance for loan losses recorded 172   172   0
Recorded Investment 139   139   0
Unpaid Principal Balance 172   172   0
Related Allowance 49   49   0
Average recorded investment in and interest income earned on impaired loans by class [Abstract]          
Average Recorded Investment, with no related allowance for loan losses recorded 0 0 0 0  
Interest Income Recognized, with no related allowance for loan losses recorded 0 0 0 0  
Average Recorded Investment, with an allowance for loan losses recorded 106 86 72 68  
Interest Income Recognized, with an allowance for loan losses recorded 0 2 0 2  
Average Recorded Investment 106 86 72 68  
Interest Income Recognized 0 2 0 2  
Installment [Member] | Recreational Vehicle Lending [Member]          
Impaired Loans by class [Abstract]          
Recorded Investment, with no related allowance for loan losses recorded 0   0   0
Unpaid Principal Balance, with no related allowance for loan losses recorded 0   0   0
With no related allowance for loan losses recorded 0   0   0
Recorded Investment, with an allowance for loan losses recorded 101   101   0
Unpaid Principal Balance, with an allowance for loan losses recorded 114   114   0
Recorded Investment 101   101   0
Unpaid Principal Balance 114   114   0
Related Allowance 23   23   0
Average recorded investment in and interest income earned on impaired loans by class [Abstract]          
Average Recorded Investment, with no related allowance for loan losses recorded 0 0 0 0  
Interest Income Recognized, with no related allowance for loan losses recorded 0 0 0 0  
Average Recorded Investment, with an allowance for loan losses recorded 96 50 80 65  
Interest Income Recognized, with an allowance for loan losses recorded 1 1 2 2  
Average Recorded Investment 96 50 80 65  
Interest Income Recognized 1 1 2 2  
Installment [Member] | Other [Member]          
Impaired Loans by class [Abstract]          
Recorded Investment, with no related allowance for loan losses recorded 0   0   1
Unpaid Principal Balance, with no related allowance for loan losses recorded 0   0   41
With no related allowance for loan losses recorded 0   0   0
Recorded Investment, with an allowance for loan losses recorded 2,164   2,164   2,924
Unpaid Principal Balance, with an allowance for loan losses recorded 2,295   2,295   3,153
Recorded Investment 2,164   2,164   2,925
Unpaid Principal Balance 2,295   2,295   3,194
Related Allowance 193   193   $ 261
Average recorded investment in and interest income earned on impaired loans by class [Abstract]          
Average Recorded Investment, with no related allowance for loan losses recorded 0 0 0 0  
Interest Income Recognized, with no related allowance for loan losses recorded 0 1 0 1  
Average Recorded Investment, with an allowance for loan losses recorded 2,324 3,105 2,545 3,211  
Interest Income Recognized, with an allowance for loan losses recorded 33 50 109 145  
Average Recorded Investment 2,324 3,105 2,545 3,211  
Interest Income Recognized $ 33 $ 51 $ 109 $ 146  
v3.20.2
Loans, Troubled Debt Restructurings (Details)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
USD ($)
Contract
Sep. 30, 2019
USD ($)
Contract
Sep. 30, 2020
USD ($)
Contract
Payment
Sep. 30, 2019
USD ($)
Contract
Dec. 31, 2019
USD ($)
Troubled Debt Restructuring [Abstract]          
Troubled debt restructuring $ 48,682   $ 48,682   $ 50,722
Number of consecutive timely payments required | Payment     6    
Troubled debt restructuring, specific reserve $ 4,900   $ 4,900   5,200
Loans classified as troubled debt restructurings [Abstract]          
Number of contracts | Contract 3 7 20 18  
Pre-modification recorded balance $ 163 $ 438 $ 8,622 $ 2,763  
Post-modification recorded balance 168 442 8,637 2,769  
Increase in allowance for loan losses (1,440) 40 90 90  
Charge offs due to troubled debt restructurings 0 0 $ 0 0  
Past due period for modified loans     90 days    
Charge-offs on TDRs that subsequently defaulted 0 $ 0 $ 0 $ 0  
Minimum [Member]          
Troubled Debt Restructuring [Abstract]          
Modification of stated interest rate of loans, range of period     9 months    
Modifications involving extension of maturity date, period range     1 month    
Maximum [Member]          
Troubled Debt Restructuring [Abstract]          
Modification of stated interest rate of loans, range of period     36 months    
Modification of stated interest rate of loans, range of period in certain circumstances     480 months    
Modifications involving extension of maturity date, period range     60 months    
Modifications involving extension of maturity date, period range in certain circumstances     360 months    
Performing TDRs [Member]          
Troubled Debt Restructuring [Abstract]          
Troubled debt restructuring 45,629   $ 45,629   47,575
Non-performing TDRs [Member]          
Troubled Debt Restructuring [Abstract]          
Troubled debt restructuring [1] 3,053   3,053   3,147
Commercial [Member]          
Troubled Debt Restructuring [Abstract]          
Troubled debt restructuring 9,495   9,495   8,514
Commercial [Member] | Performing TDRs [Member]          
Troubled Debt Restructuring [Abstract]          
Troubled debt restructuring 8,292   8,292   7,974
Commercial [Member] | Non-performing TDRs [Member]          
Troubled Debt Restructuring [Abstract]          
Troubled debt restructuring [1] $ 1,203   $ 1,203   540
Commercial [Member] | Commercial and Industrial [Member]          
Loans classified as troubled debt restructurings [Abstract]          
Number of contracts | Contract 0 2 7 3  
Pre-modification recorded balance $ 0 $ 137 $ 1,207 $ 186  
Post-modification recorded balance $ 0 $ 137 $ 1,207 $ 186  
Commercial [Member] | Commercial Real Estate [Member]          
Loans classified as troubled debt restructurings [Abstract]          
Number of contracts | Contract 0 0 4 2  
Pre-modification recorded balance $ 0 $ 0 $ 7,012 $ 1,329  
Post-modification recorded balance $ 0 $ 0 $ 7,012 $ 1,329  
Mortgage [Member] | 1-4 Family Owner Occupied - Jumbo [Member]          
Loans classified as troubled debt restructurings [Abstract]          
Number of contracts | Contract 0 0 0 0  
Pre-modification recorded balance $ 0 $ 0 $ 0 $ 0  
Post-modification recorded balance $ 0 $ 0 $ 0 $ 0  
Mortgage [Member] | 1-4 Family Owner Occupied - Non-jumbo [Member]          
Loans classified as troubled debt restructurings [Abstract]          
Number of contracts | Contract 1 1 3 2  
Pre-modification recorded balance $ 92 $ 198 $ 195 $ 479  
Post-modification recorded balance $ 95 $ 202 $ 203 $ 483  
Mortgage [Member] | 1-4 Non-owner Occupied [Member]          
Loans classified as troubled debt restructurings [Abstract]          
Number of contracts | Contract 1 0 2 1  
Pre-modification recorded balance $ 52 $ 0 $ 111 $ 506  
Post-modification recorded balance $ 54 $ 0 $ 116 $ 505  
Mortgage [Member] | 1-4 Family - 2nd Lien [Member]          
Loans classified as troubled debt restructurings [Abstract]          
Number of contracts | Contract 0 3 2 3  
Pre-modification recorded balance $ 0 $ 75 $ 45 $ 75  
Post-modification recorded balance $ 0 $ 75 $ 46 $ 75  
Mortgage [Member] | Resort Lending [Member]          
Loans classified as troubled debt restructurings [Abstract]          
Number of contracts | Contract 0 0 0 0  
Pre-modification recorded balance $ 0 $ 0 $ 0 $ 0  
Post-modification recorded balance $ 0 $ 0 $ 0 $ 0  
Installment [Member] | Boat Lending [Member]          
Loans classified as troubled debt restructurings [Abstract]          
Number of contracts | Contract 0 0 0 0  
Pre-modification recorded balance $ 0 $ 0 $ 0 $ 0  
Post-modification recorded balance $ 0 $ 0 $ 0 $ 0  
Installment [Member] | Recreational Vehicle Lending [Member]          
Loans classified as troubled debt restructurings [Abstract]          
Number of contracts | Contract 0 0 0 0  
Pre-modification recorded balance $ 0 $ 0 $ 0 $ 0  
Post-modification recorded balance $ 0 $ 0 $ 0 $ 0  
Installment [Member] | Other [Member]          
Loans classified as troubled debt restructurings [Abstract]          
Number of contracts | Contract 1 1 2 7  
Pre-modification recorded balance $ 19 $ 28 $ 52 $ 188  
Post-modification recorded balance 19 $ 28 53 $ 191  
Retail [Member]          
Troubled Debt Restructuring [Abstract]          
Troubled debt restructuring [2] 39,187   39,187   42,208
Retail [Member] | Performing TDRs [Member]          
Troubled Debt Restructuring [Abstract]          
Troubled debt restructuring [2] 37,337   37,337   39,601
Retail [Member] | Non-performing TDRs [Member]          
Troubled Debt Restructuring [Abstract]          
Troubled debt restructuring [1],[2],[3] $ 1,850   $ 1,850   $ 2,607
[1] Included in non-performing loans table above.
[2] Retail loans include mortgage and installment loan portfolio segments.
[3] Also includes loans on non-accrual at the time of modification until six payments are received on a timely basis.
v3.20.2
Loans, Non-TDR Loan Modifications and Paycheck Protection Program ("PPP") Due to COVID-19 (Details)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
USD ($)
Loan
Application
Sep. 30, 2019
USD ($)
Sep. 30, 2020
USD ($)
Application
Loan
Sep. 30, 2019
USD ($)
Jun. 30, 2020
USD ($)
Dec. 31, 2019
USD ($)
Jun. 30, 2019
USD ($)
Dec. 31, 2018
USD ($)
Non-TDR Loan Modifications and Paycheck Protection Program ("PPP") due to COVID-19 [Abstract]                
Interest only period for Commercial loans     3 months          
Suspended payments period for Retail loans     3 months          
Total loans $ 2,855,479   $ 2,855,479     $ 2,725,023    
Percentage of total loans, COVID-19 Accomodations     2.10%          
Allowance for loan losses 35,771 $ 26,148 $ 35,771 $ 26,148 $ 34,500 26,148 $ 25,903 $ 24,888
Interest and fees on loans 30,393 34,226 92,020 100,743        
Paycheck Protection Program [Member]                
Non-TDR Loan Modifications and Paycheck Protection Program ("PPP") due to COVID-19 [Abstract]                
Total loans $ 261,100   $ 261,100          
Number of outstanding loans | Loan 2,117   2,117          
Allowance for loan losses $ 0   $ 0          
Number of loan forgiveness applications submitted | Application 197   197          
Amount of loan forgiveness applications submitted $ 37,200   $ 37,200          
Interest and fees on loans 1,300 0 2,300 0        
Remaining unaccreted net fees 6,500   6,500          
Commercial [Member]                
Non-TDR Loan Modifications and Paycheck Protection Program ("PPP") due to COVID-19 [Abstract]                
Total loans 1,351,790   $ 1,351,790     1,166,695    
Percentage of total loans, COVID-19 Accomodations     1.90%          
Allowance for loan losses 8,153 8,223 $ 8,153 8,223 8,731 7,922 8,121 7,090
Mortgage [Member]                
Non-TDR Loan Modifications and Paycheck Protection Program ("PPP") due to COVID-19 [Abstract]                
Total loans 1,024,036   $ 1,024,036     1,098,911    
Percentage of total loans, COVID-19 Accomodations     3.10%          
Allowance for loan losses 6,999 7,983 $ 6,999 7,983 7,261 8,216 8,062 7,978
Installment [Member]                
Non-TDR Loan Modifications and Paycheck Protection Program ("PPP") due to COVID-19 [Abstract]                
Total loans 479,653   $ 479,653     459,417    
Percentage of total loans, COVID-19 Accomodations     0.50%          
Allowance for loan losses 1,239 $ 1,348 $ 1,239 $ 1,348 $ 1,217 $ 1,283 $ 1,293 $ 895
Mortgage Loans Serviced for Others [Member]                
Non-TDR Loan Modifications and Paycheck Protection Program ("PPP") due to COVID-19 [Abstract]                
Total loans [1] 2,873,153   $ 2,873,153          
Percentage of total loans, COVID-19 Accomodations [1]     2.30%          
COVID-19 Accomodations [Member] | Paycheck Protection Program [Member]                
Non-TDR Loan Modifications and Paycheck Protection Program ("PPP") due to COVID-19 [Abstract]                
Number of loans with Covid 19 Accommodations | Loan     311          
Non-TDR loan modifications, portfolio loans outstanding 59,827   $ 59,827          
COVID-19 Accomodations [Member] | Commercial [Member] | Paycheck Protection Program [Member]                
Non-TDR Loan Modifications and Paycheck Protection Program ("PPP") due to COVID-19 [Abstract]                
Number of loans with Covid 19 Accommodations | Loan     17          
Non-TDR loan modifications, portfolio loans outstanding 25,105   $ 25,105          
COVID-19 Accomodations [Member] | Mortgage [Member] | Paycheck Protection Program [Member]                
Non-TDR Loan Modifications and Paycheck Protection Program ("PPP") due to COVID-19 [Abstract]                
Number of loans with Covid 19 Accommodations | Loan     197          
Non-TDR loan modifications, portfolio loans outstanding 32,091   $ 32,091          
COVID-19 Accomodations [Member] | Installment [Member] | Paycheck Protection Program [Member]                
Non-TDR Loan Modifications and Paycheck Protection Program ("PPP") due to COVID-19 [Abstract]                
Number of loans with Covid 19 Accommodations | Loan     97          
Non-TDR loan modifications, portfolio loans outstanding 2,631   $ 2,631          
COVID-19 Accomodations [Member] | Mortgage Loans Serviced for Others [Member] | Paycheck Protection Program [Member]                
Non-TDR Loan Modifications and Paycheck Protection Program ("PPP") due to COVID-19 [Abstract]                
Number of loans with Covid 19 Accommodations | Loan [1]     416          
Non-TDR loan modifications, portfolio loans outstanding [1] 66,279   $ 66,279          
COVID-19 Subsequent Accommodation [Member] | Paycheck Protection Program [Member]                
Non-TDR Loan Modifications and Paycheck Protection Program ("PPP") due to COVID-19 [Abstract]                
Number of loans with Covid 19 Accommodations | Loan     182          
Non-TDR loan modifications, portfolio loans outstanding 29,880   $ 29,880          
COVID-19 Subsequent Accommodation [Member] | Commercial [Member] | Paycheck Protection Program [Member]                
Non-TDR Loan Modifications and Paycheck Protection Program ("PPP") due to COVID-19 [Abstract]                
Number of loans with Covid 19 Accommodations | Loan     6          
Non-TDR loan modifications, portfolio loans outstanding 5,726   $ 5,726          
COVID-19 Subsequent Accommodation [Member] | Mortgage [Member] | Paycheck Protection Program [Member]                
Non-TDR Loan Modifications and Paycheck Protection Program ("PPP") due to COVID-19 [Abstract]                
Number of loans with Covid 19 Accommodations | Loan     125          
Non-TDR loan modifications, portfolio loans outstanding 22,571   $ 22,571          
COVID-19 Subsequent Accommodation [Member] | Installment [Member] | Paycheck Protection Program [Member]                
Non-TDR Loan Modifications and Paycheck Protection Program ("PPP") due to COVID-19 [Abstract]                
Number of loans with Covid 19 Accommodations | Loan     51          
Non-TDR loan modifications, portfolio loans outstanding $ 1,583   $ 1,583          
[1] We have delegated authority from all investors to grant these deferrals on their behalf.
v3.20.2
Loans, Loan Ratings by Loan Class, Commercial (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Summary of Loan Ratings by Loan Class [Abstract]    
Loans $ 2,864,473 $ 2,733,370
Accrued interest included in total 8,994 8,347
Commercial [Member]    
Summary of Loan Ratings by Loan Class [Abstract]    
Loans 1,355,212 1,169,693
Accrued interest included in total 3,422 2,998
Commercial [Member] | Non-Watch 1-6 [Member]    
Summary of Loan Ratings by Loan Class [Abstract]    
Loans 1,295,357 1,096,471
Accrued interest included in total 3,267 2,763
Commercial [Member] | Watch 7-8 [Member]    
Summary of Loan Ratings by Loan Class [Abstract]    
Loans 50,340 67,420
Accrued interest included in total 116 205
Commercial [Member] | Substandard Accrual 9 [Member]    
Summary of Loan Ratings by Loan Class [Abstract]    
Loans 7,346 4,502
Accrued interest included in total 39 30
Commercial [Member] | Non-Accrual 10-11 [Member]    
Summary of Loan Ratings by Loan Class [Abstract]    
Loans 2,169 1,300
Accrued interest included in total 0 0
Commercial [Member] | Commercial and Industrial [Member]    
Summary of Loan Ratings by Loan Class [Abstract]    
Loans 764,252 564,871
Commercial [Member] | Commercial and Industrial [Member] | Non-Watch 1-6 [Member]    
Summary of Loan Ratings by Loan Class [Abstract]    
Loans 715,810 515,955
Commercial [Member] | Commercial and Industrial [Member] | Watch 7-8 [Member]    
Summary of Loan Ratings by Loan Class [Abstract]    
Loans 42,153 44,384
Commercial [Member] | Commercial and Industrial [Member] | Substandard Accrual 9 [Member]    
Summary of Loan Ratings by Loan Class [Abstract]    
Loans 4,674 3,967
Commercial [Member] | Commercial and Industrial [Member] | Non-Accrual 10-11 [Member]    
Summary of Loan Ratings by Loan Class [Abstract]    
Loans 1,615 565
Commercial [Member] | Commercial Real Estate [Member]    
Summary of Loan Ratings by Loan Class [Abstract]    
Loans 590,960 604,822
Commercial [Member] | Commercial Real Estate [Member] | Non-Watch 1-6 [Member]    
Summary of Loan Ratings by Loan Class [Abstract]    
Loans 579,547 580,516
Commercial [Member] | Commercial Real Estate [Member] | Watch 7-8 [Member]    
Summary of Loan Ratings by Loan Class [Abstract]    
Loans 8,187 23,036
Commercial [Member] | Commercial Real Estate [Member] | Substandard Accrual 9 [Member]    
Summary of Loan Ratings by Loan Class [Abstract]    
Loans 2,672 535
Commercial [Member] | Commercial Real Estate [Member] | Non-Accrual 10-11 [Member]    
Summary of Loan Ratings by Loan Class [Abstract]    
Loans $ 554 $ 735
v3.20.2
Loans, Credit Scores by Loan Class, Mortgage and Installment Segments (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
Mar. 31, 2020
Sep. 30, 2019
Mar. 31, 2019
Sep. 30, 2020
Sep. 30, 2019
Dec. 31, 2019
Loan ratings/credit scores by loan class [Abstract]              
Accrued interest included in total $ 8,994       $ 8,994   $ 8,347
Other Real Estate and Foreclosed Assets [Abstract]              
Foreclosed residential real estate properties 1,000       1,000   1,200
Retail mortgage loans in process of foreclosure 40       40   700
Sale of Mortgage Loans [Abstract]              
Proceeds from sale of loans         2,395 $ 50,516  
Gain on sale of loans 20,205   $ 5,677   46,687 13,590  
Transfer of loan to held for sale         0 $ 36,622  
Fixed Rate Residential Mortgage and Adjustable Rate Residential Mortgage [Member]              
Sale of Mortgage Loans [Abstract]              
Proceeds from sale of loans     9,900        
Gain on sale of loans     70        
Residential Fixed Rate Mortgage Loans [Member] | Freddie Mac [Member]              
Sale of Mortgage Loans [Abstract]              
Proceeds from sale of loans   $ 26,300          
Gain on sale of loans   720 1,000        
Mortgage [Member]              
Loan ratings/credit scores by loan class [Abstract]              
800 and above [1] 136,733       136,733   141,630
750-799 [1] 433,890       433,890   474,044
700-749 [1] 272,014       272,014   281,835
650-699 [1] 111,834       111,834   119,052
600-649 [1] 39,423       39,423   47,236
550-599 [1] 20,363       20,363   17,061
500-549 [1] 11,305       11,305   13,499
Under 500 [1] 2,871       2,871   3,972
Unknown [1] 0       0   4,737
Total [1] 1,028,433       1,028,433   1,103,066
Accrued interest included in total [1] 4,397       4,397   4,155
Mortgage [Member] | Residential Adjustable Rate Mortgage Loans [Member]              
Sale of Mortgage Loans [Abstract]              
Proceeds from sale of loans       $ 40,600      
Gain on sale of loans       10      
Mortgage [Member] | Residential Fixed Rate Mortgage Loans [Member]              
Sale of Mortgage Loans [Abstract]              
Proceeds from sale of loans   2,400          
Gain on sale of loans   $ 70          
Transfer of loan to held for sale     $ 36,600        
Mortgage [Member] | Residential Fixed Rate Mortgage Loans [Member] | Freddie Mac [Member]              
Sale of Mortgage Loans [Abstract]              
Proceeds from sale of loans       29,800      
Gain on sale of loans       $ 530      
Mortgage [Member] | 1-4 Family Owner Occupied - Jumbo [Member]              
Loan ratings/credit scores by loan class [Abstract]              
800 and above [1] 49,057       49,057   48,486
750-799 [1] 219,844       219,844   198,491
700-749 [1] 110,981       110,981   106,609
650-699 [1] 41,101       41,101   31,553
600-649 [1] 12,387       12,387   13,230
550-599 [1] 3,477       3,477   514
500-549 [1] 2,391       2,391   1,519
Under 500 [1] 0       0   641
Unknown [1] 0       0   510
Total [1] 439,238       439,238   401,553
Accrued interest included in total [1] 1,288       1,288   1,139
Mortgage [Member] | 1-4 Family Owner Occupied - Non-jumbo [Member]              
Loan ratings/credit scores by loan class [Abstract]              
800 and above [1] 35,243       35,243   43,848
750-799 [1] 64,957       64,957   111,521
700-749 [1] 74,914       74,914   95,064
650-699 [1] 36,963       36,963   51,174
600-649 [1] 17,032       17,032   21,938
550-599 [1] 12,270       12,270   12,308
500-549 [1] 6,062       6,062   7,940
Under 500 [1] 1,680       1,680   2,208
Unknown [1] 0       0   1,259
Total [1] 249,121       249,121   347,260
Accrued interest included in total [1] 1,891       1,891   1,662
Mortgage [Member] | 1-4 Non-owner Occupied [Member]              
Loan ratings/credit scores by loan class [Abstract]              
800 and above [1] 28,557       28,557   24,315
750-799 [1] 78,503       78,503   84,656
700-749 [1] 48,228       48,228   34,839
650-699 [1] 14,511       14,511   13,995
600-649 [1] 4,986       4,986   5,897
550-599 [1] 1,908       1,908   1,863
500-549 [1] 1,475       1,475   1,870
Under 500 [1] 696       696   533
Unknown [1] 0       0   1,569
Total [1] 178,864       178,864   169,537
Accrued interest included in total [1] 590       590   586
Mortgage [Member] | 1-4 Family - 2nd Lien [Member]              
Loan ratings/credit scores by loan class [Abstract]              
800 and above [1] 13,443       13,443   13,905
750-799 [1] 42,292       42,292   50,012
700-749 [1] 26,334       26,334   30,697
650-699 [1] 11,982       11,982   14,267
600-649 [1] 2,954       2,954   4,097
550-599 [1] 2,214       2,214   1,703
500-549 [1] 1,134       1,134   1,281
Under 500 [1] 342       342   511
Unknown [1] 0       0   69
Total [1] 100,695       100,695   116,542
Accrued interest included in total [1] 363       363   502
Mortgage [Member] | Resort Lending [Member]              
Loan ratings/credit scores by loan class [Abstract]              
800 and above [1] 10,433       10,433   11,076
750-799 [1] 28,294       28,294   29,364
700-749 [1] 11,557       11,557   14,626
650-699 [1] 7,277       7,277   8,063
600-649 [1] 2,064       2,064   2,074
550-599 [1] 494       494   673
500-549 [1] 243       243   889
Under 500 [1] 153       153   79
Unknown [1] 0       0   1,330
Total [1] 60,515       60,515   68,174
Accrued interest included in total [1] 265       265   266
Installment [Member]              
Loan ratings/credit scores by loan class [Abstract]              
800 and above [1] 70,936       70,936   60,122
750-799 [1] 255,790       255,790   244,127
700-749 [1] 99,798       99,798   99,749
650-699 [1] 41,614       41,614   41,269
600-649 [1] 7,495       7,495   8,135
550-599 [1] 2,475       2,475   3,422
500-549 [1] 1,462       1,462   1,968
Under 500 [1] 555       555   615
Unknown [1] 703       703   1,204
Total [1] 480,828       480,828   460,611
Accrued interest included in total [1] 1,175       1,175   1,194
Installment [Member] | Boat Lending [Member]              
Loan ratings/credit scores by loan class [Abstract]              
800 and above [1] 33,385       33,385   28,041
750-799 [1] 124,751       124,751   118,380
700-749 [1] 38,729       38,729   41,490
650-699 [1] 11,557       11,557   11,485
600-649 [1] 2,089       2,089   2,254
550-599 [1] 632       632   946
500-549 [1] 242       242   377
Under 500 [1] 351       351   309
Unknown [1] 0       0   0
Total [1] 211,736       211,736   203,282
Accrued interest included in total [1] 471       471   490
Installment [Member] | Recreational Vehicle Lending [Member]              
Loan ratings/credit scores by loan class [Abstract]              
800 and above [1] 29,085       29,085   24,470
750-799 [1] 94,666       94,666   88,164
700-749 [1] 34,236       34,236   31,055
650-699 [1] 8,059       8,059   7,267
600-649 [1] 1,668       1,668   1,411
550-599 [1] 449       449   592
500-549 [1] 465       465   464
Under 500 [1] 24       24   22
Unknown [1] 0       0   0
Total [1] 168,652       168,652   153,445
Accrued interest included in total [1] 381       381   378
Installment [Member] | Other [Member]              
Loan ratings/credit scores by loan class [Abstract]              
800 and above [1] 8,466       8,466   7,611
750-799 [1] 36,373       36,373   37,583
700-749 [1] 26,833       26,833   27,204
650-699 [1] 21,998       21,998   22,517
600-649 [1] 3,738       3,738   4,470
550-599 [1] 1,394       1,394   1,884
500-549 [1] 755       755   1,127
Under 500 [1] 180       180   284
Unknown [1] 703       703   1,204
Total [1] 100,440       100,440   103,884
Accrued interest included in total [1] $ 323       $ 323   $ 326
[1] Credit scores have been updated within the last twelve months.
v3.20.2
Loans, Purchase Credit Impaired ("PCI") Loans (Details) - TCSB Bancorp, Inc. [Member] - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Dec. 31, 2019
Carrying amount of loans that meet the criteria of ASC 310-30 treatment [Abstract]          
Total carrying amount $ 1,609   $ 1,609   $ 2,285
Allowance for loan losses 0   0   0
Carrying amount, net of allowance for loan losses 1,609   1,609   2,285
Accretable yield of PCI loans, or income expected to be collected [Roll Forward]          
Balance at beginning of period 573 $ 749 640 $ 462  
New loans purchased 0 0 0 0  
Accretion recorded as loan interest income (156) (56) (223) (134)  
Reclassification from (to) nonaccretable difference 0 0 0 365  
Disposals/other adjustments 0 0 0 0  
Balance at end of period 417 $ 693 417 $ 693  
Commercial [Member]          
Carrying amount of loans that meet the criteria of ASC 310-30 treatment [Abstract]          
Total carrying amount 906   906   1,394
Mortgage [Member]          
Carrying amount of loans that meet the criteria of ASC 310-30 treatment [Abstract]          
Total carrying amount 560   560   575
Installment [Member]          
Carrying amount of loans that meet the criteria of ASC 310-30 treatment [Abstract]          
Total carrying amount $ 143   $ 143   $ 316
v3.20.2
Shareholders' Equity and Earnings Per Common Share, Shareholders' Equity (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Dec. 17, 2019
Share Repurchase Plan [Abstract]          
Stock repurchased (in shares) 0 25,000 678,929 1,204,688  
Stock repurchased $ 0 $ 502 $ 13,784 $ 26,284  
Common Stock [Member]          
Share Repurchase Plan [Abstract]          
Number of shares authorized for repurchase (in shares)         1,120,000
Stock repurchased (in shares)     678,929 1,204,688  
Stock repurchased $ 0 $ 502 $ 13,784 $ 26,284  
v3.20.2
Shareholders' Equity and Earnings Per Common Share, Earings Per Share Reconciliation (Details) - USD ($)
$ / shares in Units, $ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Earnings Per Share Reconciliation [Abstract]        
Net income $ 19,584 $ 12,445 $ 39,166 $ 32,556
Weighted average shares outstanding (in shares) [1] 21,881,000 22,486,000 22,014,000 23,033,000
Stock units for deferred compensation plan for non-employee directors (in shares) 117,000 132,000 119,000 131,000
Effect of stock options (in shares) 85,000 110,000 90,000 116,000
Performance share units (in shares) 32,000 42,000 33,000 39,000
Weighted average shares outstanding for calculation of diluted earnings per share (in shares) 22,115,000 22,770,000 22,256,000 23,319,000
Net income per common share [Abstract]        
Basic (in dollars per share) [1] $ 0.90 $ 0.55 $ 1.78 $ 1.41
Diluted (in dollars per share) $ 0.89 $ 0.55 $ 1.76 $ 1.40
Stock Options [Member]        
Antidilutive Securities [Abstract]        
Antidilutive shares excluded from computation of diluted loss per share (in shares) 0 0 0 0
[1] Basic net income per common share includes weighted average common shares outstanding during the period and participating share awards.
v3.20.2
Derivative Financial Instruments (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2020
Mar. 31, 2020
Sep. 30, 2020
Dec. 31, 2019
Derivative financial instrument according to type of hedge [Abstract]        
Unrealized losses on cash flow hedges, net of tax     $ (1,100)  
Fair value of derivative instruments, balance sheet location [Abstract]        
Asset Derivatives $ 19,202   19,202 $ 5,464
Liability Derivatives 12,690   12,690 4,402
Interest-Rate Cap Agreements [Member]        
Derivative financial instrument according to type of hedge [Abstract]        
Unrealized loss on derivative instrument to be reclassified into earnings (500) $ (2,000)    
Cash Flow Hedge Designation [Member]        
Derivative financial instrument according to type of hedge [Abstract]        
Notional Amount       $ 175,000
Average Maturity       2 years 6 months
Fair Value       $ 40
Cash Flow Hedge Designation [Member] | Interest-Rate Cap Agreements [Member]        
Derivative financial instrument according to type of hedge [Abstract]        
Notional Amount       $ 150,000
Average Maturity       2 years 7 months 6 days
Fair Value       $ 214
Designated as Hedging Instrument [Member]        
Fair value of derivative instruments, balance sheet location [Abstract]        
Asset Derivatives 0   0 214
Liability Derivatives 860   860 416
No Hedge Designation [Member]        
Derivative financial instrument according to type of hedge [Abstract]        
Notional Amount 899,924   $ 899,924 $ 458,279
Average Maturity     1 year 10 months 24 days 3 years 8 months 12 days
Fair Value 7,372   $ 7,372 $ 1,264
Fair value of derivative instruments, balance sheet location [Abstract]        
Asset Derivatives 19,202   19,202 5,250
Liability Derivatives 11,830   11,830 3,986
No Hedge Designation [Member] | Rate-Lock Mortgage Loan Commitments [Member]        
Derivative financial instrument according to type of hedge [Abstract]        
Notional Amount 196,646   $ 196,646 $ 49,268
Average Maturity     1 month 6 days 1 month 6 days
Fair Value 8,356   $ 8,356 $ 1,412
No Hedge Designation [Member] | Mandatory Commitments to Sell Mortgage Loans [Member]        
Derivative financial instrument according to type of hedge [Abstract]        
Notional Amount 232,948   $ 232,948 $ 95,363
Average Maturity     1 month 6 days 1 month 6 days
Fair Value (580)   $ (580) $ (150)
No Hedge Designation [Member] | Interest-Rate Cap Agreements [Member]        
Derivative financial instrument according to type of hedge [Abstract]        
Notional Amount 150,000   $ 150,000  
Average Maturity     1 year 9 months 18 days  
Fair Value 5   $ 5  
No Hedge Designation [Member] | Purchased Options [Member]        
Derivative financial instrument according to type of hedge [Abstract]        
Notional Amount 2,908   $ 2,908 $ 2,908
Average Maturity     9 months 18 days 1 year 6 months
Fair Value 30   $ 30 $ 141
No Hedge Designation [Member] | Written Options [Member]        
Derivative financial instrument according to type of hedge [Abstract]        
Notional Amount 2,848   $ 2,848 $ 2,848
Average Maturity     9 months 18 days 1 year 6 months
Fair Value (30)   $ (30) $ (139)
Fixed Income Interest Rate [Member] | Fair Value Hedge Designation [Member] | Interest Rate Swap [Member]        
Derivative financial instrument according to type of hedge [Abstract]        
Notional Amount 7,117   $ 7,117 $ 7,117
Average Maturity     8 years 7 months 6 days 9 years 4 months 24 days
Fair Value (860)   $ (860) $ (242)
Fixed Income Interest Rate [Member] | Cash Flow Hedge Designation [Member] | Interest Rate Swap [Member]        
Derivative financial instrument according to type of hedge [Abstract]        
Notional Amount       $ 25,000
Average Maturity       1 year 7 months 6 days
Fair Value       $ (174)
Fixed Income Interest Rate [Member] | No Hedge Designation [Member] | Interest Rate Swap [Member]        
Derivative financial instrument according to type of hedge [Abstract]        
Notional Amount 144,787   $ 144,787 $ 153,946
Average Maturity     4 years 8 months 12 days 5 years 6 months
Fair Value (10,811)   $ (10,811) $ (3,641)
Fixed Income Interest Rate [Member] | No Hedge Designation [Member] | Interest Rate Swap [Member]        
Derivative financial instrument according to type of hedge [Abstract]        
Notional Amount 25,000   $ 25,000  
Average Maturity     9 months 18 days  
Fair Value (409)   $ (409)  
Variable Income Interest Rate [Member] | No Hedge Designation [Member] | Interest Rate Swap [Member]        
Derivative financial instrument according to type of hedge [Abstract]        
Notional Amount 144,787   $ 144,787 $ 153,946
Average Maturity     4 years 8 months 12 days 5 years 6 months
Fair Value 10,811   $ 10,811 $ 3,641
Other Assets [Member] | Designated as Hedging Instrument [Member] | Interest-Rate Cap Agreements [Member]        
Fair value of derivative instruments, balance sheet location [Abstract]        
Asset Derivatives 0   0 214
Other Assets [Member] | No Hedge Designation [Member] | Rate-Lock Mortgage Loan Commitments [Member]        
Fair value of derivative instruments, balance sheet location [Abstract]        
Asset Derivatives 8,356   8,356 1,412
Other Assets [Member] | No Hedge Designation [Member] | Mandatory Commitments to Sell Mortgage Loans [Member]        
Fair value of derivative instruments, balance sheet location [Abstract]        
Asset Derivatives 0   0 0
Other Assets [Member] | No Hedge Designation [Member] | Interest-Rate Cap Agreements [Member]        
Fair value of derivative instruments, balance sheet location [Abstract]        
Asset Derivatives 5   5 0
Other Assets [Member] | No Hedge Designation [Member] | Purchased Options [Member]        
Fair value of derivative instruments, balance sheet location [Abstract]        
Asset Derivatives 30   30 141
Other Assets [Member] | No Hedge Designation [Member] | Written Options [Member]        
Fair value of derivative instruments, balance sheet location [Abstract]        
Asset Derivatives 0   0 0
Other Assets [Member] | Fixed Income Interest Rate [Member] | Designated as Hedging Instrument [Member] | Interest Rate Swap [Member]        
Fair value of derivative instruments, balance sheet location [Abstract]        
Asset Derivatives 0   0 0
Other Assets [Member] | Fixed Income Interest Rate [Member] | No Hedge Designation [Member] | Interest Rate Swap [Member]        
Fair value of derivative instruments, balance sheet location [Abstract]        
Asset Derivatives 0   0 28
Other Assets [Member] | Fixed Income Interest Rate [Member] | No Hedge Designation [Member] | Interest Rate Swap [Member]        
Fair value of derivative instruments, balance sheet location [Abstract]        
Asset Derivatives 0   0 0
Other Assets [Member] | Variable Income Interest Rate [Member] | No Hedge Designation [Member] | Interest Rate Swap [Member]        
Fair value of derivative instruments, balance sheet location [Abstract]        
Asset Derivatives 10,811   10,811 3,669
Other Liabilities [Member] | Designated as Hedging Instrument [Member] | Interest-Rate Cap Agreements [Member]        
Fair value of derivative instruments, balance sheet location [Abstract]        
Liability Derivatives 0   0 0
Other Liabilities [Member] | No Hedge Designation [Member] | Rate-Lock Mortgage Loan Commitments [Member]        
Fair value of derivative instruments, balance sheet location [Abstract]        
Liability Derivatives 0   0 0
Other Liabilities [Member] | No Hedge Designation [Member] | Mandatory Commitments to Sell Mortgage Loans [Member]        
Fair value of derivative instruments, balance sheet location [Abstract]        
Liability Derivatives 580   580 150
Other Liabilities [Member] | No Hedge Designation [Member] | Interest-Rate Cap Agreements [Member]        
Fair value of derivative instruments, balance sheet location [Abstract]        
Liability Derivatives 0   0 0
Other Liabilities [Member] | No Hedge Designation [Member] | Purchased Options [Member]        
Fair value of derivative instruments, balance sheet location [Abstract]        
Liability Derivatives 0   0 0
Other Liabilities [Member] | No Hedge Designation [Member] | Written Options [Member]        
Fair value of derivative instruments, balance sheet location [Abstract]        
Liability Derivatives 30   30 139
Other Liabilities [Member] | Fixed Income Interest Rate [Member] | Designated as Hedging Instrument [Member] | Interest Rate Swap [Member]        
Fair value of derivative instruments, balance sheet location [Abstract]        
Liability Derivatives 860   860 416
Other Liabilities [Member] | Fixed Income Interest Rate [Member] | No Hedge Designation [Member] | Interest Rate Swap [Member]        
Fair value of derivative instruments, balance sheet location [Abstract]        
Liability Derivatives 10,811   10,811 3,669
Other Liabilities [Member] | Fixed Income Interest Rate [Member] | No Hedge Designation [Member] | Interest Rate Swap [Member]        
Fair value of derivative instruments, balance sheet location [Abstract]        
Liability Derivatives 409   409 0
Other Liabilities [Member] | Variable Income Interest Rate [Member] | No Hedge Designation [Member] | Interest Rate Swap [Member]        
Fair value of derivative instruments, balance sheet location [Abstract]        
Liability Derivatives $ 0   $ 0 $ 28
v3.20.2
Derivative Financial Instruments, Effect on Statement of Operations (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]        
Gain (Loss) Recognized in Other Comprehensive Income (Effective Portion) $ (26) $ (72) $ (354) $ (1,740)
Fair Value Hedge Designation [Member] | Interest Rate Swap [Member] | Non-Interest Income-Other [Member]        
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]        
Gain (Loss) Recognized in Income 6 (188) (618) (391)
Cash Flow Hedge Designation [Member]        
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]        
Gain (Loss) Recognized in Other Comprehensive Income (Effective Portion) (26) (72) (354) (1,740)
Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (Effective Portion) (310) 102 (646) 393
Cash Flow Hedge Designation [Member] | Interest-Rate Cap Agreements [Member]        
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]        
Gain (Loss) Recognized in Other Comprehensive Income (Effective Portion) 0 (37) 126 (1,311)
Cash Flow Hedge Designation [Member] | Interest-Rate Cap Agreements [Member] | Interest Expense [Member]        
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]        
Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (Effective Portion) (180) 88 (413) 321
Cash Flow Hedge Designation [Member] | Fixed Income Interest Rate [Member] | Interest Rate Swap [Member]        
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]        
Gain (Loss) Recognized in Other Comprehensive Income (Effective Portion) (26) (35) (480) (429)
Cash Flow Hedge Designation [Member] | Fixed Income Interest Rate [Member] | Interest Rate Swap [Member] | Interest Expense [Member]        
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]        
Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (Effective Portion) (130) 14 (233) 72
No Hedge Designation [Member]        
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]        
Gain (Loss) Recognized in Income 1,251 211 6,573 1,721
No Hedge Designation [Member] | Interest-Rate Cap Agreements [Member] | Interest Expense [Member]        
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]        
Gain (Loss) Recognized in Income (14) 0 (56) 0
No Hedge Designation [Member] | Rate-Lock Mortgage Loan Commitments [Member] | Mortgage Loan Gains [Member]        
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]        
Gain (Loss) Recognized in Income 1,096 (96) 6,944 1,364
No Hedge Designation [Member] | Mandatory Commitments to Sell Mortgage Loans [Member] | Mortgage Loan Gains [Member]        
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]        
Gain (Loss) Recognized in Income 52 307 (430) 356
No Hedge Designation [Member] | Purchased Options [Member] | Interest Expense [Member]        
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]        
Gain (Loss) Recognized in Income (10) (46) (111) 9
No Hedge Designation [Member] | Written Options [Member] | Interest Expense [Member]        
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]        
Gain (Loss) Recognized in Income 10 46 109 (8)
No Hedge Designation [Member] | Fixed Income Interest Rate [Member] | Interest Rate Swap [Member] | Interest Income [Member]        
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]        
Gain (Loss) Recognized in Income 688 (1,670) (7,170) (5,254)
No Hedge Designation [Member] | Fixed Income Interest Rate [Member] | Interest Rate Swap [Member] | Interest Expense [Member]        
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]        
Gain (Loss) Recognized in Income 117 0 117 0
No Hedge Designation [Member] | Variable Income Interest Rate [Member] | Interest Rate Swap [Member] | Interest Income [Member]        
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]        
Gain (Loss) Recognized in Income $ (688) $ 1,670 $ 7,170 $ 5,254
v3.20.2
Goodwill and Other Intangibles (Details) - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2019
Sep. 30, 2020
Amortized intangible assets - core deposits [Abstract]    
Gross Carrying Amount $ 11,916 $ 11,916
Accumulated Amortization 6,590 7,355
Unamortized intangible assets - goodwill [Abstract]    
Gross Carrying Amount 28,300 28,300
Goodwill impairment $ 0  
Summary of estimated core deposit intangible amortization [Abstract]    
Three months ending December 31, 2020   255
2021   970
2022   785
2023   547
2024   516
2025 and thereafter   1,488
Total   $ 4,561
v3.20.2
Share Based Compensation (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Mar. 31, 2019
Sep. 30, 2020
Sep. 30, 2019
Share Based Compensation [Abstract]          
Number of additional shares approved for grant (in shares)       400,000  
Shares issued on deferral basis credited percentage of current value 90.00%     90.00%  
Total compensation cost not yet recognized $ 2,100     $ 2,100  
Total compensation cost not yet recognized, period for recognition       1 year 9 months 18 days  
Long-Term Incentive Plan [Member]          
Share Based Compensation [Abstract]          
Total compensation expense recognized 400 $ 400   $ 1,200 $ 1,200
Tax benefit relating to compensation expense recognized $ 100 $ 100   $ 300 $ 200
Restricted Stock [Member] | Long-Term Incentive Plan [Member]          
Share Based Compensation [Abstract]          
Restricted stock and Performance stock units granted (in shares) 3,000 8,000   55,996 64,267
Restricted Stock [Member] | Long-Term Incentive Plan [Member] | Vesting Over Three Years [Member]          
Share Based Compensation [Abstract]          
Restricted stock and Performance stock units granted (in shares)   8,000.000 2,000.000    
Vesting period     3 years    
Restricted Stock [Member] | Long-Term Incentive Plan [Member] | Cliff Vest After Three Years [Member]          
Share Based Compensation [Abstract]          
Vesting period       3 years 3 years
Performance Stock Units [Member] | Long-Term Incentive Plan [Member]          
Share Based Compensation [Abstract]          
Restricted stock and Performance stock units granted (in shares) 0 0   20,897 22,016
Performance Stock Units [Member] | Long-Term Incentive Plan [Member] | Cliff Vest After Three Years [Member]          
Share Based Compensation [Abstract]          
Vesting period       3 years 3 years
Performance feature comparison period       3 years  
Non-Employee Directors [Member]          
Share Based Compensation [Abstract]          
Number of additional shares approved for grant (in shares)       200,000  
Total compensation expense recognized $ 90 $ 60   $ 260 $ 180
Tax benefit relating to compensation expense recognized $ 20 $ 10   $ 50 $ 40
Directors [Member]          
Share Based Compensation [Abstract]          
Shares issues as retainer fees (in shares)       16,000.000 8,000.000
v3.20.2
Share Based Compensation, Outstanding Stock Option Grants and Related Transactions (Details) - Stock Options [Member]
$ / shares in Units, $ in Thousands
 9 Months Ended
Sep. 30, 2020
USD ($)
$ / shares
shares
Number of Shares [Roll Forward]  
Outstanding, beginning balance (in shares) 138,506
Granted (in shares) 0
Exercised (in shares) (13,117)
Forfeited (in shares) 0
Expired (in shares) 0
Outstanding, ending balance (in shares) 125,389
Vested and expected to vest, period end (in shares) 125,389
Exercisable, period end (in shares) 125,389
Average Exercise Price [Roll Forward]  
Outstanding, beginning balance (in dollars per share) | $ / shares $ 4.62
Exercised (in dollars per share) | $ / shares 3.50
Outstanding, ending balance (in dollars per share) | $ / shares 4.73
Vested and expected to vest, period end (in dollars per share) | $ / shares 4.73
Exercisable, period end (in dollars per share) | $ / shares $ 4.73
Weighted-Average Remaining Contractual Term (Years) [Abstract]  
Outstanding, weighted average remaining contractual term 2 years 3 months 18 days
Vested and expected to vest, weighted-average remaining contractual term 2 years 3 months 18 days
Exercisable, weighted average remaining contractual term 2 years 3 months 18 days
Aggregate Intrinsic Value [Abstract]  
Outstanding, aggregate intrinsic value | $ $ 993
Vested and expected to vest, aggregate intrinsic value | $ 993
Exercisable, aggregate intrinsic value | $ $ 993
v3.20.2
Share Based Compensation, Outstanding Non-vested Restricted Stock and PSUs and Related Transactions (Details) - Non-vested Restricted Stock and PSU's [Member]
 9 Months Ended
Sep. 30, 2020
$ / shares
shares
Number of Shares [Roll Forward]  
Outstanding, beginning balance (in shares) | shares 245,726
Granted (in shares) | shares 76,893
Vested (in shares) | shares (77,092)
Forfeited (in shares) | shares (20,869)
Outstanding, ending balance (in shares) | shares 224,658
Weighted Average Grant Date Fair Value [Roll Forward]  
Outstanding, beginning balance (in dollars per share) | $ / shares $ 21.72
Granted (in dollars per share) | $ / shares 22.46
Vested (in dollars per share) | $ / shares 20.61
Forfeited (in dollars per share) | $ / shares 22.64
Outstanding, ending balance (in dollars per share) | $ / shares $ 22.26
v3.20.2
Share Based Compensation, Options Exercised During the Periods (Details) - Stock Options [Member] - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Information regarding options exercised [Abstract]        
Intrinsic value $ 11 $ 32 $ 224 $ 868
Cash proceeds received 4 6 46 701
Tax benefit realized $ 2 $ 6 $ 47 $ 182
v3.20.2
Income Tax (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Dec. 31, 2019
Income Tax [Abstract]          
Income tax expense $ 4,777 $ 3,125 $ 9,245 $ 7,979  
Decrease in income tax expense 10 $ (10) (190) $ (180)  
Gross unrecognized tax benefits $ 400   $ 400   $ 400
v3.20.2
Regulatory Matters (Details)
$ in Thousands
Sep. 30, 2020
USD ($)
Jun. 30, 2020
USD ($)
Dec. 31, 2019
USD ($)
Sep. 30, 2019
USD ($)
Jun. 30, 2019
USD ($)
Dec. 31, 2018
USD ($)
Regulatory Matters [Abstract]            
Undivided profits $ 68,300          
Tier 1 capital to average assets [Abstract]            
Capital conservation buffer 0.0250   0.0250      
Components of regulatory capital [Abstract]            
Total shareholders' equity $ 373,092 $ 355,123 $ 350,169 $ 340,245 $ 330,846 $ 338,994
Add (deduct) [Abstract]            
Accumulated other comprehensive income for regulatory purposes 6,146   (3,786)      
Subordinated debt 39,261   0      
Consolidated [Member]            
Total capital to risk-weighted assets [Abstract]            
Total risk-based capital [1] $ 441,969   $ 380,454      
Actual, Ratio [1] 0.1562   0.1374      
Minimum for Adequately Capitalized Institutions, Amount [1] $ 226,378   $ 221,562      
Minimum for Adequately Capitalized Institutions, Ratio [1] 0.0800   0.0800      
Tier 1 capital to risk-weighted assets [Abstract]            
Actual, Amount [1] $ 366,571   $ 352,764      
Actual, Ratio [1] 0.1295   0.1274      
Minimum for Adequately Capitalized Institutions, Amount [1] $ 169,783   $ 166,171      
Minimum for Adequately Capitalized Institutions, Ratio [1] 0.0600   0.0600      
Common equity tier 1 capital to risk-weighted assets [Abstract]            
Actual, Amount [1] $ 328,288   $ 314,532      
Actual, Ratio [1] 0.1160   0.1136      
Minimum for Adequately Capitalized Institutions, Amount [1] $ 127,338   $ 124,628      
Minimum for Adequately Capitalized Institutions, Ratio [1] 0.0450   0.0450      
Tier 1 capital to average assets [Abstract]            
Tier 1 capital [1] $ 366,571   $ 352,764      
Actual, Ratio [1] 0.0905   0.1011      
Minimum for Adequately Capitalized Institutions, Amount [1] $ 162,103   $ 139,632      
Minimum for Adequately Capitalized Institutions, Ratio [1] 0.0400   0.0400      
Components of regulatory capital [Abstract]            
Total shareholders' equity $ 373,092   $ 350,169      
Add (deduct) [Abstract]            
Accumulated other comprehensive income for regulatory purposes (11,943)   (2,011)      
Goodwill and other intangibles (32,861)   (33,626)      
Common equity tier 1 capital [1] 328,288   314,532      
Qualifying trust preferred securities 38,283   38,232      
Tier 1 capital [1] 366,571   352,764      
Subordinated debt 40,000   0      
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets 35,398   27,690      
Total risk-based capital [1] 441,969   380,454      
Independent Bank [Member]            
Total capital to risk-weighted assets [Abstract]            
Total risk-based capital [1] $ 391,033   $ 358,914      
Actual, Ratio [1] 0.1382   0.1296      
Minimum for Adequately Capitalized Institutions, Amount [1] $ 226,310   $ 221,482      
Minimum for Adequately Capitalized Institutions, Ratio [1] 0.0800   0.0800      
Minimum for Well-Capitalized Institutions, Amount [1] $ 282,888   $ 276,852      
Minimum for Well-Capitalized Institutions, Ratio [1] 0.1000   0.1000      
Tier 1 capital to risk-weighted assets [Abstract]            
Actual, Amount [1] $ 355,645   $ 331,224      
Actual, Ratio [1] 0.1257   0.1196      
Minimum for Adequately Capitalized Institutions, Amount [1] $ 169,733   $ 166,111      
Minimum for Adequately Capitalized Institutions, Ratio [1] 0.0600   0.0600      
Minimum for Well-Capitalized Institutions, Amount [1] $ 226,310   $ 221,482      
Minimum for Well-Capitalized Institutions, Ratio [1] 0.0800   0.0800      
Common equity tier 1 capital to risk-weighted assets [Abstract]            
Actual, Amount [1] $ 355,645   $ 331,224      
Actual, Ratio [1] 0.1257   0.1196      
Minimum for Adequately Capitalized Institutions, Amount [1] $ 127,299   $ 124,583      
Minimum for Adequately Capitalized Institutions, Ratio [1] 0.0450   0.0450      
Minimum for Well-Capitalized Institutions, Amount [1] $ 183,877   $ 179,954      
Minimum for Well-Capitalized Institutions, Ratio [1] 0.0650   0.0650      
Tier 1 capital to average assets [Abstract]            
Tier 1 capital [1] $ 355,645   $ 331,224      
Actual, Ratio [1] 0.0878   0.0949      
Minimum for Adequately Capitalized Institutions, Amount [1] $ 162,020   $ 139,615      
Minimum for Adequately Capitalized Institutions, Ratio [1] 0.0400   0.0400      
Minimum for Well-Capitalized Institutions, Amount [1] $ 202,525   $ 174,519      
Minimum for Well-Capitalized Institutions, Ratio [1] 0.0500   0.0500      
Components of regulatory capital [Abstract]            
Total shareholders' equity $ 400,449   $ 366,861      
Add (deduct) [Abstract]            
Accumulated other comprehensive income for regulatory purposes (11,943)   (2,011)      
Goodwill and other intangibles (32,861)   (33,626)      
Common equity tier 1 capital [1] 355,645   331,224      
Qualifying trust preferred securities 0   0      
Tier 1 capital [1] 355,645   331,224      
Subordinated debt 0   0      
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets 35,388   27,690      
Total risk-based capital [1] $ 391,033   $ 358,914      
[1] These ratios do not reflect a capital conservation buffer of 2.50% at September 30, 2020 and December 31, 2019.
v3.20.2
Fair Value Disclosures, Significant Assumptions (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Assets [Abstract]    
Securities available for sale $ 985,050 $ 518,400
Loans held for sale, carried at fair value 99,747 69,800
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]    
Assets [Abstract]    
Securities available for sale 0 0
Derivatives 0 0
Liabilities [Abstract]    
Derivatives 0 0
Significant Other Observable Inputs (Level 2) [Member]    
Assets [Abstract]    
Securities available for sale 985,050 518,400
Derivatives 19,202 5,464
Liabilities [Abstract]    
Derivatives 12,690 4,402
Significant Un-observable Inputs (Level 3) [Member]    
Assets [Abstract]    
Securities available for sale 0 0
Derivatives 0 0
Liabilities [Abstract]    
Derivatives 0 0
Recurring Basis [Member]    
Assets [Abstract]    
Loans held for sale, carried at fair value 99,747 69,800
Capitalized mortgage loan servicing rights 15,403 19,171
Derivatives [1] 19,202 5,464
Liabilities [Abstract]    
Derivatives [2] 12,690 4,402
Recurring Basis [Member] | U.S. Agency [Member]    
Assets [Abstract]    
Securities available for sale 11,130 14,661
Recurring Basis [Member] | U.S. Agency Residential Mortgage-Backed [Member]    
Assets [Abstract]    
Securities available for sale 335,560 227,762
Recurring Basis [Member] | U.S. Agency Commercial Mortgage-Backed [Member]    
Assets [Abstract]    
Securities available for sale 8,421 10,756
Recurring Basis [Member] | Private Label Mortgage-Backed [Member]    
Assets [Abstract]    
Securities available for sale 44,285 39,693
Recurring Basis [Member] | Other Asset Backed [Member]    
Assets [Abstract]    
Securities available for sale 263,371 93,886
Recurring Basis [Member] | Obligations of States and Political Subdivisions [Member]    
Assets [Abstract]    
Securities available for sale 244,978 96,102
Recurring Basis [Member] | Corporate [Member]    
Assets [Abstract]    
Securities available for sale 75,017 33,195
Recurring Basis [Member] | Trust Preferred [Member]    
Assets [Abstract]    
Securities available for sale 1,770 1,843
Recurring Basis [Member] | Foreign Government [Member]    
Assets [Abstract]    
Securities available for sale 518 502
Recurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]    
Assets [Abstract]    
Loans held for sale, carried at fair value 0 0
Capitalized mortgage loan servicing rights 0 0
Derivatives [1] 0 0
Liabilities [Abstract]    
Derivatives [2] 0 0
Recurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | U.S. Agency [Member]    
Assets [Abstract]    
Securities available for sale 0 0
Recurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | U.S. Agency Residential Mortgage-Backed [Member]    
Assets [Abstract]    
Securities available for sale 0 0
Recurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | U.S. Agency Commercial Mortgage-Backed [Member]    
Assets [Abstract]    
Securities available for sale 0 0
Recurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Private Label Mortgage-Backed [Member]    
Assets [Abstract]    
Securities available for sale 0 0
Recurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Other Asset Backed [Member]    
Assets [Abstract]    
Securities available for sale 0 0
Recurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Obligations of States and Political Subdivisions [Member]    
Assets [Abstract]    
Securities available for sale 0 0
Recurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Corporate [Member]    
Assets [Abstract]    
Securities available for sale 0 0
Recurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Trust Preferred [Member]    
Assets [Abstract]    
Securities available for sale 0 0
Recurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Foreign Government [Member]    
Assets [Abstract]    
Securities available for sale 0 0
Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member]    
Assets [Abstract]    
Loans held for sale, carried at fair value 99,747 69,800
Capitalized mortgage loan servicing rights 0 0
Derivatives [1] 19,202 5,464
Liabilities [Abstract]    
Derivatives [2] 12,690 4,402
Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | U.S. Agency [Member]    
Assets [Abstract]    
Securities available for sale 11,130 14,661
Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | U.S. Agency Residential Mortgage-Backed [Member]    
Assets [Abstract]    
Securities available for sale 335,560 227,762
Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | U.S. Agency Commercial Mortgage-Backed [Member]    
Assets [Abstract]    
Securities available for sale 8,421 10,756
Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Private Label Mortgage-Backed [Member]    
Assets [Abstract]    
Securities available for sale 44,285 39,693
Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Other Asset Backed [Member]    
Assets [Abstract]    
Securities available for sale 263,371 93,886
Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Obligations of States and Political Subdivisions [Member]    
Assets [Abstract]    
Securities available for sale 244,978 96,102
Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Corporate [Member]    
Assets [Abstract]    
Securities available for sale 75,017 33,195
Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Trust Preferred [Member]    
Assets [Abstract]    
Securities available for sale 1,770 1,843
Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Foreign Government [Member]    
Assets [Abstract]    
Securities available for sale 518 502
Recurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member]    
Assets [Abstract]    
Loans held for sale, carried at fair value 0 0
Capitalized mortgage loan servicing rights 15,403 19,171
Derivatives [1] 0 0
Liabilities [Abstract]    
Derivatives [2] 0 0
Recurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | U.S. Agency [Member]    
Assets [Abstract]    
Securities available for sale 0 0
Recurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | U.S. Agency Residential Mortgage-Backed [Member]    
Assets [Abstract]    
Securities available for sale 0 0
Recurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | U.S. Agency Commercial Mortgage-Backed [Member]    
Assets [Abstract]    
Securities available for sale 0 0
Recurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Private Label Mortgage-Backed [Member]    
Assets [Abstract]    
Securities available for sale 0 0
Recurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Other Asset Backed [Member]    
Assets [Abstract]    
Securities available for sale 0 0
Recurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Obligations of States and Political Subdivisions [Member]    
Assets [Abstract]    
Securities available for sale 0 0
Recurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Corporate [Member]    
Assets [Abstract]    
Securities available for sale 0 0
Recurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Trust Preferred [Member]    
Assets [Abstract]    
Securities available for sale 0 0
Recurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Foreign Government [Member]    
Assets [Abstract]    
Securities available for sale 0 0
Nonrecurring Basis [Member] | Impaired Loans [Member] | Commercial [Member] | Commercial and Industrial [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 1,591 655
Nonrecurring Basis [Member] | Impaired Loans [Member] | Commercial [Member] | Commercial Real Estate [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 7,098 316
Nonrecurring Basis [Member] | Impaired Loans [Member] | Mortgage [Member] | 1-4 Family Owner Occupied - Jumbo [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 500 987
Nonrecurring Basis [Member] | Impaired Loans [Member] | Mortgage [Member] | 1-4 Family Owner Occupied - Non-jumbo [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 284 470
Nonrecurring Basis [Member] | Impaired Loans [Member] | Mortgage [Member] | 1-4 Family Non-owner Occupied [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 58 281
Nonrecurring Basis [Member] | Impaired Loans [Member] | Mortgage [Member] | 1-4 Family - 2nd Lien [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 200 294
Nonrecurring Basis [Member] | Impaired Loans [Member] | Mortgage [Member] | Resort Lending [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 77 245
Nonrecurring Basis [Member] | Impaired Loans [Member] | Installment [Member] | Boat Lending [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 90 67
Nonrecurring Basis [Member] | Impaired Loans [Member] | Installment [Member] | Recreational Vehicle Lending [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 38 2
Nonrecurring Basis [Member] | Impaired Loans [Member] | Installment [Member] | Other [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 139 121
Nonrecurring Basis [Member] | Other Real Estate [Member] | Commercial [Member] | Commercial Real Estate [Member]    
Impaired loans [Abstract]    
Loans receivable [4] 474  
Nonrecurring Basis [Member] | Other Real Estate [Member] | Mortgage [Member] | 1-4 Family Owner Occupied - Non-jumbo [Member]    
Impaired loans [Abstract]    
Loans receivable [5]   31
Nonrecurring Basis [Member] | Other Real Estate [Member] | Installment [Member] | Other [Member]    
Impaired loans [Abstract]    
Loans receivable [5]   28
Nonrecurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired Loans [Member] | Commercial [Member] | Commercial and Industrial [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 0 0
Nonrecurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired Loans [Member] | Commercial [Member] | Commercial Real Estate [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 0 0
Nonrecurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired Loans [Member] | Mortgage [Member] | 1-4 Family Owner Occupied - Jumbo [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 0 0
Nonrecurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired Loans [Member] | Mortgage [Member] | 1-4 Family Owner Occupied - Non-jumbo [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 0 0
Nonrecurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired Loans [Member] | Mortgage [Member] | 1-4 Family Non-owner Occupied [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 0 0
Nonrecurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired Loans [Member] | Mortgage [Member] | 1-4 Family - 2nd Lien [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 0 0
Nonrecurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired Loans [Member] | Mortgage [Member] | Resort Lending [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 0 0
Nonrecurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired Loans [Member] | Installment [Member] | Boat Lending [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 0 0
Nonrecurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired Loans [Member] | Installment [Member] | Recreational Vehicle Lending [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 0 0
Nonrecurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired Loans [Member] | Installment [Member] | Other [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 0 0
Nonrecurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Other Real Estate [Member] | Commercial [Member] | Commercial Real Estate [Member]    
Impaired loans [Abstract]    
Loans receivable [4] 474  
Nonrecurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Other Real Estate [Member] | Mortgage [Member] | 1-4 Family Owner Occupied - Non-jumbo [Member]    
Impaired loans [Abstract]    
Loans receivable [5]   0
Nonrecurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Other Real Estate [Member] | Installment [Member] | Other [Member]    
Impaired loans [Abstract]    
Loans receivable [5]   0
Nonrecurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Impaired Loans [Member] | Commercial [Member] | Commercial and Industrial [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 0 0
Nonrecurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Impaired Loans [Member] | Commercial [Member] | Commercial Real Estate [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 0 0
Nonrecurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Impaired Loans [Member] | Mortgage [Member] | 1-4 Family Owner Occupied - Jumbo [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 0 0
Nonrecurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Impaired Loans [Member] | Mortgage [Member] | 1-4 Family Owner Occupied - Non-jumbo [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 0 0
Nonrecurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Impaired Loans [Member] | Mortgage [Member] | 1-4 Family Non-owner Occupied [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 0 0
Nonrecurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Impaired Loans [Member] | Mortgage [Member] | 1-4 Family - 2nd Lien [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 0 0
Nonrecurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Impaired Loans [Member] | Mortgage [Member] | Resort Lending [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 0 0
Nonrecurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Impaired Loans [Member] | Installment [Member] | Boat Lending [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 0 0
Nonrecurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Impaired Loans [Member] | Installment [Member] | Recreational Vehicle Lending [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 0 0
Nonrecurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Impaired Loans [Member] | Installment [Member] | Other [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 0 0
Nonrecurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Other Real Estate [Member] | Commercial [Member] | Commercial Real Estate [Member]    
Impaired loans [Abstract]    
Loans receivable [4] 0  
Nonrecurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Other Real Estate [Member] | Mortgage [Member] | 1-4 Family Owner Occupied - Non-jumbo [Member]    
Impaired loans [Abstract]    
Loans receivable [5]   0
Nonrecurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Other Real Estate [Member] | Installment [Member] | Other [Member]    
Impaired loans [Abstract]    
Loans receivable [5]   0
Nonrecurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Impaired Loans [Member] | Commercial [Member] | Commercial and Industrial [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 1,591 655
Nonrecurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Impaired Loans [Member] | Commercial [Member] | Commercial Real Estate [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 7,098 316
Nonrecurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Impaired Loans [Member] | Mortgage [Member] | 1-4 Family Owner Occupied - Jumbo [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 500 987
Nonrecurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Impaired Loans [Member] | Mortgage [Member] | 1-4 Family Owner Occupied - Non-jumbo [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 284 470
Nonrecurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Impaired Loans [Member] | Mortgage [Member] | 1-4 Family Non-owner Occupied [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 58 281
Nonrecurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Impaired Loans [Member] | Mortgage [Member] | 1-4 Family - 2nd Lien [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 200 294
Nonrecurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Impaired Loans [Member] | Mortgage [Member] | Resort Lending [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 77 245
Nonrecurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Impaired Loans [Member] | Installment [Member] | Boat Lending [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 90 67
Nonrecurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Impaired Loans [Member] | Installment [Member] | Recreational Vehicle Lending [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 38 2
Nonrecurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Impaired Loans [Member] | Installment [Member] | Other [Member]    
Impaired loans [Abstract]    
Loans receivable [3] 139 121
Nonrecurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Other Real Estate [Member] | Commercial [Member] | Commercial Real Estate [Member]    
Impaired loans [Abstract]    
Loans receivable [4] $ 0  
Nonrecurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Other Real Estate [Member] | Mortgage [Member] | 1-4 Family Owner Occupied - Non-jumbo [Member]    
Impaired loans [Abstract]    
Loans receivable [5]   31
Nonrecurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Other Real Estate [Member] | Installment [Member] | Other [Member]    
Impaired loans [Abstract]    
Loans receivable [5]   $ 28
[1] Included in accrued income and other assets
[2] Included in accrued expenses and other liabilities
[3] Only includes impaired loans with specific loss allocations based on collateral value.
[4] Only includes other real estate with subsequent write downs to fair value. The fair value of the commercial real estate property included in this table was based on a purchase agreement executed during the third quarter of 2020 that closed during the fourth quarter of 2020.
[5] Only includes other real estate with subsequent write downs to fair value
v3.20.2
Fair Value Disclosures, Changes in Fair Value for Financial Assets (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Dec. 31, 2019
Changes in fair value for financial assets [Abstract]          
Equity Securities at fair value, net gains       $ 167  
Loans held for sale, net gains     $ 2,081 822  
Capitalized mortgage loan servicing rights, net gains (losses)     (14,028) (9,258)  
Impairment charges recognized [Abstract]          
Collateral dependent loans, carrying amount $ 10,100   10,100   $ 3,400
Collateral dependent loans, valuation allowance 2,300   2,300   1,500
Additional provision for loan losses on impaired loans 200 $ 500 1,100 800  
Other real estate, carrying amount 470   470   60
Other real estate, valuation allowance 150   150   $ 90
Other real estate, additional charge $ 0 $ 70 90 80  
Securities [Member]          
Changes in fair value for financial assets [Abstract]          
Equity Securities at fair value, net gains       167  
Mortgage Loans [Member]          
Changes in fair value for financial assets [Abstract]          
Loans held for sale, net gains     2,081 822  
Mortgage Loan Servicing, Net [Member]          
Changes in fair value for financial assets [Abstract]          
Capitalized mortgage loan servicing rights, net gains (losses)     $ (14,028) $ (9,258)  
v3.20.2
Fair Value Disclosures, Reconciliation for all Assets Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3) (Details) - Capitalized Mortgage Loan Servicing Rights [Member] - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Reconciliation for all assets and (liabilities) measured at fair value on a recurring basis using significant unobservable inputs (Level 3) [Roll Forward]        
Beginning balance $ 13,773 $ 17,894 $ 19,171 $ 21,400
Total gains (losses) realized and unrealized [Abstract]        
Included in results of operations (2,387) (3,145) (14,028) (9,258)
Included in other comprehensive income 0 0 0 0
Purchases, issuances, settlements, maturities and calls 4,017 2,157 10,260 4,764
Transfers in and/or out of Level 3 0 0 0 0
Ending balance 15,403 16,906 15,403 16,906
Amount of total losses for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at September 30 $ (2,387) $ (3,145) $ (14,028) $ (9,258)
v3.20.2
Fair Value Disclosures, Quantitative Information About Level 3 (Details)
 9 Months Ended 12 Months Ended
Sep. 30, 2020
USD ($)
Dec. 31, 2019
USD ($)
Installment [Member]    
Ranges and Weighted Average [Abstract]    
Total Impaired collateral value $ 270,000 $ 140,000
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Significant Un-observable Inputs (Level 3) [Member]    
Asset Fair Value [Abstract]    
Servicing asset fair value $ 15,403,000 $ 19,171,000
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Present Value of Net Servicing Revenue [Member] | Significant Un-observable Inputs (Level 3) [Member] | Float Rate [Member]    
Ranges and Weighted Average [Abstract]    
Servicing asset measurement input 0.0035 0.0173
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Minimum [Member] | Significant Un-observable Inputs (Level 3) [Member] | Cost to Service [Member]    
Ranges and Weighted Average [Abstract]    
Servicing asset measurement input 58 66
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Minimum [Member] | Significant Un-observable Inputs (Level 3) [Member] | Ancillary Income [Member]    
Ranges and Weighted Average [Abstract]    
Servicing asset measurement input 20 20
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Minimum [Member] | Present Value of Net Servicing Revenue [Member] | Significant Un-observable Inputs (Level 3) [Member] | Discount Rate [Member]    
Ranges and Weighted Average [Abstract]    
Servicing asset measurement input 0.1000 0.1000
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Minimum [Member] | Present Value of Net Servicing Revenue [Member] | Significant Un-observable Inputs (Level 3) [Member] | Prepayment Rate [Member]    
Ranges and Weighted Average [Abstract]    
Servicing asset measurement input 0.0734 0.0701
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Maximum [Member] | Significant Un-observable Inputs (Level 3) [Member] | Cost to Service [Member]    
Ranges and Weighted Average [Abstract]    
Servicing asset measurement input 215 316
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Maximum [Member] | Significant Un-observable Inputs (Level 3) [Member] | Ancillary Income [Member]    
Ranges and Weighted Average [Abstract]    
Servicing asset measurement input 37 37
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Maximum [Member] | Present Value of Net Servicing Revenue [Member] | Significant Un-observable Inputs (Level 3) [Member] | Discount Rate [Member]    
Ranges and Weighted Average [Abstract]    
Servicing asset measurement input 0.1300 0.1300
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Maximum [Member] | Present Value of Net Servicing Revenue [Member] | Significant Un-observable Inputs (Level 3) [Member] | Prepayment Rate [Member]    
Ranges and Weighted Average [Abstract]    
Servicing asset measurement input 0.4016 0.6934
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Weighted Average [Member] | Significant Un-observable Inputs (Level 3) [Member] | Cost to Service [Member]    
Ranges and Weighted Average [Abstract]    
Servicing asset measurement input 79 81
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Weighted Average [Member] | Significant Un-observable Inputs (Level 3) [Member] | Ancillary Income [Member]    
Ranges and Weighted Average [Abstract]    
Servicing asset measurement input 22 22
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Weighted Average [Member] | Present Value of Net Servicing Revenue [Member] | Significant Un-observable Inputs (Level 3) [Member] | Discount Rate [Member]    
Ranges and Weighted Average [Abstract]    
Servicing asset measurement input 0.1010 0.1014
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Weighted Average [Member] | Present Value of Net Servicing Revenue [Member] | Significant Un-observable Inputs (Level 3) [Member] | Float Rate [Member]    
Ranges and Weighted Average [Abstract]    
Servicing asset measurement input 0.0035 0.0173
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Weighted Average [Member] | Present Value of Net Servicing Revenue [Member] | Significant Un-observable Inputs (Level 3) [Member] | Prepayment Rate [Member]    
Ranges and Weighted Average [Abstract]    
Servicing asset measurement input 0.2201 0.1496
Nonrecurring Basis [Member] | Impaired Loans Commercial [Member] | Significant Un-observable Inputs (Level 3) [Member]    
Asset Fair Value [Abstract]    
Impaired loans fair value $ 8,689,000 $ 971,000
Nonrecurring Basis [Member] | Impaired Loans Commercial [Member] | Income Approach [Member] | Significant Un-observable Inputs (Level 3) [Member] | Capitalization Rate [Member]    
Ranges and Weighted Average [Abstract]    
Impaired loans measurement input 0.095  
Nonrecurring Basis [Member] | Impaired Loans Commercial [Member] | Minimum [Member] | Sales Comparison Approach [Member] | Significant Un-observable Inputs (Level 3) [Member] | Adjustment for Differences Between Comparable Sales [Member]    
Ranges and Weighted Average [Abstract]    
Impaired loans measurement input (0.400) (0.480)
Nonrecurring Basis [Member] | Impaired Loans Commercial [Member] | Maximum [Member] | Sales Comparison Approach [Member] | Significant Un-observable Inputs (Level 3) [Member] | Adjustment for Differences Between Comparable Sales [Member]    
Ranges and Weighted Average [Abstract]    
Impaired loans measurement input 0.750 0.192
Nonrecurring Basis [Member] | Impaired Loans Commercial [Member] | Weighted Average [Member] | Sales Comparison Approach [Member] | Significant Un-observable Inputs (Level 3) [Member] | Adjustment for Differences Between Comparable Sales [Member]    
Ranges and Weighted Average [Abstract]    
Impaired loans measurement input 0.045 (0.056)
Nonrecurring Basis [Member] | Impaired Loans Commercial [Member] | Weighted Average [Member] | Income Approach [Member] | Significant Un-observable Inputs (Level 3) [Member] | Capitalization Rate [Member]    
Ranges and Weighted Average [Abstract]    
Impaired loans measurement input 0.095  
Nonrecurring Basis [Member] | Impaired Loans Mortgage and Installment [Member] | Significant Un-observable Inputs (Level 3) [Member]    
Asset Fair Value [Abstract]    
Impaired loans fair value [1] $ 1,386,000 $ 2,467,000
Nonrecurring Basis [Member] | Impaired Loans Mortgage and Installment [Member] | Minimum [Member] | Sales Comparison Approach [Member] | Significant Un-observable Inputs (Level 3) [Member] | Adjustment for Differences Between Comparable Sales [Member]    
Ranges and Weighted Average [Abstract]    
Impaired loans measurement input (0.120) [1] (0.252)
Nonrecurring Basis [Member] | Impaired Loans Mortgage and Installment [Member] | Maximum [Member] | Sales Comparison Approach [Member] | Significant Un-observable Inputs (Level 3) [Member] | Adjustment for Differences Between Comparable Sales [Member]    
Ranges and Weighted Average [Abstract]    
Impaired loans measurement input 1.046 [1] 0.492
Nonrecurring Basis [Member] | Impaired Loans Mortgage and Installment [Member] | Weighted Average [Member] | Sales Comparison Approach [Member] | Significant Un-observable Inputs (Level 3) [Member] | Adjustment for Differences Between Comparable Sales [Member]    
Ranges and Weighted Average [Abstract]    
Impaired loans measurement input 0.040 [1] 0.115
Nonrecurring Basis [Member] | Other Real Estate Mortgage [Member] | Significant Un-observable Inputs (Level 3) [Member]    
Asset Fair Value [Abstract]    
Other real estate fair value   $ 59,000
Nonrecurring Basis [Member] | Other Real Estate Mortgage [Member] | Minimum [Member] | Sales Comparison Approach [Member] | Significant Un-observable Inputs (Level 3) [Member] | Adjustment for Differences Between Comparable Sales [Member]    
Ranges and Weighted Average [Abstract]    
Other real estate measurement input   (0.116)
Nonrecurring Basis [Member] | Other Real Estate Mortgage [Member] | Maximum [Member] | Sales Comparison Approach [Member] | Significant Un-observable Inputs (Level 3) [Member] | Adjustment for Differences Between Comparable Sales [Member]    
Ranges and Weighted Average [Abstract]    
Other real estate measurement input   0.050
Nonrecurring Basis [Member] | Other Real Estate Mortgage [Member] | Weighted Average [Member] | Sales Comparison Approach [Member] | Significant Un-observable Inputs (Level 3) [Member] | Adjustment for Differences Between Comparable Sales [Member]    
Ranges and Weighted Average [Abstract]    
Other real estate measurement input   (0.051)
[1] In addition to the valuation techniques and unobservable inputs discussed above, at September 30, 2020 and December 31, 2019 certain impaired collateral dependent installment loans totaling approximately $0.27 million and $0.14 million, respectively are secured by collateral other than real estate.  For the majority of these loans, we apply internal discount rates to industry valuation guides.
v3.20.2
Fair Value Disclosures, Difference Between Aggregate Fair Value and Aggregate Remaining Contractual Principal (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Loans held for sale [Abstract]    
Aggregate Fair Value $ 99,747 $ 69,800
Difference 3,975 1,894
Contractual Principal $ 95,772 $ 67,906
v3.20.2
Fair Values of Financial Instruments (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Assets [Abstract]    
Interest bearing deposits - time $ 0 $ 350
Securities available for sale 985,050 518,400
Federal Home Loan Bank and Federal Reserve Bank Stock 18,427 18,359
Liabilities [Abstract]    
Other borrowings 30,005 88,646
Subordinated debt 39,261 0
Subordinated debentures 39,507 39,456
Reciprocal deposits included in deposits with no stated maturity 521,106 388,369
Reciprocal deposits included in deposits with stated maturity 36,445 42,658
Recorded Book Balance [Member]    
Assets [Abstract]    
Cash and due from banks 42,435 53,295
Interest bearing deposits 4,121 12,009
Interest bearing deposits - time   350
Securities available for sale 985,050 518,400
Federal Home Loan Bank and Federal Reserve Bank Stock 18,427 18,359
Net loans and loans held for sale 2,919,455 2,768,675
Accrued interest receivable 12,402 10,108
Derivative financial instruments 19,202 5,464
Liabilities [Abstract]    
Deposits with no stated maturity [1] 3,105,019 2,427,190
Deposits with stated maturity [1] 492,726 609,537
Other borrowings 30,005 88,646
Subordinated debt 39,261  
Subordinated debentures 39,507 39,456
Accrued interest payable 1,408 1,296
Derivative financial instruments 12,690 4,402
Fair Value [Member]    
Assets [Abstract]    
Cash and due from banks 42,435 53,295
Interest bearing deposits 4,121 12,009
Interest bearing deposits - time   350
Securities available for sale 985,050 518,400
Net loans and loans held for sale 2,915,489 2,768,817
Accrued interest receivable 12,402 10,108
Derivative financial instruments 19,202 5,464
Liabilities [Abstract]    
Deposits with no stated maturity 3,105,019 2,427,190
Deposits with stated maturity 495,694 610,235
Other borrowings 31,477 88,680
Subordinated debt 40,999  
Subordinated debentures 28,941 33,149
Accrued interest payable 1,408 1,296
Derivative financial instruments 12,690 4,402
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]    
Assets [Abstract]    
Cash and due from banks 42,435 53,295
Interest bearing deposits 4,121 12,009
Interest bearing deposits - time   0
Securities available for sale 0 0
Net loans and loans held for sale 0 0
Accrued interest receivable 1 8
Derivative financial instruments 0 0
Liabilities [Abstract]    
Deposits with no stated maturity 3,105,019 2,427,190
Deposits with stated maturity 0 0
Other borrowings 0 0
Subordinated debt 0  
Subordinated debentures 0 0
Accrued interest payable 62 97
Derivative financial instruments 0 0
Significant Other Observable Inputs (Level 2) [Member]    
Assets [Abstract]    
Cash and due from banks 0 0
Interest bearing deposits 0 0
Interest bearing deposits - time   350
Securities available for sale 985,050 518,400
Net loans and loans held for sale 99,747 69,800
Accrued interest receivable 3,409 1,752
Derivative financial instruments 19,202 5,464
Liabilities [Abstract]    
Deposits with no stated maturity 0 0
Deposits with stated maturity 495,694 610,235
Other borrowings 31,477 88,680
Subordinated debt 40,999  
Subordinated debentures 28,941 33,149
Accrued interest payable 1,346 1,199
Derivative financial instruments 12,690 4,402
Significant Unobservable Inputs (Level 3) [Member]    
Assets [Abstract]    
Cash and due from banks 0 0
Interest bearing deposits 0 0
Interest bearing deposits - time   0
Securities available for sale 0 0
Net loans and loans held for sale 2,815,742 2,699,017
Accrued interest receivable 8,992 8,348
Derivative financial instruments 0 0
Liabilities [Abstract]    
Deposits with no stated maturity 0 0
Deposits with stated maturity 0 0
Other borrowings 0 0
Subordinated debt 0  
Subordinated debentures 0 0
Accrued interest payable 0 0
Derivative financial instruments $ 0 $ 0
[1] Deposits with no stated maturity include reciprocal deposits with a recorded book balance of $521.106 million and $388.369 million at September 30, 2020 and December 31, 2019, respectively. Deposits with a stated maturity include reciprocal deposits with a recorded book balance of $36.445 million and $42.658 million at September 30, 2020 and December 31, 2019, respectively.
v3.20.2
Contingencies (Details)
$ / shares in Units, $ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
USD ($)
shares
Sep. 30, 2019
USD ($)
Sep. 30, 2020
USD ($)
shares
Sep. 30, 2019
USD ($)
Oct. 28, 2020
$ / shares
Dec. 31, 2019
USD ($)
COVID-19 [Abstract]            
Loss reimbursement on sold loans $ 50 $ 30 $ 160 $ 180    
Loss reimbursement reserve on sold mortgage loans $ 980   $ 980     $ 880
VISA Class A Common Stock [Member]            
Investment Owned [Abstract]            
Current conversion ratio     1.6228      
Closing price (in dollars per share) | $ / shares         $ 180.87  
VISA Class B Common Stock [Member]            
Investment Owned [Abstract]            
Number of shares owned (in shares) | shares 12,566   12,566      
Current value of shares owned $ 3,700   $ 3,700      
Commercial and Industrial [Member] | Retail [Member]            
COVID-19 [Abstract]            
Loans and leases receivable 99,000   99,000      
Commercial and Industrial [Member] | Food Service [Member]            
COVID-19 [Abstract]            
Loans and leases receivable 59,000   59,000      
Commercial and Industrial [Member] | Hotel [Member]            
COVID-19 [Abstract]            
Loans and leases receivable 45,000   45,000      
Commercial Real Estate [Member] | Retail [Member]            
COVID-19 [Abstract]            
Loans and leases receivable 94,000   94,000      
Commercial Real Estate [Member] | Office [Member]            
COVID-19 [Abstract]            
Loans and leases receivable 53,000   53,000      
Commercial Real Estate [Member] | Multifamily [Member]            
COVID-19 [Abstract]            
Loans and leases receivable $ 62,000   $ 62,000      
v3.20.2
Accumulated Other Comprehensive Income (Loss) ("AOCIL"), Summary of Changes (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Changes in AOCIL [Roll Forward]        
Balance at beginning of period $ 355,123 $ 330,846 $ 350,169 $ 338,994
Other comprehensive income (loss) before reclassifications 2,105 1,138 9,622 7,153
Amounts reclassified from AOCIL 245 (80) 310 (418)
Other comprehensive income 2,350 1,058 9,932 6,735
Balances at end of period 373,092 340,245 373,092 340,245
Accumulated Other Comprehensive Loss [Member]        
Changes in AOCIL [Roll Forward]        
Balance at beginning of period 3,796 (4,431) (3,786) (10,108)
Other comprehensive income 2,350 1,058 9,932 6,735
Balances at end of period 6,146 (3,373) 6,146 (3,373)
Unrealized Gains (Losses) on Securities Available For Sale [Member]        
Changes in AOCIL [Roll Forward]        
Balance at beginning of period 11,315 3,040 3,739 (4,185)
Other comprehensive income (loss) before reclassifications 2,125 1,196 9,901 8,529
Amounts reclassified from AOCIL 0 0 (200) (108)
Other comprehensive income 2,125 1,196 9,701 8,421
Balances at end of period 13,440 4,236 13,440 4,236
Disproportionate Tax Effects from Securities Available for Sale [Member]        
Changes in AOCIL [Roll Forward]        
Balance at beginning of period (5,798) (5,798) (5,798) (5,798)
Other comprehensive income (loss) before reclassifications 0 0 0 0
Amounts reclassified from AOCIL 0 0 0 0
Other comprehensive income 0 0 0 0
Balances at end of period (5,798) (5,798) (5,798) (5,798)
Unrealized Losses on Cash Flow Hedges [Member]        
Changes in AOCIL [Roll Forward]        
Balance at beginning of period (1,721) (1,673) (1,727) (125)
Other comprehensive income (loss) before reclassifications (20) (58) (279) (1,376)
Amounts reclassified from AOCIL 245 (80) 510 (310)
Other comprehensive income 225 (138) 231 (1,686)
Balances at end of period $ (1,496) $ (1,811) $ (1,496) $ (1,811)
v3.20.2
Accumulated Other Comprehensive Income (Loss) ("AOCIL"), Reclassification Out of Each Components (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Reclassifications out of AOCIL [Abstract]        
Total reclassifications before tax $ 24,361 $ 15,570 $ 48,411 $ 40,535
Interest expense (3,068) (6,939) (11,748) (20,149)
Income tax expense 4,777 3,125 9,245 7,979
Reclassifications, net of tax 19,584 12,445 39,166 32,556
Reclassification out of Accumulated Other Comprehensive Income [Member]        
Reclassifications out of AOCIL [Abstract]        
Reclassifications, net of tax (245) 80 (310) 418
Accumulated Other Comprehensive Loss [Member]        
Reclassifications out of AOCIL [Abstract]        
Reclassifications, net of tax 0 0 0 0
Unrealized Gains on Securities Available For Sale [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]        
Reclassifications out of AOCIL [Abstract]        
Net gains on securities available for sale 0 0 253 137
Net impairment loss recognized in earnings 0 0 0 0
Total reclassifications before tax 0 0 253 137
Income tax expense 0 0 53 29
Reclassifications, net of tax 0 0 200 108
Unrealized Losses on Cash Flow Hedges [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]        
Reclassifications out of AOCIL [Abstract]        
Interest expense 310 (102) 646 (393)
Income tax expense 65 (22) 136 (83)
Reclassifications, net of tax $ 245 $ (80) $ 510 $ (310)
v3.20.2
Revenue from Contracts with Customers (Details)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
USD ($)
Sep. 30, 2019
USD ($)
Sep. 30, 2020
USD ($)
Asset
Sep. 30, 2019
USD ($)
Asset
Dec. 31, 2019
USD ($)
Revenue from Contracts with Customers [Abstract]          
Percentage of revenues excluded from ASC Topic 606 87.90% 84.70% 87.90% 84.70%  
Contract assets $ 0   $ 0   $ 0
Contract liabilities 0   $ 0   $ 0
Number of real estate assets sold during the period | Asset     0 0  
Disaggregation of Revenue Sources by Attributes [Abstract]          
Revenue from contracts with customers 6,643 $ 6,831 $ 17,931 $ 19,343  
Bank owned life insurance 215 301 750 813  
Other 592 1,028 1,727 2,773  
Total 1,937 2,492 5,698 6,862  
Service Charges on Deposit Accounts [Member]          
Disaggregation of Revenue Sources by Attributes [Abstract]          
Revenue from contracts with customers 2,085 2,883 6,299 8,323  
Overdraft Fees [Member] | Retail [Member]          
Disaggregation of Revenue Sources by Attributes [Abstract]          
Revenue from contracts with customers 1,371 1,970 4,130 5,582  
Overdraft Fees [Member] | Business [Member]          
Disaggregation of Revenue Sources by Attributes [Abstract]          
Revenue from contracts with customers 170 361 668 1,123  
Account Service Charges [Member] | Retail [Member]          
Disaggregation of Revenue Sources by Attributes [Abstract]          
Revenue from contracts with customers 544 552 1,501 1,618  
Other Deposit Related Income [Member]          
Disaggregation of Revenue Sources by Attributes [Abstract]          
Revenue from contracts with customers 600 713 1,743 2,079  
ATM Fees [Member] | Retail [Member]          
Disaggregation of Revenue Sources by Attributes [Abstract]          
Revenue from contracts with customers 320 373 896 1,041  
ATM Fees [Member] | Business [Member]          
Disaggregation of Revenue Sources by Attributes [Abstract]          
Revenue from contracts with customers 7 9 18 26  
Other [Member] | Retail [Member]          
Disaggregation of Revenue Sources by Attributes [Abstract]          
Revenue from contracts with customers 184 240 577 703  
Other [Member] | Business [Member]          
Disaggregation of Revenue Sources by Attributes [Abstract]          
Revenue from contracts with customers 89 91 252 309  
Interchange Income [Member]          
Disaggregation of Revenue Sources by Attributes [Abstract]          
Revenue from contracts with customers 3,428 2,785 8,411 7,744  
Investment and Insurance Commissions [Member]          
Disaggregation of Revenue Sources by Attributes [Abstract]          
Revenue from contracts with customers 530 450 1,478 1,197  
Asset Management Revenue [Member]          
Disaggregation of Revenue Sources by Attributes [Abstract]          
Revenue from contracts with customers 335 292 937 823  
Transaction Based Revenue [Member]          
Disaggregation of Revenue Sources by Attributes [Abstract]          
Revenue from contracts with customers $ 195 $ 158 $ 541 $ 374  
v3.20.2
Leases (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Components of operating leases [Abstract]        
Operating lease cost $ 395 $ 565 $ 1,357 $ 1,692
Variable lease cost 16 43 52 115
Short-term lease cost 10 4 26 14
Total 421 612 1,435 1,821
Supplemental balance sheet information related to operating leases [Abstract]        
Lease right of use asset [1] $ 6,713 8,282 $ 6,713 8,282
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] us-gaap:OtherAssets   us-gaap:OtherAssets  
Lease liabilities [2] $ 6,945 $ 8,304 $ 6,945 $ 8,304
Operating Lease, Liability, Statement of Financial Position [Extensible List] us-gaap:OtherLiabilities   us-gaap:OtherLiabilities  
Weighted average remaining lease term (years) 6 years 10 months 2 days 7 years 5 months 19 days 6 years 10 months 2 days 7 years 5 months 19 days
Weighted average discount rate 2.60% 2.80% 2.60% 2.80%
Maturities of lease liabilities [Abstract]        
Three months ending December 31, 2020 $ 408   $ 408  
2021 1,505   1,505  
2022 1,324   1,324  
2023 1,101   1,101  
2024 692   692  
2025 and thereafter 2,576   2,576  
Total lease payments 7,606   7,606  
Less imputed interest (661)   (661)  
Total [2] $ 6,945 $ 8,304 $ 6,945 $ 8,304
[1] Included in Accrued income and other assets in our Condensed Consolidated Statements of Financial Condition.
[2] Included in Accrued expenses and other liabilities in our Condensed Consolidated Statements of Financial Condition.