10-Q

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, 2015

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.

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 or smaller reporting company.

Large accelerated filer ☐ Accelerated filer  ☒ Non-accelerated filer ☐ Smaller reporting company ☐

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	22,297,545
Class	Outstanding at November 3, 2015

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

INDEX

		Number(s)
PART I -	Financial Information
Item 1.	Condensed Consolidated Statements of Financial Condition September 30, 2015 and December 31, 2014	3
	Condensed Consolidated Statements of Operations Three- and Nine-month periods ended September 30, 2015 and 2014	4
	Condensed Consolidated Statements of Comprehensive Income Three- and Nine-month periods ended September 30, 2015 and 2014	5
	Condensed Consolidated Statements of Cash Flows Nine-month periods ended September 30, 2015 and 2014	6
	Condensed Consolidated Statements of Shareholders' Equity Nine-month periods ended September 30, 2015 and 2014	7
	Notes to Interim Condensed Consolidated Financial Statements	8-60
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	61-87
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	88
Item 4.	Controls and Procedures	88
PART II -	Other Information
Item 1A	Risk Factors	89
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	89
Item 6.	Exhibits	90

1

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;

• 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;

• the failure of assumptions underlying the establishment of, and provisions made to, our allowance for loan losses;

• the failure of assumptions underlying our estimate of probable incurred losses from vehicle service contract payment plan counterparty contingencies, including our assumptions regarding future cancellations of vehicle service contracts, the value to us of collateral that may be available to recover funds due from our counterparties, and our ability to enforce the contractual obligations of our counterparties to pay amounts owing to us;

• 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, 2014, 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 all 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

Part I - Item 1.

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Financial Condition

	September 30, 2015			December 31, 2014
	(unaudited)
	(In thousands, except share amounts)
Assets
Cash and due from banks	$	52,146		$	48,326
Interest bearing deposits		53,051			25,690
Cash and Cash Equivalents		105,197			74,016
Interest bearing deposits - time		13,029			13,561
Trading securities		225			203
Securities available for sale		604,662			533,178
Federal Home Loan Bank and Federal Reserve Bank stock, at cost		15,286			19,919
Loans held for sale, carried at fair value		25,462			23,662
Loans
Commercial		726,356			690,955
Mortgage		468,578			472,628
Installment		235,627			206,378
Payment plan receivables		37,438			40,001
Total Loans		1,467,999			1,409,962
Allowance for loan losses		(24,604	)		(25,990	)
Net Loans		1,443,395			1,383,972
Other real estate and repossessed assets		3,851			6,454
Property and equipment, net		43,359			45,948
Bank-owned life insurance		54,098			53,625
Deferred tax assets, net		41,422			48,632
Capitalized mortgage loan servicing rights		11,630			12,106
Vehicle service contract counterparty receivables, net		7,324			7,237
Other intangibles		2,366			2,627
Accrued income and other assets		23,555			23,590
Total Assets	$	2,394,861		$	2,248,730
Liabilities and Shareholders' Equity
Deposits
Non-interest bearing	$	640,208		$	576,882
Savings and interest-bearing checking		987,146			943,734
Reciprocal		47,918			53,668
Time		385,690			350,018
Total Deposits		2,060,962			1,924,302
Other borrowings		12,070			12,470
Subordinated debentures		35,569			35,569
Vehicle service contract counterparty payables		1,950			1,977
Accrued expenses and other liabilities		31,330			24,041
Total Liabilities		2,141,881			1,998,359
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: 22,548,562 shares at September 30, 2015 and 22,957,323 shares at December 31, 2014		343,601			352,462
Accumulated deficit		(86,125	)		(96,455	)
Accumulated other comprehensive loss		(4,496	)		(5,636	)
Total Shareholders’ Equity		252,980			250,371
Total Liabilities and Shareholders’ Equity	$	2,394,861		$	2,248,730

See notes to interim condensed consolidated financial statements (unaudited)

3

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

	Three months ended September 30,						Nine months ended September 30,
	2015			2014			2015			2014
	(unaudited)						(unaudited)
	(In thousands, except per share amounts)
Interest Income
Interest and fees on loans	$	17,869		$	17,818		$	52,859		$	54,179
Interest on securities
Taxable		1,901			1,644			5,528			4,623
Tax-exempt		228			281			667			830
Other investments		295			325			922			1,076
Total Interest Income		20,293			20,068			59,976			60,708
Interest Expense
Deposits		987			1,236			2,961			3,789
Other borrowings		465			649			1,382			1,720
Total Interest Expense		1,452			1,885			4,343			5,509
Net Interest Income		18,841			18,183			55,633			55,199
Provision for loan losses		(244	)		(632	)		(1,037	)		(2,049	)
Net Interest Income After Provision for Loan Losses		19,085			18,815			56,670			57,248
Non-interest Income
Service charges on deposit accounts		3,294			3,579			9,261			10,166
Interchange income		2,169			1,984			6,551			5,992
Net gains (losses) on assets
Mortgage loans		1,812			1,490			5,735			4,139
Securities		45			168			97			334
Other than temporary impairment loss on securities
Total impairment loss		-			(9	)		-			(9	)
Loss recognized in other comprehensive income		-			-			-			-
Net impairment loss recognized in earnings		-			(9	)		-			(9	)
Mortgage loan servicing		(556	)		932			476			1,389
Title insurance fees		281			243			874			734
Net gain on branch sale		1,193			-			1,193			-
Other		1,881			2,156			5,881			6,829
Total Non-interest Income		10,119			10,543			30,068			29,574
Non-Interest Expense
Compensation and employee benefits		12,029			11,718			35,605			34,774
Occupancy, net		1,940			2,079			6,399			6,715
Data processing		2,001			1,790			5,958			5,653
Loan and collection		816			1,391			2,938			4,283
Furniture, fixtures and equipment		998			1,005			2,915			3,127
Communications		754			712			2,184			2,212
Legal and professional		519			559			1,352			1,380
Advertising		406			427			1,338			1,547
FDIC deposit insurance		350			396			1,044			1,235
Interchange expense		279			368			859			1,112
Credit card and bank service fees		197			226			602			734
Vehicle service contract counterparty contingencies		30			28			89			169
Costs related to unfunded lending commitments		26			12			46			27
Provision for loss reimbursement on sold loans		(35	)		-			(59	)		(466	)
Net (gains) losses on other real estate and repossessed assets		5			(285	)		(173	)		(410	)
Other		1,564			1,658			4,512			4,952
Total Non-interest Expense		21,879			22,084			65,609			67,044
Income Before Income Tax		7,325			7,274			21,129			19,778
Income tax expense		2,278			2,345			6,682			5,659
Net Income	$	5,047		$	4,929		$	14,447		$	14,119
Net Income Per Common Share
Basic	$	0.22		$	0.21		$	0.63		$	0.62
Diluted	$	0.22		$	0.21		$	0.62		$	0.60
Dividends Per Common Share
Declared	$	0.06		$	0.06		$	0.18		$	0.12
Paid	$	0.06		$	0.06		$	0.18		$	0.12

See notes to interim condensed consolidated financial statements (unaudited)

4

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

	Three months ended September 30,					Nine months ended September 30,
	2015		2014			2015			2014
	(unaudited)					(unaudited)
	(In thousands)
Net income	$	5,047	$	4,929		$	14,447		$	14,119
Other comprehensive income, before tax
Available for sale securities
Unrealized gains arising during period		1,366		253			1,830			4,262
Change in unrealized gains for which a portion of other than temporary impairment has been recognized in earnings		10		94			-			432
Reclassification adjustment for other than temporary impairment included in earnings		-		9			-			9
Reclassification adjustments for gains included in earnings		-		(121	)		(75	)		(123	)
Unrealized gains recognized in other comprehensive income on available for sale securities		1,376		235			1,755			4,580
Income tax expense		482		82			615			1,603
Unrealized gains recognized in other comprehensive income on available for sale securities, net of tax		894		153			1,140			2,977
Derivative instruments
Reclassification adjustment for accretion on settled derivatives		-		95			-			285
Unrealized gains recognized in other comprehensive income on derivative instruments		-		95			-			285
Income tax expense		-		33			-			100
Unrealized gains recognized in other comprehensive income on derivative instruments, net of tax		-		62			-			185
Other comprehensive income		894		215			1,140			3,162
Comprehensive income	$	5,941	$	5,144		$	15,587		$	17,281

See notes to interim condensed consolidated financial statements (unaudited)

5

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

	Nine months ended September 30,
	2015			2014
	(unaudited - In thousands)
Net Income	$	14,447		$	14,119
Adjustments to Reconcile Net Income to Net Cash From Operating Activities
Proceeds from sales of loans held for sale		227,381			160,102
Disbursements for loans held for sale		(223,446	)		(158,410	)
Provision for loan losses		(1,037	)		(2,049	)
Deferred federal income tax expense		7,210			7,218
Net deferred loan costs		(1,189	)		(846	)
Depreciation, amortization of intangible assets and premiums and accretion of discounts on securities and loans		3,345			1,856
Net gains on mortgage loans		(5,735	)		(4,139	)
Net gains on securities		(97	)		(334	)
Securities impairment recognized in earnings		-			9
Net gains on other real estate and repossessed assets		(173	)		(410	)
Vehicle service contract counterparty contingencies		89			169
Share based compensation		1,153			891
Gain on branch sale		(1,193	)		-
Net gain on sale of fixed assets		(152	)		-
Increase in accrued income and other assets		(359	)		(6,034	)
Decrease in accrued expenses and other liabilities		(684	)		(5,874	)
Total Adjustments		5,113			(7,851	)
Net Cash From Operating Activities		19,560			6,268
Cash Flow Used in Investing Activities
Proceeds from the sale of securities available for sale		11,786			7,630
Proceeds from the maturity of securities available for sale		25,458			48,624
Principal payments received on securities available for sale		94,333			62,400
Purchases of securities available for sale		(195,623	)		(184,726	)
Purchases of interest bearing deposits		(4,100	)		(750	)
Proceeds from the maturity of interest bearing deposits		4,576			4,050
Purchase of Federal Reserve Bank stock		(272	)		(151	)
Redemption of Federal Reserve Bank stock		391			226
Redemption of Federal Home Loan Bank stock		4,514			-
Net increase in portfolio loans (loans originated, net of principal payments)		(56,407	)		(23,447	)
Net cash paid in branch sale		(7,229	)		-
Proceeds from the collection of vehicle service contract counterparty receivables		255			366
Proceeds from the sale of other real estate and repossessed assets		5,619			12,435
Proceeds from the sale of property and equipment		490			-
Capital expenditures		(2,925	)		(2,660	)
Net Cash Used in Investing Activities		(119,134	)		(76,003	)
Cash Flow From Financing Activities
Net increase in total deposits		145,313			11,089
Net increase (decrease) in other borrowings		(1	)		13,649
Payments of Federal Home Loan Bank advances		(399	)		(4,609	)
Net decrease in vehicle service contract counterparty payables		(27	)		(1,301	)
Dividends paid		(4,118	)		(2,752	)
Proceeds from issuance of common stock		103			66
Repurchase of common stock		(9,025	)		-
Share based compensation withholding obligation		(1,091	)		-
Net Cash From Financing Activities		130,755			16,142
Net Increase (Decrease) in Cash and Cash Equivalents		31,181			(53,593	)
Cash and Cash Equivalents at Beginning of Period		74,016			119,081
Cash and Cash Equivalents at End of Period	$	105,197		$	65,488
Cash paid during the period for
Interest	$	4,302		$	5,450
Income taxes		229			116
Transfers to other real estate and repossessed assets		2,843			3,118
Transfer of payment plan receivables to vehicle service contract counterparty receivables		431			105
Purchase of securities available for sale not yet settled		7,717			1,827

See notes to interim condensed consolidated financial statements (unaudited)

6

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Shareholders' Equity

	Nine months ended September 30,
	2015			2014
	(unaudited)
	(In thousands)
Balance at beginning of period	$	250,371		$	231,581
Net income		14,447			14,119
Cash dividends declared		(4,118	)		(2,752	)
Issuance of common stock		103			66
Share based compensation		1,153			891
Share based compensation withholding obligation		(1,091	)		-
Repurchase of common stock		(9,025	)		-
Net change in accumulated other comprehensive loss, net of related tax effect		1,140			3,162
Balance at end of period	$	252,980		$	247,067

See notes to interim condensed consolidated financial statements (unaudited)

7

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, 2014 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, 2015 and December 31, 2014, and the results of operations for the three and nine-month periods ended September 30, 2015 and 2014.  The results of operations for the three and nine-month periods ended September 30, 2015, are not necessarily indicative of the results to be expected for the full year.  Certain reclassifications have been made in the prior period financial statements to conform to the current period presentation.  Our critical accounting policies include the assessment for other than temporary impairment (“OTTI”) on investment securities,  the determination of the allowance for loan losses, the determination of vehicle service contract counterparty contingencies, the valuation of originated mortgage loan servicing rights and the valuation of deferred tax assets.  Refer to our 2014 Annual Report on Form 10-K for a disclosure of our accounting policies.

2. New Accounting Standards

In January 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-04, “Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure”. The amendments in this ASU clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. This amendment is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014, with early adoption and retrospective or prospective application permitted.  This amended guidance became effective for us on January 1, 2015, and did not have a material impact on our consolidated operating results or financial condition.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”. This ASU supersedes and replaces nearly all existing revenuerecognition guidance, including industry-specific guidance, establishes a new control-based revenue recognition model, changes the basis fordeciding when revenue is recognized over time or at a point in time, provides new and more detailed guidance on specific topics and expands and improvesdisclosures about revenue. In addition, this ASU specifies the accounting for some costs to obtain or fulfill a contract with a customer.  This amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption for fiscal years beginning after December 15, 2016, permitted. This amended guidance is not expected to have a material impact on our consolidated operating results or financial condition.

8

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

In June 2014, the FASB issued ASU 2014-12, “Compensation – Stock Compensation (Topic 718) – Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period”.  This ASU amends existing guidance related to the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. These amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition.  The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. This amended guidance is effective for us on January 1, 2016, and is not expected to have a material impact on our consolidated operating results or financial condition.

3. Securities

Securities available for sale consist of the following:

	Amortized Cost		Unrealized				Fair Value
			Gains		Losses
	(In thousands)
September 30, 2015
U.S. agency	$	50,447	$	344	$	56	$	50,735
U.S. agency residential mortgage-backed		206,387		2,116		213		208,290
U.S. agency commercial mortgage-backed		35,109		246		17		35,338
Private label residential mortgage-backed		5,295		176		342		5,129
Other asset backed		131,911		110		249		131,772
Obligations of states and political subdivisions		136,508		1,161		937		136,732
Corporate		34,088		52		34		34,106
Trust preferred		2,914		-		354		2,560
Total	$	602,659	$	4,205	$	2,202	$	604,662
December 31, 2014
U.S. agency	$	34,936	$	133	$	63	$	35,006
U.S. agency residential mortgage-backed		256,387		1,838		667		257,558
U.S. agency commercial mortgage-backed		33,779		68		119		33,728
Private label residential mortgage-backed		6,216		187		390		6,013
Other asset backed		32,314		77		38		32,353
Obligations of states and political subdivisions		143,698		961		1,244		143,415
Corporate		22,690		53		79		22,664
Trust preferred		2,910		-		469		2,441
Total	$	532,930	$	3,317	$	3,069	$	533,178

9

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, 2015
U.S. agency	$	19,021	$	50	$	1,170	$	6	$	20,191	$	56
U.S. agency residential mortgage-backed		26,884		94		16,024		119		42,908		213
U.S. agency commercial mortgage-backed		4,389		16		1,396		1		5,785		17
Private label residential mortgage-backed		-		-		3,542		342		3,542		342
Other asset backed		57,799		131		5,414		118		63,213		249
Obligations of states and political subdivisions		27,995		422		12,393		515		40,388		937
Corporate		11,098		34		-		-		11,098		34
Trust preferred		-		-		2,560		354		2,560		354
Total	$	147,186	$	747	$	42,499	$	1,455	$	189,685	$	2,202
December 31, 2014
U.S. agency	$	12,851	$	58	$	606	$	5	$	13,457	$	63
U.S. agency residential mortgage-backed		89,547		531		15,793		136		105,340		667
U.S. agency commercial mortgage-backed		21,325		119		-		-		21,325		119
Private label residential mortgage-backed		208		1		4,013		389		4,221		390
Other asset backed		2,960		15		8,729		23		11,689		38
Obligations of states and political subdivisions		28,114		106		37,540		1,138		65,654		1,244
Corporate		8,660		79		-		-		8,660		79
Trust preferred		-		-		2,441		469		2,441		469
Total	$	163,665	$	909	$	69,122	$	2,160	$	232,787	$	3,069

Our portfolio of available-for-sale securities 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 or loss.

10

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

U.S. agency, U.S. agency residential mortgage-backed securities and U.S. agency commercial mortgage backed securities — at September 30, 2015, we had 29 U.S. agency, 49 U.S. agency residential mortgage-backed and 9 U.S. agency commercial mortgage-backed securities whose fair market value is less than amortized cost. The unrealized losses are largely attributed to rises in term interest rates since acquisition and widening spreads to Treasury bonds. As management does not intend to liquidate these securities 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 are deemed to be other than temporary.

Private label residential mortgage backed securities — at September 30, 2015, we had five of this type of security whose fair value is less than amortized cost. Two of the five issues are rated by a major rating agency as investment grade, two are rated below investment grade and one is split rated. Two of these bonds have an impairment in excess of 10% and all five of these holdings have been impaired for more than 12 months.  The unrealized losses are largely attributable to credit spread widening on these securities since their acquisition.

All of these securities are receiving principal and interest payments. Most of these transactions are pass-through structures, receiving pro rata principal and interest payments from a dedicated collateral pool. The nonreceipt of interest cash flows is not expected and thus not presently considered in our discounted cash flow methodology discussed below.

All private label residential mortgage-backed securities are reviewed for 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.  Our cash flow analysis forecasts complete recovery of our cost basis for four of the five securities whose fair value is less than amortized cost while the fifth security had credit related OTTI and is discussed in further detail below.

As management does not intend to liquidate these securities 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 other declines discussed above are deemed to be other than temporary.

Other asset backed — at September 30, 2015, we had 65 other asset backed securities whose fair value is less than amortized cost. The unrealized losses are primarily due to credit spread widening.  As management does not intend to liquidate these securities 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 are deemed to be other than temporary.

Obligations of states and political subdivisions — at September 30, 2015, we had 57 municipal securities whose fair value is less than amortized cost.  The unrealized losses are primarily due to increases in interest rates since acquisition.  As management does not intend to liquidate these securities 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 are deemed to be other than temporary.

Corporate — at September 30, 2015, we had eight corporate securities whose fair value is less than amortized cost. The unrealized losses are primarily due to credit spread widening.  As management does not intend to liquidate these securities 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 are deemed to be other than temporary.

11

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Trust preferred securities — at September 30, 2015, we had three trust preferred securities whose fair value is less than amortized cost. All 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 three securities is rated by two major rating agencies as investment grade, while one (a Bank of America issuance) is rated below investment grade by two major rating agencies and 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 $0.8 million as of September 30, 2015, continues to have satisfactory credit metrics and make interest payments.

The following table breaks out our trust preferred securities in further detail as of September 30, 2015 and December 31, 2014:

	September 30, 2015					December 31, 2014
	Fair Value		Net Unrealized Loss			Fair Value		Net Unrealized Loss
	(In thousands)
Trust preferred securities
Rated issues	$	1,788	$	(127	)	$	1,643	$	(267	)
Unrated issues		772		(227	)		798		(202	)

As management does not intend to liquidate these securities 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 are deemed to be other than temporary.

We recorded no credit related OTTI charges in earnings on securities available for sale during the three or nine month periods ended September 30, 2015. We recorded $0.009 million of credit related OTTI charges in earnings on securities available for sale during the three and nine month periods ended September 30, 2014.

At September 30, 2015, three private label residential mortgage-backed securities had credit related OTTI and are summarized as follows:

	Senior Security		Super Senior Security		Senior Support Security		Total
	(In thousands)
As of September 30, 2015
Fair value	$	1,690	$	1,394	$	91	$	3,175
Amortized cost		1,722		1,309		-		3,031
Non-credit unrealized loss		32		-		-		32
Unrealized gain		-		85		91		176
Cumulative credit related OTTI		757		457		380		1,594
Credit related OTTI recognized in our Condensed Consolidated Statements of Operations
For the three months ended September 30,
2015	$	-	$	-	$	-	$	-
2014		9		-		-		9
For the nine months ended September 30,
2015		-		-		-		-
2014		9		-		-		9

12

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Each of these securities is receiving principal and interest payments similar to principal reductions in the underlying collateral.  Two of these securities have unrealized gains and one has an unrealized loss at September 30, 2015.  Prior to the second quarter of 2013, all three of these securities had an unrealized loss.  The original amortized cost 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 two of these securities is now less than previously recorded credit related OTTI amounts.  The remaining non-credit related unrealized loss in the senior security is attributed to other factors and is reflected in other comprehensive income during those same periods.

A roll forward of credit losses recognized in earnings on securities available for sale for the three and nine month periods ending September 30, follows:

	Three months ended September 30,				Nine months ended September 30,
	2015		2014		2015		2014
	(In thousands)
Balance at beginning of period	$	1,844	$	1,835	$	1,844	$	1,835
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		-		9		-		9
Balance at end of period	$	1,844	$	1,844	$	1,844	$	1,844

The amortized cost and fair value of securities available for sale at September 30, 2015, by contractual maturity, follow:

	Amortized Cost		Fair Value
	(In thousands)
Maturing within one year	$	29,195	$	29,231
Maturing after one year but within five years		69,021		69,252
Maturing after five years but within ten years		45,618		45,985
Maturing after ten years		80,123		79,665
		223,957		224,133
U.S. agency residential mortgage-backed		206,387		208,290
U.S. agency commercial mortgage-backed		35,109		35,338
Private label residential mortgage-backed		5,295		5,129
Other asset backed		131,911		131,772
Total	$	602,659	$	604,662

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:

	Proceeds		Realized Gains (1)		Losses
	(In thousands)
2015	$	11,786	$	75	$	-
2014		7,630		123		-

(1) Gains in 2014 exclude $0.179 million of unrealized gain related to a U.S. Treasury short position.

13

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

During 2015 and 2014, our trading securities consisted of various preferred stocks.  During the first nine months of 2015 and 2014, we recognized gains on trading securities of $0.022 million and $0.032 million, respectively, that are included in net gains (losses) on securities in the Condensed Consolidated Statements of Operations.  Both of these amounts relate to gains (losses) recognized on trading securities still held at each respective period end.

4. Loans

Our assessment of the allowance for loan losses is based on an evaluation of the loan portfolio, recent 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			Payment Plan Receivables			Subjective Allocation			Total
	(In thousands)
2015
Balance at beginning of period	$	6,707		$	11,465		$	1,461		$	65		$	4,888		$	24,586
Additions (deductions)
Provision for loan losses		(26	)		(47	)		(49	)		(5	)		(117	)		(244	)
Recoveries credited to allowance		637			286			250			-			-			1,173
Loans charged against the allowance		(190	)		(379	)		(342	)		-			-			(911	)
Balance at end of period	$	7,128		$	11,325		$	1,320		$	60		$	4,771		$	24,604
2014
Balance at beginning of period	$	5,175		$	15,542		$	1,988		$	80		$	5,412		$	28,197
Additions (deductions)
Provision for loan losses		(601	)		(9	)		32			(8	)		(46	)		(632	)
Recoveries credited to allowance		999			197			283			-			-			1,479
Loans charged against the allowance		(385	)		(729	)		(422	)		-			-			(1,536	)
Balance at end of period	$	5,188		$	15,001		$	1,881		$	72		$	5,366		$	27,508

14

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

	Commercial			Mortgage			Installment			Payment Plan Receivables			Subjective Allocation			Total
	(In thousands)
2015
Balance at beginning of period	$	5,445		$	13,444		$	1,814		$	64		$	5,223		$	25,990
Additions (deductions)
Provision for loan losses		479			(881	)		(179	)		(4	)		(452	)		(1,037	)
Recoveries credited to allowance		1,722			843			853			-			-			3,418
Loans charged against the allowance		(518	)		(2,081	)		(1,168	)		-			-			(3,767	)
Balance at end of period	$	7,128		$	11,325		$	1,320		$	60		$	4,771		$	24,604
2014
Balance at beginning of period	$	6,827		$	17,195		$	2,246		$	97		$	5,960		$	32,325
Additions (deductions)
Provision for loan losses		(1,164	)		(395	)		132			(28	)		(594	)		(2,049	)
Recoveries credited to allowance		3,492			1,055			886			5			-			5,438
Loans charged against the allowance		(3,967	)		(2,854	)		(1,383	)		(2	)		-			(8,206	)
Balance at end of period	$	5,188		$	15,001		$	1,881		$	72		$	5,366		$	27,508

15

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		Payment Plan Receivables		Subjective Allocation		Total
	(In thousands)
September 30, 2015
Allowance for loan losses
Individually evaluated for impairment	$	4,048	$	8,244	$	484	$	-	$	-	$	12,776
Collectively evaluated for impairment		3,080		3,081		836		60		4,771		11,828
Total ending allowance balance	$	7,128	$	11,325	$	1,320	$	60	$	4,771	$	24,604
Loans
Individually evaluated for impairment	$	30,328	$	67,871	$	6,005	$	-			$	104,204
Collectively evaluated for impairment		697,528		402,934		230,310		37,438				1,368,210
Total loans recorded investment		727,856		470,805		236,315		37,438				1,472,414
Accrued interest included in recorded investment		1,500		2,227		688		-				4,415
Total loans	$	726,356	$	468,578	$	235,627	$	37,438			$	1,467,999
December 31, 2014
Allowance for loan losses
Individually evaluated for impairment	$	3,194	$	9,311	$	728	$	-	$	-	$	13,233
Collectively evaluated for impairment		2,251		4,133		1,086		64		5,223		12,757
Total ending allowance balance	$	5,445	$	13,444	$	1,814	$	64	$	5,223	$	25,990
Loans
Individually evaluated for impairment	$	34,147	$	72,340	$	6,679	$	-			$	113,166
Collectively evaluated for impairment		658,423		402,458		200,368		40,001				1,301,250
Total loans recorded investment		692,570		474,798		207,047		40,001				1,414,416
Accrued interest included in recorded investment		1,615		2,170		669		-				4,454
Total loans	$	690,955	$	472,628	$	206,378	$	40,001			$	1,409,962

16

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:

	90+ and Still Accruing		Non- Accrual		Total Non- Performing Loans
	(In thousands)
September 30, 2015
Commercial
Income producing - real estate	$	-	$	5,135	$	5,135
Land, land development and construction - real estate		-		533		533
Commercial and industrial		-		2,318		2,318
Mortgage
1-4 family		-		5,095		5,095
Resort lending		-		1,301		1,301
Home equity - 1st lien		-		191		191
Home equity - 2nd lien		-		189		189
Installment
Home equity - 1st lien		-		175		175
Home equity - 2nd lien		-		445		445
Loans not secured by real estate		-		430		430
Other		-		2		2
Payment plan receivables
Full refund		-		6		6
Partial refund		-		10		10
Other		-		4		4
Total recorded investment	$	-	$	15,834	$	15,834
Accrued interest included in recorded investment	$	-	$	-	$	-
December 31, 2014
Commercial
Income producing - real estate	$	-	$	1,233	$	1,233
Land, land development and construction - real estate		-		594		594
Commercial and industrial		-		2,746		2,746
Mortgage
1-4 family		7		5,945		5,952
Resort lending		-		2,168		2,168
Home equity - 1st lien		-		331		331
Home equity - 2nd lien		-		605		605
Installment
Home equity - 1st lien		-		576		576
Home equity - 2nd lien		-		517		517
Loans not secured by real estate		-		454		454
Other		-		48		48
Payment plan receivables
Full refund		-		2		2
Partial refund		-		12		12
Other		-		-		-
Total recorded investment	$	7	$	15,231	$	15,238
Accrued interest included in recorded investment	$	-	$	-	$	-

17

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

An aging analysis of loans by class follows:

	Loans Past Due								Loans not Past Due		Total Loans
	30-59 days		60-89 days		90+ days		Total
	(In thousands)
September 30, 2015
Commercial
Income producing - real estate	$	183	$	-	$	660	$	843	$	274,107	$	274,950
Land, land development and construction - real estate		-		119		204		323		41,899		42,222
Commercial and industrial		2,315		320		368		3,003		407,681		410,684
Mortgage
1-4 family		2,513		662		5,095		8,270		271,130		279,400
Resort lending		309		150		1,301		1,760		116,528		118,288
Home equity - 1st lien		39		23		191		253		22,252		22,505
Home equity - 2nd lien		331		-		189		520		50,092		50,612
Installment
Home equity - 1st lien		286		65		175		526		17,954		18,480
Home equity - 2nd lien		191		53		445		689		21,616		22,305
Loans not secured by real estate		474		132		430		1,036		192,321		193,357
Other		6		2		2		10		2,163		2,173
Payment plan receivables
Full refund		563		115		6		684		22,848		23,532
Partial refund		710		249		10		969		7,459		8,428
Other		112		16		4		132		5,346		5,478
Total recorded investment	$	8,032	$	1,906	$	9,080	$	19,018	$	1,453,396	$	1,472,414
Accrued interest included in recorded investment	$	113	$	18	$	-	$	131	$	4,284	$	4,415
December 31, 2014
Commercial
Income producing - real estate	$	89	$	-	$	214	$	303	$	252,763	$	253,066
Land, land development and construction - real estate		131		-		223		354		33,984		34,338
Commercial and industrial		2,391		279		209		2,879		402,287		405,166
Mortgage
1-4 family		1,877		1,638		5,952		9,467		269,719		279,186
Resort lending		226		-		2,168		2,394		126,342		128,736
Home equity - 1st lien		39		50		331		420		19,782		20,202
Home equity - 2nd lien		711		89		605		1,405		45,269		46,674
Installment
Home equity - 1st lien		466		37		576		1,079		20,995		22,074
Home equity - 2nd lien		369		81		517		967		28,125		29,092
Loans not secured by real estate		589		231		454		1,274		152,115		153,389
Other		15		3		48		66		2,426		2,492
Payment plan receivables
Full refund		838		214		2		1,054		26,799		27,853
Partial refund		409		123		12		544		6,550		7,094
Other		96		24		-		120		4,934		5,054
Total recorded investment	$	8,246	$	2,769	$	11,311	$	22,326	$	1,392,090	$	1,414,416
Accrued interest included in recorded investment	$	55	$	29	$	-	$	84	$	4,370	$	4,454

18

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Impaired loans are as follows :

	September 30, 2015		December 31, 2014
Impaired loans with no allocated allowance	(In thousands)
TDR	$	6,416	$	9,325
Non - TDR		204		299
Impaired loans with an allocated allowance
TDR - allowance based on collateral		3,970		5,879
TDR - allowance based on present value cash flow		86,985		94,970
Non - TDR - allowance based on collateral		6,281		2,296
Non - TDR - allowance based on present value cash flow		-		-
Total impaired loans	$	103,856	$	112,769
Amount of allowance for loan losses allocated
TDR - allowance based on collateral	$	1,575	$	2,025
TDR - allowance based on present value cash flow		8,952		10,188
Non - TDR - allowance based on collateral		2,249		1,020
Non - TDR - allowance based on present value cash flow		-		-
Total amount of allowance for loan losses allocated	$	12,776	$	13,233

19

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Impaired loans by class  are as follows (1):

	September 30, 2015						December 31, 2014
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:	(In thousands)
Commercial
Income producing - real estate	$	4,778	$	4,977	$	-	$	5,868	$	6,077	$	-
Land, land development & construction-real estate		851		1,425		-		1,051		1,606		-
Commercial and industrial		985		982		-		2,685		2,667		-
Mortgage
1-4 family		23		166		-		-		49		-
Resort lending		-		-		-		48		397		-
Home equity - 1st lien		-		-		-		-		-		-
Home equity - 2nd lien		-		-		-		-		-		-
Installment
Home equity - 1st lien		-		36		-		-		40		-
Home equity - 2nd lien		-		-		-		-		-		-
Loans not secured by real estate		-		-		-		-		-		-
Other		-		-		-		-		-		-
		6,637		7,586		-		9,652		10,836		-
With an allowance recorded:
Commercial
Income producing - real estate		16,414		17,414		1,357		12,836		13,797		689
Land, land development & construction-real estate		2,061		2,140		421		3,456		3,528		499
Commercial and industrial		5,239		5,549		2,270		8,251		8,486		2,006
Mortgage
1-4 family		49,245		51,392		5,437		53,206		56,063		6,195
Resort lending		18,328		18,591		2,786		18,799		18,963		3,075
Home equity - 1st lien		155		172		11		162		177		14
Home equity - 2nd lien		120		201		10		125		205		27
Installment
Home equity - 1st lien		2,434		2,610		145		2,744		2,930		219
Home equity - 2nd lien		2,931		2,942		285		3,212		3,215		419
Loans not secured by real estate		631		689		53		711		835		89
Other		9		9		1		12		12		1
		97,567		101,709		12,776		103,514		108,211		13,233
Total
Commercial
Income producing - real estate		21,192		22,391		1,357		18,704		19,874		689
Land, land development & construction-real estate		2,912		3,565		421		4,507		5,134		499
Commercial and industrial		6,224		6,531		2,270		10,936		11,153		2,006
Mortgage
1-4 family		49,268		51,558		5,437		53,206		56,112		6,195
Resort lending		18,328		18,591		2,786		18,847		19,360		3,075
Home equity - 1st lien		155		172		11		162		177		14
Home equity - 2nd lien		120		201		10		125		205		27
Installment
Home equity - 1st lien		2,434		2,646		145		2,744		2,970		219
Home equity - 2nd lien		2,931		2,942		285		3,212		3,215		419
Loans not secured by real estate		631		689		53		711		835		89
Other		9		9		1		12		12		1
Total	$	104,204	$	109,295	$	12,776	$	113,166	$	119,047	$	13,233
Accrued interest included in recorded investment	$	348					$	397

(1) There were no impaired payment plan receivables at September 30, 2015 or December 31, 2014.

20

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 (1):

	2015				2014
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:	(In thousands)
Commercial
Income producing - real estate	$	5,133	$	45	$	8,255	$	103
Land, land development & construction-real estate		932		14		859		15
Commercial and industrial		1,922		68		3,397		63
Mortgage
1-4 family		24		3		66		-
Resort lending		-		-		42		1
Home equity - 1st lien		-		-		-		-
Home equity - 2nd lien		-		-		-		-
Installment
Home equity - 1st lien		-		-		-		-
Home equity - 2nd lien		-		-		-		-
Loans not secured by real estate		-		-		-		-
Other		-		-		-		-
		8,011		130		12,619		182
With an allowance recorded:
Commercial
Income producing - real estate		14,655		154		11,486		136
Land, land development & construction-real estate		1,993		2		4,092		38
Commercial and industrial		6,431		37		7,936		51
Mortgage
1-4 family		49,706		554		55,633		558
Resort lending		18,414		163		19,351		195
Home equity - 1st lien		157		2		165		2
Home equity - 2nd lien		185		-		39		-
Installment
Home equity - 1st lien		2,474		47		2,801		43
Home equity - 2nd lien		2,999		47		3,375		46
Loans not secured by real estate		645		10		699		9
Other		10		-		14		-
		97,669		1,016		105,591		1,078
Total
Commercial
Income producing - real estate		19,788		199		19,741		239
Land, land development & construction-real estate		2,925		16		4,951		53
Commercial and industrial		8,353		105		11,333		114
Mortgage
1-4 family		49,730		557		55,699		558
Resort lending		18,414		163		19,393		196
Home equity - 1st lien		157		2		165		2
Home equity - 2nd lien		185		-		39		-
Installment
Home equity - 1st lien		2,474		47		2,801		43
Home equity - 2nd lien		2,999		47		3,375		46
Loans not secured by real estate		645		10		699		9
Other		10		-		14		-
Total	$	105,680	$	1,146	$	118,210	$	1,260

(1) There were no impaired payment plan receivables during the three month periods ended September 30, 2015 and 2014, respectively.

21

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 (1):

	2015				2014
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:	(In thousands)
Commercial
Income producing - real estate	$	5,490	$	170	$	8,109	$	289
Land, land development & construction-real estate		986		57		1,168		43
Commercial and industrial		2,345		195		3,517		129
Mortgage
1-4 family		18		5		37		-
Resort lending		15		-		38		1
Home equity line of credit - 1st lien		-		-		-		-
Home equity line of credit - 2nd lien		-		-		-		-
Installment
Home equity installment - 1st lien		-		1		-		1
Home equity installment - 2nd lien		-		-		-		-
Loans not secured by real estate		-		-		-		-
Other		-		-		-		-
		8,854		428		12,869		463
With an allowance recorded:
Commercial
Income producing - real estate		13,752		452		12,756		417
Land, land development & construction-real estate		2,351		35		4,059		120
Commercial and industrial		7,304		117		8,562		209
Mortgage
1-4 family		51,078		1,644		56,545		1,777
Resort lending		18,523		507		19,623		581
Home equity line of credit - 1st lien		159		6		159		5
Home equity line of credit - 2nd lien		154		6		40		1
Installment
Home equity installment - 1st lien		2,582		141		2,860		132
Home equity installment - 2nd lien		3,086		147		3,396		143
Loans not secured by real estate		669		29		721		26
Other		11		1		15		1
		99,669		3,085		108,736		3,412
Total
Commercial
Income producing - real estate		19,242		622		20,865		706
Land, land development & construction-real estate		3,337		92		5,227		163
Commercial and industrial		9,649		312		12,079		338
Mortgage
1-4 family		51,096		1,649		56,582		1,777
Resort lending		18,538		507		19,661		582
Home equity line of credit - 1st lien		159		6		159		5
Home equity line of credit - 2nd lien		154		6		40		1
Installment
Home equity installment - 1st lien		2,582		142		2,860		133
Home equity installment - 2nd lien		3,086		147		3,396		143
Loans not secured by real estate		669		29		721		26
Other		11		1		15		1
Total	$	108,523	$	3,513	$	121,605	$	3,875

(1) There were no impaired payment plan receivables during the nine month periods ended September 30, 2015 and 2014, respectively.

22

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Our average investment in impaired loans was approximately $105.7 million and $118.2 million for the three-month periods ended September 30, 2015 and 2014, respectively and $108.5 million and $121.6 million for the nine-month periods ended September 30, 2015 and 2014, respectively.  Cash receipts on impaired loans on non-accrual status are generally applied to the principal balance.  Interest income recognized on impaired loans during the three months ending September 30, 2015 and 2014, was approximately $1.1 million and $1.3 million, respectively, and was approximately $3.5 million and $3.9 million during the nine months ending September 30, 2015 and 2014, respectively.

Troubled debt restructurings follow:

	September 30, 2015
	Commercial		Retail			Total
	(In thousands)
Performing TDRs	$	22,257	$	69,726		$	91,983
Non-performing TDRs(1)		1,501		3,887	(2)		5,388
Total	$	23,758	$	73,613		$	97,371
	December 31, 2014
	Commercial		Retail			Total
	(In thousands)
Performing TDRs	$	29,475	$	73,496		$	102,971
Non-performing TDRs(1)		1,978		5,225	(2)		7,203
Total	$	31,453	$	78,721		$	110,174

(1) Included in non-performing loans table above.

(2) Also includes loans on non-accrual at the time of modification until six payments are received on a timely basis.

We allocated $10.5 million and $12.2 million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of September 30, 2015 and December 31, 2014, respectively.

During the nine months ended September 30, 2015 and 2014, the terms of certain loans were modified as troubled debt restructurings. 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 new debt 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 230 months in certain circumstances.

23

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Loans that have been classified as troubled debt restructurings during the three-month periods endedSeptember 30 follow:

	Number of Contracts		Pre-modification Recorded Balance		Post-modification Recorded Balance
	(Dollars in thousands)
2015
Commercial
Income producing - real estate		-	$	-	$	-
Land, land development & construction-real estate		-		-		-
Commercial and industrial		1		48		26
Mortgage
1-4 family		3		343		344
Resort lending		-		-		-
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		-		-		-
Loans not secured by real estate		1		19		19
Other		-		-		-
Total		5	$	410	$	389
2014
Commercial
Income producing - real estate		-	$	-	$	-
Land, land development & construction-real estate		1		40		36
Commercial and industrial		5		716		693
Mortgage
1-4 family		1		87		87
Resort lending		1		378		367
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		3		118		96
Home equity - 2nd lien		-		-		-
Loans not secured by real estate		1		55		53
Other		-		-		-
Total		12	$	1,394	$	1,332

24

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Loans that have been classified as troubled debt restructurings during the nine-month periods endedSeptember 30 follow:

	Number of Contracts		Pre-modification Recorded Balance		Post-modification Recorded Balance
	(Dollars in thousands)
2015
Commercial
Income producing - real estate		2	$	229	$	234
Land, land development & construction-real estate		-		-		-
Commercial and industrial		4		301		273
Mortgage
1-4 family		9		1,373		1,189
Resort lending		1		313		309
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		5		190		164
Home equity - 2nd lien		3		58		58
Loans not secured by real estate		2		19		25
Other		-		-		-
Total		26	$	2,483	$	2,252
2014
Commercial
Income producing - real estate		3	$	354	$	326
Land, land development & construction-real estate		2		55		50
Commercial and industrial		11		2,083		1,524
Mortgage
1-4 family		8		1,037		1,049
Resort lending		4		1,011		997
Home equity - 1st lien		1		17		13
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		8		538		465
Home equity - 2nd lien		5		294		284
Loans not secured by real estate		3		88		80
Other		-		-		-
Total		45	$	5,477	$	4,788

The troubled debt restructurings described above for 2015 decreased the allowance for loan losses by $0.05 million and resulted in zero charge offs during the three months ended September 30, 2015, and increased the allowance by $0.05 million and resulted in zero charge offs during the nine months ended September 30, 2015.

The troubled debt restructurings described above for 2014 increased the allowance for loan losses by $0.2 million and resulted in zero charge offs during the three months ended September 30, 2014 and increased the allowance by $0.2 million and resulted in $0.01 million of charge offs during the nine months ended September 30, 2014.

25

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Loans that have been classified as troubled debt restructurings during the past twelve months and thathave subsequently defaulted during the three-month periods ended September 30 follow:

	Number of Contracts		Recorded Balance
	(Dollars in thousands)
2015
Commercial
Income producing - real estate		-	$	-
Land, land development & construction-real estate		-		-
Commercial and industrial		-		-
Mortgage
1-4 family		1		54
Resort lending		-		-
Home equity - 1st lien		-		-
Home equity - 2nd lien		-		-
Installment
Home equity - 1st lien		-		-
Home equity - 2nd lien		-		-
Loans not secured by real estate		-		-
Other		-		-
		1	$	54
2014
Commercial
Income producing - real estate		-	$	-
Land, land development & construction-real estate		-		-
Commercial and industrial		1		66
Mortgage
1-4 family		1		125
Resort lending		-		-
Home equity - 1st lien		-		-
Home equity - 2nd lien		-		-
Installment
Home equity - 1st lien		-		-
Home equity - 2nd lien		-		-
Loans not secured by real estate		-		-
Other		-		-
		2	$	191

26

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Loans that have been classified as troubled debt restructurings during the past twelve months and thathave subsequently defaulted during the nine-month periods ended September 30 follow:

	Number of Contracts		Recorded Balance
	(Dollars in thousands)
2015
Commercial
Income producing - real estate		-	$	-
Land, land development & construction-real estate		-		-
Commercial and industrial		2		157
Mortgage
1-4 family		1		54
Resort lending		-		-
Home equity - 1st lien		-		-
Home equity - 2nd lien		-		-
Installment
Home equity - 1st lien		-		-
Home equity - 2nd lien		-		-
Loans not secured by real estate		1		4
Other		-		-
		4	$	215
2014
Commercial
Income producing - real estate		-	$	-
Land, land development & construction-real estate		-		-
Commercial and industrial		2		319
Mortgage
1-4 family		1		125
Resort lending		-		-
Home equity - 1st lien		-		-
Home equity - 2nd lien		-		-
Installment
Home equity - 1st lien		-		-
Home equity - 2nd lien		-		-
Loans not secured by real estate		-		-
Other		-		-
		3	$	444

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

The troubled debt restructurings that subsequently defaulted described above for 2015 decreased the allowance for loan losses by $0.01 million and resulted in zero charge offs during the three months ended September 30, 2015 and had no impact on the allowance for loan losses and resulted in zero charge offs during the nine months ended September 30, 2015.

The troubled debt restructurings that subsequently defaulted described above for 2014 had no impact on the allowance for loan losses and resulted in no charge offs during the three months ended September 30, 2014 and increased the allowance for loan losses by $0.01 million and resulted in no charge offs during the nine months ended September 30, 2014.

27

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The terms of certain other loans were modified during the nine months ended September 30, 2015 and 2014 in a manner that did not meet the definition of a troubled debt restructuring.  The modification of these loans could have included modification of the terms of a loan to borrowers who were not experiencing financial difficulties or a delay in a payment that was considered to be insignificant.

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.

Credit Quality Indicators – As part of our on 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, (d) financial performance of certain counterparties for payment plan receivables and (e) 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. This rating includes 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. This rating includes loans to borrowers with weaknesses that make collection of debt 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.

28

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

	Commercial
		Non-watch 1-6		Watch 7-8		Substandard Accrual 9		Non- Accrual 10-11	Total
					(In thousands)
September 30, 2015
Income producing - real estate	$	261,676	$	7,013	$	1,126	$	5,135	$	274,950
Land, land development and construction - real estate		38,135		3,307		247		533		42,222
Commercial and industrial		371,193		29,285		7,888		2,318		410,684
Total	$	671,004	$	39,605	$	9,261	$	7,986	$	727,856
Accrued interest included in total	$	1,304	$	189	$	7	$	-	$	1,500
December 31, 2014
Income producing - real estate	$	241,266	$	8,649	$	1,918	$	1,233	$	253,066
Land, land development and construction - real estate		30,869		2,485		390		594		34,338
Commercial and industrial		372,947		23,475		5,998		2,746		405,166
Total	$	645,082	$	34,609	$	8,306	$	4,573	$	692,570
Accrued interest included in total	$	1,479	$	111	$	25	$	-	$	1,615

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

29

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

	Mortgage (1)
	1-4 Family		Resort Lending		Home Equity 1st Lien		Home Equity 2nd Lien		Total
	(In thousands)
September 30, 2015
800 and above	$	27,538	$	12,627	$	4,859	$	6,717	$	51,741
750-799		77,238		42,522		6,280		16,387		142,427
700-749		50,309		33,785		4,076		11,985		100,155
650-699		52,898		16,771		3,565		8,022		81,256
600-649		28,698		5,666		1,872		3,639		39,875
550-599		16,809		2,546		647		1,957		21,959
500-549		13,983		1,253		758		1,089		17,083
Under 500		4,098		992		210		404		5,704
Unknown		7,829		2,126		238		412		10,605
Total	$	279,400	$	118,288	$	22,505	$	50,612	$	470,805
Accrued interest included in total	$	1,427	$	508	$	92	$	200	$	2,227
December 31, 2014
800 and above	$	27,918	$	14,484	$	3,863	$	6,225	$	52,490
750-799		72,674		45,950		6,128		14,323		139,075
700-749		52,843		32,660		3,054		9,642		98,199
650-699		51,664		20,250		3,257		8,194		83,365
600-649		27,770		6,538		1,704		3,862		39,874
550-599		21,361		3,639		994		1,721		27,715
500-549		14,575		2,156		699		1,401		18,831
Under 500		6,306		875		261		632		8,074
Unknown		4,075		2,184		242		674		7,175
Total	$	279,186	$	128,736	$	20,202	$	46,674	$	474,798
Accrued interest included in total	$	1,311	$	562	$	88	$	209	$	2,170

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

30

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

	Installment (1)
	Home Equity 1st Lien		Home Equity 2nd Lien		Loans not Secured by Real Estate		Other		Total
	(In thousands)
September 30, 2015
800 and above	$	1,953	$	1,840	$	40,348	$	59	$	44,200
750-799		4,411		6,624		89,310		568		100,913
700-749		2,685		4,667		38,237		617		46,206
650-699		3,783		4,138		15,224		479		23,624
600-649		2,161		2,254		4,758		260		9,433
550-599		1,919		1,547		2,080		124		5,670
500-549		760		851		976		50		2,637
Under 500		744		280		461		11		1,496
Unknown		64		104		1,963		5		2,136
Total	$	18,480	$	22,305	$	193,357	$	2,173	$	236,315
Accrued interest included in total	$	70	$	82	$	519	$	17	$	688
December 31, 2014
800 and above	$	2,272	$	2,835	$	31,507	$	60	$	36,674
750-799		5,677		8,557		66,558		583		81,375
700-749		3,111		6,358		28,179		689		38,337
650-699		3,963		5,477		16,152		615		26,207
600-649		3,434		2,408		5,128		255		11,225
550-599		2,019		1,913		1,896		134		5,962
500-549		1,128		1,036		1,672		84		3,920
Under 500		393		427		455		28		1,303
Unknown		77		81		1,842		44		2,044
Total	$	22,074	$	29,092	$	153,389	$	2,492	$	207,047
Accrued interest included in total	$	93	$	112	$	445	$	19	$	669

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

Mepco Finance Corporation (“Mepco”) is a wholly-owned subsidiary of our Bank that operates a vehicle service contract payment plan business throughout the United States. See Note #14 for more information about Mepco’s business. As of September 30, 2015, approximately 62.9% of Mepco’s outstanding payment plan receivables relate to programs in which a third party insurer or risk retention group is obligated to pay Mepco the full refund owing upon cancellation of the related service contract (including with respect to both the portion funded to the service contract seller and the portion funded to the administrator). These receivables are shown as “Full Refund” in the table below. Another approximately 22.5% of Mepco’s outstanding payment plan receivables as of September 30, 2015, relate to programs in which a third party insurer or risk retention group is obligated to pay Mepco the refund owing upon cancellation only with respect to the unearned portion previously funded by Mepco to the administrator (but not to the service contract seller). These receivables are shown as “Partial Refund” in the table below. The balance of Mepco’s outstanding payment plan receivables relate to programs in which there is no insurer or risk retention group that has any contractual liability to Mepco for any portion of the refund amount. These receivables are shown as “Other” in the table below. For each class of our payment plan receivables we monitor financial information on the counterparties as we evaluate the credit quality of this portfolio.

31

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The following table summarizes credit ratings of insurer or risk retention group counterparties by class of payment plan receivable:

	Payment Plan Receivables
	Full Refund		Partial Refund		Other		Total
	(In thousands)
September 30, 2015
AM Best rating
A+	$	-	$	8	$	-	$	8
A		3,711		7,572		-		11,283
A-		3,226		753		5,470		9,449
Not rated		16,595		95		8		16,698
Total	$	23,532	$	8,428	$	5,478	$	37,438
December 31, 2014
AM Best rating
A+	$	-	$	43	$	-	$	43
A		10,007		6,190		-		16,197
A-		1,989		685		5,054		7,728
Not rated		15,857		176		-		16,033
Total	$	27,853	$	7,094	$	5,054	$	40,001

Although Mepco has contractual recourse against various counterparties for refunds owing upon cancellation of vehicle service contracts, see Note #14 below regarding certain risks and difficulties associated with collecting these refunds.

Foreclosed residential real estate properties included in other real estate and repossessed assets on our Condensed Consolidated Statements of Financial Condition totaled $2.8 million and $2.9 million at September 30, 2015 and December 31, 2014, respectively.  Retail mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process according to local requirements totaled $1.1 million and $2.5 million at September 30, 2015 and December 31, 2014, respectively.

5. Segments

Our reportable segments are based upon legal entities.  We currently have two reportable segments:  Independent Bank (“IB” or “Bank”) and Mepco.  These business segments are also differentiated based on the products and services provided.  We evaluate performance based principally on net income (loss) of the respective reportable segments.

In the normal course of business, our IB segment provides funding to our Mepco segment through an intercompany line of credit priced at the prime rate of interest as published in the Wall Street Journal. Our IB segment also provides certain administrative services to our Mepco segment which are reimbursed at an agreed upon rate. These intercompany transactions are eliminated upon consolidation. The only other material intersegment balances and transactions are investments in subsidiaries at the parent entities and cash balances on deposit at our IB segment.

32

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

A summary of selected financial information for our reportable segments follows:

	IB			Mepco			Other (1)			Elimination (2)			Total
	(In thousands)
Total assets
September 30, 2015	$	2,323,629		$	60,018		$	288,708		$	(277,494	)	$	2,394,861
December 31, 2014		2,174,536			63,378			286,158			(275,342	)		2,248,730
For the three months ended September 30,
2015
Interest income	$	18,973		$	1,320		$	20		$	(20	)	$	20,293
Net interest income		17,964			1,115			(238	)		-			18,841
Provision for loan losses		(238	)		(6	)		-			-			(244	)
Income (loss) before income tax		7,961			(254	)		(358	)		(24	)		7,325
Net income (loss)		5,455			(168	)		(224	)		(16	)		5,047
2014
Interest income	$	18,444		$	1,624		$	25		$	(25	)	$	20,068
Net interest income		17,254			1,338			(409	)		-			18,183
Provision for loan losses		(623	)		(9	)		-			-			(632	)
Income (loss) before income tax		7,459			247			(408	)		(24	)		7,274
Net income (loss)		5,048			163			(266	)		(16	)		4,929
For the nine months ended September 30,
2015
Interest income	$	55,895		$	4,081		$	60		$	(60	)	$	59,976
Net interest income		52,864			3,468			(699	)		-			55,633
Provision for loan losses		(1,032	)		(5	)		-			-			(1,037	)
Income (loss) before income tax		23,063			(766	)		(1,097	)		(71	)		21,129
Net income (loss)		15,623			(437	)		(693	)		(46	)		14,447
2014
Interest income	$	55,153		$	5,555		$	41		$	(41	)	$	60,708
Net interest income		51,721			4,500			(1,022	)		-			55,199
Provision for loan losses		(2,018	)		(31	)		-			-			(2,049	)
Income (loss) before income tax		20,151			908			(1,210	)		(71	)		19,778
Net income (loss)		14,345			607			(665	)		(168	)		14,119

(1) Includes amounts relating to our parent company and certain insignificant operations.

(2) Includes parent company's investment in subsidiaries and cash balances maintained at subsidiary.

6. Shareholders’ Equity and Earnings Per Common Share

On January 21, 2015, our Board of Directors authorized a share repurchase plan (the “Repurchase Plan”) to buy back up to 5% of our outstanding common stock through December 31, 2015.  We expect to accomplish the repurchases through open market transactions, though we could effect 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. The Repurchase Plan does not obligate us to acquire any particular amount of common stock, and it may be modified or suspended at any time at our discretion. We expect to fund any repurchases from cash on hand.  During the nine months ended September 30, 2015, we repurchased 659,162 shares of common stock for an aggregate purchase price of $9.0 million.

33

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

On November 15, 2011, we entered into a Tax Benefits Preservation Plan (the "Preservation Plan") with our stock transfer agent, American Stock Transfer & Trust Company. Our Board of Directors adopted the Preservation Plan in an effort to protect the value to our shareholders of our ability to use deferred tax assets such as net operating loss carry forwards to reduce potential future federal income tax obligations. Under federal tax rules, this value could be lost in the event we experienced an "ownership change," as defined in Section 382 of the Internal Revenue Code. The Preservation Plan attempts to protect this value by reducing the likelihood that we will experience such an ownership change by discouraging any person who is not already a 5% shareholder from becoming a 5% shareholder (with certain limited exceptions).

On November 15, 2011, our Board of Directors declared a dividend of one preferred share purchase right (a "Right") for each outstanding share of our common stock under the terms of the Preservation Plan. The dividend is payable to the holders of common stock outstanding as of the close of business on November 15, 2011, or outstanding at any time thereafter but before the earlier of a "Distribution Date" and the date the Preservation Plan terminates. Each Right entitles the registered holder to purchase from us 1/1000 of a share of our Series C Junior Participating Preferred Stock, no par value per share ("Series C Preferred Stock"). Each 1/1000 of a share of Series C Preferred Stock has economic and voting terms similar to those of one whole share of common stock. The Rights are not exercisable and generally do not become exercisable until a person or group has acquired, subject to certain exceptions and conditions, beneficial ownership of 4.99% or more of the outstanding shares of common stock. At that time, each Right will generally entitle its holder to purchase securities of the Company at a discount of 50% to the current market price of the common stock. However, the Rights owned by the person acquiring beneficial ownership of 4.99% or more of the outstanding shares of common stock would automatically be void. The significant dilution that would result is expected to deter any person from acquiring beneficial ownership of 4.99% or more and thereby triggering the Rights.

To date, none of the Rights have been exercised or have become exercisable because no unpermitted 4.99% or more change in the beneficial ownership of the outstanding common stock has occurred. The Rights will generally expire on the earlier to occur of the close of business on November 15, 2016, and certain other events described in the Preservation Plan, including such date as our Board of Directors determines that the Preservation Plan is no longer necessary for its intended purposes.

34

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,
	2015		2014		2015		2014
	(In thousands, except per share amounts)
Net income	$	5,047	$	4,929	$	14,447	$	14,119
Weighted average shares outstanding (1)		22,673		22,940		22,852		22,919
Restricted stock units		230		306		283		305
Effect of stock options		118		123		120		126
Stock units for deferred compensation plan for non-employee directors		112		109		111		114
Weighted average shares outstanding for calculation of diluted earnings per share		23,133		23,478		23,366		23,464
Net income per common share
Basic (1)	$	0.22	$	0.21	$	0.63	$	0.62
Diluted	$	0.22	$	0.21	$	0.62	$	0.60

⁽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 share because they were anti-dilutive totaled 0.03 million for both three-month periods ending September 30, 2015 and 2014, respectively and totaled 0.03 million for both nine-month periods ending September 30, 2015 and 2014, respectively.

7. 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.

35

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, 2015
	Notional Amount		Average Maturity (years)		Fair Value
	(Dollars in thousands)
No hedge designation
Rate-lock mortgage loan commitments	$	24,746		0.1	$	823
Mandatory commitments to sell mortgage loans		49,791		0.1		(409	)
Pay-fixed interest rate swap agreements		19,616		7.3		(674	)
Pay-variable interest rate swap agreements		19,616		7.3		674
Purchased options		1,681		5.9		126
Written options		1,681		5.9		(126	)
Total	$	117,131		2.7	$	414
	December 31, 2014
	Notional Amount		Average Maturity (years)		Fair Value
	(Dollars in thousands)
No hedge designation
Rate-lock mortgage loan commitments	$	16,759		0.1	$	437
Mandatory commitments to sell mortgage loans		38,600		0.1		(184	)
Pay-fixed interest rate swap agreements		3,300		9.4		(182	)
Pay-variable interest rate swap agreements		3,300		9.4		182
Total	$	61,959		1.1	$	253

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 earnings.

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.  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.

36

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

During 2014, we began 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 in the table above relate to this program.

During the third quarter of 2015, we began offering to our deposit customers an equity linked time deposit product (“Altitude CD”).  The Altitude CD is a time deposit that provides the customer a guaranteed return of principle 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.

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, 2015			December 31, 2014			September 30, 2015			December 31, 2014
	Balance  Sheet  Location	Fair Value		Balance  Sheet  Location	Fair Value		Balance  Sheet  Location	Fair Value		Balance  Sheet  Location	Fair Value
	(In thousands)
Derivatives not designated as hedging instruments
Rate-lock mortgage loan commitments	Other assets	$	823	Other assets	$	437	Other liabilities	$	-	Other liabilities	$	-
Mandatory commitments to sell mortgage loans	Other assets		-	Other assets		-	Other liabilities		409	Other liabilities		184
Pay-fixed interest rate swap agreements	Other assets		-	Other assets		-	Other liabilities		674	Other liabilities		182
Pay-variable interest rate swap agreements	Other assets		674	Other assets		182	Other liabilities		-	Other liabilities		-
Purchased options	Other assets		126	Other assets		-	Other liabilities		-	Other liabilities		-
Written options	Other assets		-	Other assets		-	Other liabilities		126	Other liabilities		-
Total derivatives		$	1,623		$	619		$	1,209		$	366

37

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,
	Gain (Loss) Recognized in Other Comprehensive Income (Effective Portion)				Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective	Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)					Location of Gain (Loss) Recognized	Gain (Loss) Recognized in Income
	2015		2014		Portion)	2015		2014			in Income (1)	2015			2014
	(In thousands)
Cash Flow Hedges
Pay-fixed interest rate swap agreements (2)	$	-	$	-	Interest expense	$	-	$	(95	)		$	-		$	-
Total	$	-	$	-		$	-	$	(95	)		$	-		$	-
No hedge designation
Rate-lock mortgage loan commitments											Net mortgage loan gains	$	281		$	(77	)
Mandatory commitments to sell mortgage loans											Net mortgage loan gains		(745	)		220
Pay-fixed interest rate swap agreements											Interest income		(452	)		7
Pay-variable interest rate swap agreements											Interest income		452			(7	)
Purchased options											Interest expense		126			-
Written options											Interest expense		(126	)		-
U.S. Treasury short position											Gain on securities		-			127
Total												$	(464	)	$	270

(1) For cash flow hedges, this location and amount refers to the ineffective portion.

(2) Relates to a terminated pay-fixed interest rate swap whose termination fee was included in accumulated other comprehensive loss and was being amortized into earnings through December 31, 2014.

38

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 Loss into Income (Effective	Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)					Location of Gain (Loss) Recognized	Gain (Loss) Recognized in Income
	2015		2014		Portion)	2015		2014			in Income (1)	2015			2014
	(In thousands)
Cash Flow Hedges
Pay-fixed interest rate swap agreements (2)	$	-	$	-	Interest expense	$	-	$	(285	)		$	-		$	-
Total	$	-	$	-		$	-	$	(285	)		$	-		$	-
No hedge designation
Rate-lock mortgage loan commitments											Net mortgage loan gains	$	386		$	147
Mandatory commitments to sell mortgage loans											Net mortgage loan gains		(225	)		(134	)
Pay-fixed interest rate swap agreements											Interest income		(492	)		(92	)
Pay-variable interest rate swap agreements											Interest income		492			92
Purchased options											Interest expense		126			-
Written options											Interest expense		(126	)		-
U.S. Treasury short position											Gain on securities		-			179
Total												$	161		$	192

(1) For cash flow hedges, this location and amount refers to the ineffective portion.

(2) Relates to a terminated pay-fixed interest rate swap whose termination fee was included in accumulated other comprehensive loss and was being amortized into earnings through December 31, 2014.

8. Intangible Assets

The following table summarizes intangible assets, net of amortization:

	September 30, 2015				December 31, 2014
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
	(In thousands)
Amortized intangible assets - core deposits	$	6,118	$	3,752	$	6,118	$	3,491

39

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Amortization of other intangibles has been estimated through 2020 and thereafter in the following table.

	(In thousands)
Three months ending December 31, 2015	$	86
2016		347
2017		346
2018		346
2019		346
2020 and thereafter		895
Total	$	2,366

9. 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 0.3 million shares of common stock as of September 30, 2015.  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, 2015. 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.

During each first quarter period of 2015 and 2014, pursuant to our long-term incentive plan, we granted 0.07 million shares of restricted stock and 0.03 million performance stock units (“PSU”) to certain officers.  The shares of restricted stock issued during 2015 cliff vest after a period of three years, the shares of restricted stock issued during 2014 vest ratably over three years and the PSUs issued in both periods 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 peers in the banking industry.  No long term incentive grants were made during the second or third quarters of 2015 or 2014.

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 are issued each quarter and vest immediately.  We issued 0.004 million shares and 0.011 million shares to directors during the first nine months of 2015 and 2014, respectively and expensed their value during those same periods.

40

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Total compensation expense recognized for grants pursuant to our long-term incentive plan was $0.4 million and $1.1 million during the three and nine month periods ended September 30, 2015, respectively, and was $0.3 million and $0.8 million during the same periods in 2014, respectively.  The corresponding tax benefit relating to this expense was $0.1 million and $0.4 million for the three and nine month periods ended September 30, 2015, respectively and $0.1 million and $0.3 million for the same periods in 2014. Total expense recognized for non-employee director share based payments was $0.02 million and $0.05 million during the three and nine month periods ended September 30, 2015, respectively, and was $0.05 million and $0.14 million during the same periods in 2014, respectively.  The corresponding tax benefit relating to this expense was $0.01 million and $0.02 million for the three and nine month periods ended September 30, 2015, respectively and $0.02 million and $0.05 million during the same periods in 2014.

At September 30, 2015, the total expected compensation cost related to non-vested stock options, restricted stock, PSUs and restricted stock unit awards not yet recognized was $1.8 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, 2015		281,820		$	4.69
Granted		-
Exercised		(31,450	)		3.35
Forfeited		(2,096	)		4.77
Expired		(1,924	)		6.79
Outstanding at September 30, 2015		246,350		$	4.85		6.35	$	2,472
Vested and expected to vest at
September 30, 2015		245,298		$	4.84		6.35	$	2,463
Exercisable at September 30, 2015		222,742		$	4.70		6.22	$	2,271

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

	Number of Shares			Weighted- Average Grant Date Fair Value
Outstanding at January 1, 2015		407,130		$	6.31
Granted		108,422			13.06
Vested		(249,526	)		3.92
Forfeited		(4,384	)		12.88
Outstanding at September 30, 2015		261,642		$	11.28

41

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

During the third quarter of 2015, 0.23 million restricted stock units relating to a grant in 2012 vested.  In addition, as permitted by our long-term incentive plan, 0.07 million shares were withheld from the shares that would otherwise have been issued to executive officers for these vesting restricted stock units in order to satisfy tax withholding obligations. 

Certain information regarding options exercised during the periods follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(In thousands)
Intrinsic value	$	71	$	123	$	314	$	231
Cash proceeds received	$	23	$	30	$	105	$	66
Tax benefit realized	$	25	$	44	$	110	$	81

10. Income Tax

Income tax expense was $2.3 million during each three month period ended September 30, 2015 and 2014 and $6.7 million and $5.7 million during the nine months ended September 30, 2015 and 2014, 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 both September 30, 2015 and 2014, that the realization of substantially all of our deferred tax assets continues to be more likely than not.

We did maintain a valuation allowance against our deferred tax assets of approximately $1.0 million at both September 30, 2015 and December 31, 2014. This valuation allowance on our deferred tax assets primarily relates to state income taxes at our Mepco segment.  In this instance, we determined that the future realization of these particular deferred tax assets was not more likely than not.  This conclusion was primarily based on the uncertainty of Mepco’s future earnings attributable to particular states (given the various apportionment criteria) and the significant reduction in the size of Mepco’s business.

At September 30, 2015 and December 31, 2014, we had approximately $1.0 million and $1.1 million, respectively 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 2015.

42

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

11. 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’s 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, 2015, the Bank had negative undivided profits of $15.9 million.  We can request regulatory approval for a return of capital from the Bank to the parent company. During the first quarter of 2014, we requested regulatory approval for a $15.0 million return of capital from the Bank to the parent company.  This return of capital request was approved by our banking regulators on March 28, 2014 and the Bank returned $15.0 million of capital to the parent company on April 9, 2014.  During January of 2015, we requested regulatory approval for an additional $18.5 million return of capital from the Bank to the parent company.  This return of capital request was approved by our banking regulators on February 13, 2015, and the Bank returned $18.5 million of capital to the parent company on February 17, 2015.  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 (as of January 1, 2015) 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 consolidated financial statements. 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, 2015 and December 31, 2014, 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.

On July 2, 2013, the Federal Reserve approved a final rule that establishes an integrated regulatory capital framework (the “New Capital Rules”). The rule implements in the United States the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Act.  In general, under the New Capital Rules, minimum requirements have increased for both the quantity and quality of capital held by banking organizations. Consistent with the international Basel framework, the New Capital Rules include a new minimum ratio of common equity Tier 1 capital to risk-weighted assets of 4.5% and a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets that applies to all supervised financial institutions. The rule also raises the minimum ratio of Tier 1 capital to risk-weighted assets from 4% to 6% and includes a minimum leverage ratio of 4% for all banking organizations.  As to the quality of capital, the New Capital Rules emphasize common equity Tier 1 capital, the most loss-absorbing form of capital, and implement strict eligibility criteria for regulatory capital instruments. The New Capital Rules also change the methodology for calculating risk-weighted assets to enhance risk sensitivity.  The New Capital Rules became effective for us on January 1, 2015.

43

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Our actual capital amounts and ratios follow:

	Actual					Minimum for Adequately Capitalized Institutions					Minimum for Well-Capitalized Institutions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
September 30, 2015
Total capital to risk-weighted assets
Consolidated	$	276,230		16.98	%	$	130,163		8.00	%	NA		NA
Independent Bank		253,647		15.61			130,004		8.00		$	162,506		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	255,613		15.71	%	$	97,622		6.00	%	NA		NA
Independent Bank		233,123		14.35			97,503		6.00		$	130,005		8.00	%
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	238,884		14.68	%	$	73,216		4.50	%	NA		NA
Independent Bank		233,123		14.35			73,128		4.50		$	105,629		6.50	%
Tier 1 capital to average assets
Consolidated	$	255,613		11.16	%	$	91,582		4.00	%	NA		NA
Independent Bank		233,123		10.19			91,509		4.00		$	114,387		5.00	%
December 31, 2014
Total capital to risk-weighted assets
Consolidated	$	265,163		18.06	%	$	117,427		8.00	%	NA		NA
Independent Bank		247,883		16.90			117,374		8.00		$	146,718		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	246,628		16.80	%	$	58,714		4.00	%	NA		NA
Independent Bank		229,361		15.63			58,687		4.00		$	88,031		6.00	%
Tier 1 capital to average assets
Consolidated	$	246,628		11.18	%	$	88,206		4.00	%	NA		NA
Independent Bank		229,361		10.46			87,687		4.00		$	109,609		5.00	%

NA - Not applicable

44

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The components of our regulatory capital are as follows:

	Consolidated						Independent Bank
	September 30, 2015			December 31, 2014			September 30, 2015			December 31, 2014
	(In thousands)
Total shareholders' equity	$	252,980		$	250,371		$	255,659		$	257,832
Add (deduct)
Accumulated other comprehensive (gain) loss for regulatory purposes		(1,302	)		5,636			(1,302	)		5,636
Intangible assets		(946	)		(2,627	)		(946	)		(2,627	)
Disallowed deferred tax assets		(11,848	)		(40,500	)		(20,288	)		(30,728	)
Disallowed capitalized mortgage loan servicing rights		-			(752	)		-			(752	)
Common equity tier 1 capital		238,884			212,128			233,123			229,361
Qualifying trust preferred securities		34,500			34,500			-			-
Disallowed deferred tax assets		(17,771	)		-			-			-
Tier 1 capital		255,613			246,628			233,123			229,361
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets		20,617			18,535			20,524			18,522
Total risk-based capital	$	276,230		$	265,163		$	253,647		$	247,883

12. 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.

45

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 (trading or available for sale) are classified as Level 1 of the valuation hierarchy.  Level 1 securities include certain preferred stocks included in our trading portfolio for which there are quoted prices in active markets.  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 include agency securities, private label residential mortgage-backed securities, other asset backed securities, municipal securities, trust preferred securities and corporate securities.

Loans held for sale:  The fair value of mortgage loans held for sale is based on mortgage backed security 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. We measure our investment in an impaired loan based on one of three methods: the loan’s observable market price, the fair value of the collateral or the present value of expected future cash flows discounted at the loan’s effective interest rate. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At September 30, 2015 and December 31, 2014, all of our total impaired loans were evaluated based on either the fair value of the collateral or the present value of expected future cash flows discounted at the loan’s effective interest rate. 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 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.

46

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Appraisals for both collateral-dependent impaired loans and other real estate owned 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 (for commercial properties over $0.25 million) or a member of our Collateral Evaluation Department (for commercial properties under $0.25 million) or a member of our Special Assets Group (for retail 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 retail 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 nonrecurring 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 and 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 agreements is based on a discounted cash flow analysis whose 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).

47

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, 2015:
Measured at Fair Value on a Recurring Basis:
Assets
Trading securities	$	225	$	225	$	-	$	-
Securities available for sale
U.S. agency		50,735		-		50,735		-
U.S. agency residential mortgage-backed		208,290		-		208,290		-
U.S. agency commercial mortgage-backed		35,338		-		35,338		-
Private label residential mortgage-backed		5,129		-		5,129		-
Other asset backed		131,772		-		131,772		-
Obligations of states and political subdivisions		136,732		-		136,732		-
Corporate		34,106		-		34,106		-
Trust preferred		2,560		-		2,560		-
Loans held for sale		25,462		-		25,462		-
Derivatives (1)		1,623		-		1,623		-
Liabilities
Derivatives (2)		1,209		-		1,209		-
Measured at Fair Value on a Non-recurring basis:
Assets
Capitalized mortgage loan servicing rights (3)		7,931		-		-		7,931
Impaired loans (4)
Commercial
Income producing - real estate		4,083		-		-		4,083
Land, land development & construction-real estate		203		-		-		203
Commercial and industrial		1,426		-		-		1,426
Mortgage
1-4 Family		577		-		-		577
Resort Lending		138		-		-		138
Other real estate (5)
Commercial
Land, land development & construction-real estate		639		-		-		639
Commercial and industrial		165		-		-		165
Mortgage
1-4 Family		51		-		-		51
Resort Lending		107		-		-		107
Installment
Home equity - 1st lien		36		-		-		36

(1) Included in accrued income and other assets

(2) Included in accrued expenses and other liabilities

(3) Only includes servicing rights that are carried at fair value due to recognition of a valuation allowance.

(4) Only includes impaired loans with specific loss allocations based on collateral value.

(5) Only includes other real estate with subsequent write downs to fair value.

48

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, 2014:
Measured at Fair Value on a Recurring Basis:
Assets
Trading securities	$	203	$	203	$	-	$	-
Securities available for sale
U.S. agency		35,006		-		35,006		-
U.S. agency residential mortgage-backed		257,558		-		257,558		-
U.S. agency commercial mortgage-backed		33,728		-		33,728		-
Private label residential mortgage-backed		6,013		-		6,013		-
Other asset backed		32,353		-		32,353		-
Obligations of states and political subdivisions		143,415		-		143,415		-
Corporate		22,664		-		22,664		-
Trust preferred		2,441		-		2,441		-
Loans held for sale		23,662		-		23,662		-
Derivatives (1)		619		-		619		-
Liabilities
Derivatives (2)		366		-		366		-
Measured at Fair Value on a Non-recurring basis:
Assets
Capitalized mortgage loan servicing rights (3)		9,197		-		-		9,197
Impaired loans (4)
Commercial
Income producing - real estate		869		-		-		869
Land, land development & construction-real estate		354		-		-		354
Commercial and industrial		2,601		-		-		2,601
Mortgage
1-4 Family		1,306		-		-		1,306
Other real estate (5)
Commercial
Income producing - real estate		479		-		-		479
Land, land development & construction-real estate		737		-		-		737
Mortgage
1-4 Family		102		-		-		102
Resort Lending		575		-		-		575
Installment
Home equity - 1st lien		13		-		-		13

(1) Included in accrued income and other assets

(2) Included in accrued expenses and other liabilities

(3) Only includes servicing rights that are carried at fair value due to recognition of a valuation allowance.

(4) Only includes impaired loans with specific loss allocations based on collateral value.

(5) Only includes other real estate with subsequent write downs to fair value.

There were no transfers between Level 1 and Level 2 during the nine months ended September 30, 2015 and 2014.

49

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
		2015						2014
		Net Gains (Losses) on Assets				Total Change in Fair Values Included in Current Period		Net Gains (Losses) on Assets				Total Change in Fair Values Included in Current Period
		Securities		Loans		Earnings		Securities		Loans		Earnings
	(In thousands)
Trading securities		$	22	$	-	$	22	$	32	$	-	$	32
Loans held for sale			-		311		311		-		127		127

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.

The following represent impairment charges recognized during the three and nine month periods ended September 30, 2015 and 2014 relating to assets measured at fair value on a non-recurring basis:

· Capitalized mortgage loan servicing rights, whose individual strata are measured at fair value, had a carrying amount of $7.9 million which is net of a valuation allowance of $4.1 million at September 30, 2015, and had a carrying amount of $9.2 million which is net of a valuation allowance of $3.8 million at December 31, 2014.  A recovery (charge) of $(0.9) million and $(0.3) million was included in our results of operations for the three and nine month periods ending September 30, 2015, respectively and $0.5 million and $0.04 million during the same periods in 2014.

· Loans which are measured for impairment using the fair value of collateral for collateral dependent loans had a carrying amount of $10.3 million, with a valuation allowance of $3.8 million at September 30, 2015, and had a carrying amount of $8.2 million, with a valuation allowance of $3.1 million at December 31, 2014.  The provision for loan losses included in our results of operations relating to impaired loans was an expense of $1.0 million and $0.5 million for the three month periods ending September 30, 2015 and 2014, respectively, and an expense of $1.9 million and $1.4 million for the nine month periods ending September 30, 2015 and 2014, respectively.

· Other real estate, which is measured using the fair value of the property, had a carrying amount of $1.0 million which is net of a valuation allowance of $1.7 million at September 30, 2015, and a carrying amount of $1.9 million which is net of a valuation allowance of $2.5 million at December 31, 2014.  An additional charge relating to other real estate measured at fair value of $0.03 million and $0.30 million was included in our results of operations during the three and nine month periods ended September 30, 2015, respectively and $0.3 million and $0.4 million during the same periods in 2014.

We had no assets or liabilities measured at fair value on a recurring basis that used significant unobservable inputs (Level 3) during the nine months ended September 30, 2015 and 2014.

50

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 (Liability) Fair Value		Valuation Technique	Unobservable Inputs	Weighted Average
	(In thousands)
September 30, 2015
Capitalized mortgage loan servicing rights	$	7,931	Present value of net servicing revenue	Discount rate		10.03	%
				Cost to service	$	80
				Ancillary income		24
				Float rate		1.38	%
Impaired loans
Commercial (1)		5,309	Sales comparison approach	Adjustment for differences between comparable sales		(7.2	)%
			Income approach	Capitalization rate		9.3
Mortgage		715	Sales comparison approach	Adjustment for differences between comparable sales		4.1
Other real estate
Commercial		804	Sales comparison approach	Adjustment for differences between comparable sales		(3.9	)
Mortgage and installment		194	Sales comparison approach	Adjustment for differences between comparable sales		75.6
December 31, 2014
Capitalized mortgage loan servicing rights	$	9,197	Present value of net servicing revenue	Discount rate		10.07	%
				Cost to service	$	82
				Ancillary income		25
				Float rate		1.77	%
Impaired loans
Commercial (1)		2,751	Sales comparison approach	Adjustment for differences between comparable sales		(3.8	)%
			Income approach	Capitalization rate		9.3
Mortgage		1,306	Sales comparison approach	Adjustment for differences between comparable sales		8.6
Other real estate
Commercial		1,216	Sales comparison approach	Adjustment for differences between comparable sales		(9.0	)
Mortgage and installment		690	Sales comparison approach	Adjustment for differences between comparable sales		34.3

(1) In addition to the valuation techniques and unobservable inputs discussed above, at September 30, 2015 and December 31, 2014, we had an impaired collateral dependent commercial relationship that totaled $0.4 million and $1.1 million, respectively that was primarily secured by collateral other than real estate.  Collateral securing this relationship primarily included machinery and equipment and inventory at September 30, 2015 and also included accounts receivable at December 31, 2014.  Valuation techniques at September 30, 2015, included discounting restructuring firm valuations based on estimates of value recovery of each particular asset type.  Discount rates used ranged from 0% to 100% of stated values.  Valuation techniques at December 31, 2014, included discounting cost and financial statement value approaches based on estimates of value recovery of each particular asset type.  Discount rates used ranged from 35% to 100% of stated values.

51

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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, 2015	$	25,462	$	935	$	24,527
December 31, 2014		23,662		624		23,038

13. 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 cannot be determined with precision. 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.

Cash and due from banks and interest bearing deposits:  The recorded book balance of cash and due from banks and interest bearing deposits approximate fair value and are classified as Level 1.

Interest bearing deposits - time:  Interest bearing deposits - time have been valued based on a model using a benchmark yield curve plus a base spread and are classified as Level 2.

Securities:  Financial instrument assets actively traded in a secondary market have been valued using quoted market prices.  Trading securities are classified as Level 1 while securities available for sale are classified as Level 2 as described in Note #12.

Federal Home Loan Bank and FederalReserve Bank Stock:  It is not practicable to determine the fair value of FHLB and FRB Stock due to restrictions placed on transferability.

Net loans and loans held for sale:  The fair value of loans is calculated by discounting estimated future cash flows using estimated market discount rates that reflect credit and interest-rate risk inherent in the loans resulting in a Level 3 classification.  Impaired loans are valued at the lower of cost or fair value as described in Note #12.  Loans held for sale are classified as Level 2 as described in Note #12.

Accrued interest receivable and payable:  The recorded book balance of accrued interest receivable and payable approximate fair value and are classified at the same Level as the asset and liability they are associated with.

52

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Derivative financial instruments:  The fair value of rate-lock mortgage loan commitments and mandatory commitments to sell mortgage loans is based on mortgage backed security pricing for comparable assets, the fair value of interest rate swap agreements is based on a discounted cash flow analysis whose significant fair value inputs can generally be observed in the market place and do not typically involve judgment by management and 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. Each of these instruments has been classified as Level 2 as described in note #12.

Deposits:  Deposits without a stated maturity, including demand deposits, savings, NOW and money market accounts, have a fair value equal to the amount payable on demand.  Each of these instruments is classified as Level 1.  Deposits with a stated maturity, such as certificates of deposit have generally been valued based on the discounted value of contractual cash flows using a discount rate approximating current market rates for liabilities with a similar maturity resulting in a Level 2 classification.

Other borrowings:  Other borrowings have been valued based on the discounted value of contractual cash flows using a discount rate approximating current market rates for liabilities with a similar maturity resulting in a Level 2 classification.

Subordinated debentures:  Subordinated debentures have generally been valued based on a quoted market price of similar instruments resulting in a Level 2 classification.

53

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, 2015
Assets
Cash and due from banks	$	52,146	$	52,146	$	52,146	$	-	$	-
Interest bearing deposits		53,051		53,051		53,051		-		-
Interest bearing deposits - time		13,029		13,053		-		13,053		-
Trading securities		225		225		225		-		-
Securities available for sale		604,662		604,662		-		604,662		-
Federal Home Loan Bank and Federal
Reserve Bank Stock		15,286	NA		NA		NA		NA
Net loans and loans held for sale		1,468,857		1,435,597		-		25,462		1,410,135
Accrued interest receivable		6,473		6,473		8		2,068		4,397
Derivative financial instruments		1,623		1,623		-		1,623		-
Liabilities
Deposits with no stated maturity (1)	$	1,639,402	$	1,639,402	$	1,639,402	$	-	$	-
Deposits with stated maturity (1)		421,560		419,803		-		419,803		-
Other borrowings		12,070		13,474		-		13,474		-
Subordinated debentures		35,569		22,885		-		22,885		-
Accrued interest payable		420		420		20		400		-
Derivative financial instruments		1,209		1,209		-		1,209		-
December 31, 2014
Assets
Cash and due from banks	$	48,326	$	48,326	$	48,326	$	-	$	-
Interest bearing deposits		25,690		25,690		25,690		-		-
Interest bearing deposits - time		13,561		13,585		-		13,585		-
Trading securities		203		203		203		-		-
Securities available for sale		533,178		533,178		-		533,178		-
Federal Home Loan Bank and Federal
Reserve Bank Stock		19,919	NA		NA		NA		NA
Net loans and loans held for sale		1,407,634		1,394,424		-		23,662		1,370,762
Accrued interest receivable		5,995		5,995		2		1,599		4,394
Derivative financial instruments		619		619		-		619		-
Liabilities
Deposits with no stated maturity (1)	$	1,534,175	$	1,534,175	$	1,534,175	$	-	$	-
Deposits with stated maturity (1)		390,127		389,139		-		389,139		-
Other borrowings		12,470		14,560		-		14,560		-
Subordinated debentures		35,569		23,328		-		23,328		-
Accrued interest payable		380		380		21		359		-
Derivative financial instruments		366		366		-		366		-

(1) Deposits with no stated maturity include reciprocal deposits with a recorded book balance of $12.0 million and $13.6 million at September 30, 2015 and December 31, 2014, respectively.  Deposits with a stated maturity include reciprocal deposits with a recorded book balance of $35.9 million and $40.1 million at September 30, 2015 and December 31, 2014, 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.

54

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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.

14. Contingent Liabilities

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 approximately $0.5 million. 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 or vehicle service contract counterparty receivables). 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. Risks associated with the likelihood that we will not collect the full amount owed to us, net of reserves, are disclosed elsewhere in this report.

Our Mepco segment conducts its payment plan business activities across the United States. Mepco acquires the payment plans from companies (which we refer to as Mepco’s “counterparties”) at a discount from the face amount of the payment plan. Each payment plan (which are classified as payment plan receivables in our Condensed Consolidated Statements of Financial Condition) permits a consumer to purchase a vehicle service contract by making installment payments, generally for a term of 12 to 24 months, to the sellers of those contracts (one of the “counterparties”). Mepco thereafter collects the payments from consumers. In acquiring the payment plan, Mepco generally funds a portion of the cost to the seller of the service contract and a portion of the cost to the administrator of the service contract. The administrator, in turn, pays the necessary contractual liability insurance policy (“CLIP”) premium to the insurer or risk retention group.

55

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Consumers are allowed to voluntarily cancel the service contract at any time and are generally entitled to receive a refund from the administrator of the unearned portion of the service contract at the time of cancellation. As a result, while Mepco does not owe any refund to the consumer, it also does not have any recourse against the consumer for nonpayment of a payment plan and therefore does not evaluate the creditworthiness of the individual consumer. If a consumer stops making payments on a payment plan or exercises the right to voluntarily cancel the service contract, the service contract seller and administrator are each obligated to refund to Mepco the amount necessary to make Mepco whole as a result of its funding of the service contract. In addition, the insurer or risk retention group that issued the CLIP for the service contract often guarantees all or a portion of the refund to Mepco. See note #4 above for a breakdown of Mepco’s payment plan receivables by the level of recourse Mepco has against various counterparties.

Upon the cancellation of a service contract and the completion of the billing process to the counterparties for amounts due to Mepco, there is a decrease in the amount of “payment plan receivables” and an increase in the amount of “vehicle service contract counterparty receivables” until such time as the amount due from the counterparty is collected. These amounts represent funds actually due to Mepco from its counterparties for cancelled service contracts. At September 30, 2015 and December 31, 2014, the aggregate amount of such obligations owing to Mepco by counterparties, net of write-downs and reserves made through the recognition of vehicle service contract counterparty contingencies expense, totaled $7.3 million and $7.2 million, respectively.  Mepco is currently in the process of working to recover these receivables, primarily through litigation against counterparties.

In some cases, Mepco requires collateral or guaranties by the principals of the counterparties to secure these refund obligations; however, this is generally only the case when no rated insurance company is involved to guarantee the repayment obligation of the seller and administrator counterparties. In most cases, there is no collateral to secure the counterparties’ refund obligations to Mepco, but Mepco has the contractual right to offset unpaid refund obligations against amounts Mepco would otherwise be obligated to fund to the counterparties. In addition, even when collateral is involved, the refund obligations of these counterparties are not fully secured. Mepco incurs losses when it is unable to fully recover funds owing to it by counterparties upon cancellation of the underlying service contracts. The sudden failure of one of Mepco’s major counterparties (an insurance company, administrator, or seller/dealer) could expose us to significant losses.

When counterparties do not honor their contractual obligations to Mepco to repay funds, we recognize estimated losses. Mepco pursues collection (including commencing legal action if necessary) of funds due to it under its various contracts with counterparties.  Mepco has had to initiate litigation against certain counterparties, including third party insurers, to collect amounts owed to Mepco as a result of those parties' dispute of their contractual obligations to Mepco.  Charges related to estimated losses for vehicle service contract counterparty contingencies included in non-interest expense totaled $0.03 million for both three month periods ended September 30, 2015 and 2014, respectively and totaled $0.09 million and $0.17 million for the nine month periods ended September 30, 2015 and 2014, respectively.  These charges are being classified in non-interest expense because they are associated with a default or potential default of a contractual obligation under our counterparty contracts as opposed to loss on the administration of the payment plan itself.

56

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Our estimate of probable incurred losses from vehicle service contract counterparty contingencies requires a significant amount of judgment because a number of factors can influence the amount of loss that we may ultimately incur. These factors include our estimate of future cancellations of vehicle service contracts, our evaluation of collateral that may be available to recover funds due from our counterparties, and our assessment of the amount that may ultimately be collected from counterparties in connection with their contractual obligations.  We apply a rigorous process, based upon historical payment plan activity and past experience, to estimate probable incurred losses and quantify the necessary reserves for our vehicle service contract counterparty contingencies, but there can be no assurance that our modeling process will successfully identify all such losses.

We believe our assumptions regarding the collection of vehicle service contract counterparty receivables are reasonable, and we based them on our good faith judgments using data currently available. We also believe the current amount of reserves we have established and the vehicle service contract counterparty contingencies expense that we have recorded are appropriate given our estimate of probable incurred losses at the applicable Condensed Consolidated Statement of Financial Condition date. However, because of the uncertainty surrounding the numerous and complex assumptions made, actual losses could exceed the charges we have taken to date.

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 and Ginnie Mae). 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 a credit of $0.04 million and zero for the three months ended September 30, 2015 and 2014, respectively and a credit of $0.06 million and $0.5 million for the nine months ended September 30, 2015 and 2014, respectively.  The credit provision in the first nine months of 2015 is due primarily to the settlement of certain loss reimbursement claims at slightly lower amounts than what had been specifically reserved for previously.  The credit provision in the first nine months of 2014 is due primarily to the rescission of certain loss reimbursement requests by Freddie Mac that had been pending and accrued for at the end of 2013.  The reserve for loss reimbursements on sold mortgage loans totaled $0.5 million at both September 30, 2015 and December 31, 2014. 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. The reserve levels at September 30, 2015 and December 31, 2014 also reflect the resolution of the mortgage loan origination years of 2000 to 2008 with Fannie Mae and Freddie Mac.  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.

57

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

15. Accumulated Other Comprehensive Loss (“AOCL”)

A summary of changes in AOCL follows:

	Unrealized Gains (Losses) on Available for Sale Securities			Dispropor- tionate Tax Effects from Securities Available for Sale			Unrealized Losses on Settled Derivatives			Total
For the three months ended September 30,
2015
Balances at beginning of period	$	408		$	(5,798	)	$	-		$	(5,390	)
Other comprehensive loss before reclassifications		894			-			-			894
Amounts reclassified from AOCL		-			-			-			-
Net current period other comprehensive income		894			-			-			894
Balances at end of period	$	1,302		$	(5,798	)	$	-		$	(4,496	)
2014
Balances at beginning of period	$	(376	)	$	(5,798	)	$	(124	)	$	(6,298	)
Other comprehensive income before reclassifications		226			-			-			226
Amounts reclassified from AOCL		(73	)		-			62			(11	)
Net current period other comprehensive income		153			-			62			215
Balances at end of period	$	(223	)	$	(5,798	)	$	(62	)	$	(6,083	)
For the nine months ended September 30,
2015
Balances at beginning of period	$	162		$	(5,798	)	$	-		$	(5,636	)
Other comprehensive income before reclassifications		1,189			-			-			1,189
Amounts reclassified from AOCL		(49	)		-			-			(49	)
Net current period other comprehensive income		1,140			-			-			1,140
Balances at end of period	$	1,302		$	(5,798	)	$	-		$	(4,496	)
2014
Balances at beginning of period	$	(3,200	)	$	(5,798	)	$	(247	)	$	(9,245	)
Other comprehensive income before reclassifications		3,051			-			-			3,051
Amounts reclassified from AOCL		(74	)		-			185			111
Net current period other comprehensive income		2,977			-			185			3,162
Balances at end of period	$	(223	)	$	(5,798	)	$	(62	)	$	(6,083	)

58

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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.

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

AOCL Component	Amount Reclassified From AOCL			Affected Line Item in Condensed  Consolidated Statements of Operations
	(In thousands)
2015
Unrealized gains on available for sale securities
	$	-		Net gains on securities
		-		Net impairment loss recognized in earnings
		-		Total reclassifications before tax
		-		Tax expense
	$	-		Reclassifications, net of tax
2014
Unrealized gains on available for sale securities
	$	121		Net gains on securities
		(9	)	Net impairment loss recognized in earnings
		112		Total reclassifications before tax
		39		Tax expense
	$	73		Reclassifications, net of tax
Unrealized gains on settled derivatives
	$	(95	)	Interest expense
		(33	)	Tax benefit
	$	(62	)	Reclassification, net of tax
	$	11		Total reclassifications for the period, net of tax

59

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

AOCL Component	Amount Reclassified From AOCL			Affected Line Item in Condensed  Consolidated Statements of Operations
	(In thousands)
2015
Unrealized gains on available for sale securities
	$	75		Net gains on securities
		-		Net impairment loss recognized in earnings
		75		Total reclassifications before tax
		26		Tax expense
	$	49		Reclassifications, net of tax
2014
Unrealized gains on available for sale securities
	$	123		Net gains on securities
		(9	)	Net impairment loss recognized in earnings
		114		Total reclassifications before tax
		40		Tax expense
	$	74		Reclassifications, net of tax
Unrealized gains on settled derivatives
	$	(285	)	Interest expense
		(100	)	Tax benefit
	$	(185	)	Reclassification, net of tax
	$	(111	)	Total reclassifications for the period, net of tax

60

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, 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 2014 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.  As a result, our success depends to a great extent upon the economic conditions in Michigan’s Lower Peninsula. At times, we have experienced a difficult economy in Michigan which in turn had an adverse effect on our performance.  As a result of the recession, we incurred net losses from 2008 through 2011 and found it necessary to take certain steps to preserve capital and maintain our regulatory capital ratios.

Economic conditions in Michigan began to show signs of improvement during 2010.  Generally, these improvements have continued into 2015, albeit at an uneven pace.  There has been an overall decline in the unemployment rate as well as generally improving housing prices and other related statistics (such as home sales and new building permits).  In addition, since early- to mid-2009, we have seen an improvement in our asset quality metrics. In particular, since early 2012, we have generally experienced a decline in non-performing assets, reduced levels of new loan defaults, and reduced levels of loan net charge-offs.  As a result of the foregoing factors and others, we returned to profitability in 2012 and have now been profitable for 15 consecutive quarters.  In addition, we completed various transactions to improve our capital structure.

Recent Developments. On April 29, 2015 the Bank entered into a Purchase and Assumption Agreement (“PAA”) with Isabella Bank (based in Mt. Pleasant, Michigan).  Pursuant to the PAA, on August 28, 2015, we sold the fixed assets (including an automated teller machine), real property and certain other assets of our bank branch located at 210 South Saginaw Road, Midland, Michigan (the “Midland Branch”) to Isabella Bank.  The deposit liabilities of the Midland Branch were assumed by Isabella Bank.  Under the terms of the PAA, Isabella Bank paid a premium of $0.6 million (which was equal to 6.0% of the average deposit liabilities of $9.7 million based on the 20-day average ending two business days prior to the closing date of August 28, 2015) and $0.85 million for the real property and fixed assets (including the ATM).  The real property and the fixed assets (including the ATM) had a net book value of approximately $0.2 million as of August 28, 2015.  We recorded a net gain of $1.2 million in the third quarter of 2015 on the sale of the Midland Branch.

In January 2015, we adopted a plan to consolidate certain branch offices (the “Branch Consolidation”). This Branch Consolidation reflects our ongoing cost reduction initiatives and undertakings to further improve the overall efficiency of our operations.  The Branch Consolidation resulted in the closing of six of our branch offices on April 30, 2015.  It is expected that the aggregate, annual reduction in non-interest expenses resulting from the Branch Consolidation will amount to approximately $1.6 million.  We also estimate a potential annual loss of revenue of approximately $0.3 million to $0.4 million due to possible customer attrition. We also undertook certain additional staffing reductions related to our retail banking operations. In connection with the Branch Consolidation and these staffing reductions, we recorded $0.2 million of severance expenses in the first quarter of 2015.  We recorded a net gain of approximately $0.2 million in the second quarter of 2015 (included in Other Non-Interest Income) that was comprised of a $0.3 million gain on the sale of the real property of two of the branches that was partially offset by $0.1 million of write downs of the fixed assets (including real property) of the other four branches.  We are in the process of disposing of the real property associated with these other four branches (two of which we expect to donate to local community groups).

61

Regulation. On July 2, 2013, the Federal Reserve Board (the "FRB") approved a final rule that establishes an integrated regulatory capital framework (the "New Capital Rules"). The rule implements in the United States the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).  In general, under the New Capital Rules, minimum requirements have increased for both the quantity and quality of capital held by banking organizations. Consistent with the international Basel framework, the New Capital Rules include a new minimum ratio of common equity tier 1 capital to risk-weighted assets of 4.5% and a common equity tier 1 capital conservation buffer of 2.5% of risk-weighted assets that applies to all supervised financial institutions. The 2.5% capital conservation buffer is being phased in over a four-year period beginning in 2016. The rule also raises the minimum ratio of tier 1 capital to risk-weighted assets from 4% to 6% and includes a minimum leverage ratio of 4% for all banking organizations. As to the quality of capital, the New Capital Rules emphasize common equity tier 1 capital, the most loss-absorbing form of capital, and implements strict eligibility criteria for regulatory capital instruments. The New Capital Rules also change the methodology for calculating risk-weighted assets to enhance risk sensitivity.  Under the New Capital Rules our existing trust preferred securities are grandfathered as qualifying regulatory capital. We were subject to the New Capital Rules beginning on January 1, 2015, and as of September 30, 2015 we exceeded all of the capital ratio requirements of the New Capital Rules.

It is against this backdrop that we discuss our results of operations for the third quarter and first nine months of 2015 as compared to 2014 and our financial condition as of September 30, 2015.

Results of Operations

Summary.  We recorded net income of $5.0 million and $4.9 million, respectively, during the three months ended September 30, 2015 and 2014.  The increase in net income on a comparative quarterly basis is due primarily to an increase in net interest income and a decrease in non-interest expense that were partially offset by an increase in the provision for loan losses (a lower credit) and a decrease in non-interest income.

We recorded net income of $14.4 million and $14.1 million, respectively, during the nine months ended September 30, 2015 and 2014.  The increase in net income on a comparative year-to-date basis is due primarily to increases in net interest income and non-interest income and a decrease in non-interest expense that were partially offset by increases in the provision for loan losses (a lower credit) and income tax expense.

62

Key performance ratios
	Three months ended September 30,						Nine months ended September 30
	2015			2014			2015			2014
Net income (annualized) to
Average assets		0.86	%		0.87	%		0.84	%		0.84	%
Average common shareholders’ equity		7.84			7.95			7.59			7.86
Net income per common share
Basic	$	0.22		$	0.21		$	0.63		$	0.62
Diluted		0.22			0.21			0.62			0.60

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 $18.8 million during the third quarter of 2015, an increase of $0.7 million, or 3.6% from the year-ago period.  The quarterly increase in net interest income in 2015 compared to 2014 primarily reflects a $91.5 million increase in average interest-earning assets that was partially offset by a three 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 2015, net interest income totaled $55.6 million, an increase of $0.4 million, or 0.8% from 2014. The year-to-date increase in net interest income in 2015 compared to 2014 primarily reflects a $79.0 million increase in average interest-earning assets that was partially offset by a 12 basis point decrease in our net interest margin.

The decline in our net interest margin is primarily due to the prolonged low interest rate environment that has pushed our average yield on loans lower.

Interest rates have generally been at extremely low levels since 2008 due primarily to the FRB’s monetary policies and its efforts to stimulate the U.S. economy.  This very low interest rate environment has generally had an adverse impact on our interest income and net interest income.   Based on recent announcements by the FRB, short-term interest rates are expected to remain extremely low until at least late-2015 or early-2016.  Given the repricing characteristics of our interest-earning assets and interest-bearing liabilities (and our level of non-interest bearing demand deposits), we would expect that our net interest margin will generally benefit on a long-term basis from rising interest rates.

Our net interest income is also adversely impacted by our level of non-accrual loans.  In the third quarter and first nine months of 2015 non-accrual loans averaged $12.9 million and $13.7 million, respectively compared to $17.1 million and $18.4 million, respectively for the same periods in 2014.  In addition, in the third quarter and first nine months of 2015 we had net recoveries of $0.16 million and $0.34 million, respectively, of accrued and unpaid interest on loans placed on or taken off non-accrual during each period compared to net recoveries of $0.06 million and $0.21 million, respectively, during the same periods in 2014.

63

Average Balances and Tax Equivalent Rates
	Three Months Ended September 30,
			2015							2014
	Average Balance		Interest		Rate (3)			Average Balance		Interest		Rate (3)
	(Dollars in thousands)
Assets (1)
Taxable loans	$	1,470,529	$	17,834		4.83	%	$	1,390,811	$	17,768		5.08	%
Tax-exempt loans (2)		3,740		54		5.73			4,803		77		6.36
Taxable securities		520,805		1,901		1.46			484,687		1,644		1.35
Tax-exempt securities (2)		33,104		347		4.19			40,613		430		4.20
Interest bearing cash and repurchase agreement		68,972		70		0.40			76,529		61		0.32
Other investments		15,231		225		5.86			23,415		264		4.47
Interest Earning Assets		2,112,381		20,431		3.85			2,020,858		20,244		3.98
Cash and due from banks		45,477							46,643
Other assets, net		164,253							179,861
Total Assets	$	2,322,111						$	2,247,362
Liabilities
Savings and interest-bearing checking	$	990,229		266		0.11		$	949,039		270		0.11
Time deposits		371,501		721		0.77			402,951		966		0.95
Other borrowings		47,769		465		3.86			67,114		649		3.84
Interest Bearing Liabilities		1,409,499		1,452		0.41			1,419,104		1,885		0.53
Non-interest bearing deposits		633,305							551,617
Other liabilities		23,844							30,734
Shareholders’ equity		255,463							245,907
Total liabilities and shareholders’ equity	$	2,322,111						$	2,247,362
Net Interest Income			$	18,979						$	18,359
Net Interest Income as a Percent of Average Interest Earning Assets						3.58	%						3.61	%

(1) All domestic.

(2) Interest on tax-exempt loans and securities is presented on a fully tax equivalent basis assuming a marginal tax rate of 35%

(3) Annualized

64

Average Balances and Tax Equivalent Rates

	Nine Months Ended September 30,
			2015							2014
	Average Balance		Interest		Rate (3)			Average Balance		Interest		Rate (3)
	(Dollars in thousands)
Assets (1)
Taxable loans	$	1,446,857	$	52,736		4.87	%	$	1,377,884	$	54,024		5.24	%
Tax-exempt loans (2)		4,097		189		6.17			5,028		239		6.36
Taxable securities		518,906		5,528		1.42			470,995		4,623		1.31
Tax-exempt securities (2)		32,790		1,021		4.15			41,493		1,268		4.09
Interest bearing cash and repurchase agreement		64,913		194		0.40			87,511		219		0.33
Other investments		17,772		728		5.48			23,416		857		4.89
Interest Earning Assets		2,085,335		60,396		3.87			2,006,327		61,230		4.08
Cash and due from banks		44,829							45,137
Other assets, net		167,849							184,709
Total Assets	$	2,298,013						$	2,236,173
Liabilities
Savings and interest- bearing checking	$	988,594		792		0.11		$	953,008		799		0.11
Time deposits		373,235		2,169		0.78			421,775		2,990		0.95
Other borrowings		47,930		1,382		3.86			59,362		1,720		3.87
Interest Bearing Liabilities		1,409,759		4,343		0.41			1,434,145		5,509		0.51
Non-interest bearing deposits		609,192							529,654
Other liabilities		24,581							32,226
Shareholders’ equity		254,481							240,148
Total liabilities and shareholders’ equity	$	2,298,013						$	2,236,173
Net Interest Income			$	56,053						$	55,721
Net Interest Income as a Percentof Average Interest Earning Assets						3.59	%						3.71	%

(1) All domestic.

(2) Interest on tax-exempt loans and securities is presented on a fully tax equivalent basis assuming a marginal tax rate of 35%

(3) Annualized

65

Provision for loan losses.  The provision for loan losses was a credit of $0.2 million and $0.6 million during the three months ended September 30, 2015 and 2014, respectively. During the nine-month periods ended September 30, 2015 and 2014, the provision was a credit of $1.0 million and $2.0 million, respectively. The provision reflects our assessment of the allowance for loan losses taking into consideration factors such as 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.  See “Portfolio Loans and asset quality” for a discussion of the various components of the allowance for loan losses and their impact on the provision for loan losses in the third quarter and first nine months of 2015.

Non-interest income.  Non-interest income is a significant element in assessing our results of operations. We regard net gains on mortgage loans as a core recurring source of revenue but they are quite cyclical and thus can be volatile. We regard net gains (losses) on securities as a “non-operating” component of non-interest income.

Non-interest income totaled $10.1 million during the three months ended September 30, 2015, a decrease of $0.4 million from the comparable period in 2014.  For the first nine months of 2015 non-interest income totaled $30.1 million, a $0.5 million increase from the comparable period in 2014.  The components of non-interest income are as follows:

Non-Interest Income
	Three months ended September 30,						Nine months ended September 30,
	2015			2014			2015		2014
	(In thousands)
Service charges on deposit accounts	$	3,294		$	3,579		$	9,261	$	10,166
Interchange income		2,169			1,984			6,551		5,992
Net gains (losses) on assets:
Mortgage loans		1,812			1,490			5,735		4,139
Securities		45			168			97		334
Other than temporary loss on securities available for sale:
Total impairment loss		-			(9	)		-		(9	)
Recognized in other comprehensive loss		-			-			-		-
Net impairment loss in earnings		-			(9	)		-		(9	)
Mortgage loan servicing		(556	)		932			476		1,389
Investment and insurance commissions		447			404			1,380		1,305
Bank owned life insurance		304			361			979		1,021
Title insurance fees		281			243			874		734
Gain on branch sale		1,193			-			1,193		-
Other		1,130			1,391			3,522		4,503
Total non-interest income	$	10,119		$	10,543		$	30,068	$	29,574

Service charges on deposit accounts declined on both a comparative quarterly and year-to-date basis in 2015 as compared to 2014.  The decrease in such service charges in 2015 principally results from a decline in non-sufficient funds (“NSF”) occurrences and related NSF fees. We believe the decline in NSF occurrences is principally due to our customers managing their finances more closely in order to reduce NSF activity and avoid the associated fees.

66

Interchange income increased on both a comparative quarterly and year-to-date basis in 2015 as compared to 2014.  The increase in interchange income primarily results from a new Debit Brand Agreement with MasterCard (which replaces our former agreement with VISA) that we executed in January 2014.  We began converting our debit card base to MasterCard in June 2014 and completed the conversion in September 2014.

The Dodd-Frank Act includes a provision under which interchange fees for debit cards are set by the FRB under a restrictive “reasonable and proportional cost” per transaction standard. On June 29, 2011, the FRB issued final rules (that were effective October 1, 2011) on interchange fees for debit cards. Overall, these final rules established price caps for debit card interchange fees that were significantly lower than previous averages. However, debit card issuers with less than $10 billion in assets (like us) are exempt from this rule. On a long-term basis, it is not clear how competitive market factors may impact debit card issuers who are exempt from the rule.  However, we have been experiencing some reduction in per transaction interchange revenue due to certain transaction routing changes, particularly at large merchants.

Net gains on mortgage loans increased 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,
	2015			2014			2015			2014
	(Dollars in thousands)
Mortgage loans originated	$	79,648		$	77,501		$	260,744		$	187,172
Mortgage loans sold		71,063			62,007			221,957			156,090
Mortgage loans sold with servicing rights released		872			11,229			4,314			27,447
Net gains on the sale of mortgage loans		1,812			1,490			5,735			4,139
Net gains as a percent of mortgage loans sold (“Loan Sales Margin”)		2.55	%		2.40	%		2.58	%		2.65	%
Fair value adjustments included in the Loan
Sales Margin		(0.05	)		(0.13	)		0.21			0.09

The increases in mortgage loan originations, sales and net gains in 2015 as compared to 2014 is due primarily to a decrease in mortgage loan interest rates during parts of 2015 that resulted in an increase in  mortgage loan refinance volumes as well as an improving housing market which has resulted in an increase in purchase money mortgage origination volume.

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.

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Net gains as a percentage of mortgage loans sold (our “Loan Sales Margin”) are impacted by several factors including competition and the manner in which the loan is sold (with servicing rights retained or released). Our decision to sell or retain mortgage loan servicing rights is primarily influenced by an evaluation of the price being paid for mortgage loan servicing by outside third parties compared to our calculation of the economic value of retaining such servicing. Net gains on mortgage loans are also impacted by recording fair value accounting adjustments. Excluding the aforementioned fair value accounting adjustments, the Loan Sales Margin would have been 2.60% and 2.53% in the third quarters of 2015 and 2014, respectively and 2.37% and 2.56% for the comparative 2015 and 2014 year-to-date periods, respectively. The decrease in the year-to-date Loan Sales Margin (excluding fair value adjustments) in 2015 was generally due to a narrowing of primary-to-secondary market pricing spreads reflecting increased price competition. The changes in the fair value accounting adjustments are primarily due to changes in the amount of commitments to originate mortgage loans for sale.

Net securities gains totaled $0.045 million and $0.097 million during the three and nine months ended September 30, 2015, respectively, and $0.168 million and $0.334 million for the respective comparable periods in 2014. The third quarter 2015 net securities gain was due to an increase in the fair value of trading securities.  The year-to-date 2015 net securities gain was due primarily to the sale of U.S. agency residential mortgage-backed securities.  The 2014 net securities gains were due primarily to the sale of a municipal security as well as fair value adjustments on trading securities and a U.S. treasury short sale position.

We recorded no net impairment losses in 2015 for other than temporary impairment of securities available for sale.  We recorded net other than temporary impairment charges on securities available for sale of $0.009 million during both the three and nine months ended September 30, 2014.  These 2014 impairment charges all related to private label residential mortgage-backed investment securities.  (See “Securities.”)

Mortgage loan servicing generated a loss of $0.6 million and income of $0.5 million in the third quarter and first nine months of 2015, respectively, compared to income of $0.9 million and $1.4 million in the third quarter and first nine months of 2014, respectively. These variances are primarily due to changes in the valuation allowance on and the amortization of capitalized mortgage loan servicing rights. The period end valuation allowance is based on the valuation of the mortgage loan servicing portfolio.  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,
	2015			2014			2015			2014
	(In thousands)
Balance at beginning of period	$	12,535		$	12,796		$	12,106		$	13,710
Originated servicing rights capitalized		678			489			2,128			1,253
Amortization		(700	)		(628	)		(2,259	)		(1,827	)
Change in valuation allowance		(883	)		523			(345	)		44
Balance at end of period	$	11,630		$	13,180		$	11,630		$	13,180
Valuation allowance at end of period	$	4,118		$	2,811		$	4,118		$	2,811

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At September 30, 2015 we were servicing approximately $1.65 billion in mortgage loans for others on which servicing rights have been capitalized. This servicing portfolio had a weighted average coupon rate of 4.34% and a weighted average service fee of approximately 25.3 basis points. Remaining capitalized mortgage loan servicing rights at September 30, 2015 totaled $11.6 million, representing approximately 71 basis points on the related amount of mortgage loans serviced for others. The capitalized mortgage loan servicing had an estimated fair market value of $11.9 million at September 30, 2015.

Investment and insurance commissions increased slightly on both a comparative quarterly and year-to-date basis in 2015 compared to 2014.  These changes primarily reflect the sales volumes of such products.

Income from bank owned life insurance declined on both a comparative quarterly and year-to-date basis in 2015 compared to 2014 reflecting a lower average crediting rate on our cash surrender value. Our separate account is primarily invested in agency mortgage-backed securities and managed by PIMCO. The crediting rate (on which the earnings are based) reflects the performance of the separate account.  The total cash surrender value of our bank owned life insurance was $54.1 million and $53.6 million at September 30, 2015 and December 31, 2014, respectively.

Title insurance fees were higher on both a comparative quarterly and year-to-date basis in 2015 as compared to 2014.  The amount of title insurance fees is primarily a function of the level of mortgage loans that we originated. During 2015, an increase in title insurance revenues related to mortgage loans was partially offset by a decline in title insurance revenues related to commercial loans and a lower retention bonus as compared to 2014.

Other non-interest income decreased on both a comparative quarterly and year-to-date basis in 2015 compared to 2014.  This decrease is primarily due to declines in rental income on other real estate (“ORE”) and income from merchant card processing.  The decline in rental income on ORE is due to the sales of income-producing properties.  The decline in income from merchant card processing is due primarily to a change in our third-party processing provider and the timeframe required to transition customers from the prior provider.

Non-interest expense.  Non-interest expense is an important component of our results of operations. We strive to efficiently manage our cost structure and management is focused on a number of initiatives to reduce and contain non-interest expenses.

Non-interest expense decreased by $0.2 million to $21.9 million and by $1.4 million to $65.6 million during the three- and nine-month periods ended September 30, 2015, respectively, compared to the same periods in 2014. The components of non-interest expense are as follows:

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Non-Interest Expense
	Three months ended September 30,						Nine months ended September 30,
	2015			2014			2015			2014
	(in thousands)
Compensation	$	8,419		$	8,574		$	24,880		$	25,321
Performance-based compensation		1,572			1,203			4,604			3,348
Payroll taxes and employee benefits		2,038			1,941			6,121			6,105
Compensation and employee benefits		12,029			11,718			35,605			34,774
Occupancy, net		1,940			2,079			6,399			6,715
Data processing		2,001			1,790			5,958			5,653
Loan and collection		816			1,391			2,938			4,283
Furniture, fixtures and equipment		998			1,005			2,915			3,127
Communications		754			712			2,184			2,212
Legal and professional fees		519			559			1,352			1,380
Advertising		406			427			1,338			1,547
FDIC deposit insurance		350			396			1,044			1,235
Interchange expense		279			368			859			1,112
Supplies		190			249			619			746
Credit card and bank service fees		197			226			602			734
Amortization of intangible assets		86			134			260			402
Vehicle service contract counterparty contingencies		30			28			89			169
Costs related to unfunded lending commitments		26			12			46			27
Provision for loss reimbursement on sold loans		(35	)		-			(59	)		(466	)
Net (gains) losses on ORE and repossessed assets		5			(285	)		(173	)		(410	)
Other		1,288			1,275			3,633			3,804
Total non-interest expense	$	21,879		$	22,084		$	65,609		$	67,044

Compensation and employee benefits expenses, in total, increased $0.3 million, or 2.7%, on a quarterly comparative basis and increased $0.8 million, or 2.4%, for the first nine months of 2015 compared to the same periods in 2014.

Compensation expense decreased by $0.2 million, or 1.8%, and by $0.4 million, or 1.7%, in the third quarter and first nine months of 2015, respectively, compared to the same periods in 2014.  Average full-time equivalent employees (“FTEs”) were reduced by approximately 5.5% and  4.4% during the third quarter and first nine months of 2015, respectively, compared to the year ago periods.  However, the impact of the FTE reductions was partially offset by merit raises granted in 2015.

Performance-based compensation increased by $0.4 million and by $1.3 million in the third quarter and first nine months of 2015, respectively, compared to the same periods in 2014, due primarily to a higher accrual for anticipated incentive compensation based on our estimated 2015 performance as compared to goals.

Payroll taxes and employee benefits increased by $0.097 million and $0.016 million in the third quarter and first nine months of 2015, respectively, compared to the same periods in 2014, due primarily to an increase in recruiting costs principally for our mortgage banking operations.

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Occupancy, net, decreased by $0.1 million and $0.3 million in the third quarter and first nine months of 2015, respectively, compared to the same periods in 2014.  These declines are primarily due to decreases in utility costs, real estate property taxes and property insurance which reflect fewer properties owned due to sales or other dispositions.

Data processing expenses increased by $0.2 million and by $0.3 million in the third quarter and first nine months of 2015, respectively, compared to the same periods in 2014, due primarily to costs associated with a new sales and marketing system and a new mortgage loan origination system and the outsourcing of certain network and desktop delivery functions as well as an increase in mobile banking expenses.

Loan and collection expenses primarily reflect costs related to the management and collection of non-performing loans and other problem credits. These expenses have further declined in 2015, which primarily reflects the overall year-over-year decrease in non-performing assets. (See “Portfolio Loans and asset quality.”)

Furniture, fixtures and equipment, communications, and supplies expenses, collectively, were lower on both a comparative quarterly and year-to-date basis, which primarily reflects our cost reduction efforts.

Legal and professional fees were slightly lower on both a comparative quarterly and year-to-date basis.  The decreases are due primarily to a decline in legal fees and consulting fees at the Bank.

Advertising expenses were lower on both a comparative quarterly and year-to-date basis due primarily to a reduction in outdoor (billboard) advertising and 2014 including expenses related to a website redesign.

FDIC deposit insurance expense decreased by $0.046 million and by $0.191 million in the third quarter and first nine months of 2015, respectively, compared to the same periods in 2014. The decline in 2015 principally reflects a reduction in the Bank’s risk based premium rate due to our continued improving financial metrics.

Interchange expense primarily represents our third-party cost to process debit card transactions.  This cost has declined on both a comparative quarterly and year-to-date basis due primarily to the impact of a new seven-year core data processing contract that we executed in March 2014.

Credit card and bank service fees decreased on both a comparative quarterly and year-to-date basis primarily due to a decline in the number of payment plans being serviced by Mepco in 2015 compared to 2014.

The amortization of intangible assets primarily relates to 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 $2.4 million and $2.6 million at September 30, 2015 and December 31, 2014, respectively. See Note #8 to the Condensed Consolidated Financial Statements for a schedule of future amortization of intangible assets.

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We record estimated incurred losses associated with Mepco’s vehicle service contract payment plan receivables in our provision for loan losses and establish a related allowance for loan losses. (See “Portfolio Loans and asset quality.”) We record estimated incurred losses associated with defaults by Mepco’s counterparties as “vehicle service contract counterparty contingencies expense,” which is included in non-interest expenses in our Condensed Consolidated Statements of Operations. Such expenses totaled $0.03 million and $0.09 million for vehicle service contract payment plan counterparty contingencies in the third quarter and first nine months of 2015, respectively, compared to $0.03 million and $0.17 million, respectively, for the same periods in 2014.

Our estimate of probable incurred losses from vehicle service contract counterparty contingencies requires a significant amount of judgment because a number of factors can influence the amount of loss that we may ultimately incur. These factors include our estimate of future cancellations of vehicle service contracts, our evaluation of collateral that may be available to recover funds due from our counterparties, and our assessment of the amount that may ultimately be collected from counterparties in connection with their contractual obligations. We apply a rigorous process, based upon historical payment plan activity and past experience, to estimate probable incurred losses and quantify the necessary reserves for our vehicle service contract counterparty contingencies, but there can be no assurance that our modeling process will successfully identify all such losses.

In particular, as noted in our Risk Factors included in Part I - Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2014, Mepco has had to initiate litigation against certain counterparties, including third party insurers, to collect amounts owed to Mepco as a result of those parties' dispute of their contractual obligations to Mepco.  In addition, see Note #14 to the Condensed Consolidated Financial Statements included within this report for more information about Mepco's business, certain risks and difficulties we currently face with respect to that business, and reserves we have established (through vehicle service contract counterparty contingencies expense) for losses related to the business.

The changes in cost 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 a credit of $0.035 million and a credit of $0.059 million in the third quarter and first nine months of 2015, respectively, compared to an expense of zero and a credit of $0.47 million in the third quarter and first nine months of 2014, respectively. This provision represents our estimate of incurred losses related to mortgage loans that we have sold to investors (primarily Fannie Mae, Freddie Mac and Ginnie Mae).  The third quarter and year-to-date credit provisions in 2015 are due primarily to the settlement of certain loss reimbursement claims at slightly lower amounts than what had been specifically reserved for previously. The credit provision in the first nine months of 2014 is due primarily to the rescission of certain loss reimbursement requests by Freddie Mac that had been pending and accrued for at the end of 2013.  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 $0.54 million and $0.69 million at September 30, 2015 and December 31, 2014, 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. The reserve levels at September 30, 2015, and December 31, 2014, also reflect the resolution of the mortgage loan origination years of 2000 to 2008 with Fannie Mae and Freddie Mac.  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.

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Net (gains) losses on ORE 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.  We recorded a net loss of $0.005 million and a net gain of $0.173 million in the third quarter and first nine months of 2015, respectively (as compared to net gains of $0.285 million and $0.410 million, respectively, recorded in the same periods in 2014). The gains primarily reflect greater stability in real estate prices during the last two years, with some markets even experiencing price increases.

Other non-interest expenses were relatively unchanged and decreased by $0.2 million in the third quarter and first nine months of 2015, respectively, compared to the same periods in 2014.  The year-to-date comparative decline is due primarily to decreases in insurance costs and fraud related expenses.

Income tax expense.  We recorded an income tax expense of $2.3 million and $6.7 million in the third quarter and the first nine months of 2015, respectively. This compares to an income tax expense of $2.3 million and $5.7 million in the third quarter and the first nine months of 2014, respectively.

Our actual federal income tax expense is different than the amount computed by applying our statutory federal income tax rate to our pre-tax income 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 second quarter and year-to-date 2014 income tax expense was reduced by a credit of approximately $0.7 million due to a true-up of the amount of unrecognized tax benefits relative to certain net operating loss carryforwards and the reversal of a valuation allowance on a capital loss carryforward that was believed to not be more likely than not to be realized prior to a strategy executed during the second quarter of 2014 that generated capital gains.

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 both September 30, 2015 and 2014, that the realization of substantially all of our deferred tax assets continues to be more likely than not.

We did maintain a valuation allowance against our deferred tax assets of approximately $1.0 million at both September 30, 2015 and December 31, 2014. This valuation allowance on our deferred tax assets primarily relates to state income taxes at our Mepco segment.  In this instance, we determined that the future realization of these particular deferred tax assets was not more likely than not.  This conclusion was primarily based on the uncertainty of Mepco’s future earnings attributable to particular states (given the various apportionment criteria) and the significant reduction in the size of Mepco’s business.

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Because of our net operating loss and tax credit carryforwards, we are still subject to the rules of Section 382 of the Internal Revenue Code of 1986, as amended.  An ownership change, as defined by these rules, would negatively affect our ability to utilize our net operating loss carryforwards and other deferred tax assets in the future. If such an ownership change were to occur, we may suffer higher-than-anticipated tax expense, and consequently lower net income and cash flow, in those future years.  Although we cannot control market purchases or sales of our common stock, we have in place a Tax Benefits Preservation Plan to dissuade any movement in our stock that would trigger an ownership change to avoid triggering any Section 382 limitations.

Business Segments.  Our reportable segments are based upon legal entities.  We currently have two reportable segments:  Independent Bank and Mepco.  These business segments are also differentiated based on the products and services provided.  We evaluate performance based principally on net income (loss) of the respective reportable segments.

The following table presents net income (loss) by business segment.

Business Segments

	Three months ended September 30,						Nine months ended September 30,
	2015			2014			2015			2014
	(in thousands)
Independent Bank	$	5,455		$	5,048		$	15,623		$	14,345
Mepco		(168	)		163			(437	)		607
Other(1)		(224	)		(266	)		(693	)		(665	)
Elimination		(16	)		(16	)		(46	)		(168	)
Net income (loss)	$	5,047		$	4,929		$	14,447		$	14,119

⁽¹⁾ Includes amounts relating to our parent company and certain insignificant operations.

The increase in net income on a comparative quarterly basis at Independent Bank is due primarily to an increase in net interest income and a decrease in non-interest expense that were partially offset by an increase in the provision for loan losses (a lower credit) and a decrease in non-interest income.  The increase in year-to-date net income at Independent Bank in 2015 compared to 2014 is primarily due to increases in net interest income and non-interest income and a decrease in non-interest expense that were partially offset by increases in the provision for loan losses (a smaller credit) and in income tax expense.  (See “Net interest income,” “Provision for loan losses,” “Non-interest income,” “Non-interest expense,” “Income tax expense,” and “Portfolio Loans and asset quality.”)

The change in Mepco’s results (net losses in 2015 compared to net income in 2014) is due to a decrease in net interest income as a result of a decline in year-over-year average payment plan receivables and a decrease in non-interest income due to a decline in rental income on ORE that were partially offset by a decrease in non-interest expense.  All of Mepco’s funding is provided by Independent Bank through an intercompany loan (that is eliminated in consolidation).  The rate on this intercompany loan is based on the Prime Rate (currently 3.25%). Mepco might not be able to obtain such favorable funding costs on its own in the open market.

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Financial Condition

Summary.  Our total assets increased by $146.1 million, or 6.5%, during the first nine months of 2015 due primarily to increases in cash and cash equivalents, securities available for sale and loans.  Loans, excluding loans held for sale ("Portfolio Loans"), totaled $1.47 billion at September 30, 2015, an increase of $58.0 million, or 4.1%, from December 31, 2014.  (See "Portfolio Loans and asset quality.")

Deposits totaled $2.06 billion at September 30, 2015, compared to $1.92 billion at December 31, 2014.  The $136.7 million increase in total deposits during the period is primarily due to growth in checking, savings and time account balances.

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 and trust preferred securities. 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.”)

Securities

			Unrealized
	Amortized Cost		Gains		Losses		Fair Value
	(In thousands)
Securities available for sale
September 30, 2015	$	602,659	$	4,205	$	2,202	$	604,662
December 31, 2014		532,930		3,317		3,069		533,178

Securities available for sale increased during 2015 due primarily to the purchase of U.S. agency, corporate, and asset-backed securities.  The securities were purchased to utilize funds generated from the increase in total deposits. (See “Deposits” and “Liquidity and capital resources.”)

Our portfolio of available-for-sale securities 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 or loss. We recorded no net other than temporary impairment charges on securities in earnings in 2015. We recorded $0.009 million of net other than temporary impairment charges on securities in earnings in 2014.

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

	Nine months ended September 30,
	2015		2014
	(In thousands)
Proceeds	$	11,786	$	7,630
Gross gains	$	75	$	123
Gross losses		-		-
Net impairment charges		-		(9	)
Fair value adjustments		22		211
Net gains	$	97	$	325

Portfolio Loans and asset quality.  In addition to the communities served by our Bank branch 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.

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 mortgage loans as Portfolio Loans, while 15- and 30-year, fixed-rate obligations are generally sold to mitigate exposure to changes in interest rates. (See “Non-interest income.”)

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Non-performing assets ⁽¹⁾

	September 30, 2015			December 31, 2014
	(Dollars in thousands)
Non-accrual loans	$	15,834		$	15,231
Loans 90 days or more past due and still accruing interest		-			7
Total non-performing loans		15,834			15,238
Other real estate and repossessed assets		3,851			6,454
Total non-performing assets	$	19,685		$	21,692
As a percent of Portfolio Loans
Non-performing loans		1.08	%		1.08	%
Allowance for loan losses		1.68			1.84
Non-performing assets to total assets		0.82			0.96
Allowance for loan losses as a percent of non-performing loans		155.39			170.56

⁽¹⁾ Excludes loans classified as "trouble debt restructured" that are not past due and vehicle service contract counterparty receivables, net.

Troubled debt restructurings ("TDR")

	September 30, 2015
	Commercial		Retail			Total
	(In thousands)
Performing TDRs	$	22,257	$	69,726		$	91,983
Non-performing TDRs(1)		1,501		3,887	(2)		5,388
Total	$	23,758	$	73,613		$	97,371

	December 31, 2014
	Commercial		Retail			Total
	(In thousands)
Performing TDRs	$	29,475	$	73,496		$	102,971
Non-performing TDRs(1)		1,978		5,225	(2)		7,203
Total	$	31,453	$	78,721		$	110,174

(1) Included in non-performing assets table above.

(2) 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 $0.6 million, or 3.9%, during the first nine months of 2015 due principally to a $3.4 million increase in non-performing commercial loans that was largely offset by decreases in non-performing mortgage and consumer/installment loans. The increase in non-performing commercial loans was primarily due to the movement of a $4.2 million commercial relationship into non-accrual during the third quarter of 2015.  This relationship is primarily secured by income producing properties and had been previously classified as an accruing “watch” credit.  The declines in non-performing mortgage and consumer/installment loans primarily reflect reduced levels of new loan defaults as well as loan charge-offs, pay-offs, negotiated transactions, and the migration of loans into ORE. In general, improving economic conditions in our market areas, as well as our collection and resolution efforts, have resulted in a longer-term downward trend in non-performing loans.  However, we are still experiencing some loan defaults, particularly related to commercial loans secured by income-producing property and mortgage loans secured by resort/vacation property.

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Non-performing loans exclude performing loans that are classified as troubled debt restructurings (“TDRs”). Performing TDRs totaled $92.0 million, or 6.3% of total Portfolio Loans, and $103.0 million, or 7.3% of total Portfolio Loans, at September 30, 2015 and December 31, 2014, respectively. The decrease in the amount of performing TDRs in the first nine months of 2015 reflects declines in both commercial loan and retail loan TDRs.

ORE and repossessed assets totaled $3.9 million at September 30, 2015, compared to $6.5 million at December 31, 2014. This decrease is primarily the result of sales of ORE being in excess of the migration of non-performing loans secured by real estate into ORE as the foreclosure process is completed.

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.

The ratio of loan net charge-offs to average Portfolio Loans was 0.03% on an annualized basis in the first nine months of 2015 compared to 0.27% in the first nine months of 2014.  The $2.4 million decline in loan net charge-offs is primarily due to a $1.7 million decrease in commercial loan net charge-offs as well as decreases in mortgage loan ($0.6 million) and consumer/installment loan ($0.1 million) net charge-offs.  The overall decrease in loan net charge-offs primarily reflects a year-over-year reduction in loan defaults and improvement in collateral liquidation values.

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Allowance for loan losses

	Nine months ended September 30,
	2015					2014
	Loans			Unfunded Commitments		Loans			Unfunded Commitments
	(Dollars in thousands)
Balance at beginning of period	$	25,990		$	539	$	32,325		$	508
Additions (deductions)
Provision for loan losses		(1,037	)		-		(2,049	)		-
Recoveries credited to allowance		3,418			-		5,438			-
Loans charged against the allowance		(3,767	)		-		(8,206	)		-
Additions (deductions) included in non-interest expense		-			46		-			27
Balance at end of period	$	24,604		$	585	$	27,508		$	535
Net loans charged against the allowance to average Portfolio Loans (annualized)		0.03	%				0.27	%

Allocation of the Allowance for Loan Losses

	September 30, 2015		December 31, 2014
	(In thousands)
Specific allocations	$	12,776	$	13,233
Other adversely rated commercial loans		1,259		761
Historical loss allocations		5,798		6,773
Additional allocations based on subjective factors		4,771		5,223
Total	$	24,604	$	25,990

Some loans will not be repaid in full. Therefore, an allowance for loan losses (“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.

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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 allowance 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 allowance for loan losses 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.

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 and payment plan receivables 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 allowance.

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.

Mepco’s allowance for losses is determined in a similar manner as discussed above, and primarily takes into account historical loss experience and other subjective factors deemed relevant to Mepco’s payment plan business. Estimated incurred losses associated with Mepco’s outstanding vehicle service contract payment plans are included in the provision for loan losses. Mepco recorded credits of $0.005 million and $0.031 million in the first nine months of 2015 and 2014, respectively, for its provision for loan losses.  Mepco’s allowance for loan losses totaled $0.07 million at both September 30, 2015 and December 31, 2014. Mepco has established procedures for vehicle service contract payment plan servicing, administration and collections, including the timely cancellation of the vehicle service contract, in order to protect our position in the event of payment default or voluntary cancellation by the customer. Mepco has also established procedures to attempt to prevent and detect fraud since the payment plan origination activities and initial customer contacts are done entirely through unrelated third parties (vehicle service contract administrators and sellers or automobile dealerships). However, there can be no assurance that the aforementioned risk management policies and procedures will prevent us from the possibility of incurring significant credit or fraud related losses in this business segment. The estimated incurred losses described in this paragraph should be distinguished from the possible losses we may incur from counterparties failing to pay their obligations to Mepco.  See Note #14 to the Condensed Consolidated Financial Statements included within this report.

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The allowance for loan losses decreased $1.4 million to $24.6 million at September 30, 2015, from $26.0 million at December 31, 2014, and was equal to 1.68% of total Portfolio Loans at September 30, 2015, compared to 1.84% at December 31, 2014. Three of the four components of the allowance for loan losses outlined above declined in the first nine months of 2015. The allowance for loan losses related to specific loans decreased $0.5 million in 2015 due primarily to a decline in the balance of individually impaired loans as well as charge-offs. The allowance for loan losses related to other adversely rated commercial loans increased $0.5 million in 2015 primarily due to an increase in the balance of such loans included in this component to $34.1 million at September 30, 2015 from $30.6 million at December 31, 2014. The allowance for loan losses related to historical losses decreased $1.0 million during 2015 due principally to the use of a lower estimated probability of default for homogenous mortgage and installment loans (resulting from lower loan net charge-offs and reduced levels of new defaults on loans). The allowance for loan losses related to subjective factors decreased $0.5 million during 2015 primarily due to the improvement of various economic indicators used in computing this portion of the allowance.

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.

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 $2.06 billion and $1.92 billion at September 30, 2015, and December 31, 2014, respectively.  The $136.7 million increase in deposits in the first nine months of 2015 is due to growth in checking, savings and time deposit account balances.  Reciprocal deposits totaled $47.9 million and $53.7 million at September 30, 2015, and December 31, 2014, 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.

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, 2015, we had approximately $522.8 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.

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Other borrowings, comprised almost entirely of advances from the Federal Home Loan Bank (the “FHLB”), totaled $12.1 million and $12.5 million at September 30, 2015, and December 31, 2014, respectively.

As described above, we utilize wholesale funding, including FHLB borrowings and Brokered CDs to augment our core deposits and fund a portion of our assets. At September 30, 2015, our use of such wholesale funding sources (including reciprocal deposits) amounted to approximately $60.0 million, or 2.9% of total funding (deposits and total borrowings, excluding 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.

We historically employed derivative financial instruments to manage our exposure to changes in interest rates. We discontinued the active use of derivative financial instruments during 2008.  We began to again utilize interest-rate swaps in 2014, relating to our commercial lending activities.  During the first nine months of 2015 and 2014, we entered into $16.6 million and $2.4 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 $0.30 million and $0.05 million of fee income related to these transactions during the first nine months of 2015 and 2014, respectively.

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 investment securities) as well as developing access to a variety of borrowing sources to supplement our deposit gathering activities and provide funds for purchasing investment securities 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, a federal funds purchased borrowing facility with another commercial bank, and access to the capital markets (for Brokered CDs).

At September 30, 2015, we had $296.9 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, $1.64 billion of our deposits at September 30, 2015, 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.

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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 short-term assets with maturities less than 30 days and loans held for sale) to total assets, short-term liability dependence and basic surplus (defined as quick assets compared to short-term liabilities). Policy limits have been established for our various liquidity measurements and are monitored on a monthly 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, our ability to issue Brokered CDs and our improved financial metrics.

We also believe that the available cash on hand at the parent company (including time deposits) of approximately $22.0 million as of September 30, 2015, provides sufficient liquidity resources at the parent company to meet operating expenses, to make interest payments on the subordinated debentures and to pay a cash dividend on our common stock for the foreseeable future.

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 cumulative trust preferred securities.

Capitalization

	September 30, 2015			December 31, 2014
	(In thousands)
Subordinated debentures	$	35,569		$	35,569
Amount not qualifying as regulatory capital		(1,069	)		(1,069	)
Amount qualifying as regulatory capital		34,500			34,500
Shareholders’ equity
Common stock		343,601			352,462
Accumulated deficit		(86,125	)		(96,455	)
Accumulated other comprehensive loss		(4,496	)		(5,636	)
Total shareholders’ equity		252,980			250,371
Total capitalization	$	287,480		$	284,871

We currently have three special purpose entities that originally issued $39.5 million of cumulative trust preferred securities.  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.

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On December 1, 2014, we purchased 5,000 shares of trust preferred securities (liquidation amount of $1,000 per security, representing a total of $5.0 million) that were issued by IBC Capital Finance IV.  The trust preferred securities have been retired along with certain related common stock issued by IBC Capital Finance IV and subordinated debentures issued by us.

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, 2015, and December 31, 2014. Although the Dodd-Frank Act further limited Tier 1 treatment for trust preferred securities, those new limits did not apply to our outstanding trust preferred securities.  Further, the New Capital Rules grandfathered the treatment of our trust preferred securities as qualifying regulatory capital.

Common shareholders’ equity increased to $253.0 million at September 30, 2015 from $250.4 million at December 31, 2014, due primarily to our net income in the first nine months of 2015 as well as a decline in our accumulated other comprehensive loss that were partially offset by dividends and share repurchases. Our tangible common equity (“TCE”) totaled $250.6 million and $247.7 million, respectively, at those same dates. Our ratio of TCE to tangible assets was 10.48% and 11.03% at September 30, 2015 and December 31, 2014, respectively.

Because the Bank currently has negative “undivided profits” (i.e. a retained deficit) of $15.9 million at September 30, 2015, under Michigan banking regulations, the Bank is not currently permitted to pay a dividend.  We can request regulatory approval for a return of capital from the Bank to the parent company. During the first quarter of 2015, we requested regulatory approval for an $18.5 million return of capital from the Bank to the parent company.  This return of capital request was approved by our banking regulators on February 13, 2015, and the Bank returned $18.5 million of capital to the parent company on February 17, 2015.  Also see note #11 to the Condensed Consolidated Financial Statements included within this report.

On January 21, 2015, our Board of Directors authorized a share repurchase plan.  Under the terms of the share repurchase plan, we are authorized to buy back up to 5% of our outstanding common stock.    The repurchase plan is authorized to last through December 31, 2015.  We intend and expect to accomplish the repurchases through open market transactions, though we could affect 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, other regulatory requirements, potential alternative uses for capital, and our financial performance. The repurchase program does not obligate us to acquire any particular amount of common stock, and it may be modified or suspended at any time at our discretion.  During the first nine months of 2015 we repurchased 659,162 shares of our comment stock pursuant to this plan at an average price of $13.69 per share.

We resumed a quarterly cash dividend on our common stock of six cents per share in May 2014 and have continued to pay regular quarterly dividends at that amount through August 2015.  In October 2015, our Board of Directors increased the quarterly cash dividend on our common stock to eight cents per share.

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As of September 30, 2015 and December 31, 2014, our Bank (and holding company) continued to meet the requirements to be considered “well-capitalized” under federal regulatory standards (also see note #11 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 statement of financial condition 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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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, 2015
200 basis point rise	$	420,900		8.93	%	$	78,400		6.52	%
100 basis point rise		407,500		5.46			76,300		3.67
Base-rate scenario		386,400		-			73,600		-
100 basis point decline		357,600		(7.45	)		70,900		(3.67	)
December 31, 2014
200 basis point rise	$	421,700		9.56	%	$	75,600		6.03	%
100 basis point rise		406,800		5.69			73,600		3.23
Base-rate scenario		384,900		-			71,300		-
100 basis point decline		355,000		(7.77	)		69,200		(2.95	)

(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 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”). Trading securities, securities available-for-sale, loans held for sale, and derivatives 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, capitalized mortgage loan servicing rights and certain other assets. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets. See Note #12 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.

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Litigation Matters

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 approximately $0.5 million.  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 or vehicle service contract counterparty receivables). 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. Risks associated with the likelihood that we will not collect the full amount owed to us, net of reserves, are disclosed elsewhere in this report.

 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 other than temporary impairment of investment securities, the allowance for loan losses, originated mortgage loan servicing rights, vehicle service contract payment plan counterparty contingencies, and income taxes 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, 2014.

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Item 3.

Quantitative and Qualitative Disclosures about Market Risk

See applicable disclaimers 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, 2015, 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, 2015, 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.

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Part II

Item 1A. Risk Factors

There have been no material changes to the risk factors disclosed in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2014.

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 2015, the Company issued 698 shares of common stock to non-employee directors on a current basis and 472 shares of common stock to the trust for distribution to directors on a deferred basis.  The shares were issued on July 1, 2015, at a price of $13.56 per share, representing aggregate fees of $0.02 million.   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 purchases of common stock for the three-months ended September 30, 2015:

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 2015	-		$	-		-		870,515
August 2015		299,923		14.08		227,500		643,015
September 2015		154,247		14.00		154,247		488,768
Total		454,170	$	14.05		381,747		488,768

(1) Represents (i) 72,423 shares withheld from the shares that would otherwise have been issued to certain officers in order to satisfy tax withholding obligations resulting from vesting of restricted stock units and (ii) 381,747 shares purchased in the open market pursuant to a publicly announced plan.

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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:

11. Computation of Earnings Per Share.

31.1 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).

31.2 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).

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).

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).

101. INS Instance Document

101. SCH XBRL Taxonomy Extension Schema Document

101. CAL XBRL Taxonomy Extension Calculation Linkbase Document

101. DEF XBRL Taxonomy Extension Definition Linkbase Document

101. LAB XBRL Taxonomy Extension Label Linkbase Document

101. PRE XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES

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

Date	November 4, 2015	By	/s/ Robert N. Shuster
			Robert N. Shuster, Principal Financial Officer
Date	November 4, 2015	By	/s/ James J. Twarozynski
			James J. Twarozynski, Principal Accounting Officer

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EX-11

                 Exhibit 11

Computation of Earnings Per Share

See Note #6 to the Interim Condensed Consolidated Financial Statements (unaudited) for a reconciliation of basic and diluted earnings per share for the three- and nine- month periods ending September 30, 2015 and 2014.

EX-31.1

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 4, 2015	/s/ William B. Kessel
	William B. Kessel
	President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Robert N. Shuster, 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 4, 2015	/s/ Robert N. Shuster
	Robert N. Shuster
	Chief Financial Officer

EX-32.1

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, 2015, 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, 2015, fairly presents, in all material respects, the financial condition and results of operations of Independent Bank Corporation.

	INDEPENDENT BANK CORPORATION
Date:  November 4, 2015	/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.

EX-32.2

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, Robert N. Shuster, 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, 2015, 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, 2015, fairly presents, in all material respects, the financial condition and results of operations of Independent Bank Corporation.

	INDEPENDENT BANK CORPORATION
Date:  November 4, 2015	/s/ Robert N. Shuster
	Robert N. Shuster
	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.

XML

Loans, Troubled Debt Restructurings (Details) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2015 USD ($) Contract	Sep. 30, 2014 USD ($) Contract	Sep. 30, 2015 USD ($) Contract	Sep. 30, 2014 USD ($) Contract	Dec. 31, 2014 USD ($)
Financing Receivable, Modifications [Line Items]
Troubled debt restructuring		$ 97,371		$ 97,371		$ 110,174
Troubled debt restructuring, specific reserve		$ 10,500		$ 10,500		12,200
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		5	12	26	45
Pre-modification recorded balance		$ 410	$ 1,394	$ 2,483	$ 5,477
Post-modification recorded balance		389	1,332	2,252	4,788
Increase (decrease) in allowance for loan losses		(50)	200	50	200
Charge offs due to troubled debt restructurings		$ 0	$ 0	$ 0	$ 10
TDR that subsequently defaulted [Abstract]
Number of contracts | Contract		1	2	4	3
Recorded Balance		$ 54	$ 191	$ 215	$ 444
Past due period for modified loans		90 days
Increase (decrease) in allowance for loan loss due to TDRs that subsequently defaulted		$ (10)	0	0	10
Charge-offs on TDRs that subsequently defaulted		0	$ 0	$ 0	$ 0
Minimum [Member]
Financing Receivable, Modifications [Line Items]
Modification of stated interest rate of loans, range of period				9 months
Modifications involving extension of maturity date, period range				1 month
Maximum [Member]
Financing Receivable, Modifications [Line Items]
Modification of stated interest rate of loans, range of period				36 months
Modifications involving extension of maturity date, period range				60 months
Maximum in Certain Circumstances [Member]
Financing Receivable, Modifications [Line Items]
Modification of stated interest rate of loans, range of period				480 months
Modifications involving extension of maturity date, period range				230 months
Commercial [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructuring		23,758		$ 23,758		31,453
Retail [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructuring		$ 73,613		$ 73,613		78,721
Income Producing - Real Estate [Member] | Commercial [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		0	0	2	3
Pre-modification recorded balance		$ 0	$ 0	$ 229	$ 354
Post-modification recorded balance		$ 0	$ 0	$ 234	$ 326
TDR that subsequently defaulted [Abstract]
Number of contracts | Contract		0	0	0	0
Recorded Balance		$ 0	$ 0	$ 0	$ 0
Land, Land Development and Construction - Real Estate [Member] | Commercial [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		0	1	0	2
Pre-modification recorded balance		$ 0	$ 40	$ 0	$ 55
Post-modification recorded balance		$ 0	$ 36	$ 0	$ 50
TDR that subsequently defaulted [Abstract]
Number of contracts | Contract		0	0	0	0
Recorded Balance		$ 0	$ 0	$ 0	$ 0
Commercial and Industrial [Member] | Commercial [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		1	5	4	11
Pre-modification recorded balance		$ 48	$ 716	$ 301	$ 2,083
Post-modification recorded balance		$ 26	$ 693	$ 273	$ 1,524
TDR that subsequently defaulted [Abstract]
Number of contracts | Contract		0	1	2	2
Recorded Balance		$ 0	$ 66	$ 157	$ 319
1-4 Family [Member] | Mortgage [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		3	1	9	8
Pre-modification recorded balance		$ 343	$ 87	$ 1,373	$ 1,037
Post-modification recorded balance		$ 344	$ 87	$ 1,189	$ 1,049
TDR that subsequently defaulted [Abstract]
Number of contracts | Contract		1	1	1	1
Recorded Balance		$ 54	$ 125	$ 54	$ 125
Resort Lending [Member] | Mortgage [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		0	1	1	4
Pre-modification recorded balance		$ 0	$ 378	$ 313	$ 1,011
Post-modification recorded balance		$ 0	$ 367	$ 309	$ 997
TDR that subsequently defaulted [Abstract]
Number of contracts | Contract		0	0	0	0
Recorded Balance		$ 0	$ 0	$ 0	$ 0
Home Equity - 1st Lien [Member] | Mortgage [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		0	0	0	1
Pre-modification recorded balance		$ 0	$ 0	$ 0	$ 17
Post-modification recorded balance		$ 0	$ 0	$ 0	$ 13
TDR that subsequently defaulted [Abstract]
Number of contracts | Contract		0	0	0	0
Recorded Balance		$ 0	$ 0	$ 0	$ 0
Home Equity - 1st Lien [Member] | Installment [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		0	3	5	8
Pre-modification recorded balance		$ 0	$ 118	$ 190	$ 538
Post-modification recorded balance		$ 0	$ 96	$ 164	$ 465
TDR that subsequently defaulted [Abstract]
Number of contracts | Contract		0	0	0	0
Recorded Balance		$ 0	$ 0	$ 0	$ 0
Home Equity - 2nd Lien [Member] | Mortgage [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
TDR that subsequently defaulted [Abstract]
Number of contracts | Contract		0	0	0	0
Recorded Balance		$ 0	$ 0	$ 0	$ 0
Home Equity - 2nd Lien [Member] | Installment [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		0	0	3	5
Pre-modification recorded balance		$ 0	$ 0	$ 58	$ 294
Post-modification recorded balance		$ 0	$ 0	$ 58	$ 284
TDR that subsequently defaulted [Abstract]
Number of contracts | Contract		0	0	0	0
Recorded Balance		$ 0	$ 0	$ 0	$ 0
Loans Not Secured By Real Estate [Member] | Installment [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		1	1	2	3
Pre-modification recorded balance		$ 19	$ 55	$ 19	$ 88
Post-modification recorded balance		$ 19	$ 53	$ 25	$ 80
TDR that subsequently defaulted [Abstract]
Number of contracts | Contract		0	0	1	0
Recorded Balance		$ 0	$ 0	$ 4	$ 0
Other [Member] | Installment [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
TDR that subsequently defaulted [Abstract]
Number of contracts | Contract		0	0	0	0
Recorded Balance		$ 0	$ 0	$ 0	$ 0
Performing TDRs [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructuring		91,983		91,983		102,971
Performing TDRs [Member] | Commercial [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructuring		22,257		22,257		29,475
Performing TDRs [Member] | Retail [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructuring		69,726		69,726		73,496
Non-performing TDRs [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructuring	[1]	5,388		5,388		7,203
Non-performing TDRs [Member] | Commercial [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructuring	[1]	1,501		1,501		1,978
Non-performing TDRs [Member] | Retail [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructuring	[1],[2]	$ 3,887		$ 3,887		$ 5,225

[1] Included in non-performing loans table above.

[2] Also includes loans on non-accrual at the time of modification until six payments are received on a timely basis.

XML

Contingent Liabilities (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Loss Contingencies [Line Items]
Aggregate amount of counterparty obligations	$ 7,324		$ 7,324		$ 7,237
VSC counterparty contingency expense	30	$ 28	89	$ 169
Provision for loss reimbursement on sold loans	(35)	$ 0	(59)	$ (466)
Reserve for loss reimbursement on sold mortgage loans	500		500		$ 500
Pending Litigation [Member]
Loss Contingencies [Line Items]
Maximum range of reasonably possible loss	$ 500		$ 500
Accounts Receivables Due to Mepco [Member]
Loss Contingencies [Line Items]
Installment payments period for service contract, minimum			12 months
Installment payments period for service contract, maximum			24 months

XML

Regulatory Matters (Details) - USD ($) $ in Thousands		3 Months Ended
	Jan. 31, 2015	Mar. 31, 2014	Sep. 30, 2015	Feb. 17, 2015	Dec. 31, 2014	Sep. 30, 2014	Apr. 09, 2014	Dec. 31, 2013
Regulatory Matters [Abstract]
Undivided profits			$ (15,900)
Request for approval to transfer capital from bank to parent entity	$ 18,500	$ 15,000
Transfer of capital from bank to the parent company				$ 18,500			$ 15,000
Components of regulatory capital [Abstract]
Total shareholders' equity			252,980		$ 250,371	$ 247,067		$ 231,581
Add (deduct) [Abstract]
Accumulated other comprehensive loss			(4,496)		(5,636)
Intangible assets			(2,366)		(2,627)
Consolidated [Member]
Total capital to risk-weighted assets [Abstract]
Total risk-based capital			276,230		265,163
Minimum for Adequately Capitalized Institutions, Amount			$ 130,163		$ 117,427
Actual, Ratio			16.98%		18.06%
Minimum for Adequately Capitalized Institutions, Ratio			8.00%		8.00%
Tier 1 capital to risk-weighted assets [Abstract]
Actual, Amount			$ 255,613		$ 246,628
Minimum for Adequately Capitalized Institutions, Amount			$ 97,622		$ 58,714
Actual, Ratio			15.71%		16.80%
Minimum for Adequately Capitalized Institutions, Ratio			6.00%		4.00%
Common equity tier 1 capital to risk-weighted assets [Abstract]
Actual, Amount			$ 238,884		$ 212,128
Minimum for Adequately Capitalized Institutions, Amount			$ 73,216
Actual, Ratio			14.68%
Minimum for Adequately Capitalized Institutions, Ratio			4.50%
Tier 1 capital to average assets [Abstract]
Tier 1 capital			$ 255,613		246,628
Minimum for Adequately Capitalized Institutions, Amount			$ 91,582		$ 88,206
Actual, Ratio			11.16%		11.18%
Minimum for Adequately Capitalized Institutions, Ratio			4.00%		4.00%
Components of regulatory capital [Abstract]
Total shareholders' equity			$ 252,980		$ 250,371
Add (deduct) [Abstract]
Accumulated other comprehensive loss			(1,302)		5,636
Intangible assets			(946)		(2,627)
Disallowed deferred tax assets			(11,848)		(40,500)
Disallowed capitalized mortgage loan servicing rights			0		(752)
Common equity tier 1 capital			238,884		212,128
Qualifying trust preferred securities			34,500		34,500
Disallowed deferred tax assets			(17,771)		0
Tier 1 capital			255,613		246,628
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets			20,617		18,535
Total risk-based capital			276,230		265,163
Independent Bank [Member]
Total capital to risk-weighted assets [Abstract]
Total risk-based capital			253,647		247,883
Minimum for Adequately Capitalized Institutions, Amount			130,004		117,374
Minimum for Well Capitalized Institutions, Amount			$ 162,506		$ 146,718
Actual, Ratio			15.61%		16.90%
Minimum for Adequately Capitalized Institutions, Ratio			8.00%		8.00%
Minimum for Well-Capitalized Institutions, Ratio			10.00%		10.00%
Tier 1 capital to risk-weighted assets [Abstract]
Actual, Amount			$ 233,123		$ 229,361
Minimum for Adequately Capitalized Institutions, Amount			97,503		58,687
Minimum for Well-Capitalized Institutions, Amount			$ 130,005		$ 88,031
Actual, Ratio			14.35%		15.63%
Minimum for Adequately Capitalized Institutions, Ratio			6.00%		4.00%
Minimum for Well Capitalized Institutions, Ratio			8.00%		6.00%
Common equity tier 1 capital to risk-weighted assets [Abstract]
Actual, Amount			$ 233,123		$ 229,361
Minimum for Adequately Capitalized Institutions, Amount			73,128
Minimum for Well-Capitalized Institutions, Amount			$ 105,629
Actual, Ratio			14.35%
Minimum for Adequately Capitalized Institutions, Ratio			4.50%
Minimum for Well Capitalized Institutions, Ratio			6.50%
Tier 1 capital to average assets [Abstract]
Tier 1 capital			$ 233,123		229,361
Minimum for Adequately Capitalized Institutions, Amount			91,509		87,687
Minimum for Well-Capitalized Institutions, Amount			$ 114,387		$ 109,609
Actual, Ratio			10.19%		10.46%
Minimum for Adequately Capitalized Institutions, Ratio			4.00%		4.00%
Minimum for Well-Capitalized Institutions, Ratio			5.00%		5.00%
Components of regulatory capital [Abstract]
Total shareholders' equity			$ 255,659		$ 257,832
Add (deduct) [Abstract]
Accumulated other comprehensive loss			(1,302)		5,636
Intangible assets			(946)		(2,627)
Disallowed deferred tax assets			(20,288)		(30,728)
Disallowed capitalized mortgage loan servicing rights			0		(752)
Common equity tier 1 capital			233,123		229,361
Qualifying trust preferred securities			0		0
Disallowed deferred tax assets			0		0
Tier 1 capital			233,123		229,361
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets			20,524		18,522
Total risk-based capital			$ 253,647		$ 247,883

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Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Accumulated Other Comprehensive Income Loss [Line Items]
Balance at beginning of period			$ 250,371	$ 231,581
Balance at end of period	$ 252,980	$ 247,067	252,980	247,067
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]
Net impairment loss recognized in earnings	0	(9)	0	(9)
Total reclassifications before tax	7,325	7,274	21,129	19,778
Interest expense	(1,452)	(1,885)	(4,343)	(5,509)
Tax expense (benefit)	2,278	2,345	6,682	5,659
Reclassifications, net of tax	5,047	4,929	14,447	14,119
Reclassification Out Of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]
Reclassifications, net of tax		11		(111)
AOCI Attributable to Parent [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Balance at beginning of period	(5,390)	(6,298)	(5,636)	(9,245)
Other comprehensive loss before reclassifications	894	226	1,189	3,051
Amounts reclassified from AOCL	0	(11)	(49)	111
Other comprehensive income	894	215	1,140	3,162
Balance at end of period	(4,496)	(6,083)	(4,496)	(6,083)
Unrealized Gains (Losses) on Available For Sale Securities [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Balance at beginning of period	408	(376)	162	(3,200)
Other comprehensive loss before reclassifications	894	226	1,189	3,051
Amounts reclassified from AOCL	0	(73)	(49)	(74)
Other comprehensive income	894	153	1,140	2,977
Balance at end of period	1,302	(223)	1,302	(223)
Unrealized Gains (Losses) on Available For Sale Securities [Member] | Reclassification Out Of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]
Net gains on securities	0	121	75	123
Net impairment loss recognized in earnings	0	(9)	0	(9)
Total reclassifications before tax	0	112	75	114
Tax expense (benefit)	0	39	26	40
Reclassifications, net of tax	0	73	49	74
Disproportionate Tax Effects from Securities Available for Sale [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Balance at beginning of period	(5,798)	(5,798)	(5,798)	(5,798)
Other comprehensive loss before reclassifications	0	0	0	0
Amounts reclassified from AOCL	0	0	0	0
Other comprehensive income	0	0	0	0
Balance at end of period	(5,798)	(5,798)	(5,798)	(5,798)
Unrealized Gains (Losses) on Settled Derivatives [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Balance at beginning of period	0	(124)	0	(247)
Other comprehensive loss before reclassifications	0	0	0	0
Amounts reclassified from AOCL	0	62	0	185
Other comprehensive income	0	62	0	185
Balance at end of period	$ 0	(62)	$ 0	(62)
Unrealized Gains (Losses) on Settled Derivatives [Member] | Reclassification Out Of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]
Interest expense		(95)		(285)
Tax expense (benefit)		(33)		(100)
Reclassifications, net of tax		$ (62)		$ (185)

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Share Based Compensation (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				9 Months Ended
	Sep. 30, 2015	Mar. 31, 2015	Sep. 30, 2014	Mar. 31, 2014	Sep. 30, 2015	Sep. 30, 2014
Share based compensation arrangements [Line Items]
Number of additional shares approved for grant (in shares)					300,000
Total compensation cost not yet recognized	$ 1,800				$ 1,800
Total compensation cost not yet recognized, period for recognition					1 year 9 months 18 days
Information regarding options exercised [Abstract]
Intrinsic value	71		$ 123		$ 314	$ 231
Cash proceeds received	23		30		105	66
Tax benefit realized	$ 25		$ 44		110	81
Long-term Incentive Plan [Member]
Share based compensation arrangements [Line Items]
Number of additional shares approved for grant (in shares)	0		0
Total compensation expense (recovery) recognized	$ 400		$ 300		1,100	800
Tax benefit relating to compensation expense recognized	$ 100		100		$ 400	$ 300
Stock Options [Member]
Outstanding stock option grants and transaction [Roll Forward]
Outstanding, beginning balance (in shares)		281,820			281,820
Granted (in shares)					0
Exercised (in shares)					(31,450)
Forfeited (in shares)					(2,096)
Expired (in shares)					(1,924)
Outstanding, ending balance (in shares)	246,350				246,350
Vested and expected to vest, period end (in shares)	245,298				245,298
Exercisable, period end (in shares)	222,742				222,742
Weighted Average Exercise Price [Roll Forward]
Outstanding, beginning balance (in dollars per share)		$ 4.69			$ 4.69
Exercised (in dollars per share)					3.35
Forfeited (in dollars per share)					4.77
Expired (in dollars per share)					6.79
Outstanding, ending balance (in dollars per share)	$ 4.85				4.85
Vested and expected to vest, period end (in dollars per share)	4.84				4.84
Exercisable, period end (in dollars per share)	$ 4.70				$ 4.70
Weighted-Average Remaining Contractual Term [Abstract]
Outstanding, Weighted Average Remaining Contractual Term					6 years 4 months 6 days
Vested and Expected to Vest, Weighted-Average Remaining Contractual Term					6 years 4 months 6 days
Exercisable, Weighted Average Remaining Contractual Term					6 years 2 months 19 days
Aggregate intrinsic value [Abstract]
Outstanding, Aggregate Intrinsic Value	$ 2,472				$ 2,472
Vested and Expected to Vest, Outstanding, Aggregate Intrinsic Value	2,463				2,463
Exercisable, Aggregate Intrinsic Value	$ 2,271				$ 2,271
Restricted Stock [Member]
Share based compensation arrangements [Line Items]
Stock options vested (in shares)	230,000
Number of Shares [Roll Forward]
Vested (in shares)	(230,000)
Restricted Stock [Member] | Long-term Incentive Plan [Member]
Share based compensation arrangements [Line Items]
Number of shares withheld for tax withholding obligations (in shares)	70,000
Non-Vested Restricted Stock, Restricted Stock Units and PSU's [Member]
Share based compensation arrangements [Line Items]
Stock options vested (in shares)					249,526
Number of Shares [Roll Forward]
Outstanding, beginning balance (in shares)		407,130			407,130
Granted (in shares)					108,422
Vested (in shares)					(249,526)
Forfeited (in shares)					(4,384)
Outstanding, ending balance (in shares)	261,642				261,642
Weighted Average Grant Date Fair Value [Roll Forward]
Outstanding, beginning balance (in dollars per share)		$ 6.31			$ 6.31
Granted (in dollars per share)					13.06
Vested (in dollars per share)					3.92
Forfeited (in dollars per share)					12.88
Outstanding, ending balance (in dollars per share)	$ 11.28				$ 11.28
Director [Member]
Share based compensation arrangements [Line Items]
Shares issues as retainer fees (in shares)					4,000	11,000
Non-Employee Directors [Member]
Share based compensation arrangements [Line Items]
Number of additional shares approved for grant (in shares)					200,000
Total compensation expense (recovery) recognized	$ 20		50		$ 50	$ 140
Tax benefit relating to compensation expense recognized	$ 10		$ 20		$ 20	$ 50
Officers [Member] | Restricted Stock [Member] | Long-term Incentive Plan [Member]
Share based compensation arrangements [Line Items]
Number of stock units or restricted shares issued in period (in shares)		70,000		70,000
Vesting period		3 years		3 years
Officers [Member] | Performance stock units [Member] | Long-term Incentive Plan [Member]
Share based compensation arrangements [Line Items]
Number of stock units or restricted shares issued in period (in shares)		30,000		30,000
Vesting period		3 years		3 years

XML

Fair Values of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2015

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, 2015
Assets
Cash and due from banks	$	52,146	$	52,146	$	52,146	$	-	$	-
Interest bearing deposits		53,051		53,051		53,051		-		-
Interest bearing deposits - time		13,029		13,053		-		13,053		-
Trading securities		225		225		225		-		-
Securities available for sale		604,662		604,662		-		604,662		-
Federal Home Loan Bank and Federal
Reserve Bank Stock		15,286	NA		NA		NA		NA
Net loans and loans held for sale		1,468,857		1,435,597		-		25,462		1,410,135
Accrued interest receivable		6,473		6,473		8		2,068		4,397
Derivative financial instruments		1,623		1,623		-		1,623		-
Liabilities
Deposits with no stated maturity (1)	$	1,639,402	$	1,639,402	$	1,639,402	$	-	$	-
Deposits with stated maturity (1)		421,560		419,803		-		419,803		-
Other borrowings		12,070		13,474		-		13,474		-
Subordinated debentures		35,569		22,885		-		22,885		-
Accrued interest payable		420		420		20		400		-
Derivative financial instruments		1,209		1,209		-		1,209		-
December 31, 2014
Assets
Cash and due from banks	$	48,326	$	48,326	$	48,326	$	-	$	-
Interest bearing deposits		25,690		25,690		25,690		-		-
Interest bearing deposits - time		13,561		13,585		-		13,585		-
Trading securities		203		203		203		-		-
Securities available for sale		533,178		533,178		-		533,178		-
Federal Home Loan Bank and Federal
Reserve Bank Stock		19,919	NA		NA		NA		NA
Net loans and loans held for sale		1,407,634		1,394,424		-		23,662		1,370,762
Accrued interest receivable		5,995		5,995		2		1,599		4,394
Derivative financial instruments		619		619		-		619		-
Liabilities
Deposits with no stated maturity (1)	$	1,534,175	$	1,534,175	$	1,534,175	$	-	$	-
Deposits with stated maturity (1)		390,127		389,139		-		389,139		-
Other borrowings		12,470		14,560		-		14,560		-
Subordinated debentures		35,569		23,328		-		23,328		-
Accrued interest payable		380		380		21		359		-
Derivative financial instruments		366		366		-		366		-

(1) Deposits with no stated maturity include reciprocal deposits with a recorded book balance of $12.0 million and $13.6 million at September 30, 2015 and December 31, 2014, respectively.  Deposits with a stated maturity include reciprocal deposits with a recorded book balance of $35.9 million and $40.1 million at September 30, 2015 and December 31, 2014, respectively.

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Loans (Tables)

9 Months Ended

Sep. 30, 2015

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			Payment Plan Receivables			Subjective Allocation			Total
	(In thousands)
2015
Balance at beginning of period	$	6,707		$	11,465		$	1,461		$	65		$	4,888		$	24,586
Additions (deductions)
Provision for loan losses		(26	)		(47	)		(49	)		(5	)		(117	)		(244	)
Recoveries credited to allowance		637			286			250			-			-			1,173
Loans charged against the allowance		(190	)		(379	)		(342	)		-			-			(911	)
Balance at end of period	$	7,128		$	11,325		$	1,320		$	60		$	4,771		$	24,604
2014
Balance at beginning of period	$	5,175		$	15,542		$	1,988		$	80		$	5,412		$	28,197
Additions (deductions)
Provision for loan losses		(601	)		(9	)		32			(8	)		(46	)		(632	)
Recoveries credited to allowance		999			197			283			-			-			1,479
Loans charged against the allowance		(385	)		(729	)		(422	)		-			-			(1,536	)
Balance at end of period	$	5,188		$	15,001		$	1,881		$	72		$	5,366		$	27,508

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

	Commercial			Mortgage			Installment			Payment Plan Receivables			Subjective Allocation			Total
	(In thousands)
2015
Balance at beginning of period	$	5,445		$	13,444		$	1,814		$	64		$	5,223		$	25,990
Additions (deductions)
Provision for loan losses		479			(881	)		(179	)		(4	)		(452	)		(1,037	)
Recoveries credited to allowance		1,722			843			853			-			-			3,418
Loans charged against the allowance		(518	)		(2,081	)		(1,168	)		-			-			(3,767	)
Balance at end of period	$	7,128		$	11,325		$	1,320		$	60		$	4,771		$	24,604
2014
Balance at beginning of period	$	6,827		$	17,195		$	2,246		$	97		$	5,960		$	32,325
Additions (deductions)
Provision for loan losses		(1,164	)		(395	)		132			(28	)		(594	)		(2,049	)
Recoveries credited to allowance		3,492			1,055			886			5			-			5,438
Loans charged against the allowance		(3,967	)		(2,854	)		(1,383	)		(2	)		-			(8,206	)
Balance at end of period	$	5,188		$	15,001		$	1,881		$	72		$	5,366		$	27,508

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		Payment Plan Receivables		Subjective Allocation		Total
	(In thousands)
September 30, 2015
Allowance for loan losses
Individually evaluated for impairment	$	4,048	$	8,244	$	484	$	-	$	-	$	12,776
Collectively evaluated for impairment		3,080		3,081		836		60		4,771		11,828
Total ending allowance balance	$	7,128	$	11,325	$	1,320	$	60	$	4,771	$	24,604
Loans
Individually evaluated for impairment	$	30,328	$	67,871	$	6,005	$	-			$	104,204
Collectively evaluated for impairment		697,528		402,934		230,310		37,438				1,368,210
Total loans recorded investment		727,856		470,805		236,315		37,438				1,472,414
Accrued interest included in recorded investment		1,500		2,227		688		-				4,415
Total loans	$	726,356	$	468,578	$	235,627	$	37,438			$	1,467,999
December 31, 2014
Allowance for loan losses
Individually evaluated for impairment	$	3,194	$	9,311	$	728	$	-	$	-	$	13,233
Collectively evaluated for impairment		2,251		4,133		1,086		64		5,223		12,757
Total ending allowance balance	$	5,445	$	13,444	$	1,814	$	64	$	5,223	$	25,990
Loans
Individually evaluated for impairment	$	34,147	$	72,340	$	6,679	$	-			$	113,166
Collectively evaluated for impairment		658,423		402,458		200,368		40,001				1,301,250
Total loans recorded investment		692,570		474,798		207,047		40,001				1,414,416
Accrued interest included in recorded investment		1,615		2,170		669		-				4,454
Total loans	$	690,955	$	472,628	$	206,378	$	40,001			$	1,409,962

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:

	90+ and Still Accruing		Non- Accrual		Total Non- Performing Loans
	(In thousands)
September 30, 2015
Commercial
Income producing - real estate	$	-	$	5,135	$	5,135
Land, land development and construction - real estate		-		533		533
Commercial and industrial		-		2,318		2,318
Mortgage
1-4 family		-		5,095		5,095
Resort lending		-		1,301		1,301
Home equity - 1st lien		-		191		191
Home equity - 2nd lien		-		189		189
Installment
Home equity - 1st lien		-		175		175
Home equity - 2nd lien		-		445		445
Loans not secured by real estate		-		430		430
Other		-		2		2
Payment plan receivables
Full refund		-		6		6
Partial refund		-		10		10
Other		-		4		4
Total recorded investment	$	-	$	15,834	$	15,834
Accrued interest included in recorded investment	$	-	$	-	$	-
December 31, 2014
Commercial
Income producing - real estate	$	-	$	1,233	$	1,233
Land, land development and construction - real estate		-		594		594
Commercial and industrial		-		2,746		2,746
Mortgage
1-4 family		7		5,945		5,952
Resort lending		-		2,168		2,168
Home equity - 1st lien		-		331		331
Home equity - 2nd lien		-		605		605
Installment
Home equity - 1st lien		-		576		576
Home equity - 2nd lien		-		517		517
Loans not secured by real estate		-		454		454
Other		-		48		48
Payment plan receivables
Full refund		-		2		2
Partial refund		-		12		12
Other		-		-		-
Total recorded investment	$	7	$	15,231	$	15,238
Accrued interest included in recorded investment	$	-	$	-	$	-

Aging analysis of loans by class

An aging analysis of loans by class follows:

	Loans Past Due								Loans not Past Due		Total Loans
	30-59 days		60-89 days		90+ days		Total
	(In thousands)
September 30, 2015
Commercial
Income producing - real estate	$	183	$	-	$	660	$	843	$	274,107	$	274,950
Land, land development and construction - real estate		-		119		204		323		41,899		42,222
Commercial and industrial		2,315		320		368		3,003		407,681		410,684
Mortgage
1-4 family		2,513		662		5,095		8,270		271,130		279,400
Resort lending		309		150		1,301		1,760		116,528		118,288
Home equity - 1st lien		39		23		191		253		22,252		22,505
Home equity - 2nd lien		331		-		189		520		50,092		50,612
Installment
Home equity - 1st lien		286		65		175		526		17,954		18,480
Home equity - 2nd lien		191		53		445		689		21,616		22,305
Loans not secured by real estate		474		132		430		1,036		192,321		193,357
Other		6		2		2		10		2,163		2,173
Payment plan receivables
Full refund		563		115		6		684		22,848		23,532
Partial refund		710		249		10		969		7,459		8,428
Other		112		16		4		132		5,346		5,478
Total recorded investment	$	8,032	$	1,906	$	9,080	$	19,018	$	1,453,396	$	1,472,414
Accrued interest included in recorded investment	$	113	$	18	$	-	$	131	$	4,284	$	4,415
December 31, 2014
Commercial
Income producing - real estate	$	89	$	-	$	214	$	303	$	252,763	$	253,066
Land, land development and construction - real estate		131		-		223		354		33,984		34,338
Commercial and industrial		2,391		279		209		2,879		402,287		405,166
Mortgage
1-4 family		1,877		1,638		5,952		9,467		269,719		279,186
Resort lending		226		-		2,168		2,394		126,342		128,736
Home equity - 1st lien		39		50		331		420		19,782		20,202
Home equity - 2nd lien		711		89		605		1,405		45,269		46,674
Installment
Home equity - 1st lien		466		37		576		1,079		20,995		22,074
Home equity - 2nd lien		369		81		517		967		28,125		29,092
Loans not secured by real estate		589		231		454		1,274		152,115		153,389
Other		15		3		48		66		2,426		2,492
Payment plan receivables
Full refund		838		214		2		1,054		26,799		27,853
Partial refund		409		123		12		544		6,550		7,094
Other		96		24		-		120		4,934		5,054
Total recorded investment	$	8,246	$	2,769	$	11,311	$	22,326	$	1,392,090	$	1,414,416
Accrued interest included in recorded investment	$	55	$	29	$	-	$	84	$	4,370	$	4,454

Impaired loans

Impaired loans are as follows :

	September 30, 2015		December 31, 2014
Impaired loans with no allocated allowance	(In thousands)
TDR	$	6,416	$	9,325
Non - TDR		204		299
Impaired loans with an allocated allowance
TDR - allowance based on collateral		3,970		5,879
TDR - allowance based on present value cash flow		86,985		94,970
Non - TDR - allowance based on collateral		6,281		2,296
Non - TDR - allowance based on present value cash flow		-		-
Total impaired loans	$	103,856	$	112,769
Amount of allowance for loan losses allocated
TDR - allowance based on collateral	$	1,575	$	2,025
TDR - allowance based on present value cash flow		8,952		10,188
Non - TDR - allowance based on collateral		2,249		1,020
Non - TDR - allowance based on present value cash flow		-		-
Total amount of allowance for loan losses allocated	$	12,776	$	13,233

Impaired loans by class  are as follows (1):

	September 30, 2015						December 31, 2014
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:	(In thousands)
Commercial
Income producing - real estate	$	4,778	$	4,977	$	-	$	5,868	$	6,077	$	-
Land, land development & construction-real estate		851		1,425		-		1,051		1,606		-
Commercial and industrial		985		982		-		2,685		2,667		-
Mortgage
1-4 family		23		166		-		-		49		-
Resort lending		-		-		-		48		397		-
Home equity - 1st lien		-		-		-		-		-		-
Home equity - 2nd lien		-		-		-		-		-		-
Installment
Home equity - 1st lien		-		36		-		-		40		-
Home equity - 2nd lien		-		-		-		-		-		-
Loans not secured by real estate		-		-		-		-		-		-
Other		-		-		-		-		-		-
		6,637		7,586		-		9,652		10,836		-
With an allowance recorded:
Commercial
Income producing - real estate		16,414		17,414		1,357		12,836		13,797		689
Land, land development & construction-real estate		2,061		2,140		421		3,456		3,528		499
Commercial and industrial		5,239		5,549		2,270		8,251		8,486		2,006
Mortgage
1-4 family		49,245		51,392		5,437		53,206		56,063		6,195
Resort lending		18,328		18,591		2,786		18,799		18,963		3,075
Home equity - 1st lien		155		172		11		162		177		14
Home equity - 2nd lien		120		201		10		125		205		27
Installment
Home equity - 1st lien		2,434		2,610		145		2,744		2,930		219
Home equity - 2nd lien		2,931		2,942		285		3,212		3,215		419
Loans not secured by real estate		631		689		53		711		835		89
Other		9		9		1		12		12		1
		97,567		101,709		12,776		103,514		108,211		13,233
Total
Commercial
Income producing - real estate		21,192		22,391		1,357		18,704		19,874		689
Land, land development & construction-real estate		2,912		3,565		421		4,507		5,134		499
Commercial and industrial		6,224		6,531		2,270		10,936		11,153		2,006
Mortgage
1-4 family		49,268		51,558		5,437		53,206		56,112		6,195
Resort lending		18,328		18,591		2,786		18,847		19,360		3,075
Home equity - 1st lien		155		172		11		162		177		14
Home equity - 2nd lien		120		201		10		125		205		27
Installment
Home equity - 1st lien		2,434		2,646		145		2,744		2,970		219
Home equity - 2nd lien		2,931		2,942		285		3,212		3,215		419
Loans not secured by real estate		631		689		53		711		835		89
Other		9		9		1		12		12		1
Total	$	104,204	$	109,295	$	12,776	$	113,166	$	119,047	$	13,233
Accrued interest included in recorded investment	$	348					$	397

(1) There were no impaired payment plan receivables at September 30, 2015 or December 31, 2014.

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 (1):

	2015				2014
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:	(In thousands)
Commercial
Income producing - real estate	$	5,133	$	45	$	8,255	$	103
Land, land development & construction-real estate		932		14		859		15
Commercial and industrial		1,922		68		3,397		63
Mortgage
1-4 family		24		3		66		-
Resort lending		-		-		42		1
Home equity - 1st lien		-		-		-		-
Home equity - 2nd lien		-		-		-		-
Installment
Home equity - 1st lien		-		-		-		-
Home equity - 2nd lien		-		-		-		-
Loans not secured by real estate		-		-		-		-
Other		-		-		-		-
		8,011		130		12,619		182
With an allowance recorded:
Commercial
Income producing - real estate		14,655		154		11,486		136
Land, land development & construction-real estate		1,993		2		4,092		38
Commercial and industrial		6,431		37		7,936		51
Mortgage
1-4 family		49,706		554		55,633		558
Resort lending		18,414		163		19,351		195
Home equity - 1st lien		157		2		165		2
Home equity - 2nd lien		185		-		39		-
Installment
Home equity - 1st lien		2,474		47		2,801		43
Home equity - 2nd lien		2,999		47		3,375		46
Loans not secured by real estate		645		10		699		9
Other		10		-		14		-
		97,669		1,016		105,591		1,078
Total
Commercial
Income producing - real estate		19,788		199		19,741		239
Land, land development & construction-real estate		2,925		16		4,951		53
Commercial and industrial		8,353		105		11,333		114
Mortgage
1-4 family		49,730		557		55,699		558
Resort lending		18,414		163		19,393		196
Home equity - 1st lien		157		2		165		2
Home equity - 2nd lien		185		-		39		-
Installment
Home equity - 1st lien		2,474		47		2,801		43
Home equity - 2nd lien		2,999		47		3,375		46
Loans not secured by real estate		645		10		699		9
Other		10		-		14		-
Total	$	105,680	$	1,146	$	118,210	$	1,260

(1) There were no impaired payment plan receivables during the three month periods ended September 30, 2015 and 2014, respectively.

Average recorded investment in and interest income earned on impaired loans by class for the nine month periods ending September 30, follows (1):

	2015				2014
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:	(In thousands)
Commercial
Income producing - real estate	$	5,490	$	170	$	8,109	$	289
Land, land development & construction-real estate		986		57		1,168		43
Commercial and industrial		2,345		195		3,517		129
Mortgage
1-4 family		18		5		37		-
Resort lending		15		-		38		1
Home equity line of credit - 1st lien		-		-		-		-
Home equity line of credit - 2nd lien		-		-		-		-
Installment
Home equity installment - 1st lien		-		1		-		1
Home equity installment - 2nd lien		-		-		-		-
Loans not secured by real estate		-		-		-		-
Other		-		-		-		-
		8,854		428		12,869		463
With an allowance recorded:
Commercial
Income producing - real estate		13,752		452		12,756		417
Land, land development & construction-real estate		2,351		35		4,059		120
Commercial and industrial		7,304		117		8,562		209
Mortgage
1-4 family		51,078		1,644		56,545		1,777
Resort lending		18,523		507		19,623		581
Home equity line of credit - 1st lien		159		6		159		5
Home equity line of credit - 2nd lien		154		6		40		1
Installment
Home equity installment - 1st lien		2,582		141		2,860		132
Home equity installment - 2nd lien		3,086		147		3,396		143
Loans not secured by real estate		669		29		721		26
Other		11		1		15		1
		99,669		3,085		108,736		3,412
Total
Commercial
Income producing - real estate		19,242		622		20,865		706
Land, land development & construction-real estate		3,337		92		5,227		163
Commercial and industrial		9,649		312		12,079		338
Mortgage
1-4 family		51,096		1,649		56,582		1,777
Resort lending		18,538		507		19,661		582
Home equity line of credit - 1st lien		159		6		159		5
Home equity line of credit - 2nd lien		154		6		40		1
Installment
Home equity installment - 1st lien		2,582		142		2,860		133
Home equity installment - 2nd lien		3,086		147		3,396		143
Loans not secured by real estate		669		29		721		26
Other		11		1		15		1
Total	$	108,523	$	3,513	$	121,605	$	3,875

(1) There were no impaired payment plan receivables during the nine month periods ended September 30, 2015 and 2014, respectively.

Troubled debt restructurings

Troubled debt restructurings follow:

	September 30, 2015
	Commercial		Retail			Total
	(In thousands)
Performing TDRs	$	22,257	$	69,726		$	91,983
Non-performing TDRs(1)		1,501		3,887	(2)		5,388
Total	$	23,758	$	73,613		$	97,371
	December 31, 2014
	Commercial		Retail			Total
	(In thousands)
Performing TDRs	$	29,475	$	73,496		$	102,971
Non-performing TDRs(1)		1,978		5,225	(2)		7,203
Total	$	31,453	$	78,721		$	110,174

(1) Included in non-performing loans table above.

(2) 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 troubled debt restructurings during the three-month periods endedSeptember 30 follow:

	Number of Contracts		Pre-modification Recorded Balance		Post-modification Recorded Balance
	(Dollars in thousands)
2015
Commercial
Income producing - real estate		-	$	-	$	-
Land, land development & construction-real estate		-		-		-
Commercial and industrial		1		48		26
Mortgage
1-4 family		3		343		344
Resort lending		-		-		-
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		-		-		-
Loans not secured by real estate		1		19		19
Other		-		-		-
Total		5	$	410	$	389
2014
Commercial
Income producing - real estate		-	$	-	$	-
Land, land development & construction-real estate		1		40		36
Commercial and industrial		5		716		693
Mortgage
1-4 family		1		87		87
Resort lending		1		378		367
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		3		118		96
Home equity - 2nd lien		-		-		-
Loans not secured by real estate		1		55		53
Other		-		-		-
Total		12	$	1,394	$	1,332

Loans that have been classified as troubled debt restructurings during the nine-month periods endedSeptember 30 follow:

	Number of Contracts		Pre-modification Recorded Balance		Post-modification Recorded Balance
	(Dollars in thousands)
2015
Commercial
Income producing - real estate		2	$	229	$	234
Land, land development & construction-real estate		-		-		-
Commercial and industrial		4		301		273
Mortgage
1-4 family		9		1,373		1,189
Resort lending		1		313		309
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		5		190		164
Home equity - 2nd lien		3		58		58
Loans not secured by real estate		2		19		25
Other		-		-		-
Total		26	$	2,483	$	2,252
2014
Commercial
Income producing - real estate		3	$	354	$	326
Land, land development & construction-real estate		2		55		50
Commercial and industrial		11		2,083		1,524
Mortgage
1-4 family		8		1,037		1,049
Resort lending		4		1,011		997
Home equity - 1st lien		1		17		13
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		8		538		465
Home equity - 2nd lien		5		294		284
Loans not secured by real estate		3		88		80
Other		-		-		-
Total		45	$	5,477	$	4,788

Troubled debt restructuring during the past twelve months that subsequently defaulted

Loans that have been classified as troubled debt restructurings during the past twelve months and thathave subsequently defaulted during the three-month periods ended September 30 follow:

	Number of Contracts		Recorded Balance
	(Dollars in thousands)
2015
Commercial
Income producing - real estate		-	$	-
Land, land development & construction-real estate		-		-
Commercial and industrial		-		-
Mortgage
1-4 family		1		54
Resort lending		-		-
Home equity - 1st lien		-		-
Home equity - 2nd lien		-		-
Installment
Home equity - 1st lien		-		-
Home equity - 2nd lien		-		-
Loans not secured by real estate		-		-
Other		-		-
		1	$	54
2014
Commercial
Income producing - real estate		-	$	-
Land, land development & construction-real estate		-		-
Commercial and industrial		1		66
Mortgage
1-4 family		1		125
Resort lending		-		-
Home equity - 1st lien		-		-
Home equity - 2nd lien		-		-
Installment
Home equity - 1st lien		-		-
Home equity - 2nd lien		-		-
Loans not secured by real estate		-		-
Other		-		-
		2	$	191

Loans that have been classified as troubled debt restructurings during the past twelve months and thathave subsequently defaulted during the nine-month periods ended September 30 follow:

	Number of Contracts		Recorded Balance
	(Dollars in thousands)
2015
Commercial
Income producing - real estate		-	$	-
Land, land development & construction-real estate		-		-
Commercial and industrial		2		157
Mortgage
1-4 family		1		54
Resort lending		-		-
Home equity - 1st lien		-		-
Home equity - 2nd lien		-		-
Installment
Home equity - 1st lien		-		-
Home equity - 2nd lien		-		-
Loans not secured by real estate		1		4
Other		-		-
		4	$	215
2014
Commercial
Income producing - real estate		-	$	-
Land, land development & construction-real estate		-		-
Commercial and industrial		2		319
Mortgage
1-4 family		1		125
Resort lending		-		-
Home equity - 1st lien		-		-
Home equity - 2nd lien		-		-
Installment
Home equity - 1st lien		-		-
Home equity - 2nd lien		-		-
Loans not secured by real estate		-		-
Other		-		-
		3	$	444

Summary of loan ratings by loan class

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

	Commercial
		Non-watch 1-6		Watch 7-8		Substandard Accrual 9		Non- Accrual 10-11	Total
					(In thousands)
September 30, 2015
Income producing - real estate	$	261,676	$	7,013	$	1,126	$	5,135	$	274,950
Land, land development and construction - real estate		38,135		3,307		247		533		42,222
Commercial and industrial		371,193		29,285		7,888		2,318		410,684
Total	$	671,004	$	39,605	$	9,261	$	7,986	$	727,856
Accrued interest included in total	$	1,304	$	189	$	7	$	-	$	1,500
December 31, 2014
Income producing - real estate	$	241,266	$	8,649	$	1,918	$	1,233	$	253,066
Land, land development and construction - real estate		30,869		2,485		390		594		34,338
Commercial and industrial		372,947		23,475		5,998		2,746		405,166
Total	$	645,082	$	34,609	$	8,306	$	4,573	$	692,570
Accrued interest included in total	$	1,479	$	111	$	25	$	-	$	1,615

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

	Mortgage (1)
	1-4 Family		Resort Lending		Home Equity 1st Lien		Home Equity 2nd Lien		Total
	(In thousands)
September 30, 2015
800 and above	$	27,538	$	12,627	$	4,859	$	6,717	$	51,741
750-799		77,238		42,522		6,280		16,387		142,427
700-749		50,309		33,785		4,076		11,985		100,155
650-699		52,898		16,771		3,565		8,022		81,256
600-649		28,698		5,666		1,872		3,639		39,875
550-599		16,809		2,546		647		1,957		21,959
500-549		13,983		1,253		758		1,089		17,083
Under 500		4,098		992		210		404		5,704
Unknown		7,829		2,126		238		412		10,605
Total	$	279,400	$	118,288	$	22,505	$	50,612	$	470,805
Accrued interest included in total	$	1,427	$	508	$	92	$	200	$	2,227
December 31, 2014
800 and above	$	27,918	$	14,484	$	3,863	$	6,225	$	52,490
750-799		72,674		45,950		6,128		14,323		139,075
700-749		52,843		32,660		3,054		9,642		98,199
650-699		51,664		20,250		3,257		8,194		83,365
600-649		27,770		6,538		1,704		3,862		39,874
550-599		21,361		3,639		994		1,721		27,715
500-549		14,575		2,156		699		1,401		18,831
Under 500		6,306		875		261		632		8,074
Unknown		4,075		2,184		242		674		7,175
Total	$	279,186	$	128,736	$	20,202	$	46,674	$	474,798
Accrued interest included in total	$	1,311	$	562	$	88	$	209	$	2,170

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

	Installment (1)
	Home Equity 1st Lien		Home Equity 2nd Lien		Loans not Secured by Real Estate		Other		Total
	(In thousands)
September 30, 2015
800 and above	$	1,953	$	1,840	$	40,348	$	59	$	44,200
750-799		4,411		6,624		89,310		568		100,913
700-749		2,685		4,667		38,237		617		46,206
650-699		3,783		4,138		15,224		479		23,624
600-649		2,161		2,254		4,758		260		9,433
550-599		1,919		1,547		2,080		124		5,670
500-549		760		851		976		50		2,637
Under 500		744		280		461		11		1,496
Unknown		64		104		1,963		5		2,136
Total	$	18,480	$	22,305	$	193,357	$	2,173	$	236,315
Accrued interest included in total	$	70	$	82	$	519	$	17	$	688
December 31, 2014
800 and above	$	2,272	$	2,835	$	31,507	$	60	$	36,674
750-799		5,677		8,557		66,558		583		81,375
700-749		3,111		6,358		28,179		689		38,337
650-699		3,963		5,477		16,152		615		26,207
600-649		3,434		2,408		5,128		255		11,225
550-599		2,019		1,913		1,896		134		5,962
500-549		1,128		1,036		1,672		84		3,920
Under 500		393		427		455		28		1,303
Unknown		77		81		1,842		44		2,044
Total	$	22,074	$	29,092	$	153,389	$	2,492	$	207,047
Accrued interest included in total	$	93	$	112	$	445	$	19	$	669

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

The following table summarizes credit ratings of insurer or risk retention group counterparties by class of payment plan receivable:

	Payment Plan Receivables
	Full Refund		Partial Refund		Other		Total
	(In thousands)
September 30, 2015
AM Best rating
A+	$	-	$	8	$	-	$	8
A		3,711		7,572		-		11,283
A-		3,226		753		5,470		9,449
Not rated		16,595		95		8		16,698
Total	$	23,532	$	8,428	$	5,478	$	37,438
December 31, 2014
AM Best rating
A+	$	-	$	43	$	-	$	43
A		10,007		6,190		-		16,197
A-		1,989		685		5,054		7,728
Not rated		15,857		176		-		16,033
Total	$	27,853	$	7,094	$	5,054	$	40,001

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Fair Value Disclosures, Part 2 (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Impairment charges recognized [Abstract]
Capitalized mortgage loan servicing rights, carrying amount	$ 7,900		$ 7,900		$ 9,200
Capitalized mortgage loan servicing rights, valuation allowance	4,100		4,100		3,800
Capitalized mortgage loan servicing rights, recovery (charges)	(900)	$ 500	(300)	$ 40
Collateral dependent loans, carrying amount	10,300		10,300		8,200
Collateral dependent loans, valuation allowance	3,800		3,800		3,100
Additional provision for loan losses on impaired loans	1,000	500	1,900	1,400
Other real estate, carrying amount	1,000		1,000		1,900
Other real estate, valuation allowance	1,700		1,700		$ 2,500
Other real estate, additional charge	$ 30	$ 300	300	400
Trading Securities [Member]
Changes in fair value for financial assets [Abstract]
Net Gains (Losses) on Assets			22	32
Total Change in Fair Values Included in Current Period Earnings			22	32
Loans Held For Sale [Member]
Changes in fair value for financial assets [Abstract]
Net Gains (Losses) on Assets			311	127
Total Change in Fair Values Included in Current Period Earnings			$ 311	$ 127

XML

Shareholders' Equity and Earnings Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands			3 Months Ended		9 Months Ended
		Nov. 15, 2011	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Jan. 21, 2015
Class of Stock [Line Items]
Stock repurchased					$ 9,025	$ 0
Shareholders with certain limited exceptions		5.00%
Number of Series C Junior participating preferred stock purchase by each right		1/1000
Beneficial ownership level		4.99%
Discount to current market price of the common stock		50.00%
Earnings Per Share Reconciliation [Abstract]
Net income			$ 5,047	$ 4,929	$ 14,447	$ 14,119
Weighted average shares outstanding (in shares)	[1]		22,673,000	22,940,000	22,852,000	22,919,000
Restricted stock units (in shares)			230,000	306,000	283,000	305,000
Effect of stock options (in shares)			118,000	123,000	120,000	126,000
Stock units for deferred compensation plan for non-employee directors (in shares)			112,000	109,000	111,000	114,000
Weighted average shares outstanding for calculation of diluted earnings per share (in shares)			23,133,000	23,478,000	23,366,000	23,464,000
Net income per common share [Abstract]
Basic (in dollars per share)	[1]		$ 0.22	$ 0.21	$ 0.63	$ 0.62
Diluted (in dollars per share)			$ 0.22	$ 0.21	$ 0.62	$ 0.60
Common Stock [Member]
Class of Stock [Line Items]
Stock repurchase program percentage of shares authorized to be repurchased							5.00%
Stock repurchased (in shares)					659,162
Stock repurchased					$ 9,000
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive shares excluded from computation of diluted loss per share (in shares)			30,000	30,000	30,000	30,000

[1] Basic net income per common share includes weighted average common shares outstanding during the period and participating share awards.

XML

Loans, Receivables Past Due (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Aging analysis of loans by class [Abstract]
Total Loans	$ 1,467,999	$ 1,409,962
Total Recorded Investment [Member]
Non performing loans [Abstract]
90+ and Still Accruing	0	7
Non-Accrual	15,834	15,231
Total Non-performing Loans	15,834	15,238
Aging analysis of loans by class [Abstract]
Total	19,018	22,326
Loans not Past Due	1,453,396	1,392,090
Total Loans	1,472,414	1,414,416
Total Recorded Investment [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total	8,032	8,246
Total Recorded Investment [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total	1,906	2,769
Total Recorded Investment [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total	9,080	11,311
Accrued Interest Included in Recorded Investment [Member]
Non performing loans [Abstract]
90+ and Still Accruing	0	0
Non-Accrual	0	0
Total Non-performing Loans	0	0
Aging analysis of loans by class [Abstract]
Total	131	84
Loans not Past Due	4,284	4,370
Total Loans	4,415	4,454
Accrued Interest Included in Recorded Investment [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total	113	55
Accrued Interest Included in Recorded Investment [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total	18	29
Accrued Interest Included in Recorded Investment [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total	0	0
Commercial [Member]
Aging analysis of loans by class [Abstract]
Total Loans	726,356	690,955
Commercial [Member] | Income Producing - Real Estate [Member]
Non performing loans [Abstract]
90+ and Still Accruing	0	0
Non-Accrual	5,135	1,233
Total Non-performing Loans	5,135	1,233
Aging analysis of loans by class [Abstract]
Total	843	303
Loans not Past Due	274,107	252,763
Total Loans	274,950	253,066
Commercial [Member] | Income Producing - Real Estate [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total	183	89
Commercial [Member] | Income Producing - Real Estate [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total	0	0
Commercial [Member] | Income Producing - Real Estate [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total	660	214
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member]
Non performing loans [Abstract]
90+ and Still Accruing	0	0
Non-Accrual	533	594
Total Non-performing Loans	533	594
Aging analysis of loans by class [Abstract]
Total	323	354
Loans not Past Due	41,899	33,984
Total Loans	42,222	34,338
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total	0	131
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total	119	0
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total	204	223
Commercial [Member] | Commercial and Industrial [Member]
Non performing loans [Abstract]
90+ and Still Accruing	0	0
Non-Accrual	2,318	2,746
Total Non-performing Loans	2,318	2,746
Aging analysis of loans by class [Abstract]
Total	3,003	2,879
Loans not Past Due	407,681	402,287
Total Loans	410,684	405,166
Commercial [Member] | Commercial and Industrial [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total	2,315	2,391
Commercial [Member] | Commercial and Industrial [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total	320	279
Commercial [Member] | Commercial and Industrial [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total	368	209
Mortgage [Member]
Aging analysis of loans by class [Abstract]
Total Loans	468,578	472,628
Mortgage [Member] | 1-4 Family [Member]
Non performing loans [Abstract]
90+ and Still Accruing	0	7
Non-Accrual	5,095	5,945
Total Non-performing Loans	5,095	5,952
Aging analysis of loans by class [Abstract]
Total	8,270	9,467
Loans not Past Due	271,130	269,719
Total Loans	279,400	279,186
Mortgage [Member] | 1-4 Family [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total	2,513	1,877
Mortgage [Member] | 1-4 Family [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total	662	1,638
Mortgage [Member] | 1-4 Family [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total	5,095	5,952
Mortgage [Member] | Resort Lending [Member]
Non performing loans [Abstract]
90+ and Still Accruing	0	0
Non-Accrual	1,301	2,168
Total Non-performing Loans	1,301	2,168
Aging analysis of loans by class [Abstract]
Total	1,760	2,394
Loans not Past Due	116,528	126,342
Total Loans	118,288	128,736
Mortgage [Member] | Resort Lending [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total	309	226
Mortgage [Member] | Resort Lending [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total	150	0
Mortgage [Member] | Resort Lending [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total	1,301	2,168
Mortgage [Member] | Home Equity - 1st Lien [Member]
Non performing loans [Abstract]
90+ and Still Accruing	0	0
Non-Accrual	191	331
Total Non-performing Loans	191	331
Aging analysis of loans by class [Abstract]
Total	253	420
Loans not Past Due	22,252	19,782
Total Loans	22,505	20,202
Mortgage [Member] | Home Equity - 1st Lien [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total	39	39
Mortgage [Member] | Home Equity - 1st Lien [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total	23	50
Mortgage [Member] | Home Equity - 1st Lien [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total	191	331
Mortgage [Member] | Home Equity - 2nd Lien [Member]
Non performing loans [Abstract]
90+ and Still Accruing	0	0
Non-Accrual	189	605
Total Non-performing Loans	189	605
Aging analysis of loans by class [Abstract]
Total	520	1,405
Loans not Past Due	50,092	45,269
Total Loans	50,612	46,674
Mortgage [Member] | Home Equity - 2nd Lien [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total	331	711
Mortgage [Member] | Home Equity - 2nd Lien [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total	0	89
Mortgage [Member] | Home Equity - 2nd Lien [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total	189	605
Installment [Member]
Aging analysis of loans by class [Abstract]
Total Loans	235,627	206,378
Installment [Member] | Home Equity - 1st Lien [Member]
Non performing loans [Abstract]
90+ and Still Accruing	0	0
Non-Accrual	175	576
Total Non-performing Loans	175	576
Aging analysis of loans by class [Abstract]
Total	526	1,079
Loans not Past Due	17,954	20,995
Total Loans	18,480	22,074
Installment [Member] | Home Equity - 1st Lien [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total	286	466
Installment [Member] | Home Equity - 1st Lien [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total	65	37
Installment [Member] | Home Equity - 1st Lien [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total	175	576
Installment [Member] | Home Equity - 2nd Lien [Member]
Non performing loans [Abstract]
90+ and Still Accruing	0	0
Non-Accrual	445	517
Total Non-performing Loans	445	517
Aging analysis of loans by class [Abstract]
Total	689	967
Loans not Past Due	21,616	28,125
Total Loans	22,305	29,092
Installment [Member] | Home Equity - 2nd Lien [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total	191	369
Installment [Member] | Home Equity - 2nd Lien [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total	53	81
Installment [Member] | Home Equity - 2nd Lien [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total	445	517
Installment [Member] | Loans Not Secured By Real Estate [Member]
Non performing loans [Abstract]
90+ and Still Accruing	0	0
Non-Accrual	430	454
Total Non-performing Loans	430	454
Aging analysis of loans by class [Abstract]
Total	1,036	1,274
Loans not Past Due	192,321	152,115
Total Loans	193,357	153,389
Installment [Member] | Loans Not Secured By Real Estate [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total	474	589
Installment [Member] | Loans Not Secured By Real Estate [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total	132	231
Installment [Member] | Loans Not Secured By Real Estate [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total	430	454
Installment [Member] | Other [Member]
Non performing loans [Abstract]
90+ and Still Accruing	0	0
Non-Accrual	2	48
Total Non-performing Loans	2	48
Aging analysis of loans by class [Abstract]
Total	10	66
Loans not Past Due	2,163	2,426
Total Loans	2,173	2,492
Installment [Member] | Other [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total	6	15
Installment [Member] | Other [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total	2	3
Installment [Member] | Other [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total	2	48
Payment Plan Receivables [Member]
Aging analysis of loans by class [Abstract]
Total Loans	37,438	40,001
Payment Plan Receivables [Member] | Other [Member]
Non performing loans [Abstract]
90+ and Still Accruing	0	0
Non-Accrual	4	0
Total Non-performing Loans	4	0
Aging analysis of loans by class [Abstract]
Total	132	120
Loans not Past Due	5,346	4,934
Total Loans	5,478	5,054
Payment Plan Receivables [Member] | Other [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total	112	96
Payment Plan Receivables [Member] | Other [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total	16	24
Payment Plan Receivables [Member] | Other [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total	4	0
Payment Plan Receivables [Member] | Full Refund [Member]
Non performing loans [Abstract]
90+ and Still Accruing	0	0
Non-Accrual	6	2
Total Non-performing Loans	6	2
Aging analysis of loans by class [Abstract]
Total	684	1,054
Loans not Past Due	22,848	26,799
Total Loans	23,532	27,853
Payment Plan Receivables [Member] | Full Refund [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total	563	838
Payment Plan Receivables [Member] | Full Refund [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total	115	214
Payment Plan Receivables [Member] | Full Refund [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total	6	2
Payment Plan Receivables [Member] | Partial Refund [Member]
Non performing loans [Abstract]
90+ and Still Accruing	0	0
Non-Accrual	10	12
Total Non-performing Loans	10	12
Aging analysis of loans by class [Abstract]
Total	969	544
Loans not Past Due	7,459	6,550
Total Loans	8,428	7,094
Payment Plan Receivables [Member] | Partial Refund [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total	710	409
Payment Plan Receivables [Member] | Partial Refund [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total	249	123
Payment Plan Receivables [Member] | Partial Refund [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total	$ 10	$ 12

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Fair Value Disclosures, Part 4 (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Fair value option - Loans held for sale [Abstract]
Loans held for sale	$ 25,462	$ 23,662
Difference	935	624
Aggregate Fair Value [Member]
Fair value option - Loans held for sale [Abstract]
Loans held for sale	25,462	23,662
Contractual Principal [Member]
Fair value option - Loans held for sale [Abstract]
Loans held for sale	$ 24,527	$ 23,038

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Income Tax (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Income Tax [Abstract]
Income tax expense	$ 2,278	$ 2,345	$ 6,682	$ 5,659
Gross unrecognized tax benefits	1,000		1,000		$ 1,100
Valuation Allowance [Line Items]
Valuation allowance	1,000		1,000		1,000
Mepco [Member]
Valuation Allowance [Line Items]
Valuation allowance against deferred tax assets attributable to Mepco	$ 1,000		$ 1,000		$ 1,000

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New Accounting Standards

9 Months Ended

Sep. 30, 2015

New Accounting Standards [Abstract]

New Accounting Standards

2. New Accounting Standards

In January 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-04, “Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure”. The amendments in this ASU clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. This amendment is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014, with early adoption and retrospective or prospective application permitted.  This amended guidance became effective for us on January 1, 2015, and did not have a material impact on our consolidated operating results or financial condition.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”. This ASU supersedes and replaces nearly all existing revenuerecognition guidance, including industry-specific guidance, establishes a new control-based revenue recognition model, changes the basis fordeciding when revenue is recognized over time or at a point in time, provides new and more detailed guidance on specific topics and expands and improvesdisclosures about revenue. In addition, this ASU specifies the accounting for some costs to obtain or fulfill a contract with a customer.  This amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption for fiscal years beginning after December 15, 2016, permitted. This amended guidance is not expected to have a material impact on our consolidated operating results or financial condition.

In June 2014, the FASB issued ASU 2014-12, “Compensation – Stock Compensation (Topic 718) – Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period”.  This ASU amends existing guidance related to the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. These amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition.  The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. This amended guidance is effective for us on January 1, 2016, and is not expected to have a material impact on our consolidated operating results or financial condition.

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Derivative Financial Instruments (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2015	Dec. 31, 2014
Derivative financial instrument according to type of hedge[ Abstract]
Notional Amount	$ 117,131	$ 61,959
Average Maturity	2 years 8 months 12 days	1 year 1 month 6 days
Fair Value	$ 414	$ 253
Fair value of derivative instruments, balance sheet location [Abstract]
Asset Derivatives	1,623	619
Liability Derivatives	1,209	366
No Hedge Designation [Member] | Rate-Lock Mortgage Loan Commitments [Member]
Derivative financial instrument according to type of hedge[ Abstract]
Notional Amount	$ 24,746	$ 16,759
Average Maturity	1 month 6 days	1 month 6 days
Fair Value	$ 823	$ 437
No Hedge Designation [Member] | Mandatory Commitments to Sell Mortgage Loans [Member]
Derivative financial instrument according to type of hedge[ Abstract]
Notional Amount	$ 49,791	$ 38,600
Average Maturity	1 month 6 days	1 month 6 days
Fair Value	$ (409)	$ (184)
No Hedge Designation [Member] | Purchased Options [Member]
Derivative financial instrument according to type of hedge[ Abstract]
Notional Amount	$ 1,681
Average Maturity	5 years 10 months 24 days
Fair Value	$ 126
No Hedge Designation [Member] | Written Options [Member]
Derivative financial instrument according to type of hedge[ Abstract]
Notional Amount	$ 1,681
Average Maturity	5 years 10 months 24 days
Fair Value	$ (126)
Fixed Income Interest Rate [Member] | No Hedge Designation [Member] | Interest Rate Swap [Member]
Derivative financial instrument according to type of hedge[ Abstract]
Notional Amount	$ 19,616	$ 3,300
Average Maturity	7 years 3 months 18 days	9 years 4 months 24 days
Fair Value	$ (674)	$ (182)
Variable Income Interest Rate [Member] | No Hedge Designation [Member] | Interest Rate Swap [Member]
Derivative financial instrument according to type of hedge[ Abstract]
Notional Amount	$ 19,616	$ 3,300
Average Maturity	7 years 3 months 18 days	9 years 4 months 24 days
Fair Value	$ 674	$ 182
Other Assets [Member] | No Hedge Designation [Member] | Rate-Lock Mortgage Loan Commitments [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Asset Derivatives	823	437
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
Other Assets [Member] | No Hedge Designation [Member] | Purchased Options [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Asset Derivatives	126	0
Other Assets [Member] | No Hedge Designation [Member] | Written Options [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Asset Derivatives	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
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	674	182
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
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	409	184
Other Liabilities [Member] | No Hedge Designation [Member] | Purchased Options [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Liability Derivatives	0	0
Other Liabilities [Member] | No Hedge Designation [Member] | Written Options [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Liability Derivatives	126	0
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	674	182
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

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Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2015

Intangible Assets [Abstract]

Other intangible assets, net of amortization

The following table summarizes intangible assets, net of amortization:

	September 30, 2015				December 31, 2014
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
	(In thousands)
Amortized intangible assets - core deposits	$	6,118	$	3,752	$	6,118	$	3,491

Estimated amortization of other intangible assets

Amortization of other intangibles has been estimated through 2020 and thereafter in the following table.

	(In thousands)
Three months ending December 31, 2015	$	86
2016		347
2017		346
2018		346
2019		346
2020 and thereafter		895
Total	$	2,366

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Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2015

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, 2015
	Notional Amount		Average Maturity (years)		Fair Value
	(Dollars in thousands)
No hedge designation
Rate-lock mortgage loan commitments	$	24,746		0.1	$	823
Mandatory commitments to sell mortgage loans		49,791		0.1		(409	)
Pay-fixed interest rate swap agreements		19,616		7.3		(674	)
Pay-variable interest rate swap agreements		19,616		7.3		674
Purchased options		1,681		5.9		126
Written options		1,681		5.9		(126	)
Total	$	117,131		2.7	$	414
	December 31, 2014
	Notional Amount		Average Maturity (years)		Fair Value
	(Dollars in thousands)
No hedge designation
Rate-lock mortgage loan commitments	$	16,759		0.1	$	437
Mandatory commitments to sell mortgage loans		38,600		0.1		(184	)
Pay-fixed interest rate swap agreements		3,300		9.4		(182	)
Pay-variable interest rate swap agreements		3,300		9.4		182
Total	$	61,959		1.1	$	253

Fair value of derivative instruments

Fair Values of Derivative Instruments

	Asset Derivatives						Liability Derivatives
	September 30, 2015			December 31, 2014			September 30, 2015			December 31, 2014
	Balance  Sheet  Location	Fair Value		Balance  Sheet  Location	Fair Value		Balance  Sheet  Location	Fair Value		Balance  Sheet  Location	Fair Value
	(In thousands)
Derivatives not designated as hedging instruments
Rate-lock mortgage loan commitments	Other assets	$	823	Other assets	$	437	Other liabilities	$	-	Other liabilities	$	-
Mandatory commitments to sell mortgage loans	Other assets		-	Other assets		-	Other liabilities		409	Other liabilities		184
Pay-fixed interest rate swap agreements	Other assets		-	Other assets		-	Other liabilities		674	Other liabilities		182
Pay-variable interest rate swap agreements	Other assets		674	Other assets		182	Other liabilities		-	Other liabilities		-
Purchased options	Other assets		126	Other assets		-	Other liabilities		-	Other liabilities		-
Written options	Other assets		-	Other assets		-	Other liabilities		126	Other liabilities		-
Total derivatives		$	1,623		$	619		$	1,209		$	366

Effect of derivative financial instruments on condensed consolidated statement of operation

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

Three Month Periods Ended September 30,
	Gain (Loss) Recognized in Other Comprehensive Income (Effective Portion)				Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective	Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)					Location of Gain (Loss) Recognized	Gain (Loss) Recognized in Income
	2015		2014		Portion)	2015		2014			in Income (1)	2015			2014
	(In thousands)
Cash Flow Hedges
Pay-fixed interest rate swap agreements (2)	$	-	$	-	Interest expense	$	-	$	(95	)		$	-		$	-
Total	$	-	$	-		$	-	$	(95	)		$	-		$	-
No hedge designation
Rate-lock mortgage loan commitments											Net mortgage loan gains	$	281		$	(77	)
Mandatory commitments to sell mortgage loans											Net mortgage loan gains		(745	)		220
Pay-fixed interest rate swap agreements											Interest income		(452	)		7
Pay-variable interest rate swap agreements											Interest income		452			(7	)
Purchased options											Interest expense		126			-
Written options											Interest expense		(126	)		-
U.S. Treasury short position											Gain on securities		-			127
Total												$	(464	)	$	270

(1) For cash flow hedges, this location and amount refers to the ineffective portion.

(2) Relates to a terminated pay-fixed interest rate swap whose termination fee was included in accumulated other comprehensive loss and was being amortized into earnings through December 31, 2014.

	Nine Month Periods Ended September 30,
	Gain (Loss) Recognized in Other Comprehensive Income (Effective Portion)				Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective	Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)					Location of Gain (Loss) Recognized	Gain (Loss) Recognized in Income
	2015		2014		Portion)	2015		2014			in Income (1)	2015			2014
	(In thousands)
Cash Flow Hedges
Pay-fixed interest rate swap agreements (2)	$	-	$	-	Interest expense	$	-	$	(285	)		$	-		$	-
Total	$	-	$	-		$	-	$	(285	)		$	-		$	-
No hedge designation
Rate-lock mortgage loan commitments											Net mortgage loan gains	$	386		$	147
Mandatory commitments to sell mortgage loans											Net mortgage loan gains		(225	)		(134	)
Pay-fixed interest rate swap agreements											Interest income		(492	)		(92	)
Pay-variable interest rate swap agreements											Interest income		492			92
Purchased options											Interest expense		126			-
Written options											Interest expense		(126	)		-
U.S. Treasury short position											Gain on securities		-			179
Total												$	161		$	192

(1) For cash flow hedges, this location and amount refers to the ineffective portion.

(2) Relates to a terminated pay-fixed interest rate swap whose termination fee was included in accumulated other comprehensive loss and was being amortized into earnings through December 31, 2014.

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Derivative Financial Instruments, Effect on Statement of Operations (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Cash Flow Hedge [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	$ 0	$ 0	$ 0
Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)		0	(95)	0	(285)
Gain (Loss) Recognized in Income	[1]	0	0	0	0
Cash Flow Hedge [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)	[2]	0	0	0	0
Gain (Loss) Recognized in Income	[1],[2]	0	0	0	0
Cash Flow Hedge [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 Loss into Income (Effective Portion)	[2]	0	(95)	0	(285)
No Hedge Designation [Member]
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]
Gain (Loss) Recognized in Income	[1]	(464)	270	161	192
No Hedge Designation [Member] | Rate-Lock Mortgage Loan Commitments [Member] | Net Mortgage Loan Gains [Member]
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]
Gain (Loss) Recognized in Income	[1]	281	(77)	386	147
No Hedge Designation [Member] | Mandatory Commitments to Sell Mortgage Loans [Member] | Net Mortgage Loan Gains [Member]
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]
Gain (Loss) Recognized in Income	[1]	(745)	220	(225)	(134)
No Hedge Designation [Member] | U.S. Treasury Short Position [Member] | Gain on Securities [Member]
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]
Gain (Loss) Recognized in Income	[1]	0	127	0	179
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	[1]	126	0	126	0
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	[1]	(126)	0	(126)	0
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	[1]	(452)	7	(492)	(92)
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	[1]	$ 452	$ (7)	$ 492	$ 92

[1] For cash flow hedges, this location and amount refers to the ineffective portion.

[2] Relates to a terminated pay-fixed interest rate swap whose termination fee was included in accumulated other comprehensive loss and was being amortized into earnings through December 31, 2014.

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Share Based Compensation (Tables)

9 Months Ended

Sep. 30, 2015

Share Based Compensation [Abstract]

Summary of 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, 2015		281,820		$	4.69
Granted		-
Exercised		(31,450	)		3.35
Forfeited		(2,096	)		4.77
Expired		(1,924	)		6.79
Outstanding at September 30, 2015		246,350		$	4.85		6.35	$	2,472
Vested and expected to vest at
September 30, 2015		245,298		$	4.84		6.35	$	2,463
Exercisable at September 30, 2015		222,742		$	4.70		6.22	$	2,271

Summary of non-vested restricted stock, restricted stock units and PSU's

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

	Number of Shares			Weighted- Average Grant Date Fair Value
Outstanding at January 1, 2015		407,130		$	6.31
Granted		108,422			13.06
Vested		(249,526	)		3.92
Forfeited		(4,384	)		12.88
Outstanding at September 30, 2015		261,642		$	11.28

Information regarding options exercised

Certain information regarding options exercised during the periods follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(In thousands)
Intrinsic value	$	71	$	123	$	314	$	231
Cash proceeds received	$	23	$	30	$	105	$	66
Tax benefit realized	$	25	$	44	$	110	$	81

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Regulatory Matters (Tables)

9 Months Ended

Sep. 30, 2015

Regulatory Matters [Abstract]

Actual capital amounts and ratios

Our actual capital amounts and ratios follow:

	Actual					Minimum for Adequately Capitalized Institutions					Minimum for Well-Capitalized Institutions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
September 30, 2015
Total capital to risk-weighted assets
Consolidated	$	276,230		16.98	%	$	130,163		8.00	%	NA		NA
Independent Bank		253,647		15.61			130,004		8.00		$	162,506		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	255,613		15.71	%	$	97,622		6.00	%	NA		NA
Independent Bank		233,123		14.35			97,503		6.00		$	130,005		8.00	%
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	238,884		14.68	%	$	73,216		4.50	%	NA		NA
Independent Bank		233,123		14.35			73,128		4.50		$	105,629		6.50	%
Tier 1 capital to average assets
Consolidated	$	255,613		11.16	%	$	91,582		4.00	%	NA		NA
Independent Bank		233,123		10.19			91,509		4.00		$	114,387		5.00	%
December 31, 2014
Total capital to risk-weighted assets
Consolidated	$	265,163		18.06	%	$	117,427		8.00	%	NA		NA
Independent Bank		247,883		16.90			117,374		8.00		$	146,718		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	246,628		16.80	%	$	58,714		4.00	%	NA		NA
Independent Bank		229,361		15.63			58,687		4.00		$	88,031		6.00	%
Tier 1 capital to average assets
Consolidated	$	246,628		11.18	%	$	88,206		4.00	%	NA		NA
Independent Bank		229,361		10.46			87,687		4.00		$	109,609		5.00	%

NA - Not applicable

Components of regulatory capital

The components of our regulatory capital are as follows:

	Consolidated						Independent Bank
	September 30, 2015			December 31, 2014			September 30, 2015			December 31, 2014
	(In thousands)
Total shareholders' equity	$	252,980		$	250,371		$	255,659		$	257,832
Add (deduct)
Accumulated other comprehensive (gain) loss for regulatory purposes		(1,302	)		5,636			(1,302	)		5,636
Intangible assets		(946	)		(2,627	)		(946	)		(2,627	)
Disallowed deferred tax assets		(11,848	)		(40,500	)		(20,288	)		(30,728	)
Disallowed capitalized mortgage loan servicing rights		-			(752	)		-			(752	)
Common equity tier 1 capital		238,884			212,128			233,123			229,361
Qualifying trust preferred securities		34,500			34,500			-			-
Disallowed deferred tax assets		(17,771	)		-			-			-
Tier 1 capital		255,613			246,628			233,123			229,361
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets		20,617			18,535			20,524			18,522
Total risk-based capital	$	276,230		$	265,163		$	253,647		$	247,883

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Preparation of Financial Statements

9 Months Ended

Sep. 30, 2015

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, 2014 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, 2015 and December 31, 2014, and the results of operations for the three and nine-month periods ended September 30, 2015 and 2014.  The results of operations for the three and nine-month periods ended September 30, 2015, are not necessarily indicative of the results to be expected for the full year.  Certain reclassifications have been made in the prior period financial statements to conform to the current period presentation.  Our critical accounting policies include the assessment for other than temporary impairment (“OTTI”) on investment securities,  the determination of the allowance for loan losses, the determination of vehicle service contract counterparty contingencies, the valuation of originated mortgage loan servicing rights and the valuation of deferred tax assets.  Refer to our 2014 Annual Report on Form 10-K for a disclosure of our accounting policies.

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Fair Value Disclosures (Tables)

9 Months Ended

Sep. 30, 2015

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, 2015:
Measured at Fair Value on a Recurring Basis:
Assets
Trading securities	$	225	$	225	$	-	$	-
Securities available for sale
U.S. agency		50,735		-		50,735		-
U.S. agency residential mortgage-backed		208,290		-		208,290		-
U.S. agency commercial mortgage-backed		35,338		-		35,338		-
Private label residential mortgage-backed		5,129		-		5,129		-
Other asset backed		131,772		-		131,772		-
Obligations of states and political subdivisions		136,732		-		136,732		-
Corporate		34,106		-		34,106		-
Trust preferred		2,560		-		2,560		-
Loans held for sale		25,462		-		25,462		-
Derivatives (1)		1,623		-		1,623		-
Liabilities
Derivatives (2)		1,209		-		1,209		-
Measured at Fair Value on a Non-recurring basis:
Assets
Capitalized mortgage loan servicing rights (3)		7,931		-		-		7,931
Impaired loans (4)
Commercial
Income producing - real estate		4,083		-		-		4,083
Land, land development & construction-real estate		203		-		-		203
Commercial and industrial		1,426		-		-		1,426
Mortgage
1-4 Family		577		-		-		577
Resort Lending		138		-		-		138
Other real estate (5)
Commercial
Land, land development & construction-real estate		639		-		-		639
Commercial and industrial		165		-		-		165
Mortgage
1-4 Family		51		-		-		51
Resort Lending		107		-		-		107
Installment
Home equity - 1st lien		36		-		-		36

(1) Included in accrued income and other assets

(2) Included in accrued expenses and other liabilities

(3) Only includes servicing rights that are carried at fair value due to recognition of a valuation allowance.

(4) Only includes impaired loans with specific loss allocations based on collateral value.

(5) Only includes other real estate with subsequent write downs to fair value.

			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, 2014:
Measured at Fair Value on a Recurring Basis:
Assets
Trading securities	$	203	$	203	$	-	$	-
Securities available for sale
U.S. agency		35,006		-		35,006		-
U.S. agency residential mortgage-backed		257,558		-		257,558		-
U.S. agency commercial mortgage-backed		33,728		-		33,728		-
Private label residential mortgage-backed		6,013		-		6,013		-
Other asset backed		32,353		-		32,353		-
Obligations of states and political subdivisions		143,415		-		143,415		-
Corporate		22,664		-		22,664		-
Trust preferred		2,441		-		2,441		-
Loans held for sale		23,662		-		23,662		-
Derivatives (1)		619		-		619		-
Liabilities
Derivatives (2)		366		-		366		-
Measured at Fair Value on a Non-recurring basis:
Assets
Capitalized mortgage loan servicing rights (3)		9,197		-		-		9,197
Impaired loans (4)
Commercial
Income producing - real estate		869		-		-		869
Land, land development & construction-real estate		354		-		-		354
Commercial and industrial		2,601		-		-		2,601
Mortgage
1-4 Family		1,306		-		-		1,306
Other real estate (5)
Commercial
Income producing - real estate		479		-		-		479
Land, land development & construction-real estate		737		-		-		737
Mortgage
1-4 Family		102		-		-		102
Resort Lending		575		-		-		575
Installment
Home equity - 1st lien		13		-		-		13

(1) Included in accrued income and other assets

(2) Included in accrued expenses and other liabilities

(3) Only includes servicing rights that are carried at fair value due to recognition of a valuation allowance.

(4) Only includes impaired loans with specific loss allocations based on collateral value.

(5) 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
		2015						2014
		Net Gains (Losses) on Assets				Total Change in Fair Values Included in Current Period		Net Gains (Losses) on Assets				Total Change in Fair Values Included in Current Period
		Securities		Loans		Earnings		Securities		Loans		Earnings
	(In thousands)
Trading securities		$	22	$	-	$	22	$	32	$	-	$	32
Loans held for sale			-		311		311		-		127		127

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

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

	Asset (Liability) Fair Value		Valuation Technique	Unobservable Inputs	Weighted Average
	(In thousands)
September 30, 2015
Capitalized mortgage loan servicing rights	$	7,931	Present value of net servicing revenue	Discount rate		10.03	%
				Cost to service	$	80
				Ancillary income		24
				Float rate		1.38	%
Impaired loans
Commercial (1)		5,309	Sales comparison approach	Adjustment for differences between comparable sales		(7.2	)%
			Income approach	Capitalization rate		9.3
Mortgage		715	Sales comparison approach	Adjustment for differences between comparable sales		4.1
Other real estate
Commercial		804	Sales comparison approach	Adjustment for differences between comparable sales		(3.9	)
Mortgage and installment		194	Sales comparison approach	Adjustment for differences between comparable sales		75.6
December 31, 2014
Capitalized mortgage loan servicing rights	$	9,197	Present value of net servicing revenue	Discount rate		10.07	%
				Cost to service	$	82
				Ancillary income		25
				Float rate		1.77	%
Impaired loans
Commercial (1)		2,751	Sales comparison approach	Adjustment for differences between comparable sales		(3.8	)%
			Income approach	Capitalization rate		9.3
Mortgage		1,306	Sales comparison approach	Adjustment for differences between comparable sales		8.6
Other real estate
Commercial		1,216	Sales comparison approach	Adjustment for differences between comparable sales		(9.0	)
Mortgage and installment		690	Sales comparison approach	Adjustment for differences between comparable sales		34.3

(1) In addition to the valuation techniques and unobservable inputs discussed above, at September 30, 2015 and December 31, 2014, we had an impaired collateral dependent commercial relationship that totaled $0.4 million and $1.1 million, respectively that was primarily secured by collateral other than real estate.  Collateral securing this relationship primarily included machinery and equipment and inventory at September 30, 2015 and also included accounts receivable at December 31, 2014.  Valuation techniques at September 30, 2015, included discounting restructuring firm valuations based on estimates of value recovery of each particular asset type.  Discount rates used ranged from 0% to 100% of stated values.  Valuation techniques at December 31, 2014, included discounting cost and financial statement value approaches based on estimates of value recovery of each particular asset type.  Discount rates used ranged from 35% to 100% of stated values.

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, 2015	$	25,462	$	935	$	24,527
December 31, 2014		23,662		624		23,038

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Loans, Loan Ratings by Loan Class, Commercial Segment (Details) - USD ($) $ in Thousands		Sep. 30, 2015	Dec. 31, 2014
Loan ratings/credit scores by loan class [Abstract]
Commercial		$ 726,356	$ 690,955
Accrued interest included in total		$ 4,415	4,454
Credit ratings of insurer or risk retention group counterparties [Abstract]
Subsidiary's outstanding payment plan insured by third party		62.90%
Subsidiary's outstanding payment plan 2, insured by third party		22.50%
Payment Plan Receivables, Full Refund		$ 23,532	27,853
Payment Plan Receivables, Partial Refund		8,428	7,094
Payment Plan Receivables, Other		5,478	5,054
Total		37,438	40,001
Other Real Estate and Foreclosed Assets [Abstract]
Foreclosed residential real estate properties		2,800	2,900
Retail mortgage loans in process of foreclosure		1,100	2,500
AM Best Rating A+ [Member]
Credit ratings of insurer or risk retention group counterparties [Abstract]
Payment Plan Receivables, Full Refund		0	0
Payment Plan Receivables, Partial Refund		8	43
Payment Plan Receivables, Other		0	0
Total		8	43
AM Best A Rating [Member]
Credit ratings of insurer or risk retention group counterparties [Abstract]
Payment Plan Receivables, Full Refund		3,711	10,007
Payment Plan Receivables, Partial Refund		7,572	6,190
Payment Plan Receivables, Other		0	0
Total		11,283	16,197
AM Best Rating, A- Rating [Member]
Credit ratings of insurer or risk retention group counterparties [Abstract]
Payment Plan Receivables, Full Refund		3,226	1,989
Payment Plan Receivables, Partial Refund		753	685
Payment Plan Receivables, Other		5,470	5,054
Total		9,449	7,728
Not Rated [Member]
Credit ratings of insurer or risk retention group counterparties [Abstract]
Payment Plan Receivables, Full Refund		16,595	15,857
Payment Plan Receivables, Partial Refund		95	176
Payment Plan Receivables, Other		8	0
Total		16,698	16,033
Commercial [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		727,856	692,570
Accrued interest included in total		1,500	1,615
Commercial [Member] | Non-Watch 1-6 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		671,004	645,082
Commercial [Member] | Watch 7-8 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		39,605	34,609
Commercial [Member] | Substandard Accrual 9 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		9,261	8,306
Commercial [Member] | Non Accrual 10-11 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		7,986	4,573
Commercial [Member] | Accrued Interest Included in Total [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		1,500	1,615
Commercial [Member] | Accrued Interest Included in Total [Member] | Non-Watch 1-6 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		1,304	1,479
Commercial [Member] | Accrued Interest Included in Total [Member] | Watch 7-8 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		189	111
Commercial [Member] | Accrued Interest Included in Total [Member] | Substandard Accrual 9 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		7	25
Commercial [Member] | Accrued Interest Included in Total [Member] | Non Accrual 10-11 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		0	0
Commercial [Member] | Income Producing - Real Estate [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		274,950	253,066
Commercial [Member] | Income Producing - Real Estate [Member] | Non-Watch 1-6 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		261,676	241,266
Commercial [Member] | Income Producing - Real Estate [Member] | Watch 7-8 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		7,013	8,649
Commercial [Member] | Income Producing - Real Estate [Member] | Substandard Accrual 9 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		1,126	1,918
Commercial [Member] | Income Producing - Real Estate [Member] | Non Accrual 10-11 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		5,135	1,233
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		42,222	34,338
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member] | Non-Watch 1-6 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		38,135	30,869
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member] | Watch 7-8 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		3,307	2,485
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member] | Substandard Accrual 9 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		247	390
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member] | Non Accrual 10-11 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		533	594
Commercial [Member] | Commercial and Industrial [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		410,684	405,166
Commercial [Member] | Commercial and Industrial [Member] | Non-Watch 1-6 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		371,193	372,947
Commercial [Member] | Commercial and Industrial [Member] | Watch 7-8 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		29,285	23,475
Commercial [Member] | Commercial and Industrial [Member] | Substandard Accrual 9 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		7,888	5,998
Commercial [Member] | Commercial and Industrial [Member] | Non Accrual 10-11 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		2,318	2,746
Mortgage [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	51,741	52,490
750-799	[1]	142,427	139,075
700-749	[1]	100,155	98,199
650-699	[1]	81,256	83,365
600-649	[1]	39,875	39,874
550-599	[1]	21,959	27,715
500-549	[1]	17,083	18,831
Under 500	[1]	5,704	8,074
Unknown	[1]	10,605	7,175
Total	[1]	470,805	474,798
Accrued interest included in total		2,227	2,170
Mortgage [Member] | Accrued Interest Included in Total [Member]
Loan ratings/credit scores by loan class [Abstract]
Accrued interest included in total	[1]	2,227	2,170
Mortgage [Member] | 1-4 Family [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	27,538	27,918
750-799	[1]	77,238	72,674
700-749	[1]	50,309	52,843
650-699	[1]	52,898	51,664
600-649	[1]	28,698	27,770
550-599	[1]	16,809	21,361
500-549	[1]	13,983	14,575
Under 500	[1]	4,098	6,306
Unknown	[1]	7,829	4,075
Total	[1]	279,400	279,186
Mortgage [Member] | 1-4 Family [Member] | Accrued Interest Included in Total [Member]
Loan ratings/credit scores by loan class [Abstract]
Accrued interest included in total	[1]	1,427	1,311
Mortgage [Member] | Resort Lending [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	12,627	14,484
750-799	[1]	42,522	45,950
700-749	[1]	33,785	32,660
650-699	[1]	16,771	20,250
600-649	[1]	5,666	6,538
550-599	[1]	2,546	3,639
500-549	[1]	1,253	2,156
Under 500	[1]	992	875
Unknown	[1]	2,126	2,184
Total	[1]	118,288	128,736
Mortgage [Member] | Resort Lending [Member] | Accrued Interest Included in Total [Member]
Loan ratings/credit scores by loan class [Abstract]
Accrued interest included in total	[1]	508	562
Mortgage [Member] | Home Equity - 1st Lien [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	4,859	3,863
750-799	[1]	6,280	6,128
700-749	[1]	4,076	3,054
650-699	[1]	3,565	3,257
600-649	[1]	1,872	1,704
550-599	[1]	647	994
500-549	[1]	758	699
Under 500	[1]	210	261
Unknown	[1]	238	242
Total	[1]	22,505	20,202
Mortgage [Member] | Home Equity - 1st Lien [Member] | Accrued Interest Included in Total [Member]
Loan ratings/credit scores by loan class [Abstract]
Accrued interest included in total	[1]	92	88
Mortgage [Member] | Home Equity - 2nd Lien [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	6,717	6,225
750-799	[1]	16,387	14,323
700-749	[1]	11,985	9,642
650-699	[1]	8,022	8,194
600-649	[1]	3,639	3,862
550-599	[1]	1,957	1,721
500-549	[1]	1,089	1,401
Under 500	[1]	404	632
Unknown	[1]	412	674
Total	[1]	50,612	46,674
Mortgage [Member] | Home Equity - 2nd Lien [Member] | Accrued Interest Included in Total [Member]
Loan ratings/credit scores by loan class [Abstract]
Accrued interest included in total	[1]	200	209
Installment [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	44,200	36,674
750-799	[1]	100,913	81,375
700-749	[1]	46,206	38,337
650-699	[1]	23,624	26,207
600-649	[1]	9,433	11,225
550-599	[1]	5,670	5,962
500-549	[1]	2,637	3,920
Under 500	[1]	1,496	1,303
Unknown	[1]	2,136	2,044
Total	[1]	236,315	207,047
Accrued interest included in total		688	669
Installment [Member] | Accrued Interest Included in Total [Member]
Loan ratings/credit scores by loan class [Abstract]
Accrued interest included in total	[1]	688	669
Installment [Member] | Home Equity - 1st Lien [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	1,953	2,272
750-799	[1]	4,411	5,677
700-749	[1]	2,685	3,111
650-699	[1]	3,783	3,963
600-649	[1]	2,161	3,434
550-599	[1]	1,919	2,019
500-549	[1]	760	1,128
Under 500	[1]	744	393
Unknown	[1]	64	77
Total	[1]	18,480	22,074
Installment [Member] | Home Equity - 1st Lien [Member] | Accrued Interest Included in Total [Member]
Loan ratings/credit scores by loan class [Abstract]
Accrued interest included in total	[1]	70	93
Installment [Member] | Home Equity - 2nd Lien [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	1,840	2,835
750-799	[1]	6,624	8,557
700-749	[1]	4,667	6,358
650-699	[1]	4,138	5,477
600-649	[1]	2,254	2,408
550-599	[1]	1,547	1,913
500-549	[1]	851	1,036
Under 500	[1]	280	427
Unknown	[1]	104	81
Total	[1]	22,305	29,092
Installment [Member] | Home Equity - 2nd Lien [Member] | Accrued Interest Included in Total [Member]
Loan ratings/credit scores by loan class [Abstract]
Accrued interest included in total	[1]	82	112
Installment [Member] | Loans Not Secured By Real Estate [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	40,348	31,507
750-799	[1]	89,310	66,558
700-749	[1]	38,237	28,179
650-699	[1]	15,224	16,152
600-649	[1]	4,758	5,128
550-599	[1]	2,080	1,896
500-549	[1]	976	1,672
Under 500	[1]	461	455
Unknown	[1]	1,963	1,842
Total	[1]	193,357	153,389
Installment [Member] | Loans Not Secured By Real Estate [Member] | Accrued Interest Included in Total [Member]
Loan ratings/credit scores by loan class [Abstract]
Accrued interest included in total	[1]	519	445
Installment [Member] | Other [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	59	60
750-799	[1]	568	583
700-749	[1]	617	689
650-699	[1]	479	615
600-649	[1]	260	255
550-599	[1]	124	134
500-549	[1]	50	84
Under 500	[1]	11	28
Unknown	[1]	5	44
Total	[1]	2,173	2,492
Installment [Member] | Other [Member] | Accrued Interest Included in Total [Member]
Loan ratings/credit scores by loan class [Abstract]
Accrued interest included in total	[1]	$ 17	$ 19

[1] Credit scores have been updated within the last twelve months.

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Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands		Sep. 30, 2015	Dec. 31, 2014
Assets [Abstract]
Trading securities		$ 225	$ 203
Securities available for sale		604,662	533,178
Federal Home Loan Bank and Federal Reserve Bank Stock		15,286	19,919
Liabilities [Abstract]
Other borrowings		12,070	12,470
Subordinated debentures		35,569	35,569
Reciprocal deposits included in deposits with no stated maturity		12,000	13,600
Reciprocal deposits included in deposits with stated maturity		35,900	40,100
Recorded Book Balance [Member]
Assets [Abstract]
Cash and due from banks		52,146	48,326
Interest bearing deposits		53,051	25,690
Interest bearing deposits - time		13,029	13,561
Trading securities		225	203
Securities available for sale		604,662	533,178
Federal Home Loan Bank and Federal Reserve Bank Stock		15,286	19,919
Net loans and loans held for sale		1,468,857	1,407,634
Accrued interest receivable		6,473	5,995
Derivative financial instruments		1,623	619
Liabilities [Abstract]
Deposits with no stated maturity	[1]	1,639,402	1,534,175
Deposits with stated maturity	[1]	421,560	390,127
Other borrowings		12,070	12,470
Subordinated debentures		35,569	35,569
Accrued interest payable		420	380
Derivative financial instruments		1,209	366
Fair Value [Member]
Assets [Abstract]
Cash and due from banks		52,146	48,326
Interest bearing deposits		53,051	25,690
Interest bearing deposits - time		13,053	13,585
Trading securities		225	203
Securities available for sale		604,662	533,178
Net loans and loans held for sale		1,435,597	1,394,424
Accrued interest receivable		6,473	5,995
Derivative financial instruments		1,623	619
Liabilities [Abstract]
Deposits with no stated maturity	[1]	1,639,402	1,534,175
Deposits with stated maturity	[1]	419,803	389,139
Other borrowings		13,474	14,560
Subordinated debentures		22,885	23,328
Accrued interest payable		420	380
Derivative financial instruments		1,209	366
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets [Abstract]
Cash and due from banks		52,146	48,326
Interest bearing deposits		53,051	25,690
Interest bearing deposits - time		0	0
Trading securities		225	203
Securities available for sale		0	0
Net loans and loans held for sale		0	0
Accrued interest receivable		8	2
Derivative financial instruments		0	0
Liabilities [Abstract]
Deposits with no stated maturity	[1]	1,639,402	1,534,175
Deposits with stated maturity	[1]	0	0
Other borrowings		0	0
Subordinated debentures		0	0
Accrued interest payable		20	21
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		13,053	13,585
Trading securities		0	0
Securities available for sale		604,662	533,178
Net loans and loans held for sale		25,462	23,662
Accrued interest receivable		2,068	1,599
Derivative financial instruments		1,623	619
Liabilities [Abstract]
Deposits with no stated maturity	[1]	0	0
Deposits with stated maturity	[1]	419,803	389,139
Other borrowings		13,474	14,560
Subordinated debentures		22,885	23,328
Accrued interest payable		400	359
Derivative financial instruments		1,209	366
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	0
Trading securities		0	0
Securities available for sale		0	0
Net loans and loans held for sale		1,410,135	1,370,762
Accrued interest receivable		4,397	4,394
Derivative financial instruments		0	0
Liabilities [Abstract]
Deposits with no stated maturity	[1]	0	0
Deposits with stated maturity	[1]	0	0
Other borrowings		0	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 $12.0 million and $13.6 million at September 30, 2015 and December 31, 2014, respectively. Deposits with a stated maturity include reciprocal deposits with a recorded book balance of $35.9 million and $40.1 million at September 30, 2015 and December 31, 2014, respectively.

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Condensed Consolidated Statements of Financial Condition (unaudited) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Assets
Cash and due from banks	$ 52,146	$ 48,326
Interest bearing deposits	53,051	25,690
Cash and Cash Equivalents	105,197	74,016
Interest bearing deposits - time	13,029	13,561
Trading securities	225	203
Securities available for sale	604,662	533,178
Federal Home Loan Bank and Federal Reserve Bank stock, at cost	15,286	19,919
Loans held for sale, carried at fair value	25,462	23,662
Loans
Commercial	726,356	690,955
Mortgage	468,578	472,628
Installment	235,627	206,378
Payment plan receivables	37,438	40,001
Total Loans	1,467,999	1,409,962
Allowance for loan losses	(24,604)	(25,990)
Net Loans	1,443,395	1,383,972
Other real estate and repossessed assets	3,851	6,454
Property and equipment, net	43,359	45,948
Bank-owned life insurance	54,098	53,625
Deferred tax assets, net	41,422	48,632
Capitalized mortgage loan servicing rights	11,630	12,106
Vehicle service contract counterparty receivables, net	7,324	7,237
Other intangibles	2,366	2,627
Accrued income and other assets	23,555	23,590
Total Assets	2,394,861	2,248,730
Deposits
Non-interest bearing	640,208	576,882
Savings and interest-bearing checking	987,146	943,734
Reciprocal	47,918	53,668
Time	385,690	350,018
Total Deposits	2,060,962	1,924,302
Other borrowings	12,070	12,470
Subordinated debentures	35,569	35,569
Vehicle service contract counterparty payables	1,950	1,977
Accrued expenses and other liabilities	31,330	24,041
Total Liabilities	2,141,881	1,998,359
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: 22,548,562 shares at September 30, 2015 and 22,957,323 shares at December 31, 2014	343,601	352,462
Accumulated deficit	(86,125)	(96,455)
Accumulated other comprehensive loss	(4,496)	(5,636)
Total Shareholders' Equity	252,980	250,371
Total Liabilities and Shareholders' Equity	$ 2,394,861	$ 2,248,730

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Intangible Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Amortized intangible assets - core deposits [Abstract]
Gross Carrying Amount	$ 6,118	$ 6,118
Accumulated Amortization	3,752	$ 3,491
Summary of estimated intangible amortization [Abstract]
Three months ending December 31, 2015	86
2016	347
2017	346
2018	346
2019	346
2020 and thereafter	895
Total	$ 2,366

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Condensed Consolidated Statements of Cash Flows (unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Condensed Consolidated Statements of Cash Flows (unaudited) [Abstract]
Net income	$ 14,447	$ 14,119
Adjustments to Reconcile Net Income to Net Cash From Operating Activities
Proceeds from sales of loans held for sale	227,381	160,102
Disbursements for loans held for sale	(223,446)	(158,410)
Provision for loan losses	(1,037)	(2,049)
Deferred federal income tax expense	7,210	7,218
Net deferred loan costs	(1,189)	(846)
Depreciation, amortization of intangible assets and premiums and accretion of discounts on securities and loans	3,345	1,856
Net gains on mortgage loans	(5,735)	(4,139)
Net gains on securities	(97)	(334)
Securities impairment recognized in earnings	0	9
Net gains on other real estate and repossessed assets	(173)	(410)
Vehicle service contract counterparty contingencies	89	169
Share based compensation	1,153	891
Gain on branch sale	(1,193)	0
Net gain on sale of fixed assets	(152)	0
Increase in accrued income and other assets	(359)	(6,034)
Decrease in accrued expenses and other liabilities	(684)	(5,874)
Total Adjustments	5,113	(7,851)
Net Cash From Operating Activities	19,560	6,268
Cash Flow Used in Investing Activities
Proceeds from the sale of securities available for sale	11,786	7,630
Proceeds from the maturity of securities available for sale	25,458	48,624
Principal payments received on securities available for sale	94,333	62,400
Purchases of securities available for sale	(195,623)	(184,726)
Purchases of interest bearing deposits	(4,100)	(750)
Proceeds from the maturity of interest bearing deposits	4,576	4,050
Purchase of Federal Reserve Bank stock	(272)	(151)
Redemption of Federal Reserve Bank stock	391	226
Redemption of Federal Home Loan Bank stock	4,514	0
Net increase in portfolio loans (loans originated, net of principal payments)	(56,407)	(23,447)
Net cash paid in branch sale	(7,229)	0
Proceeds from the collection of vehicle service contract counterparty receivables	255	366
Proceeds from the sale of other real estate and repossessed assets	5,619	12,435
Proceeds from the sale of property and equipment	490	0
Capital expenditures	(2,925)	(2,660)
Net Cash Used in Investing Activities	(119,134)	(76,003)
Cash Flow From Financing Activities
Net increase in total deposits	145,313	11,089
Net increase (decrease) in other borrowings	(1)	13,649
Payments of Federal Home Loan Bank advances	(399)	(4,609)
Net decrease in vehicle service contract counterparty payables	(27)	(1,301)
Dividends paid	(4,118)	(2,752)
Proceeds from issuance of common stock	103	66
Repurchase of common stock	(9,025)	0
Share based compensation withholding obligation	(1,091)	0
Net Cash From Financing Activities	130,755	16,142
Net Increase (Decrease) in Cash and Cash Equivalents	31,181	(53,593)
Cash and Cash Equivalents at Beginning of Period	74,016	119,081
Cash and Cash Equivalents at End of Period	105,197	65,488
Cash paid during the period for
Interest	4,302	5,450
Income taxes	229	116
Transfers to other real estate and repossessed assets	2,843	3,118
Transfer of payment plan receivables to vehicle service contract counterparty receivables	431	105
Purchase of securities available for sale not yet settled	$ 7,717	$ 1,827

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Securities (Details) $ in Thousands		3 Months Ended		9 Months Ended		12 Months Ended
		Sep. 30, 2015 USD ($) Security	Sep. 30, 2014 USD ($)	Sep. 30, 2015 USD ($) Security	Sep. 30, 2014 USD ($)	Dec. 31, 2014 USD ($)	Mar. 31, 2013 Security
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost		$ 602,659		$ 602,659		$ 532,930
Unrealized Gains		4,205		4,205		3,317
Unrealized Losses		2,202		2,202		3,069
Fair Value		604,662		604,662		533,178
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value		147,186		147,186		163,665
Less Than Twelve Months, Unrealized Losses		747		747		909
Twelve Months or More, Fair Value		42,499		42,499		69,122
Twelve Months or More, Unrealized Losses		1,455		1,455		2,160
Total, Fair Value		189,685		189,685		232,787
Total, Unrealized Losses		2,202		2,202		3,069
Private Label Residential Mortgage Backed Securities Below Investment Grade [Abstract]
Fair value		3,175		3,175
Amortized cost		3,031		3,031
Non-credit unrealized loss		32		32
Unrealized gain		176		176
Cumulative credit related OTTI		1,594		1,594
OTTI changes recorded in earnings		0	$ 9	0	$ 9
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis, Fiscal Year Maturity [Abstract]
Maturing within one year		29,195		29,195
Maturing after one year but within five years		69,021		69,021
Maturing after five years but within ten years		45,618		45,618
Maturing after ten years		80,123		80,123
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis		223,957		223,957
U.S. agency residential mortgage-backed		206,387		206,387
U.S. agency commercial mortgage-backed		35,109		35,109
Private label residential mortgage-backed		5,295		5,295
Other asset backed		131,911		131,911
Total		602,659		602,659
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Maturing within one year		29,231		29,231
Maturing after one year but within five years		69,252		69,252
Maturing after five years but within ten years		45,985		45,985
Maturing after ten years		79,665		79,665
Available-for-sale Securities fair value total		224,133		224,133
U.S. agency residential mortgage-backed		208,290		208,290
U.S. agency commercial mortgage-backed		35,338		35,338
Private label residential mortgage-backed		5,129		5,129
Other asset backed		131,772		131,772
Total		604,662		604,662
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Roll Forward]
Balance at beginning of period		1,844	1,835	1,844	1,835	1,835
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	9	0	9
Balance at end of period		1,844	1,844	1,844	1,844	1,844
Gain and losses realized on sale of securities available for sale [Abstract]
Proceeds				11,786	7,630
Realized Gains	[1]			75	123
Realized Losses				0	0
Trading securities, realized gains (losses)				22	32
Unrealized gain related to U.S. Treasury short position					179
Credit related OTTI recognized in earnings		$ 0	9	$ 0	9
U.S. Agency [Member]
Schedule of Available-for-sale Securities [Line Items]
Number of securities with market fair value less than amortized cost | Security		29		29
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost		$ 50,447		$ 50,447		34,936
Unrealized Gains		344		344		133
Unrealized Losses		56		56		63
Fair Value		50,735		50,735		35,006
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value		19,021		19,021		12,851
Less Than Twelve Months, Unrealized Losses		50		50		58
Twelve Months or More, Fair Value		1,170		1,170		606
Twelve Months or More, Unrealized Losses		6		6		5
Total, Fair Value		20,191		20,191		13,457
Total, Unrealized Losses		$ 56		$ 56		63
U.S. Agency Residential Mortgage-Backed [Member]
Schedule of Available-for-sale Securities [Line Items]
Number of securities with market fair value less than amortized cost | Security		49		49
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost		$ 206,387		$ 206,387		256,387
Unrealized Gains		2,116		2,116		1,838
Unrealized Losses		213		213		667
Fair Value		208,290		208,290		257,558
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value		26,884		26,884		89,547
Less Than Twelve Months, Unrealized Losses		94		94		531
Twelve Months or More, Fair Value		16,024		16,024		15,793
Twelve Months or More, Unrealized Losses		119		119		136
Total, Fair Value		42,908		42,908		105,340
Total, Unrealized Losses		$ 213		$ 213		667
U.S. Agency Commercial Mortgage-Backed [Member]
Schedule of Available-for-sale Securities [Line Items]
Number of securities with market fair value less than amortized cost | Security		9		9
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost		$ 35,109		$ 35,109		33,779
Unrealized Gains		246		246		68
Unrealized Losses		17		17		119
Fair Value		35,338		35,338		33,728
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value		4,389		4,389		21,325
Less Than Twelve Months, Unrealized Losses		16		16		119
Twelve Months or More, Fair Value		1,396		1,396		0
Twelve Months or More, Unrealized Losses		1		1		0
Total, Fair Value		5,785		5,785		21,325
Total, Unrealized Losses		$ 17		$ 17		119
Private Label Residential Mortgage-Backed [Member]
Schedule of Available-for-sale Securities [Line Items]
Number of securities with market fair value less than amortized cost | Security		5		5
Number of securities | Security		5		5
Number of securities rated as investment grade | Security		2		2
Number of securities rated as below investment grade | Security		2		2
Number of securities rated as split rated grade | Security		1		1
Number of bonds with impairment in excess of ten percent | Security		2		2
Percentage of excess impairment on bonds		10.00%		10.00%
Number of bonds with impairment for more than 12 months | Security		5		5
Number of private label mortgage backed securities complete recovery of cost basis | Security		4		4
Number of private label mortgage backed securities with OTTI unrealized gains | Security		2		2
Number of private label mortgage backed securities with OTTI unrealized loss | Security		1		1			3
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost		$ 5,295		$ 5,295		6,216
Unrealized Gains		176		176		187
Unrealized Losses		342		342		390
Fair Value		5,129		5,129		6,013
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value		0		0		208
Less Than Twelve Months, Unrealized Losses		0		0		1
Twelve Months or More, Fair Value		3,542		3,542		4,013
Twelve Months or More, Unrealized Losses		342		342		389
Total, Fair Value		3,542		3,542		4,221
Total, Unrealized Losses		342		342		390
Senior Security [Member]
Private Label Residential Mortgage Backed Securities Below Investment Grade [Abstract]
Fair value		1,690		1,690
Amortized cost		1,722		1,722
Non-credit unrealized loss		32		32
Unrealized gain		0		0
Cumulative credit related OTTI		757		757
OTTI changes recorded in earnings		0	9	0	9
Super Senior Security [Member]
Private Label Residential Mortgage Backed Securities Below Investment Grade [Abstract]
Fair value		1,394		1,394
Amortized cost		1,309		1,309
Non-credit unrealized loss		0		0
Unrealized gain		85		85
Cumulative credit related OTTI		457		457
OTTI changes recorded in earnings		0	0	0	0
Senior Support Security [Member]
Private Label Residential Mortgage Backed Securities Below Investment Grade [Abstract]
Fair value		91		91
Amortized cost		0		0
Non-credit unrealized loss		0		0
Unrealized gain		91		91
Cumulative credit related OTTI		380		380
OTTI changes recorded in earnings		$ 0	$ 0	$ 0	$ 0
Other Asset Backed [Member]
Schedule of Available-for-sale Securities [Line Items]
Number of securities with market fair value less than amortized cost | Security		65		65
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost		$ 131,911		$ 131,911		32,314
Unrealized Gains		110		110		77
Unrealized Losses		249		249		38
Fair Value		131,772		131,772		32,353
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value		57,799		57,799		2,960
Less Than Twelve Months, Unrealized Losses		131		131		15
Twelve Months or More, Fair Value		5,414		5,414		8,729
Twelve Months or More, Unrealized Losses		118		118		23
Total, Fair Value		63,213		63,213		11,689
Total, Unrealized Losses		$ 249		$ 249		38
Obligations of States and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Number of securities with market fair value less than amortized cost | Security		57		57
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost		$ 136,508		$ 136,508		143,698
Unrealized Gains		1,161		1,161		961
Unrealized Losses		937		937		1,244
Fair Value		136,732		136,732		143,415
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value		27,995		27,995		28,114
Less Than Twelve Months, Unrealized Losses		422		422		106
Twelve Months or More, Fair Value		12,393		12,393		37,540
Twelve Months or More, Unrealized Losses		515		515		1,138
Total, Fair Value		40,388		40,388		65,654
Total, Unrealized Losses		$ 937		$ 937		1,244
Corporate [Member]
Schedule of Available-for-sale Securities [Line Items]
Number of securities with market fair value less than amortized cost | Security		8		8
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost		$ 34,088		$ 34,088		22,690
Unrealized Gains		52		52		53
Unrealized Losses		34		34		79
Fair Value		34,106		34,106		22,664
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value		11,098		11,098		8,660
Less Than Twelve Months, Unrealized Losses		34		34		79
Twelve Months or More, Fair Value		0		0		0
Twelve Months or More, Unrealized Losses		0		0		0
Total, Fair Value		11,098		11,098		8,660
Total, Unrealized Losses		$ 34		$ 34		79
Trust Preferred [Member]
Schedule of Available-for-sale Securities [Line Items]
Number of securities with market fair value less than amortized cost | Security		3		3
Number of securities rated as investment grade | Security		1		1
Number of securities rated as below investment grade | Security		1		1
Number of major credit rating agencies | Security		2		2
Number of securities non-rated | Security		1		1
Non-rated trust preferred securities, amortized cost		$ 1,000		$ 1,000
Non-rated trust preferred securities, fair value		800		800
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost		2,914		2,914		2,910
Unrealized Gains		0		0		0
Unrealized Losses		354		354		469
Fair Value		2,560		2,560		2,441
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		2,560		2,560		2,441
Twelve Months or More, Unrealized Losses		354		354		469
Total, Fair Value		2,560		2,560		2,441
Total, Unrealized Losses		354		354		469
Rated Issues [Member]
Trust preferred securities [Abstract]
Fair Value		1,788		1,788		1,643
Net Unrealized Loss				(127)		(267)
Unrated Issues [Member]
Trust preferred securities [Abstract]
Fair Value		$ 772		772		798
Net Unrealized Loss				$ (227)		$ (202)

[1] Gains in 2014 exclude $0.179 million of unrealized gain related to a U.S. Treasury short position.

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Accumulated Other Comprehensive Loss ("AOCL")

9 Months Ended

Sep. 30, 2015

Accumulated Other Comprehensive Loss ("AOCL") [Abstract]

Accumulated Other Comprehensive Loss ("AOCL")

15. Accumulated Other Comprehensive Loss (“AOCL”)

A summary of changes in AOCL follows:

	Unrealized Gains (Losses) on Available for Sale Securities			Dispropor- tionate Tax Effects from Securities Available for Sale			Unrealized Losses on Settled Derivatives			Total
For the three months ended September 30,
2015
Balances at beginning of period	$	408		$	(5,798	)	$	-		$	(5,390	)
Other comprehensive loss before reclassifications		894			-			-			894
Amounts reclassified from AOCL		-			-			-			-
Net current period other comprehensive income		894			-			-			894
Balances at end of period	$	1,302		$	(5,798	)	$	-		$	(4,496	)
2014
Balances at beginning of period	$	(376	)	$	(5,798	)	$	(124	)	$	(6,298	)
Other comprehensive income before reclassifications		226			-			-			226
Amounts reclassified from AOCL		(73	)		-			62			(11	)
Net current period other comprehensive income		153			-			62			215
Balances at end of period	$	(223	)	$	(5,798	)	$	(62	)	$	(6,083	)
For the nine months ended September 30,
2015
Balances at beginning of period	$	162		$	(5,798	)	$	-		$	(5,636	)
Other comprehensive income before reclassifications		1,189			-			-			1,189
Amounts reclassified from AOCL		(49	)		-			-			(49	)
Net current period other comprehensive income		1,140			-			-			1,140
Balances at end of period	$	1,302		$	(5,798	)	$	-		$	(4,496	)
2014
Balances at beginning of period	$	(3,200	)	$	(5,798	)	$	(247	)	$	(9,245	)
Other comprehensive income before reclassifications		3,051			-			-			3,051
Amounts reclassified from AOCL		(74	)		-			185			111
Net current period other comprehensive income		2,977			-			185			3,162
Balances at end of period	$	(223	)	$	(5,798	)	$	(62	)	$	(6,083	)

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.

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

AOCL Component	Amount Reclassified From AOCL			Affected Line Item in Condensed  Consolidated Statements of Operations
	(In thousands)
2015
Unrealized gains on available for sale securities
	$	-		Net gains on securities
		-		Net impairment loss recognized in earnings
		-		Total reclassifications before tax
		-		Tax expense
	$	-		Reclassifications, net of tax
2014
Unrealized gains on available for sale securities
	$	121		Net gains on securities
		(9	)	Net impairment loss recognized in earnings
		112		Total reclassifications before tax
		39		Tax expense
	$	73		Reclassifications, net of tax
Unrealized gains on settled derivatives
	$	(95	)	Interest expense
		(33	)	Tax benefit
	$	(62	)	Reclassification, net of tax
	$	11		Total reclassifications for the period, net of tax

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

AOCL Component	Amount Reclassified From AOCL			Affected Line Item in Condensed  Consolidated Statements of Operations
	(In thousands)
2015
Unrealized gains on available for sale securities
	$	75		Net gains on securities
		-		Net impairment loss recognized in earnings
		75		Total reclassifications before tax
		26		Tax expense
	$	49		Reclassifications, net of tax
2014
Unrealized gains on available for sale securities
	$	123		Net gains on securities
		(9	)	Net impairment loss recognized in earnings
		114		Total reclassifications before tax
		40		Tax expense
	$	74		Reclassifications, net of tax
Unrealized gains on settled derivatives
	$	(285	)	Interest expense
		(100	)	Tax benefit
	$	(185	)	Reclassification, net of tax
	$	(111	)	Total reclassifications for the period, net of tax

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Loans (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Analysis of allowance for loan losses by portfolio segment [Roll Forward]
Balance at beginning of period	$ 24,586	$ 28,197	$ 25,990	$ 32,325
Additions (deductions) [Abstract]
Provision for loan losses	(244)	(632)	(1,037)	(2,049)
Recoveries credited to allowance	1,173	1,479	3,418	5,438
Loans charged against the allowance	(911)	(1,536)	(3,767)	(8,206)
Balance at end of period	24,604	27,508	24,604	27,508
Allowance for loan losses and recorded investment in loans by portfolio segment [Abstract]
Allowance for loan losses Individually evaluated for impairment	12,776		12,776		$ 13,233
Collectively evaluated for impairment	11,828		11,828		12,757
Total ending allowance balance	24,604		24,604		25,990
Loans [Abstract]
Individually evaluated for impairment	104,204		104,204		113,166
Collectively evaluated for impairment	1,368,210		1,368,210		1,301,250
Total loans recorded investment	1,472,414		1,472,414		1,414,416
Accrued interest included in recorded investment	4,415		4,415		4,454
Total Loans	1,467,999		1,467,999		1,409,962
Commercial [Member]
Analysis of allowance for loan losses by portfolio segment [Roll Forward]
Balance at beginning of period	6,707	5,175	5,445	6,827
Additions (deductions) [Abstract]
Provision for loan losses	(26)	(601)	479	(1,164)
Recoveries credited to allowance	637	999	1,722	3,492
Loans charged against the allowance	(190)	(385)	(518)	(3,967)
Balance at end of period	7,128	5,188	7,128	5,188
Allowance for loan losses and recorded investment in loans by portfolio segment [Abstract]
Allowance for loan losses Individually evaluated for impairment	4,048		4,048		3,194
Collectively evaluated for impairment	3,080		3,080		2,251
Total ending allowance balance	7,128		7,128		5,445
Loans [Abstract]
Individually evaluated for impairment	30,328		30,328		34,147
Collectively evaluated for impairment	697,528		697,528		658,423
Total loans recorded investment	727,856		727,856		692,570
Accrued interest included in recorded investment	1,500		1,500		1,615
Total Loans	726,356		726,356		690,955
Mortgage [Member]
Analysis of allowance for loan losses by portfolio segment [Roll Forward]
Balance at beginning of period	11,465	15,542	13,444	17,195
Additions (deductions) [Abstract]
Provision for loan losses	(47)	(9)	(881)	(395)
Recoveries credited to allowance	286	197	843	1,055
Loans charged against the allowance	(379)	(729)	(2,081)	(2,854)
Balance at end of period	11,325	15,001	11,325	15,001
Allowance for loan losses and recorded investment in loans by portfolio segment [Abstract]
Allowance for loan losses Individually evaluated for impairment	8,244		8,244		9,311
Collectively evaluated for impairment	3,081		3,081		4,133
Total ending allowance balance	11,325		11,325		13,444
Loans [Abstract]
Individually evaluated for impairment	67,871		67,871		72,340
Collectively evaluated for impairment	402,934		402,934		402,458
Total loans recorded investment	470,805		470,805		474,798
Accrued interest included in recorded investment	2,227		2,227		2,170
Total Loans	468,578		468,578		472,628
Installment [Member]
Analysis of allowance for loan losses by portfolio segment [Roll Forward]
Balance at beginning of period	1,461	1,988	1,814	2,246
Additions (deductions) [Abstract]
Provision for loan losses	(49)	32	(179)	132
Recoveries credited to allowance	250	283	853	886
Loans charged against the allowance	(342)	(422)	(1,168)	(1,383)
Balance at end of period	1,320	1,881	1,320	1,881
Allowance for loan losses and recorded investment in loans by portfolio segment [Abstract]
Allowance for loan losses Individually evaluated for impairment	484		484		728
Collectively evaluated for impairment	836		836		1,086
Total ending allowance balance	1,320		1,320		1,814
Loans [Abstract]
Individually evaluated for impairment	6,005		6,005		6,679
Collectively evaluated for impairment	230,310		230,310		200,368
Total loans recorded investment	236,315		236,315		207,047
Accrued interest included in recorded investment	688		688		669
Total Loans	235,627		235,627		206,378
Payment Plan Receivables [Member]
Analysis of allowance for loan losses by portfolio segment [Roll Forward]
Balance at beginning of period	65	80	64	97
Additions (deductions) [Abstract]
Provision for loan losses	(5)	(8)	(4)	(28)
Recoveries credited to allowance	0	0	0	5
Loans charged against the allowance	0	0	0	(2)
Balance at end of period	60	72	60	72
Allowance for loan losses and recorded investment in loans by portfolio segment [Abstract]
Allowance for loan losses Individually evaluated for impairment	0		0		0
Collectively evaluated for impairment	60		60		64
Total ending allowance balance	60		60		64
Loans [Abstract]
Individually evaluated for impairment	0		0		0
Collectively evaluated for impairment	37,438		37,438		40,001
Total loans recorded investment	37,438		37,438		40,001
Accrued interest included in recorded investment	0		0		0
Total Loans	37,438		37,438		40,001
Subjective Allocation [Member]
Analysis of allowance for loan losses by portfolio segment [Roll Forward]
Balance at beginning of period	4,888	5,412	5,223	5,960
Additions (deductions) [Abstract]
Provision for loan losses	(117)	(46)	(452)	(594)
Recoveries credited to allowance	0	0	0	0
Loans charged against the allowance	0	0	0	0
Balance at end of period	4,771	$ 5,366	4,771	$ 5,366
Allowance for loan losses and recorded investment in loans by portfolio segment [Abstract]
Allowance for loan losses Individually evaluated for impairment	0		0		0
Collectively evaluated for impairment	4,771		4,771		5,223
Total ending allowance balance	$ 4,771		$ 4,771		$ 5,223

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Securities (Tables)

9 Months Ended

Sep. 30, 2015

Securities [Abstract]

Securities available for sale

Securities available for sale consist of the following:

	Amortized Cost		Unrealized				Fair Value
			Gains		Losses
	(In thousands)
September 30, 2015
U.S. agency	$	50,447	$	344	$	56	$	50,735
U.S. agency residential mortgage-backed		206,387		2,116		213		208,290
U.S. agency commercial mortgage-backed		35,109		246		17		35,338
Private label residential mortgage-backed		5,295		176		342		5,129
Other asset backed		131,911		110		249		131,772
Obligations of states and political subdivisions		136,508		1,161		937		136,732
Corporate		34,088		52		34		34,106
Trust preferred		2,914		-		354		2,560
Total	$	602,659	$	4,205	$	2,202	$	604,662
December 31, 2014
U.S. agency	$	34,936	$	133	$	63	$	35,006
U.S. agency residential mortgage-backed		256,387		1,838		667		257,558
U.S. agency commercial mortgage-backed		33,779		68		119		33,728
Private label residential mortgage-backed		6,216		187		390		6,013
Other asset backed		32,314		77		38		32,353
Obligations of states and political subdivisions		143,698		961		1,244		143,415
Corporate		22,690		53		79		22,664
Trust preferred		2,910		-		469		2,441
Total	$	532,930	$	3,317	$	3,069	$	533,178

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, 2015
U.S. agency	$	19,021	$	50	$	1,170	$	6	$	20,191	$	56
U.S. agency residential mortgage-backed		26,884		94		16,024		119		42,908		213
U.S. agency commercial mortgage-backed		4,389		16		1,396		1		5,785		17
Private label residential mortgage-backed		-		-		3,542		342		3,542		342
Other asset backed		57,799		131		5,414		118		63,213		249
Obligations of states and political subdivisions		27,995		422		12,393		515		40,388		937
Corporate		11,098		34		-		-		11,098		34
Trust preferred		-		-		2,560		354		2,560		354
Total	$	147,186	$	747	$	42,499	$	1,455	$	189,685	$	2,202
December 31, 2014
U.S. agency	$	12,851	$	58	$	606	$	5	$	13,457	$	63
U.S. agency residential mortgage-backed		89,547		531		15,793		136		105,340		667
U.S. agency commercial mortgage-backed		21,325		119		-		-		21,325		119
Private label residential mortgage-backed		208		1		4,013		389		4,221		390
Other asset backed		2,960		15		8,729		23		11,689		38
Obligations of states and political subdivisions		28,114		106		37,540		1,138		65,654		1,244
Corporate		8,660		79		-		-		8,660		79
Trust preferred		-		-		2,441		469		2,441		469
Total	$	163,665	$	909	$	69,122	$	2,160	$	232,787	$	3,069

Trust preferred securities

The following table breaks out our trust preferred securities in further detail as of September 30, 2015 and December 31, 2014:

	September 30, 2015					December 31, 2014
	Fair Value		Net Unrealized Loss			Fair Value		Net Unrealized Loss
	(In thousands)
Trust preferred securities
Rated issues	$	1,788	$	(127	)	$	1,643	$	(267	)
Unrated issues		772		(227	)		798		(202	)

Private label residential mortgage backed securities below investment grade

At September 30, 2015, three private label residential mortgage-backed securities had credit related OTTI and are summarized as follows:

	Senior Security		Super Senior Security		Senior Support Security		Total
	(In thousands)
As of September 30, 2015
Fair value	$	1,690	$	1,394	$	91	$	3,175
Amortized cost		1,722		1,309		-		3,031
Non-credit unrealized loss		32		-		-		32
Unrealized gain		-		85		91		176
Cumulative credit related OTTI		757		457		380		1,594
Credit related OTTI recognized in our Condensed Consolidated Statements of Operations
For the three months ended September 30,
2015	$	-	$	-	$	-	$	-
2014		9		-		-		9
For the nine months ended September 30,
2015		-		-		-		-
2014		9		-		-		9

Credit losses recognized in earnings on securities available for sale

A roll forward of credit losses recognized in earnings on securities available for sale for the three and nine month periods ending September 30, follows:

	Three months ended September 30,				Nine months ended September 30,
	2015		2014		2015		2014
	(In thousands)
Balance at beginning of period	$	1,844	$	1,835	$	1,844	$	1,835
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		-		9		-		9
Balance at end of period	$	1,844	$	1,844	$	1,844	$	1,844

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, 2015, by contractual maturity, follow:

	Amortized Cost		Fair Value
	(In thousands)
Maturing within one year	$	29,195	$	29,231
Maturing after one year but within five years		69,021		69,252
Maturing after five years but within ten years		45,618		45,985
Maturing after ten years		80,123		79,665
		223,957		224,133
U.S. agency residential mortgage-backed		206,387		208,290
U.S. agency commercial mortgage-backed		35,109		35,338
Private label residential mortgage-backed		5,295		5,129
Other asset backed		131,911		131,772
Total	$	602,659	$	604,662

Gains and losses realized on sale of securities available for sale

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:

	Proceeds		Realized Gains (1)		Losses
	(In thousands)
2015	$	11,786	$	75	$	-
2014		7,630		123		-

(1) Gains in 2014 exclude $0.179 million of unrealized gain related to a U.S. Treasury short position.

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Condensed Consolidated Statements of Shareholders' Equity (unaudited) $ in Thousands	USD ($)
Balance at beginning of period at Dec. 31, 2013	$ 231,581
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	14,119
Cash dividends declared	(2,752)
Issuance of common stock	66
Share based compensation	891
Share based compensation withholding obligation	0
Repurchase of common stock	0
Net change in accumulated other comprehensive loss, net of related tax effect	3,162
Balance at end of period at Sep. 30, 2014	247,067
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	4,929
Net change in accumulated other comprehensive loss, net of related tax effect	215
Balance at end of period at Sep. 30, 2014	247,067
Balance at beginning of period at Dec. 31, 2014	250,371
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	14,447
Cash dividends declared	(4,118)
Issuance of common stock	103
Share based compensation	1,153
Share based compensation withholding obligation	(1,091)
Repurchase of common stock	(9,025)
Net change in accumulated other comprehensive loss, net of related tax effect	1,140
Balance at end of period at Sep. 30, 2015	252,980
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	5,047
Net change in accumulated other comprehensive loss, net of related tax effect	894
Balance at end of period at Sep. 30, 2015	$ 252,980

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Condensed Consolidated Statements of Financial Condition (unaudited) (Parenthetical) - $ / shares	Sep. 30, 2015	Dec. 31, 2014
Shareholders' Equity
Convertible preferred stock, par value (in dollars per share)	$ 0	$ 0
Convertible preferred stock, shares authorized (in shares)	200,000	200,000
Convertible preferred stock, shares issued (in shares)	0	0
Convertible 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)	22,548,562	22,957,323
Common stock, shares outstanding (in shares)	22,548,562	22,957,323

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Income Tax

9 Months Ended

Sep. 30, 2015

Income Tax [Abstract]

Income Tax

10. Income Tax

Income tax expense was $2.3 million during each three month period ended September 30, 2015 and 2014 and $6.7 million and $5.7 million during the nine months ended September 30, 2015 and 2014, 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 both September 30, 2015 and 2014, that the realization of substantially all of our deferred tax assets continues to be more likely than not.

We did maintain a valuation allowance against our deferred tax assets of approximately $1.0 million at both September 30, 2015 and December 31, 2014. This valuation allowance on our deferred tax assets primarily relates to state income taxes at our Mepco segment.  In this instance, we determined that the future realization of these particular deferred tax assets was not more likely than not.  This conclusion was primarily based on the uncertainty of Mepco’s future earnings attributable to particular states (given the various apportionment criteria) and the significant reduction in the size of Mepco’s business.

At September 30, 2015 and December 31, 2014, we had approximately $1.0 million and $1.1 million, respectively 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 2015.

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2015	Nov. 03, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	INDEPENDENT BANK CORP /MI/
Entity Central Index Key	0000039311
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		22,297,545
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2015

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Regulatory Matters

9 Months Ended

Sep. 30, 2015

Regulatory Matters [Abstract]

Regulatory Matters

11. 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’s 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, 2015, the Bank had negative undivided profits of $15.9 million.  We can request regulatory approval for a return of capital from the Bank to the parent company. During the first quarter of 2014, we requested regulatory approval for a $15.0 million return of capital from the Bank to the parent company.  This return of capital request was approved by our banking regulators on March 28, 2014 and the Bank returned $15.0 million of capital to the parent company on April 9, 2014.  During January of 2015, we requested regulatory approval for an additional $18.5 million return of capital from the Bank to the parent company.  This return of capital request was approved by our banking regulators on February 13, 2015, and the Bank returned $18.5 million of capital to the parent company on February 17, 2015.  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 (as of January 1, 2015) 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 consolidated financial statements. 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, 2015 and December 31, 2014, 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.

On July 2, 2013, the Federal Reserve approved a final rule that establishes an integrated regulatory capital framework (the “New Capital Rules”). The rule implements in the United States the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Act.  In general, under the New Capital Rules, minimum requirements have increased for both the quantity and quality of capital held by banking organizations. Consistent with the international Basel framework, the New Capital Rules include a new minimum ratio of common equity Tier 1 capital to risk-weighted assets of 4.5% and a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets that applies to all supervised financial institutions. The rule also raises the minimum ratio of Tier 1 capital to risk-weighted assets from 4% to 6% and includes a minimum leverage ratio of 4% for all banking organizations.  As to the quality of capital, the New Capital Rules emphasize common equity Tier 1 capital, the most loss-absorbing form of capital, and implement strict eligibility criteria for regulatory capital instruments. The New Capital Rules also change the methodology for calculating risk-weighted assets to enhance risk sensitivity.  The New Capital Rules became effective for us on January 1, 2015.

Our actual capital amounts and ratios follow:

	Actual					Minimum for Adequately Capitalized Institutions					Minimum for Well-Capitalized Institutions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
September 30, 2015
Total capital to risk-weighted assets
Consolidated	$	276,230		16.98	%	$	130,163		8.00	%	NA		NA
Independent Bank		253,647		15.61			130,004		8.00		$	162,506		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	255,613		15.71	%	$	97,622		6.00	%	NA		NA
Independent Bank		233,123		14.35			97,503		6.00		$	130,005		8.00	%
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	238,884		14.68	%	$	73,216		4.50	%	NA		NA
Independent Bank		233,123		14.35			73,128		4.50		$	105,629		6.50	%
Tier 1 capital to average assets
Consolidated	$	255,613		11.16	%	$	91,582		4.00	%	NA		NA
Independent Bank		233,123		10.19			91,509		4.00		$	114,387		5.00	%
December 31, 2014
Total capital to risk-weighted assets
Consolidated	$	265,163		18.06	%	$	117,427		8.00	%	NA		NA
Independent Bank		247,883		16.90			117,374		8.00		$	146,718		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	246,628		16.80	%	$	58,714		4.00	%	NA		NA
Independent Bank		229,361		15.63			58,687		4.00		$	88,031		6.00	%
Tier 1 capital to average assets
Consolidated	$	246,628		11.18	%	$	88,206		4.00	%	NA		NA
Independent Bank		229,361		10.46			87,687		4.00		$	109,609		5.00	%

NA - Not applicable

The components of our regulatory capital are as follows:

	Consolidated						Independent Bank
	September 30, 2015			December 31, 2014			September 30, 2015			December 31, 2014
	(In thousands)
Total shareholders' equity	$	252,980		$	250,371		$	255,659		$	257,832
Add (deduct)
Accumulated other comprehensive (gain) loss for regulatory purposes		(1,302	)		5,636			(1,302	)		5,636
Intangible assets		(946	)		(2,627	)		(946	)		(2,627	)
Disallowed deferred tax assets		(11,848	)		(40,500	)		(20,288	)		(30,728	)
Disallowed capitalized mortgage loan servicing rights		-			(752	)		-			(752	)
Common equity tier 1 capital		238,884			212,128			233,123			229,361
Qualifying trust preferred securities		34,500			34,500			-			-
Disallowed deferred tax assets		(17,771	)		-			-			-
Tier 1 capital		255,613			246,628			233,123			229,361
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets		20,617			18,535			20,524			18,522
Total risk-based capital	$	276,230		$	265,163		$	253,647		$	247,883

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Condensed Consolidated Statements of Operations (unaudited) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Interest Income
Interest and fees on loans		$ 17,869	$ 17,818	$ 52,859	$ 54,179
Interest on securities
Taxable		1,901	1,644	5,528	4,623
Tax-exempt		228	281	667	830
Other investments		295	325	922	1,076
Total Interest Income		20,293	20,068	59,976	60,708
Interest Expense
Deposits		987	1,236	2,961	3,789
Other borrowings		465	649	1,382	1,720
Total Interest Expense		1,452	1,885	4,343	5,509
Net Interest Income		18,841	18,183	55,633	55,199
Provision for loan losses		(244)	(632)	(1,037)	(2,049)
Net Interest Income After Provision for Loan Losses		19,085	18,815	56,670	57,248
Non-interest Income
Service charges on deposit accounts		3,294	3,579	9,261	10,166
Interchange income		2,169	1,984	6,551	5,992
Net gains (losses) on assets
Mortgage loans		1,812	1,490	5,735	4,139
Securities		45	168	97	334
Other than temporary impairment loss on securities
Total impairment loss		0	(9)	0	(9)
Loss recognized in other comprehensive income		0	0	0	0
Net impairment loss recognized in earnings		0	(9)	0	(9)
Mortgage loan servicing		(556)	932	476	1,389
Title insurance fees		281	243	874	734
Net gain on branch sale		1,193	0	1,193	0
Other		1,881	2,156	5,881	6,829
Total Non-interest Income		10,119	10,543	30,068	29,574
Non-Interest Expense
Compensation and employee benefits		12,029	11,718	35,605	34,774
Occupancy, net		1,940	2,079	6,399	6,715
Data processing		2,001	1,790	5,958	5,653
Loan and collection		816	1,391	2,938	4,283
Furniture, fixtures and equipment		998	1,005	2,915	3,127
Communications		754	712	2,184	2,212
Legal and professional		519	559	1,352	1,380
Advertising		406	427	1,338	1,547
FDIC deposit insurance		350	396	1,044	1,235
Interchange expense		279	368	859	1,112
Credit card and bank service fees		197	226	602	734
Vehicle service contract counterparty contingencies		30	28	89	169
Costs related to unfunded lending commitments		26	12	46	27
Provision for loss reimbursement on sold loans		(35)	0	(59)	(466)
Net gains on other real estate and repossessed assets		5	(285)	(173)	(410)
Other		1,564	1,658	4,512	4,952
Total Non-interest Expense		21,879	22,084	65,609	67,044
Income Before Income Tax		7,325	7,274	21,129	19,778
Income tax expense		2,278	2,345	6,682	5,659
Net Income		$ 5,047	$ 4,929	$ 14,447	$ 14,119
Net Income Per Common Share
Basic (in dollars per share)	[1]	$ 0.22	$ 0.21	$ 0.63	$ 0.62
Diluted (in dollars per share)		0.22	0.21	0.62	0.60
Dividends Per Common Share
Declared (in dollars per share)		0.06	0.06	0.18	0.12
Paid (in dollars per share)		$ 0.06	$ 0.06	$ 0.18	$ 0.12

[1] Basic net income per common share includes weighted average common shares outstanding during the period and participating share awards.

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Segments

9 Months Ended

Sep. 30, 2015

Segments [Abstract]

Segments

5. Segments

Our reportable segments are based upon legal entities.  We currently have two reportable segments:  Independent Bank (“IB” or “Bank”) and Mepco.  These business segments are also differentiated based on the products and services provided.  We evaluate performance based principally on net income (loss) of the respective reportable segments.

In the normal course of business, our IB segment provides funding to our Mepco segment through an intercompany line of credit priced at the prime rate of interest as published in the Wall Street Journal. Our IB segment also provides certain administrative services to our Mepco segment which are reimbursed at an agreed upon rate. These intercompany transactions are eliminated upon consolidation. The only other material intersegment balances and transactions are investments in subsidiaries at the parent entities and cash balances on deposit at our IB segment.

A summary of selected financial information for our reportable segments follows:

	IB			Mepco			Other (1)			Elimination (2)			Total
	(In thousands)
Total assets
September 30, 2015	$	2,323,629		$	60,018		$	288,708		$	(277,494	)	$	2,394,861
December 31, 2014		2,174,536			63,378			286,158			(275,342	)		2,248,730
For the three months ended September 30,
2015
Interest income	$	18,973		$	1,320		$	20		$	(20	)	$	20,293
Net interest income		17,964			1,115			(238	)		-			18,841
Provision for loan losses		(238	)		(6	)		-			-			(244	)
Income (loss) before income tax		7,961			(254	)		(358	)		(24	)		7,325
Net income (loss)		5,455			(168	)		(224	)		(16	)		5,047
2014
Interest income	$	18,444		$	1,624		$	25		$	(25	)	$	20,068
Net interest income		17,254			1,338			(409	)		-			18,183
Provision for loan losses		(623	)		(9	)		-			-			(632	)
Income (loss) before income tax		7,459			247			(408	)		(24	)		7,274
Net income (loss)		5,048			163			(266	)		(16	)		4,929
For the nine months ended September 30,
2015
Interest income	$	55,895		$	4,081		$	60		$	(60	)	$	59,976
Net interest income		52,864			3,468			(699	)		-			55,633
Provision for loan losses		(1,032	)		(5	)		-			-			(1,037	)
Income (loss) before income tax		23,063			(766	)		(1,097	)		(71	)		21,129
Net income (loss)		15,623			(437	)		(693	)		(46	)		14,447
2014
Interest income	$	55,153		$	5,555		$	41		$	(41	)	$	60,708
Net interest income		51,721			4,500			(1,022	)		-			55,199
Provision for loan losses		(2,018	)		(31	)		-			-			(2,049	)
Income (loss) before income tax		20,151			908			(1,210	)		(71	)		19,778
Net income (loss)		14,345			607			(665	)		(168	)		14,119

(1) Includes amounts relating to our parent company and certain insignificant operations.

(2) Includes parent company's investment in subsidiaries and cash balances maintained at subsidiary.

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Loans

9 Months Ended

Sep. 30, 2015

Loans [Abstract]

Loans

4. Loans

Our assessment of the allowance for loan losses is based on an evaluation of the loan portfolio, recent 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			Payment Plan Receivables			Subjective Allocation			Total
	(In thousands)
2015
Balance at beginning of period	$	6,707		$	11,465		$	1,461		$	65		$	4,888		$	24,586
Additions (deductions)
Provision for loan losses		(26	)		(47	)		(49	)		(5	)		(117	)		(244	)
Recoveries credited to allowance		637			286			250			-			-			1,173
Loans charged against the allowance		(190	)		(379	)		(342	)		-			-			(911	)
Balance at end of period	$	7,128		$	11,325		$	1,320		$	60		$	4,771		$	24,604
2014
Balance at beginning of period	$	5,175		$	15,542		$	1,988		$	80		$	5,412		$	28,197
Additions (deductions)
Provision for loan losses		(601	)		(9	)		32			(8	)		(46	)		(632	)
Recoveries credited to allowance		999			197			283			-			-			1,479
Loans charged against the allowance		(385	)		(729	)		(422	)		-			-			(1,536	)
Balance at end of period	$	5,188		$	15,001		$	1,881		$	72		$	5,366		$	27,508

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

	Commercial			Mortgage			Installment			Payment Plan Receivables			Subjective Allocation			Total
	(In thousands)
2015
Balance at beginning of period	$	5,445		$	13,444		$	1,814		$	64		$	5,223		$	25,990
Additions (deductions)
Provision for loan losses		479			(881	)		(179	)		(4	)		(452	)		(1,037	)
Recoveries credited to allowance		1,722			843			853			-			-			3,418
Loans charged against the allowance		(518	)		(2,081	)		(1,168	)		-			-			(3,767	)
Balance at end of period	$	7,128		$	11,325		$	1,320		$	60		$	4,771		$	24,604
2014
Balance at beginning of period	$	6,827		$	17,195		$	2,246		$	97		$	5,960		$	32,325
Additions (deductions)
Provision for loan losses		(1,164	)		(395	)		132			(28	)		(594	)		(2,049	)
Recoveries credited to allowance		3,492			1,055			886			5			-			5,438
Loans charged against the allowance		(3,967	)		(2,854	)		(1,383	)		(2	)		-			(8,206	)
Balance at end of period	$	5,188		$	15,001		$	1,881		$	72		$	5,366		$	27,508

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

	Commercial		Mortgage		Installment		Payment Plan Receivables		Subjective Allocation		Total
	(In thousands)
September 30, 2015
Allowance for loan losses
Individually evaluated for impairment	$	4,048	$	8,244	$	484	$	-	$	-	$	12,776
Collectively evaluated for impairment		3,080		3,081		836		60		4,771		11,828
Total ending allowance balance	$	7,128	$	11,325	$	1,320	$	60	$	4,771	$	24,604
Loans
Individually evaluated for impairment	$	30,328	$	67,871	$	6,005	$	-			$	104,204
Collectively evaluated for impairment		697,528		402,934		230,310		37,438				1,368,210
Total loans recorded investment		727,856		470,805		236,315		37,438				1,472,414
Accrued interest included in recorded investment		1,500		2,227		688		-				4,415
Total loans	$	726,356	$	468,578	$	235,627	$	37,438			$	1,467,999
December 31, 2014
Allowance for loan losses
Individually evaluated for impairment	$	3,194	$	9,311	$	728	$	-	$	-	$	13,233
Collectively evaluated for impairment		2,251		4,133		1,086		64		5,223		12,757
Total ending allowance balance	$	5,445	$	13,444	$	1,814	$	64	$	5,223	$	25,990
Loans
Individually evaluated for impairment	$	34,147	$	72,340	$	6,679	$	-			$	113,166
Collectively evaluated for impairment		658,423		402,458		200,368		40,001				1,301,250
Total loans recorded investment		692,570		474,798		207,047		40,001				1,414,416
Accrued interest included in recorded investment		1,615		2,170		669		-				4,454
Total loans	$	690,955	$	472,628	$	206,378	$	40,001			$	1,409,962

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

	90+ and Still Accruing		Non- Accrual		Total Non- Performing Loans
	(In thousands)
September 30, 2015
Commercial
Income producing - real estate	$	-	$	5,135	$	5,135
Land, land development and construction - real estate		-		533		533
Commercial and industrial		-		2,318		2,318
Mortgage
1-4 family		-		5,095		5,095
Resort lending		-		1,301		1,301
Home equity - 1st lien		-		191		191
Home equity - 2nd lien		-		189		189
Installment
Home equity - 1st lien		-		175		175
Home equity - 2nd lien		-		445		445
Loans not secured by real estate		-		430		430
Other		-		2		2
Payment plan receivables
Full refund		-		6		6
Partial refund		-		10		10
Other		-		4		4
Total recorded investment	$	-	$	15,834	$	15,834
Accrued interest included in recorded investment	$	-	$	-	$	-
December 31, 2014
Commercial
Income producing - real estate	$	-	$	1,233	$	1,233
Land, land development and construction - real estate		-		594		594
Commercial and industrial		-		2,746		2,746
Mortgage
1-4 family		7		5,945		5,952
Resort lending		-		2,168		2,168
Home equity - 1st lien		-		331		331
Home equity - 2nd lien		-		605		605
Installment
Home equity - 1st lien		-		576		576
Home equity - 2nd lien		-		517		517
Loans not secured by real estate		-		454		454
Other		-		48		48
Payment plan receivables
Full refund		-		2		2
Partial refund		-		12		12
Other		-		-		-
Total recorded investment	$	7	$	15,231	$	15,238
Accrued interest included in recorded investment	$	-	$	-	$	-

An aging analysis of loans by class follows:

	Loans Past Due								Loans not Past Due		Total Loans
	30-59 days		60-89 days		90+ days		Total
	(In thousands)
September 30, 2015
Commercial
Income producing - real estate	$	183	$	-	$	660	$	843	$	274,107	$	274,950
Land, land development and construction - real estate		-		119		204		323		41,899		42,222
Commercial and industrial		2,315		320		368		3,003		407,681		410,684
Mortgage
1-4 family		2,513		662		5,095		8,270		271,130		279,400
Resort lending		309		150		1,301		1,760		116,528		118,288
Home equity - 1st lien		39		23		191		253		22,252		22,505
Home equity - 2nd lien		331		-		189		520		50,092		50,612
Installment
Home equity - 1st lien		286		65		175		526		17,954		18,480
Home equity - 2nd lien		191		53		445		689		21,616		22,305
Loans not secured by real estate		474		132		430		1,036		192,321		193,357
Other		6		2		2		10		2,163		2,173
Payment plan receivables
Full refund		563		115		6		684		22,848		23,532
Partial refund		710		249		10		969		7,459		8,428
Other		112		16		4		132		5,346		5,478
Total recorded investment	$	8,032	$	1,906	$	9,080	$	19,018	$	1,453,396	$	1,472,414
Accrued interest included in recorded investment	$	113	$	18	$	-	$	131	$	4,284	$	4,415
December 31, 2014
Commercial
Income producing - real estate	$	89	$	-	$	214	$	303	$	252,763	$	253,066
Land, land development and construction - real estate		131		-		223		354		33,984		34,338
Commercial and industrial		2,391		279		209		2,879		402,287		405,166
Mortgage
1-4 family		1,877		1,638		5,952		9,467		269,719		279,186
Resort lending		226		-		2,168		2,394		126,342		128,736
Home equity - 1st lien		39		50		331		420		19,782		20,202
Home equity - 2nd lien		711		89		605		1,405		45,269		46,674
Installment
Home equity - 1st lien		466		37		576		1,079		20,995		22,074
Home equity - 2nd lien		369		81		517		967		28,125		29,092
Loans not secured by real estate		589		231		454		1,274		152,115		153,389
Other		15		3		48		66		2,426		2,492
Payment plan receivables
Full refund		838		214		2		1,054		26,799		27,853
Partial refund		409		123		12		544		6,550		7,094
Other		96		24		-		120		4,934		5,054
Total recorded investment	$	8,246	$	2,769	$	11,311	$	22,326	$	1,392,090	$	1,414,416
Accrued interest included in recorded investment	$	55	$	29	$	-	$	84	$	4,370	$	4,454

Impaired loans are as follows :

	September 30, 2015		December 31, 2014
Impaired loans with no allocated allowance	(In thousands)
TDR	$	6,416	$	9,325
Non - TDR		204		299
Impaired loans with an allocated allowance
TDR - allowance based on collateral		3,970		5,879
TDR - allowance based on present value cash flow		86,985		94,970
Non - TDR - allowance based on collateral		6,281		2,296
Non - TDR - allowance based on present value cash flow		-		-
Total impaired loans	$	103,856	$	112,769
Amount of allowance for loan losses allocated
TDR - allowance based on collateral	$	1,575	$	2,025
TDR - allowance based on present value cash flow		8,952		10,188
Non - TDR - allowance based on collateral		2,249		1,020
Non - TDR - allowance based on present value cash flow		-		-
Total amount of allowance for loan losses allocated	$	12,776	$	13,233

Impaired loans by class  are as follows (1):

	September 30, 2015						December 31, 2014
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:	(In thousands)
Commercial
Income producing - real estate	$	4,778	$	4,977	$	-	$	5,868	$	6,077	$	-
Land, land development & construction-real estate		851		1,425		-		1,051		1,606		-
Commercial and industrial		985		982		-		2,685		2,667		-
Mortgage
1-4 family		23		166		-		-		49		-
Resort lending		-		-		-		48		397		-
Home equity - 1st lien		-		-		-		-		-		-
Home equity - 2nd lien		-		-		-		-		-		-
Installment
Home equity - 1st lien		-		36		-		-		40		-
Home equity - 2nd lien		-		-		-		-		-		-
Loans not secured by real estate		-		-		-		-		-		-
Other		-		-		-		-		-		-
		6,637		7,586		-		9,652		10,836		-
With an allowance recorded:
Commercial
Income producing - real estate		16,414		17,414		1,357		12,836		13,797		689
Land, land development & construction-real estate		2,061		2,140		421		3,456		3,528		499
Commercial and industrial		5,239		5,549		2,270		8,251		8,486		2,006
Mortgage
1-4 family		49,245		51,392		5,437		53,206		56,063		6,195
Resort lending		18,328		18,591		2,786		18,799		18,963		3,075
Home equity - 1st lien		155		172		11		162		177		14
Home equity - 2nd lien		120		201		10		125		205		27
Installment
Home equity - 1st lien		2,434		2,610		145		2,744		2,930		219
Home equity - 2nd lien		2,931		2,942		285		3,212		3,215		419
Loans not secured by real estate		631		689		53		711		835		89
Other		9		9		1		12		12		1
		97,567		101,709		12,776		103,514		108,211		13,233
Total
Commercial
Income producing - real estate		21,192		22,391		1,357		18,704		19,874		689
Land, land development & construction-real estate		2,912		3,565		421		4,507		5,134		499
Commercial and industrial		6,224		6,531		2,270		10,936		11,153		2,006
Mortgage
1-4 family		49,268		51,558		5,437		53,206		56,112		6,195
Resort lending		18,328		18,591		2,786		18,847		19,360		3,075
Home equity - 1st lien		155		172		11		162		177		14
Home equity - 2nd lien		120		201		10		125		205		27
Installment
Home equity - 1st lien		2,434		2,646		145		2,744		2,970		219
Home equity - 2nd lien		2,931		2,942		285		3,212		3,215		419
Loans not secured by real estate		631		689		53		711		835		89
Other		9		9		1		12		12		1
Total	$	104,204	$	109,295	$	12,776	$	113,166	$	119,047	$	13,233
Accrued interest included in recorded investment	$	348					$	397

(1) There were no impaired payment plan receivables at September 30, 2015 or December 31, 2014.

Average recorded investment in and interest income earned on impaired loans by class for the three month periods ending September 30, follows (1):

	2015				2014
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:	(In thousands)
Commercial
Income producing - real estate	$	5,133	$	45	$	8,255	$	103
Land, land development & construction-real estate		932		14		859		15
Commercial and industrial		1,922		68		3,397		63
Mortgage
1-4 family		24		3		66		-
Resort lending		-		-		42		1
Home equity - 1st lien		-		-		-		-
Home equity - 2nd lien		-		-		-		-
Installment
Home equity - 1st lien		-		-		-		-
Home equity - 2nd lien		-		-		-		-
Loans not secured by real estate		-		-		-		-
Other		-		-		-		-
		8,011		130		12,619		182
With an allowance recorded:
Commercial
Income producing - real estate		14,655		154		11,486		136
Land, land development & construction-real estate		1,993		2		4,092		38
Commercial and industrial		6,431		37		7,936		51
Mortgage
1-4 family		49,706		554		55,633		558
Resort lending		18,414		163		19,351		195
Home equity - 1st lien		157		2		165		2
Home equity - 2nd lien		185		-		39		-
Installment
Home equity - 1st lien		2,474		47		2,801		43
Home equity - 2nd lien		2,999		47		3,375		46
Loans not secured by real estate		645		10		699		9
Other		10		-		14		-
		97,669		1,016		105,591		1,078
Total
Commercial
Income producing - real estate		19,788		199		19,741		239
Land, land development & construction-real estate		2,925		16		4,951		53
Commercial and industrial		8,353		105		11,333		114
Mortgage
1-4 family		49,730		557		55,699		558
Resort lending		18,414		163		19,393		196
Home equity - 1st lien		157		2		165		2
Home equity - 2nd lien		185		-		39		-
Installment
Home equity - 1st lien		2,474		47		2,801		43
Home equity - 2nd lien		2,999		47		3,375		46
Loans not secured by real estate		645		10		699		9
Other		10		-		14		-
Total	$	105,680	$	1,146	$	118,210	$	1,260

(1) There were no impaired payment plan receivables during the three month periods ended September 30, 2015 and 2014, respectively.

Average recorded investment in and interest income earned on impaired loans by class for the nine month periods ending September 30, follows (1):

	2015				2014
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:	(In thousands)
Commercial
Income producing - real estate	$	5,490	$	170	$	8,109	$	289
Land, land development & construction-real estate		986		57		1,168		43
Commercial and industrial		2,345		195		3,517		129
Mortgage
1-4 family		18		5		37		-
Resort lending		15		-		38		1
Home equity line of credit - 1st lien		-		-		-		-
Home equity line of credit - 2nd lien		-		-		-		-
Installment
Home equity installment - 1st lien		-		1		-		1
Home equity installment - 2nd lien		-		-		-		-
Loans not secured by real estate		-		-		-		-
Other		-		-		-		-
		8,854		428		12,869		463
With an allowance recorded:
Commercial
Income producing - real estate		13,752		452		12,756		417
Land, land development & construction-real estate		2,351		35		4,059		120
Commercial and industrial		7,304		117		8,562		209
Mortgage
1-4 family		51,078		1,644		56,545		1,777
Resort lending		18,523		507		19,623		581
Home equity line of credit - 1st lien		159		6		159		5
Home equity line of credit - 2nd lien		154		6		40		1
Installment
Home equity installment - 1st lien		2,582		141		2,860		132
Home equity installment - 2nd lien		3,086		147		3,396		143
Loans not secured by real estate		669		29		721		26
Other		11		1		15		1
		99,669		3,085		108,736		3,412
Total
Commercial
Income producing - real estate		19,242		622		20,865		706
Land, land development & construction-real estate		3,337		92		5,227		163
Commercial and industrial		9,649		312		12,079		338
Mortgage
1-4 family		51,096		1,649		56,582		1,777
Resort lending		18,538		507		19,661		582
Home equity line of credit - 1st lien		159		6		159		5
Home equity line of credit - 2nd lien		154		6		40		1
Installment
Home equity installment - 1st lien		2,582		142		2,860		133
Home equity installment - 2nd lien		3,086		147		3,396		143
Loans not secured by real estate		669		29		721		26
Other		11		1		15		1
Total	$	108,523	$	3,513	$	121,605	$	3,875

(1) There were no impaired payment plan receivables during the nine month periods ended September 30, 2015 and 2014, respectively.

Our average investment in impaired loans was approximately $105.7 million and $118.2 million for the three-month periods ended September 30, 2015 and 2014, respectively and $108.5 million and $121.6 million for the nine-month periods ended September 30, 2015 and 2014, respectively.  Cash receipts on impaired loans on non-accrual status are generally applied to the principal balance.  Interest income recognized on impaired loans during the three months ending September 30, 2015 and 2014, was approximately $1.1 million and $1.3 million, respectively, and was approximately $3.5 million and $3.9 million during the nine months ending September 30, 2015 and 2014, respectively.

Troubled debt restructurings follow:

	September 30, 2015
	Commercial		Retail			Total
	(In thousands)
Performing TDRs	$	22,257	$	69,726		$	91,983
Non-performing TDRs(1)		1,501		3,887	(2)		5,388
Total	$	23,758	$	73,613		$	97,371
	December 31, 2014
	Commercial		Retail			Total
	(In thousands)
Performing TDRs	$	29,475	$	73,496		$	102,971
Non-performing TDRs(1)		1,978		5,225	(2)		7,203
Total	$	31,453	$	78,721		$	110,174

(1) Included in non-performing loans table above.

(2) Also includes loans on non-accrual at the time of modification until six payments are received on a timely basis.

We allocated $10.5 million and $12.2 million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of September 30, 2015 and December 31, 2014, respectively.

During the nine months ended September 30, 2015 and 2014, the terms of certain loans were modified as troubled debt restructurings. 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 new debt 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 230 months in certain circumstances.

Loans that have been classified as troubled debt restructurings during the three-month periods endedSeptember 30 follow:

	Number of Contracts		Pre-modification Recorded Balance		Post-modification Recorded Balance
	(Dollars in thousands)
2015
Commercial
Income producing - real estate		-	$	-	$	-
Land, land development & construction-real estate		-		-		-
Commercial and industrial		1		48		26
Mortgage
1-4 family		3		343		344
Resort lending		-		-		-
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		-		-		-
Loans not secured by real estate		1		19		19
Other		-		-		-
Total		5	$	410	$	389
2014
Commercial
Income producing - real estate		-	$	-	$	-
Land, land development & construction-real estate		1		40		36
Commercial and industrial		5		716		693
Mortgage
1-4 family		1		87		87
Resort lending		1		378		367
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		3		118		96
Home equity - 2nd lien		-		-		-
Loans not secured by real estate		1		55		53
Other		-		-		-
Total		12	$	1,394	$	1,332

Loans that have been classified as troubled debt restructurings during the nine-month periods endedSeptember 30 follow:

	Number of Contracts		Pre-modification Recorded Balance		Post-modification Recorded Balance
	(Dollars in thousands)
2015
Commercial
Income producing - real estate		2	$	229	$	234
Land, land development & construction-real estate		-		-		-
Commercial and industrial		4		301		273
Mortgage
1-4 family		9		1,373		1,189
Resort lending		1		313		309
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		5		190		164
Home equity - 2nd lien		3		58		58
Loans not secured by real estate		2		19		25
Other		-		-		-
Total		26	$	2,483	$	2,252
2014
Commercial
Income producing - real estate		3	$	354	$	326
Land, land development & construction-real estate		2		55		50
Commercial and industrial		11		2,083		1,524
Mortgage
1-4 family		8		1,037		1,049
Resort lending		4		1,011		997
Home equity - 1st lien		1		17		13
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		8		538		465
Home equity - 2nd lien		5		294		284
Loans not secured by real estate		3		88		80
Other		-		-		-
Total		45	$	5,477	$	4,788

The troubled debt restructurings described above for 2015 decreased the allowance for loan losses by $0.05 million and resulted in zero charge offs during the three months ended September 30, 2015, and increased the allowance by $0.05 million and resulted in zero charge offs during the nine months ended September 30, 2015.

The troubled debt restructurings described above for 2014 increased the allowance for loan losses by $0.2 million and resulted in zero charge offs during the three months ended September 30, 2014 and increased the allowance by $0.2 million and resulted in $0.01 million of charge offs during the nine months ended September 30, 2014.

Loans that have been classified as troubled debt restructurings during the past twelve months and thathave subsequently defaulted during the three-month periods ended September 30 follow:

	Number of Contracts		Recorded Balance
	(Dollars in thousands)
2015
Commercial
Income producing - real estate		-	$	-
Land, land development & construction-real estate		-		-
Commercial and industrial		-		-
Mortgage
1-4 family		1		54
Resort lending		-		-
Home equity - 1st lien		-		-
Home equity - 2nd lien		-		-
Installment
Home equity - 1st lien		-		-
Home equity - 2nd lien		-		-
Loans not secured by real estate		-		-
Other		-		-
		1	$	54
2014
Commercial
Income producing - real estate		-	$	-
Land, land development & construction-real estate		-		-
Commercial and industrial		1		66
Mortgage
1-4 family		1		125
Resort lending		-		-
Home equity - 1st lien		-		-
Home equity - 2nd lien		-		-
Installment
Home equity - 1st lien		-		-
Home equity - 2nd lien		-		-
Loans not secured by real estate		-		-
Other		-		-
		2	$	191

Loans that have been classified as troubled debt restructurings during the past twelve months and thathave subsequently defaulted during the nine-month periods ended September 30 follow:

	Number of Contracts		Recorded Balance
	(Dollars in thousands)
2015
Commercial
Income producing - real estate		-	$	-
Land, land development & construction-real estate		-		-
Commercial and industrial		2		157
Mortgage
1-4 family		1		54
Resort lending		-		-
Home equity - 1st lien		-		-
Home equity - 2nd lien		-		-
Installment
Home equity - 1st lien		-		-
Home equity - 2nd lien		-		-
Loans not secured by real estate		1		4
Other		-		-
		4	$	215
2014
Commercial
Income producing - real estate		-	$	-
Land, land development & construction-real estate		-		-
Commercial and industrial		2		319
Mortgage
1-4 family		1		125
Resort lending		-		-
Home equity - 1st lien		-		-
Home equity - 2nd lien		-		-
Installment
Home equity - 1st lien		-		-
Home equity - 2nd lien		-		-
Loans not secured by real estate		-		-
Other		-		-
		3	$	444

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

The troubled debt restructurings that subsequently defaulted described above for 2015 decreased the allowance for loan losses by $0.01 million and resulted in zero charge offs during the three months ended September 30, 2015 and had no impact on the allowance for loan losses and resulted in zero charge offs during the nine months ended September 30, 2015.

The troubled debt restructurings that subsequently defaulted described above for 2014 had no impact on the allowance for loan losses and resulted in no charge offs during the three months ended September 30, 2014 and increased the allowance for loan losses by $0.01 million and resulted in no charge offs during the nine months ended September 30, 2014.

The terms of certain other loans were modified during the nine months ended September 30, 2015 and 2014 in a manner that did not meet the definition of a troubled debt restructuring.  The modification of these loans could have included modification of the terms of a loan to borrowers who were not experiencing financial difficulties or a delay in a payment that was considered to be insignificant.

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.

Credit Quality Indicators – As part of our on 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, (d) financial performance of certain counterparties for payment plan receivables and (e) 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. This rating includes 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. This rating includes loans to borrowers with weaknesses that make collection of debt 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 loan segment:

	Commercial
		Non-watch 1-6		Watch 7-8		Substandard Accrual 9		Non- Accrual 10-11	Total
					(In thousands)
September 30, 2015
Income producing - real estate	$	261,676	$	7,013	$	1,126	$	5,135	$	274,950
Land, land development and construction - real estate		38,135		3,307		247		533		42,222
Commercial and industrial		371,193		29,285		7,888		2,318		410,684
Total	$	671,004	$	39,605	$	9,261	$	7,986	$	727,856
Accrued interest included in total	$	1,304	$	189	$	7	$	-	$	1,500
December 31, 2014
Income producing - real estate	$	241,266	$	8,649	$	1,918	$	1,233	$	253,066
Land, land development and construction - real estate		30,869		2,485		390		594		34,338
Commercial and industrial		372,947		23,475		5,998		2,746		405,166
Total	$	645,082	$	34,609	$	8,306	$	4,573	$	692,570
Accrued interest included in total	$	1,479	$	111	$	25	$	-	$	1,615

For each of our mortgage and installment 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 segments:

	Mortgage (1)
	1-4 Family		Resort Lending		Home Equity 1st Lien		Home Equity 2nd Lien		Total
	(In thousands)
September 30, 2015
800 and above	$	27,538	$	12,627	$	4,859	$	6,717	$	51,741
750-799		77,238		42,522		6,280		16,387		142,427
700-749		50,309		33,785		4,076		11,985		100,155
650-699		52,898		16,771		3,565		8,022		81,256
600-649		28,698		5,666		1,872		3,639		39,875
550-599		16,809		2,546		647		1,957		21,959
500-549		13,983		1,253		758		1,089		17,083
Under 500		4,098		992		210		404		5,704
Unknown		7,829		2,126		238		412		10,605
Total	$	279,400	$	118,288	$	22,505	$	50,612	$	470,805
Accrued interest included in total	$	1,427	$	508	$	92	$	200	$	2,227
December 31, 2014
800 and above	$	27,918	$	14,484	$	3,863	$	6,225	$	52,490
750-799		72,674		45,950		6,128		14,323		139,075
700-749		52,843		32,660		3,054		9,642		98,199
650-699		51,664		20,250		3,257		8,194		83,365
600-649		27,770		6,538		1,704		3,862		39,874
550-599		21,361		3,639		994		1,721		27,715
500-549		14,575		2,156		699		1,401		18,831
Under 500		6,306		875		261		632		8,074
Unknown		4,075		2,184		242		674		7,175
Total	$	279,186	$	128,736	$	20,202	$	46,674	$	474,798
Accrued interest included in total	$	1,311	$	562	$	88	$	209	$	2,170

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

	Installment (1)
	Home Equity 1st Lien		Home Equity 2nd Lien		Loans not Secured by Real Estate		Other		Total
	(In thousands)
September 30, 2015
800 and above	$	1,953	$	1,840	$	40,348	$	59	$	44,200
750-799		4,411		6,624		89,310		568		100,913
700-749		2,685		4,667		38,237		617		46,206
650-699		3,783		4,138		15,224		479		23,624
600-649		2,161		2,254		4,758		260		9,433
550-599		1,919		1,547		2,080		124		5,670
500-549		760		851		976		50		2,637
Under 500		744		280		461		11		1,496
Unknown		64		104		1,963		5		2,136
Total	$	18,480	$	22,305	$	193,357	$	2,173	$	236,315
Accrued interest included in total	$	70	$	82	$	519	$	17	$	688
December 31, 2014
800 and above	$	2,272	$	2,835	$	31,507	$	60	$	36,674
750-799		5,677		8,557		66,558		583		81,375
700-749		3,111		6,358		28,179		689		38,337
650-699		3,963		5,477		16,152		615		26,207
600-649		3,434		2,408		5,128		255		11,225
550-599		2,019		1,913		1,896		134		5,962
500-549		1,128		1,036		1,672		84		3,920
Under 500		393		427		455		28		1,303
Unknown		77		81		1,842		44		2,044
Total	$	22,074	$	29,092	$	153,389	$	2,492	$	207,047
Accrued interest included in total	$	93	$	112	$	445	$	19	$	669

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

Mepco Finance Corporation (“Mepco”) is a wholly-owned subsidiary of our Bank that operates a vehicle service contract payment plan business throughout the United States. See Note #14 for more information about Mepco’s business. As of September 30, 2015, approximately 62.9% of Mepco’s outstanding payment plan receivables relate to programs in which a third party insurer or risk retention group is obligated to pay Mepco the full refund owing upon cancellation of the related service contract (including with respect to both the portion funded to the service contract seller and the portion funded to the administrator). These receivables are shown as “Full Refund” in the table below. Another approximately 22.5% of Mepco’s outstanding payment plan receivables as of September 30, 2015, relate to programs in which a third party insurer or risk retention group is obligated to pay Mepco the refund owing upon cancellation only with respect to the unearned portion previously funded by Mepco to the administrator (but not to the service contract seller). These receivables are shown as “Partial Refund” in the table below. The balance of Mepco’s outstanding payment plan receivables relate to programs in which there is no insurer or risk retention group that has any contractual liability to Mepco for any portion of the refund amount. These receivables are shown as “Other” in the table below. For each class of our payment plan receivables we monitor financial information on the counterparties as we evaluate the credit quality of this portfolio.

The following table summarizes credit ratings of insurer or risk retention group counterparties by class of payment plan receivable:

	Payment Plan Receivables
	Full Refund		Partial Refund		Other		Total
	(In thousands)
September 30, 2015
AM Best rating
A+	$	-	$	8	$	-	$	8
A		3,711		7,572		-		11,283
A-		3,226		753		5,470		9,449
Not rated		16,595		95		8		16,698
Total	$	23,532	$	8,428	$	5,478	$	37,438
December 31, 2014
AM Best rating
A+	$	-	$	43	$	-	$	43
A		10,007		6,190		-		16,197
A-		1,989		685		5,054		7,728
Not rated		15,857		176		-		16,033
Total	$	27,853	$	7,094	$	5,054	$	40,001

Although Mepco has contractual recourse against various counterparties for refunds owing upon cancellation of vehicle service contracts, see Note #14 below regarding certain risks and difficulties associated with collecting these refunds.

Foreclosed residential real estate properties included in other real estate and repossessed assets on our Condensed Consolidated Statements of Financial Condition totaled $2.8 million and $2.9 million at September 30, 2015 and December 31, 2014, respectively.  Retail mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process according to local requirements totaled $1.1 million and $2.5 million at September 30, 2015 and December 31, 2014, respectively.

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New Accounting Standards (Policies)

9 Months Ended

Sep. 30, 2015

New Accounting Standards [Abstract]

New Accounting Standards

In January 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-04, “Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure”. The amendments in this ASU clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. This amendment is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014, with early adoption and retrospective or prospective application permitted.  This amended guidance became effective for us on January 1, 2015, and did not have a material impact on our consolidated operating results or financial condition.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”. This ASU supersedes and replaces nearly all existing revenuerecognition guidance, including industry-specific guidance, establishes a new control-based revenue recognition model, changes the basis fordeciding when revenue is recognized over time or at a point in time, provides new and more detailed guidance on specific topics and expands and improvesdisclosures about revenue. In addition, this ASU specifies the accounting for some costs to obtain or fulfill a contract with a customer.  This amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption for fiscal years beginning after December 15, 2016, permitted. This amended guidance is not expected to have a material impact on our consolidated operating results or financial condition.

In June 2014, the FASB issued ASU 2014-12, “Compensation – Stock Compensation (Topic 718) – Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period”.  This ASU amends existing guidance related to the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. These amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition.  The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. This amended guidance is effective for us on January 1, 2016, and is not expected to have a material impact on our consolidated operating results or financial condition.

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Fair Value Disclosures

9 Months Ended

Sep. 30, 2015

Fair Value Disclosures [Abstract]

Fair Value Disclosures

12. 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 (trading or available for sale) are classified as Level 1 of the valuation hierarchy.  Level 1 securities include certain preferred stocks included in our trading portfolio for which there are quoted prices in active markets.  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 include agency securities, private label residential mortgage-backed securities, other asset backed securities, municipal securities, trust preferred securities and corporate securities.

Loans held for sale:  The fair value of mortgage loans held for sale is based on mortgage backed security 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. We measure our investment in an impaired loan based on one of three methods: the loan’s observable market price, the fair value of the collateral or the present value of expected future cash flows discounted at the loan’s effective interest rate. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At September 30, 2015 and December 31, 2014, all of our total impaired loans were evaluated based on either the fair value of the collateral or the present value of expected future cash flows discounted at the loan’s effective interest rate. 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 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 owned 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 (for commercial properties over $0.25 million) or a member of our Collateral Evaluation Department (for commercial properties under $0.25 million) or a member of our Special Assets Group (for retail 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 retail 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 nonrecurring 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 and 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 agreements is based on a discounted cash flow analysis whose 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, 2015:
Measured at Fair Value on a Recurring Basis:
Assets
Trading securities	$	225	$	225	$	-	$	-
Securities available for sale
U.S. agency		50,735		-		50,735		-
U.S. agency residential mortgage-backed		208,290		-		208,290		-
U.S. agency commercial mortgage-backed		35,338		-		35,338		-
Private label residential mortgage-backed		5,129		-		5,129		-
Other asset backed		131,772		-		131,772		-
Obligations of states and political subdivisions		136,732		-		136,732		-
Corporate		34,106		-		34,106		-
Trust preferred		2,560		-		2,560		-
Loans held for sale		25,462		-		25,462		-
Derivatives (1)		1,623		-		1,623		-
Liabilities
Derivatives (2)		1,209		-		1,209		-
Measured at Fair Value on a Non-recurring basis:
Assets
Capitalized mortgage loan servicing rights (3)		7,931		-		-		7,931
Impaired loans (4)
Commercial
Income producing - real estate		4,083		-		-		4,083
Land, land development & construction-real estate		203		-		-		203
Commercial and industrial		1,426		-		-		1,426
Mortgage
1-4 Family		577		-		-		577
Resort Lending		138		-		-		138
Other real estate (5)
Commercial
Land, land development & construction-real estate		639		-		-		639
Commercial and industrial		165		-		-		165
Mortgage
1-4 Family		51		-		-		51
Resort Lending		107		-		-		107
Installment
Home equity - 1st lien		36		-		-		36

(1) Included in accrued income and other assets

(2) Included in accrued expenses and other liabilities

(3) Only includes servicing rights that are carried at fair value due to recognition of a valuation allowance.

(4) Only includes impaired loans with specific loss allocations based on collateral value.

(5) Only includes other real estate with subsequent write downs to fair value.

			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, 2014:
Measured at Fair Value on a Recurring Basis:
Assets
Trading securities	$	203	$	203	$	-	$	-
Securities available for sale
U.S. agency		35,006		-		35,006		-
U.S. agency residential mortgage-backed		257,558		-		257,558		-
U.S. agency commercial mortgage-backed		33,728		-		33,728		-
Private label residential mortgage-backed		6,013		-		6,013		-
Other asset backed		32,353		-		32,353		-
Obligations of states and political subdivisions		143,415		-		143,415		-
Corporate		22,664		-		22,664		-
Trust preferred		2,441		-		2,441		-
Loans held for sale		23,662		-		23,662		-
Derivatives (1)		619		-		619		-
Liabilities
Derivatives (2)		366		-		366		-
Measured at Fair Value on a Non-recurring basis:
Assets
Capitalized mortgage loan servicing rights (3)		9,197		-		-		9,197
Impaired loans (4)
Commercial
Income producing - real estate		869		-		-		869
Land, land development & construction-real estate		354		-		-		354
Commercial and industrial		2,601		-		-		2,601
Mortgage
1-4 Family		1,306		-		-		1,306
Other real estate (5)
Commercial
Income producing - real estate		479		-		-		479
Land, land development & construction-real estate		737		-		-		737
Mortgage
1-4 Family		102		-		-		102
Resort Lending		575		-		-		575
Installment
Home equity - 1st lien		13		-		-		13

(1) Included in accrued income and other assets

(2) Included in accrued expenses and other liabilities

(3) Only includes servicing rights that are carried at fair value due to recognition of a valuation allowance.

(4) Only includes impaired loans with specific loss allocations based on collateral value.

(5) Only includes other real estate with subsequent write downs to fair value.

There were no transfers between Level 1 and Level 2 during the nine months ended September 30, 2015 and 2014.

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
		2015						2014
		Net Gains (Losses) on Assets				Total Change in Fair Values Included in Current Period		Net Gains (Losses) on Assets				Total Change in Fair Values Included in Current Period
		Securities		Loans		Earnings		Securities		Loans		Earnings
	(In thousands)
Trading securities		$	22	$	-	$	22	$	32	$	-	$	32
Loans held for sale			-		311		311		-		127		127

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.

The following represent impairment charges recognized during the three and nine month periods ended September 30, 2015 and 2014 relating to assets measured at fair value on a non-recurring basis:

· Capitalized mortgage loan servicing rights, whose individual strata are measured at fair value, had a carrying amount of $7.9 million which is net of a valuation allowance of $4.1 million at September 30, 2015, and had a carrying amount of $9.2 million which is net of a valuation allowance of $3.8 million at December 31, 2014.  A recovery (charge) of $(0.9) million and $(0.3) million was included in our results of operations for the three and nine month periods ending September 30, 2015, respectively and $0.5 million and $0.04 million during the same periods in 2014.

· Loans which are measured for impairment using the fair value of collateral for collateral dependent loans had a carrying amount of $10.3 million, with a valuation allowance of $3.8 million at September 30, 2015, and had a carrying amount of $8.2 million, with a valuation allowance of $3.1 million at December 31, 2014.  The provision for loan losses included in our results of operations relating to impaired loans was an expense of $1.0 million and $0.5 million for the three month periods ending September 30, 2015 and 2014, respectively, and an expense of $1.9 million and $1.4 million for the nine month periods ending September 30, 2015 and 2014, respectively.

· Other real estate, which is measured using the fair value of the property, had a carrying amount of $1.0 million which is net of a valuation allowance of $1.7 million at September 30, 2015, and a carrying amount of $1.9 million which is net of a valuation allowance of $2.5 million at December 31, 2014.  An additional charge relating to other real estate measured at fair value of $0.03 million and $0.30 million was included in our results of operations during the three and nine month periods ended September 30, 2015, respectively and $0.3 million and $0.4 million during the same periods in 2014.

We had no assets or liabilities measured at fair value on a recurring basis that used significant unobservable inputs (Level 3) during the nine months ended September 30, 2015 and 2014.

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

	Asset (Liability) Fair Value		Valuation Technique	Unobservable Inputs	Weighted Average
	(In thousands)
September 30, 2015
Capitalized mortgage loan servicing rights	$	7,931	Present value of net servicing revenue	Discount rate		10.03	%
				Cost to service	$	80
				Ancillary income		24
				Float rate		1.38	%
Impaired loans
Commercial (1)		5,309	Sales comparison approach	Adjustment for differences between comparable sales		(7.2	)%
			Income approach	Capitalization rate		9.3
Mortgage		715	Sales comparison approach	Adjustment for differences between comparable sales		4.1
Other real estate
Commercial		804	Sales comparison approach	Adjustment for differences between comparable sales		(3.9	)
Mortgage and installment		194	Sales comparison approach	Adjustment for differences between comparable sales		75.6
December 31, 2014
Capitalized mortgage loan servicing rights	$	9,197	Present value of net servicing revenue	Discount rate		10.07	%
				Cost to service	$	82
				Ancillary income		25
				Float rate		1.77	%
Impaired loans
Commercial (1)		2,751	Sales comparison approach	Adjustment for differences between comparable sales		(3.8	)%
			Income approach	Capitalization rate		9.3
Mortgage		1,306	Sales comparison approach	Adjustment for differences between comparable sales		8.6
Other real estate
Commercial		1,216	Sales comparison approach	Adjustment for differences between comparable sales		(9.0	)
Mortgage and installment		690	Sales comparison approach	Adjustment for differences between comparable sales		34.3

(1) In addition to the valuation techniques and unobservable inputs discussed above, at September 30, 2015 and December 31, 2014, we had an impaired collateral dependent commercial relationship that totaled $0.4 million and $1.1 million, respectively that was primarily secured by collateral other than real estate.  Collateral securing this relationship primarily included machinery and equipment and inventory at September 30, 2015 and also included accounts receivable at December 31, 2014.  Valuation techniques at September 30, 2015, included discounting restructuring firm valuations based on estimates of value recovery of each particular asset type.  Discount rates used ranged from 0% to 100% of stated values.  Valuation techniques at December 31, 2014, included discounting cost and financial statement value approaches based on estimates of value recovery of each particular asset type.  Discount rates used ranged from 35% to 100% of stated values.

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, 2015	$	25,462	$	935	$	24,527
December 31, 2014		23,662		624		23,038

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Intangible Assets

9 Months Ended

Sep. 30, 2015

Intangible Assets [Abstract]

Intangible Assets

8. Intangible Assets

The following table summarizes intangible assets, net of amortization:

	September 30, 2015				December 31, 2014
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
	(In thousands)
Amortized intangible assets - core deposits	$	6,118	$	3,752	$	6,118	$	3,491

Amortization of other intangibles has been estimated through 2020 and thereafter in the following table.

	(In thousands)
Three months ending December 31, 2015	$	86
2016		347
2017		346
2018		346
2019		346
2020 and thereafter		895
Total	$	2,366

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Shareholders' Equity and Earnings Per Common Share

9 Months Ended

Sep. 30, 2015

Shareholders' Equity and Earnings Per Common Share [Abstract]

Shareholders' Equity and Earnings Per Common Share

6. Shareholders’ Equity and Earnings Per Common Share

On January 21, 2015, our Board of Directors authorized a share repurchase plan (the “Repurchase Plan”) to buy back up to 5% of our outstanding common stock through December 31, 2015.  We expect to accomplish the repurchases through open market transactions, though we could effect 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. The Repurchase Plan does not obligate us to acquire any particular amount of common stock, and it may be modified or suspended at any time at our discretion. We expect to fund any repurchases from cash on hand.  During the nine months ended September 30, 2015, we repurchased 659,162 shares of common stock for an aggregate purchase price of $9.0 million.

On November 15, 2011, we entered into a Tax Benefits Preservation Plan (the "Preservation Plan") with our stock transfer agent, American Stock Transfer & Trust Company. Our Board of Directors adopted the Preservation Plan in an effort to protect the value to our shareholders of our ability to use deferred tax assets such as net operating loss carry forwards to reduce potential future federal income tax obligations. Under federal tax rules, this value could be lost in the event we experienced an "ownership change," as defined in Section 382 of the Internal Revenue Code. The Preservation Plan attempts to protect this value by reducing the likelihood that we will experience such an ownership change by discouraging any person who is not already a 5% shareholder from becoming a 5% shareholder (with certain limited exceptions).

On November 15, 2011, our Board of Directors declared a dividend of one preferred share purchase right (a "Right") for each outstanding share of our common stock under the terms of the Preservation Plan. The dividend is payable to the holders of common stock outstanding as of the close of business on November 15, 2011, or outstanding at any time thereafter but before the earlier of a "Distribution Date" and the date the Preservation Plan terminates. Each Right entitles the registered holder to purchase from us 1/1000 of a share of our Series C Junior Participating Preferred Stock, no par value per share ("Series C Preferred Stock"). Each 1/1000 of a share of Series C Preferred Stock has economic and voting terms similar to those of one whole share of common stock. The Rights are not exercisable and generally do not become exercisable until a person or group has acquired, subject to certain exceptions and conditions, beneficial ownership of 4.99% or more of the outstanding shares of common stock. At that time, each Right will generally entitle its holder to purchase securities of the Company at a discount of 50% to the current market price of the common stock. However, the Rights owned by the person acquiring beneficial ownership of 4.99% or more of the outstanding shares of common stock would automatically be void. The significant dilution that would result is expected to deter any person from acquiring beneficial ownership of 4.99% or more and thereby triggering the Rights.

To date, none of the Rights have been exercised or have become exercisable because no unpermitted 4.99% or more change in the beneficial ownership of the outstanding common stock has occurred. The Rights will generally expire on the earlier to occur of the close of business on November 15, 2016, and certain other events described in the Preservation Plan, including such date as our Board of Directors determines that the Preservation Plan is no longer necessary for its intended purposes.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(In thousands, except per share amounts)
Net income	$	5,047	$	4,929	$	14,447	$	14,119
Weighted average shares outstanding (1)		22,673		22,940		22,852		22,919
Restricted stock units		230		306		283		305
Effect of stock options		118		123		120		126
Stock units for deferred compensation plan for non-employee directors		112		109		111		114
Weighted average shares outstanding for calculation of diluted earnings per share		23,133		23,478		23,366		23,464
Net income per common share
Basic (1)	$	0.22	$	0.21	$	0.63	$	0.62
Diluted	$	0.22	$	0.21	$	0.62	$	0.60

⁽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 share because they were anti-dilutive totaled 0.03 million for both three-month periods ending September 30, 2015 and 2014, respectively and totaled 0.03 million for both nine-month periods ending September 30, 2015 and 2014, respectively.

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Derivative Financial Instruments

9 Months Ended

Sep. 30, 2015

Derivative Financial Instruments [Abstract]

Derivative Financial Instruments

7. 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, 2015
	Notional Amount		Average Maturity (years)		Fair Value
	(Dollars in thousands)
No hedge designation
Rate-lock mortgage loan commitments	$	24,746		0.1	$	823
Mandatory commitments to sell mortgage loans		49,791		0.1		(409	)
Pay-fixed interest rate swap agreements		19,616		7.3		(674	)
Pay-variable interest rate swap agreements		19,616		7.3		674
Purchased options		1,681		5.9		126
Written options		1,681		5.9		(126	)
Total	$	117,131		2.7	$	414
	December 31, 2014
	Notional Amount		Average Maturity (years)		Fair Value
	(Dollars in thousands)
No hedge designation
Rate-lock mortgage loan commitments	$	16,759		0.1	$	437
Mandatory commitments to sell mortgage loans		38,600		0.1		(184	)
Pay-fixed interest rate swap agreements		3,300		9.4		(182	)
Pay-variable interest rate swap agreements		3,300		9.4		182
Total	$	61,959		1.1	$	253

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 earnings.

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.  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.

During 2014, we began 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 in the table above relate to this program.

During the third quarter of 2015, we began offering to our deposit customers an equity linked time deposit product (“Altitude CD”).  The Altitude CD is a time deposit that provides the customer a guaranteed return of principle 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.

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, 2015			December 31, 2014			September 30, 2015			December 31, 2014
	Balance  Sheet  Location	Fair Value		Balance  Sheet  Location	Fair Value		Balance  Sheet  Location	Fair Value		Balance  Sheet  Location	Fair Value
	(In thousands)
Derivatives not designated as hedging instruments
Rate-lock mortgage loan commitments	Other assets	$	823	Other assets	$	437	Other liabilities	$	-	Other liabilities	$	-
Mandatory commitments to sell mortgage loans	Other assets		-	Other assets		-	Other liabilities		409	Other liabilities		184
Pay-fixed interest rate swap agreements	Other assets		-	Other assets		-	Other liabilities		674	Other liabilities		182
Pay-variable interest rate swap agreements	Other assets		674	Other assets		182	Other liabilities		-	Other liabilities		-
Purchased options	Other assets		126	Other assets		-	Other liabilities		-	Other liabilities		-
Written options	Other assets		-	Other assets		-	Other liabilities		126	Other liabilities		-
Total derivatives		$	1,623		$	619		$	1,209		$	366

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

Three Month Periods Ended September 30,
	Gain (Loss) Recognized in Other Comprehensive Income (Effective Portion)				Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective	Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)					Location of Gain (Loss) Recognized	Gain (Loss) Recognized in Income
	2015		2014		Portion)	2015		2014			in Income (1)	2015			2014
	(In thousands)
Cash Flow Hedges
Pay-fixed interest rate swap agreements (2)	$	-	$	-	Interest expense	$	-	$	(95	)		$	-		$	-
Total	$	-	$	-		$	-	$	(95	)		$	-		$	-
No hedge designation
Rate-lock mortgage loan commitments											Net mortgage loan gains	$	281		$	(77	)
Mandatory commitments to sell mortgage loans											Net mortgage loan gains		(745	)		220
Pay-fixed interest rate swap agreements											Interest income		(452	)		7
Pay-variable interest rate swap agreements											Interest income		452			(7	)
Purchased options											Interest expense		126			-
Written options											Interest expense		(126	)		-
U.S. Treasury short position											Gain on securities		-			127
Total												$	(464	)	$	270

(1) For cash flow hedges, this location and amount refers to the ineffective portion.

(2) Relates to a terminated pay-fixed interest rate swap whose termination fee was included in accumulated other comprehensive loss and was being amortized into earnings through December 31, 2014.

	Nine Month Periods Ended September 30,
	Gain (Loss) Recognized in Other Comprehensive Income (Effective Portion)				Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective	Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)					Location of Gain (Loss) Recognized	Gain (Loss) Recognized in Income
	2015		2014		Portion)	2015		2014			in Income (1)	2015			2014
	(In thousands)
Cash Flow Hedges
Pay-fixed interest rate swap agreements (2)	$	-	$	-	Interest expense	$	-	$	(285	)		$	-		$	-
Total	$	-	$	-		$	-	$	(285	)		$	-		$	-
No hedge designation
Rate-lock mortgage loan commitments											Net mortgage loan gains	$	386		$	147
Mandatory commitments to sell mortgage loans											Net mortgage loan gains		(225	)		(134	)
Pay-fixed interest rate swap agreements											Interest income		(492	)		(92	)
Pay-variable interest rate swap agreements											Interest income		492			92
Purchased options											Interest expense		126			-
Written options											Interest expense		(126	)		-
U.S. Treasury short position											Gain on securities		-			179
Total												$	161		$	192

(1) For cash flow hedges, this location and amount refers to the ineffective portion.

(2) Relates to a terminated pay-fixed interest rate swap whose termination fee was included in accumulated other comprehensive loss and was being amortized into earnings through December 31, 2014.

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Share Based Compensation

9 Months Ended

Sep. 30, 2015

Share Based Compensation [Abstract]

Share Based Compensation

9. 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 0.3 million shares of common stock as of September 30, 2015.  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, 2015. 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.

During each first quarter period of 2015 and 2014, pursuant to our long-term incentive plan, we granted 0.07 million shares of restricted stock and 0.03 million performance stock units (“PSU”) to certain officers.  The shares of restricted stock issued during 2015 cliff vest after a period of three years, the shares of restricted stock issued during 2014 vest ratably over three years and the PSUs issued in both periods 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 peers in the banking industry.  No long term incentive grants were made during the second or third quarters of 2015 or 2014.

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 are issued each quarter and vest immediately.  We issued 0.004 million shares and 0.011 million shares to directors during the first nine months of 2015 and 2014, 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 $1.1 million during the three and nine month periods ended September 30, 2015, respectively, and was $0.3 million and $0.8 million during the same periods in 2014, respectively.  The corresponding tax benefit relating to this expense was $0.1 million and $0.4 million for the three and nine month periods ended September 30, 2015, respectively and $0.1 million and $0.3 million for the same periods in 2014. Total expense recognized for non-employee director share based payments was $0.02 million and $0.05 million during the three and nine month periods ended September 30, 2015, respectively, and was $0.05 million and $0.14 million during the same periods in 2014, respectively.  The corresponding tax benefit relating to this expense was $0.01 million and $0.02 million for the three and nine month periods ended September 30, 2015, respectively and $0.02 million and $0.05 million during the same periods in 2014.

At September 30, 2015, the total expected compensation cost related to non-vested stock options, restricted stock, PSUs and restricted stock unit awards not yet recognized was $1.8 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, 2015		281,820		$	4.69
Granted		-
Exercised		(31,450	)		3.35
Forfeited		(2,096	)		4.77
Expired		(1,924	)		6.79
Outstanding at September 30, 2015		246,350		$	4.85		6.35	$	2,472
Vested and expected to vest at
September 30, 2015		245,298		$	4.84		6.35	$	2,463
Exercisable at September 30, 2015		222,742		$	4.70		6.22	$	2,271

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

	Number of Shares			Weighted- Average Grant Date Fair Value
Outstanding at January 1, 2015		407,130		$	6.31
Granted		108,422			13.06
Vested		(249,526	)		3.92
Forfeited		(4,384	)		12.88
Outstanding at September 30, 2015		261,642		$	11.28

During the third quarter of 2015, 0.23 million restricted stock units relating to a grant in 2012 vested.  In addition, as permitted by our long-term incentive plan, 0.07 million shares were withheld from the shares that would otherwise have been issued to executive officers for these vesting restricted stock units in order to satisfy tax withholding obligations. 

Certain information regarding options exercised during the periods follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(In thousands)
Intrinsic value	$	71	$	123	$	314	$	231
Cash proceeds received	$	23	$	30	$	105	$	66
Tax benefit realized	$	25	$	44	$	110	$	81

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Accumulated Other Comprehensive Loss (Tables)

9 Months Ended

Sep. 30, 2015

Accumulated Other Comprehensive Loss ("AOCL") [Abstract]

Schedule of accumulated other comprehensive income (loss)

A summary of changes in AOCL follows:

	Unrealized Gains (Losses) on Available for Sale Securities			Dispropor- tionate Tax Effects from Securities Available for Sale			Unrealized Losses on Settled Derivatives			Total
For the three months ended September 30,
2015
Balances at beginning of period	$	408		$	(5,798	)	$	-		$	(5,390	)
Other comprehensive loss before reclassifications		894			-			-			894
Amounts reclassified from AOCL		-			-			-			-
Net current period other comprehensive income		894			-			-			894
Balances at end of period	$	1,302		$	(5,798	)	$	-		$	(4,496	)
2014
Balances at beginning of period	$	(376	)	$	(5,798	)	$	(124	)	$	(6,298	)
Other comprehensive income before reclassifications		226			-			-			226
Amounts reclassified from AOCL		(73	)		-			62			(11	)
Net current period other comprehensive income		153			-			62			215
Balances at end of period	$	(223	)	$	(5,798	)	$	(62	)	$	(6,083	)
For the nine months ended September 30,
2015
Balances at beginning of period	$	162		$	(5,798	)	$	-		$	(5,636	)
Other comprehensive income before reclassifications		1,189			-			-			1,189
Amounts reclassified from AOCL		(49	)		-			-			(49	)
Net current period other comprehensive income		1,140			-			-			1,140
Balances at end of period	$	1,302		$	(5,798	)	$	-		$	(4,496	)
2014
Balances at beginning of period	$	(3,200	)	$	(5,798	)	$	(247	)	$	(9,245	)
Other comprehensive income before reclassifications		3,051			-			-			3,051
Amounts reclassified from AOCL		(74	)		-			185			111
Net current period other comprehensive income		2,977			-			185			3,162
Balances at end of period	$	(223	)	$	(5,798	)	$	(62	)	$	(6,083	)

Summary of reclassifications out of each component of AOCL

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

AOCL Component	Amount Reclassified From AOCL			Affected Line Item in Condensed  Consolidated Statements of Operations
	(In thousands)
2015
Unrealized gains on available for sale securities
	$	-		Net gains on securities
		-		Net impairment loss recognized in earnings
		-		Total reclassifications before tax
		-		Tax expense
	$	-		Reclassifications, net of tax
2014
Unrealized gains on available for sale securities
	$	121		Net gains on securities
		(9	)	Net impairment loss recognized in earnings
		112		Total reclassifications before tax
		39		Tax expense
	$	73		Reclassifications, net of tax
Unrealized gains on settled derivatives
	$	(95	)	Interest expense
		(33	)	Tax benefit
	$	(62	)	Reclassification, net of tax
	$	11		Total reclassifications for the period, net of tax

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

AOCL Component	Amount Reclassified From AOCL			Affected Line Item in Condensed  Consolidated Statements of Operations
	(In thousands)
2015
Unrealized gains on available for sale securities
	$	75		Net gains on securities
		-		Net impairment loss recognized in earnings
		75		Total reclassifications before tax
		26		Tax expense
	$	49		Reclassifications, net of tax
2014
Unrealized gains on available for sale securities
	$	123		Net gains on securities
		(9	)	Net impairment loss recognized in earnings
		114		Total reclassifications before tax
		40		Tax expense
	$	74		Reclassifications, net of tax
Unrealized gains on settled derivatives
	$	(285	)	Interest expense
		(100	)	Tax benefit
	$	(185	)	Reclassification, net of tax
	$	(111	)	Total reclassifications for the period, net of tax

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Fair Value Disclosures, Part 3 (Details) - USD ($)		9 Months Ended	12 Months Ended
		Sep. 30, 2015	Dec. 31, 2014
Asset (Liability) Fair Value [Abstract]
Capitalized mortgage loan servicing rights		$ 7,931,000	$ 9,197,000
Impaired Loans Commercial [Member]
Impaired loan [Abstract]
Commercial	[1]	5,309,000	2,751,000
Unobservable Inputs Weighted Average [Abstract]
Total impaired collateral value		$ 400,000	$ 1,100,000
Impaired Loans Commercial [Member] | Minimum [Member]
Unobservable Inputs Weighted Average [Abstract]
Discount rate		0.00%	35.00%
Impaired Loans Commercial [Member] | Maximum [Member]
Unobservable Inputs Weighted Average [Abstract]
Discount rate		100.00%	100.00%
Mortgage [Member]
Impaired loan [Abstract]
Mortgage		$ 715,000	$ 1,306,000
Other Real Estate Commercial [Member]
Other real estate [Abstract]
Commercial		804,000	1,216,000
Mortgage and Installment [Member]
Other real estate [Abstract]
Mortgage and installment		$ 194,000	$ 690,000
Income Approach [Member] | Impaired Loans Commercial [Member]
Unobservable Inputs Weighted Average [Abstract]
Capitalization rate		9.30%	9.30%
Present Value of Net Servicing Revenue [Member]
Unobservable Inputs Weighted Average [Abstract]
Discount rate		10.03%	10.07%
Cost to service		$ 80	$ 82
Ancillary income		$ 24	$ 25
Float rate		1.38%	1.77%
Sales Comparison Approach [Member] | Impaired Loans Commercial [Member]
Unobservable Inputs Weighted Average [Abstract]
Adjustment for differences between comparable sales		(7.20%)	(3.80%)
Sales Comparison Approach [Member] | Mortgage [Member]
Unobservable Inputs Weighted Average [Abstract]
Adjustment for differences between comparable sales		4.10%	8.60%
Sales Comparison Approach [Member] | Other Real Estate Commercial [Member]
Unobservable Inputs Weighted Average [Abstract]
Adjustment for differences between comparable sales		(3.90%)	(9.00%)
Sales Comparison Approach [Member] | Mortgage and Installment [Member]
Unobservable Inputs Weighted Average [Abstract]
Adjustment for differences between comparable sales		75.60%	34.30%

[1] In addition to the valuation techniques and unobservable inputs discussed above, at September 30, 2015 and December 31, 2014, we had an impaired collateral dependent commercial relationship that totaled $0.4 million and $1.1 million, respectively that was primarily secured by collateral other than real estate. Collateral securing this relationship primarily included machinery and equipment and inventory at September 30, 2015 and also included accounts receivable at December 31, 2014. Valuation techniques at September 30, 2015, included discounting restructuring firm valuations based on estimates of value recovery of each particular asset type. Discount rates used ranged from 0% to 100% of stated values. Valuation techniques at December 31, 2014, included discounting cost and financial statement value approaches based on estimates of value recovery of each particular asset type. Discount rates used ranged from 35% to 100% of stated values.

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Contingent Liabilities

9 Months Ended

Sep. 30, 2015

Contingent Liabilities [Abstract]

Contingent Liabilities

14. Contingent Liabilities

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 approximately $0.5 million. 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 or vehicle service contract counterparty receivables). 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. Risks associated with the likelihood that we will not collect the full amount owed to us, net of reserves, are disclosed elsewhere in this report.

Our Mepco segment conducts its payment plan business activities across the United States. Mepco acquires the payment plans from companies (which we refer to as Mepco’s “counterparties”) at a discount from the face amount of the payment plan. Each payment plan (which are classified as payment plan receivables in our Condensed Consolidated Statements of Financial Condition) permits a consumer to purchase a vehicle service contract by making installment payments, generally for a term of 12 to 24 months, to the sellers of those contracts (one of the “counterparties”). Mepco thereafter collects the payments from consumers. In acquiring the payment plan, Mepco generally funds a portion of the cost to the seller of the service contract and a portion of the cost to the administrator of the service contract. The administrator, in turn, pays the necessary contractual liability insurance policy (“CLIP”) premium to the insurer or risk retention group.

Consumers are allowed to voluntarily cancel the service contract at any time and are generally entitled to receive a refund from the administrator of the unearned portion of the service contract at the time of cancellation. As a result, while Mepco does not owe any refund to the consumer, it also does not have any recourse against the consumer for nonpayment of a payment plan and therefore does not evaluate the creditworthiness of the individual consumer. If a consumer stops making payments on a payment plan or exercises the right to voluntarily cancel the service contract, the service contract seller and administrator are each obligated to refund to Mepco the amount necessary to make Mepco whole as a result of its funding of the service contract. In addition, the insurer or risk retention group that issued the CLIP for the service contract often guarantees all or a portion of the refund to Mepco. See note #4 above for a breakdown of Mepco’s payment plan receivables by the level of recourse Mepco has against various counterparties.

Upon the cancellation of a service contract and the completion of the billing process to the counterparties for amounts due to Mepco, there is a decrease in the amount of “payment plan receivables” and an increase in the amount of “vehicle service contract counterparty receivables” until such time as the amount due from the counterparty is collected. These amounts represent funds actually due to Mepco from its counterparties for cancelled service contracts. At September 30, 2015 and December 31, 2014, the aggregate amount of such obligations owing to Mepco by counterparties, net of write-downs and reserves made through the recognition of vehicle service contract counterparty contingencies expense, totaled $7.3 million and $7.2 million, respectively.  Mepco is currently in the process of working to recover these receivables, primarily through litigation against counterparties.

In some cases, Mepco requires collateral or guaranties by the principals of the counterparties to secure these refund obligations; however, this is generally only the case when no rated insurance company is involved to guarantee the repayment obligation of the seller and administrator counterparties. In most cases, there is no collateral to secure the counterparties’ refund obligations to Mepco, but Mepco has the contractual right to offset unpaid refund obligations against amounts Mepco would otherwise be obligated to fund to the counterparties. In addition, even when collateral is involved, the refund obligations of these counterparties are not fully secured. Mepco incurs losses when it is unable to fully recover funds owing to it by counterparties upon cancellation of the underlying service contracts. The sudden failure of one of Mepco’s major counterparties (an insurance company, administrator, or seller/dealer) could expose us to significant losses.

When counterparties do not honor their contractual obligations to Mepco to repay funds, we recognize estimated losses. Mepco pursues collection (including commencing legal action if necessary) of funds due to it under its various contracts with counterparties.  Mepco has had to initiate litigation against certain counterparties, including third party insurers, to collect amounts owed to Mepco as a result of those parties' dispute of their contractual obligations to Mepco.  Charges related to estimated losses for vehicle service contract counterparty contingencies included in non-interest expense totaled $0.03 million for both three month periods ended September 30, 2015 and 2014, respectively and totaled $0.09 million and $0.17 million for the nine month periods ended September 30, 2015 and 2014, respectively.  These charges are being classified in non-interest expense because they are associated with a default or potential default of a contractual obligation under our counterparty contracts as opposed to loss on the administration of the payment plan itself.

Our estimate of probable incurred losses from vehicle service contract counterparty contingencies requires a significant amount of judgment because a number of factors can influence the amount of loss that we may ultimately incur. These factors include our estimate of future cancellations of vehicle service contracts, our evaluation of collateral that may be available to recover funds due from our counterparties, and our assessment of the amount that may ultimately be collected from counterparties in connection with their contractual obligations.  We apply a rigorous process, based upon historical payment plan activity and past experience, to estimate probable incurred losses and quantify the necessary reserves for our vehicle service contract counterparty contingencies, but there can be no assurance that our modeling process will successfully identify all such losses.

We believe our assumptions regarding the collection of vehicle service contract counterparty receivables are reasonable, and we based them on our good faith judgments using data currently available. We also believe the current amount of reserves we have established and the vehicle service contract counterparty contingencies expense that we have recorded are appropriate given our estimate of probable incurred losses at the applicable Condensed Consolidated Statement of Financial Condition date. However, because of the uncertainty surrounding the numerous and complex assumptions made, actual losses could exceed the charges we have taken to date.

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 and Ginnie Mae). 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 a credit of $0.04 million and zero for the three months ended September 30, 2015 and 2014, respectively and a credit of $0.06 million and $0.5 million for the nine months ended September 30, 2015 and 2014, respectively.  The credit provision in the first nine months of 2015 is due primarily to the settlement of certain loss reimbursement claims at slightly lower amounts than what had been specifically reserved for previously.  The credit provision in the first nine months of 2014 is due primarily to the rescission of certain loss reimbursement requests by Freddie Mac that had been pending and accrued for at the end of 2013.  The reserve for loss reimbursements on sold mortgage loans totaled $0.5 million at both September 30, 2015 and December 31, 2014. 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. The reserve levels at September 30, 2015 and December 31, 2014 also reflect the resolution of the mortgage loan origination years of 2000 to 2008 with Fannie Mae and Freddie Mac.  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.

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Segments (Tables)

9 Months Ended

Sep. 30, 2015

Segments [Abstract]

Summary of selected financial information for reportable segments

A summary of selected financial information for our reportable segments follows:

	IB			Mepco			Other (1)			Elimination (2)			Total
	(In thousands)
Total assets
September 30, 2015	$	2,323,629		$	60,018		$	288,708		$	(277,494	)	$	2,394,861
December 31, 2014		2,174,536			63,378			286,158			(275,342	)		2,248,730
For the three months ended September 30,
2015
Interest income	$	18,973		$	1,320		$	20		$	(20	)	$	20,293
Net interest income		17,964			1,115			(238	)		-			18,841
Provision for loan losses		(238	)		(6	)		-			-			(244	)
Income (loss) before income tax		7,961			(254	)		(358	)		(24	)		7,325
Net income (loss)		5,455			(168	)		(224	)		(16	)		5,047
2014
Interest income	$	18,444		$	1,624		$	25		$	(25	)	$	20,068
Net interest income		17,254			1,338			(409	)		-			18,183
Provision for loan losses		(623	)		(9	)		-			-			(632	)
Income (loss) before income tax		7,459			247			(408	)		(24	)		7,274
Net income (loss)		5,048			163			(266	)		(16	)		4,929
For the nine months ended September 30,
2015
Interest income	$	55,895		$	4,081		$	60		$	(60	)	$	59,976
Net interest income		52,864			3,468			(699	)		-			55,633
Provision for loan losses		(1,032	)		(5	)		-			-			(1,037	)
Income (loss) before income tax		23,063			(766	)		(1,097	)		(71	)		21,129
Net income (loss)		15,623			(437	)		(693	)		(46	)		14,447
2014
Interest income	$	55,153		$	5,555		$	41		$	(41	)	$	60,708
Net interest income		51,721			4,500			(1,022	)		-			55,199
Provision for loan losses		(2,018	)		(31	)		-			-			(2,049	)
Income (loss) before income tax		20,151			908			(1,210	)		(71	)		19,778
Net income (loss)		14,345			607			(665	)		(168	)		14,119

(1) Includes amounts relating to our parent company and certain insignificant operations.

(2) Includes parent company's investment in subsidiaries and cash balances maintained at subsidiary.

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Fair Value Disclosures Part 1 (Details) - USD ($) $ in Thousands		Sep. 30, 2015	Dec. 31, 2014
Fair Value Disclosures [Abstract]
Value of collateral-dependent impaired loans that will be reviewed by independent third party, minimum		$ 250
Value of collateral-dependent impaired loans that will be reviewed by special assets group, maximum		250
Assets [Abstract]
Trading securities		225	$ 203
Securities available for sale		604,662	533,178
Assets [Abstract]
Capitalized mortgage loan servicing rights		7,931	9,197
U.S. Agency [Member]
Assets [Abstract]
Securities available for sale		50,735	35,006
U.S. Agency Residential Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		208,290	257,558
U.S. Agency Commercial Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		35,338	33,728
Private Label Residential Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		5,129	6,013
Other Asset Backed [Member]
Assets [Abstract]
Securities available for sale		131,772	32,353
Obligations of States and Political Subdivisions [Member]
Assets [Abstract]
Securities available for sale		136,732	143,415
Corporate [Member]
Assets [Abstract]
Securities available for sale		34,106	22,664
Trust Preferred [Member]
Assets [Abstract]
Securities available for sale		2,560	2,441
Fair Value Measurements [Member] | Fair Value, Measurements, Recurring [Member]
Assets [Abstract]
Trading securities		225	203
Loans held for sale		25,462	23,662
Derivatives	[1]	1,623	619
Liabilities [Abstract]
Derivatives	[2]	1,209	366
Fair Value Measurements [Member] | Fair Value, Measurements, Recurring [Member] | U.S. Agency [Member]
Assets [Abstract]
Securities available for sale		50,735	35,006
Fair Value Measurements [Member] | Fair Value, Measurements, Recurring [Member] | U.S. Agency Residential Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		208,290	257,558
Fair Value Measurements [Member] | Fair Value, Measurements, Recurring [Member] | U.S. Agency Commercial Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		35,338	33,728
Fair Value Measurements [Member] | Fair Value, Measurements, Recurring [Member] | Private Label Residential Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		5,129	6,013
Fair Value Measurements [Member] | Fair Value, Measurements, Recurring [Member] | Other Asset Backed [Member]
Assets [Abstract]
Securities available for sale		131,772	32,353
Fair Value Measurements [Member] | Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions [Member]
Assets [Abstract]
Securities available for sale		136,732	143,415
Fair Value Measurements [Member] | Fair Value, Measurements, Recurring [Member] | Corporate [Member]
Assets [Abstract]
Securities available for sale		34,106	22,664
Fair Value Measurements [Member] | Fair Value, Measurements, Recurring [Member] | Trust Preferred [Member]
Assets [Abstract]
Securities available for sale		2,560	2,441
Fair Value Measurements [Member] | Fair Value, Measurements, Nonrecurring [Member]
Assets [Abstract]
Capitalized mortgage loan servicing rights	[3]	7,931	9,197
Fair Value Measurements [Member] | Fair Value, Measurements, Nonrecurring [Member] | Impaired Loans [Member]
Commercial [Abstract]
Income producing - real estate	[4]	4,083	869
Land, land development & construction - real estate	[4]	203	354
Commercial and industrial	[4]	1,426	2,601
Mortgage [Abstract]
1-4 Family	[4]	577	1,306
Resort Lending	[4]	138
Commercial [Abstract]
Income producing - real estate	[4]	4,083	869
Land, land development & construction - real estate	[4]	203	354
Commercial and industrial	[4]	1,426	2,601
Mortgage [Abstract]
1-4 Family	[4]	577	1,306
Resort Lending	[4]	138
Fair Value Measurements [Member] | Fair Value, Measurements, Nonrecurring [Member] | Other Real Estate [Member]
Commercial [Abstract]
Income producing - real estate	[5]		479
Land, land development & construction - real estate	[5]	639	737
Commercial and industrial	[5]	165
Mortgage [Abstract]
1-4 Family	[5]	51	102
Resort Lending	[5]	107	575
Commercial [Abstract]
Income producing - real estate	[5]		479
Land, land development & construction - real estate	[5]	639	737
Commercial and industrial	[5]	165
Mortgage [Abstract]
1-4 Family	[5]	51	102
Resort Lending	[5]	107	575
Installment [Abstract]
Home equity - 1st lien	[5]	36	13
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets [Abstract]
Trading securities		225	203
Securities available for sale		0	0
Derivatives		0	0
Liabilities [Abstract]
Derivatives		0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Fair Value, Measurements, Recurring [Member]
Assets [Abstract]
Trading securities		225	203
Loans held for sale		0	0
Derivatives	[1]	0	0
Liabilities [Abstract]
Derivatives	[2]	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Fair Value, Measurements, Recurring [Member] | U.S. Agency [Member]
Assets [Abstract]
Securities available for sale		0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Fair Value, Measurements, Recurring [Member] | U.S. Agency Residential Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Fair Value, Measurements, Recurring [Member] | U.S. Agency Commercial Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Fair Value, Measurements, Recurring [Member] | Private Label Residential Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Fair Value, Measurements, Recurring [Member] | Other Asset Backed [Member]
Assets [Abstract]
Securities available for sale		0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions [Member]
Assets [Abstract]
Securities available for sale		0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Fair Value, Measurements, Recurring [Member] | Corporate [Member]
Assets [Abstract]
Securities available for sale		0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Fair Value, Measurements, Recurring [Member] | Trust Preferred [Member]
Assets [Abstract]
Securities available for sale		0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Fair Value, Measurements, Nonrecurring [Member]
Assets [Abstract]
Capitalized mortgage loan servicing rights	[3]	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Fair Value, Measurements, Nonrecurring [Member] | Impaired Loans [Member]
Commercial [Abstract]
Income producing - real estate	[4]	0	0
Land, land development & construction - real estate	[4]	0	0
Commercial and industrial	[4]	0	0
Mortgage [Abstract]
1-4 Family	[4]	0	0
Resort Lending	[4]	0
Commercial [Abstract]
Income producing - real estate	[4]	0	0
Land, land development & construction - real estate	[4]	0	0
Commercial and industrial	[4]	0	0
Mortgage [Abstract]
1-4 Family	[4]	0	0
Resort Lending	[4]	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Fair Value, Measurements, Nonrecurring [Member] | Other Real Estate [Member]
Commercial [Abstract]
Income producing - real estate	[5]		0
Land, land development & construction - real estate	[5]	0	0
Commercial and industrial	[5]	0
Mortgage [Abstract]
1-4 Family	[5]	0	0
Resort Lending	[5]	0	0
Commercial [Abstract]
Income producing - real estate	[5]		0
Land, land development & construction - real estate	[5]	0	0
Commercial and industrial	[5]	0
Mortgage [Abstract]
1-4 Family	[5]	0	0
Resort Lending	[5]	0	0
Installment [Abstract]
Home equity - 1st lien	[5]	0	0
Significant Other Observable Inputs (Level 2) [Member]
Assets [Abstract]
Trading securities		0	0
Securities available for sale		604,662	533,178
Derivatives		1,623	619
Liabilities [Abstract]
Derivatives		1,209	366
Significant Other Observable Inputs (Level 2) [Member] | Fair Value, Measurements, Recurring [Member]
Assets [Abstract]
Trading securities		0	0
Loans held for sale		25,462	23,662
Derivatives	[1]	1,623	619
Liabilities [Abstract]
Derivatives	[2]	1,209	366
Significant Other Observable Inputs (Level 2) [Member] | Fair Value, Measurements, Recurring [Member] | U.S. Agency [Member]
Assets [Abstract]
Securities available for sale		50,735	35,006
Significant Other Observable Inputs (Level 2) [Member] | Fair Value, Measurements, Recurring [Member] | U.S. Agency Residential Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		208,290	257,558
Significant Other Observable Inputs (Level 2) [Member] | Fair Value, Measurements, Recurring [Member] | U.S. Agency Commercial Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		35,338	33,728
Significant Other Observable Inputs (Level 2) [Member] | Fair Value, Measurements, Recurring [Member] | Private Label Residential Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		5,129	6,013
Significant Other Observable Inputs (Level 2) [Member] | Fair Value, Measurements, Recurring [Member] | Other Asset Backed [Member]
Assets [Abstract]
Securities available for sale		131,772	32,353
Significant Other Observable Inputs (Level 2) [Member] | Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions [Member]
Assets [Abstract]
Securities available for sale		136,732	143,415
Significant Other Observable Inputs (Level 2) [Member] | Fair Value, Measurements, Recurring [Member] | Corporate [Member]
Assets [Abstract]
Securities available for sale		34,106	22,664
Significant Other Observable Inputs (Level 2) [Member] | Fair Value, Measurements, Recurring [Member] | Trust Preferred [Member]
Assets [Abstract]
Securities available for sale		2,560	2,441
Significant Other Observable Inputs (Level 2) [Member] | Fair Value, Measurements, Nonrecurring [Member]
Assets [Abstract]
Capitalized mortgage loan servicing rights	[3]	0	0
Significant Other Observable Inputs (Level 2) [Member] | Fair Value, Measurements, Nonrecurring [Member] | Impaired Loans [Member]
Commercial [Abstract]
Income producing - real estate	[4]	0	0
Land, land development & construction - real estate	[4]	0	0
Commercial and industrial	[4]	0	0
Mortgage [Abstract]
1-4 Family	[4]	0	0
Resort Lending	[4]	0
Commercial [Abstract]
Income producing - real estate	[4]	0	0
Land, land development & construction - real estate	[4]	0	0
Commercial and industrial	[4]	0	0
Mortgage [Abstract]
1-4 Family	[4]	0	0
Resort Lending	[4]	0
Significant Other Observable Inputs (Level 2) [Member] | Fair Value, Measurements, Nonrecurring [Member] | Other Real Estate [Member]
Commercial [Abstract]
Income producing - real estate	[5]		0
Land, land development & construction - real estate	[5]	0	0
Commercial and industrial	[5]	0
Mortgage [Abstract]
1-4 Family	[5]	0	0
Resort Lending	[5]	0	0
Commercial [Abstract]
Income producing - real estate	[5]		0
Land, land development & construction - real estate	[5]	0	0
Commercial and industrial	[5]	0
Mortgage [Abstract]
1-4 Family	[5]	0	0
Resort Lending	[5]	0	0
Installment [Abstract]
Home equity - 1st lien	[5]	0	0
Significant Unobservable Inputs (Level 3) [Member]
Assets [Abstract]
Trading securities		0	0
Securities available for sale		0	0
Derivatives		0	0
Liabilities [Abstract]
Derivatives		0	0
Significant Unobservable Inputs (Level 3) [Member] | Fair Value, Measurements, Recurring [Member]
Assets [Abstract]
Trading securities		0	0
Loans held for sale		0	0
Derivatives	[1]	0	0
Liabilities [Abstract]
Derivatives	[2]	0	0
Significant Unobservable Inputs (Level 3) [Member] | Fair Value, Measurements, Recurring [Member] | U.S. Agency [Member]
Assets [Abstract]
Securities available for sale		0	0
Significant Unobservable Inputs (Level 3) [Member] | Fair Value, Measurements, Recurring [Member] | U.S. Agency Residential Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		0	0
Significant Unobservable Inputs (Level 3) [Member] | Fair Value, Measurements, Recurring [Member] | U.S. Agency Commercial Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		0	0
Significant Unobservable Inputs (Level 3) [Member] | Fair Value, Measurements, Recurring [Member] | Private Label Residential Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		0	0
Significant Unobservable Inputs (Level 3) [Member] | Fair Value, Measurements, Recurring [Member] | Other Asset Backed [Member]
Assets [Abstract]
Securities available for sale		0	0
Significant Unobservable Inputs (Level 3) [Member] | Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions [Member]
Assets [Abstract]
Securities available for sale		0	0
Significant Unobservable Inputs (Level 3) [Member] | Fair Value, Measurements, Recurring [Member] | Corporate [Member]
Assets [Abstract]
Securities available for sale		0	0
Significant Unobservable Inputs (Level 3) [Member] | Fair Value, Measurements, Recurring [Member] | Trust Preferred [Member]
Assets [Abstract]
Securities available for sale		0	0
Significant Unobservable Inputs (Level 3) [Member] | Fair Value, Measurements, Nonrecurring [Member]
Assets [Abstract]
Capitalized mortgage loan servicing rights	[3]	7,931	9,197
Significant Unobservable Inputs (Level 3) [Member] | Fair Value, Measurements, Nonrecurring [Member] | Impaired Loans [Member]
Commercial [Abstract]
Income producing - real estate	[4]	4,083	869
Land, land development & construction - real estate	[4]	203	354
Commercial and industrial	[4]	1,426	2,601
Mortgage [Abstract]
1-4 Family	[4]	577	1,306
Resort Lending	[4]	138
Commercial [Abstract]
Income producing - real estate	[4]	4,083	869
Land, land development & construction - real estate	[4]	203	354
Commercial and industrial	[4]	1,426	2,601
Mortgage [Abstract]
1-4 Family	[4]	577	1,306
Resort Lending	[4]	138
Significant Unobservable Inputs (Level 3) [Member] | Fair Value, Measurements, Nonrecurring [Member] | Other Real Estate [Member]
Commercial [Abstract]
Income producing - real estate	[5]		479
Land, land development & construction - real estate	[5]	639	737
Commercial and industrial	[5]	165
Mortgage [Abstract]
1-4 Family	[5]	51	102
Resort Lending	[5]	107	575
Commercial [Abstract]
Income producing - real estate	[5]		479
Land, land development & construction - real estate	[5]	639	737
Commercial and industrial	[5]	165
Mortgage [Abstract]
1-4 Family	[5]	51	102
Resort Lending	[5]	107	575
Installment [Abstract]
Home equity - 1st lien	[5]	$ 36	$ 13

[1] Included in accrued income and other assets.

[2] Included in accrued expenses and other liabilities.

[3] Only includes servicing rights that are carried at fair value due to recognition of a valuation allowance.

[4] Only includes impaired loans with specific loss allocations based on collateral value.

[5] Only includes other real estate with subsequent write downs to fair value.

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Segments (Details) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)	Sep. 30, 2015 USD ($) Segment	Sep. 30, 2014 USD ($)	Dec. 31, 2014 USD ($)
Segments [Abstract]
Number of reportable segments | Segment				2
Selected financial information for reportable segments [Abstract]
Total assets		$ 2,394,861		$ 2,394,861		$ 2,248,730
Interest income		20,293	$ 20,068	59,976	$ 60,708
Net interest income		18,841	18,183	55,633	55,199
Provision for loan losses		(244)	(632)	(1,037)	(2,049)
Income (loss) before income tax		7,325	7,274	21,129	19,778
Net income (loss)		5,047	4,929	14,447	14,119
Other [Member]
Selected financial information for reportable segments [Abstract]
Total assets	[1]	288,708		288,708		286,158
Interest income	[1]	20	25	60	41
Net interest income	[1]	(238)	(409)	(699)	(1,022)
Provision for loan losses	[1]	0	0	0	0
Income (loss) before income tax	[1]	(358)	(408)	(1,097)	(1,210)
Net income (loss)	[1]	(224)	(266)	(693)	(665)
Operating Segments [Member] | IB [Member]
Selected financial information for reportable segments [Abstract]
Total assets		2,323,629		2,323,629		2,174,536
Interest income		18,973	18,444	55,895	55,153
Net interest income		17,964	17,254	52,864	51,721
Provision for loan losses		(238)	(623)	(1,032)	(2,018)
Income (loss) before income tax		7,961	7,459	23,063	20,151
Net income (loss)		5,455	5,048	15,623	14,345
Operating Segments [Member] | Mepco [Member]
Selected financial information for reportable segments [Abstract]
Total assets		60,018		60,018		63,378
Interest income		1,320	1,624	4,081	5,555
Net interest income		1,115	1,338	3,468	4,500
Provision for loan losses		(6)	(9)	(5)	(31)
Income (loss) before income tax		(254)	247	(766)	908
Net income (loss)		(168)	163	(437)	607
Elimination [Member]
Selected financial information for reportable segments [Abstract]
Total assets	[2]	(277,494)		(277,494)		$ (275,342)
Interest income	[2]	(20)	(25)	(60)	(41)
Net interest income	[2]	0	0	0	0
Provision for loan losses	[2]	0	0	0	0
Income (loss) before income tax	[2]	(24)	(24)	(71)	(71)
Net income (loss)	[2]	$ (16)	$ (16)	$ (46)	$ (168)

[1] Includes amounts relating to our parent company and certain insignificant operations.

[2] Includes parent company's investment in subsidiaries and cash balances maintained at subsidiary.

XML

Condensed Consolidated Statements of Comprehensive Income (unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Condensed Consolidated Statements of Comprehensive Income (unaudited) [Abstract]
Net income	$ 5,047	$ 4,929	$ 14,447	$ 14,119
Available for sale securities
Unrealized gains arising during period	1,366	253	1,830	4,262
Change in unrealized gains for which a portion of other than temporary impairment has been recognized in earnings	10	94	0	432
Reclassification adjustment for other than temporary impairment included in earnings	0	9	0	9
Reclassification adjustments for gains included in earnings	0	(121)	(75)	(123)
Unrealized gains recognized in other comprehensive income on available for sale securities	1,376	235	1,755	4,580
Income tax expense	482	82	615	1,603
Unrealized gains recognized in other comprehensive income on available for sale securities, net of tax	894	153	1,140	2,977
Derivative instruments
Reclassification adjustment for accretion on settled derivatives	0	95	0	285
Unrealized gains recognized in other comprehensive income on derivative instruments	0	95	0	285
Income tax expense	0	33	0	100
Unrealized gains recognized in other comprehensive income on derivative instruments, net of tax	0	62	0	185
Other comprehensive income	894	215	1,140	3,162
Comprehensive income	$ 5,941	$ 5,144	$ 15,587	$ 17,281

XML

Securities

9 Months Ended

Sep. 30, 2015

Securities [Abstract]

Securities

3. Securities

Securities available for sale consist of the following:

	Amortized Cost		Unrealized				Fair Value
			Gains		Losses
	(In thousands)
September 30, 2015
U.S. agency	$	50,447	$	344	$	56	$	50,735
U.S. agency residential mortgage-backed		206,387		2,116		213		208,290
U.S. agency commercial mortgage-backed		35,109		246		17		35,338
Private label residential mortgage-backed		5,295		176		342		5,129
Other asset backed		131,911		110		249		131,772
Obligations of states and political subdivisions		136,508		1,161		937		136,732
Corporate		34,088		52		34		34,106
Trust preferred		2,914		-		354		2,560
Total	$	602,659	$	4,205	$	2,202	$	604,662
December 31, 2014
U.S. agency	$	34,936	$	133	$	63	$	35,006
U.S. agency residential mortgage-backed		256,387		1,838		667		257,558
U.S. agency commercial mortgage-backed		33,779		68		119		33,728
Private label residential mortgage-backed		6,216		187		390		6,013
Other asset backed		32,314		77		38		32,353
Obligations of states and political subdivisions		143,698		961		1,244		143,415
Corporate		22,690		53		79		22,664
Trust preferred		2,910		-		469		2,441
Total	$	532,930	$	3,317	$	3,069	$	533,178

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, 2015
U.S. agency	$	19,021	$	50	$	1,170	$	6	$	20,191	$	56
U.S. agency residential mortgage-backed		26,884		94		16,024		119		42,908		213
U.S. agency commercial mortgage-backed		4,389		16		1,396		1		5,785		17
Private label residential mortgage-backed		-		-		3,542		342		3,542		342
Other asset backed		57,799		131		5,414		118		63,213		249
Obligations of states and political subdivisions		27,995		422		12,393		515		40,388		937
Corporate		11,098		34		-		-		11,098		34
Trust preferred		-		-		2,560		354		2,560		354
Total	$	147,186	$	747	$	42,499	$	1,455	$	189,685	$	2,202
December 31, 2014
U.S. agency	$	12,851	$	58	$	606	$	5	$	13,457	$	63
U.S. agency residential mortgage-backed		89,547		531		15,793		136		105,340		667
U.S. agency commercial mortgage-backed		21,325		119		-		-		21,325		119
Private label residential mortgage-backed		208		1		4,013		389		4,221		390
Other asset backed		2,960		15		8,729		23		11,689		38
Obligations of states and political subdivisions		28,114		106		37,540		1,138		65,654		1,244
Corporate		8,660		79		-		-		8,660		79
Trust preferred		-		-		2,441		469		2,441		469
Total	$	163,665	$	909	$	69,122	$	2,160	$	232,787	$	3,069

Our portfolio of available-for-sale securities 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 or loss.

U.S. agency, U.S. agency residential mortgage-backed securities and U.S. agency commercial mortgage backed securities — at September 30, 2015, we had 29 U.S. agency, 49 U.S. agency residential mortgage-backed and 9 U.S. agency commercial mortgage-backed securities whose fair market value is less than amortized cost. The unrealized losses are largely attributed to rises in term interest rates since acquisition and widening spreads to Treasury bonds. As management does not intend to liquidate these securities 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 are deemed to be other than temporary.

Private label residential mortgage backed securities — at September 30, 2015, we had five of this type of security whose fair value is less than amortized cost. Two of the five issues are rated by a major rating agency as investment grade, two are rated below investment grade and one is split rated. Two of these bonds have an impairment in excess of 10% and all five of these holdings have been impaired for more than 12 months.  The unrealized losses are largely attributable to credit spread widening on these securities since their acquisition.

All of these securities are receiving principal and interest payments. Most of these transactions are pass-through structures, receiving pro rata principal and interest payments from a dedicated collateral pool. The nonreceipt of interest cash flows is not expected and thus not presently considered in our discounted cash flow methodology discussed below.

All private label residential mortgage-backed securities are reviewed for 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.  Our cash flow analysis forecasts complete recovery of our cost basis for four of the five securities whose fair value is less than amortized cost while the fifth security had credit related OTTI and is discussed in further detail below.

As management does not intend to liquidate these securities 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 other declines discussed above are deemed to be other than temporary.

Other asset backed — at September 30, 2015, we had 65 other asset backed securities whose fair value is less than amortized cost. The unrealized losses are primarily due to credit spread widening.  As management does not intend to liquidate these securities 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 are deemed to be other than temporary.

Obligations of states and political subdivisions — at September 30, 2015, we had 57 municipal securities whose fair value is less than amortized cost.  The unrealized losses are primarily due to increases in interest rates since acquisition.  As management does not intend to liquidate these securities 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 are deemed to be other than temporary.

Corporate — at September 30, 2015, we had eight corporate securities whose fair value is less than amortized cost. The unrealized losses are primarily due to credit spread widening.  As management does not intend to liquidate these securities 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 are deemed to be other than temporary.

Trust preferred securities — at September 30, 2015, we had three trust preferred securities whose fair value is less than amortized cost. All 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 three securities is rated by two major rating agencies as investment grade, while one (a Bank of America issuance) is rated below investment grade by two major rating agencies and 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 $0.8 million as of September 30, 2015, continues to have satisfactory credit metrics and make interest payments.

The following table breaks out our trust preferred securities in further detail as of September 30, 2015 and December 31, 2014:

	September 30, 2015					December 31, 2014
	Fair Value		Net Unrealized Loss			Fair Value		Net Unrealized Loss
	(In thousands)
Trust preferred securities
Rated issues	$	1,788	$	(127	)	$	1,643	$	(267	)
Unrated issues		772		(227	)		798		(202	)

As management does not intend to liquidate these securities 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 are deemed to be other than temporary.

We recorded no credit related OTTI charges in earnings on securities available for sale during the three or nine month periods ended September 30, 2015. We recorded $0.009 million of credit related OTTI charges in earnings on securities available for sale during the three and nine month periods ended September 30, 2014.

At September 30, 2015, three private label residential mortgage-backed securities had credit related OTTI and are summarized as follows:

	Senior Security		Super Senior Security		Senior Support Security		Total
	(In thousands)
As of September 30, 2015
Fair value	$	1,690	$	1,394	$	91	$	3,175
Amortized cost		1,722		1,309		-		3,031
Non-credit unrealized loss		32		-		-		32
Unrealized gain		-		85		91		176
Cumulative credit related OTTI		757		457		380		1,594
Credit related OTTI recognized in our Condensed Consolidated Statements of Operations
For the three months ended September 30,
2015	$	-	$	-	$	-	$	-
2014		9		-		-		9
For the nine months ended September 30,
2015		-		-		-		-
2014		9		-		-		9

Each of these securities is receiving principal and interest payments similar to principal reductions in the underlying collateral.  Two of these securities have unrealized gains and one has an unrealized loss at September 30, 2015.  Prior to the second quarter of 2013, all three of these securities had an unrealized loss.  The original amortized cost 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 two of these securities is now less than previously recorded credit related OTTI amounts.  The remaining non-credit related unrealized loss in the senior security is attributed to other factors and is reflected in other comprehensive income during those same periods.

A roll forward of credit losses recognized in earnings on securities available for sale for the three and nine month periods ending September 30, follows:

	Three months ended September 30,				Nine months ended September 30,
	2015		2014		2015		2014
	(In thousands)
Balance at beginning of period	$	1,844	$	1,835	$	1,844	$	1,835
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		-		9		-		9
Balance at end of period	$	1,844	$	1,844	$	1,844	$	1,844

The amortized cost and fair value of securities available for sale at September 30, 2015, by contractual maturity, follow:

	Amortized Cost		Fair Value
	(In thousands)
Maturing within one year	$	29,195	$	29,231
Maturing after one year but within five years		69,021		69,252
Maturing after five years but within ten years		45,618		45,985
Maturing after ten years		80,123		79,665
		223,957		224,133
U.S. agency residential mortgage-backed		206,387		208,290
U.S. agency commercial mortgage-backed		35,109		35,338
Private label residential mortgage-backed		5,295		5,129
Other asset backed		131,911		131,772
Total	$	602,659	$	604,662

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:

	Proceeds		Realized Gains (1)		Losses
	(In thousands)
2015	$	11,786	$	75	$	-
2014		7,630		123		-

(1) Gains in 2014 exclude $0.179 million of unrealized gain related to a U.S. Treasury short position.

During 2015 and 2014, our trading securities consisted of various preferred stocks.  During the first nine months of 2015 and 2014, we recognized gains on trading securities of $0.022 million and $0.032 million, respectively, that are included in net gains (losses) on securities in the Condensed Consolidated Statements of Operations.  Both of these amounts relate to gains (losses) recognized on trading securities still held at each respective period end.

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Shareholders' Equity and Earnings Per Common Share (Tables)

9 Months Ended

Sep. 30, 2015

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,
	2015		2014		2015		2014
	(In thousands, except per share amounts)
Net income	$	5,047	$	4,929	$	14,447	$	14,119
Weighted average shares outstanding (1)		22,673		22,940		22,852		22,919
Restricted stock units		230		306		283		305
Effect of stock options		118		123		120		126
Stock units for deferred compensation plan for non-employee directors		112		109		111		114
Weighted average shares outstanding for calculation of diluted earnings per share		23,133		23,478		23,366		23,464
Net income per common share
Basic (1)	$	0.22	$	0.21	$	0.63	$	0.62
Diluted	$	0.22	$	0.21	$	0.62	$	0.60

⁽¹⁾Basic net income per common share includes weighted average common shares outstanding during the period and participating share awards.

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Loans, Impaired Financing Receivables (Details) - USD ($) $ in Thousands		3 Months Ended				9 Months Ended
		Sep. 30, 2015		Sep. 30, 2014	[2]	Sep. 30, 2015		Sep. 30, 2014	[3]	Dec. 31, 2014
Impaired loans [Abstract]
TDR		$ 6,416				$ 6,416				$ 9,325
Non - TDR		204				204				299
TDR allowances based on collateral		3,970				3,970				5,879
TDR - allowances based on present value cash flow		86,985				86,985				94,970
Non - TDR - allowance based on collateral		6,281				6,281				2,296
Non - TDR - allowance based on present value cash flow		0				0				0
Total impaired loans		103,856				103,856				112,769
Amount of allowance for loan losses allocated [Abstract]
TDR - allowance based on collateral		1,575				1,575				2,025
TDR - allowance based on present value cash flow		8,952				8,952				10,188
Non - TDR - allowance based on collateral		2,249				2,249				1,020
Non - TDR - allowance based on present value cash flow		0				0				0
Allowance for loan losses allocated		12,776				12,776				13,233
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	6,637				6,637				9,652
Unpaid Principal Balance, with no related allowance	[1]	7,586				7,586				10,836
No Related Allowance	[1]	0				0				0
Recorded Investment, with an allowance recorded	[1]	97,567				97,567				103,514
Unpaid Principal Balance, with an allowance recorded	[1]	101,709				101,709				108,211
Recorded Investment	[1]	104,204				104,204				113,166
Unpaid Principal Balance	[1]	109,295				109,295				119,047
Related Allowance	[1]	12,776				12,776				13,233
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance		8,011	[2]	$ 12,619		8,854	[3]	$ 12,869
Interest Income Recognized, with No Related Allowance		130	[2]	182		428	[3]	463
Average Recorded Investment, with Related Allowance		97,669	[2]	105,591		99,669	[3]	108,736
Interest Income Recognized, with Related Allowance		1,016	[2]	1,078		3,085	[3]	3,412
Average Recorded Investment		105,680	[2]	118,210		108,523	[3]	121,605
Interest Income Recognized		1,146	[2]	1,260		3,513	[3]	3,875
Accrued Interest Included in Recorded Investment [Member]
Impaired Loans by class [Abstract]
Recorded Investment	[1]	348				348				397
Commercial [Member] | Income Producing - Real Estate [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	4,778				4,778				5,868
Unpaid Principal Balance, with no related allowance	[1]	4,977				4,977				6,077
No Related Allowance	[1]	0				0				0
Recorded Investment, with an allowance recorded	[1]	16,414				16,414				12,836
Unpaid Principal Balance, with an allowance recorded	[1]	17,414				17,414				13,797
Recorded Investment	[1]	21,192				21,192				18,704
Unpaid Principal Balance	[1]	22,391				22,391				19,874
Related Allowance	[1]	1,357				1,357				689
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance		5,133	[2]	8,255		5,490	[3]	8,109
Interest Income Recognized, with No Related Allowance		45	[2]	103		170	[3]	289
Average Recorded Investment, with Related Allowance		14,655	[2]	11,486		13,752	[3]	12,756
Interest Income Recognized, with Related Allowance		154	[2]	136		452	[3]	417
Average Recorded Investment		19,788	[2]	19,741		19,242	[3]	20,865
Interest Income Recognized		199	[2]	239		622	[3]	706
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	851				851				1,051
Unpaid Principal Balance, with no related allowance	[1]	1,425				1,425				1,606
No Related Allowance	[1]	0				0				0
Recorded Investment, with an allowance recorded	[1]	2,061				2,061				3,456
Unpaid Principal Balance, with an allowance recorded	[1]	2,140				2,140				3,528
Recorded Investment	[1]	2,912				2,912				4,507
Unpaid Principal Balance	[1]	3,565				3,565				5,134
Related Allowance	[1]	421				421				499
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance		932	[2]	859		986	[3]	1,168
Interest Income Recognized, with No Related Allowance		14	[2]	15		57	[3]	43
Average Recorded Investment, with Related Allowance		1,993	[2]	4,092		2,351	[3]	4,059
Interest Income Recognized, with Related Allowance		2	[2]	38		35	[3]	120
Average Recorded Investment		2,925	[2]	4,951		3,337	[3]	5,227
Interest Income Recognized		16	[2]	53		92	[3]	163
Commercial [Member] | Commercial and Industrial [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	985				985				2,685
Unpaid Principal Balance, with no related allowance	[1]	982				982				2,667
No Related Allowance	[1]	0				0				0
Recorded Investment, with an allowance recorded	[1]	5,239				5,239				8,251
Unpaid Principal Balance, with an allowance recorded	[1]	5,549				5,549				8,486
Recorded Investment	[1]	6,224				6,224				10,936
Unpaid Principal Balance	[1]	6,531				6,531				11,153
Related Allowance	[1]	2,270				2,270				2,006
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance		1,922	[2]	3,397		2,345	[3]	3,517
Interest Income Recognized, with No Related Allowance		68	[2]	63		195	[3]	129
Average Recorded Investment, with Related Allowance		6,431	[2]	7,936		7,304	[3]	8,562
Interest Income Recognized, with Related Allowance		37	[2]	51		117	[3]	209
Average Recorded Investment		8,353	[2]	11,333		9,649	[3]	12,079
Interest Income Recognized		105	[2]	114		312	[3]	338
Mortgage [Member] | 1-4 Family [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	23				23				0
Unpaid Principal Balance, with no related allowance	[1]	166				166				49
No Related Allowance	[1]	0				0				0
Recorded Investment, with an allowance recorded	[1]	49,245				49,245				53,206
Unpaid Principal Balance, with an allowance recorded	[1]	51,392				51,392				56,063
Recorded Investment	[1]	49,268				49,268				53,206
Unpaid Principal Balance	[1]	51,558				51,558				56,112
Related Allowance	[1]	5,437				5,437				6,195
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance		24	[2]	66		18	[3]	37
Interest Income Recognized, with No Related Allowance		3	[2]	0		5	[3]	0
Average Recorded Investment, with Related Allowance		49,706	[2]	55,633		51,078	[3]	56,545
Interest Income Recognized, with Related Allowance		554	[2]	558		1,644	[3]	1,777
Average Recorded Investment		49,730	[2]	55,699		51,096	[3]	56,582
Interest Income Recognized		557	[2]	558		1,649	[3]	1,777
Mortgage [Member] | Resort Lending [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	0				0				48
Unpaid Principal Balance, with no related allowance	[1]	0				0				397
No Related Allowance	[1]	0				0				0
Recorded Investment, with an allowance recorded	[1]	18,328				18,328				18,799
Unpaid Principal Balance, with an allowance recorded	[1]	18,591				18,591				18,963
Recorded Investment	[1]	18,328				18,328				18,847
Unpaid Principal Balance	[1]	18,591				18,591				19,360
Related Allowance	[1]	2,786				2,786				3,075
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance		0	[2]	42		15	[3]	38
Interest Income Recognized, with No Related Allowance		0	[2]	1		0	[3]	1
Average Recorded Investment, with Related Allowance		18,414	[2]	19,351		18,523	[3]	19,623
Interest Income Recognized, with Related Allowance		163	[2]	195		507	[3]	581
Average Recorded Investment		18,414	[2]	19,393		18,538	[3]	19,661
Interest Income Recognized		163	[2]	196		507	[3]	582
Mortgage [Member] | Home Equity - 1st Lien [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	0				0				0
Unpaid Principal Balance, with no related allowance	[1]	0				0				0
No Related Allowance	[1]	0				0				0
Recorded Investment, with an allowance recorded	[1]	155				155				162
Unpaid Principal Balance, with an allowance recorded	[1]	172				172				177
Recorded Investment	[1]	155				155				162
Unpaid Principal Balance	[1]	172				172				177
Related Allowance	[1]	11				11				14
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance		0	[2]	0		0	[3]	0
Interest Income Recognized, with No Related Allowance		0	[2]	0		0	[3]	0
Average Recorded Investment, with Related Allowance		157	[2]	165		159	[3]	159
Interest Income Recognized, with Related Allowance		2	[2]	2		6	[3]	5
Average Recorded Investment		157	[2]	165		159	[3]	159
Interest Income Recognized		2	[2]	2		6	[3]	5
Mortgage [Member] | Home Equity - 2nd Lien [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	0				0				0
Unpaid Principal Balance, with no related allowance	[1]	0				0				0
No Related Allowance	[1]	0				0				0
Recorded Investment, with an allowance recorded	[1]	120				120				125
Unpaid Principal Balance, with an allowance recorded	[1]	201				201				205
Recorded Investment	[1]	120				120				125
Unpaid Principal Balance	[1]	201				201				205
Related Allowance	[1]	10				10				27
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance		0	[2]	0		0	[3]	0
Interest Income Recognized, with No Related Allowance		0	[2]	0		0	[3]	0
Average Recorded Investment, with Related Allowance		185	[2]	39		154	[3]	40
Interest Income Recognized, with Related Allowance		0	[2]	0		6	[3]	1
Average Recorded Investment		185	[2]	39		154	[3]	40
Interest Income Recognized		0	[2]	0		6	[3]	1
Installment [Member] | Home Equity - 1st Lien [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	0				0				0
Unpaid Principal Balance, with no related allowance	[1]	36				36				40
No Related Allowance	[1]	0				0				0
Recorded Investment, with an allowance recorded	[1]	2,434				2,434				2,744
Unpaid Principal Balance, with an allowance recorded	[1]	2,610				2,610				2,930
Recorded Investment	[1]	2,434				2,434				2,744
Unpaid Principal Balance	[1]	2,646				2,646				2,970
Related Allowance	[1]	145				145				219
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance		0	[2]	0		0	[3]	0
Interest Income Recognized, with No Related Allowance		0	[2]	0		1	[3]	1
Average Recorded Investment, with Related Allowance		2,474	[2]	2,801		2,582	[3]	2,860
Interest Income Recognized, with Related Allowance		47	[2]	43		141	[3]	132
Average Recorded Investment		2,474	[2]	2,801		2,582	[3]	2,860
Interest Income Recognized		47	[2]	43		142	[3]	133
Installment [Member] | Home Equity - 2nd Lien [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	0				0				0
Unpaid Principal Balance, with no related allowance	[1]	0				0				0
No Related Allowance	[1]	0				0				0
Recorded Investment, with an allowance recorded	[1]	2,931				2,931				3,212
Unpaid Principal Balance, with an allowance recorded	[1]	2,942				2,942				3,215
Recorded Investment	[1]	2,931				2,931				3,212
Unpaid Principal Balance	[1]	2,942				2,942				3,215
Related Allowance	[1]	285				285				419
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance		0	[2]	0		0	[3]	0
Interest Income Recognized, with No Related Allowance		0	[2]	0		0	[3]	0
Average Recorded Investment, with Related Allowance		2,999	[2]	3,375		3,086	[3]	3,396
Interest Income Recognized, with Related Allowance		47	[2]	46		147	[3]	143
Average Recorded Investment		2,999	[2]	3,375		3,086	[3]	3,396
Interest Income Recognized		47	[2]	46		147	[3]	143
Installment [Member] | Loans Not Secured By Real Estate [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	0				0				0
Unpaid Principal Balance, with no related allowance	[1]	0				0				0
No Related Allowance	[1]	0				0				0
Recorded Investment, with an allowance recorded	[1]	631				631				711
Unpaid Principal Balance, with an allowance recorded	[1]	689				689				835
Recorded Investment	[1]	631				631				711
Unpaid Principal Balance	[1]	689				689				835
Related Allowance	[1]	53				53				89
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance		0	[2]	0		0	[3]	0
Interest Income Recognized, with No Related Allowance		0	[2]	0		0	[3]	0
Average Recorded Investment, with Related Allowance		645	[2]	699		669	[3]	721
Interest Income Recognized, with Related Allowance		10	[2]	9		29	[3]	26
Average Recorded Investment		645	[2]	699		669	[3]	721
Interest Income Recognized		10	[2]	9		29	[3]	26
Installment [Member] | Other [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	0				0				0
Unpaid Principal Balance, with no related allowance	[1]	0				0				0
No Related Allowance	[1]	0				0				0
Recorded Investment, with an allowance recorded	[1]	9				9				12
Unpaid Principal Balance, with an allowance recorded	[1]	9				9				12
Recorded Investment	[1]	9				9				12
Unpaid Principal Balance	[1]	9				9				12
Related Allowance	[1]	1				1				$ 1
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance		0	[2]	0		0	[3]	0
Interest Income Recognized, with No Related Allowance		0	[2]	0		0	[3]	0
Average Recorded Investment, with Related Allowance		10	[2]	14		11	[3]	15
Interest Income Recognized, with Related Allowance		0	[2]	0		1	[3]	1
Average Recorded Investment		10	[2]	14		11	[3]	15
Interest Income Recognized		$ 0	[2]	$ 0		$ 1	[3]	$ 1

[1] There were no impaired payment plan receivables at September 30, 2015 or December 31, 2014.

[2] There were no impaired payment plan receivables during the three month periods ended September 30, 2015 and 2014, respectively.

[3] There were no impaired payment plan receivables during the nine month periods ended September 30, 2015 and 2014, respectively.

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Fair Values of Financial Instruments

9 Months Ended

Sep. 30, 2015

Fair Values of Financial Instruments [Abstract]

Fair Values of Financial Instruments

13. 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 cannot be determined with precision. 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.

Cash and due from banks and interest bearing deposits:  The recorded book balance of cash and due from banks and interest bearing deposits approximate fair value and are classified as Level 1.

Interest bearing deposits - time:  Interest bearing deposits - time have been valued based on a model using a benchmark yield curve plus a base spread and are classified as Level 2.

Securities:  Financial instrument assets actively traded in a secondary market have been valued using quoted market prices.  Trading securities are classified as Level 1 while securities available for sale are classified as Level 2 as described in Note #12.

Federal Home Loan Bank and FederalReserve Bank Stock:  It is not practicable to determine the fair value of FHLB and FRB Stock due to restrictions placed on transferability.

Net loans and loans held for sale:  The fair value of loans is calculated by discounting estimated future cash flows using estimated market discount rates that reflect credit and interest-rate risk inherent in the loans resulting in a Level 3 classification.  Impaired loans are valued at the lower of cost or fair value as described in Note #12.  Loans held for sale are classified as Level 2 as described in Note #12.

Accrued interest receivable and payable:  The recorded book balance of accrued interest receivable and payable approximate fair value and are classified at the same Level as the asset and liability they are associated with.

Derivative financial instruments:  The fair value of rate-lock mortgage loan commitments and mandatory commitments to sell mortgage loans is based on mortgage backed security pricing for comparable assets, the fair value of interest rate swap agreements is based on a discounted cash flow analysis whose significant fair value inputs can generally be observed in the market place and do not typically involve judgment by management and 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. Each of these instruments has been classified as Level 2 as described in note #12.

Deposits:  Deposits without a stated maturity, including demand deposits, savings, NOW and money market accounts, have a fair value equal to the amount payable on demand.  Each of these instruments is classified as Level 1.  Deposits with a stated maturity, such as certificates of deposit have generally been valued based on the discounted value of contractual cash flows using a discount rate approximating current market rates for liabilities with a similar maturity resulting in a Level 2 classification.

Other borrowings:  Other borrowings have been valued based on the discounted value of contractual cash flows using a discount rate approximating current market rates for liabilities with a similar maturity resulting in a Level 2 classification.

Subordinated debentures:  Subordinated debentures have generally been valued based on a quoted market price of similar instruments resulting in a Level 2 classification.

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, 2015
Assets
Cash and due from banks	$	52,146	$	52,146	$	52,146	$	-	$	-
Interest bearing deposits		53,051		53,051		53,051		-		-
Interest bearing deposits - time		13,029		13,053		-		13,053		-
Trading securities		225		225		225		-		-
Securities available for sale		604,662		604,662		-		604,662		-
Federal Home Loan Bank and Federal
Reserve Bank Stock		15,286	NA		NA		NA		NA
Net loans and loans held for sale		1,468,857		1,435,597		-		25,462		1,410,135
Accrued interest receivable		6,473		6,473		8		2,068		4,397
Derivative financial instruments		1,623		1,623		-		1,623		-
Liabilities
Deposits with no stated maturity (1)	$	1,639,402	$	1,639,402	$	1,639,402	$	-	$	-
Deposits with stated maturity (1)		421,560		419,803		-		419,803		-
Other borrowings		12,070		13,474		-		13,474		-
Subordinated debentures		35,569		22,885		-		22,885		-
Accrued interest payable		420		420		20		400		-
Derivative financial instruments		1,209		1,209		-		1,209		-
December 31, 2014
Assets
Cash and due from banks	$	48,326	$	48,326	$	48,326	$	-	$	-
Interest bearing deposits		25,690		25,690		25,690		-		-
Interest bearing deposits - time		13,561		13,585		-		13,585		-
Trading securities		203		203		203		-		-
Securities available for sale		533,178		533,178		-		533,178		-
Federal Home Loan Bank and Federal
Reserve Bank Stock		19,919	NA		NA		NA		NA
Net loans and loans held for sale		1,407,634		1,394,424		-		23,662		1,370,762
Accrued interest receivable		5,995		5,995		2		1,599		4,394
Derivative financial instruments		619		619		-		619		-
Liabilities
Deposits with no stated maturity (1)	$	1,534,175	$	1,534,175	$	1,534,175	$	-	$	-
Deposits with stated maturity (1)		390,127		389,139		-		389,139		-
Other borrowings		12,470		14,560		-		14,560		-
Subordinated debentures		35,569		23,328		-		23,328		-
Accrued interest payable		380		380		21		359		-
Derivative financial instruments		366		366		-		366		-

(1) Deposits with no stated maturity include reciprocal deposits with a recorded book balance of $12.0 million and $13.6 million at September 30, 2015 and December 31, 2014, respectively.  Deposits with a stated maturity include reciprocal deposits with a recorded book balance of $35.9 million and $40.1 million at September 30, 2015 and December 31, 2014, 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.