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 March 31, 2016

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	21,262,815
Class	Outstanding at May 3, 2016

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

INDEX

		Number(s)
PART I -	Financial Information
Item 1.	Condensed Consolidated Statements of Financial Condition March 31, 2016 and December 31, 2015	3
	Condensed Consolidated Statements of Operations Three-month periods ended March 31, 2016 and 2015	4
	Condensed Consolidated Statements of Comprehensive Income Three-month periods ended March 31, 2016 and 2015	5
	Condensed Consolidated Statements of Cash Flows Three-month periods ended March 31, 2016 and 2015	6
	Condensed Consolidated Statements of Shareholders' Equity Three-month periods ended March 31, 2016 and 2015	7
	Notes to Interim Condensed Consolidated Financial Statements	8-55
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	56-79
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	80
Item 4.	Controls and Procedures	80
PART II -	Other Information
Item 1A	Risk Factors	81
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	81
Item 6.	Exhibits	82

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, 2015, 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

	March 31, 2016			December 31, 2015
	(unaudited)
	(In thousands, except share
	amounts)
Assets
Cash and due from banks	$	41,790		$	54,260
Interest bearing deposits		102,919			31,523
Cash and Cash Equivalents		144,709			85,783
Interest bearing deposits - time		10,178			11,866
Trading securities		136			148
Securities available for sale		589,500			585,484
Federal Home Loan Bank and Federal Reserve Bank stock, at cost		15,600			15,471
Loans held for sale, carried at fair value		28,016			27,866
Loans
Commercial		770,886			748,398
Mortgage		504,004			500,454
Installment		231,787			231,599
Payment plan receivables		32,305			34,599
Total Loans		1,538,982			1,515,050
Allowance for loan losses		(22,495	)		(22,570	)
Net Loans		1,516,487			1,492,480
Other real estate and repossessed assets		6,672			7,150
Property and equipment, net		42,089			43,103
Bank-owned life insurance		54,691			54,402
Deferred tax assets, net		37,167			39,635
Capitalized mortgage loan servicing rights		10,983			12,436
Vehicle service contract counterparty receivables, net		3,173			7,229
Other intangibles		2,193			2,280
Accrued income and other assets		25,526			23,733
Total Assets	$	2,487,120		$	2,409,066
Liabilities and Shareholders' Equity
Deposits
Non-interest bearing	$	671,621		$	659,793
Savings and interest-bearing checking		1,018,740			988,174
Reciprocal		50,298			50,207
Time		414,047			387,789
Total Deposits		2,154,706			2,085,963
Other borrowings		11,953			11,954
Subordinated debentures		35,569			35,569
Vehicle service contract counterparty payables		1,247			797
Accrued expenses and other liabilities		44,100			23,691
Total Liabilities		2,247,575			2,157,974
Shareholders’ Equity
Preferred stock, no par value, 200,000 shares authorized;  none issued or outstanding		-			-
Common stock, no par value, 500,000,000 shares authorized; issued and outstanding: 21,261,830 shares at March 31, 2016 and 22,251,373 shares at December 31, 2015		324,328			339,462
Accumulated deficit		(79,984	)		(82,334	)
Accumulated other comprehensive loss		(4,799	)		(6,036	)
Total Shareholders’ Equity		239,545			251,092
Total Liabilities and Shareholders’ Equity	$	2,487,120		$	2,409,066

See notes to interim condensed consolidated financial statements (unaudited)

3

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

	Three months ended March 31,
	2016			2015
	(unaudited)
	(In thousands, except share amounts)
Interest Income
Interest and fees on loans	$	18,556		$	17,239
Interest on securities
Taxable		2,244			1,758
Tax-exempt		248			217
Other investments		306			338
Total Interest Income		21,354			19,552
Interest Expense
Deposits		1,114			1,007
Other borrowings		477			454
Total Interest Expense		1,591			1,461
Net Interest Income		19,763			18,091
Provision for loan losses		(530	)		(659	)
Net Interest Income After Provision for Loan Losses		20,293			18,750
Non-interest Income
Service charges on deposit accounts		2,845			2,850
Interchange income		1,878			2,142
Net gains on assets
Mortgage loans		1,642			2,139
Securities		162			85
Mortgage loan servicing, net		(978	)		(420	)
Title insurance fees		288			256
Other		1,972			1,910
Total Non-interest Income		7,809			8,962
Non-Interest Expense
Compensation and employee benefits		11,881			11,785
Occupancy, net		2,207			2,419
Data processing		2,101			1,930
Furniture, fixtures and equipment		984			952
Communications		888			736
Loan and collection		825			1,155
Advertising		477			484
Legal and professional		413			380
FDIC deposit insurance		334			343
Interchange expense		266			291
Credit card and bank service fees		187			202
Vehicle service contract counterparty contingencies		30			29
Costs related to unfunded lending commitments		13			16
Net gains on other real estate and repossessed assets		(6	)		(39	)
Provision for loss reimbursement on sold loans		(15	)		(69	)
Other		1,460			1,537
Total Non-interest Expense		22,045			22,151
Income Before Income Tax		6,057			5,561
Income tax expense		1,957			1,780
Net Income	$	4,100		$	3,781
Net Income Per Common Share
Basic	$	0.19		$	0.16
Diluted	$	0.19		$	0.16
Dividends Per Common Share
Declared	$	0.08		$	0.06
Paid	$	0.08		$	0.06

See notes to interim condensed consolidated financial statements (unaudited)

4

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

	Three months ended March 31,
	2016			2015
	(unaudited)
	(In thousands)
Net income	$	4,100		$	3,781
Other comprehensive income, before tax
Securities available for sale
Unrealized gains arising during period		2,114			2,270
Change in unrealized gains for which a portion of other than temporary impairment has been recognized in earnings		(36	)		11
Reclassification adjustments for gains included in earnings		(174	)		(75	)
Unrealized gains recognized in other comprehensive income on securities available for sale		1,904			2,206
Income tax expense		667			772
Unrealized gains recognized in other comprehensive income on available for sale securities, net of tax		1,237			1,434
Other comprehensive income		1,237			1,434
Comprehensive income	$	5,337		$	5,215

See notes to interim condensed consolidated financial statements (unaudited)

5

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

	Three months ended March 31,
	2016			2015
	(unaudited - In thousands)
Net Income	$	4,100		$	3,781
Adjustments to Reconcile Net Income to Net Cash From (Used in) Operating Activities
Proceeds from sales of loans held for sale		57,181			70,657
Disbursements for loans held for sale		(55,689	)		(75,788	)
Provision for loan losses		(530	)		(659	)
Deferred federal income tax expense		2,468			2,442
Deferred loan fees		(216	)		(193	)
Depreciation, amortization of intangible assets and premiums and accretion of discounts on securities, loans and interest bearning deposits - time		1,306			1,179
Net gains on mortgage loans		(1,642	)		(2,139	)
Net gains on securities		(162	)		(85	)
Net gains on other real estate and repossessed assets		(6	)		(39	)
Vehicle service contract counterparty contingencies		30			29
Share based compensation		410			373
(Increase) decrease in accrued income and other assets		(1,160	)		517
Decrease in accrued expenses and other liabilities		(1,057	)		(2,385	)
Total Adjustments		933			(6,091	)
Net Cash From (Used in) Operating Activities		5,033			(2,310	)
Cash Flow From (Used in) Investing Activities
Proceeds from the sale of securities available for sale		42,391			11,786
Proceeds from the maturity of securities available for sale		13,385			6,785
Principal payments received on securities available for sale		37,246			25,103
Purchases of securities available for sale		(74,259	)		(77,534	)
Purchases of interest bearing deposits - time		-			(246	)
Proceeds from the maturity of interest bearing deposits - time		1,678			2,211
Purchase of Federal Reserve Bank stock		(129	)		(132	)
Net increase in portfolio loans (loans originated, net of principal payments)		(23,280	)		(13,170	)
Proceeds from the collection of vehicle service contract counterparty receivables		4,217			-
Proceeds from the sale of other real estate and repossessed assets		1,357			1,848
Capital expenditures		(611	)		(975	)
Net Cash From (Used in) Investing Activities		1,995			(44,324	)
Cash Flow From Financing Activities
Net increase in total deposits		68,743			76,171
Net decrease in other borrowings		(1	)		(2	)
Net increase in vehicle service contract counterparty payables		450			335
Dividends paid		(1,750	)		(1,382	)
Proceeds from issuance of common stock		32			16
Repurchase of common stock		(15,510	)		(902	)
Share based compensation withholding obligation		(66	)		(66	)
Net Cash From Financing Activities		51,898			74,170
Net Increase in Cash and Cash Equivalents		58,926			27,536
Cash and Cash Equivalents at Beginning of Period		85,783			74,016
Cash and Cash Equivalents at End of Period	$	144,709		$	101,552
Cash paid during the period for
Interest	$	1,495		$	1,477
Income taxes		120			55
Transfers to other real estate and repossessed assets		873			1,017
Transfer of payment plan receivables to vehicle service contract counterparty receivables		191			21
Purchase of securities available for sale not yet settled		21,329			3,154

See notes to interim condensed consolidated financial statements (unaudited)

6

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Shareholders' Equity

	Three months ended March 31,
	2016			2015
	(unaudited)
	(In thousands)
Balance at beginning of period	$	251,092		$	250,371
Net income		4,100			3,781
Cash dividends declared		(1,750	)		(1,382	)
Issuance of common stock		32			16
Share based compensation		410			373
Share based compensation withholding obligation		(66	)		(66	)
Repurchase of common stock		(15,510	)		(902	)
Net change in accumulated other comprehensive loss, net of related tax effect		1,237			1,434
Balance at end of period	$	239,545		$	253,625

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, 2015 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 March 31, 2016 and December 31, 2015, and the results of operations for the three month periods ended March 31, 2016 and 2015.  The results of operations for the three month periods ended March 31, 2016, 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 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 2015 Annual Report on Form 10-K for a disclosure of our accounting policies.

2.  New Accounting Standards

In June 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 became effective for us on January 1, 2016, 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 us on January 1, 2018, and 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 January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities”.  This ASU amends existing guidance related to the accounting for certain financial assets and liabilities. These amendments, among other things, requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. This amended guidance is effective for us on January 1, 2018, and is not expected to have a material impact on our consolidated operating results or financial condition.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”.  This ASU amends existing guidance related to the accounting for leases. These amendments, among other things, requires lessees to account for most leases on the balance sheet while recognizing expense on the income statement in a manner similar to existing guidance.  For lessors the guidance modifies the classification criteria and the accounting for sales-type and direct finance leases. This amended guidance is effective for us on January 1, 2019, and is not expected to have a material impact on our consolidated operating results or financial condition.

In March 2016, the FASB issued ASU 2016-09, “Compensation – Stock Compensation (718) Improvements to Employee Share-Based Payment Accounting”.  This ASU amends existing guidance in an effort to simplify certain aspects of accounting for share-based payments. The areas for simplification in this ASU include income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows.  This amended guidance is effective for us on January 1, 2017, with early adoption permitted, and is not expected to have a material impact on our consolidated operating results or financial condition.

9

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

3.  Securities

Securities available for sale consist of the following:

	Amortized		Unrealized
	Cost		Gains		Losses		Fair Value
	(In thousands)
March 31, 2016
U.S. agency	$	35,016	$	431	$	62	$	35,385
U.S. agency residential mortgage-backed		196,017		1,635		273		197,379
U.S. agency commercial mortgage-backed		8,382		112		2		8,492
Private label mortgage-backed		18,569		154		348		18,375
Other asset backed		128,431		124		483		128,072
Obligations of states and political subdivisions		147,411		1,644		710		148,345
Corporate		49,565		162		217		49,510
Trust preferred		2,918		-		615		2,303
Foreign government		1,654		-		15		1,639
Total	$	587,963	$	4,262	$	2,725	$	589,500
December 31, 2015
U.S. agency	$	47,283	$	309	$	80	$	47,512
U.S. agency residential mortgage-backed		195,055		1,584		583		196,056
U.S. agency commercial mortgage-backed		34,017		94		83		34,028
Private label mortgage-backed		5,061		161		319		4,903
Other asset backed		117,431		54		581		116,904
Obligations of states and political subdivisions		145,193		941		1,150		144,984
Corporate		38,895		9		290		38,614
Trust preferred		2,916		-		433		2,483
Total	$	585,851	$	3,152	$	3,519	$	585,484

10

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)
March 31, 2016
U.S. agency	$	7,168	$	20	$	6,360	$	42	$	13,528	$	62
U.S. agency residential mortgage-backed		26,856		130		16,325		143		43,181		273
U.S. agency commercial mortgage-backed		1,236		1		202		1		1,438		2
Private label mortgage- backed		5,645		17		3,093		331		8,738		348
Other asset backed		82,903		280		9,804		203		92,707		483
Obligations of states and political subdivisions		22,296		282		9,737		428		32,033		710
Corporate		28,299		208		991		9		29,290		217
Trust preferred		-		-		2,303		615		2,303		615
Foreign government		1,639		15		-		-		1,639		15
Total	$	176,042	$	953	$	48,815	$	1,772	$	224,857	$	2,725
December 31, 2015
U.S. agency	$	12,164	$	47	$	6,746	$	33	$	18,910	$	80
U.S. agency residential mortgage-backed		57,538		316		23,340		267		80,878		583
U.S. agency commercial mortgage-backed		16,747		60		2,247		23		18,994		83
Private label mortgage- backed		-		-		3,393		319		3,393		319
Other asset backed		102,660		434		5,189		147		107,849		581
Obligations of states and political subdivisions		52,493		597		12,240		553		64,733		1,150
Corporate		30,550		290		-		-		30,550		290
Trust preferred		-		-		2,483		433		2,483		433
Total	$	272,152	$	1,744	$	55,638	$	1,775	$	327,790	$	3,519

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

11

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 March 31, 2016, we had 30 U.S. agency, 66 U.S. agency residential mortgage-backed and five U.S. agency commercial mortgage-backed securities whose fair market value is less than amortized cost. The unrealized losses are largely attributed to increases in 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 mortgage backed securities — at March 31, 2016, we had 11 of this type of security whose fair value is less than amortized cost.  The unrealized losses are primarily attributed to five securities purchased prior to 2016.  Two of these five securities have an impairment in excess of 10% and four of these holdings have been impaired for more than 12 months.  The unrealized losses are largely attributable to credit spread widening on these five securities since their acquisition.

These five 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.

These five private label mortgage-backed securities are reviewed for other than temporary impairment (“OTTI”) utilizing a cash flow projection. The cash flow analysis forecasts cash flow from the underlying loans in each transaction and then applies these cash flows to the bonds in the securitization.  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 recognized in prior years 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 March 31, 2016, we had 121 other asset backed securities whose fair value is less than amortized cost. The unrealized losses are primarily due to credit spread widening and 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.

Obligations of states and political subdivisions — at March 31, 2016, we had 44 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 March 31, 2016, we had 23 corporate securities whose fair value is less than amortized cost. The unrealized losses are primarily due to credit spread widening and 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.

12

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Trust preferred securities — at March 31, 2016, 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 March 31, 2016, continues to have satisfactory credit metrics and make interest payments.

The following table breaks out our trust preferred securities in further detail as of March 31, 2016 and December 31, 2015:

	March 31, 2016					December 31, 2015
	Fair Value		Net Unrealized Loss			Fair Value		Net Unrealized Loss
	(In thousands)
Trust preferred securities
Rated issues	$	1,550	$	(368	)	$	1,690	$	(226	)
Unrated issues		753		(247	)		793		(207	)

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.

Foreign government — at March 31, 2016, we had one foreign government security whose fair value is less than amortized cost. The unrealized loss is primarily due to an increase in interest rates since acquisition.  As management does not intend to liquidate this security and it is more likely than not that we will not be required to sell this security prior to recovery of this unrealized loss, the decline is not deemed to be other than temporary.

We recorded no credit related OTTI charges in our Condensed Consolidated Statements of Operations related to securities available for sale during the three month periods ended March 31, 2016 and 2015.

13

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

At March 31, 2016, three private label 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 March 31, 2016
Fair value	$	1,546	$	1,250	$	75	$	2,871
Amortized cost		1,575		1,188		-		2,763
Non-credit unrealized loss		29		-		-		29
Unrealized gain		-		62		75		137
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 March 31,
2016	$	-	$	-	$	-	$	-
2015		-		-		-		-

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 March 31, 2016.  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 month periods ending March 31, follows:

	Three months ended March 31,
	2016		2015
	(In thousands)
Balance at beginning of period	$	1,844	$	1,844
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		-		-
Balance at end of period	$	1,844	$	1,844

14

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The amortized cost and fair value of securities available for sale at March 31, 2016, by contractual maturity, follow:

	Amortized Cost		Fair Value
	(In thousands)
Maturing within one year	$	30,411	$	30,453
Maturing after one year but within five years		74,249		74,472
Maturing after five years but within ten years		62,664		63,236
Maturing after ten years		69,240		69,021
		236,564		237,182
U.S. agency residential mortgage-backed		196,017		197,379
U.S. agency commercial mortgage-backed		8,382		8,492
Private label residential mortgage-backed		18,569		18,375
Other asset backed		128,431		128,072
Total	$	587,963	$	589,500

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 three month periods ending March 31, follows:

	Proceeds		Realized Gains		Losses
	(In thousands)
2016	$	42,391	$	226	$	52
2015		11,786		75		-

During 2016 and 2015, our trading securities consisted of various preferred stocks.  During the first three months of 2016 and 2015, we recognized gains (losses) on trading securities of $(0.012) million and $0.010 million, respectively, that are included in net gains 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.

15

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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 March 31, follows:

	Commercial			Mortgage			Installment			Payment Plan Receivables			Subjective Allocation			Total
	(In thousands)
2016
Balance at beginning of period	$	5,670		$	10,391		$	1,181		$	56		$	5,272		$	22,570
Additions (deductions)
Provision for loan losses		(404	)		(279	)		65			(3	)		91			(530	)
Recoveries credited to allowance		356			382			221			-			-			959
Loans charged against the allowance		-			(198	)		(306	)		-			-			(504	)
Balance at end of period	$	5,622		$	10,296		$	1,161		$	53		$	5,363		$	22,495
2015
Balance at beginning of period	$	5,445		$	13,444		$	1,814		$	64		$	5,223		$	25,990
Additions (deductions)
Provision for loan losses		328			(733	)		(85	)		(2	)		(167	)		(659	)
Recoveries credited to allowance		433			238			319			-			-			990
Loans charged against the allowance		(290	)		(868	)		(484	)		-			-			(1,642	)
Balance at end of period	$	5,916		$	12,081		$	1,564		$	62		$	5,056		$	24,679

16

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)
March 31, 2016
Allowance for loan losses
Individually evaluated for impairment	$	2,791	$	7,651	$	408	$	-	$	-	$	10,850
Collectively evaluated for impairment		2,831		2,645		753		53		5,363		11,645
Total ending allowance balance	$	5,622	$	10,296	$	1,161	$	53	$	5,363	$	22,495
Loans
Individually evaluated for impairment	$	17,585	$	64,899	$	5,670	$	-			$	88,154
Collectively evaluated for impairment		754,908		441,354		226,789		32,305				1,455,356
Total loans recorded investment		772,493		506,253		232,459		32,305				1,543,510
Accrued interest included in recorded investment		1,607		2,249		672		-				4,528
Total loans	$	770,886	$	504,004	$	231,787	$	32,305			$	1,538,982
December 31, 2015
Allowance for loan losses
Individually evaluated for impairment	$	2,708	$	7,818	$	457	$	-	$	-	$	10,983
Collectively evaluated for impairment		2,962		2,573		724		56		5,272		11,587
Total ending allowance balance	$	5,670	$	10,391	$	1,181	$	56	$	5,272	$	22,570
Loans
Individually evaluated for impairment	$	16,868	$	66,375	$	5,888	$	-			$	89,131
Collectively evaluated for impairment		733,399		436,349		226,409		34,599				1,430,756
Total loans recorded investment		750,267		502,724		232,297		34,599				1,519,887
Accrued interest included in recorded investment		1,869		2,270		698		-				4,837
Total loans	$	748,398	$	500,454	$	231,599	$	34,599			$	1,515,050

17

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)
March 31, 2016
Commercial
Income producing - real estate	$	-	$	1,117	$	1,117
Land, land development and construction - real estate		-		168		168
Commercial and industrial		147		2,304		2,451
Mortgage
1-4 family		-		4,795		4,795
Resort lending		-		805		805
Home equity - 1st lien		-		154		154
Home equity - 2nd lien		-		268		268
Purchased loans		3		2		5
Installment
Home equity - 1st lien		-		79		79
Home equity - 2nd lien		-		344		344
Loans not secured by real estate		-		384		384
Other		-		2		2
Payment plan receivables
Full refund		-		2		2
Partial refund		-		-		-
Other		-		1		1
Total recorded investment	$	150	$	10,425	$	10,575
Accrued interest included in recorded investment	$	3	$	-	$	3
December 31, 2015
Commercial
Income producing - real estate	$	-	$	1,027	$	1,027
Land, land development and construction - real estate		49		401		450
Commercial and industrial		69		2,028		2,097
Mortgage
1-4 family		-		4,744		4,744
Resort lending		-		1,094		1,094
Home equity - 1st lien		-		187		187
Home equity - 2nd lien		-		147		147
Purchased loans		-		2		2
Installment
Home equity - 1st lien		-		106		106
Home equity - 2nd lien		-		443		443
Loans not secured by real estate		-		421		421
Other		-		2		2
Payment plan receivables
Full refund		-		2		2
Partial refund		-		2		2
Other		-		1		1
Total recorded investment	$	118	$	10,607	$	10,725
Accrued interest included in recorded investment	$	2	$	-	$	2

18

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

An aging analysis of loans by class follows:

	Loans Past Due								Loans not		Total
	30-59 days		60-89 days		90+ days		Total		Past Due		Loans
	(In thousands)
March 31, 2016
Commercial
Income producing - real estate	$	337	$	-	$	776	$	1,113	$	310,604	$	311,717
Land, land development and construction - real estate		-		-		168		168		40,795		40,963
Commercial and industrial		354		192		229		775		419,038		419,813
Mortgage
1-4 family		2,505		662		4,795		7,962		275,295		283,257
Resort lending		677		-		805		1,482		111,434		112,916
Home equity - 1st lien		66		-		154		220		26,024		26,244
Home equity - 2nd lien		235		287		268		790		51,620		52,410
Purchased loans		12		1		5		18		31,408		31,426
Installment
Home equity - 1st lien		529		176		79		784		15,429		16,213
Home equity - 2nd lien		215		133		344		692		18,367		19,059
Loans not secured by real estate		386		108		384		878		194,202		195,080
Other		3		11		2		16		2,091		2,107
Payment plan receivables
Full refund		408		65		2		475		17,609		18,084
Partial refund		303		61		-		364		6,197		6,561
Other		154		3		1		158		7,502		7,660
Total recorded investment	$	6,184	$	1,699	$	8,012	$	15,895	$	1,527,615	$	1,543,510
Accrued interest included in recorded investment	$	56	$	21	$	3	$	80	$	4,448	$	4,528
December 31, 2015
Commercial
Income producing - real estate	$	203	$	209	$	647	$	1,059	$	305,155	$	306,214
Land, land development and construction - real estate		-		-		252		252		44,231		44,483
Commercial and industrial		785		16		151		952		398,618		399,570
Mortgage
1-4 family		1,943		640		4,744		7,327		272,298		279,625
Resort lending		307		-		1,094		1,401		114,619		116,020
Home equity - 1st lien		50		-		187		237		22,327		22,564
Home equity - 2nd lien		439		54		147		640		50,618		51,258
Purchased loans		9		1		2		12		33,245		33,257
Installment
Home equity - 1st lien		315		107		106		528		16,707		17,235
Home equity - 2nd lien		231		149		443		823		19,727		20,550
Loans not secured by real estate		567		83		421		1,071		191,262		192,333
Other		15		3		2		20		2,159		2,179
Payment plan receivables
Full refund		492		62		2		556		21,294		21,850
Partial refund		415		228		2		645		5,834		6,479
Other		110		3		1		114		6,156		6,270
Total recorded investment	$	5,881	$	1,555	$	8,201	$	15,637	$	1,504,250	$	1,519,887
Accrued interest included in recorded investment	$	53	$	17	$	2	$	72	$	4,765	$	4,837

19

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Impaired loans are as follows :

	March 31, 2016		December 31, 2015
Impaired loans with no allocated allowance	(In thousands)
TDR	$	2,368	$	2,518
Non - TDR		168		203
Impaired loans with an allocated allowance
TDR - allowance based on collateral		4,683		4,810
TDR - allowance based on present value cash flow		80,009		81,002
Non - TDR - allowance based on collateral		623		260
Non - TDR - allowance based on present value cash flow		-		-
Total impaired loans	$	87,851	$	88,793
Amount of allowance for loan losses allocated
TDR - allowance based on collateral	$	2,531	$	2,436
TDR - allowance based on present value cash flow		8,135		8,471
Non - TDR - allowance based on collateral		184		76
Non - TDR - allowance based on present value cash flow		-		-
Total amount of allowance for loan losses allocated	$	10,850	$	10,983

20

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Impaired loans by class  are as follows (1):

	March 31, 2016						December 31, 2015
	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	$	785	$	1,030	$	-	$	641	$	851	$	-
Land, land development & construction-real estate		537		1,112		-		818		1,393		-
Commercial and industrial		1,218		1,216		-		1,245		1,241		-
Mortgage
1-4 family		-		140		-		23		183		-
Resort lending		-		-		-		-		-		-
Home equity - 1st lien		-		-		-		-		-		-
Home equity - 2nd lien		-		-		-		-		-		-
Installment
Home equity - 1st lien		1		75		-		-		76		-
Home equity - 2nd lien		14		13		-		-		-		-
Loans not secured by real estate		-		-		-		-		-		-
Other		-		-		-		-		-		-
		2,555		3,586		-		2,727		3,744		-
With an allowance recorded:
Commercial
Income producing - real estate		8,234		9,061		548		8,377		9,232		516
Land, land development & construction-real estate		1,484		1,484		95		1,690		1,778		296
Commercial and industrial		5,327		5,592		2,148		4,097		4,439		1,896
Mortgage
1-4 family		46,608		48,532		4,976		47,792		49,808		5,132
Resort lending		17,929		17,963		2,654		18,148		18,319		2,662
Home equity - 1st lien		243		247		12		168		172		9
Home equity - 2nd lien		119		201		9		244		325		15
Installment
Home equity - 1st lien		2,287		2,421		130		2,364		2,492		143
Home equity - 2nd lien		2,793		2,807		239		2,929		2,951		271
Loans not secured by real estate		569		641		38		587		658		42
Other		6		6		1		8		8		1
		85,599		88,955		10,850		86,404		90,182		10,983
Total
Commercial
Income producing - real estate		9,019		10,091		548		9,018		10,083		516
Land, land development & construction-real estate		2,021		2,596		95		2,508		3,171		296
Commercial and industrial		6,545		6,808		2,148		5,342		5,680		1,896
Mortgage
1-4 family		46,608		48,672		4,976		47,815		49,991		5,132
Resort lending		17,929		17,963		2,654		18,148		18,319		2,662
Home equity - 1st lien		243		247		12		168		172		9
Home equity - 2nd lien		119		201		9		244		325		15
Installment
Home equity - 1st lien		2,288		2,496		130		2,364		2,568		143
Home equity - 2nd lien		2,807		2,820		239		2,929		2,951		271
Loans not secured by real estate		569		641		38		587		658		42
Other		6		6		1		8		8		1
Total	$	88,154	$	92,541	$	10,850	$	89,131	$	93,926	$	10,983
Accrued interest included in recorded investment	$	303					$	338

(1) There were no impaired payment plan receivables or purchased mortgage loans at March 31, 2016 or December 31, 2015.

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 three month periods ending March 31, follows (1):

	2016				2015
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:	(In thousands)
Commercial
Income producing - real estate	$	713	$	2	$	5,848	$	53
Land, land development & construction-real estate		678		7		1,041		34
Commercial and industrial		1,232		21		2,768		37
Mortgage
1-4 family		12		1		13		-
Resort lending		-		-		31		-
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		7		-		-		-
Loans not secured by real estate		-		-		-		-
Other		-		-		-		-
		2,643		32		9,701		124
With an allowance recorded:
Commercial
Income producing - real estate		8,306		107		12,849		157
Land, land development & construction-real estate		1,587		13		2,709		14
Commercial and industrial		4,712		23		8,177		66
Mortgage
1-4 family		47,200		502		52,451		551
Resort lending		18,039		160		18,632		171
Home equity line of credit - 1st lien		206		2		162		2
Home equity line of credit - 2nd lien		182		1		123		2
Installment
Home equity installment - 1st lien		2,326		42		2,691		50
Home equity installment - 2nd lien		2,861		44		3,174		51
Loans not secured by real estate		578		9		694		10
Other		7		-		12		-
		86,004		903		101,674		1,074
Total
Commercial
Income producing - real estate		9,019		109		18,697		210
Land, land development & construction-real estate		2,265		20		3,750		48
Commercial and industrial		5,944		44		10,945		103
Mortgage
1-4 family		47,212		503		52,464		551
Resort lending		18,039		160		18,663		171
Home equity line of credit - 1st lien		206		2		162		2
Home equity line of credit - 2nd lien		182		1		123		2
Installment
Home equity installment - 1st lien		2,327		43		2,691		50
Home equity installment - 2nd lien		2,868		44		3,174		51
Loans not secured by real estate		578		9		694		10
Other		7		-		12		-
Total	$	88,647	$	935	$	111,375	$	1,198

(1) There were no impaired payment plan receivables or purchased mortgage loans during the three month periods ended March 31, 2016 and 2015, respectively.

22

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Our average investment in impaired loans was approximately $88.6 million and $111.4 million for the three-month periods ended March 31, 2016 and 2015, 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 March 31, 2016 and 2015, was approximately $0.9 million and $1.2 million, respectively.

Troubled debt restructurings follow:

	March 31, 2016
	Commercial		Retail			Total
	(In thousands)
Performing TDRs	$	13,950	$	66,619		$	80,569
Non-performing TDRs(1)		2,798		3,693	(2)		6,491
Total	$	16,748	$	70,312		$	87,060

	December 31, 2015
	Commercial		Retail			Total
	(In thousands)
Performing TDRs	$	13,318	$	68,194		$	81,512
Non-performing TDRs(1)		3,041		3,777	(2)		6,818
Total	$	16,359	$	71,971		$	88,330

(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 $10.7 million and $10.9 million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of March 31, 2016 and December 31, 2015, respectively.

During the three months ended March 31, 2016 and 2015, 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 ended March 31 follow:

	Number of Contracts		Pre-modification Recorded Balance		Post-modification Recorded Balance
	(Dollars in thousands)
2016
Commercial
Income producing - real estate		2	$	110	$	110
Land, land development & construction-real estate		-		-		-
Commercial and industrial		4		1,758		1,758
Mortgage
1-4 family		2		83		153
Resort lending		1		116		117
Home equity - 1st lien		1		107		78
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		1		30		31
Home equity - 2nd lien		2		55		56
Loans not secured by real estate		-		-		-
Other		-		-		-
Total		13	$	2,259	$	2,303
2015
Commercial
Income producing - real estate		1	$	156	$	164
Land, land development & construction-real estate		-		-		-
Commercial and industrial		2		236		234
Mortgage
1-4 family		5		1,005		805
Resort lending		-		-		-
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		4		167		140
Home equity - 2nd lien		-		-		-
Loans not secured by real estate		-		-		-
Other		-		-		-
Total		12	$	1,564	$	1,343

The troubled debt restructurings described above for 2016 increased the allowance for loan losses by $0.06 million and resulted in zero charge offs while the troubled debt restructurings described above for 2015 increased the allowance for loan losses by $0.03 million and resulted in zero charge offs.

24

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Loans that have been classified as troubled debt restructurings during the past twelve months and that have subsequently defaulted during the three-month periods ended March 31 follow:

	Number of Contracts		Recorded Balance
	(Dollars in thousands)
2016
Commercial
Income producing - real estate		-	$	-
Land, land development & construction-real estate		-		-
Commercial and industrial		-		-
Mortgage
1-4 family		-		-
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		-		-
		-	$	-
2015
Commercial
Income producing - real estate		-	$	-
Land, land development & construction-real estate		-		-
Commercial and industrial		1		91
Mortgage
1-4 family		-		-
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	$	91

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

There were no troubled debt restructurings that subsequently defaulted in 2016 while the troubled debt restructurings that subsequently defaulted described above for 2015 had no impact on the balance of the allowance for loan losses and resulted in zero charge offs.

The terms of certain other loans were modified during the three months ended March 31, 2016 and 2015 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.

25

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

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.

26

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)
March 31, 2016
Income producing - real estate	$	303,195	$	6,367	$	1,038	$	1,117	$	311,717
Land, land development and construction - real estate		39,120		1,675		-		168		40,963
Commercial and industrial		391,207		20,687		5,615		2,304		419,813
Total	$	733,522	$	28,729	$	6,653	$	3,589	$	772,493
Accrued interest included in total	$	1,507	$	82	$	18	$	-	$	1,607
December 31, 2015
Income producing - real estate	$	296,898	$	6,866	$	1,423	$	1,027	$	306,214
Land, land development and construction - real estate		40,844		2,995		243		401		44,483
Commercial and industrial		371,357		19,502		6,683		2,028		399,570
Total	$	709,099	$	29,363	$	8,349	$	3,456	$	750,267
Accrued interest included in total	$	1,729	$	108	$	32	$	-	$	1,869

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.

27

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		Purchased Loans
											Total
	(In thousands)
March 31, 2016
800 and above	$	29,357	$	13,694	$	4,206	$	7,409	$	2,298	$	56,964
750-799		84,315		39,748		10,292		18,190		20,775		173,320
700-749		54,911		31,331		4,601		11,796		6,901		109,540
650-699		51,725		16,538		3,696		7,501		-		79,460
600-649		27,962		4,934		1,447		3,720		-		38,063
550-599		16,128		3,052		1,022		1,887		-		22,089
500-549		10,348		985		561		1,261		-		13,155
Under 500		4,570		548		223		252		-		5,593
Unknown		3,941		2,086		196		394		1,452		8,069
Total	$	283,257	$	112,916	$	26,244	$	52,410	$	31,426	$	506,253
Accrued interest included in total	$	1,368	$	489	$	93	$	195	$	104	$	2,249
December 31, 2015
800 and above	$	28,760	$	13,943	$	4,374	$	7,696	$	2,310	$	57,083
750-799		78,802		40,888		7,137		17,405		23,283		167,515
700-749		56,519		31,980		4,341		11,022		6,940		110,802
650-699		51,813		17,433		3,203		7,691		-		80,140
600-649		27,966		4,991		1,467		3,684		-		38,108
550-599		16,714		3,070		1,027		1,918		-		22,729
500-549		10,610		1,051		572		1,295		-		13,528
Under 500		4,708		554		244		265		-		5,771
Unknown		3,733		2,110		199		282		724		7,048
Total	$	279,625	$	116,020	$	22,564	$	51,258	$	33,257	$	502,724
Accrued interest included in total	$	1,396	$	477	$	87	$	196	$	114	$	2,270

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

28

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)
March 31, 2016
800 and above	$	1,638	$	1,678	$	43,330	$	91	$	46,737
750-799		3,850		5,552		89,742		522		99,666
700-749		2,375		3,591		35,628		633		42,227
650-699		3,308		3,761		16,394		459		23,922
600-649		2,032		2,068		4,663		202		8,965
550-599		1,741		1,296		1,825		105		4,967
500-549		1,000		804		1,068		55		2,927
Under 500		211		280		297		23		811
Unknown		58		29		2,133		17		2,237
Total	$	16,213	$	19,059	$	195,080	$	2,107	$	232,459
Accrued interest included in total	$	69	$	73	$	514	$	16	$	672
December 31, 2015
800 and above	$	1,792	$	1,782	$	44,254	$	58	$	47,886
750-799		4,117		5,931		86,800		531		97,379
700-749		2,507		3,899		34,789		694		41,889
650-699		3,508		4,182		16,456		499		24,645
600-649		2,173		2,153		4,979		200		9,505
550-599		1,800		1,346		1,997		109		5,252
500-549		1,056		855		1,170		61		3,142
Under 500		223		370		385		23		1,001
Unknown		59		32		1,503		4		1,598
Total	$	17,235	$	20,550	$	192,333	$	2,179	$	232,297
Accrued interest included in total	$	78	$	83	$	520	$	17	$	698

(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 March 31, 2016, approximately 56.0% 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 20.3% of Mepco’s outstanding payment plan receivables as of March 31, 2016, 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.

29

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)
March 31, 2016
AM Best rating
A+	$	-	$	11	$	-	$	11
A		1,845		5,285		-		7,130
A-		2,576		1,208		7,658		11,442
Not rated		13,663		57		2		13,722
Total	$	18,084	$	6,561	$	7,660	$	32,305
December 31, 2015
AM Best rating
A+	$	-	$	6	$	-	$	6
A		2,712		5,203		-		7,915
A-		3,418		1,177		6,265		10,860
Not rated		15,720		93		5		15,818
Total	$	21,850	$	6,479	$	6,270	$	34,599

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 $2.5 million and $2.8 million at March 31, 2016 and December 31, 2015, respectively.  Retail mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process according to local requirements totaled $1.4 million and $1.1 million at March 31, 2016 and December 31, 2015, 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.

30

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
March 31, 2016	$	2,425,152		$	50,515		$	275,315		$	(263,862	)	$	2,487,120
December 31, 2015		2,340,566			57,208			286,936			(275,644	)		2,409,066
For the three months ended March 31,
2016
Interest income	$	20,243		$	1,110		$	5		$	(4	)	$	21,354
Net interest income		19,102			932			(271	)		-			19,763
Provision for loan losses		(526	)		(4	)		-			-			(530	)
Income (loss) before income tax		6,862			(359	)		(423	)		(23	)		6,057
Net income (loss)		4,619			(237	)		(267	)		(15	)		4,100
2015
Interest income	$	18,221		$	1,331		$	20		$	(20	)	$	19,552
Net interest income		17,183			1,135			(227	)		-			18,091
Provision for loan losses		(656	)		(3	)		-			-			(659	)
Income (loss) before income tax		6,259			(291	)		(383	)		(24	)		5,561
Net income (loss)		4,233			(192	)		(244	)		(16	)		3,781

(1) Includes amounts relating to our parent company.

(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, 2016, 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, 2016.  We 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, 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 three months ended March 31, 2016, we repurchased 1,059,865 shares of common stock for an aggregate purchase price of $15.5 million leaving 52,703 shares to be repurchased under the Repurchase Plan.  On April 26, 2016 our Board of Directors authorized a $5.0 million expansion of the Repurchase Plan.

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).

31

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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.  At the present time, the Board of Directors does not intend to extend the Preservation Plan.

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

	Three Months Ended March 31,
	2016		2015
Net income	$	4,100	$	3,781
Weighted average shares outstanding (1)		21,751		22,997
Stock units for deferred compensation plan for non-employee directors		113		111
Effect of stock options		112		121
Restricted stock units		86		309
Weighted average shares outstanding for calculation of diluted earnings per share		22,062		23,538
Net income per common share
Basic (1)	$	0.19	$	0.16
Diluted	$	0.19	$	0.16

⁽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 included in weighted average shares outstanding for calculation of diluted earnings per share because they were anti-dilutive totaled 0.03 million for both the three-month periods ended March 31, 2016 and 2015.

32

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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:

	March 31, 2016
	Notional Amount		Average Maturity (years)		Fair Value
	(Dollars in thousands)
No hedge designation
Rate-lock mortgage loan commitments	$	23,854		0.1	$	769
Mandatory commitments to sell mortgage loans		50,127		0.1		(137	)
Pay-fixed interest rate swap agreements		42,933		9.5		(1,615	)
Pay-variable interest rate swap agreements		42,933		9.5		1,615
Purchased options		2,803		5.3		200
Written options		2,803		5.3		(200	)
Total	$	165,453		5.2	$	632

	December 31, 2015
	Notional Amount		Average Maturity (years)		Fair Value
	(Dollars in thousands)
No hedge designation
Rate-lock mortgage loan commitments	$	20,581		0.1	$	550
Mandatory commitments to sell mortgage loans		46,320		0.1		69
Pay-fixed interest rate swap agreements		27,587		8.0		(497	)
Pay-variable interest rate swap agreements		27,587		8.0		497
Purchased options		2,098		5.7		122
Written options		2,098		5.7		(122	)
Total	$	126,271		3.7	$	619

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

33

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

In the ordinary course of business, we enter into rate-lock mortgage loan commitments with customers (“Rate-Lock Commitments”).  These commitments expose us to interest rate risk.  We also enter into mandatory commitments to sell mortgage loans (“Mandatory Commitments”) to reduce the impact of price fluctuations of mortgage loans held for sale and Rate-Lock Commitments.  Mandatory Commitments help protect our loan sale profit margin from fluctuations in interest rates. The changes in the fair value of Rate-Lock Commitments and Mandatory Commitments are recognized currently as part of net gains on mortgage loans.  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 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 principal at maturity plus a potential equity return (a written option), while we receive a like stream of funds based on the equity return (a purchased option).  The written and purchased options will generally move in opposite directions resulting in little or no net impact on our Condensed Consolidated Statements of Operations.  All of the written and purchased options in the table above relate to this Altitude CD product.

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

34

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

Fair Values of Derivative Instruments

	Asset Derivatives						Liability Derivatives
	March 31, 2016			December 31, 2015			March 31, 2016			December 31, 2015
	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	$	769	Other assets	$	550	Other liabilities	$	-	Other liabilities	$	-
Mandatory commitments to sell mortgage loans	Other assets		-	Other assets		69	Other liabilities		137	Other liabilities		-
Pay-fixed interest rate swap agreements	Other assets		-	Other assets		-	Other liabilities		1,615	Other liabilities		497
Pay-variable interest rateswap agreements	Other assets		1,615	Other assets		497	Other liabilities		-	Other liabilities		-
Purchased options	Other assets		200	Other assets		122	Other liabilities		-	Other liabilities		-
Written options	Other assets		-	Other assets		-	Other liabilities		200	Other liabilities		122
Total derivatives		$	2,584		$	1,238		$	1,952		$	619

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

	Three Month Periods Ended March 31,
	Location of Gain (Loss)	Gain (Loss) Recognized in Income
	Recognized in Income	2016			2015
		(In thousands)
No hedge designation
Rate-lock mortgage loan commitments	Net gains on mortgage loans	$	219		$	388
Mandatory  commitments to sell mortgage loans	Net gains on mortgage loans		(206	)		(39	)
Pay-fixed interest rate  swap agreements	Interest income		(1,118	)		(261	)
Pay-variable interest rate swap agreements	Interest income		1,118			261
Purchased options	Interest expense		78			-
Written options	Interest expense		(78	)		-
Total		$	13		$	349

35

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

8.  Intangible Assets

The following table summarizes intangible assets, net of amortization:

	March 31, 2016				December 31, 2015
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
	(In thousands)
Amortized intangible assets - core deposits	$	6,118	$	3,925	$	6,118	$	3,838

Amortization of other intangibles has been estimated through 2021 and thereafter in the following table.

	(In thousands)
Nine months ending December 31, 2016	$	260
2017		346
2018		346
2019		346
2020		346
2021 and thereafter		549
Total	$	2,193

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 0.2 million shares of common stock as of March 31, 2016.  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 March 31, 2016. 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 2016 and 2015, 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 and PSUs 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 a banking index of our peers.

Our directors may elect to receive a portion of their quarterly cash retainer fees in the form of common stock (either on a current basis or on a deferred basis pursuant to the non-employee director stock purchase plan referenced above). Shares equal in value to that portion of each director’s fees that he or she has elected to receive in stock are issued each quarter and vest immediately.  We issued 0.002 million shares and 0.001 million shares to directors during the first three months of 2016 and 2015, respectively and expensed their value during those same periods.

36

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 during both three month periods ended March 31, 2016 and 2015.  The corresponding tax benefit relating to this expense was $0.1 million for each period. Total expense recognized for non-employee director share based payments was $0.03 million and $0.02 million during the three months ended March 31, 2016 and 2015, respectively. The corresponding tax benefit relating to this expense was $0.01 million for each period.

At March 31, 2016, the total expected compensation cost related to non-vested stock options, restricted stock, PSUs and restricted stock unit awards not yet recognized was $2.4 million.  The weighted-average period over which this amount will be recognized is 2.1 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, 2016		235,596		$	4.94
Granted		-
Exercised		(10,216	)		3.18
Forfeited		(498	)		6.42
Expired		-
Outstanding at March 31, 2016		224,882		$	5.01		5.84	$	2,180
Vested and expected to vest at March 31, 2016		224,631		$	5.01		5.84	$	2,178
Exercisable at March 31, 2016		202,938		$	4.86		5.69	$	2,002

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, 2016		261,981		$	11.29
Granted		96,191			14.39
Vested		(21,225	)		12.78
Forfeited		(1,398	)		12.70
Outstanding at March 31, 2016		335,549		$	12.08

37

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Certain information regarding options exercised during the periods follows:

	Three Months Ended March 31,
	2016		2015
Intrinsic value	$	117	$	56
Cash proceeds received	$	32	$	15
Tax benefit realized	$	41	$	20

10.  Income Tax

Income tax expense was $2.0 million and $1.8 million during the three months ended March 31, 2016 and 2015, 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 March 31, 2016 and 2015, 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 $1.1 million at both March 31, 2016 and December 31, 2015. 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 both March 31, 2016 and December 31, 2015, we had approximately $1.0 million, of gross unrecognized tax benefits.  We do not expect the total amount of unrecognized tax benefits to significantly increase or decrease during the balance of 2016.

38

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 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 March 31, 2016, the Bank had negative undivided profits of $5.7 million.  We can request regulatory approval for a return of capital from the Bank to the parent company. During the first quarters of 2016 and 2015, we requested regulatory approval for returns of capital from the Bank to the parent company of  $18.0 million and $18.5 million, respectively.  These return of capital requests were approved by our banking regulators on February 24, 2016 and February 13, 2015, respectively and the Bank returned these amounts to the parent company on February 25, 2016 and February 17, 2015, respectively.  It is not our intent to have dividends paid in amounts that would reduce the capital of our Bank to levels below those which we consider prudent and in accordance with guidelines of regulatory authorities.

We are also subject to various regulatory capital requirements. The prompt corrective action regulations establish quantitative measures to ensure capital adequacy and require minimum amounts and ratios of total, Tier 1, and common equity Tier 1 capital to risk-weighted assets and Tier 1 capital to average assets. Failure to meet minimum capital requirements can result in certain mandatory, and possibly discretionary, actions by regulators that could have a material effect on our 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 March 31, 2016 and December 31, 2015, 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 capital conservation buffer began to phase in on January 1, 2016 with 0.625% added to the minimum ratio for adequately capitalized institutions for 2016.  To avoid limits on capital distributions and certain discretionary bonus payments we must meet the minimum ratio for adequately capitalized institutions plus the phased in buffer.  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.

39

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)
March 31, 2016
Total capital to risk-weighted assets
Consolidated	$	268,031		15.81	%	$	135,651		8.00	%	NA			NA
Independent Bank		251,157		14.83			135,503		8.00			$	169,379		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	246,688		14.55	%	$	101,738		6.00	%	NA			NA
Independent Bank		229,884		13.57			101,628		6.00			$	135,503		8.00	%
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	222,205		13.10	%	$	76,304		4.50	%	NA			NA
Independent Bank		229,884		13.57			76,221		4.50			$	110,097		6.50	%
Tier 1 capital to average assets
Consolidated	$	246,688		10.31	%	$	95,713		4.00	%	NA			NA
Independent Bank		229,884		9.61			95,647		4.00			$	119,559		5.00	%
December 31, 2015
Total capital to risk-weighted assets
Consolidated	$	278,170		16.65	%	$	133,668		8.00	%	NA			NA
Independent Bank		261,894		15.69			133,514		8.00			$	166,893		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	257,050		15.38	%	$	100,251		6.00	%	NA			NA
Independent Bank		240,867		14.43			100,136		6.00			$	133,514		8.00	%
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	239,271		14.32	%	$	75,188		4.50	%	NA			NA
Independent Bank		240,867		14.43			75,102		4.50			$	108,480		6.50	%
Tier 1 capital to average assets
Consolidated	$	257,050		10.91	%	$	94,217		4.00	%	NA			NA
Independent Bank		240,867		10.23			94,145		4.00			$	117,682		5.00	%

NA - Not applicable

40

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The components of our regulatory capital are as follows:

	Consolidated						Independent Bank
	March 31, 2016			December 31, 2015			March 31, 2016			December 31, 2015
	(In thousands)
Total shareholders' equity	$	239,545		$	251,092		$	247,567		$	259,947
Add (deduct)
Accumulated other comprehensive (income) loss for regulatory purposes		(999	)		238			(999	)		238
Intangible assets		(1,316	)		(912	)		(1,316	)		(912	)
Disallowed deferred tax assets		(15,025	)		(11,147	)		(15,368	)		(18,406	)
Common equity tier 1 capital		222,205			239,271			229,884			240,867
Qualifying trust preferred securities		34,500			34,500			-			-
Disallowed deferred tax assets		(10,017	)		(16,721	)		-			-
Tier 1 capital		246,688			257,050			229,884			240,867
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets		21,343			21,120			21,273			21,027
Total risk-based capital	$	268,031		$	278,170		$	251,157		$	261,894

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.

41

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 primarily include agency securities, private label 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 March 31, 2016 and December 31, 2015, all of our 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.

42

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Appraisals for both collateral-dependent impaired loans and other real estate are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by us.  Once received, an independent third party (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).

43

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)
March 31, 2016:
Measured at Fair Value on a Recurring Basis:
Assets
Trading securities	$	136	$	136	$	-	$	-
Securities available for sale
U.S. agency		35,385		-		35,385		-
U.S. agency residential mortgage-backed		197,379		-		197,379		-
U.S. agency commercial mortgage-backed		8,492		-		8,492		-
Private label mortgage-backed		18,375		-		18,375		-
Other asset backed		128,072		-		128,072		-
Obligations of states and political subdivisions		148,345		-		148,345		-
Corporate		49,510		-		49,510		-
Trust preferred		2,303		-		2,303		-
Foreign government		1,639		-		1,639		-
Loans held for sale		28,016		-		28,016		-
Derivatives (1)		2,584		-		2,584		-
Liabilities
Derivatives (2)		1,952		-		1,952		-
Measured at Fair Value on a Non-recurring basis:
Assets
Capitalized mortgage loan servicing rights (3)		10,454		-		-		10,454
Impaired loans (4)
Commercial
Income producing - real estate		605		-		-		605
Land, land development & construction-real estate		35		-		-		35
Commercial and industrial		1,166		-		-		1,166
Mortgage
1-4 Family		540		-		-		540
Resort Lending		245		-		-		245
Other real estate (5)
Commercial
Land, land development & construction-real estate		549		-		-		549
Mortgage
1-4 Family		66		-		-		66
Resort lending		93		-		-		93
Home equity - 1st lien		18						18
Installment
Home equity - 1st lien		23		-		-		23

(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.

44

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, 2015:
Measured at Fair Value on a Recurring Basis:
Assets
Trading securities	$	148	$	148	$	-	$	-
Securities available for sale
U.S. agency		47,512		-		47,512		-
U.S. agency residential mortgage-backed		196,056		-		196,056		-
U.S. agency commercial mortgage-backed		34,028		-		34,028		-
Private label mortgage-backed		4,903		-		4,903		-
Other asset backed		116,904		-		116,904		-
Obligations of states and political subdivisions		144,984		-		144,984		-
Corporate		38,614		-		38,614		-
Trust preferred		2,483		-		2,483		-
Loans held for sale		27,866		-		27,866		-
Derivatives (1)		1,238		-		1,238		-
Liabilities
Derivatives (2)		619		-		619		-
Measured at Fair Value on a Non-recurring basis:
Assets
Capitalized mortgage loan servicing rights (3)		8,481		-		-		8,481
Impaired loans (4)
Commercial
Income producing - real estate		711		-		-		711
Land, land development & construction-real estate		40		-		-		40
Commercial and industrial		1,257		-		-		1,257
Mortgage
1-4 Family		421		-		-		421
Resort lending		129		-		-		129
Other real estate (5)
Commercial
Land, land development & construction-real estate		639		-		-		639
Commercial and industrial		165		-		-		165
Mortgage
1-4 Family		26		-		-		26
Resort lending		107		-		-		107
Home equity - 1st lien		14		-		-		14
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.

There were no transfers between Level 1 and Level 2 during the three months ended March 31, 2016 and 2015.

45

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 three-Month Periods Ended March 31 for Items Measured at Fair Value Pursuant to Election of the Fair Value Option
		2016								2015
		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		$	(12	)	$	-	$	(12	)	$	10	$	-	$	10
Loans held for sale			-			127		127			-		209		209

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

The following represent impairment charges recognized during the three periods ended March 31, 2016 and 2015 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 $10.5 million which is net of a valuation allowance of $4.7 million at March 31, 2016 and had a carrying amount of $8.5 million which is net of a valuation allowance of $3.3 million at December 31, 2015.  An additional charge relating to capitalized mortgage loan servicing rights measured at fair value of $1.5 million and $0.7 million was included in our results of operations for the three month periods ending March 31, 2016 and 2015, respectively.

· Loans which are measured for impairment using the fair value of collateral for collateral dependent loans, had a carrying amount of $5.3 million, with a valuation allowance of $2.7 million at March 31, 2016 and had a carrying amount of $5.1 million, with a valuation allowance of $2.5 million at December 31, 2015.  The provision for loan losses included in our results of operations relating to impaired loans was an expense of $0.6 million for both three month periods ending March 31, 2016 and 2015.

· Other real estate, which is measured using the fair value of the property, had a carrying amount of $0.7 million which is net of a valuation allowance of $1.7 million at March 31, 2016 and a carrying amount of $1.0 million which is net of a valuation allowance of $1.7 million at December 31, 2015.  An additional charge relating to other real estate measured at fair value of $0.2 million was included in our results of operations during both three month periods ended March 31, 2016 and 2015, respectively.

We had no assets or liabilities measured at fair value on a recurring basis that used significant unobservable inputs (Level 3) during the three months ended March 31, 2016 and 2015.

46

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

	Asset Fair Value		Valuation Technique	Unobservable Inputs	Weighted Average
	(In thousands)
March 31, 2016
Capitalized mortgage loan servicing rights	$	10,454	Present value of net servicing revenue	Discount rate		10.04	%
				Cost to service	$	80
				Ancillary income		24
				Float rate		1.17	%
Impaired loans
Commercial (1)		1,601	Sales comparison approach	Adjustment for differences between comparable sales		(1.2	)%
Mortgage		785	Sales comparison approach	Adjustment for differences between comparable sales		2.2
Other real estate
Commercial		549	Sales comparison approach	Adjustment for differences between comparable sales		(5.6	)
Mortgage and installment		200	Sales comparison approach	Adjustment for differences between comparable sales		58.5
December 31, 2015
Capitalized mortgage loan servicing rights	$	8,481	Present value of net servicing revenue	Discount rate		10.04	%
				Cost to service	$	80
				Ancillary income		24
				Float rate		1.73	%
Impaired loans
Commercial (1)		1,605	Sales comparison approach	Adjustment for differences between comparable sales		(2.1	)%
			Income approach	Capitalization rate		9.3
Mortgage		550	Sales comparison approach	Adjustment for differences between comparable sales		0.7
Other real estate
Commercial		804	Sales comparison approach	Adjustment for differences between comparable sales		(3.9	)
Mortgage and installment		183	Sales comparison approach	Adjustment for differences between comparable sales		75.6

(1) In addition to the valuation techniques and unobservable inputs discussed above, at March 31, 2016 and December 31, 2015, we had an impaired collateral dependent commercial relationship that totaled $0.2 million and $0.4 million, respectively that was primarily secured by collateral other than real estate.  Collateral securing this relationship primarily included machinery and equipment and inventory at March 31, 2016 and December 31, 2015.  Valuation techniques at March 31, 2016 and December 31, 2015, included appraisals and 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.

47

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
March 31, 2016	$	28,016	$	841	$	27,175
December 31, 2015		27,866		714		27,152

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 may not be a precise estimate. Changes in assumptions could significantly affect the estimates.

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

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 Federal Reserve 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 and do not necessarily represent an exit price.  Loans are classified as Level 3.  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.

48

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.

49

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)
March 31, 2016
Assets
Cash and due from banks	$	41,790	$	41,790	$	41,790	$	-	$	-
Interest bearing deposits		102,919		102,919		102,919		-		-
Interest bearing deposits - time		10,178		10,214		-		10,214		-
Trading securities		136		136		136		-		-
Securities available for sale		589,500		589,500		-		589,500		-
Federal Home Loan Bank and Federal
Reserve Bank Stock		15,600	NA		NA		NA		NA
Net loans and loans held for sale		1,544,503		1,513,641		-		28,016		1,485,625
Accrued interest receivable		6,855		6,855		-		2,300		4,555
Derivative financial instruments		2,584		2,584		-		2,584		-
Liabilities
Deposits with no stated maturity (1)	$	1,704,515	$	1,704,515	$	1,704,515	$	-	$	-
Deposits with stated maturity (1)		450,191		449,221		-		449,221		-
Other borrowings		11,953		13,425		-		13,425		-
Subordinated debentures		35,569		22,526		-		22,526		-
Accrued interest payable		562		562		21		541		-
Derivative financial instruments		1,952		1,952		-		1,952		-
December 31, 2015
Assets
Cash and due from banks	$	54,260	$	54,260	$	54,260	$	-	$	-
Interest bearing deposits		31,523		31,523		31,523		-		-
Interest bearing deposits - time		11,866		11,858		-		11,858		-
Trading securities		148		148		148		-		-
Securities available for sale		585,484		585,484		-		585,484		-
Federal Home Loan Bank and Federal
Reserve Bank Stock		15,471	NA		NA		NA		NA
Net loans and loans held for sale		1,520,346		1,472,613		-		27,866		1,444,747
Accrued interest receivable		6,565		6,565		5		1,969		4,591
Derivative financial instruments		1,238		1,238		-		1,238		-
Liabilities
Deposits with no stated maturity (1)	$	1,659,743	$	1,659,743	$	1,659,743	$	-	$	-
Deposits with stated maturity (1)		426,220		423,776		-		423,776		-
Other borrowings		11,954		13,448		-		13,448		-
Subordinated debentures		35,569		23,069		-		23,069		-
Accrued interest payable		466		466		21		445		-
Derivative financial instruments		619		619		-		619		-

(1) Deposits with no stated maturity include reciprocal deposits with a recorded book balance of $14.2 million and $11.8 million at March 31, 2016 and December 31, 2015, respectively.  Deposits with a stated maturity include reciprocal deposits with a recorded book balance of $36.1 million and $38.4 million at March 31, 2016 and December 31, 2015, 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.

50

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 $1.0 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.

51

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. Mepco is currently in the process of working to recover these receivables, primarily through negotiated settlements with the 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 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.  During the first quarter of 2016, we settled our last significant remaining litigation matter with certain of Mepco’s counterparties.  This settlement resulted in our receipt of a cash payment of $4.0 million, which reduced vehicle service contract counterparty receivables, net to $3.2 million as of March 31, 2016 compared to $7.2 million as of December 31, 2015.  This settlement also resulted in our receipt of an interest-bearing promissory note from one of Mepco’s counterparties for $1.5 million with monthly payments scheduled over a five-year period beginning in May 2016.  Due to the lack of any payment history and limited financial information on this counterparty, we established a full reserve on this promissory note as of March 31, 2016.  As a payment history is developed on this note, we will continue to evaluate the need for all or any part of a reserve.  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 March 31, 2016 and 2015.  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.

52

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 $0.02 million and $0.07 million for the three months ended March 31, 2016 and 2015, respectively.  The credit provision in each period is due primarily to the settlement of certain loss reimbursement claims at slightly lower amounts than what had been specifically reserved for previously.  The reserve for loss reimbursements on sold mortgage loans totaled $0.5 million at both March 31, 2016 and December 31, 2015. 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 March 31, 2016 and December 31, 2015 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.

53

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			Total
For the three months ended March 31,
2016
Balances at beginning of period	$	(238	)	$	(5,798	)	$	(6,036	)
Other comprehensive income before reclassifications		1,349			-			1,349
Amounts reclassified from AOCL		(112	)		-			(112	)
Net current period other comprehensive income		1,237			-			1,237
Balances at end of period	$	999		$	(5,798	)	$	(4,799	)
2015
Balances at beginning of period	$	162		$	(5,798	)	$	(5,636	)
Other comprehensive income before reclassifications		1,483			-			1,483
Amounts reclassified from AOCL		(49	)		-			(49	)
Net current period other comprehensive income		1,434			-			1,434
Balances at end of period	$	1,596		$	(5,798	)	$	(4,202	)

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.

54

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

A summary of reclassifications out of each component of AOCL for the three months ended March 31 follows:

AOCL Component	Amount Reclassified From AOCL		Affected Line Item in Condensed  Consolidated Statements of Operations
	(In thousands)
2016
Unrealized losses on securities available for sale
	$	174	Net gains on securities
		-	Net impairment loss recognized in earnings
		174	Total reclassifications before tax
		62	Income tax expense
	$	112	Reclassifications, net of tax
2015
Unrealized losses on securities available for sale
	$	75	Net gains on securities
		-	Net impairment loss recognized in earnings
		75	Total reclassifications before tax
		26	Income tax expense
	$	49	Reclassifications, net of tax

55

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 2015 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. Economic conditions in Michigan began to show signs of improvement during 2010.  Generally, these improvements have continued into 2016, 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.

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 with 0.625% added to the minimum ratio for adequately capitalized institutions for 2016.  To avoid limits on capital distributions and certain discretionary bonus payments we must meet the minimum ratio for adequately capitalized institutions plus the phased in buffer.  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 March 31, 2016 and December 31, 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 and financial condition in the first quarter of 2016 as compared to 2015.

56

Results of Operations

Summary.  We recorded net income of $4.1 million during the three months ended March 31, 2016, compared to net income of $3.8 million during the three months ended March 31, 2015. The increase in net income is primarily due to an increase in net interest income and a decrease in non-interest expenses that were partially offset by a decline in non-interest income and increases in the provision for loan losses (lower credit) and in income tax expense.

Key performance ratios
	Three months ended March 31,
	2016			2015
Net income (annualized) to
Average assets		0.68	%		0.67	%
Average common shareholders’ equity		6.70			6.05
Net income per common share
Basic	$	0.19		$	0.16
Diluted		0.19			0.16

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.

Net interest income totaled $19.8 million during the first quarter of 2016, which represents a $1.7 million, or 9.2% increase, from the comparable quarter one year earlier.  The increase in net interest income in 2016 compared to 2015 primarily reflects a four basis point increase in our tax equivalent net interest income as a percent of average interest-earning assets (the “net interest margin”) as well as an increase in average interest-earning assets.

Although the prolonged low interest rate environment has continued to pressure loan yields, this has been offset by growth in the amount of interest-earning assets, particularly loans.  Total average interest-earning assets were $2.21 billion in the first quarter of 2016 compared to $2.06 billion in the year ago quarter.  Also contributing to the growth in net interest income were net recoveries of interest on loans of $0.55 million in the first quarter of 2016 compared to $0.05 million in the year ago quarter.

57

Interest rates have generally been at extremely low levels since 2008 due primarily to the Federal Reserve Bank’s (“FRB”) monetary policies and its efforts to stimulate the U.S. economy.  This very low interest rate environment has created challenges as we seek to grow our interest income and net interest income.   The FRB did move the target federal funds rate up by 0.25% in mid-December 2015.  Future changes in the target federal funds rate are uncertain, however, we anticipate that any upward movements in short-term interest rates will be very gradual.  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 first quarter of 2016 non-accrual loans averaged $10.5 million compared to $15.1 million in the first quarter of 2015.

58

Average Balances and Tax Equivalent Rates

	Three Months Ended March 31,
	2016							2015
	Average Balance		Interest		Rate (3)			Average Balance		Interest		Rate (3)
	(Dollars in thousands)
Assets (1)
Taxable loans	$	1,546,142	$	18,520		4.81	%	$	1,420,272	$	17,195		4.88	%
Tax-exempt loans (2)		3,647		55		6.07			4,360		68		6.33
Taxable securities		521,833		2,244		1.72			506,411		1,758		1.39
Tax-exempt securities (2)		41,982		381		3.63			33,877		333		3.93
Interest bearing cash		81,436		106		0.52			75,171		70		0.38
Other investments		15,546		200		5.17			19,991		268		5.44
Interest Earning Assets		2,210,586		21,506		3.90			2,060,082		19,692		3.86
Cash and due from banks		45,165							46,035
Other assets, net		165,104							171,878
Total Assets	$	2,420,855						$	2,277,995
Liabilities
Savings and interest-bearing checking	$	1,014,117		270		0.11		$	985,482		266		0.11
Time deposits		435,943		844		0.78			376,958		741		0.80
Other borrowings		47,524		477		4.04			48,038		454		3.83
Interest Bearing Liabilities		1,497,584		1,591		0.43			1,410,478		1,461		0.42
Non-interest bearing deposits		653,417							590,088
Other liabilities		23,768							23,955
Shareholders’ equity		246,086							253,474
Total liabilities and shareholders’ equity	$	2,420,855						$	2,277,995
Net Interest Income			$	19,915						$	18,231
Net Interest Income as a Percent of Average Interest Earning Assets						3.61	%						3.57	%

(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

59

Provision for loan losses.  The provision for loan losses was a credit of $0.5 million and a credit of $0.7 million in the first quarters of 2016 and 2015, 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 first quarter of 2016.

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 $7.8 million and $9.0 million during the first three months of 2016 and 2015, respectively.  The components of non-interest income are as follows:

Non-Interest Income
	Three months ended March 31,
	2016			2015
	(In thousands)
Service charges on deposit accounts	$	2,845		$	2,850
Interchange income		1,878			2,142
Net gains on assets
Mortgage loans		1,642			2,139
Securities		162			85
Mortgage loan servicing		(978	)		(420	)
Investment and insurance commissions		467			446
Bank owned life insurance		290			350
Title insurance fees		288			256
Other		1,215			1,114
Total non-interest income	$	7,809		$	8,962

Service charges on deposit accounts totaled $2.85 million in the first quarter of 2016, essentially unchanged from the comparable period in 2015.  Over the last few years, such service charges have been decreasing, principally due to a decline in non-sufficient funds (“NSF”) occurrences and related NSF fees. We believe the long-term decline in NSF occurrences is due to our customers managing their finances more closely and having real-time access to deposit account information through electronic channels allowing them to reduce NSF activity and avoid the associated fees.

Interchange income decreased by $0.3 million, or 12.3%, in the first quarter of 2016 compared to the year ago period.  The decrease in interchange income in 2016 as compared to 2015 primarily results from lower incentives under our Debit Brand Agreement with MasterCard.  In addition, although transaction volume increased 2.7% year-over-year, interchange revenue per transaction declined by 7.5%, primarily due to a higher mix of debit (PIN-based) versus credit (signature-based) transactions.

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Net gains on mortgage loans were $1.6 million and $2.1 million in the first quarters of 2016 and 2015, respectively.   Mortgage loan sales totaled $55.7 million in the first quarter of 2016 compared to $68.7 million in the first quarter of 2015.  Mortgage loans originated totaled $73.5 million in the first quarter of 2016 compared to $79.8 million in the comparable quarter of 2015.  The decrease in mortgage loan originations, sales and net gains in 2016 as compared to 2015 is due primarily to lower mortgage refinance volume that was only partially offset by an increase in purchase money mortgage volume.

Mortgage Loan Activity
	Three months ended March 31,
	2016			2015
	(Dollars in thousands)
Mortgage loans originated	$	73,502		$	79,790
Mortgage loans sold		55,666			68,727
Net gains on the sale of mortgage loans		1,642			2,139
Net gains as a percentage of mortgage loans sold (“Loan Sales Margin”)		2.95	%		3.11	%
Fair value adjustments included in the Loan Sales Margin		0.25			0.81

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.

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 these fair value accounting adjustments, the Loan Sales Margin would have been 2.70% and 2.30% in the first quarters of 2016 and 2015, respectively. The increase in the Loan Sales Margin (excluding fair value adjustments) in 2016 was generally due to a widening of primary-to-secondary market pricing spreads as well as a higher content of government (FHA and VA) mortgage loan sales, which generally have higher profit margins than conventional mortgage loan sales.

We recorded net gains on securities of approximately $0.2 million and $0.1 million in the first quarters of 2016 and 2015, respectively. The first quarter 2016 net gains on securities are due primarily to sales of $42.4 million. The first quarter 2015 net gains on securities are due primarily to the sales of $11.8 million.

We recorded no net impairment losses in either the first quarter of 2016 or 2015, for other than temporary impairment of securities available for sale.  (See “Securities.”)

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Mortgage loan servicing generated losses of $1.0 million and $0.4 million in the first quarters of 2016 and 2015, respectively.  This quarterly comparative variance is 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 March 31,
	2016			2015
	(In thousands)
Balance at beginning of period	$	12,436		$	12,106
Originated servicing rights capitalized		554			663
Amortization		(557	)		(759	)
Change in valuation allowance		(1,450	)		(692	)
Balance at end of period	$	10,983		$	11,318
Valuation allowance at end of period	$	4,722		$	4,465

At March 31, 2016 we were servicing approximately $1.64 billion in mortgage loans for others on which servicing rights have been capitalized. This servicing portfolio had a weighted average coupon rate of 4.30% and a weighted average service fee of approximately 25.4 basis points. Remaining capitalized mortgage loan servicing rights at March 31, 2016 totaled $11.0 million, representing approximately 67 basis points on the related amount of mortgage loans serviced for others. The capitalized mortgage loan servicing had an estimated fair market value of $11.2 million at March 31, 2016.

Investment and insurance commissions increased modestly (by $0.02 million) during the first quarter of 2016 as compared to the year ago period due primarily to an increase in sales.

We earned $0.3 million and $0.4 million in the first quarters of 2016 and 2015, respectively, principally as a result of increases in the cash surrender value of our separate account bank owned life insurance.  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 $54.7 million and $54.4 million at March 31, 2016 and December 31, 2015, respectively.

Title insurance fees totaled $0.3 million in both the first quarters of 2016 and 2015.

Other non-interest income totaled $1.2 million and $1.1 million during the first quarters of 2016 and 2015, respectively.  This increase is primarily due to increases in commercial loan swap fee income and merchant processing income.

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.

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Non-interest expense totaled $22.0 million in the first quarter of 2016 compared to $22.2 million in the year ago period. The components of non-interest expense are as follows:

Non-Interest Expense
	Three months ended March 31,
	2016			2015
	(In thousands)
Compensation	$	8,234		$	8,330
Performance-based compensation		1,521			1,288
Payroll taxes and employee benefits		2,126			2,167
Compensation and employee benefits		11,881			11,785
Occupancy, net		2,207			2,419
Data processing		2,101			1,930
Furniture, fixtures and equipment		984			952
Communications		888			736
Loan and collection		825			1,155
Advertising		477			484
Legal and professional fees		413			380
FDIC deposit insurance		334			343
Interchange expense		266			291
Credit card and bank service fees		187			202
Supplies		176			213
Amortization of intangible assets		87			87
Vehicle service contract counterparty contingencies		30			29
Costs related to unfunded lending commitments		13			16
Net gains on other real estate and repossessed assets		(6	)		(39	)
Provision for loss reimbursement on sold loans		(15	)		(69	)
Other		1,197			1,237
Total non-interest expense	$	22,045		$	22,151

Compensation and employee benefits expenses, in total, increased by $0.1 million, or 0.8%, in the first quarter of 2016, due primarily to an increase in performance-based compensation.

Compensation expense decreased by $0.1 million, or 1.2%.  Average full-time equivalent employees (“FTE’s”) were reduced by 20.9, or 2.6%, during the first quarter of 2016 compared to the year ago quarter.  However, the impact of the FTE reductions was partially offset by annual pay increases that were effective January 1, 2016.  The first quarter of 2015 also included $0.2 million increase of severance expenses in connection with the branch consolidation and other staffing reductions

Performance-based compensation increased by $0.2 million in 2016 due primarily to a higher accrual for anticipated incentive compensation based on our estimated 2016 performance as compared to goals.

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Payroll taxes and employee benefits decreased $0.04 million in 2016 due primarily to a decrease in medical insurance costs.

Occupancy, net, decreased $0.2 million, or 8.8%, in the first quarter of 2016 compared to 2015 primarily because of fewer facilities as a result of the closing or consolidation of six branch offices in the second quarter of 2015 and the sale of one branch office in the third quarter of 2015.

Data processing expense increased $0.2 million, or 8.9%, in the first quarter of 2016 compared to the year earlier period due primarily to new services added with our core data processing vendor and increased costs for mobile banking due to growth in transaction volumes using that channel.

Furniture, fixtures and equipment, advertising, legal and professional, FDIC deposit insurance and other non-interest expenses were all relatively unchanged in the first quarter of 2016 as compared to the year earlier period.

Communications expense increased $0.2 million, or 20.7%, in the first quarter of 2016 compared to the year earlier period due primarily to mailing costs to convert our debit card customers to a chip-enabled card and for distribution of materials related to a new checking account program.

Loan and collection expenses primarily reflect costs related to the management and collection of non-performing loans and other problem credits. These expenses have declined in 2016, which primarily reflects the overall year-over-year decrease in non-performing loans. (See “Portfolio Loans and asset quality.”)

Interchange expense decreased modestly in the first quarter of 2016 compared to the year earlier period due primarily to the decline in debit card transaction revenue described above.

Credit card and bank service fees decreased primarily due to a decline in the number of payment plans being serviced by Mepco in the first quarter of 2016 compared to the first quarter of 2015.

Supplies expense is lower in 2016 primarily due to a reduction in our number of branch offices as described earlier as well as our cost reduction efforts.

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 $2.2 million and $2.3 million at March 31, 2016 and December 31, 2015, respectively. See Note #8 to the Condensed Consolidated Financial Statements for a schedule of future amortization of intangible assets.

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 in both the first quarter of 2016 and 2015.

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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, 2015, 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.  During the first quarter of 2016, we settled our last significant remaining litigation matter with certain of Mepco’s counterparties.  This settlement resulted in our receipt of a cash payment of $4.0 million, which reduced vehicle service contract counterparty receivables, net to $3.2 million as of March 31, 2016 compared to $7.2 million as of December 31, 2015.  This settlement also resulted in our receipt of an interest-bearing promissory note from one of Mepco’s counterparties for $1.5 million with monthly payments scheduled over a five-year period beginning in May 2016.  Due to the lack of any payment history and limited financial information on this counterparty, we established a full reserve on this promissory note as of March 31, 2016.  As a payment history is developed on this note, we will continue to evaluate the need for all or any part of a reserve.

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.

Net gains on other real estate and repossessed assets primarily represent gains and losses on the sale of and 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 small net gains in both the first quarters of 2016 and 2015, which reflects relative stability in real estate prices within our markets.

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The provision for loss reimbursement on sold loans was a credit of $0.02 million and a credit of $0.07 million in the first quarters of 2016 and 2015, respectively, and 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 small credit provisions in the first quarters of 2016 and 2015 is due primarily to the settlements of certain loss reimbursement claims at slightly lower amounts than what had been specifically reserved for at the end of the previous year.  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 $0.5 million at both March 31, 2016 and December 31, 2015. 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 March 31, 2016 and December 31, 2015 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.

Income tax expense.  We recorded an income tax expense of $2.0 million and $1.8 million in the first quarters of 2016 and 2015, respectively.

Our actual federal income tax expense is different than the amount computed by applying our statutory federal income tax rate to our income before income tax primarily due to tax-exempt interest income and tax-exempt income from the increase in the cash surrender value on life insurance.

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 March 31, 2016 and 2015, 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 $1.1 million at both March 31, 2016 and December 31, 2015. 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.

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.

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

Business Segments
	Three months ended March 31,
	2016			2015
	(In thousands)
Independent Bank	$	4,619		$	4,233
Mepco		(237	)		(192	)
Other(1)		(267	)		(244	)
Elimination		(15	)		(16	)
Net income	$	4,100		$	3,781

⁽¹⁾ Includes amounts relating to our parent company.

The increase in net income at Independent Bank in 2016 compared to 2015 is primarily due to an increase in net interest income that was partially offset by increases in the provision for loan losses (slightly lower credit) and income taxes as well as a decline in non-interest income.  (See “Net interest income,” “Provision for loan losses,” “Non-interest income,” “Income tax expense,” and “Portfolio Loans and asset quality.”)

The slight increase in the net loss at Mepco is principally due to a decrease in net interest income as a result of the reduction in payment plan receivables that was 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 3.50%). Mepco might not be able to obtain such favorable funding costs on its own in the open market.

Financial Condition

Summary.  Our total assets increased by $78.1 million during the first three months of 2016 due primarily to increases in cash and cash equivalents and loans.  Loans, excluding loans held for sale ("Portfolio Loans"), totaled $1.54 billion at March 31, 2016, an increase of $23.9 million, or 1.6%, from December 31, 2015.  (See "Portfolio Loans and asset quality.")

Deposits totaled $2.15 billion at March 31, 2016, compared to $2.09 billion at December 31, 2015.  The $68.7 million increase in total deposits during the period is primarily due to growth in checking, savings and time deposit 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.”)

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Securities
			Unrealized
	Amortized Cost		Gains		Losses		Fair Value
	(In thousands)
Securities available for sale
March 31, 2016	$	587,963	$	4,262	$	2,725	$	589,500
December 31, 2015		585,851		3,152		3,519		585,484

In the first quarter of 2016, we initiated the use of Pacific Investment Management Company LLC (“PIMCO”) to manage an approximately $150 million segment of our securities available for sale.  We anticipate achieving about $0.5 million of additional annual interest income, after management fees, on this portion of our securities available for sale, once fully invested.  Although this segment of our securities available for sale is expected to have a similar risk-weighting and duration as our remaining portfolio, the additional earnings are anticipated to be generated through rebalancing into other sectors and better trade execution.  These other sectors include certain structured securities (commercial and non-agency residential mortgage-backed securities and collateralized loan obligations) and non-U.S. government securities (but U.S. dollar denominated) as well as an increased allocation of corporate securities.

Securities available for sale increased slightly during the first quarter of 2016 due primarily to increases in asset-backed securities and corporate securities. The securities were purchased to utilize a portion of the 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.

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

	Three months ended March 31,
	2016			2015
	(In thousands)
Proceeds	$	42,391		$	11,786
Gross gains	$	226		$	75
Gross losses		(52	)		-
Net impairment charges		-			-
Fair value adjustments		(12	)		10
Net gains	$	162		$	85

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 and make whole loan purchases from other financial institutions.  In December 2015, we purchased $32.6 million of single-family residential fixed rate jumbo mortgage loans from another Michigan-based financial institution.  These mortgage loans were all on properties located in Michigan, had a weighted average interest rate (after a 0.25% servicing fee) of 3.94% and a weighted average remaining contractual maturity of 344 months.  We did not have any single-family residential mortgage loan purchases during the first quarter of 2016.

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)
	March 31, 2016			December 31, 2015
	(Dollars in thousands)
Non-accrual loans	$	10,425		$	10,607
Loans 90 days or more past due and still accruing interest		147			116
Total non-performing loans		10,572			10,723
Other real estate and repossessed assets		6,672			7,150
Total non-performing assets	$	17,244		$	17,873
As a percent of Portfolio Loans
Non-performing loans		0.69	%		0.71	%
Allowance for loan losses		1.46			1.49
Non-performing assets to total assets		0.69			0.74
Allowance for loan losses as a percent of non-performing loans		212.78			210.48

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

Troubled debt restructurings ("TDR")
	March 31, 2016
	Commercial		Retail			Total
	(In thousands)
Performing TDR's	$	13,950	$	66,619		$	80,569
Non-performing TDR's(1)		2,798		3,693	(2)		6,491
Total	$	16,748	$	70,312		$	87,060
	December 31, 2015
	Commercial		Retail			Total
	(In thousands)
Performing TDR's	$	13,318	$	68,194		$	81,512
Non-performing TDR's(1)		3,041		3,777	(2)		6,818
Total	$	16,359	$	71,971		$	88,330

(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 decreased by $0.2 million, or 1.4%, during the first quarter of 2016 due principally to decreases in non-performing mortgage and consumer/installment loans. These declines primarily reflect reduced levels of new loan defaults as well as loan charge-offs, pay-offs, negotiated transactions, and the migration of loans into other real estate. In general, improving economic conditions in our market areas, as well as our collection and resolution efforts, have resulted in a 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 $80.6 million, or 5.2% of total Portfolio Loans, and $81.5 million, or 5.4% of total Portfolio Loans, at March 31, 2016 and December 31, 2015, respectively. The decrease in the amount of performing TDRs in the first quarter of 2016 reflects a decline in retail loan TDRs.

Other real estate and repossessed assets totaled $6.7 million at March 31, 2016, compared to $7.2 million at December 31, 2015. This decrease is primarily the result of sales of other real estate being in excess of the migration of non-performing loans secured by real estate into other real estate 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 a negative 0.12% (as a result of net recoveries) on an annualized basis in the first quarter of 2016 compared to 0.19% in the first quarter of 2015.  The $1.1 million decline in loan net charge-offs is primarily due to declines in commercial loan, mortgage loan and consumer/installment loan net charge-offs.  The overall decrease in loan net charge-offs primarily reflects a year-over-year reduction in non-performing loans and improvement in collateral liquidation values.

Allowance for loan losses
	Three months ended March 31,
	2016					2015
	Loans			Unfunded Commitments		Loans			Unfunded Commitments
	(Dollars in thousands)
Balance at beginning of period	$	22,570		$	652	$	25,990		$	539
Additions (deductions)
Provision for loan losses		(530	)		-		(659	)		-
Recoveries credited to allowance		959			-		990			-
Loans charged against the allowance		(504	)		-		(1,642	)		-
Additions (deductions) included in non-interest expense		-			13		-			16
Balance at end of period	$	22,495		$	665	$	24,679		$	555
Net loans charged against the allowance to average Portfolio Loans (annualized)		(0.12	)%				0.19	%

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Allocation of the Allowance for Loan Losses
	March 31, 2016		December 31, 2015
	(In thousands)
Specific allocations	$	10,850	$	10,983
Other adversely rated commercial loans		822		1,053
Historical loss allocations		5,460		5,262
Additional allocations based on subjective factors		5,363		5,272
Total	$	22,495	$	22,570

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.

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 AFLL.

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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 a $0.004 million credit and a $0.003 million credit in the first quarters of 2016 and 2015, respectively, for its provision for loan losses.  Mepco’s allowance for loan losses totaled $0.059 million and $0.063 million at March 31, 2016 and December 31, 2015, respectively. 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.

The allowance for loan losses decreased $0.1 million to $22.5 million at March 31, 2016 from $22.6 million at December 31, 2015 and was equal to 1.46% of total Portfolio Loans at March 31, 2016 compared to 1.49% at December 31, 2015. Two of the four components of the allowance for loan losses outlined above declined in the first quarter of 2016. The allowance for loan losses related to specific loans decreased $0.1 million in 2016 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 decreased $0.2 million in 2016 primarily due to a decrease in the balance of such loans included in this component to $25.5 million at March 31, 2016 from $27.8 million at December 31, 2015. The allowance for loan losses related to historical losses increased $0.2 million during 2016 due principally to commercial loan growth. The allowance for loan losses related to subjective factors increased $0.1 million during 2016 primarily due to minor deterioration of some of the 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.

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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 $2.15 billion and $2.09 billion at March 31, 2016 and December 31, 2015, respectively.  The $68.7 million increase in deposits in the first quarter of 2016 is due to growth in checking, savings and time deposit account balances.  Reciprocal deposits totaled $50.3 million and $50.2 million at March 31, 2016 and December 31, 2015, 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 March 31, 2016, we had approximately $534.3 million of uninsured deposits. A reduction in core deposits would likely increase our need to rely on wholesale funding sources.

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

Other borrowings, comprised almost entirely of advances from the Federal Home Loan Bank (the “FHLB”), totaled $12.0 million at both March 31, 2016 and December 31, 2015.

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 March 31, 2016, our use of such wholesale funding sources (including reciprocal deposits) amounted to approximately $62.3 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.

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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 quarters of 2016 and 2015, we entered into $31.6 million and 24.4 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 $0.3 million and $0.2 million of fee income related to these transactions during the first quarters of 2016 and 2015, 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 securities available for sale) as well as developing access to a variety of borrowing sources to supplement our deposit gathering activities and provide funds for purchasing securities available for sale or originating Portfolio Loans as well as to be able to respond to unforeseen liquidity needs.

Our primary sources of funds include our deposit base, secured advances from the FHLB, a federal funds purchased borrowing facility with another commercial bank, and access to the capital markets (for Brokered CDs).

At March 31, 2016, we had $331.6 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, $1.70 billion of our deposits at March 31, 2016, were in account types from which the customer could withdraw the funds on demand. Changes in the balances of deposits that can be withdrawn upon demand are usually predictable and the total balances of these accounts have generally grown or have been stable over time as a result of our marketing and promotional activities. However, there can be no assurance that historical patterns of renewing time deposits or overall growth or stability in deposits will continue in the future.

We have developed contingency funding plans that stress test our liquidity needs that may arise from certain events such as an adverse change in our financial metrics (for example, credit quality or regulatory capital ratios). Our liquidity management also includes periodic monitoring that measures quick assets (defined generally as 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 $16.4 million as of March 31, 2016 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.

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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
	March 31, 2016			December 31, 2015
	(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		324,328			339,462
Accumulated deficit		(79,984	)		(82,334	)
Accumulated other comprehensive loss		(4,799	)		(6,036	)
Total shareholders’ equity		239,545			251,092
Total capitalization	$	274,045		$	285,592

We currently have three special purpose entities with $34.5 million of outstanding 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.

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 March 31, 2016 and December 31, 2015. 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 decreased to $239.5 million at March 31, 2016 from $251.1 million at December 31, 2015 due primarily to share repurchases and a dividend paid that were in excess of our net income in the first quarter of 2016 as well as a decline in our accumulated other comprehensive loss. Our tangible common equity (“TCE”) totaled $237.4 million and $248.8 million, respectively, at those same dates. Our ratio of TCE to tangible assets was 9.55% and 10.34% at March 31, 2016 and December 31, 2015, respectively.

We resumed a quarterly cash dividend on our common stock of six cents per share in May 2014 and 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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Because the Bank currently has negative “undivided profits” (i.e. a retained deficit) of $5.7 million at March 31, 2016, 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 2016, we requested regulatory approval for an $18.0 million return of capital from the Bank to the parent company.  This return of capital request was approved by our banking regulators on February 24, 2016 and the Bank returned $18.0 million of capital to the parent company on February 25, 2016.  Also see Note #11 to the Condensed Consolidated Financial Statements included within this report.

On January 21, 2016, our Board of Directors authorized a share repurchase plan.  Under the terms of the 2016 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, 2016.  We intend and 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, 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 quarter of 2016 we repurchased 1,059,865 shares of our common stock pursuant to this plan at an average price of $14.63 per share  leaving 52,703 shares to be repurchased under this repurchase plan.  On April 26, 2016 our Board of Directors authorized a $5.0 million expansion of this repurchase plan.

As of March 31, 2016 and December 31, 2015, 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.

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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.

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)
March 31, 2016
200 basis point rise	$	402,600		10.33	%	$	82,200		7.73	%
100 basis point rise		388,500		6.47			79,700		4.46
Base-rate scenario		364,900		-			76,300		-
100 basis point decline		331,900		(9.04	)		71,900		(5.77	)
December 31, 2015
200 basis point rise	$	419,600		8.42	%	$	80,700		6.32	%
100 basis point rise		407,300		5.25			78,700		3.69
Base-rate scenario		387,000		-			75,900		-
100 basis point decline		356,500		(7.88	)		72,000		(5.14	)

(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.

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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.

 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 $1.0 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 the allowance for loan losses, capitalized 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.  During the first quarter of 2016, we dropped the assessment of other than temporary impairment of securities available for sale as a critical accounting policy as we do not believe that this assessment will have a material impact on our consolidated financial position or results of operations.  There have been no other material changes to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2015.

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Item 3.

Quantitative and Qualitative Disclosures about Market Risk

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

Item 4.

Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures.

With the participation of management, our chief executive officer and chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a – 15(e) and 15d – 15(e)) for the period ended March 31, 2016, have concluded that, as of such date, our disclosure controls and procedures were effective.

(b) Changes in Internal Controls.

During the quarter ended March 31, 2016, 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, 2015.

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 first quarter of 2016, the Company issued 621 shares of common stock to non-employee directors on a current basis and 1,263 shares of common stock to the trust for distribution to directors on a deferred basis.  The shares were issued on January 1, 2016, at a price of $15.23 per share, representing aggregate fees of $0.03 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 repurchases of common stock for the three-months ended March 31, 2016:

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
January 2016		-	$	-		-		1,112,568
February 2016		907,930		14.64		859,665		252,903
March 2016		200,200		14.59		200,200		52,703
Total		1,108,130	$	14.63		1,059,865		52,703

(1) Represents (i) 43,705 shares of our common stock purchased in the open market by the Independent Bank Corporation Employee Stock Ownership Trust as part of our employee stock ownership plan, (ii) 4,560 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 and (iii) 1,059,865 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:
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	May 4, 2016	By	/s/ Robert N. Shuster
			Robert N. Shuster, Principal Financial Officer
Date	May 4, 2016	By	/s/ James J. Twarozynski
			James J. Twarozynski, Principal Accounting Officer

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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:  May  4, 2016	/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:  May  4, 2016	/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 March 31, 2016, 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 March 31, 2016, fairly presents, in all material respects, the financial condition and results of operations of Independent Bank Corporation.

	INDEPENDENT BANK CORPORATION
Date:  May  4, 2016	/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 March 31, 2016, 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 March 31, 2016, fairly presents, in all material respects, the financial condition and results of operations of Independent Bank Corporation.

	INDEPENDENT BANK CORPORATION
Date:  May  4, 2016	/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.

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Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	May. 03, 2016
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		21,262,815
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2016

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Condensed Consolidated Statements of Financial Condition (unaudited) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Assets
Cash and due from banks	$ 41,790	$ 54,260
Interest bearing deposits	102,919	31,523
Cash and Cash Equivalents	144,709	85,783
Interest bearing deposits - time	10,178	11,866
Trading securities	136	148
Securities available for sale	589,500	585,484
Federal Home Loan Bank and Federal Reserve Bank stock, at cost	15,600	15,471
Loans held for sale, carried at fair value	28,016	27,866
Loans
Commercial	770,886	748,398
Mortgage	504,004	500,454
Installment	231,787	231,599
Payment plan receivables	32,305	34,599
Total Loans	1,538,982	1,515,050
Allowance for loan losses	(22,495)	(22,570)
Net Loans	1,516,487	1,492,480
Other real estate and repossessed assets	6,672	7,150
Property and equipment, net	42,089	43,103
Bank-owned life insurance	54,691	54,402
Deferred tax assets, net	37,167	39,635
Capitalized mortgage loan servicing rights	10,983	12,436
Vehicle service contract counterparty receivables, net	3,173	7,229
Other intangibles	2,193	2,280
Accrued income and other assets	25,526	23,733
Total Assets	2,487,120	2,409,066
Deposits
Non-interest bearing	671,621	659,793
Savings and interest-bearing checking	1,018,740	988,174
Reciprocal	50,298	50,207
Time	414,047	387,789
Total Deposits	2,154,706	2,085,963
Other borrowings	11,953	11,954
Subordinated debentures	35,569	35,569
Vehicle service contract counterparty payables	1,247	797
Accrued expenses and other liabilities	44,100	23,691
Total Liabilities	2,247,575	2,157,974
Shareholders' Equity
Preferred stock, no par value, 200,000 shares authorized; none issued or outstanding	0	0
Common stock, no par value, 500,000,000 shares authorized; issued and outstanding: 21,261,830 shares at March 31, 2016 and 22,251,373 shares at December 31, 2015	324,328	339,462
Accumulated deficit	(79,984)	(82,334)
Accumulated other comprehensive loss	(4,799)	(6,036)
Total Shareholders' Equity	239,545	251,092
Total Liabilities and Shareholders' Equity	$ 2,487,120	$ 2,409,066

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Condensed Consolidated Statements of Financial Condition (unaudited) (Parenthetical) - $ / shares	Mar. 31, 2016	Dec. 31, 2015
Shareholders' Equity
Preferred stock, par value (in dollars per share)	$ 0	$ 0
Preferred stock, shares authorized (in shares)	200,000	200,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized (in shares)	500,000,000	500,000,000
Common stock, shares issued (in shares)	21,261,830	22,251,373
Common stock, shares outstanding (in shares)	21,261,830	22,251,373

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Condensed Consolidated Statements of Operations (unaudited) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2016	Mar. 31, 2015
Interest Income
Interest and fees on loans		$ 18,556	$ 17,239
Interest on securities
Taxable		2,244	1,758
Tax-exempt		248	217
Other investments		306	338
Total Interest Income		21,354	19,552
Interest Expense
Deposits		1,114	1,007
Other borrowings		477	454
Total Interest Expense		1,591	1,461
Net Interest Income		19,763	18,091
Provision for loan losses		(530)	(659)
Net Interest Income After Provision for Loan Losses		20,293	18,750
Non-interest Income
Service charges on deposit accounts		2,845	2,850
Interchange income		1,878	2,142
Net gains on assets
Mortgage loans		1,642	2,139
Securities		162	85
Mortgage loan servicing, net		(978)	(420)
Title insurance fees		288	256
Other		1,972	1,910
Total Non-interest Income		7,809	8,962
Non-Interest Expense
Compensation and employee benefits		11,881	11,785
Occupancy, net		2,207	2,419
Data processing		2,101	1,930
Furniture, fixtures and equipment		984	952
Communications		888	736
Loan and collection		825	1,155
Advertising		477	484
Legal and professional		413	380
FDIC deposit insurance		334	343
Interchange expense		266	291
Credit card and bank service fees		187	202
Vehicle service contract counterparty contingencies		30	29
Costs related to unfunded lending commitments		13	16
Net gains on other real estate and repossessed assets		(6)	(39)
Provision for loss reimbursement on sold loans		(15)	(69)
Other		1,460	1,537
Total Non-interest Expense		22,045	22,151
Income Before Income Tax		6,057	5,561
Income tax expense		1,957	1,780
Net Income		$ 4,100	$ 3,781
Net Income Per Common Share
Basic (in dollars per share)	[1]	$ 0.19	$ 0.16
Diluted (in dollars per share)		0.19	0.16
Dividends Per Common Share
Declared (in dollars per share)		0.08	0.06
Paid (in dollars per share)		$ 0.08	$ 0.06

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

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Condensed Consolidated Statements of Comprehensive Income (unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Condensed Consolidated Statements of Comprehensive Income (unaudited) [Abstract]
Net income	$ 4,100	$ 3,781
Securities available for sale
Unrealized gains arising during period	2,114	2,270
Change in unrealized gains for which a portion of other than temporary impairment has been recognized in earnings	(36)	11
Reclassification adjustments for gains included in earnings	(174)	(75)
Unrealized gains recognized in other comprehensive income on securities available for sale	1,904	2,206
Income tax expense	667	772
Unrealized gains recognized in other comprehensive income on available for sale securities, net of tax	1,237	1,434
Other comprehensive income	1,237	1,434
Comprehensive income	$ 5,337	$ 5,215

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Condensed Consolidated Statements of Cash Flows (unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Condensed Consolidated Statements of Cash Flows (unaudited) [Abstract]
Net income	$ 4,100	$ 3,781
Adjustments to Reconcile Net Income to Net Cash From (Used in) Operating Activities
Proceeds from sales of loans held for sale	57,181	70,657
Disbursements for loans held for sale	(55,689)	(75,788)
Provision for loan losses	(530)	(659)
Deferred federal income tax expense	2,468	2,442
Deferred loan fees	(216)	(193)
Depreciation, amortization of intangible assets and premiums and accretion of discounts on securities, loans and interest bearning deposits - time	1,306	1,179
Net gains on mortgage loans	(1,642)	(2,139)
Net gains on securities	(162)	(85)
Net gains on other real estate and repossessed assets	(6)	(39)
Vehicle service contract counterparty contingencies	30	29
Share based compensation	410	373
(Increase) decrease in accrued income and other assets	(1,160)	517
Decrease in accrued expenses and other liabilities	(1,057)	(2,385)
Total Adjustments	933	(6,091)
Net Cash From (Used in) Operating Activities	5,033	(2,310)
Cash Flow From (Used in) Investing Activities
Proceeds from the sale of securities available for sale	42,391	11,786
Proceeds from the maturity of securities available for sale	13,385	6,785
Principal payments received on securities available for sale	37,246	25,103
Purchases of securities available for sale	(74,259)	(77,534)
Purchases of interest bearing deposits - time	0	(246)
Proceeds from the maturity of interest bearing deposits - time	1,678	2,211
Purchase of Federal Reserve Bank stock	(129)	(132)
Net increase in portfolio loans (loans originated, net of principal payments)	(23,280)	(13,170)
Proceeds from the collection of vehicle service contract counterparty receivables	4,217	0
Proceeds from the sale of other real estate and repossessed assets	1,357	1,848
Capital expenditures	(611)	(975)
Net Cash From (Used in) Investing Activities	1,995	(44,324)
Cash Flow From Financing Activities
Net increase in total deposits	68,743	76,171
Net decrease in other borrowings	(1)	(2)
Net increase in vehicle service contract counterparty payables	450	335
Dividends paid	(1,750)	(1,382)
Proceeds from issuance of common stock	32	16
Repurchase of common stock	(15,510)	(902)
Share based compensation withholding obligation	(66)	(66)
Net Cash From Financing Activities	51,898	74,170
Net Increase in Cash and Cash Equivalents	58,926	27,536
Cash and Cash Equivalents at Beginning of Period	85,783	74,016
Cash and Cash Equivalents at End of Period	144,709	101,552
Cash paid during the period for
Interest	1,495	1,477
Income taxes	120	55
Transfers to other real estate and repossessed assets	873	1,017
Transfer of payment plan receivables to vehicle service contract counterparty receivables	191	21
Purchase of securities available for sale not yet settled	$ 21,329	$ 3,154

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Condensed Consolidated Statements of Shareholders' Equity (unaudited) $ in Thousands	USD ($)
Balance at beginning of period at Dec. 31, 2014	$ 250,371
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	3,781
Cash dividends declared	(1,382)
Issuance of common stock	16
Share based compensation	373
Share based compensation withholding obligation	(66)
Repurchase of common stock	(902)
Net change in accumulated other comprehensive loss, net of related tax effect	1,434
Balance at end of period at Mar. 31, 2015	253,625
Balance at beginning of period at Dec. 31, 2015	251,092
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	4,100
Cash dividends declared	(1,750)
Issuance of common stock	32
Share based compensation	410
Share based compensation withholding obligation	(66)
Repurchase of common stock	(15,510)
Net change in accumulated other comprehensive loss, net of related tax effect	1,237
Balance at end of period at Mar. 31, 2016	$ 239,545

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Preparation of Financial Statements

3 Months Ended

Mar. 31, 2016

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, 2015 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 March 31, 2016 and December 31, 2015, and the results of operations for the three month periods ended March 31, 2016 and 2015.  The results of operations for the three month periods ended March 31, 2016, 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 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 2015 Annual Report on Form 10-K for a disclosure of our accounting policies.

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New Accounting Standards

3 Months Ended

Mar. 31, 2016

New Accounting Standards [Abstract]

New Accounting Standards

2.  New Accounting Standards

In June 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 became effective for us on January 1, 2016, 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 us on January 1, 2018, and is not expected to have a material impact on our consolidated operating results or financial condition.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities”.  This ASU amends existing guidance related to the accounting for certain financial assets and liabilities. These amendments, among other things, requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. This amended guidance is effective for us on January 1, 2018, and is not expected to have a material impact on our consolidated operating results or financial condition.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”.  This ASU amends existing guidance related to the accounting for leases. These amendments, among other things, requires lessees to account for most leases on the balance sheet while recognizing expense on the income statement in a manner similar to existing guidance.  For lessors the guidance modifies the classification criteria and the accounting for sales-type and direct finance leases. This amended guidance is effective for us on January 1, 2019, and is not expected to have a material impact on our consolidated operating results or financial condition.

In March 2016, the FASB issued ASU 2016-09, “Compensation – Stock Compensation (718) Improvements to Employee Share-Based Payment Accounting”.  This ASU amends existing guidance in an effort to simplify certain aspects of accounting for share-based payments. The areas for simplification in this ASU include income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows.  This amended guidance is effective for us on January 1, 2017, with early adoption permitted, and is not expected to have a material impact on our consolidated operating results or financial condition.

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Securities

3 Months Ended

Mar. 31, 2016

Securities [Abstract]

Securities

3.  Securities

Securities available for sale consist of the following:

	Amortized		Unrealized
	Cost		Gains		Losses		Fair Value
	(In thousands)
March 31, 2016
U.S. agency	$	35,016	$	431	$	62	$	35,385
U.S. agency residential mortgage-backed		196,017		1,635		273		197,379
U.S. agency commercial mortgage-backed		8,382		112		2		8,492
Private label mortgage-backed		18,569		154		348		18,375
Other asset backed		128,431		124		483		128,072
Obligations of states and political subdivisions		147,411		1,644		710		148,345
Corporate		49,565		162		217		49,510
Trust preferred		2,918		-		615		2,303
Foreign government		1,654		-		15		1,639
Total	$	587,963	$	4,262	$	2,725	$	589,500
December 31, 2015
U.S. agency	$	47,283	$	309	$	80	$	47,512
U.S. agency residential mortgage-backed		195,055		1,584		583		196,056
U.S. agency commercial mortgage-backed		34,017		94		83		34,028
Private label mortgage-backed		5,061		161		319		4,903
Other asset backed		117,431		54		581		116,904
Obligations of states and political subdivisions		145,193		941		1,150		144,984
Corporate		38,895		9		290		38,614
Trust preferred		2,916		-		433		2,483
Total	$	585,851	$	3,152	$	3,519	$	585,484

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)
March 31, 2016
U.S. agency	$	7,168	$	20	$	6,360	$	42	$	13,528	$	62
U.S. agency residential mortgage-backed		26,856		130		16,325		143		43,181		273
U.S. agency commercial mortgage-backed		1,236		1		202		1		1,438		2
Private label mortgage- backed		5,645		17		3,093		331		8,738		348
Other asset backed		82,903		280		9,804		203		92,707		483
Obligations of states and political subdivisions		22,296		282		9,737		428		32,033		710
Corporate		28,299		208		991		9		29,290		217
Trust preferred		-		-		2,303		615		2,303		615
Foreign government		1,639		15		-		-		1,639		15
Total	$	176,042	$	953	$	48,815	$	1,772	$	224,857	$	2,725
December 31, 2015
U.S. agency	$	12,164	$	47	$	6,746	$	33	$	18,910	$	80
U.S. agency residential mortgage-backed		57,538		316		23,340		267		80,878		583
U.S. agency commercial mortgage-backed		16,747		60		2,247		23		18,994		83
Private label mortgage- backed		-		-		3,393		319		3,393		319
Other asset backed		102,660		434		5,189		147		107,849		581
Obligations of states and political subdivisions		52,493		597		12,240		553		64,733		1,150
Corporate		30,550		290		-		-		30,550		290
Trust preferred		-		-		2,483		433		2,483		433
Total	$	272,152	$	1,744	$	55,638	$	1,775	$	327,790	$	3,519

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

U.S. agency, U.S. agency residential mortgage-backed securities and U.S. agency commercial mortgage backed securities — at March 31, 2016, we had 30 U.S. agency, 66 U.S. agency residential mortgage-backed and five U.S. agency commercial mortgage-backed securities whose fair market value is less than amortized cost. The unrealized losses are largely attributed to increases in 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 mortgage backed securities — at March 31, 2016, we had 11 of this type of security whose fair value is less than amortized cost.  The unrealized losses are primarily attributed to five securities purchased prior to 2016.  Two of these five securities have an impairment in excess of 10% and four of these holdings have been impaired for more than 12 months.  The unrealized losses are largely attributable to credit spread widening on these five securities since their acquisition.

These five 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.

These five private label mortgage-backed securities are reviewed for other than temporary impairment (“OTTI”) utilizing a cash flow projection. The cash flow analysis forecasts cash flow from the underlying loans in each transaction and then applies these cash flows to the bonds in the securitization.  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 recognized in prior years 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 March 31, 2016, we had 121 other asset backed securities whose fair value is less than amortized cost. The unrealized losses are primarily due to credit spread widening and 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.

Obligations of states and political subdivisions — at March 31, 2016, we had 44 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 March 31, 2016, we had 23 corporate securities whose fair value is less than amortized cost. The unrealized losses are primarily due to credit spread widening and 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.

Trust preferred securities — at March 31, 2016, 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 March 31, 2016, continues to have satisfactory credit metrics and make interest payments.

The following table breaks out our trust preferred securities in further detail as of March 31, 2016 and December 31, 2015:

	March 31, 2016					December 31, 2015
	Fair Value		Net Unrealized Loss			Fair Value		Net Unrealized Loss
	(In thousands)
Trust preferred securities
Rated issues	$	1,550	$	(368	)	$	1,690	$	(226	)
Unrated issues		753		(247	)		793		(207	)

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.

Foreign government — at March 31, 2016, we had one foreign government security whose fair value is less than amortized cost. The unrealized loss is primarily due to an increase in interest rates since acquisition.  As management does not intend to liquidate this security and it is more likely than not that we will not be required to sell this security prior to recovery of this unrealized loss, the decline is not deemed to be other than temporary.

We recorded no credit related OTTI charges in our Condensed Consolidated Statements of Operations related to securities available for sale during the three month periods ended March 31, 2016 and 2015.

At March 31, 2016, three private label 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 March 31, 2016
Fair value	$	1,546	$	1,250	$	75	$	2,871
Amortized cost		1,575		1,188		-		2,763
Non-credit unrealized loss		29		-		-		29
Unrealized gain		-		62		75		137
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 March 31,
2016	$	-	$	-	$	-	$	-
2015		-		-		-		-

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 March 31, 2016.  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 month periods ending March 31, follows:

	Three months ended March 31,
	2016		2015
	(In thousands)
Balance at beginning of period	$	1,844	$	1,844
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		-		-
Balance at end of period	$	1,844	$	1,844

The amortized cost and fair value of securities available for sale at March 31, 2016, by contractual maturity, follow:

	Amortized Cost		Fair Value
	(In thousands)
Maturing within one year	$	30,411	$	30,453
Maturing after one year but within five years		74,249		74,472
Maturing after five years but within ten years		62,664		63,236
Maturing after ten years		69,240		69,021
		236,564		237,182
U.S. agency residential mortgage-backed		196,017		197,379
U.S. agency commercial mortgage-backed		8,382		8,492
Private label residential mortgage-backed		18,569		18,375
Other asset backed		128,431		128,072
Total	$	587,963	$	589,500

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 three month periods ending March 31, follows:

	Proceeds		Realized Gains		Losses
	(In thousands)
2016	$	42,391	$	226	$	52
2015		11,786		75		-

During 2016 and 2015, our trading securities consisted of various preferred stocks.  During the first three months of 2016 and 2015, we recognized gains (losses) on trading securities of $(0.012) million and $0.010 million, respectively, that are included in net gains 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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Loans

3 Months Ended

Mar. 31, 2016

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 March 31, follows:

	Commercial			Mortgage			Installment			Payment Plan Receivables			Subjective Allocation			Total
	(In thousands)
2016
Balance at beginning of period	$	5,670		$	10,391		$	1,181		$	56		$	5,272		$	22,570
Additions (deductions)
Provision for loan losses		(404	)		(279	)		65			(3	)		91			(530	)
Recoveries credited to allowance		356			382			221			-			-			959
Loans charged against the allowance		-			(198	)		(306	)		-			-			(504	)
Balance at end of period	$	5,622		$	10,296		$	1,161		$	53		$	5,363		$	22,495
2015
Balance at beginning of period	$	5,445		$	13,444		$	1,814		$	64		$	5,223		$	25,990
Additions (deductions)
Provision for loan losses		328			(733	)		(85	)		(2	)		(167	)		(659	)
Recoveries credited to allowance		433			238			319			-			-			990
Loans charged against the allowance		(290	)		(868	)		(484	)		-			-			(1,642	)
Balance at end of period	$	5,916		$	12,081		$	1,564		$	62		$	5,056		$	24,679

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

	Commercial		Mortgage		Installment		Payment Plan Receivables		Subjective Allocation		Total
	(In thousands)
March 31, 2016
Allowance for loan losses
Individually evaluated for impairment	$	2,791	$	7,651	$	408	$	-	$	-	$	10,850
Collectively evaluated for impairment		2,831		2,645		753		53		5,363		11,645
Total ending allowance balance	$	5,622	$	10,296	$	1,161	$	53	$	5,363	$	22,495
Loans
Individually evaluated for impairment	$	17,585	$	64,899	$	5,670	$	-			$	88,154
Collectively evaluated for impairment		754,908		441,354		226,789		32,305				1,455,356
Total loans recorded investment		772,493		506,253		232,459		32,305				1,543,510
Accrued interest included in recorded investment		1,607		2,249		672		-				4,528
Total loans	$	770,886	$	504,004	$	231,787	$	32,305			$	1,538,982
December 31, 2015
Allowance for loan losses
Individually evaluated for impairment	$	2,708	$	7,818	$	457	$	-	$	-	$	10,983
Collectively evaluated for impairment		2,962		2,573		724		56		5,272		11,587
Total ending allowance balance	$	5,670	$	10,391	$	1,181	$	56	$	5,272	$	22,570
Loans
Individually evaluated for impairment	$	16,868	$	66,375	$	5,888	$	-			$	89,131
Collectively evaluated for impairment		733,399		436,349		226,409		34,599				1,430,756
Total loans recorded investment		750,267		502,724		232,297		34,599				1,519,887
Accrued interest included in recorded investment		1,869		2,270		698		-				4,837
Total loans	$	748,398	$	500,454	$	231,599	$	34,599			$	1,515,050

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)
March 31, 2016
Commercial
Income producing - real estate	$	-	$	1,117	$	1,117
Land, land development and construction - real estate		-		168		168
Commercial and industrial		147		2,304		2,451
Mortgage
1-4 family		-		4,795		4,795
Resort lending		-		805		805
Home equity - 1st lien		-		154		154
Home equity - 2nd lien		-		268		268
Purchased loans		3		2		5
Installment
Home equity - 1st lien		-		79		79
Home equity - 2nd lien		-		344		344
Loans not secured by real estate		-		384		384
Other		-		2		2
Payment plan receivables
Full refund		-		2		2
Partial refund		-		-		-
Other		-		1		1
Total recorded investment	$	150	$	10,425	$	10,575
Accrued interest included in recorded investment	$	3	$	-	$	3
December 31, 2015
Commercial
Income producing - real estate	$	-	$	1,027	$	1,027
Land, land development and construction - real estate		49		401		450
Commercial and industrial		69		2,028		2,097
Mortgage
1-4 family		-		4,744		4,744
Resort lending		-		1,094		1,094
Home equity - 1st lien		-		187		187
Home equity - 2nd lien		-		147		147
Purchased loans		-		2		2
Installment
Home equity - 1st lien		-		106		106
Home equity - 2nd lien		-		443		443
Loans not secured by real estate		-		421		421
Other		-		2		2
Payment plan receivables
Full refund		-		2		2
Partial refund		-		2		2
Other		-		1		1
Total recorded investment	$	118	$	10,607	$	10,725
Accrued interest included in recorded investment	$	2	$	-	$	2

An aging analysis of loans by class follows:

	Loans Past Due								Loans not		Total
	30-59 days		60-89 days		90+ days		Total		Past Due		Loans
	(In thousands)
March 31, 2016
Commercial
Income producing - real estate	$	337	$	-	$	776	$	1,113	$	310,604	$	311,717
Land, land development and construction - real estate		-		-		168		168		40,795		40,963
Commercial and industrial		354		192		229		775		419,038		419,813
Mortgage
1-4 family		2,505		662		4,795		7,962		275,295		283,257
Resort lending		677		-		805		1,482		111,434		112,916
Home equity - 1st lien		66		-		154		220		26,024		26,244
Home equity - 2nd lien		235		287		268		790		51,620		52,410
Purchased loans		12		1		5		18		31,408		31,426
Installment
Home equity - 1st lien		529		176		79		784		15,429		16,213
Home equity - 2nd lien		215		133		344		692		18,367		19,059
Loans not secured by real estate		386		108		384		878		194,202		195,080
Other		3		11		2		16		2,091		2,107
Payment plan receivables
Full refund		408		65		2		475		17,609		18,084
Partial refund		303		61		-		364		6,197		6,561
Other		154		3		1		158		7,502		7,660
Total recorded investment	$	6,184	$	1,699	$	8,012	$	15,895	$	1,527,615	$	1,543,510
Accrued interest included in recorded investment	$	56	$	21	$	3	$	80	$	4,448	$	4,528
December 31, 2015
Commercial
Income producing - real estate	$	203	$	209	$	647	$	1,059	$	305,155	$	306,214
Land, land development and construction - real estate		-		-		252		252		44,231		44,483
Commercial and industrial		785		16		151		952		398,618		399,570
Mortgage
1-4 family		1,943		640		4,744		7,327		272,298		279,625
Resort lending		307		-		1,094		1,401		114,619		116,020
Home equity - 1st lien		50		-		187		237		22,327		22,564
Home equity - 2nd lien		439		54		147		640		50,618		51,258
Purchased loans		9		1		2		12		33,245		33,257
Installment
Home equity - 1st lien		315		107		106		528		16,707		17,235
Home equity - 2nd lien		231		149		443		823		19,727		20,550
Loans not secured by real estate		567		83		421		1,071		191,262		192,333
Other		15		3		2		20		2,159		2,179
Payment plan receivables
Full refund		492		62		2		556		21,294		21,850
Partial refund		415		228		2		645		5,834		6,479
Other		110		3		1		114		6,156		6,270
Total recorded investment	$	5,881	$	1,555	$	8,201	$	15,637	$	1,504,250	$	1,519,887
Accrued interest included in recorded investment	$	53	$	17	$	2	$	72	$	4,765	$	4,837

Impaired loans are as follows :

	March 31, 2016		December 31, 2015
Impaired loans with no allocated allowance	(In thousands)
TDR	$	2,368	$	2,518
Non - TDR		168		203
Impaired loans with an allocated allowance
TDR - allowance based on collateral		4,683		4,810
TDR - allowance based on present value cash flow		80,009		81,002
Non - TDR - allowance based on collateral		623		260
Non - TDR - allowance based on present value cash flow		-		-
Total impaired loans	$	87,851	$	88,793
Amount of allowance for loan losses allocated
TDR - allowance based on collateral	$	2,531	$	2,436
TDR - allowance based on present value cash flow		8,135		8,471
Non - TDR - allowance based on collateral		184		76
Non - TDR - allowance based on present value cash flow		-		-
Total amount of allowance for loan losses allocated	$	10,850	$	10,983

Impaired loans by class  are as follows (1):

	March 31, 2016						December 31, 2015
	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	$	785	$	1,030	$	-	$	641	$	851	$	-
Land, land development & construction-real estate		537		1,112		-		818		1,393		-
Commercial and industrial		1,218		1,216		-		1,245		1,241		-
Mortgage
1-4 family		-		140		-		23		183		-
Resort lending		-		-		-		-		-		-
Home equity - 1st lien		-		-		-		-		-		-
Home equity - 2nd lien		-		-		-		-		-		-
Installment
Home equity - 1st lien		1		75		-		-		76		-
Home equity - 2nd lien		14		13		-		-		-		-
Loans not secured by real estate		-		-		-		-		-		-
Other		-		-		-		-		-		-
		2,555		3,586		-		2,727		3,744		-
With an allowance recorded:
Commercial
Income producing - real estate		8,234		9,061		548		8,377		9,232		516
Land, land development & construction-real estate		1,484		1,484		95		1,690		1,778		296
Commercial and industrial		5,327		5,592		2,148		4,097		4,439		1,896
Mortgage
1-4 family		46,608		48,532		4,976		47,792		49,808		5,132
Resort lending		17,929		17,963		2,654		18,148		18,319		2,662
Home equity - 1st lien		243		247		12		168		172		9
Home equity - 2nd lien		119		201		9		244		325		15
Installment
Home equity - 1st lien		2,287		2,421		130		2,364		2,492		143
Home equity - 2nd lien		2,793		2,807		239		2,929		2,951		271
Loans not secured by real estate		569		641		38		587		658		42
Other		6		6		1		8		8		1
		85,599		88,955		10,850		86,404		90,182		10,983
Total
Commercial
Income producing - real estate		9,019		10,091		548		9,018		10,083		516
Land, land development & construction-real estate		2,021		2,596		95		2,508		3,171		296
Commercial and industrial		6,545		6,808		2,148		5,342		5,680		1,896
Mortgage
1-4 family		46,608		48,672		4,976		47,815		49,991		5,132
Resort lending		17,929		17,963		2,654		18,148		18,319		2,662
Home equity - 1st lien		243		247		12		168		172		9
Home equity - 2nd lien		119		201		9		244		325		15
Installment
Home equity - 1st lien		2,288		2,496		130		2,364		2,568		143
Home equity - 2nd lien		2,807		2,820		239		2,929		2,951		271
Loans not secured by real estate		569		641		38		587		658		42
Other		6		6		1		8		8		1
Total	$	88,154	$	92,541	$	10,850	$	89,131	$	93,926	$	10,983
Accrued interest included in recorded investment	$	303					$	338

(1) There were no impaired payment plan receivables or purchased mortgage loans at March 31, 2016 or December 31, 2015.

Average recorded investment in and interest income earned on impaired loans by class for the three month periods ending March 31, follows (1):

	2016				2015
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:	(In thousands)
Commercial
Income producing - real estate	$	713	$	2	$	5,848	$	53
Land, land development & construction-real estate		678		7		1,041		34
Commercial and industrial		1,232		21		2,768		37
Mortgage
1-4 family		12		1		13		-
Resort lending		-		-		31		-
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		7		-		-		-
Loans not secured by real estate		-		-		-		-
Other		-		-		-		-
		2,643		32		9,701		124
With an allowance recorded:
Commercial
Income producing - real estate		8,306		107		12,849		157
Land, land development & construction-real estate		1,587		13		2,709		14
Commercial and industrial		4,712		23		8,177		66
Mortgage
1-4 family		47,200		502		52,451		551
Resort lending		18,039		160		18,632		171
Home equity line of credit - 1st lien		206		2		162		2
Home equity line of credit - 2nd lien		182		1		123		2
Installment
Home equity installment - 1st lien		2,326		42		2,691		50
Home equity installment - 2nd lien		2,861		44		3,174		51
Loans not secured by real estate		578		9		694		10
Other		7		-		12		-
		86,004		903		101,674		1,074
Total
Commercial
Income producing - real estate		9,019		109		18,697		210
Land, land development & construction-real estate		2,265		20		3,750		48
Commercial and industrial		5,944		44		10,945		103
Mortgage
1-4 family		47,212		503		52,464		551
Resort lending		18,039		160		18,663		171
Home equity line of credit - 1st lien		206		2		162		2
Home equity line of credit - 2nd lien		182		1		123		2
Installment
Home equity installment - 1st lien		2,327		43		2,691		50
Home equity installment - 2nd lien		2,868		44		3,174		51
Loans not secured by real estate		578		9		694		10
Other		7		-		12		-
Total	$	88,647	$	935	$	111,375	$	1,198

(1) There were no impaired payment plan receivables or purchased mortgage loans during the three month periods ended March 31, 2016 and 2015, respectively.

Our average investment in impaired loans was approximately $88.6 million and $111.4 million for the three-month periods ended March 31, 2016 and 2015, 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 March 31, 2016 and 2015, was approximately $0.9 million and $1.2 million, respectively.

Troubled debt restructurings follow:

	March 31, 2016
	Commercial		Retail			Total
	(In thousands)
Performing TDRs	$	13,950	$	66,619		$	80,569
Non-performing TDRs(1)		2,798		3,693	(2)		6,491
Total	$	16,748	$	70,312		$	87,060

	December 31, 2015
	Commercial		Retail			Total
	(In thousands)
Performing TDRs	$	13,318	$	68,194		$	81,512
Non-performing TDRs(1)		3,041		3,777	(2)		6,818
Total	$	16,359	$	71,971		$	88,330

(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 $10.7 million and $10.9 million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of March 31, 2016 and December 31, 2015, respectively.

During the three months ended March 31, 2016 and 2015, 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 ended March 31 follow:

	Number of Contracts		Pre-modification Recorded Balance		Post-modification Recorded Balance
	(Dollars in thousands)
2016
Commercial
Income producing - real estate		2	$	110	$	110
Land, land development & construction-real estate		-		-		-
Commercial and industrial		4		1,758		1,758
Mortgage
1-4 family		2		83		153
Resort lending		1		116		117
Home equity - 1st lien		1		107		78
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		1		30		31
Home equity - 2nd lien		2		55		56
Loans not secured by real estate		-		-		-
Other		-		-		-
Total		13	$	2,259	$	2,303
2015
Commercial
Income producing - real estate		1	$	156	$	164
Land, land development & construction-real estate		-		-		-
Commercial and industrial		2		236		234
Mortgage
1-4 family		5		1,005		805
Resort lending		-		-		-
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		4		167		140
Home equity - 2nd lien		-		-		-
Loans not secured by real estate		-		-		-
Other		-		-		-
Total		12	$	1,564	$	1,343

The troubled debt restructurings described above for 2016 increased the allowance for loan losses by $0.06 million and resulted in zero charge offs while the troubled debt restructurings described above for 2015 increased the allowance for loan losses by $0.03 million and resulted in zero charge offs.

Loans that have been classified as troubled debt restructurings during the past twelve months and that have subsequently defaulted during the three-month periods ended March 31 follow:

	Number of Contracts		Recorded Balance
	(Dollars in thousands)
2016
Commercial
Income producing - real estate		-	$	-
Land, land development & construction-real estate		-		-
Commercial and industrial		-		-
Mortgage
1-4 family		-		-
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		-		-
		-	$	-
2015
Commercial
Income producing - real estate		-	$	-
Land, land development & construction-real estate		-		-
Commercial and industrial		1		91
Mortgage
1-4 family		-		-
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	$	91

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

There were no troubled debt restructurings that subsequently defaulted in 2016 while the troubled debt restructurings that subsequently defaulted described above for 2015 had no impact on the balance of the allowance for loan losses and resulted in zero charge offs.

The terms of certain other loans were modified during the three months ended March 31, 2016 and 2015 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)
March 31, 2016
Income producing - real estate	$	303,195	$	6,367	$	1,038	$	1,117	$	311,717
Land, land development and construction - real estate		39,120		1,675		-		168		40,963
Commercial and industrial		391,207		20,687		5,615		2,304		419,813
Total	$	733,522	$	28,729	$	6,653	$	3,589	$	772,493
Accrued interest included in total	$	1,507	$	82	$	18	$	-	$	1,607
December 31, 2015
Income producing - real estate	$	296,898	$	6,866	$	1,423	$	1,027	$	306,214
Land, land development and construction - real estate		40,844		2,995		243		401		44,483
Commercial and industrial		371,357		19,502		6,683		2,028		399,570
Total	$	709,099	$	29,363	$	8,349	$	3,456	$	750,267
Accrued interest included in total	$	1,729	$	108	$	32	$	-	$	1,869

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		Purchased Loans
											Total
	(In thousands)
March 31, 2016
800 and above	$	29,357	$	13,694	$	4,206	$	7,409	$	2,298	$	56,964
750-799		84,315		39,748		10,292		18,190		20,775		173,320
700-749		54,911		31,331		4,601		11,796		6,901		109,540
650-699		51,725		16,538		3,696		7,501		-		79,460
600-649		27,962		4,934		1,447		3,720		-		38,063
550-599		16,128		3,052		1,022		1,887		-		22,089
500-549		10,348		985		561		1,261		-		13,155
Under 500		4,570		548		223		252		-		5,593
Unknown		3,941		2,086		196		394		1,452		8,069
Total	$	283,257	$	112,916	$	26,244	$	52,410	$	31,426	$	506,253
Accrued interest included in total	$	1,368	$	489	$	93	$	195	$	104	$	2,249
December 31, 2015
800 and above	$	28,760	$	13,943	$	4,374	$	7,696	$	2,310	$	57,083
750-799		78,802		40,888		7,137		17,405		23,283		167,515
700-749		56,519		31,980		4,341		11,022		6,940		110,802
650-699		51,813		17,433		3,203		7,691		-		80,140
600-649		27,966		4,991		1,467		3,684		-		38,108
550-599		16,714		3,070		1,027		1,918		-		22,729
500-549		10,610		1,051		572		1,295		-		13,528
Under 500		4,708		554		244		265		-		5,771
Unknown		3,733		2,110		199		282		724		7,048
Total	$	279,625	$	116,020	$	22,564	$	51,258	$	33,257	$	502,724
Accrued interest included in total	$	1,396	$	477	$	87	$	196	$	114	$	2,270

(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)
March 31, 2016
800 and above	$	1,638	$	1,678	$	43,330	$	91	$	46,737
750-799		3,850		5,552		89,742		522		99,666
700-749		2,375		3,591		35,628		633		42,227
650-699		3,308		3,761		16,394		459		23,922
600-649		2,032		2,068		4,663		202		8,965
550-599		1,741		1,296		1,825		105		4,967
500-549		1,000		804		1,068		55		2,927
Under 500		211		280		297		23		811
Unknown		58		29		2,133		17		2,237
Total	$	16,213	$	19,059	$	195,080	$	2,107	$	232,459
Accrued interest included in total	$	69	$	73	$	514	$	16	$	672
December 31, 2015
800 and above	$	1,792	$	1,782	$	44,254	$	58	$	47,886
750-799		4,117		5,931		86,800		531		97,379
700-749		2,507		3,899		34,789		694		41,889
650-699		3,508		4,182		16,456		499		24,645
600-649		2,173		2,153		4,979		200		9,505
550-599		1,800		1,346		1,997		109		5,252
500-549		1,056		855		1,170		61		3,142
Under 500		223		370		385		23		1,001
Unknown		59		32		1,503		4		1,598
Total	$	17,235	$	20,550	$	192,333	$	2,179	$	232,297
Accrued interest included in total	$	78	$	83	$	520	$	17	$	698

(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 March 31, 2016, approximately 56.0% 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 20.3% of Mepco’s outstanding payment plan receivables as of March 31, 2016, 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)
March 31, 2016
AM Best rating
A+	$	-	$	11	$	-	$	11
A		1,845		5,285		-		7,130
A-		2,576		1,208		7,658		11,442
Not rated		13,663		57		2		13,722
Total	$	18,084	$	6,561	$	7,660	$	32,305
December 31, 2015
AM Best rating
A+	$	-	$	6	$	-	$	6
A		2,712		5,203		-		7,915
A-		3,418		1,177		6,265		10,860
Not rated		15,720		93		5		15,818
Total	$	21,850	$	6,479	$	6,270	$	34,599

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 $2.5 million and $2.8 million at March 31, 2016 and December 31, 2015, respectively.  Retail mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process according to local requirements totaled $1.4 million and $1.1 million at March 31, 2016 and December 31, 2015, respectively.

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Segments

3 Months Ended

Mar. 31, 2016

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
March 31, 2016	$	2,425,152		$	50,515		$	275,315		$	(263,862	)	$	2,487,120
December 31, 2015		2,340,566			57,208			286,936			(275,644	)		2,409,066
For the three months ended March 31,
2016
Interest income	$	20,243		$	1,110		$	5		$	(4	)	$	21,354
Net interest income		19,102			932			(271	)		-			19,763
Provision for loan losses		(526	)		(4	)		-			-			(530	)
Income (loss) before income tax		6,862			(359	)		(423	)		(23	)		6,057
Net income (loss)		4,619			(237	)		(267	)		(15	)		4,100
2015
Interest income	$	18,221		$	1,331		$	20		$	(20	)	$	19,552
Net interest income		17,183			1,135			(227	)		-			18,091
Provision for loan losses		(656	)		(3	)		-			-			(659	)
Income (loss) before income tax		6,259			(291	)		(383	)		(24	)		5,561
Net income (loss)		4,233			(192	)		(244	)		(16	)		3,781

(1) Includes amounts relating to our parent company.

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

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Shareholders' Equity and Earnings Per Common Share

3 Months Ended

Mar. 31, 2016

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, 2016, 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, 2016.  We 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, 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 three months ended March 31, 2016, we repurchased 1,059,865 shares of common stock for an aggregate purchase price of $15.5 million leaving 52,703 shares to be repurchased under the Repurchase Plan.  On April 26, 2016 our Board of Directors authorized a $5.0 million expansion of the Repurchase Plan.

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.  At the present time, the Board of Directors does not intend to extend the Preservation Plan.

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

	Three Months Ended March 31,
	2016		2015
Net income	$	4,100	$	3,781
Weighted average shares outstanding (1)		21,751		22,997
Stock units for deferred compensation plan for non-employee directors		113		111
Effect of stock options		112		121
Restricted stock units		86		309
Weighted average shares outstanding for calculation of diluted earnings per share		22,062		23,538
Net income per common share
Basic (1)	$	0.19	$	0.16
Diluted	$	0.19	$	0.16

⁽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 included in weighted average shares outstanding for calculation of diluted earnings per share because they were anti-dilutive totaled 0.03 million for both the three-month periods ended March 31, 2016 and 2015.

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Derivative Financial Instruments

3 Months Ended

Mar. 31, 2016

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:

	March 31, 2016
	Notional Amount		Average Maturity (years)		Fair Value
	(Dollars in thousands)
No hedge designation
Rate-lock mortgage loan commitments	$	23,854		0.1	$	769
Mandatory commitments to sell mortgage loans		50,127		0.1		(137	)
Pay-fixed interest rate swap agreements		42,933		9.5		(1,615	)
Pay-variable interest rate swap agreements		42,933		9.5		1,615
Purchased options		2,803		5.3		200
Written options		2,803		5.3		(200	)
Total	$	165,453		5.2	$	632

	December 31, 2015
	Notional Amount		Average Maturity (years)		Fair Value
	(Dollars in thousands)
No hedge designation
Rate-lock mortgage loan commitments	$	20,581		0.1	$	550
Mandatory commitments to sell mortgage loans		46,320		0.1		69
Pay-fixed interest rate swap agreements		27,587		8.0		(497	)
Pay-variable interest rate swap agreements		27,587		8.0		497
Purchased options		2,098		5.7		122
Written options		2,098		5.7		(122	)
Total	$	126,271		3.7	$	619

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

In the ordinary course of business, we enter into rate-lock mortgage loan commitments with customers (“Rate-Lock Commitments”).  These commitments expose us to interest rate risk.  We also enter into mandatory commitments to sell mortgage loans (“Mandatory Commitments”) to reduce the impact of price fluctuations of mortgage loans held for sale and Rate-Lock Commitments.  Mandatory Commitments help protect our loan sale profit margin from fluctuations in interest rates. The changes in the fair value of Rate-Lock Commitments and Mandatory Commitments are recognized currently as part of net gains on mortgage loans.  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 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 principal at maturity plus a potential equity return (a written option), while we receive a like stream of funds based on the equity return (a purchased option).  The written and purchased options will generally move in opposite directions resulting in little or no net impact on our Condensed Consolidated Statements of Operations.  All of the written and purchased options in the table above relate to this Altitude CD product.

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

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

Fair Values of Derivative Instruments

	Asset Derivatives						Liability Derivatives
	March 31, 2016			December 31, 2015			March 31, 2016			December 31, 2015
	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	$	769	Other assets	$	550	Other liabilities	$	-	Other liabilities	$	-
Mandatory commitments to sell mortgage loans	Other assets		-	Other assets		69	Other liabilities		137	Other liabilities		-
Pay-fixed interest rate swap agreements	Other assets		-	Other assets		-	Other liabilities		1,615	Other liabilities		497
Pay-variable interest rateswap agreements	Other assets		1,615	Other assets		497	Other liabilities		-	Other liabilities		-
Purchased options	Other assets		200	Other assets		122	Other liabilities		-	Other liabilities		-
Written options	Other assets		-	Other assets		-	Other liabilities		200	Other liabilities		122
Total derivatives		$	2,584		$	1,238		$	1,952		$	619

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

	Three Month Periods Ended March 31,
	Location of Gain (Loss)	Gain (Loss) Recognized in Income
	Recognized in Income	2016			2015
		(In thousands)
No hedge designation
Rate-lock mortgage loan commitments	Net gains on mortgage loans	$	219		$	388
Mandatory  commitments to sell mortgage loans	Net gains on mortgage loans		(206	)		(39	)
Pay-fixed interest rate  swap agreements	Interest income		(1,118	)		(261	)
Pay-variable interest rate swap agreements	Interest income		1,118			261
Purchased options	Interest expense		78			-
Written options	Interest expense		(78	)		-
Total		$	13		$	349

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Intangible Assets

3 Months Ended

Mar. 31, 2016

Intangible Assets [Abstract]

Intangible Assets

8.  Intangible Assets

The following table summarizes intangible assets, net of amortization:

	March 31, 2016				December 31, 2015
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
	(In thousands)
Amortized intangible assets - core deposits	$	6,118	$	3,925	$	6,118	$	3,838

Amortization of other intangibles has been estimated through 2021 and thereafter in the following table.

	(In thousands)
Nine months ending December 31, 2016	$	260
2017		346
2018		346
2019		346
2020		346
2021 and thereafter		549
Total	$	2,193

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Share Based Compensation

3 Months Ended

Mar. 31, 2016

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 0.2 million shares of common stock as of March 31, 2016.  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 March 31, 2016. 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 2016 and 2015, 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 and PSUs 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 a banking index of our peers.

Our directors may elect to receive a portion of their quarterly cash retainer fees in the form of common stock (either on a current basis or on a deferred basis pursuant to the non-employee director stock purchase plan referenced above). Shares equal in value to that portion of each director’s fees that he or she has elected to receive in stock are issued each quarter and vest immediately.  We issued 0.002 million shares and 0.001 million shares to directors during the first three months of 2016 and 2015, 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 during both three month periods ended March 31, 2016 and 2015.  The corresponding tax benefit relating to this expense was $0.1 million for each period. Total expense recognized for non-employee director share based payments was $0.03 million and $0.02 million during the three months ended March 31, 2016 and 2015, respectively. The corresponding tax benefit relating to this expense was $0.01 million for each period.

At March 31, 2016, the total expected compensation cost related to non-vested stock options, restricted stock, PSUs and restricted stock unit awards not yet recognized was $2.4 million.  The weighted-average period over which this amount will be recognized is 2.1 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, 2016		235,596		$	4.94
Granted		-
Exercised		(10,216	)		3.18
Forfeited		(498	)		6.42
Expired		-
Outstanding at March 31, 2016		224,882		$	5.01		5.84	$	2,180
Vested and expected to vest at March 31, 2016		224,631		$	5.01		5.84	$	2,178
Exercisable at March 31, 2016		202,938		$	4.86		5.69	$	2,002

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, 2016		261,981		$	11.29
Granted		96,191			14.39
Vested		(21,225	)		12.78
Forfeited		(1,398	)		12.70
Outstanding at March 31, 2016		335,549		$	12.08

Certain information regarding options exercised during the periods follows:

	Three Months Ended March 31,
	2016		2015
Intrinsic value	$	117	$	56
Cash proceeds received	$	32	$	15
Tax benefit realized	$	41	$	20

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Income Tax

3 Months Ended

Mar. 31, 2016

Income Tax [Abstract]

Income Tax

10.  Income Tax

Income tax expense was $2.0 million and $1.8 million during the three months ended March 31, 2016 and 2015, 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 March 31, 2016 and 2015, 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 $1.1 million at both March 31, 2016 and December 31, 2015. 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 both March 31, 2016 and December 31, 2015, we had approximately $1.0 million, of gross unrecognized tax benefits.  We do not expect the total amount of unrecognized tax benefits to significantly increase or decrease during the balance of 2016.

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Regulatory Matters

3 Months Ended

Mar. 31, 2016

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 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 March 31, 2016, the Bank had negative undivided profits of $5.7 million.  We can request regulatory approval for a return of capital from the Bank to the parent company. During the first quarters of 2016 and 2015, we requested regulatory approval for returns of capital from the Bank to the parent company of  $18.0 million and $18.5 million, respectively.  These return of capital requests were approved by our banking regulators on February 24, 2016 and February 13, 2015, respectively and the Bank returned these amounts to the parent company on February 25, 2016 and February 17, 2015, respectively.  It is not our intent to have dividends paid in amounts that would reduce the capital of our Bank to levels below those which we consider prudent and in accordance with guidelines of regulatory authorities.

We are also subject to various regulatory capital requirements. The prompt corrective action regulations establish quantitative measures to ensure capital adequacy and require minimum amounts and ratios of total, Tier 1, and common equity Tier 1 capital to risk-weighted assets and Tier 1 capital to average assets. Failure to meet minimum capital requirements can result in certain mandatory, and possibly discretionary, actions by regulators that could have a material effect on our 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 March 31, 2016 and December 31, 2015, 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 capital conservation buffer began to phase in on January 1, 2016 with 0.625% added to the minimum ratio for adequately capitalized institutions for 2016.  To avoid limits on capital distributions and certain discretionary bonus payments we must meet the minimum ratio for adequately capitalized institutions plus the phased in buffer.  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)
March 31, 2016
Total capital to risk-weighted assets
Consolidated	$	268,031		15.81	%	$	135,651		8.00	%	NA			NA
Independent Bank		251,157		14.83			135,503		8.00			$	169,379		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	246,688		14.55	%	$	101,738		6.00	%	NA			NA
Independent Bank		229,884		13.57			101,628		6.00			$	135,503		8.00	%
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	222,205		13.10	%	$	76,304		4.50	%	NA			NA
Independent Bank		229,884		13.57			76,221		4.50			$	110,097		6.50	%
Tier 1 capital to average assets
Consolidated	$	246,688		10.31	%	$	95,713		4.00	%	NA			NA
Independent Bank		229,884		9.61			95,647		4.00			$	119,559		5.00	%
December 31, 2015
Total capital to risk-weighted assets
Consolidated	$	278,170		16.65	%	$	133,668		8.00	%	NA			NA
Independent Bank		261,894		15.69			133,514		8.00			$	166,893		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	257,050		15.38	%	$	100,251		6.00	%	NA			NA
Independent Bank		240,867		14.43			100,136		6.00			$	133,514		8.00	%
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	239,271		14.32	%	$	75,188		4.50	%	NA			NA
Independent Bank		240,867		14.43			75,102		4.50			$	108,480		6.50	%
Tier 1 capital to average assets
Consolidated	$	257,050		10.91	%	$	94,217		4.00	%	NA			NA
Independent Bank		240,867		10.23			94,145		4.00			$	117,682		5.00	%

NA - Not applicable

The components of our regulatory capital are as follows:

	Consolidated						Independent Bank
	March 31, 2016			December 31, 2015			March 31, 2016			December 31, 2015
	(In thousands)
Total shareholders' equity	$	239,545		$	251,092		$	247,567		$	259,947
Add (deduct)
Accumulated other comprehensive (income) loss for regulatory purposes		(999	)		238			(999	)		238
Intangible assets		(1,316	)		(912	)		(1,316	)		(912	)
Disallowed deferred tax assets		(15,025	)		(11,147	)		(15,368	)		(18,406	)
Common equity tier 1 capital		222,205			239,271			229,884			240,867
Qualifying trust preferred securities		34,500			34,500			-			-
Disallowed deferred tax assets		(10,017	)		(16,721	)		-			-
Tier 1 capital		246,688			257,050			229,884			240,867
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets		21,343			21,120			21,273			21,027
Total risk-based capital	$	268,031		$	278,170		$	251,157		$	261,894

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Fair Value Disclosures

3 Months Ended

Mar. 31, 2016

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 primarily include agency securities, private label 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 March 31, 2016 and December 31, 2015, all of our 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 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)
March 31, 2016:
Measured at Fair Value on a Recurring Basis:
Assets
Trading securities	$	136	$	136	$	-	$	-
Securities available for sale
U.S. agency		35,385		-		35,385		-
U.S. agency residential mortgage-backed		197,379		-		197,379		-
U.S. agency commercial mortgage-backed		8,492		-		8,492		-
Private label mortgage-backed		18,375		-		18,375		-
Other asset backed		128,072		-		128,072		-
Obligations of states and political subdivisions		148,345		-		148,345		-
Corporate		49,510		-		49,510		-
Trust preferred		2,303		-		2,303		-
Foreign government		1,639		-		1,639		-
Loans held for sale		28,016		-		28,016		-
Derivatives (1)		2,584		-		2,584		-
Liabilities
Derivatives (2)		1,952		-		1,952		-
Measured at Fair Value on a Non-recurring basis:
Assets
Capitalized mortgage loan servicing rights (3)		10,454		-		-		10,454
Impaired loans (4)
Commercial
Income producing - real estate		605		-		-		605
Land, land development & construction-real estate		35		-		-		35
Commercial and industrial		1,166		-		-		1,166
Mortgage
1-4 Family		540		-		-		540
Resort Lending		245		-		-		245
Other real estate (5)
Commercial
Land, land development & construction-real estate		549		-		-		549
Mortgage
1-4 Family		66		-		-		66
Resort lending		93		-		-		93
Home equity - 1st lien		18						18
Installment
Home equity - 1st lien		23		-		-		23

(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, 2015:
Measured at Fair Value on a Recurring Basis:
Assets
Trading securities	$	148	$	148	$	-	$	-
Securities available for sale
U.S. agency		47,512		-		47,512		-
U.S. agency residential mortgage-backed		196,056		-		196,056		-
U.S. agency commercial mortgage-backed		34,028		-		34,028		-
Private label mortgage-backed		4,903		-		4,903		-
Other asset backed		116,904		-		116,904		-
Obligations of states and political subdivisions		144,984		-		144,984		-
Corporate		38,614		-		38,614		-
Trust preferred		2,483		-		2,483		-
Loans held for sale		27,866		-		27,866		-
Derivatives (1)		1,238		-		1,238		-
Liabilities
Derivatives (2)		619		-		619		-
Measured at Fair Value on a Non-recurring basis:
Assets
Capitalized mortgage loan servicing rights (3)		8,481		-		-		8,481
Impaired loans (4)
Commercial
Income producing - real estate		711		-		-		711
Land, land development & construction-real estate		40		-		-		40
Commercial and industrial		1,257		-		-		1,257
Mortgage
1-4 Family		421		-		-		421
Resort lending		129		-		-		129
Other real estate (5)
Commercial
Land, land development & construction-real estate		639		-		-		639
Commercial and industrial		165		-		-		165
Mortgage
1-4 Family		26		-		-		26
Resort lending		107		-		-		107
Home equity - 1st lien		14		-		-		14
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.

There were no transfers between Level 1 and Level 2 during the three months ended March 31, 2016 and 2015.

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 three-Month Periods Ended March 31 for Items Measured at Fair Value Pursuant to Election of the Fair Value Option
		2016								2015
		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		$	(12	)	$	-	$	(12	)	$	10	$	-	$	10
Loans held for sale			-			127		127			-		209		209

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

The following represent impairment charges recognized during the three periods ended March 31, 2016 and 2015 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 $10.5 million which is net of a valuation allowance of $4.7 million at March 31, 2016 and had a carrying amount of $8.5 million which is net of a valuation allowance of $3.3 million at December 31, 2015.  An additional charge relating to capitalized mortgage loan servicing rights measured at fair value of $1.5 million and $0.7 million was included in our results of operations for the three month periods ending March 31, 2016 and 2015, respectively.

· Loans which are measured for impairment using the fair value of collateral for collateral dependent loans, had a carrying amount of $5.3 million, with a valuation allowance of $2.7 million at March 31, 2016 and had a carrying amount of $5.1 million, with a valuation allowance of $2.5 million at December 31, 2015.  The provision for loan losses included in our results of operations relating to impaired loans was an expense of $0.6 million for both three month periods ending March 31, 2016 and 2015.

· Other real estate, which is measured using the fair value of the property, had a carrying amount of $0.7 million which is net of a valuation allowance of $1.7 million at March 31, 2016 and a carrying amount of $1.0 million which is net of a valuation allowance of $1.7 million at December 31, 2015.  An additional charge relating to other real estate measured at fair value of $0.2 million was included in our results of operations during both three month periods ended March 31, 2016 and 2015, respectively.

We had no assets or liabilities measured at fair value on a recurring basis that used significant unobservable inputs (Level 3) during the three months ended March 31, 2016 and 2015.

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

	Asset Fair Value		Valuation Technique	Unobservable Inputs	Weighted Average
	(In thousands)
March 31, 2016
Capitalized mortgage loan servicing rights	$	10,454	Present value of net servicing revenue	Discount rate		10.04	%
				Cost to service	$	80
				Ancillary income		24
				Float rate		1.17	%
Impaired loans
Commercial (1)		1,601	Sales comparison approach	Adjustment for differences between comparable sales		(1.2	)%
Mortgage		785	Sales comparison approach	Adjustment for differences between comparable sales		2.2
Other real estate
Commercial		549	Sales comparison approach	Adjustment for differences between comparable sales		(5.6	)
Mortgage and installment		200	Sales comparison approach	Adjustment for differences between comparable sales		58.5
December 31, 2015
Capitalized mortgage loan servicing rights	$	8,481	Present value of net servicing revenue	Discount rate		10.04	%
				Cost to service	$	80
				Ancillary income		24
				Float rate		1.73	%
Impaired loans
Commercial (1)		1,605	Sales comparison approach	Adjustment for differences between comparable sales		(2.1	)%
			Income approach	Capitalization rate		9.3
Mortgage		550	Sales comparison approach	Adjustment for differences between comparable sales		0.7
Other real estate
Commercial		804	Sales comparison approach	Adjustment for differences between comparable sales		(3.9	)
Mortgage and installment		183	Sales comparison approach	Adjustment for differences between comparable sales		75.6

(1) In addition to the valuation techniques and unobservable inputs discussed above, at March 31, 2016 and December 31, 2015, we had an impaired collateral dependent commercial relationship that totaled $0.2 million and $0.4 million, respectively that was primarily secured by collateral other than real estate.  Collateral securing this relationship primarily included machinery and equipment and inventory at March 31, 2016 and December 31, 2015.  Valuation techniques at March 31, 2016 and December 31, 2015, included appraisals and 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.

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
March 31, 2016	$	28,016	$	841	$	27,175
December 31, 2015		27,866		714		27,152

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Fair Values of Financial Instruments

3 Months Ended

Mar. 31, 2016

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 may not be a precise estimate. Changes in assumptions could significantly affect the estimates.

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

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 Federal Reserve 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 and do not necessarily represent an exit price.  Loans are classified as Level 3.  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)
March 31, 2016
Assets
Cash and due from banks	$	41,790	$	41,790	$	41,790	$	-	$	-
Interest bearing deposits		102,919		102,919		102,919		-		-
Interest bearing deposits - time		10,178		10,214		-		10,214		-
Trading securities		136		136		136		-		-
Securities available for sale		589,500		589,500		-		589,500		-
Federal Home Loan Bank and Federal
Reserve Bank Stock		15,600	NA		NA		NA		NA
Net loans and loans held for sale		1,544,503		1,513,641		-		28,016		1,485,625
Accrued interest receivable		6,855		6,855		-		2,300		4,555
Derivative financial instruments		2,584		2,584		-		2,584		-
Liabilities
Deposits with no stated maturity (1)	$	1,704,515	$	1,704,515	$	1,704,515	$	-	$	-
Deposits with stated maturity (1)		450,191		449,221		-		449,221		-
Other borrowings		11,953		13,425		-		13,425		-
Subordinated debentures		35,569		22,526		-		22,526		-
Accrued interest payable		562		562		21		541		-
Derivative financial instruments		1,952		1,952		-		1,952		-
December 31, 2015
Assets
Cash and due from banks	$	54,260	$	54,260	$	54,260	$	-	$	-
Interest bearing deposits		31,523		31,523		31,523		-		-
Interest bearing deposits - time		11,866		11,858		-		11,858		-
Trading securities		148		148		148		-		-
Securities available for sale		585,484		585,484		-		585,484		-
Federal Home Loan Bank and Federal
Reserve Bank Stock		15,471	NA		NA		NA		NA
Net loans and loans held for sale		1,520,346		1,472,613		-		27,866		1,444,747
Accrued interest receivable		6,565		6,565		5		1,969		4,591
Derivative financial instruments		1,238		1,238		-		1,238		-
Liabilities
Deposits with no stated maturity (1)	$	1,659,743	$	1,659,743	$	1,659,743	$	-	$	-
Deposits with stated maturity (1)		426,220		423,776		-		423,776		-
Other borrowings		11,954		13,448		-		13,448		-
Subordinated debentures		35,569		23,069		-		23,069		-
Accrued interest payable		466		466		21		445		-
Derivative financial instruments		619		619		-		619		-

(1) Deposits with no stated maturity include reciprocal deposits with a recorded book balance of $14.2 million and $11.8 million at March 31, 2016 and December 31, 2015, respectively.  Deposits with a stated maturity include reciprocal deposits with a recorded book balance of $36.1 million and $38.4 million at March 31, 2016 and December 31, 2015, 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.

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Contingent Liabilities

3 Months Ended

Mar. 31, 2016

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 $1.0 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. Mepco is currently in the process of working to recover these receivables, primarily through negotiated settlements with the 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 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.  During the first quarter of 2016, we settled our last significant remaining litigation matter with certain of Mepco’s counterparties.  This settlement resulted in our receipt of a cash payment of $4.0 million, which reduced vehicle service contract counterparty receivables, net to $3.2 million as of March 31, 2016 compared to $7.2 million as of December 31, 2015.  This settlement also resulted in our receipt of an interest-bearing promissory note from one of Mepco’s counterparties for $1.5 million with monthly payments scheduled over a five-year period beginning in May 2016.  Due to the lack of any payment history and limited financial information on this counterparty, we established a full reserve on this promissory note as of March 31, 2016.  As a payment history is developed on this note, we will continue to evaluate the need for all or any part of a reserve.  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 March 31, 2016 and 2015.  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 $0.02 million and $0.07 million for the three months ended March 31, 2016 and 2015, respectively.  The credit provision in each period is due primarily to the settlement of certain loss reimbursement claims at slightly lower amounts than what had been specifically reserved for previously.  The reserve for loss reimbursements on sold mortgage loans totaled $0.5 million at both March 31, 2016 and December 31, 2015. 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 March 31, 2016 and December 31, 2015 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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Accumulated Other Comprehensive Loss ("AOCL")

3 Months Ended

Mar. 31, 2016

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			Total
For the three months ended March 31,
2016
Balances at beginning of period	$	(238	)	$	(5,798	)	$	(6,036	)
Other comprehensive income before reclassifications		1,349			-			1,349
Amounts reclassified from AOCL		(112	)		-			(112	)
Net current period other comprehensive income		1,237			-			1,237
Balances at end of period	$	999		$	(5,798	)	$	(4,799	)
2015
Balances at beginning of period	$	162		$	(5,798	)	$	(5,636	)
Other comprehensive income before reclassifications		1,483			-			1,483
Amounts reclassified from AOCL		(49	)		-			(49	)
Net current period other comprehensive income		1,434			-			1,434
Balances at end of period	$	1,596		$	(5,798	)	$	(4,202	)

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 March 31 follows:

AOCL Component	Amount Reclassified From AOCL		Affected Line Item in Condensed  Consolidated Statements of Operations
	(In thousands)
2016
Unrealized losses on securities available for sale
	$	174	Net gains on securities
		-	Net impairment loss recognized in earnings
		174	Total reclassifications before tax
		62	Income tax expense
	$	112	Reclassifications, net of tax
2015
Unrealized losses on securities available for sale
	$	75	Net gains on securities
		-	Net impairment loss recognized in earnings
		75	Total reclassifications before tax
		26	Income tax expense
	$	49	Reclassifications, net of tax

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New Accounting Standards (Policies)

3 Months Ended

Mar. 31, 2016

New Accounting Standards [Abstract]

New Accounting Standards

In June 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 became effective for us on January 1, 2016, 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 us on January 1, 2018, and is not expected to have a material impact on our consolidated operating results or financial condition.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities”.  This ASU amends existing guidance related to the accounting for certain financial assets and liabilities. These amendments, among other things, requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. This amended guidance is effective for us on January 1, 2018, and is not expected to have a material impact on our consolidated operating results or financial condition.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”.  This ASU amends existing guidance related to the accounting for leases. These amendments, among other things, requires lessees to account for most leases on the balance sheet while recognizing expense on the income statement in a manner similar to existing guidance.  For lessors the guidance modifies the classification criteria and the accounting for sales-type and direct finance leases. This amended guidance is effective for us on January 1, 2019, and is not expected to have a material impact on our consolidated operating results or financial condition.

In March 2016, the FASB issued ASU 2016-09, “Compensation – Stock Compensation (718) Improvements to Employee Share-Based Payment Accounting”.  This ASU amends existing guidance in an effort to simplify certain aspects of accounting for share-based payments. The areas for simplification in this ASU include income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows.  This amended guidance is effective for us on January 1, 2017, with early adoption permitted, and is not expected to have a material impact on our consolidated operating results or financial condition.

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Securities (Tables)

3 Months Ended

Mar. 31, 2016

Securities [Abstract]

Securities available for sale

Securities available for sale consist of the following:

	Amortized		Unrealized
	Cost		Gains		Losses		Fair Value
	(In thousands)
March 31, 2016
U.S. agency	$	35,016	$	431	$	62	$	35,385
U.S. agency residential mortgage-backed		196,017		1,635		273		197,379
U.S. agency commercial mortgage-backed		8,382		112		2		8,492
Private label mortgage-backed		18,569		154		348		18,375
Other asset backed		128,431		124		483		128,072
Obligations of states and political subdivisions		147,411		1,644		710		148,345
Corporate		49,565		162		217		49,510
Trust preferred		2,918		-		615		2,303
Foreign government		1,654		-		15		1,639
Total	$	587,963	$	4,262	$	2,725	$	589,500
December 31, 2015
U.S. agency	$	47,283	$	309	$	80	$	47,512
U.S. agency residential mortgage-backed		195,055		1,584		583		196,056
U.S. agency commercial mortgage-backed		34,017		94		83		34,028
Private label mortgage-backed		5,061		161		319		4,903
Other asset backed		117,431		54		581		116,904
Obligations of states and political subdivisions		145,193		941		1,150		144,984
Corporate		38,895		9		290		38,614
Trust preferred		2,916		-		433		2,483
Total	$	585,851	$	3,152	$	3,519	$	585,484

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)
March 31, 2016
U.S. agency	$	7,168	$	20	$	6,360	$	42	$	13,528	$	62
U.S. agency residential mortgage-backed		26,856		130		16,325		143		43,181		273
U.S. agency commercial mortgage-backed		1,236		1		202		1		1,438		2
Private label mortgage- backed		5,645		17		3,093		331		8,738		348
Other asset backed		82,903		280		9,804		203		92,707		483
Obligations of states and political subdivisions		22,296		282		9,737		428		32,033		710
Corporate		28,299		208		991		9		29,290		217
Trust preferred		-		-		2,303		615		2,303		615
Foreign government		1,639		15		-		-		1,639		15
Total	$	176,042	$	953	$	48,815	$	1,772	$	224,857	$	2,725
December 31, 2015
U.S. agency	$	12,164	$	47	$	6,746	$	33	$	18,910	$	80
U.S. agency residential mortgage-backed		57,538		316		23,340		267		80,878		583
U.S. agency commercial mortgage-backed		16,747		60		2,247		23		18,994		83
Private label mortgage- backed		-		-		3,393		319		3,393		319
Other asset backed		102,660		434		5,189		147		107,849		581
Obligations of states and political subdivisions		52,493		597		12,240		553		64,733		1,150
Corporate		30,550		290		-		-		30,550		290
Trust preferred		-		-		2,483		433		2,483		433
Total	$	272,152	$	1,744	$	55,638	$	1,775	$	327,790	$	3,519

Trust preferred securities

The following table breaks out our trust preferred securities in further detail as of March 31, 2016 and December 31, 2015:

	March 31, 2016					December 31, 2015
	Fair Value		Net Unrealized Loss			Fair Value		Net Unrealized Loss
	(In thousands)
Trust preferred securities
Rated issues	$	1,550	$	(368	)	$	1,690	$	(226	)
Unrated issues		753		(247	)		793		(207	)

Private label mortgage backed securities below investment grade

At March 31, 2016, three private label 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 March 31, 2016
Fair value	$	1,546	$	1,250	$	75	$	2,871
Amortized cost		1,575		1,188		-		2,763
Non-credit unrealized loss		29		-		-		29
Unrealized gain		-		62		75		137
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 March 31,
2016	$	-	$	-	$	-	$	-
2015		-		-		-		-

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 month periods ending March 31, follows:

	Three months ended March 31,
	2016		2015
	(In thousands)
Balance at beginning of period	$	1,844	$	1,844
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		-		-
Balance at end of period	$	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 March 31, 2016, by contractual maturity, follow:

	Amortized Cost		Fair Value
	(In thousands)
Maturing within one year	$	30,411	$	30,453
Maturing after one year but within five years		74,249		74,472
Maturing after five years but within ten years		62,664		63,236
Maturing after ten years		69,240		69,021
		236,564		237,182
U.S. agency residential mortgage-backed		196,017		197,379
U.S. agency commercial mortgage-backed		8,382		8,492
Private label residential mortgage-backed		18,569		18,375
Other asset backed		128,431		128,072
Total	$	587,963	$	589,500

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 three month periods ending March 31, follows:

	Proceeds		Realized Gains		Losses
	(In thousands)
2016	$	42,391	$	226	$	52
2015		11,786		75		-

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Loans (Tables)

3 Months Ended

Mar. 31, 2016

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 March 31, follows:

	Commercial			Mortgage			Installment			Payment Plan Receivables			Subjective Allocation			Total
	(In thousands)
2016
Balance at beginning of period	$	5,670		$	10,391		$	1,181		$	56		$	5,272		$	22,570
Additions (deductions)
Provision for loan losses		(404	)		(279	)		65			(3	)		91			(530	)
Recoveries credited to allowance		356			382			221			-			-			959
Loans charged against the allowance		-			(198	)		(306	)		-			-			(504	)
Balance at end of period	$	5,622		$	10,296		$	1,161		$	53		$	5,363		$	22,495
2015
Balance at beginning of period	$	5,445		$	13,444		$	1,814		$	64		$	5,223		$	25,990
Additions (deductions)
Provision for loan losses		328			(733	)		(85	)		(2	)		(167	)		(659	)
Recoveries credited to allowance		433			238			319			-			-			990
Loans charged against the allowance		(290	)		(868	)		(484	)		-			-			(1,642	)
Balance at end of period	$	5,916		$	12,081		$	1,564		$	62		$	5,056		$	24,679

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)
March 31, 2016
Allowance for loan losses
Individually evaluated for impairment	$	2,791	$	7,651	$	408	$	-	$	-	$	10,850
Collectively evaluated for impairment		2,831		2,645		753		53		5,363		11,645
Total ending allowance balance	$	5,622	$	10,296	$	1,161	$	53	$	5,363	$	22,495
Loans
Individually evaluated for impairment	$	17,585	$	64,899	$	5,670	$	-			$	88,154
Collectively evaluated for impairment		754,908		441,354		226,789		32,305				1,455,356
Total loans recorded investment		772,493		506,253		232,459		32,305				1,543,510
Accrued interest included in recorded investment		1,607		2,249		672		-				4,528
Total loans	$	770,886	$	504,004	$	231,787	$	32,305			$	1,538,982
December 31, 2015
Allowance for loan losses
Individually evaluated for impairment	$	2,708	$	7,818	$	457	$	-	$	-	$	10,983
Collectively evaluated for impairment		2,962		2,573		724		56		5,272		11,587
Total ending allowance balance	$	5,670	$	10,391	$	1,181	$	56	$	5,272	$	22,570
Loans
Individually evaluated for impairment	$	16,868	$	66,375	$	5,888	$	-			$	89,131
Collectively evaluated for impairment		733,399		436,349		226,409		34,599				1,430,756
Total loans recorded investment		750,267		502,724		232,297		34,599				1,519,887
Accrued interest included in recorded investment		1,869		2,270		698		-				4,837
Total loans	$	748,398	$	500,454	$	231,599	$	34,599			$	1,515,050

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)
March 31, 2016
Commercial
Income producing - real estate	$	-	$	1,117	$	1,117
Land, land development and construction - real estate		-		168		168
Commercial and industrial		147		2,304		2,451
Mortgage
1-4 family		-		4,795		4,795
Resort lending		-		805		805
Home equity - 1st lien		-		154		154
Home equity - 2nd lien		-		268		268
Purchased loans		3		2		5
Installment
Home equity - 1st lien		-		79		79
Home equity - 2nd lien		-		344		344
Loans not secured by real estate		-		384		384
Other		-		2		2
Payment plan receivables
Full refund		-		2		2
Partial refund		-		-		-
Other		-		1		1
Total recorded investment	$	150	$	10,425	$	10,575
Accrued interest included in recorded investment	$	3	$	-	$	3
December 31, 2015
Commercial
Income producing - real estate	$	-	$	1,027	$	1,027
Land, land development and construction - real estate		49		401		450
Commercial and industrial		69		2,028		2,097
Mortgage
1-4 family		-		4,744		4,744
Resort lending		-		1,094		1,094
Home equity - 1st lien		-		187		187
Home equity - 2nd lien		-		147		147
Purchased loans		-		2		2
Installment
Home equity - 1st lien		-		106		106
Home equity - 2nd lien		-		443		443
Loans not secured by real estate		-		421		421
Other		-		2		2
Payment plan receivables
Full refund		-		2		2
Partial refund		-		2		2
Other		-		1		1
Total recorded investment	$	118	$	10,607	$	10,725
Accrued interest included in recorded investment	$	2	$	-	$	2

Aging analysis of loans by class

An aging analysis of loans by class follows:

	Loans Past Due								Loans not		Total
	30-59 days		60-89 days		90+ days		Total		Past Due		Loans
	(In thousands)
March 31, 2016
Commercial
Income producing - real estate	$	337	$	-	$	776	$	1,113	$	310,604	$	311,717
Land, land development and construction - real estate		-		-		168		168		40,795		40,963
Commercial and industrial		354		192		229		775		419,038		419,813
Mortgage
1-4 family		2,505		662		4,795		7,962		275,295		283,257
Resort lending		677		-		805		1,482		111,434		112,916
Home equity - 1st lien		66		-		154		220		26,024		26,244
Home equity - 2nd lien		235		287		268		790		51,620		52,410
Purchased loans		12		1		5		18		31,408		31,426
Installment
Home equity - 1st lien		529		176		79		784		15,429		16,213
Home equity - 2nd lien		215		133		344		692		18,367		19,059
Loans not secured by real estate		386		108		384		878		194,202		195,080
Other		3		11		2		16		2,091		2,107
Payment plan receivables
Full refund		408		65		2		475		17,609		18,084
Partial refund		303		61		-		364		6,197		6,561
Other		154		3		1		158		7,502		7,660
Total recorded investment	$	6,184	$	1,699	$	8,012	$	15,895	$	1,527,615	$	1,543,510
Accrued interest included in recorded investment	$	56	$	21	$	3	$	80	$	4,448	$	4,528
December 31, 2015
Commercial
Income producing - real estate	$	203	$	209	$	647	$	1,059	$	305,155	$	306,214
Land, land development and construction - real estate		-		-		252		252		44,231		44,483
Commercial and industrial		785		16		151		952		398,618		399,570
Mortgage
1-4 family		1,943		640		4,744		7,327		272,298		279,625
Resort lending		307		-		1,094		1,401		114,619		116,020
Home equity - 1st lien		50		-		187		237		22,327		22,564
Home equity - 2nd lien		439		54		147		640		50,618		51,258
Purchased loans		9		1		2		12		33,245		33,257
Installment
Home equity - 1st lien		315		107		106		528		16,707		17,235
Home equity - 2nd lien		231		149		443		823		19,727		20,550
Loans not secured by real estate		567		83		421		1,071		191,262		192,333
Other		15		3		2		20		2,159		2,179
Payment plan receivables
Full refund		492		62		2		556		21,294		21,850
Partial refund		415		228		2		645		5,834		6,479
Other		110		3		1		114		6,156		6,270
Total recorded investment	$	5,881	$	1,555	$	8,201	$	15,637	$	1,504,250	$	1,519,887
Accrued interest included in recorded investment	$	53	$	17	$	2	$	72	$	4,765	$	4,837

Impaired loans

Impaired loans are as follows :

	March 31, 2016		December 31, 2015
Impaired loans with no allocated allowance	(In thousands)
TDR	$	2,368	$	2,518
Non - TDR		168		203
Impaired loans with an allocated allowance
TDR - allowance based on collateral		4,683		4,810
TDR - allowance based on present value cash flow		80,009		81,002
Non - TDR - allowance based on collateral		623		260
Non - TDR - allowance based on present value cash flow		-		-
Total impaired loans	$	87,851	$	88,793
Amount of allowance for loan losses allocated
TDR - allowance based on collateral	$	2,531	$	2,436
TDR - allowance based on present value cash flow		8,135		8,471
Non - TDR - allowance based on collateral		184		76
Non - TDR - allowance based on present value cash flow		-		-
Total amount of allowance for loan losses allocated	$	10,850	$	10,983

Impaired loans by class  are as follows (1):

	March 31, 2016						December 31, 2015
	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	$	785	$	1,030	$	-	$	641	$	851	$	-
Land, land development & construction-real estate		537		1,112		-		818		1,393		-
Commercial and industrial		1,218		1,216		-		1,245		1,241		-
Mortgage
1-4 family		-		140		-		23		183		-
Resort lending		-		-		-		-		-		-
Home equity - 1st lien		-		-		-		-		-		-
Home equity - 2nd lien		-		-		-		-		-		-
Installment
Home equity - 1st lien		1		75		-		-		76		-
Home equity - 2nd lien		14		13		-		-		-		-
Loans not secured by real estate		-		-		-		-		-		-
Other		-		-		-		-		-		-
		2,555		3,586		-		2,727		3,744		-
With an allowance recorded:
Commercial
Income producing - real estate		8,234		9,061		548		8,377		9,232		516
Land, land development & construction-real estate		1,484		1,484		95		1,690		1,778		296
Commercial and industrial		5,327		5,592		2,148		4,097		4,439		1,896
Mortgage
1-4 family		46,608		48,532		4,976		47,792		49,808		5,132
Resort lending		17,929		17,963		2,654		18,148		18,319		2,662
Home equity - 1st lien		243		247		12		168		172		9
Home equity - 2nd lien		119		201		9		244		325		15
Installment
Home equity - 1st lien		2,287		2,421		130		2,364		2,492		143
Home equity - 2nd lien		2,793		2,807		239		2,929		2,951		271
Loans not secured by real estate		569		641		38		587		658		42
Other		6		6		1		8		8		1
		85,599		88,955		10,850		86,404		90,182		10,983
Total
Commercial
Income producing - real estate		9,019		10,091		548		9,018		10,083		516
Land, land development & construction-real estate		2,021		2,596		95		2,508		3,171		296
Commercial and industrial		6,545		6,808		2,148		5,342		5,680		1,896
Mortgage
1-4 family		46,608		48,672		4,976		47,815		49,991		5,132
Resort lending		17,929		17,963		2,654		18,148		18,319		2,662
Home equity - 1st lien		243		247		12		168		172		9
Home equity - 2nd lien		119		201		9		244		325		15
Installment
Home equity - 1st lien		2,288		2,496		130		2,364		2,568		143
Home equity - 2nd lien		2,807		2,820		239		2,929		2,951		271
Loans not secured by real estate		569		641		38		587		658		42
Other		6		6		1		8		8		1
Total	$	88,154	$	92,541	$	10,850	$	89,131	$	93,926	$	10,983
Accrued interest included in recorded investment	$	303					$	338

(1) There were no impaired payment plan receivables or purchased mortgage loans at March 31, 2016 or December 31, 2015.

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 March 31, follows (1):

	2016				2015
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:	(In thousands)
Commercial
Income producing - real estate	$	713	$	2	$	5,848	$	53
Land, land development & construction-real estate		678		7		1,041		34
Commercial and industrial		1,232		21		2,768		37
Mortgage
1-4 family		12		1		13		-
Resort lending		-		-		31		-
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		7		-		-		-
Loans not secured by real estate		-		-		-		-
Other		-		-		-		-
		2,643		32		9,701		124
With an allowance recorded:
Commercial
Income producing - real estate		8,306		107		12,849		157
Land, land development & construction-real estate		1,587		13		2,709		14
Commercial and industrial		4,712		23		8,177		66
Mortgage
1-4 family		47,200		502		52,451		551
Resort lending		18,039		160		18,632		171
Home equity line of credit - 1st lien		206		2		162		2
Home equity line of credit - 2nd lien		182		1		123		2
Installment
Home equity installment - 1st lien		2,326		42		2,691		50
Home equity installment - 2nd lien		2,861		44		3,174		51
Loans not secured by real estate		578		9		694		10
Other		7		-		12		-
		86,004		903		101,674		1,074
Total
Commercial
Income producing - real estate		9,019		109		18,697		210
Land, land development & construction-real estate		2,265		20		3,750		48
Commercial and industrial		5,944		44		10,945		103
Mortgage
1-4 family		47,212		503		52,464		551
Resort lending		18,039		160		18,663		171
Home equity line of credit - 1st lien		206		2		162		2
Home equity line of credit - 2nd lien		182		1		123		2
Installment
Home equity installment - 1st lien		2,327		43		2,691		50
Home equity installment - 2nd lien		2,868		44		3,174		51
Loans not secured by real estate		578		9		694		10
Other		7		-		12		-
Total	$	88,647	$	935	$	111,375	$	1,198

(1) There were no impaired payment plan receivables or purchased mortgage loans during the three month periods ended March 31, 2016 and 2015, respectively.

Troubled debt restructurings

Troubled debt restructurings follow:

	March 31, 2016
	Commercial		Retail			Total
	(In thousands)
Performing TDRs	$	13,950	$	66,619		$	80,569
Non-performing TDRs(1)		2,798		3,693	(2)		6,491
Total	$	16,748	$	70,312		$	87,060

	December 31, 2015
	Commercial		Retail			Total
	(In thousands)
Performing TDRs	$	13,318	$	68,194		$	81,512
Non-performing TDRs(1)		3,041		3,777	(2)		6,818
Total	$	16,359	$	71,971		$	88,330

(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 ended March 31 follow:

	Number of Contracts		Pre-modification Recorded Balance		Post-modification Recorded Balance
	(Dollars in thousands)
2016
Commercial
Income producing - real estate		2	$	110	$	110
Land, land development & construction-real estate		-		-		-
Commercial and industrial		4		1,758		1,758
Mortgage
1-4 family		2		83		153
Resort lending		1		116		117
Home equity - 1st lien		1		107		78
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		1		30		31
Home equity - 2nd lien		2		55		56
Loans not secured by real estate		-		-		-
Other		-		-		-
Total		13	$	2,259	$	2,303
2015
Commercial
Income producing - real estate		1	$	156	$	164
Land, land development & construction-real estate		-		-		-
Commercial and industrial		2		236		234
Mortgage
1-4 family		5		1,005		805
Resort lending		-		-		-
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		4		167		140
Home equity - 2nd lien		-		-		-
Loans not secured by real estate		-		-		-
Other		-		-		-
Total		12	$	1,564	$	1,343

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 that have subsequently defaulted during the three-month periods ended March 31 follow:

	Number of Contracts		Recorded Balance
	(Dollars in thousands)
2016
Commercial
Income producing - real estate		-	$	-
Land, land development & construction-real estate		-		-
Commercial and industrial		-		-
Mortgage
1-4 family		-		-
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		-		-
		-	$	-
2015
Commercial
Income producing - real estate		-	$	-
Land, land development & construction-real estate		-		-
Commercial and industrial		1		91
Mortgage
1-4 family		-		-
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	$	91

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)
March 31, 2016
Income producing - real estate	$	303,195	$	6,367	$	1,038	$	1,117	$	311,717
Land, land development and construction - real estate		39,120		1,675		-		168		40,963
Commercial and industrial		391,207		20,687		5,615		2,304		419,813
Total	$	733,522	$	28,729	$	6,653	$	3,589	$	772,493
Accrued interest included in total	$	1,507	$	82	$	18	$	-	$	1,607
December 31, 2015
Income producing - real estate	$	296,898	$	6,866	$	1,423	$	1,027	$	306,214
Land, land development and construction - real estate		40,844		2,995		243		401		44,483
Commercial and industrial		371,357		19,502		6,683		2,028		399,570
Total	$	709,099	$	29,363	$	8,349	$	3,456	$	750,267
Accrued interest included in total	$	1,729	$	108	$	32	$	-	$	1,869

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		Purchased Loans
											Total
	(In thousands)
March 31, 2016
800 and above	$	29,357	$	13,694	$	4,206	$	7,409	$	2,298	$	56,964
750-799		84,315		39,748		10,292		18,190		20,775		173,320
700-749		54,911		31,331		4,601		11,796		6,901		109,540
650-699		51,725		16,538		3,696		7,501		-		79,460
600-649		27,962		4,934		1,447		3,720		-		38,063
550-599		16,128		3,052		1,022		1,887		-		22,089
500-549		10,348		985		561		1,261		-		13,155
Under 500		4,570		548		223		252		-		5,593
Unknown		3,941		2,086		196		394		1,452		8,069
Total	$	283,257	$	112,916	$	26,244	$	52,410	$	31,426	$	506,253
Accrued interest included in total	$	1,368	$	489	$	93	$	195	$	104	$	2,249
December 31, 2015
800 and above	$	28,760	$	13,943	$	4,374	$	7,696	$	2,310	$	57,083
750-799		78,802		40,888		7,137		17,405		23,283		167,515
700-749		56,519		31,980		4,341		11,022		6,940		110,802
650-699		51,813		17,433		3,203		7,691		-		80,140
600-649		27,966		4,991		1,467		3,684		-		38,108
550-599		16,714		3,070		1,027		1,918		-		22,729
500-549		10,610		1,051		572		1,295		-		13,528
Under 500		4,708		554		244		265		-		5,771
Unknown		3,733		2,110		199		282		724		7,048
Total	$	279,625	$	116,020	$	22,564	$	51,258	$	33,257	$	502,724
Accrued interest included in total	$	1,396	$	477	$	87	$	196	$	114	$	2,270

(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)
March 31, 2016
800 and above	$	1,638	$	1,678	$	43,330	$	91	$	46,737
750-799		3,850		5,552		89,742		522		99,666
700-749		2,375		3,591		35,628		633		42,227
650-699		3,308		3,761		16,394		459		23,922
600-649		2,032		2,068		4,663		202		8,965
550-599		1,741		1,296		1,825		105		4,967
500-549		1,000		804		1,068		55		2,927
Under 500		211		280		297		23		811
Unknown		58		29		2,133		17		2,237
Total	$	16,213	$	19,059	$	195,080	$	2,107	$	232,459
Accrued interest included in total	$	69	$	73	$	514	$	16	$	672
December 31, 2015
800 and above	$	1,792	$	1,782	$	44,254	$	58	$	47,886
750-799		4,117		5,931		86,800		531		97,379
700-749		2,507		3,899		34,789		694		41,889
650-699		3,508		4,182		16,456		499		24,645
600-649		2,173		2,153		4,979		200		9,505
550-599		1,800		1,346		1,997		109		5,252
500-549		1,056		855		1,170		61		3,142
Under 500		223		370		385		23		1,001
Unknown		59		32		1,503		4		1,598
Total	$	17,235	$	20,550	$	192,333	$	2,179	$	232,297
Accrued interest included in total	$	78	$	83	$	520	$	17	$	698

(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)
March 31, 2016
AM Best rating
A+	$	-	$	11	$	-	$	11
A		1,845		5,285		-		7,130
A-		2,576		1,208		7,658		11,442
Not rated		13,663		57		2		13,722
Total	$	18,084	$	6,561	$	7,660	$	32,305
December 31, 2015
AM Best rating
A+	$	-	$	6	$	-	$	6
A		2,712		5,203		-		7,915
A-		3,418		1,177		6,265		10,860
Not rated		15,720		93		5		15,818
Total	$	21,850	$	6,479	$	6,270	$	34,599

XML

Segments (Tables)

3 Months Ended

Mar. 31, 2016

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
March 31, 2016	$	2,425,152		$	50,515		$	275,315		$	(263,862	)	$	2,487,120
December 31, 2015		2,340,566			57,208			286,936			(275,644	)		2,409,066
For the three months ended March 31,
2016
Interest income	$	20,243		$	1,110		$	5		$	(4	)	$	21,354
Net interest income		19,102			932			(271	)		-			19,763
Provision for loan losses		(526	)		(4	)		-			-			(530	)
Income (loss) before income tax		6,862			(359	)		(423	)		(23	)		6,057
Net income (loss)		4,619			(237	)		(267	)		(15	)		4,100
2015
Interest income	$	18,221		$	1,331		$	20		$	(20	)	$	19,552
Net interest income		17,183			1,135			(227	)		-			18,091
Provision for loan losses		(656	)		(3	)		-			-			(659	)
Income (loss) before income tax		6,259			(291	)		(383	)		(24	)		5,561
Net income (loss)		4,233			(192	)		(244	)		(16	)		3,781

(1) Includes amounts relating to our parent company.

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

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Shareholders' Equity and Earnings Per Common Share (Tables)

3 Months Ended

Mar. 31, 2016

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 March 31,
	2016		2015
Net income	$	4,100	$	3,781
Weighted average shares outstanding (1)		21,751		22,997
Stock units for deferred compensation plan for non-employee directors		113		111
Effect of stock options		112		121
Restricted stock units		86		309
Weighted average shares outstanding for calculation of diluted earnings per share		22,062		23,538
Net income per common share
Basic (1)	$	0.19	$	0.16
Diluted	$	0.19	$	0.16

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

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Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2016

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:

	March 31, 2016
	Notional Amount		Average Maturity (years)		Fair Value
	(Dollars in thousands)
No hedge designation
Rate-lock mortgage loan commitments	$	23,854		0.1	$	769
Mandatory commitments to sell mortgage loans		50,127		0.1		(137	)
Pay-fixed interest rate swap agreements		42,933		9.5		(1,615	)
Pay-variable interest rate swap agreements		42,933		9.5		1,615
Purchased options		2,803		5.3		200
Written options		2,803		5.3		(200	)
Total	$	165,453		5.2	$	632

	December 31, 2015
	Notional Amount		Average Maturity (years)		Fair Value
	(Dollars in thousands)
No hedge designation
Rate-lock mortgage loan commitments	$	20,581		0.1	$	550
Mandatory commitments to sell mortgage loans		46,320		0.1		69
Pay-fixed interest rate swap agreements		27,587		8.0		(497	)
Pay-variable interest rate swap agreements		27,587		8.0		497
Purchased options		2,098		5.7		122
Written options		2,098		5.7		(122	)
Total	$	126,271		3.7	$	619

Fair value of derivative instruments

Fair Values of Derivative Instruments

	Asset Derivatives						Liability Derivatives
	March 31, 2016			December 31, 2015			March 31, 2016			December 31, 2015
	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	$	769	Other assets	$	550	Other liabilities	$	-	Other liabilities	$	-
Mandatory commitments to sell mortgage loans	Other assets		-	Other assets		69	Other liabilities		137	Other liabilities		-
Pay-fixed interest rate swap agreements	Other assets		-	Other assets		-	Other liabilities		1,615	Other liabilities		497
Pay-variable interest rateswap agreements	Other assets		1,615	Other assets		497	Other liabilities		-	Other liabilities		-
Purchased options	Other assets		200	Other assets		122	Other liabilities		-	Other liabilities		-
Written options	Other assets		-	Other assets		-	Other liabilities		200	Other liabilities		122
Total derivatives		$	2,584		$	1,238		$	1,952		$	619

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 March 31,
	Location of Gain (Loss)	Gain (Loss) Recognized in Income
	Recognized in Income	2016			2015
		(In thousands)
No hedge designation
Rate-lock mortgage loan commitments	Net gains on mortgage loans	$	219		$	388
Mandatory  commitments to sell mortgage loans	Net gains on mortgage loans		(206	)		(39	)
Pay-fixed interest rate  swap agreements	Interest income		(1,118	)		(261	)
Pay-variable interest rate swap agreements	Interest income		1,118			261
Purchased options	Interest expense		78			-
Written options	Interest expense		(78	)		-
Total		$	13		$	349

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Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2016

Intangible Assets [Abstract]

Other intangible assets, net of amortization

The following table summarizes intangible assets, net of amortization:

	March 31, 2016				December 31, 2015
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
	(In thousands)
Amortized intangible assets - core deposits	$	6,118	$	3,925	$	6,118	$	3,838

Estimated amortization of other intangible assets

Amortization of other intangibles has been estimated through 2021 and thereafter in the following table.

	(In thousands)
Nine months ending December 31, 2016	$	260
2017		346
2018		346
2019		346
2020		346
2021 and thereafter		549
Total	$	2,193

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Share Based Compensation (Tables)

3 Months Ended

Mar. 31, 2016

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, 2016		235,596		$	4.94
Granted		-
Exercised		(10,216	)		3.18
Forfeited		(498	)		6.42
Expired		-
Outstanding at March 31, 2016		224,882		$	5.01		5.84	$	2,180
Vested and expected to vest at March 31, 2016		224,631		$	5.01		5.84	$	2,178
Exercisable at March 31, 2016		202,938		$	4.86		5.69	$	2,002

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, 2016		261,981		$	11.29
Granted		96,191			14.39
Vested		(21,225	)		12.78
Forfeited		(1,398	)		12.70
Outstanding at March 31, 2016		335,549		$	12.08

Information regarding options exercised

Certain information regarding options exercised during the periods follows:

	Three Months Ended March 31,
	2016		2015
Intrinsic value	$	117	$	56
Cash proceeds received	$	32	$	15
Tax benefit realized	$	41	$	20

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Regulatory Matters (Tables)

3 Months Ended

Mar. 31, 2016

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)
March 31, 2016
Total capital to risk-weighted assets
Consolidated	$	268,031		15.81	%	$	135,651		8.00	%	NA			NA
Independent Bank		251,157		14.83			135,503		8.00			$	169,379		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	246,688		14.55	%	$	101,738		6.00	%	NA			NA
Independent Bank		229,884		13.57			101,628		6.00			$	135,503		8.00	%
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	222,205		13.10	%	$	76,304		4.50	%	NA			NA
Independent Bank		229,884		13.57			76,221		4.50			$	110,097		6.50	%
Tier 1 capital to average assets
Consolidated	$	246,688		10.31	%	$	95,713		4.00	%	NA			NA
Independent Bank		229,884		9.61			95,647		4.00			$	119,559		5.00	%
December 31, 2015
Total capital to risk-weighted assets
Consolidated	$	278,170		16.65	%	$	133,668		8.00	%	NA			NA
Independent Bank		261,894		15.69			133,514		8.00			$	166,893		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	257,050		15.38	%	$	100,251		6.00	%	NA			NA
Independent Bank		240,867		14.43			100,136		6.00			$	133,514		8.00	%
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	239,271		14.32	%	$	75,188		4.50	%	NA			NA
Independent Bank		240,867		14.43			75,102		4.50			$	108,480		6.50	%
Tier 1 capital to average assets
Consolidated	$	257,050		10.91	%	$	94,217		4.00	%	NA			NA
Independent Bank		240,867		10.23			94,145		4.00			$	117,682		5.00	%

NA - Not applicable

Components of regulatory capital

The components of our regulatory capital are as follows:

	Consolidated						Independent Bank
	March 31, 2016			December 31, 2015			March 31, 2016			December 31, 2015
	(In thousands)
Total shareholders' equity	$	239,545		$	251,092		$	247,567		$	259,947
Add (deduct)
Accumulated other comprehensive (income) loss for regulatory purposes		(999	)		238			(999	)		238
Intangible assets		(1,316	)		(912	)		(1,316	)		(912	)
Disallowed deferred tax assets		(15,025	)		(11,147	)		(15,368	)		(18,406	)
Common equity tier 1 capital		222,205			239,271			229,884			240,867
Qualifying trust preferred securities		34,500			34,500			-			-
Disallowed deferred tax assets		(10,017	)		(16,721	)		-			-
Tier 1 capital		246,688			257,050			229,884			240,867
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets		21,343			21,120			21,273			21,027
Total risk-based capital	$	268,031		$	278,170		$	251,157		$	261,894

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Fair Value Disclosures (Tables)

3 Months Ended

Mar. 31, 2016

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)
March 31, 2016:
Measured at Fair Value on a Recurring Basis:
Assets
Trading securities	$	136	$	136	$	-	$	-
Securities available for sale
U.S. agency		35,385		-		35,385		-
U.S. agency residential mortgage-backed		197,379		-		197,379		-
U.S. agency commercial mortgage-backed		8,492		-		8,492		-
Private label mortgage-backed		18,375		-		18,375		-
Other asset backed		128,072		-		128,072		-
Obligations of states and political subdivisions		148,345		-		148,345		-
Corporate		49,510		-		49,510		-
Trust preferred		2,303		-		2,303		-
Foreign government		1,639		-		1,639		-
Loans held for sale		28,016		-		28,016		-
Derivatives (1)		2,584		-		2,584		-
Liabilities
Derivatives (2)		1,952		-		1,952		-
Measured at Fair Value on a Non-recurring basis:
Assets
Capitalized mortgage loan servicing rights (3)		10,454		-		-		10,454
Impaired loans (4)
Commercial
Income producing - real estate		605		-		-		605
Land, land development & construction-real estate		35		-		-		35
Commercial and industrial		1,166		-		-		1,166
Mortgage
1-4 Family		540		-		-		540
Resort Lending		245		-		-		245
Other real estate (5)
Commercial
Land, land development & construction-real estate		549		-		-		549
Mortgage
1-4 Family		66		-		-		66
Resort lending		93		-		-		93
Home equity - 1st lien		18						18
Installment
Home equity - 1st lien		23		-		-		23

(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, 2015:
Measured at Fair Value on a Recurring Basis:
Assets
Trading securities	$	148	$	148	$	-	$	-
Securities available for sale
U.S. agency		47,512		-		47,512		-
U.S. agency residential mortgage-backed		196,056		-		196,056		-
U.S. agency commercial mortgage-backed		34,028		-		34,028		-
Private label mortgage-backed		4,903		-		4,903		-
Other asset backed		116,904		-		116,904		-
Obligations of states and political subdivisions		144,984		-		144,984		-
Corporate		38,614		-		38,614		-
Trust preferred		2,483		-		2,483		-
Loans held for sale		27,866		-		27,866		-
Derivatives (1)		1,238		-		1,238		-
Liabilities
Derivatives (2)		619		-		619		-
Measured at Fair Value on a Non-recurring basis:
Assets
Capitalized mortgage loan servicing rights (3)		8,481		-		-		8,481
Impaired loans (4)
Commercial
Income producing - real estate		711		-		-		711
Land, land development & construction-real estate		40		-		-		40
Commercial and industrial		1,257		-		-		1,257
Mortgage
1-4 Family		421		-		-		421
Resort lending		129		-		-		129
Other real estate (5)
Commercial
Land, land development & construction-real estate		639		-		-		639
Commercial and industrial		165		-		-		165
Mortgage
1-4 Family		26		-		-		26
Resort lending		107		-		-		107
Home equity - 1st lien		14		-		-		14
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.

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 three-Month Periods Ended March 31 for Items Measured at Fair Value Pursuant to Election of the Fair Value Option
		2016								2015
		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		$	(12	)	$	-	$	(12	)	$	10	$	-	$	10
Loans held for sale			-			127		127			-		209		209

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 Fair Value		Valuation Technique	Unobservable Inputs	Weighted Average
	(In thousands)
March 31, 2016
Capitalized mortgage loan servicing rights	$	10,454	Present value of net servicing revenue	Discount rate		10.04	%
				Cost to service	$	80
				Ancillary income		24
				Float rate		1.17	%
Impaired loans
Commercial (1)		1,601	Sales comparison approach	Adjustment for differences between comparable sales		(1.2	)%
Mortgage		785	Sales comparison approach	Adjustment for differences between comparable sales		2.2
Other real estate
Commercial		549	Sales comparison approach	Adjustment for differences between comparable sales		(5.6	)
Mortgage and installment		200	Sales comparison approach	Adjustment for differences between comparable sales		58.5
December 31, 2015
Capitalized mortgage loan servicing rights	$	8,481	Present value of net servicing revenue	Discount rate		10.04	%
				Cost to service	$	80
				Ancillary income		24
				Float rate		1.73	%
Impaired loans
Commercial (1)		1,605	Sales comparison approach	Adjustment for differences between comparable sales		(2.1	)%
			Income approach	Capitalization rate		9.3
Mortgage		550	Sales comparison approach	Adjustment for differences between comparable sales		0.7
Other real estate
Commercial		804	Sales comparison approach	Adjustment for differences between comparable sales		(3.9	)
Mortgage and installment		183	Sales comparison approach	Adjustment for differences between comparable sales		75.6

(1) In addition to the valuation techniques and unobservable inputs discussed above, at March 31, 2016 and December 31, 2015, we had an impaired collateral dependent commercial relationship that totaled $0.2 million and $0.4 million, respectively that was primarily secured by collateral other than real estate.  Collateral securing this relationship primarily included machinery and equipment and inventory at March 31, 2016 and December 31, 2015.  Valuation techniques at March 31, 2016 and December 31, 2015, included appraisals and 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.

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
March 31, 2016	$	28,016	$	841	$	27,175
December 31, 2015		27,866		714		27,152

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Fair Values of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2016

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)
March 31, 2016
Assets
Cash and due from banks	$	41,790	$	41,790	$	41,790	$	-	$	-
Interest bearing deposits		102,919		102,919		102,919		-		-
Interest bearing deposits - time		10,178		10,214		-		10,214		-
Trading securities		136		136		136		-		-
Securities available for sale		589,500		589,500		-		589,500		-
Federal Home Loan Bank and Federal
Reserve Bank Stock		15,600	NA		NA		NA		NA
Net loans and loans held for sale		1,544,503		1,513,641		-		28,016		1,485,625
Accrued interest receivable		6,855		6,855		-		2,300		4,555
Derivative financial instruments		2,584		2,584		-		2,584		-
Liabilities
Deposits with no stated maturity (1)	$	1,704,515	$	1,704,515	$	1,704,515	$	-	$	-
Deposits with stated maturity (1)		450,191		449,221		-		449,221		-
Other borrowings		11,953		13,425		-		13,425		-
Subordinated debentures		35,569		22,526		-		22,526		-
Accrued interest payable		562		562		21		541		-
Derivative financial instruments		1,952		1,952		-		1,952		-
December 31, 2015
Assets
Cash and due from banks	$	54,260	$	54,260	$	54,260	$	-	$	-
Interest bearing deposits		31,523		31,523		31,523		-		-
Interest bearing deposits - time		11,866		11,858		-		11,858		-
Trading securities		148		148		148		-		-
Securities available for sale		585,484		585,484		-		585,484		-
Federal Home Loan Bank and Federal
Reserve Bank Stock		15,471	NA		NA		NA		NA
Net loans and loans held for sale		1,520,346		1,472,613		-		27,866		1,444,747
Accrued interest receivable		6,565		6,565		5		1,969		4,591
Derivative financial instruments		1,238		1,238		-		1,238		-
Liabilities
Deposits with no stated maturity (1)	$	1,659,743	$	1,659,743	$	1,659,743	$	-	$	-
Deposits with stated maturity (1)		426,220		423,776		-		423,776		-
Other borrowings		11,954		13,448		-		13,448		-
Subordinated debentures		35,569		23,069		-		23,069		-
Accrued interest payable		466		466		21		445		-
Derivative financial instruments		619		619		-		619		-

(1) Deposits with no stated maturity include reciprocal deposits with a recorded book balance of $14.2 million and $11.8 million at March 31, 2016 and December 31, 2015, respectively.  Deposits with a stated maturity include reciprocal deposits with a recorded book balance of $36.1 million and $38.4 million at March 31, 2016 and December 31, 2015, respectively.

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Accumulated Other Comprehensive Loss (Tables)

3 Months Ended

Mar. 31, 2016

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

Schedule of accumulated other comprehensive loss (AOCL), net of tax

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			Total
For the three months ended March 31,
2016
Balances at beginning of period	$	(238	)	$	(5,798	)	$	(6,036	)
Other comprehensive income before reclassifications		1,349			-			1,349
Amounts reclassified from AOCL		(112	)		-			(112	)
Net current period other comprehensive income		1,237			-			1,237
Balances at end of period	$	999		$	(5,798	)	$	(4,799	)
2015
Balances at beginning of period	$	162		$	(5,798	)	$	(5,636	)
Other comprehensive income before reclassifications		1,483			-			1,483
Amounts reclassified from AOCL		(49	)		-			(49	)
Net current period other comprehensive income		1,434			-			1,434
Balances at end of period	$	1,596		$	(5,798	)	$	(4,202	)

Summary of reclassifications out of each component of AOCL

A summary of reclassifications out of each component of AOCL for the three months ended March 31 follows:

AOCL Component	Amount Reclassified From AOCL		Affected Line Item in Condensed  Consolidated Statements of Operations
	(In thousands)
2016
Unrealized losses on securities available for sale
	$	174	Net gains on securities
		-	Net impairment loss recognized in earnings
		174	Total reclassifications before tax
		62	Income tax expense
	$	112	Reclassifications, net of tax
2015
Unrealized losses on securities available for sale
	$	75	Net gains on securities
		-	Net impairment loss recognized in earnings
		75	Total reclassifications before tax
		26	Income tax expense
	$	49	Reclassifications, net of tax

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Securities (Details) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2016 USD ($) Security	Mar. 31, 2015 USD ($)	Dec. 31, 2015 USD ($) Security
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost	$ 587,963		$ 585,851
Unrealized Gains	4,262		3,152
Unrealized Losses	2,725		3,519
Fair Value	589,500		585,484
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value	176,042		272,152
Less Than Twelve Months, Unrealized Losses	953		1,744
Twelve Months or More, Fair Value	48,815		55,638
Twelve Months or More, Unrealized Losses	1,772		1,775
Total, Fair Value	224,857		327,790
Total, Unrealized Losses	2,725		3,519
Private Label Mortgage Backed Securities Below Investment Grade [Abstract]
Fair value	2,871
Amortized cost	2,763
Non-credit unrealized loss	29
Unrealized gain	137
Cumulative credit related OTTI	1,594
OTTI changes recorded in earnings	0	$ 0
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Roll Forward]
Balance at beginning of period	1,844	1,844	1,844
Additions to credit losses on securities for which no previous OTTI was recognized	0	0
Increases to credit losses on securities for which OTTI was previously recognized	0	0
Balance at end of period	1,844	1,844	1,844
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis, Fiscal Year Maturity [Abstract]
Maturing within one year	30,411
Maturing after one year but within five years	74,249
Maturing after five years but within ten years	62,664
Maturing after ten years	69,240
Available-for-sale securities, debt maturities, amortized cost basis	236,564
U.S. agency residential mortgage-backed	196,017
U.S. agency commercial mortgage-backed	8,382
Private label residential mortgage-backed	18,569
Other asset backed	128,431
Total	587,963
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Maturing within one year	30,453
Maturing after one year but within five years	74,472
Maturing after five years but within ten years	63,236
Maturing after ten years	69,021
Total available-for-sale securities fair value	237,182
U.S. agency residential mortgage-backed	197,379
U.S. agency commercial mortgage-backed	8,492
Private label residential mortgage-backed	18,375
Other asset backed	128,072
Total	589,500
Gain and losses realized on sale of securities available for sale [Abstract]
Proceeds	42,391	11,786
Realized gains	226	75
Realized losses	52	0
Trading securities, realized gains (losses)	(12)	10
Credit related OTTI recognized in earnings	0	0
U.S. Agency [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost	35,016		47,283
Unrealized Gains	431		309
Unrealized Losses	62		80
Fair Value	35,385		47,512
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value	7,168		12,164
Less Than Twelve Months, Unrealized Losses	20		47
Twelve Months or More, Fair Value	6,360		6,746
Twelve Months or More, Unrealized Losses	42		33
Total, Fair Value	13,528		18,910
Total, Unrealized Losses	$ 62		80
Number of securities with market fair value less than amortized cost | Security	30
U.S. Agency Residential Mortgage-Backed [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost	$ 196,017		195,055
Unrealized Gains	1,635		1,584
Unrealized Losses	273		583
Fair Value	197,379		196,056
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value	26,856		57,538
Less Than Twelve Months, Unrealized Losses	130		316
Twelve Months or More, Fair Value	16,325		23,340
Twelve Months or More, Unrealized Losses	143		267
Total, Fair Value	43,181		80,878
Total, Unrealized Losses	$ 273		583
Number of securities with market fair value less than amortized cost | Security	66
U.S. Agency Commercial Mortgage-Backed [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost	$ 8,382		34,017
Unrealized Gains	112		94
Unrealized Losses	2		83
Fair Value	8,492		34,028
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value	1,236		16,747
Less Than Twelve Months, Unrealized Losses	1		60
Twelve Months or More, Fair Value	202		2,247
Twelve Months or More, Unrealized Losses	1		23
Total, Fair Value	1,438		18,994
Total, Unrealized Losses	$ 2		83
Number of securities with market fair value less than amortized cost | Security	5
Private Label Mortgage-Backed [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost	$ 18,569		5,061
Unrealized Gains	154		161
Unrealized Losses	348		319
Fair Value	18,375		4,903
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value	5,645		0
Less Than Twelve Months, Unrealized Losses	17		0
Twelve Months or More, Fair Value	3,093		3,393
Twelve Months or More, Unrealized Losses	331		319
Total, Fair Value	8,738		3,393
Total, Unrealized Losses	$ 348		$ 319
Number of securities with market fair value less than amortized cost | Security	11
Number of securities purchased prior to 2016 | Security			5
Number of securities with impairment in excess of ten percent | Security	2
Percentage of excess impairment on securities	10.00%
Number of securities with impairment for more than 12 months | Security	4
Private Label Mortgage Backed Securities Below Investment Grade [Abstract]
Number of private label mortgage backed securities complete recovery of cost basis | Security	4
Number of private label mortgage backed securities with OTTI unrealized gains | Security	2
Number of private label mortgage backed securities with OTTI unrealized loss | Security	1
Number of private label mortgage backed securities currently below investment grade with OTTI unrealized loss less than previous OTTI credit | Security	2
Senior Security [Member]
Private Label Mortgage Backed Securities Below Investment Grade [Abstract]
Fair value	$ 1,546
Amortized cost	1,575
Non-credit unrealized loss	29
Unrealized gain	0
Cumulative credit related OTTI	757
OTTI changes recorded in earnings	0	0
Super Senior Security [Member]
Private Label Mortgage Backed Securities Below Investment Grade [Abstract]
Fair value	1,250
Amortized cost	1,188
Non-credit unrealized loss	0
Unrealized gain	62
Cumulative credit related OTTI	457
OTTI changes recorded in earnings	0	0
Senior Support Security [Member]
Private Label Mortgage Backed Securities Below Investment Grade [Abstract]
Fair value	75
Amortized cost	0
Non-credit unrealized loss	0
Unrealized gain	75
Cumulative credit related OTTI	380
OTTI changes recorded in earnings	0	$ 0
Other Asset Backed [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost	128,431		$ 117,431
Unrealized Gains	124		54
Unrealized Losses	483		581
Fair Value	128,072		116,904
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value	82,903		102,660
Less Than Twelve Months, Unrealized Losses	280		434
Twelve Months or More, Fair Value	9,804		5,189
Twelve Months or More, Unrealized Losses	203		147
Total, Fair Value	92,707		107,849
Total, Unrealized Losses	$ 483		581
Number of securities with market fair value less than amortized cost | Security	121
Obligations of States and Political Subdivisions [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost	$ 147,411		145,193
Unrealized Gains	1,644		941
Unrealized Losses	710		1,150
Fair Value	148,345		144,984
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value	22,296		52,493
Less Than Twelve Months, Unrealized Losses	282		597
Twelve Months or More, Fair Value	9,737		12,240
Twelve Months or More, Unrealized Losses	428		553
Total, Fair Value	32,033		64,733
Total, Unrealized Losses	$ 710		1,150
Number of securities with market fair value less than amortized cost | Security	44
Corporate [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost	$ 49,565		38,895
Unrealized Gains	162		9
Unrealized Losses	217		290
Fair Value	49,510		38,614
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value	28,299		30,550
Less Than Twelve Months, Unrealized Losses	208		290
Twelve Months or More, Fair Value	991		0
Twelve Months or More, Unrealized Losses	9		0
Total, Fair Value	29,290		30,550
Total, Unrealized Losses	$ 217		290
Number of securities with market fair value less than amortized cost | Security	23
Trust Preferred [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost	$ 2,918		2,916
Unrealized Gains	0		0
Unrealized Losses	615		433
Fair Value	2,303		2,483
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value	0		0
Less Than Twelve Months, Unrealized Losses	0		0
Twelve Months or More, Fair Value	2,303		2,483
Twelve Months or More, Unrealized Losses	615		433
Total, Fair Value	2,303		2,483
Total, Unrealized Losses	$ 615		433
Number of securities with market fair value less than amortized cost | Security	3
Number of securities rated as investment grade | Security	1
Number of securities rated as below investment grade | Security	1
Number of major credit rating agencies | Security	2
Number of securities non-rated | Security	1
Non-rated trust preferred securities, amortized cost	$ 1,000
Non-rated trust preferred securities, fair value	800
Rated Issues [Member]
Trust preferred securities [Abstract]
Fair Value	1,550		1,690
Net Unrealized Loss	(368)		(226)
Unrated Issues [Member]
Trust preferred securities [Abstract]
Fair Value	753		793
Net Unrealized Loss	(247)		$ (207)
Foreign Government [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost	1,654
Unrealized Gains	0
Unrealized Losses	15
Fair Value	1,639
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value	1,639
Less Than Twelve Months, Unrealized Losses	15
Twelve Months or More, Fair Value	0
Twelve Months or More, Unrealized Losses	0
Total, Fair Value	1,639
Total, Unrealized Losses	$ 15
Number of securities with market fair value less than amortized cost | Security	1

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Loans (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Analysis of allowance for loan losses by portfolio segment [Roll Forward]
Balance at beginning of period		$ 22,570	$ 25,990
Additions (deductions) [Abstract]
Provision for loan losses		(530)	(659)
Recoveries credited to allowance		959	990
Loans charged against the allowance		(504)	(1,642)
Balance at end of period		22,495	24,679
Allowance for loan losses [Abstract]
Individually evaluated for impairment		10,850		$ 10,983
Collectively evaluated for impairment		11,645		11,587
Total ending allowance balance		22,495		22,570
Loans [Abstract]
Individually evaluated for impairment		88,154		89,131
Collectively evaluated for impairment		1,455,356		1,430,756
Total loans recorded investment		1,543,510		1,519,887
Accrued interest included in recorded investment		4,528		4,837
Total loans		1,538,982		1,515,050
Commercial [Member]
Analysis of allowance for loan losses by portfolio segment [Roll Forward]
Balance at beginning of period		5,670	5,445
Additions (deductions) [Abstract]
Provision for loan losses		(404)	328
Recoveries credited to allowance		356	433
Loans charged against the allowance		0	(290)
Balance at end of period		5,622	5,916
Allowance for loan losses [Abstract]
Individually evaluated for impairment		2,791		2,708
Collectively evaluated for impairment		2,831		2,962
Total ending allowance balance		5,622		5,670
Loans [Abstract]
Individually evaluated for impairment		17,585		16,868
Collectively evaluated for impairment		754,908		733,399
Total loans recorded investment		772,493		750,267
Accrued interest included in recorded investment		1,607		1,869
Total loans		770,886		748,398
Mortgage [Member]
Analysis of allowance for loan losses by portfolio segment [Roll Forward]
Balance at beginning of period		10,391	13,444
Additions (deductions) [Abstract]
Provision for loan losses		(279)	(733)
Recoveries credited to allowance		382	238
Loans charged against the allowance		(198)	(868)
Balance at end of period		10,296	12,081
Allowance for loan losses [Abstract]
Individually evaluated for impairment		7,651		7,818
Collectively evaluated for impairment		2,645		2,573
Total ending allowance balance		10,296		10,391
Loans [Abstract]
Individually evaluated for impairment		64,899		66,375
Collectively evaluated for impairment		441,354		436,349
Total loans recorded investment		506,253		502,724
Accrued interest included in recorded investment	[1]	2,249		2,270
Total loans		504,004		500,454
Installment [Member]
Analysis of allowance for loan losses by portfolio segment [Roll Forward]
Balance at beginning of period		1,181	1,814
Additions (deductions) [Abstract]
Provision for loan losses		65	(85)
Recoveries credited to allowance		221	319
Loans charged against the allowance		(306)	(484)
Balance at end of period		1,161	1,564
Allowance for loan losses [Abstract]
Individually evaluated for impairment		408		457
Collectively evaluated for impairment		753		724
Total ending allowance balance		1,161		1,181
Loans [Abstract]
Individually evaluated for impairment		5,670		5,888
Collectively evaluated for impairment		226,789		226,409
Total loans recorded investment		232,459		232,297
Accrued interest included in recorded investment	[1]	672		698
Total loans		231,787		231,599
Payment Plan Receivables [Member]
Analysis of allowance for loan losses by portfolio segment [Roll Forward]
Balance at beginning of period		56	64
Additions (deductions) [Abstract]
Provision for loan losses		(3)	(2)
Recoveries credited to allowance		0	0
Loans charged against the allowance		0	0
Balance at end of period		53	62
Allowance for loan losses [Abstract]
Individually evaluated for impairment		0		0
Collectively evaluated for impairment		53		56
Total ending allowance balance		53		56
Loans [Abstract]
Individually evaluated for impairment		0		0
Collectively evaluated for impairment		32,305		34,599
Total loans recorded investment		32,305		34,599
Accrued interest included in recorded investment		0		0
Total loans		32,305		34,599
Subjective Allocation [Member]
Analysis of allowance for loan losses by portfolio segment [Roll Forward]
Balance at beginning of period		5,272	5,223
Additions (deductions) [Abstract]
Provision for loan losses		91	(167)
Recoveries credited to allowance		0	0
Loans charged against the allowance		0	0
Balance at end of period		5,363	$ 5,056
Allowance for loan losses [Abstract]
Individually evaluated for impairment		0		0
Collectively evaluated for impairment		5,363		5,272
Total ending allowance balance		$ 5,363		$ 5,272

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

XML

Loans, Receivables Past Due (Details) - USD ($) $ in Thousands		Mar. 31, 2016	Dec. 31, 2015
Non performing loans [Abstract]
90+ and Still Accruing		$ 150	$ 118
Non-Accrual		10,425	10,607
Total Non-performing Loans		10,575	10,725
Accrued interest included in recorded investment		3	2
Aging analysis of loans by class [Abstract]
Total		15,895	15,637
Loans not Past Due		1,527,615	1,504,250
Total loans recorded investment		1,543,510	1,519,887
Accrued interest included in recorded investment		4,528	4,837
Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		6,184	5,881
Accrued interest included in recorded investment		56	53
Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		1,699	1,555
Accrued interest included in recorded investment		21	17
Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		8,012	8,201
Accrued interest included in recorded investment		3	2
Loans Past Due Total [Member]
Aging analysis of loans by class [Abstract]
Accrued interest included in recorded investment		80	72
Loans Not Past Due [Member]
Aging analysis of loans by class [Abstract]
Accrued interest included in recorded investment		4,448	4,765
Commercial [Member]
Aging analysis of loans by class [Abstract]
Total loans recorded investment		772,493	750,267
Accrued interest included in recorded investment		1,607	1,869
Commercial [Member] | Income Producing - Real Estate [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		1,117	1,027
Total Non-performing Loans		1,117	1,027
Aging analysis of loans by class [Abstract]
Total		1,113	1,059
Loans not Past Due		310,604	305,155
Total loans recorded investment		311,717	306,214
Commercial [Member] | Income Producing - Real Estate [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		337	203
Commercial [Member] | Income Producing - Real Estate [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		0	209
Commercial [Member] | Income Producing - Real Estate [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		776	647
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	49
Non-Accrual		168	401
Total Non-performing Loans		168	450
Aging analysis of loans by class [Abstract]
Total		168	252
Loans not Past Due		40,795	44,231
Total loans recorded investment		40,963	44,483
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	0
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		0	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		168	252
Commercial [Member] | Commercial and Industrial [Member]
Non performing loans [Abstract]
90+ and Still Accruing		147	69
Non-Accrual		2,304	2,028
Total Non-performing Loans		2,451	2,097
Aging analysis of loans by class [Abstract]
Total		775	952
Loans not Past Due		419,038	398,618
Total loans recorded investment		419,813	399,570
Commercial [Member] | Commercial and Industrial [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		354	785
Commercial [Member] | Commercial and Industrial [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		192	16
Commercial [Member] | Commercial and Industrial [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		229	151
Mortgage [Member]
Aging analysis of loans by class [Abstract]
Total loans recorded investment		506,253	502,724
Accrued interest included in recorded investment	[1]	2,249	2,270
Mortgage [Member] | 1-4 Family [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		4,795	4,744
Total Non-performing Loans		4,795	4,744
Aging analysis of loans by class [Abstract]
Total		7,962	7,327
Loans not Past Due		275,295	272,298
Total loans recorded investment		283,257	279,625
Accrued interest included in recorded investment	[1]	1,368	1,396
Mortgage [Member] | 1-4 Family [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		2,505	1,943
Mortgage [Member] | 1-4 Family [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		662	640
Mortgage [Member] | 1-4 Family [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		4,795	4,744
Mortgage [Member] | Resort Lending [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		805	1,094
Total Non-performing Loans		805	1,094
Aging analysis of loans by class [Abstract]
Total		1,482	1,401
Loans not Past Due		111,434	114,619
Total loans recorded investment		112,916	116,020
Accrued interest included in recorded investment	[1]	489	477
Mortgage [Member] | Resort Lending [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		677	307
Mortgage [Member] | Resort Lending [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		0	0
Mortgage [Member] | Resort Lending [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		805	1,094
Mortgage [Member] | Home Equity - 1st Lien [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		154	187
Total Non-performing Loans		154	187
Aging analysis of loans by class [Abstract]
Total		220	237
Loans not Past Due		26,024	22,327
Total loans recorded investment		26,244	22,564
Accrued interest included in recorded investment	[1]	93	87
Mortgage [Member] | Home Equity - 1st Lien [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		66	50
Mortgage [Member] | Home Equity - 1st Lien [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		0	0
Mortgage [Member] | Home Equity - 1st Lien [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		154	187
Mortgage [Member] | Home Equity - 2nd Lien [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		268	147
Total Non-performing Loans		268	147
Aging analysis of loans by class [Abstract]
Total		790	640
Loans not Past Due		51,620	50,618
Total loans recorded investment		52,410	51,258
Accrued interest included in recorded investment	[1]	195	196
Mortgage [Member] | Home Equity - 2nd Lien [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		235	439
Mortgage [Member] | Home Equity - 2nd Lien [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		287	54
Mortgage [Member] | Home Equity - 2nd Lien [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		268	147
Mortgage [Member] | Purchased Loans [Member]
Non performing loans [Abstract]
90+ and Still Accruing		3	0
Non-Accrual		2	2
Total Non-performing Loans		5	2
Aging analysis of loans by class [Abstract]
Total		18	12
Loans not Past Due		31,408	33,245
Total loans recorded investment		31,426	33,257
Accrued interest included in recorded investment	[1]	104	114
Mortgage [Member] | Purchased Loans [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		12	9
Mortgage [Member] | Purchased Loans [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		1	1
Mortgage [Member] | Purchased Loans [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		5	2
Installment [Member]
Aging analysis of loans by class [Abstract]
Total loans recorded investment		232,459	232,297
Accrued interest included in recorded investment	[1]	672	698
Installment [Member] | Home Equity - 1st Lien [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		79	106
Total Non-performing Loans		79	106
Aging analysis of loans by class [Abstract]
Total		784	528
Loans not Past Due		15,429	16,707
Total loans recorded investment		16,213	17,235
Accrued interest included in recorded investment	[1]	69	78
Installment [Member] | Home Equity - 1st Lien [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		529	315
Installment [Member] | Home Equity - 1st Lien [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		176	107
Installment [Member] | Home Equity - 1st Lien [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		79	106
Installment [Member] | Home Equity - 2nd Lien [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		344	443
Total Non-performing Loans		344	443
Aging analysis of loans by class [Abstract]
Total		692	823
Loans not Past Due		18,367	19,727
Total loans recorded investment		19,059	20,550
Accrued interest included in recorded investment	[1]	73	83
Installment [Member] | Home Equity - 2nd Lien [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		215	231
Installment [Member] | Home Equity - 2nd Lien [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		133	149
Installment [Member] | Home Equity - 2nd Lien [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		344	443
Installment [Member] | Loans Not Secured By Real Estate [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		384	421
Total Non-performing Loans		384	421
Aging analysis of loans by class [Abstract]
Total		878	1,071
Loans not Past Due		194,202	191,262
Total loans recorded investment		195,080	192,333
Accrued interest included in recorded investment	[1]	514	520
Installment [Member] | Loans Not Secured By Real Estate [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		386	567
Installment [Member] | Loans Not Secured By Real Estate [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		108	83
Installment [Member] | Loans Not Secured By Real Estate [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		384	421
Installment [Member] | Other [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		2	2
Total Non-performing Loans		2	2
Aging analysis of loans by class [Abstract]
Total		16	20
Loans not Past Due		2,091	2,159
Total loans recorded investment		2,107	2,179
Accrued interest included in recorded investment	[1]	16	17
Installment [Member] | Other [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		3	15
Installment [Member] | Other [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		11	3
Installment [Member] | Other [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		2	2
Payment Plan Receivables [Member]
Aging analysis of loans by class [Abstract]
Total loans recorded investment		32,305	34,599
Accrued interest included in recorded investment		0	0
Payment Plan Receivables [Member] | Other [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		1	1
Total Non-performing Loans		1	1
Aging analysis of loans by class [Abstract]
Total		158	114
Loans not Past Due		7,502	6,156
Total loans recorded investment		7,660	6,270
Payment Plan Receivables [Member] | Other [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		154	110
Payment Plan Receivables [Member] | Other [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		3	3
Payment Plan Receivables [Member] | Other [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		1	1
Payment Plan Receivables [Member] | Full Refund [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		2	2
Total Non-performing Loans		2	2
Aging analysis of loans by class [Abstract]
Total		475	556
Loans not Past Due		17,609	21,294
Total loans recorded investment		18,084	21,850
Payment Plan Receivables [Member] | Full Refund [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		408	492
Payment Plan Receivables [Member] | Full Refund [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		65	62
Payment Plan Receivables [Member] | Full Refund [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		2	2
Payment Plan Receivables [Member] | Partial Refund [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		0	2
Total Non-performing Loans		0	2
Aging analysis of loans by class [Abstract]
Total		364	645
Loans not Past Due		6,197	5,834
Total loans recorded investment		6,561	6,479
Payment Plan Receivables [Member] | Partial Refund [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		303	415
Payment Plan Receivables [Member] | Partial Refund [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		61	228
Payment Plan Receivables [Member] | Partial Refund [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		$ 0	$ 2

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

XML

Loans, Impaired Financing Receivables (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Impaired loans [Abstract]
TDR		$ 2,368		$ 2,518
Non - TDR		168		203
TDR allowances based on collateral		4,683		4,810
TDR - allowances based on present value cash flow		80,009		81,002
Non - TDR - allowance based on collateral		623		260
Non - TDR - allowance based on present value cash flow		0		0
Total impaired loans		87,851		88,793
Amount of allowance for loan losses allocated [Abstract]
TDR - allowance based on collateral		2,531		2,436
TDR - allowance based on present value cash flow		8,135		8,471
Non - TDR - allowance based on collateral		184		76
Non - TDR - allowance based on present value cash flow		0		0
Allowance for loan losses allocated		10,850		10,983
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	2,555		2,727
Unpaid Principal Balance, with no related allowance	[1]	3,586		3,744
No Related Allowance	[1]	0		0
Recorded Investment, with an allowance recorded	[1]	85,599		86,404
Unpaid Principal Balance, with an allowance recorded	[1]	88,955		90,182
Recorded Investment	[1]	88,154		89,131
Unpaid Principal Balance	[1]	92,541		93,926
Related Allowance	[1]	10,850		10,983
Accrued interest included in recorded investment	[1]	303		338
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance	[2]	2,643	$ 9,701
Interest Income Recognized, with No Related Allowance	[2]	32	124
Average Recorded Investment, with Related Allowance	[2]	86,004	101,674
Interest Income Recognized, with Related Allowance	[2]	903	1,074
Average Recorded Investment	[2]	88,647	111,375
Interest Income Recognized	[2]	935	1,198
Commercial [Member] | Income Producing - Real Estate [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	785		641
Unpaid Principal Balance, with no related allowance	[1]	1,030		851
No Related Allowance	[1]	0		0
Recorded Investment, with an allowance recorded	[1]	8,234		8,377
Unpaid Principal Balance, with an allowance recorded	[1]	9,061		9,232
Recorded Investment	[1]	9,019		9,018
Unpaid Principal Balance	[1]	10,091		10,083
Related Allowance	[1]	548		516
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance	[2]	713	5,848
Interest Income Recognized, with No Related Allowance	[2]	2	53
Average Recorded Investment, with Related Allowance	[2]	8,306	12,849
Interest Income Recognized, with Related Allowance	[2]	107	157
Average Recorded Investment	[2]	9,019	18,697
Interest Income Recognized	[2]	109	210
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	537		818
Unpaid Principal Balance, with no related allowance	[1]	1,112		1,393
No Related Allowance	[1]	0		0
Recorded Investment, with an allowance recorded	[1]	1,484		1,690
Unpaid Principal Balance, with an allowance recorded	[1]	1,484		1,778
Recorded Investment	[1]	2,021		2,508
Unpaid Principal Balance	[1]	2,596		3,171
Related Allowance	[1]	95		296
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance	[2]	678	1,041
Interest Income Recognized, with No Related Allowance	[2]	7	34
Average Recorded Investment, with Related Allowance	[2]	1,587	2,709
Interest Income Recognized, with Related Allowance	[2]	13	14
Average Recorded Investment	[2]	2,265	3,750
Interest Income Recognized	[2]	20	48
Commercial [Member] | Commercial and Industrial [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	1,218		1,245
Unpaid Principal Balance, with no related allowance	[1]	1,216		1,241
No Related Allowance	[1]	0		0
Recorded Investment, with an allowance recorded	[1]	5,327		4,097
Unpaid Principal Balance, with an allowance recorded	[1]	5,592		4,439
Recorded Investment	[1]	6,545		5,342
Unpaid Principal Balance	[1]	6,808		5,680
Related Allowance	[1]	2,148		1,896
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance	[2]	1,232	2,768
Interest Income Recognized, with No Related Allowance	[2]	21	37
Average Recorded Investment, with Related Allowance	[2]	4,712	8,177
Interest Income Recognized, with Related Allowance	[2]	23	66
Average Recorded Investment	[2]	5,944	10,945
Interest Income Recognized	[2]	44	103
Mortgage [Member] | 1-4 Family [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	0		23
Unpaid Principal Balance, with no related allowance	[1]	140		183
No Related Allowance	[1]	0		0
Recorded Investment, with an allowance recorded	[1]	46,608		47,792
Unpaid Principal Balance, with an allowance recorded	[1]	48,532		49,808
Recorded Investment	[1]	46,608		47,815
Unpaid Principal Balance	[1]	48,672		49,991
Related Allowance	[1]	4,976		5,132
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance	[2]	12	13
Interest Income Recognized, with No Related Allowance	[2]	1	0
Average Recorded Investment, with Related Allowance	[2]	47,200	52,451
Interest Income Recognized, with Related Allowance	[2]	502	551
Average Recorded Investment	[2]	47,212	52,464
Interest Income Recognized	[2]	503	551
Mortgage [Member] | Resort Lending [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	0		0
Unpaid Principal Balance, with no related allowance	[1]	0		0
No Related Allowance	[1]	0		0
Recorded Investment, with an allowance recorded	[1]	17,929		18,148
Unpaid Principal Balance, with an allowance recorded	[1]	17,963		18,319
Recorded Investment	[1]	17,929		18,148
Unpaid Principal Balance	[1]	17,963		18,319
Related Allowance	[1]	2,654		2,662
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance	[2]	0	31
Interest Income Recognized, with No Related Allowance	[2]	0	0
Average Recorded Investment, with Related Allowance	[2]	18,039	18,632
Interest Income Recognized, with Related Allowance	[2]	160	171
Average Recorded Investment	[2]	18,039	18,663
Interest Income Recognized	[2]	160	171
Mortgage [Member] | Home Equity - 1st Lien [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	0		0
Unpaid Principal Balance, with no related allowance	[1]	0		0
No Related Allowance	[1]	0		0
Recorded Investment, with an allowance recorded	[1]	243		168
Unpaid Principal Balance, with an allowance recorded	[1]	247		172
Recorded Investment	[1]	243		168
Unpaid Principal Balance	[1]	247		172
Related Allowance	[1]	12		9
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance	[2]	0	0
Interest Income Recognized, with No Related Allowance	[2]	0	0
Average Recorded Investment, with Related Allowance	[2]	206	162
Interest Income Recognized, with Related Allowance	[2]	2	2
Average Recorded Investment	[2]	206	162
Interest Income Recognized	[2]	2	2
Mortgage [Member] | Home Equity - 2nd Lien [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	0		0
Unpaid Principal Balance, with no related allowance	[1]	0		0
No Related Allowance	[1]	0		0
Recorded Investment, with an allowance recorded	[1]	119		244
Unpaid Principal Balance, with an allowance recorded	[1]	201		325
Recorded Investment	[1]	119		244
Unpaid Principal Balance	[1]	201		325
Related Allowance	[1]	9		15
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance	[2]	0	0
Interest Income Recognized, with No Related Allowance	[2]	0	0
Average Recorded Investment, with Related Allowance	[2]	182	123
Interest Income Recognized, with Related Allowance	[2]	1	2
Average Recorded Investment	[2]	182	123
Interest Income Recognized	[2]	1	2
Installment [Member] | Home Equity - 1st Lien [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	1		0
Unpaid Principal Balance, with no related allowance	[1]	75		76
No Related Allowance	[1]	0		0
Recorded Investment, with an allowance recorded	[1]	2,287		2,364
Unpaid Principal Balance, with an allowance recorded	[1]	2,421		2,492
Recorded Investment	[1]	2,288		2,364
Unpaid Principal Balance	[1]	2,496		2,568
Related Allowance	[1]	130		143
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance	[2]	1	0
Interest Income Recognized, with No Related Allowance	[2]	1	0
Average Recorded Investment, with Related Allowance	[2]	2,326	2,691
Interest Income Recognized, with Related Allowance	[2]	42	50
Average Recorded Investment	[2]	2,327	2,691
Interest Income Recognized	[2]	43	50
Installment [Member] | Home Equity - 2nd Lien [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	14		0
Unpaid Principal Balance, with no related allowance	[1]	13		0
No Related Allowance	[1]	0		0
Recorded Investment, with an allowance recorded	[1]	2,793		2,929
Unpaid Principal Balance, with an allowance recorded	[1]	2,807		2,951
Recorded Investment	[1]	2,807		2,929
Unpaid Principal Balance	[1]	2,820		2,951
Related Allowance	[1]	239		271
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance	[2]	7	0
Interest Income Recognized, with No Related Allowance	[2]	0	0
Average Recorded Investment, with Related Allowance	[2]	2,861	3,174
Interest Income Recognized, with Related Allowance	[2]	44	51
Average Recorded Investment	[2]	2,868	3,174
Interest Income Recognized	[2]	44	51
Installment [Member] | Loans Not Secured By Real Estate [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	0		0
Unpaid Principal Balance, with no related allowance	[1]	0		0
No Related Allowance	[1]	0		0
Recorded Investment, with an allowance recorded	[1]	569		587
Unpaid Principal Balance, with an allowance recorded	[1]	641		658
Recorded Investment	[1]	569		587
Unpaid Principal Balance	[1]	641		658
Related Allowance	[1]	38		42
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance	[2]	0	0
Interest Income Recognized, with No Related Allowance	[2]	0	0
Average Recorded Investment, with Related Allowance	[2]	578	694
Interest Income Recognized, with Related Allowance	[2]	9	10
Average Recorded Investment	[2]	578	694
Interest Income Recognized	[2]	9	10
Installment [Member] | Other [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	0		0
Unpaid Principal Balance, with no related allowance	[1]	0		0
No Related Allowance	[1]	0		0
Recorded Investment, with an allowance recorded	[1]	6		8
Unpaid Principal Balance, with an allowance recorded	[1]	6		8
Recorded Investment	[1]	6		8
Unpaid Principal Balance	[1]	6		8
Related Allowance	[1]	1		$ 1
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance	[2]	0	0
Interest Income Recognized, with No Related Allowance	[2]	0	0
Average Recorded Investment, with Related Allowance	[2]	7	12
Interest Income Recognized, with Related Allowance	[2]	0	0
Average Recorded Investment	[2]	7	12
Interest Income Recognized	[2]	$ 0	$ 0

[1] (1) There were no impaired payment plan receivables or purchased mortgage loans at March 31, 2016 or December 31, 2015.

[2] (1) There were no impaired payment plan receivables or purchased mortgage loans during the three month periods ended March 31, 2016 and 2015, respectively.

XML

Loans, Troubled Debt Restructurings (Details) $ in Thousands		3 Months Ended
		Mar. 31, 2016 USD ($) Contract	Mar. 31, 2015 USD ($) Contract	Dec. 31, 2015 USD ($)
Financing Receivable, Modifications [Line Items]
Troubled debt restructuring		$ 87,060		$ 88,330
Troubled debt restructuring, specific reserve		$ 10,700		10,900
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		13	12
Pre-modification recorded balance		$ 2,259	$ 1,564
Post-modification recorded balance		2,303	1,343
Increase (decrease) in allowance for loan losses		60	30
Charge offs due to troubled debt restructurings		$ 0	$ 0
TDR that subsequently defaulted [Abstract]
Number of contracts | Contract		0	1
Recorded Balance		$ 0	$ 91
Past due period for modified loans		90 days
Charge-offs on TDRs that subsequently defaulted			$ 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		$ 16,748		16,359
Retail [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructuring		$ 70,312		71,971
Income Producing - Real Estate [Member] | Commercial [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		2	1
Pre-modification recorded balance		$ 110	$ 156
Post-modification recorded balance		$ 110	$ 164
TDR that subsequently defaulted [Abstract]
Number of contracts | Contract		0	0
Recorded Balance		$ 0	$ 0
Land, Land Development and Construction - Real Estate [Member] | Commercial [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		0	0
Pre-modification recorded balance		$ 0	$ 0
Post-modification recorded balance		$ 0	$ 0
TDR that subsequently defaulted [Abstract]
Number of contracts | Contract		0	0
Recorded Balance		$ 0	$ 0
Commercial and Industrial [Member] | Commercial [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		4	2
Pre-modification recorded balance		$ 1,758	$ 236
Post-modification recorded balance		$ 1,758	$ 234
TDR that subsequently defaulted [Abstract]
Number of contracts | Contract		0	1
Recorded Balance		$ 0	$ 91
1-4 Family [Member] | Mortgage [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		2	5
Pre-modification recorded balance		$ 83	$ 1,005
Post-modification recorded balance		$ 153	$ 805
TDR that subsequently defaulted [Abstract]
Number of contracts | Contract		0	0
Recorded Balance		$ 0	$ 0
Resort Lending [Member] | Mortgage [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		1	0
Pre-modification recorded balance		$ 116	$ 0
Post-modification recorded balance		$ 117	$ 0
TDR that subsequently defaulted [Abstract]
Number of contracts | Contract		0	0
Recorded Balance		$ 0	$ 0
Home Equity - 1st Lien [Member] | Mortgage [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		1	0
Pre-modification recorded balance		$ 107	$ 0
Post-modification recorded balance		$ 78	$ 0
TDR that subsequently defaulted [Abstract]
Number of contracts | Contract		0	0
Recorded Balance		$ 0	$ 0
Home Equity - 1st Lien [Member] | Installment [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		1	4
Pre-modification recorded balance		$ 30	$ 167
Post-modification recorded balance		$ 31	$ 140
TDR that subsequently defaulted [Abstract]
Number of contracts | Contract		0	0
Recorded Balance		$ 0	$ 0
Home Equity - 2nd Lien [Member] | Mortgage [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		0	0
Pre-modification recorded balance		$ 0	$ 0
Post-modification recorded balance		$ 0	$ 0
TDR that subsequently defaulted [Abstract]
Number of contracts | Contract		0	0
Recorded Balance		$ 0	$ 0
Home Equity - 2nd Lien [Member] | Installment [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		2	0
Pre-modification recorded balance		$ 55	$ 0
Post-modification recorded balance		$ 56	$ 0
TDR that subsequently defaulted [Abstract]
Number of contracts | Contract		0	0
Recorded Balance		$ 0	$ 0
Loans Not Secured By Real Estate [Member] | Installment [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		0	0
Pre-modification recorded balance		$ 0	$ 0
Post-modification recorded balance		$ 0	$ 0
TDR that subsequently defaulted [Abstract]
Number of contracts | Contract		0	0
Recorded Balance		$ 0	$ 0
Other [Member] | Installment [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		0	0
Pre-modification recorded balance		$ 0	$ 0
Post-modification recorded balance		$ 0	$ 0
TDR that subsequently defaulted [Abstract]
Number of contracts | Contract		0	0
Recorded Balance		$ 0	$ 0
Performing TDRs [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructuring		80,569		81,512
Performing TDRs [Member] | Commercial [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructuring		13,950		13,318
Performing TDRs [Member] | Retail [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructuring		66,619		68,194
Non-performing TDRs [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructuring	[1]	6,491		6,818
Non-performing TDRs [Member] | Commercial [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructuring	[1]	2,798		3,041
Non-performing TDRs [Member] | Retail [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructuring	[1],[2]	$ 3,693		$ 3,777

[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

Loans, Loan Ratings by Loan Class, Commercial Segment (Details) - USD ($) $ in Thousands		Mar. 31, 2016	Dec. 31, 2015
Loan ratings/credit scores by loan class [Abstract]
Commercial		$ 770,886	$ 748,398
Accrued interest included in total		$ 4,528	4,837
Credit ratings of insurer or risk retention group counterparties [Abstract]
Subsidiary's outstanding payment plan insured by third party		56.00%
Subsidiary's outstanding payment plan 2, insured by third party		20.30%
Payment Plan Receivables, Full Refund		$ 18,084	21,850
Payment Plan Receivables, Partial Refund		6,561	6,479
Payment Plan Receivables, Other		7,660	6,270
Total		32,305	34,599
Other Real Estate and Foreclosed Assets [Abstract]
Foreclosed residential real estate properties		2,500	2,800
Retail mortgage loans in process of foreclosure		1,400	1,100
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		11	6
Payment Plan Receivables, Other		0	0
Total		11	6
AM Best A Rating [Member]
Credit ratings of insurer or risk retention group counterparties [Abstract]
Payment Plan Receivables, Full Refund		1,845	2,712
Payment Plan Receivables, Partial Refund		5,285	5,203
Payment Plan Receivables, Other		0	0
Total		7,130	7,915
AM Best Rating, A- Rating [Member]
Credit ratings of insurer or risk retention group counterparties [Abstract]
Payment Plan Receivables, Full Refund		2,576	3,418
Payment Plan Receivables, Partial Refund		1,208	1,177
Payment Plan Receivables, Other		7,658	6,265
Total		11,442	10,860
Not Rated [Member]
Credit ratings of insurer or risk retention group counterparties [Abstract]
Payment Plan Receivables, Full Refund		13,663	15,720
Payment Plan Receivables, Partial Refund		57	93
Payment Plan Receivables, Other		2	5
Total		13,722	15,818
Commercial [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		772,493	750,267
Accrued interest included in total		1,607	1,869
Commercial [Member] | Non-Watch 1-6 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		733,522	709,099
Accrued interest included in total		1,507	1,729
Commercial [Member] | Watch 7-8 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		28,729	29,363
Accrued interest included in total		82	108
Commercial [Member] | Substandard Accrual 9 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		6,653	8,349
Accrued interest included in total		18	32
Commercial [Member] | Non Accrual 10-11 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		3,589	3,456
Accrued interest included in total		0	0
Commercial [Member] | Income Producing - Real Estate [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		311,717	306,214
Commercial [Member] | Income Producing - Real Estate [Member] | Non-Watch 1-6 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		303,195	296,898
Commercial [Member] | Income Producing - Real Estate [Member] | Watch 7-8 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		6,367	6,866
Commercial [Member] | Income Producing - Real Estate [Member] | Substandard Accrual 9 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		1,038	1,423
Commercial [Member] | Income Producing - Real Estate [Member] | Non Accrual 10-11 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		1,117	1,027
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		40,963	44,483
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member] | Non-Watch 1-6 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		39,120	40,844
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member] | Watch 7-8 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		1,675	2,995
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member] | Substandard Accrual 9 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		0	243
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member] | Non Accrual 10-11 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		168	401
Commercial [Member] | Commercial and Industrial [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		419,813	399,570
Commercial [Member] | Commercial and Industrial [Member] | Non-Watch 1-6 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		391,207	371,357
Commercial [Member] | Commercial and Industrial [Member] | Watch 7-8 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		20,687	19,502
Commercial [Member] | Commercial and Industrial [Member] | Substandard Accrual 9 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		5,615	6,683
Commercial [Member] | Commercial and Industrial [Member] | Non Accrual 10-11 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		2,304	2,028
Mortgage [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	56,964	57,083
750-799	[1]	173,320	167,515
700-749	[1]	109,540	110,802
650-699	[1]	79,460	80,140
600-649	[1]	38,063	38,108
550-599	[1]	22,089	22,729
500-549	[1]	13,155	13,528
Under 500	[1]	5,593	5,771
Unknown	[1]	8,069	7,048
Total	[1]	506,253	502,724
Accrued interest included in total	[1]	2,249	2,270
Mortgage [Member] | 1-4 Family [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	29,357	28,760
750-799	[1]	84,315	78,802
700-749	[1]	54,911	56,519
650-699	[1]	51,725	51,813
600-649	[1]	27,962	27,966
550-599	[1]	16,128	16,714
500-549	[1]	10,348	10,610
Under 500	[1]	4,570	4,708
Unknown	[1]	3,941	3,733
Total	[1]	283,257	279,625
Accrued interest included in total	[1]	1,368	1,396
Mortgage [Member] | Resort Lending [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	13,694	13,943
750-799	[1]	39,748	40,888
700-749	[1]	31,331	31,980
650-699	[1]	16,538	17,433
600-649	[1]	4,934	4,991
550-599	[1]	3,052	3,070
500-549	[1]	985	1,051
Under 500	[1]	548	554
Unknown	[1]	2,086	2,110
Total	[1]	112,916	116,020
Accrued interest included in total	[1]	489	477
Mortgage [Member] | Home Equity - 1st Lien [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	4,206	4,374
750-799	[1]	10,292	7,137
700-749	[1]	4,601	4,341
650-699	[1]	3,696	3,203
600-649	[1]	1,447	1,467
550-599	[1]	1,022	1,027
500-549	[1]	561	572
Under 500	[1]	223	244
Unknown	[1]	196	199
Total	[1]	26,244	22,564
Accrued interest included in total	[1]	93	87
Mortgage [Member] | Home Equity - 2nd Lien [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	7,409	7,696
750-799	[1]	18,190	17,405
700-749	[1]	11,796	11,022
650-699	[1]	7,501	7,691
600-649	[1]	3,720	3,684
550-599	[1]	1,887	1,918
500-549	[1]	1,261	1,295
Under 500	[1]	252	265
Unknown	[1]	394	282
Total	[1]	52,410	51,258
Accrued interest included in total	[1]	195	196
Mortgage [Member] | Purchased Loans [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	2,298	2,310
750-799	[1]	20,775	23,283
700-749	[1]	6,901	6,940
650-699	[1]	0	0
600-649	[1]	0	0
550-599	[1]	0	0
500-549	[1]	0	0
Under 500	[1]	0	0
Unknown	[1]	1,452	724
Total	[1]	31,426	33,257
Accrued interest included in total	[1]	104	114
Installment [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	46,737	47,886
750-799	[1]	99,666	97,379
700-749	[1]	42,227	41,889
650-699	[1]	23,922	24,645
600-649	[1]	8,965	9,505
550-599	[1]	4,967	5,252
500-549	[1]	2,927	3,142
Under 500	[1]	811	1,001
Unknown	[1]	2,237	1,598
Total	[1]	232,459	232,297
Accrued interest included in total	[1]	672	698
Installment [Member] | Home Equity - 1st Lien [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	1,638	1,792
750-799	[1]	3,850	4,117
700-749	[1]	2,375	2,507
650-699	[1]	3,308	3,508
600-649	[1]	2,032	2,173
550-599	[1]	1,741	1,800
500-549	[1]	1,000	1,056
Under 500	[1]	211	223
Unknown	[1]	58	59
Total	[1]	16,213	17,235
Accrued interest included in total	[1]	69	78
Installment [Member] | Home Equity - 2nd Lien [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	1,678	1,782
750-799	[1]	5,552	5,931
700-749	[1]	3,591	3,899
650-699	[1]	3,761	4,182
600-649	[1]	2,068	2,153
550-599	[1]	1,296	1,346
500-549	[1]	804	855
Under 500	[1]	280	370
Unknown	[1]	29	32
Total	[1]	19,059	20,550
Accrued interest included in total	[1]	73	83
Installment [Member] | Loans Not Secured By Real Estate [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	43,330	44,254
750-799	[1]	89,742	86,800
700-749	[1]	35,628	34,789
650-699	[1]	16,394	16,456
600-649	[1]	4,663	4,979
550-599	[1]	1,825	1,997
500-549	[1]	1,068	1,170
Under 500	[1]	297	385
Unknown	[1]	2,133	1,503
Total	[1]	195,080	192,333
Accrued interest included in total	[1]	514	520
Installment [Member] | Other [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	91	58
750-799	[1]	522	531
700-749	[1]	633	694
650-699	[1]	459	499
600-649	[1]	202	200
550-599	[1]	105	109
500-549	[1]	55	61
Under 500	[1]	23	23
Unknown	[1]	17	4
Total	[1]	2,107	2,179
Accrued interest included in total	[1]	$ 16	$ 17

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

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Segments (Details) $ in Thousands		3 Months Ended
		Mar. 31, 2016 USD ($) Segment	Mar. 31, 2015 USD ($)	Dec. 31, 2015 USD ($)
Segments [Abstract]
Number of reportable segments | Segment		2
Selected financial information for reportable segments [Abstract]
Total assets		$ 2,487,120		$ 2,409,066
Interest income		21,354	$ 19,552
Net interest income		19,763	18,091
Provision for loan losses		(530)	(659)
Income (loss) before income tax		6,057	5,561
Net income (loss)		4,100	3,781
Other [Member]
Selected financial information for reportable segments [Abstract]
Total assets	[1]	275,315		286,936
Interest income	[1]	5	20
Net interest income	[1]	(271)	(227)
Provision for loan losses	[1]	0	0
Income (loss) before income tax	[1]	(423)	(383)
Net income (loss)	[1]	(267)	(244)
Operating Segments [Member] | IB [Member]
Selected financial information for reportable segments [Abstract]
Total assets		2,425,152		2,340,566
Interest income		20,243	18,221
Net interest income		19,102	17,183
Provision for loan losses		(526)	(656)
Income (loss) before income tax		6,862	6,259
Net income (loss)		4,619	4,233
Operating Segments [Member] | Mepco [Member]
Selected financial information for reportable segments [Abstract]
Total assets		50,515		57,208
Interest income		1,110	1,331
Net interest income		932	1,135
Provision for loan losses		(4)	(3)
Income (loss) before income tax		(359)	(291)
Net income (loss)		(237)	(192)
Elimination [Member]
Selected financial information for reportable segments [Abstract]
Total assets	[2]	(263,862)		$ (275,644)
Interest income	[2]	(4)	(20)
Net interest income	[2]	0	0
Provision for loan losses	[2]	0	0
Income (loss) before income tax	[2]	(23)	(24)
Net income (loss)	[2]	$ (15)	$ (16)

[1] Includes amounts relating to our parent company.

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

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Shareholders' Equity and Earnings Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands			3 Months Ended
		Nov. 15, 2011	Mar. 31, 2016	Mar. 31, 2015	Apr. 26, 2016	Jan. 21, 2016
Class of Stock [Line Items]
Stock repurchased			$ 15,510	$ 902
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			$ 4,100	$ 3,781
Weighted average shares outstanding (in shares)	[1]		21,751,000	22,997,000
Stock units for deferred compensation plan for non-employee directors (in shares)			113,000	111,000
Effect of stock options (in shares)			112,000	121,000
Restricted stock units (in shares)			86,000	309,000
Weighted average shares outstanding for calculation of diluted earnings per share (in shares)			22,062,000	23,538,000
Net income per common share [Abstract]
Basic (in dollars per share)	[1]		$ 0.19	$ 0.16
Diluted (in dollars per share)			$ 0.19	$ 0.16
Common Stock [Member]
Class of Stock [Line Items]
Stock repurchase program percentage of shares authorized to be repurchased						5.00%
Stock repurchased (in shares)			1,059,865
Stock repurchased			$ 15,500
Stock repurchase program, remaining shares to be repurchased (in shares)			52,703
Common Stock [Member] | Subsequent Event [Member]
Class of Stock [Line Items]
Stock repurchase program, additional authorized amount					$ 5,000
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

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

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Derivative Financial Instruments (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Derivative financial instrument according to type of hedge[ Abstract]
Notional Amount	$ 165,453	$ 126,271
Average Maturity	5 years 2 months 12 days	3 years 8 months 12 days
Fair Value	$ 632	$ 619
Fair value of derivative instruments, balance sheet location [Abstract]
Asset Derivatives	2,584	1,238
Liability Derivatives	1,952	619
No Hedge Designation [Member] | Rate-Lock Mortgage Loan Commitments [Member]
Derivative financial instrument according to type of hedge[ Abstract]
Notional Amount	$ 23,854	$ 20,581
Average Maturity	1 month 6 days	1 month 6 days
Fair Value	$ 769	$ 550
No Hedge Designation [Member] | Mandatory Commitments to Sell Mortgage Loans [Member]
Derivative financial instrument according to type of hedge[ Abstract]
Notional Amount	$ 50,127	$ 46,320
Average Maturity	1 month 6 days	1 month 6 days
Fair Value	$ (137)	$ 69
No Hedge Designation [Member] | Purchased Options [Member]
Derivative financial instrument according to type of hedge[ Abstract]
Notional Amount	$ 2,803	$ 2,098
Average Maturity	5 years 3 months 18 days	5 years 8 months 12 days
Fair Value	$ 200	$ 122
No Hedge Designation [Member] | Written Options [Member]
Derivative financial instrument according to type of hedge[ Abstract]
Notional Amount	$ 2,803	$ 2,098
Average Maturity	5 years 3 months 18 days	5 years 8 months 12 days
Fair Value	$ (200)	$ (122)
Fixed Income Interest Rate [Member] | No Hedge Designation [Member] | Interest Rate Swap [Member]
Derivative financial instrument according to type of hedge[ Abstract]
Notional Amount	$ 42,933	$ 27,587
Average Maturity	9 years 6 months	8 years
Fair Value	$ (1,615)	$ (497)
Variable Income Interest Rate [Member] | No Hedge Designation [Member] | Interest Rate Swap [Member]
Derivative financial instrument according to type of hedge[ Abstract]
Notional Amount	$ 42,933	$ 27,587
Average Maturity	9 years 6 months	8 years
Fair Value	$ 1,615	$ 497
Other Assets [Member] | No Hedge Designation [Member] | Rate-Lock Mortgage Loan Commitments [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Asset Derivatives	769	550
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	69
Other Assets [Member] | No Hedge Designation [Member] | Purchased Options [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Asset Derivatives	200	122
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	1,615	497
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	137	0
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	200	122
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	1,615	497
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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Derivative Financial Instruments, Effect on Statement of Operations (Details) - No Hedge Designation [Member] - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]
Gain (Loss) Recognized in Income	$ 13	$ 349
Rate-Lock Mortgage Loan Commitments [Member] | Net Gains on Mortgage Loans [Member]
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]
Gain (Loss) Recognized in Income	219	388
Mandatory Commitments to Sell Mortgage Loans [Member] | Net Gains on Mortgage Loans [Member]
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]
Gain (Loss) Recognized in Income	(206)	(39)
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	78	0
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	(78)	0
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	(1,118)	(261)
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	$ 1,118	$ 261

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Intangible Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Amortized intangible assets - core deposits [Abstract]
Gross Carrying Amount	$ 6,118	$ 6,118
Accumulated Amortization	3,925	$ 3,838
Summary of estimated intangible amortization [Abstract]
Nine months ending December 31, 2016	260
2017	346
2018	346
2019	346
2020	346
2021 and thereafter	549
Total	$ 2,193

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Share Based Compensation (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Share based compensation arrangements [Line Items]
Number of additional shares approved for grant (in shares)	200,000
Total compensation cost not yet recognized	$ 2,400
Total compensation cost not yet recognized, period for recognition	2 years 1 month 6 days
Information regarding options exercised [Abstract]
Intrinsic value	$ 117	$ 56
Cash proceeds received	32	15
Tax benefit realized	41	20
Long-term Incentive Plan [Member]
Share based compensation arrangements [Line Items]
Total compensation expense recognized	400	400
Tax benefit relating to compensation expense recognized	$ 100	$ 100
Stock Options [Member]
Outstanding stock option grants and transaction [Roll Forward]
Outstanding, beginning balance (in shares)	235,596
Granted (in shares)	0
Exercised (in shares)	(10,216)
Forfeited (in shares)	(498)
Expired (in shares)	0
Outstanding, ending balance (in shares)	224,882
Vested and expected to vest, period end (in shares)	224,631
Exercisable, period end (in shares)	202,938
Weighted Average Exercise Price [Roll Forward]
Outstanding, beginning balance (in dollars per share)	$ 4.94
Exercised (in dollars per share)	3.18
Forfeited (in dollars per share)	6.42
Outstanding, ending balance (in dollars per share)	5.01
Vested and expected to vest, period end (in dollars per share)	5.01
Exercisable, period end (in dollars per share)	$ 4.86
Weighted-Average Remaining Contractual Term [Abstract]
Outstanding, Weighted Average Remaining Contractual Term	5 years 10 months 2 days
Vested and Expected to Vest, Weighted-Average Remaining Contractual Term	5 years 10 months 2 days
Exercisable, Weighted Average Remaining Contractual Term	5 years 8 months 8 days
Aggregate intrinsic value [Abstract]
Outstanding, Aggregate Intrinsic Value	$ 2,180
Vested and Expected to Vest, Outstanding, Aggregate Intrinsic Value	2,178
Exercisable, Aggregate Intrinsic Value	$ 2,002
Non-Vested Restricted Stock, Restricted Stock Units and PSU's [Member]
Number of Shares [Roll Forward]
Outstanding, beginning balance (in shares)	261,981
Granted (in shares)	96,191
Vested (in shares)	(21,225)
Forfeited (in shares)	(1,398)
Outstanding, ending balance (in shares)	335,549
Weighted Average Grant Date Fair Value [Roll Forward]
Outstanding, beginning balance (in dollars per share)	$ 11.29
Granted (in dollars per share)	14.39
Vested (in dollars per share)	12.78
Forfeited (in dollars per share)	12.70
Outstanding, ending balance (in dollars per share)	$ 12.08
Director [Member]
Share based compensation arrangements [Line Items]
Shares issues as retainer fees (in shares)	2,000	1,000
Non-Employee Directors [Member]
Share based compensation arrangements [Line Items]
Number of additional shares approved for grant (in shares)	200,000
Total compensation expense recognized	$ 30	$ 20
Tax benefit relating to compensation expense recognized	$ 10	$ 10
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

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Income Tax (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Income Tax [Abstract]
Income tax expense	$ 1,957	$ 1,780
Gross unrecognized tax benefits	1,000		$ 1,000
Valuation Allowance [Line Items]
Valuation allowance	1,100		1,100
Mepco [Member]
Valuation Allowance [Line Items]
Valuation allowance against deferred tax assets attributable to Mepco	$ 1,100		$ 1,100

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Regulatory Matters (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015	Dec. 31, 2014
Regulatory Matters [Abstract]
Undivided profits	$ (5,700)
Request for approval to transfer capital from bank to parent entity	18,000	$ 18,500
Components of regulatory capital [Abstract]
Total shareholders' equity	239,545	$ 253,625	$ 251,092	$ 250,371
Add (deduct) [Abstract]
Accumulated other comprehensive (income) loss for regulatory purposes	(4,799)		(6,036)
Intangible assets	(2,193)		(2,280)
Consolidated [Member]
Total capital to risk-weighted assets [Abstract]
Total risk-based capital	268,031		278,170
Minimum for Adequately Capitalized Institutions, Amount	$ 135,651		$ 133,668
Actual, Ratio	15.81%		16.65%
Minimum for Adequately Capitalized Institutions, Ratio	8.00%		8.00%
Tier 1 capital to risk-weighted assets [Abstract]
Actual, Amount	$ 246,688		$ 257,050
Minimum for Adequately Capitalized Institutions, Amount	$ 101,738		$ 100,251
Actual, Ratio	14.55%		15.38%
Minimum for Adequately Capitalized Institutions, Ratio	6.00%		6.00%
Common equity tier 1 capital to risk-weighted assets [Abstract]
Actual, Amount	$ 222,205		$ 239,271
Minimum for Adequately Capitalized Institutions, Amount	$ 76,304		$ 75,188
Actual, Ratio	13.10%		14.32%
Minimum for Adequately Capitalized Institutions, Ratio	4.50%		4.50%
Tier 1 capital to average assets [Abstract]
Tier 1 capital	$ 246,688		$ 257,050
Minimum for Adequately Capitalized Institutions, Amount	$ 95,713		$ 94,217
Actual, Ratio	10.31%		10.91%
Minimum for Adequately Capitalized Institutions, Ratio	4.00%		4.00%
Components of regulatory capital [Abstract]
Total shareholders' equity	$ 239,545		$ 251,092
Add (deduct) [Abstract]
Accumulated other comprehensive (income) loss for regulatory purposes	(999)		238
Intangible assets	(1,316)		(912)
Disallowed deferred tax assets	(15,025)		(11,147)
Common equity tier 1 capital	222,205		239,271
Qualifying trust preferred securities	34,500		34,500
Disallowed deferred tax assets	(10,017)		(16,721)
Tier 1 capital	246,688		257,050
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets	21,343		21,120
Total risk-based capital	268,031		278,170
Independent Bank [Member]
Total capital to risk-weighted assets [Abstract]
Total risk-based capital	251,157		261,894
Minimum for Adequately Capitalized Institutions, Amount	135,503		133,514
Minimum for Well Capitalized Institutions, Amount	$ 169,379		$ 166,893
Actual, Ratio	14.83%		15.69%
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	$ 229,884		$ 240,867
Minimum for Adequately Capitalized Institutions, Amount	101,628		100,136
Minimum for Well-Capitalized Institutions, Amount	$ 135,503		$ 133,514
Actual, Ratio	13.57%		14.43%
Minimum for Adequately Capitalized Institutions, Ratio	6.00%		6.00%
Minimum for Well Capitalized Institutions, Ratio	8.00%		8.00%
Common equity tier 1 capital to risk-weighted assets [Abstract]
Actual, Amount	$ 229,884		$ 240,867
Minimum for Adequately Capitalized Institutions, Amount	76,221		75,102
Minimum for Well-Capitalized Institutions, Amount	$ 110,097		$ 108,480
Actual, Ratio	13.57%		14.43%
Minimum for Adequately Capitalized Institutions, Ratio	4.50%		4.50%
Minimum for Well Capitalized Institutions, Ratio	6.50%		6.50%
Tier 1 capital to average assets [Abstract]
Tier 1 capital	$ 229,884		$ 240,867
Minimum for Adequately Capitalized Institutions, Amount	95,647		94,145
Minimum for Well-Capitalized Institutions, Amount	$ 119,559		$ 117,682
Actual, Ratio	9.61%		10.23%
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	$ 247,567		$ 259,947
Add (deduct) [Abstract]
Accumulated other comprehensive (income) loss for regulatory purposes	(999)		238
Intangible assets	(1,316)		(912)
Disallowed deferred tax assets	(15,368)		(18,406)
Common equity tier 1 capital	229,884		240,867
Qualifying trust preferred securities	0		0
Disallowed deferred tax assets	0		0
Tier 1 capital	229,884		240,867
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets	21,273		21,027
Total risk-based capital	$ 251,157		$ 261,894

XML

Fair Value Disclosures, Part 1 (Details) - USD ($) $ in Thousands		Mar. 31, 2016	Dec. 31, 2015
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		136	$ 148
Securities available for sale		589,500	585,484
Assets [Abstract]
Capitalized mortgage loan servicing rights		10,454	8,481
U.S. Agency [Member]
Assets [Abstract]
Securities available for sale		35,385	47,512
U.S. Agency Residential Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		197,379	196,056
U.S. Agency Commercial Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		8,492	34,028
Private Label Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		18,375	4,903
Other Asset Backed [Member]
Assets [Abstract]
Securities available for sale		128,072	116,904
Obligations of States and Political Subdivisions [Member]
Assets [Abstract]
Securities available for sale		148,345	144,984
Corporate [Member]
Assets [Abstract]
Securities available for sale		49,510	38,614
Trust Preferred [Member]
Assets [Abstract]
Securities available for sale		2,303	2,483
Foreign Government [Member]
Assets [Abstract]
Securities available for sale		1,639
Fair Value Measurements [Member] | Fair Value, Measurements, Recurring [Member]
Assets [Abstract]
Trading securities		136	148
Loans held for sale		28,016	27,866
Derivatives	[1]	2,584	1,238
Liabilities [Abstract]
Derivatives	[2]	1,952	619
Fair Value Measurements [Member] | Fair Value, Measurements, Recurring [Member] | U.S. Agency [Member]
Assets [Abstract]
Securities available for sale		35,385	47,512
Fair Value Measurements [Member] | Fair Value, Measurements, Recurring [Member] | U.S. Agency Residential Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		197,379	196,056
Fair Value Measurements [Member] | Fair Value, Measurements, Recurring [Member] | U.S. Agency Commercial Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		8,492	34,028
Fair Value Measurements [Member] | Fair Value, Measurements, Recurring [Member] | Private Label Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		18,375	4,903
Fair Value Measurements [Member] | Fair Value, Measurements, Recurring [Member] | Other Asset Backed [Member]
Assets [Abstract]
Securities available for sale		128,072	116,904
Fair Value Measurements [Member] | Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions [Member]
Assets [Abstract]
Securities available for sale		148,345	144,984
Fair Value Measurements [Member] | Fair Value, Measurements, Recurring [Member] | Corporate [Member]
Assets [Abstract]
Securities available for sale		49,510	38,614
Fair Value Measurements [Member] | Fair Value, Measurements, Recurring [Member] | Trust Preferred [Member]
Assets [Abstract]
Securities available for sale		2,303	2,483
Fair Value Measurements [Member] | Fair Value, Measurements, Recurring [Member] | Foreign Government [Member]
Assets [Abstract]
Securities available for sale		1,639
Fair Value Measurements [Member] | Fair Value, Measurements, Nonrecurring [Member]
Assets [Abstract]
Capitalized mortgage loan servicing rights	[3]	10,454	8,481
Fair Value Measurements [Member] | Fair Value, Measurements, Nonrecurring [Member] | Impaired Loans [Member]
Commercial [Abstract]
Income producing - real estate	[4]	605	711
Land, land development & construction - real estate	[4]	35	40
Commercial and industrial	[4]	1,166	1,257
Mortgage [Abstract]
1-4 Family	[4]	540	421
Resort Lending	[4]	245	129
Commercial [Abstract]
Land, land development & construction - real estate	[4]	35	40
Commercial and industrial	[4]	1,166	1,257
Mortgage [Abstract]
1-4 Family	[4]	540	421
Resort Lending	[4]	245	129
Fair Value Measurements [Member] | Fair Value, Measurements, Nonrecurring [Member] | Other Real Estate [Member]
Commercial [Abstract]
Land, land development & construction - real estate	[5]	549	639
Commercial and industrial	[5]		165
Mortgage [Abstract]
1-4 Family	[5]	66	26
Resort Lending	[5]	93	107
Commercial [Abstract]
Land, land development & construction - real estate	[5]	549	639
Commercial and industrial	[5]		165
Mortgage [Abstract]
1-4 Family	[5]	66	26
Resort Lending	[5]	93	107
Home equity - 1st lien	[5]	18	14
Installment [Abstract]
Home equity - 1st lien	[5]	23	36
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets [Abstract]
Trading securities		136	148
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		136	148
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 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, Recurring [Member] | Foreign Government [Member]
Assets [Abstract]
Securities available for sale		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	0
Commercial [Abstract]
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	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Fair Value, Measurements, Nonrecurring [Member] | Other Real Estate [Member]
Commercial [Abstract]
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]
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
Home equity - 1st lien	[5]		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		589,500	585,484
Derivatives		2,584	1,238
Liabilities [Abstract]
Derivatives		1,952	619
Significant Other Observable Inputs (Level 2) [Member] | Fair Value, Measurements, Recurring [Member]
Assets [Abstract]
Trading securities		0	0
Loans held for sale		28,016	27,866
Derivatives	[1]	2,584	1,238
Liabilities [Abstract]
Derivatives	[2]	1,952	619
Significant Other Observable Inputs (Level 2) [Member] | Fair Value, Measurements, Recurring [Member] | U.S. Agency [Member]
Assets [Abstract]
Securities available for sale		35,385	47,512
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		197,379	196,056
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		8,492	34,028
Significant Other Observable Inputs (Level 2) [Member] | Fair Value, Measurements, Recurring [Member] | Private Label Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		18,375	4,903
Significant Other Observable Inputs (Level 2) [Member] | Fair Value, Measurements, Recurring [Member] | Other Asset Backed [Member]
Assets [Abstract]
Securities available for sale		128,072	116,904
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		148,345	144,984
Significant Other Observable Inputs (Level 2) [Member] | Fair Value, Measurements, Recurring [Member] | Corporate [Member]
Assets [Abstract]
Securities available for sale		49,510	38,614
Significant Other Observable Inputs (Level 2) [Member] | Fair Value, Measurements, Recurring [Member] | Trust Preferred [Member]
Assets [Abstract]
Securities available for sale		2,303	2,483
Significant Other Observable Inputs (Level 2) [Member] | Fair Value, Measurements, Recurring [Member] | Foreign Government [Member]
Assets [Abstract]
Securities available for sale		1,639
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	0
Commercial [Abstract]
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	0
Significant Other Observable Inputs (Level 2) [Member] | Fair Value, Measurements, Nonrecurring [Member] | Other Real Estate [Member]
Commercial [Abstract]
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]
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
Home equity - 1st lien	[5]		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 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, Recurring [Member] | Foreign Government [Member]
Assets [Abstract]
Securities available for sale		0
Significant Unobservable Inputs (Level 3) [Member] | Fair Value, Measurements, Nonrecurring [Member]
Assets [Abstract]
Capitalized mortgage loan servicing rights	[3]	10,454	8,481
Significant Unobservable Inputs (Level 3) [Member] | Fair Value, Measurements, Nonrecurring [Member] | Impaired Loans [Member]
Commercial [Abstract]
Income producing - real estate	[4]	605	711
Land, land development & construction - real estate	[4]	35	40
Commercial and industrial	[4]	1,166	1,257
Mortgage [Abstract]
1-4 Family	[4]	540	421
Resort Lending	[4]	245	129
Commercial [Abstract]
Land, land development & construction - real estate	[4]	35	40
Commercial and industrial	[4]	1,166	1,257
Mortgage [Abstract]
1-4 Family	[4]	540	421
Resort Lending	[4]	245	129
Significant Unobservable Inputs (Level 3) [Member] | Fair Value, Measurements, Nonrecurring [Member] | Other Real Estate [Member]
Commercial [Abstract]
Land, land development & construction - real estate	[5]	549	639
Commercial and industrial	[5]		165
Mortgage [Abstract]
1-4 Family	[5]	66	26
Resort Lending	[5]	93	107
Commercial [Abstract]
Land, land development & construction - real estate	[5]	549	639
Commercial and industrial	[5]		165
Mortgage [Abstract]
1-4 Family	[5]	66	26
Resort Lending	[5]	93	107
Home equity - 1st lien	[5]	18	14
Installment [Abstract]
Home equity - 1st lien	[5]	$ 23	$ 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.

XML

Fair Value Disclosures, Part 2 (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Impairment charges recognized [Abstract]
Capitalized mortgage loan servicing rights, carrying amount	$ 10,500		$ 8,500
Capitalized mortgage loan servicing rights, valuation allowance	4,700		3,300
Capitalized mortgage loan servicing rights	1,500	$ 700
Collateral dependent loans, carrying amount	5,300		5,100
Collateral dependent loans, valuation allowance	2,700		2,500
Additional provision for loan losses on impaired loans	600	600
Other real estate, carrying amount	700		1,000
Other real estate, valuation allowance	1,700		$ 1,700
Other real estate, additional charge	200	200
Trading Securities [Member]
Changes in fair value for financial assets [Abstract]
Net Gains (Losses) on Assets	(12)	10
Total Change in Fair Values Included in Current Period Earnings	(12)	10
Loans Held For Sale [Member]
Changes in fair value for financial assets [Abstract]
Net Gains (Losses) on Assets	127	209
Total Change in Fair Values Included in Current Period Earnings	$ 127	$ 209

XML

Fair Value Disclosures, Part 3 (Details) - USD ($)		3 Months Ended	12 Months Ended
		Mar. 31, 2016	Dec. 31, 2015
Asset (Liability) Fair Value [Abstract]
Capitalized mortgage loan servicing rights		$ 10,454,000	$ 8,481,000
Impaired Loans Commercial [Member]
Impaired loan [Abstract]
Commercial	[1]	1,601,000	1,605,000
Unobservable Inputs Weighted Average [Abstract]
Total impaired collateral value		$ 200,000	$ 400,000
Impaired Loans Commercial [Member] | Minimum [Member]
Unobservable Inputs Weighted Average [Abstract]
Discount rate		0.00%	0.00%
Impaired Loans Commercial [Member] | Maximum [Member]
Unobservable Inputs Weighted Average [Abstract]
Discount rate		100.00%	100.00%
Mortgage [Member]
Impaired loan [Abstract]
Mortgage		$ 785,000	$ 550,000
Other Real Estate Commercial [Member]
Other real estate [Abstract]
Commercial		549,000	804,000
Mortgage and Installment [Member]
Other real estate [Abstract]
Mortgage and installment		$ 200,000	$ 183,000
Income Approach [Member] | Impaired Loans Commercial [Member]
Unobservable Inputs Weighted Average [Abstract]
Capitalization rate			9.30%
Present Value of Net Servicing Revenue [Member]
Unobservable Inputs Weighted Average [Abstract]
Discount rate		10.04%	10.04%
Cost to service		$ 80	$ 80
Ancillary income		$ 24	$ 24
Float rate		1.17%	1.73%
Sales Comparison Approach [Member] | Impaired Loans Commercial [Member]
Unobservable Inputs Weighted Average [Abstract]
Adjustment for differences between comparable sales		(1.20%)	(2.10%)
Sales Comparison Approach [Member] | Mortgage [Member]
Unobservable Inputs Weighted Average [Abstract]
Adjustment for differences between comparable sales		2.20%	0.70%
Sales Comparison Approach [Member] | Other Real Estate Commercial [Member]
Unobservable Inputs Weighted Average [Abstract]
Adjustment for differences between comparable sales		(5.60%)	(3.90%)
Sales Comparison Approach [Member] | Mortgage and Installment [Member]
Unobservable Inputs Weighted Average [Abstract]
Adjustment for differences between comparable sales		58.50%	75.60%

[1] In addition to the valuation techniques and unobservable inputs discussed above, at March 31, 2016 and December 31, 2015, we had an impaired collateral dependent commercial relationship that totaled $0.2 million and $0.4 million, respectively that was primarily secured by collateral other than real estate. Collateral securing this relationship primarily included machinery and equipment and inventory at March 31, 2016 and December 31, 2015. Valuation techniques at March 31, 2016 and December 31, 2015, included appraisals and 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.

XML

Fair Value Disclosures, Part 4 (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Fair value option - Loans held for sale [Abstract]
Loans held for sale	$ 28,016	$ 27,866
Difference	841	714
Aggregate Fair Value [Member]
Fair value option - Loans held for sale [Abstract]
Loans held for sale	28,016	27,866
Contractual Principal [Member]
Fair value option - Loans held for sale [Abstract]
Loans held for sale	$ 27,175	$ 27,152

XML

Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands		Mar. 31, 2016	Dec. 31, 2015
Assets [Abstract]
Interest bearing deposits - time		$ 10,178	$ 11,866
Trading securities		136	148
Securities available for sale		589,500	585,484
Federal Home Loan Bank and Federal Reserve Bank Stock		15,600	15,471
Liabilities [Abstract]
Other borrowings		11,953	11,954
Subordinated debentures		35,569	35,569
Reciprocal deposits included in deposits with no stated maturity		14,200	11,800
Reciprocal deposits included in deposits with stated maturity		36,100	38,400
Recorded Book Balance [Member]
Assets [Abstract]
Cash and due from banks		41,790	54,260
Interest bearing deposits		102,919	31,523
Interest bearing deposits - time		10,178	11,866
Trading securities		136	148
Securities available for sale		589,500	585,484
Federal Home Loan Bank and Federal Reserve Bank Stock		15,600	15,471
Net loans and loans held for sale		1,544,503	1,520,346
Accrued interest receivable		6,855	6,565
Derivative financial instruments		2,584	1,238
Liabilities [Abstract]
Deposits with no stated maturity	[1]	1,704,515	1,659,743
Deposits with stated maturity	[1]	450,191	426,220
Other borrowings		11,953	11,954
Subordinated debentures		35,569	35,569
Accrued interest payable		562	466
Derivative financial instruments		1,952	619
Fair Value [Member]
Assets [Abstract]
Cash and due from banks		41,790	54,260
Interest bearing deposits		102,919	31,523
Interest bearing deposits - time		10,214	11,858
Trading securities		136	148
Securities available for sale		589,500	585,484
Net loans and loans held for sale		1,513,641	1,472,613
Accrued interest receivable		6,855	6,565
Derivative financial instruments		2,584	1,238
Liabilities [Abstract]
Deposits with no stated maturity	[1]	1,704,515	1,659,743
Deposits with stated maturity	[1]	449,221	423,776
Other borrowings		13,425	13,448
Subordinated debentures		22,526	23,069
Accrued interest payable		562	466
Derivative financial instruments		1,952	619
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets [Abstract]
Cash and due from banks		41,790	54,260
Interest bearing deposits		102,919	31,523
Interest bearing deposits - time		0	0
Trading securities		136	148
Securities available for sale		0	0
Net loans and loans held for sale		0	0
Accrued interest receivable		0	5
Derivative financial instruments		0	0
Liabilities [Abstract]
Deposits with no stated maturity	[1]	1,704,515	1,659,743
Deposits with stated maturity	[1]	0	0
Other borrowings		0	0
Subordinated debentures		0	0
Accrued interest payable		21	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		10,214	11,858
Trading securities		0	0
Securities available for sale		589,500	585,484
Net loans and loans held for sale		28,016	27,866
Accrued interest receivable		2,300	1,969
Derivative financial instruments		2,584	1,238
Liabilities [Abstract]
Deposits with no stated maturity	[1]	0	0
Deposits with stated maturity	[1]	449,221	423,776
Other borrowings		13,425	13,448
Subordinated debentures		22,526	23,069
Accrued interest payable		541	445
Derivative financial instruments		1,952	619
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		1,485,625	1,444,747
Accrued interest receivable		4,555	4,591
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 $14.2 million and $11.8 million at March 31, 2016 and December 31, 2015, respectively. Deposits with a stated maturity include reciprocal deposits with a recorded book balance of $36.1 million and $38.4 million at March 31, 2016 and December 31, 2015, respectively.

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Contingent Liabilities (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Loss Contingencies [Line Items]
Cash payment for litigation settlement relating to collection of vehicle service contracts counterparty receivables	$ 4,000
Aggregate amount of counterparty obligations	3,173		$ 7,229
VSC counterparty contingency expense	30	$ 29
Provision for loss reimbursement on sold loans	(15)	$ (69)
Reserve for loss reimbursement on sold mortgage loans	500		$ 500
Promissory Note [Member]
Loss Contingencies [Line Items]
Notes payable amount of settlement to counterparties	$ 1,500
Term of note	5 years
Pending Litigation [Member]
Loss Contingencies [Line Items]
Maximum range of reasonably possible loss	$ 1,000
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

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Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Accumulated Other Comprehensive Income Loss [Line Items]
Balance at beginning of period	$ 251,092	$ 250,371
Balance at end of period	239,545	253,625
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]
Total reclassifications before tax	6,057	5,561
Income tax expense	1,957	1,780
Reclassifications, net of tax	4,100	3,781
Accumulated Other Comprehensive Loss [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Balance at beginning of period	(6,036)	(5,636)
Other comprehensive income before reclassifications	1,349	1,483
Amounts reclassified from AOCL	(112)	(49)
Net current period other comprehensive income	1,237	1,434
Balance at end of period	(4,799)	(4,202)
Unrealized Gains (Losses) on Available For Sale Securities [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Balance at beginning of period	(238)	162
Other comprehensive income before reclassifications	1,349	1,483
Amounts reclassified from AOCL	(112)	(49)
Net current period other comprehensive income	1,237	1,434
Balance at end of period	999	1,596
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	174	75
Net impairment loss recognized in earnings	0	0
Total reclassifications before tax	174	75
Income tax expense	62	26
Reclassifications, net of tax	112	49
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)
Other comprehensive income before reclassifications	0	0
Amounts reclassified from AOCL	0	0
Net current period other comprehensive income	0	0
Balance at end of period	$ (5,798)	$ (5,798)