10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 2017

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, smaller reporting company or an emerging growth company.

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

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

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ☐      NO ☒         

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Common stock, no par value	21,331,967
Class	Outstanding at November 2, 2017

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

INDEX

		Number(s)
PART I -	Financial Information
Item 1.	Condensed Consolidated Statements of Financial Condition September 30, 2017 and December 31, 2016	3
	Condensed Consolidated Statements of Operations Three- and Nine-month periods ended September 30, 2017 and 2016	4
	Condensed Consolidated Statements of Comprehensive Income Three- and Nine-month periods ended September 30, 2017 and 2016	5
	Condensed Consolidated Statements of Cash Flows Nine-month periods ended September 30, 2017 and 2016	6
	Condensed Consolidated Statements of Shareholders' Equity Nine-month periods ended September 30, 2017 and 2016	7
	Notes to Interim Condensed Consolidated Financial Statements	8-59
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	60-83
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	84
Item 4.	Controls and Procedures	84
PART II -	Other Information
Item 1A	Risk Factors	85
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	85
Item 6.	Exhibits	86

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;

• 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, 2016, as updated by any new or modified risk factors disclosed in Part II – Item 1A of any subsequently filed Quarterly Report on Form 10-Q, include all known risks our management believes could materially affect the results described by forward-looking statements in this report. However, those risks may not be the only risks we face. Our results of operations, cash flows, financial position, and prospects could also be materially and adversely affected by additional factors that are not presently known to us that we currently consider to be immaterial, or that develop after the date of this report. We cannot assure you that our future results will meet expectations. While we believe the forward-looking statements in this report are reasonable, you should not place undue reliance on any forward-looking statement. In addition, these statements speak only as of the date made. We do not undertake, and expressly disclaim, any obligation to update or alter any statements, whether as a result of new information, future events, or otherwise, except as required by applicable law.

2

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

	September 30, 2017			December 31, 2016
	(unaudited)
	(In thousands, except share amounts)
Assets
Cash and due from banks	$	31,998		$	35,238
Interest bearing deposits		15,605			47,956
Cash and Cash Equivalents		47,603			83,194
Interest bearing deposits - time		3,489			5,591
Trading securities		347			410
Securities available for sale		548,865			610,616
Federal Home Loan Bank and Federal Reserve Bank stock, at cost		15,543			15,543
Loans held for sale, carried at fair value		47,611			35,946
Payment plan receivables and other assets held for sale		-			33,360
Loans
Commercial		837,250			804,017
Mortgage		781,346			538,615
Installment		318,498			265,616
Total Loans		1,937,094			1,608,248
Allowance for loan losses		(21,478	)		(20,234	)
Net Loans		1,915,616			1,588,014
Other real estate and repossessed assets		2,150			5,004
Property and equipment, net		38,774			40,175
Bank-owned life insurance		54,286			54,033
Deferred tax assets, net		22,433			32,818
Capitalized mortgage loan servicing rights		14,675			13,671
Other intangibles		1,673			1,932
Accrued income and other assets		40,381			28,643
Total Assets	$	2,753,446		$	2,548,950
Liabilities and Shareholders' Equity
Deposits
Non-interest bearing	$	753,555		$	717,472
Savings and interest-bearing checking		1,040,974			1,015,724
Reciprocal		49,078			38,657
Time		412,601			453,866
Brokered time		87,553			-
Total Deposits		2,343,761			2,225,719
Federal funds purchased		3,000			-
Other borrowings		72,849			9,433
Subordinated debentures		35,569			35,569
Other liabilities held for sale		-			718
Accrued expenses and other liabilities		30,557			28,531
Total Liabilities		2,485,736			2,299,970
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: 21,332,317 shares at September 30, 2017 and 21,258,092 shares at December 31, 2016		324,607			323,745
Accumulated deficit		(53,240	)		(65,657	)
Accumulated other comprehensive loss		(3,657	)		(9,108	)
Total Shareholders’ Equity		267,710			248,980
Total Liabilities and Shareholders’ Equity	$	2,753,446		$	2,548,950

See notes to interim condensed consolidated financial statements (unaudited)

3

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

	Three months ended September 30,					Nine months ended September 30,
	2017		2016			2017		2016
	(unaudited)					(unaudited)
	(In thousands, except per share amounts)
Interest Income
Interest and fees on loans	$	21,831	$	18,597		$	61,638	$	55,361
Interest on securities
Taxable		2,765		2,537			8,300		7,261
Tax-exempt		512		330			1,478		860
Other investments		263		281			867		884
Total Interest Income		25,371		21,745			72,283		64,366
Interest Expense
Deposits		1,833		1,254			4,754		3,520
Other borrowings and subordinated debentures		626		493			1,659		1,455
Total Interest Expense		2,459		1,747			6,413		4,975
Net Interest Income		22,912		19,998			65,870		59,391
Provision for loan losses		582		(175	)		806		(1,439	)
Net Interest Income After Provision for Loan Losses		22,330		20,173			65,064		60,830
Non-interest Income
Service charges on deposit accounts		3,281		3,281			9,465		9,164
Interchange income		1,942		1,943			5,869		5,797
Net gains (losses) on assets
Mortgage loans		2,971		3,556			8,886		7,727
Securities		69		(45	)		62		302
Mortgage loan servicing, net		1		858			668		(454	)
Other		2,040		2,115			6,139		6,561
Total Non-interest Income		10,304		11,708			31,089		29,097
Non-interest Expense
Compensation and employee benefits		13,577		13,031			41,104		36,912
Occupancy, net		1,970		1,919			6,032		5,982
Data processing		1,796		1,971			5,670		6,008
Furniture, fixtures and equipment		961		990			2,943		2,939
Communications		685		670			2,046		2,280
Loan and collection		481		568			1,564		1,964
Advertising		526		455			1,551		1,410
Legal and professional		550		420			1,376		1,178
Interchange expense		294		276			869		809
FDIC deposit insurance		208		187			608		852
Credit card and bank service fees		105		203			432		588
Other		1,463		1,839			4,751		4,547
Total Non-interest Expense		22,616		22,529			68,946		65,469
Income Before Income Tax		10,018		9,352			27,207		24,458
Income tax expense		3,159		2,979			8,443		7,547
Net Income	$	6,859	$	6,373		$	18,764	$	16,911
Net Income Per Common Share
Basic	$	0.32	$	0.30		$	0.88	$	0.79
Diluted	$	0.32	$	0.30		$	0.87	$	0.78
Dividends Per Common Share
Declared	$	0.10	$	0.08		$	0.30	$	0.24
Paid	$	0.10	$	0.08		$	0.30	$	0.24

See notes to interim condensed consolidated financial statements (unaudited)

4

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
	(unaudited)
	(In thousands)
Net income	$	6,859		$	6,373		$	18,764		$	16,911
Other comprehensive income, before tax
Securities available for sale
Unrealized gains arising during period		20			451			7,738			4,899
Change in unrealized gains for which a portion of other than temporary impairment has been recognized in earnings		126			(24	)		211			47
Reclassification adjustments for gains included in earnings		(8	)		(15	)		(125	)		(298	)
Unrealized gains recognized in other comprehensive income on securities available for sale		138			412			7,824			4,648
Income tax expense		48			144			2,738			1,627
Unrealized gains recognized in other comprehensive income on securities available for sale, net of tax		90			268			5,086			3,021
Derivative instruments
Unrealized gain arising during period		95			-			95			-
Reclassification adjustment for expense recognized in earnings		5			-			5			-
Unrealized gains recognized in other comprehensive income on derivative instruments		100			-			100			-
Income tax expense		35			-			35			-
Unrealized gains recognized in other comprehensive income on derivative instruments, net of tax		65			-			65			-
Other comprehensive income		155			268			5,151			3,021
Comprehensive income	$	7,014		$	6,641		$	23,915		$	19,932

See notes to interim condensed consolidated financial statements (unaudited)

5

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

	Nine months ended September 30,
	2017			2016
	(unaudited - In thousands)
Net Income	$	18,764		$	16,911
Adjustments to Reconcile Net Income to Net Cash From Operating Activities Proceeds from sales of loans held for sale		313,559			222,610
Disbursements for loans held for sale		(316,338	)		(225,025	)
Provision for loan losses		806			(1,439	)
Deferred income tax expense		7,422			7,099
Deferred loan fees		(4,588	)		(1,634	)
Net depreciation, amortization of intangible assets and premiums and accretion of discounts on securities, loans and interest bearing deposits - time		5,079			3,831
Net gains on mortgage loans		(8,886	)		(7,727	)
Net gains on securities		(62	)		(302	)
Share based compensation		1,342			1,200
Increase in accrued income and other assets		(13,159	)		(3,804	)
Increase in accrued expenses and other liabilities		2,274			1,150
Total Adjustments		(12,551	)		(4,041	)
Net Cash From Operating Activities		6,213			12,870
Cash Flow Used in Investing Activities
Proceeds from the sale of securities available for sale		8,834			56,451
Proceeds from maturities, prepayments and calls of securities available for sale		143,953			150,103
Purchases of securities available for sale		(84,080	)		(213,839	)
Proceeds from the maturity of interest bearing deposits - time		2,100			4,613
Purchase of Federal Reserve Bank stock		-			(407	)
Redemption of Federal Reserve Bank stock		-			371
Net increase in portfolio loans (loans originated, net of principal payments)		(326,089	)		(73,673	)
Purchase of portfolio loans		-			(15,000	)
Cash received from the sale of Mepco Finance Corporation assets, net		33,446			-
Proceeds from bank-owned life insurance		523			2,235
Proceeds from the collection of vehicle service contract counterparty receivables		411			4,671
Proceeds from the sale of other real estate and repossessed assets		4,111			3,854
Capital expenditures		(2,592	)		(1,717	)
Net Cash Used in Investing Activities		(219,383	)		(82,338	)
Cash Flow From Financing Activities
Net increase in total deposits		118,042			120,997
Net increase in other borrowings		3,003			5
Proceeds from Federal Home Loan Bank Advances		461,000			-
Payments of Federal Home Loan Bank Advances		(397,587	)		(432	)
Dividends paid		(6,400	)		(5,149	)
Proceeds from issuance of common stock		57			61
Repurchase of common stock		-			(16,854	)
Share based compensation withholding obligation		(536	)		(627	)
Net Cash From Financing Activities		177,579			98,001
Net Increase (Decrease) in Cash and Cash Equivalents		(35,591	)		28,533
Cash and Cash Equivalents at Beginning of Period		83,194			85,783
Cash and Cash Equivalents at End of Period	$	47,603		$	114,316
Cash paid during the period for
Interest	$	6,240		$	4,811
Income taxes		988			437
Transfers to other real estate and repossessed assets		1,389			1,791
Purchase of securities available for sale not yet settled		1,765			7,440
Sale of securities available for sale not yet settled		760			-

See notes to interim condensed consolidated financial statements (unaudited)

6

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Shareholders' Equity

	Nine months ended September 30,
	2017			2016
	(unaudited)
	(In thousands)
Balance at beginning of period	$	248,980		$	251,092
Cumulative effect of change in accounting		352			1,247
Balance at beginning of period, as adjusted		249,332			252,339
Net income		18,764			16,911
Cash dividends declared		(6,400	)		(5,149	)
Issuance of common stock		57			61
Share based compensation		1,342			1,200
Share based compensation withholding obligation		(536	)		(627	)
Repurchase of common stock		-			(16,854	)
Net change in accumulated other comprehensive loss, net of related tax effect		5,151			3,021
Balance at end of period	$	267,710		$	250,902

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, 2016 included in our Annual Report on Form 10-K.

In our opinion, the accompanying unaudited condensed consolidated financial statements contain all the adjustments necessary to present fairly our consolidated financial condition as of September 30, 2017 and December 31, 2016, and the results of operations for the three and nine-month periods ended September 30, 2017 and 2016.  The results of operations for the three and nine-month periods ended September 30, 2017, 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 valuation of originated mortgage loan servicing rights and the valuation of deferred tax assets.  Refer to our 2016 Annual Report on Form 10-K for a disclosure of our accounting policies.

2. New Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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.  We expect to adopt this ASU using the modified retrospective approach.  Financial instruments for the most part and related contractual rights and obligations which are the sources of the majority of our operating revenue are excluded from the scope of this amended guidance.  In addition, for those operating revenue streams that are included in the scope of this amended guidance, based upon our review of these sources of income we do not believe they will be materially impacted by this amended guidance.

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, require 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, require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset and eliminate 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.  We have reviewed the types of financial instruments impacted by this amended guidance, including certain equity investments and liabilities measured under the fair value election, and have determined that we do not currently own any such instruments.  The balance of this amended guidance is expected to impact certain disclosure items but is not expected to have any 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, require 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.  Based on a review of our operating leases that we currently have in place we do not expect a material change in the recognition, measurement and presentation of lease expense or impact on cash flow.  While the primary impact will be the recognition of certain operating leases on our Condensed Consolidated Statements of Financial Condition this impact is not expected to be material.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments”.  This ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.  This ASU will replace today’s “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. For securities available for sale, allowances will be recorded rather than reducing the carrying amount as is done under the current other-than-temporary impairment model. This ASU also simplifies the accounting model for purchased credit-impaired debt securities and loans. This amended guidance is effective for us on January 1, 2020.  We began evaluating this ASU in 2016 and have formed a committee that includes personnel from various areas of the Bank that meets regularly to discuss the implementation of the ASU.  We are currently in the process of gathering data and reviewing loss methodologies and have engaged third party resources that will assist us in the implementation of this ASU.  While we have not yet determined what the impact will be on our consolidated operating results or financial condition by the nature of the implementation of an expected loss model compared to an incurred loss approach, we would expect our allowance for loan losses (“AFLL”) to increase under this ASU.

9

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities”.  This new ASU amends the hedge accounting model in Topic 815 to enable entities to better portray the economics of their risk management activities in the financial statements and enhance the transparency and understandability of hedge results. The amendments expand an entity’s ability to hedge nonfinancial and financial risk components and reduce complexity in fair value hedges of interest rate risk. The guidance eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The guidance also eases certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment of hedge effectiveness.  This amended guidance is effective for us on January 1, 2019, and given our current level of derivatives designated as hedges is not expected to have a material impact on our consolidated operating results or financial condition.

In March 2017, the FASB issued ASU 2017-08, “Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20) Premium Amortization on Purchased Callable Debt Securities” (“ASU 2017-08”).  This ASU shortens the amortization period for certain callable debt securities held at a premium.  Specifically, the amendments require the premium to be amortized to the earliest call date.  The amendments do not require an accounting change for securities held at a discount; the discount continues to be accreted to maturity.   This amended guidance is effective for us on January 1, 2019, with early adoption permitted.  We adopted this amended guidance during the first quarter of 2017 using a modified retrospective approach.  The impact of this adoption was to adjust our January 1, 2017 Condensed Consolidated Statement of Financial Position to reflect cumulative effect adjustments as summarized in the table below. The adjustments below reflect the recording of $0.46 million ($0.30 million, net of tax) of additional premium amortization on securities available for sale and a $0.30 million decrease in accumulated other comprehensive loss to reflect the decrease in after tax unrealized losses on securities available for sale as of January 1, 2017 as a result of adopting this amended guidance. After January 1, 2017, premium amortization on certain callable debt securities is now amortized to the first call date.  During the first quarter of 2017 the impact on the Condensed Consolidated Statements of Operations was an increase to premium amortization of $0.03 million.

During the first quarter of 2017, we adopted the fair value method of accounting for our capitalized mortgage loan servicing rights pursuant to FASB Accounting Standards Codification topic 860 – “Transfers and Servicing”.  Prior to January 1, 2017, we were accounting for our capitalized mortgage loan servicing rights under the amortization method.  We adopted the fair value method using a modified retrospective adjustment to beginning accumulated deficit.  The impact of the adoption of the fair value method is summarized in the table below.  The adjustments below reflect the recording of a $0.54 million increase in the fair value of our capitalized mortgage loan servicing rights with a $0.19 million reduction in deferred tax assets, net for a net impact on accumulated deficit and total equity of $0.35 million.

10

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

	January 1, 2017 Originally Presented			Cumulative Retrospective Adjustments					January 1, 2017 Adjusted
	(In thousands)
Deferred tax assets, net	$	32,818		$	(190	)	(1	)	$	32,628
Capitalized mortgage loan servicing rights	$	13,671		$	542		(1	)	$	14,213
Total assets	$	2,548,950		$	352				$	2,549,302
Accumulated deficit	$	(65,657	)	$	352		(1	)
				$	(300	)	(2	)	$	(65,605	)
Accumulated other comprehensive loss	$	(9,108	)	$	300		(2	)	$	(8,808	)
Total Shareholders’ Equity	$	248,980		$	352				$	249,332
Total Liabilities and Shareholders’ Equity	$	2,548,950		$	352				$	2,549,302

(1) Represents adjustment to capitalized mortgage loan servicing rights, deferred tax assets, net, and accumulated deficit to reflect the adoption of the fair value method of accounting for our capitalized mortgage loan servicing rights.

(2) Represents  adjustment to accumulated deficit and accumulated other comprehensive loss to reflect the adoption of ASU 2017-08.

3. Securities

Securities available for sale consist of the following:

	Amortized		Unrealized
	Cost		Gains		Losses		Fair Value
	(In thousands)
September 30, 2017
U.S. agency	$	26,455	$	210	$	39	$	26,626
U.S. agency residential mortgage-backed		135,293		1,331		515		136,109
U.S. agency commercial mortgage-backed		10,767		84		115		10,736
Private label mortgage-backed		26,703		518		231		26,990
Other asset backed		108,128		319		108		108,339
Obligations of states and political subdivisions		176,087		1,708		619		177,176
Corporate		57,213		853		66		58,000
Trust preferred		2,928		-		128		2,800
Foreign government		2,098		-		9		2,089
Total	$	545,672	$	5,023	$	1,830	$	548,865
December 31, 2016
U.S. agency	$	28,909	$	159	$	80	$	28,988
U.S. agency residential mortgage-backed		156,053		1,173		937		156,289
U.S. agency commercial mortgage-backed		12,799		28		195		12,632
Private label mortgage-backed		35,035		216		524		34,727
Other asset backed		146,829		271		391		146,709
Obligations of states and political subdivisions		175,180		478		4,759		170,899
Corporate		56,356		223		399		56,180
Trust preferred		2,922		-		343		2,579
Foreign government		1,626		-		13		1,613
Total	$	615,709	$	2,548	$	7,641	$	610,616

11

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

We adopted ASU 2017-08 during the first quarter of 2017 using a modified retrospective approach.  As a result, the amortized cost of securities as of January 1, 2017 was adjusted lower by $0.46 million (see note #2).

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

	Less Than Twelve Months				Twelve Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In thousands)
September 30, 2017
U.S. agency	$	4,819	$	21	$	4,947	$	18	$	9,766	$	39
U.S. agency residential mortgage-backed		24,116		215		27,817		300		51,933		515
U.S. agency commercial mortgage-backed		1,815		22		3,933		93		5,748		115
Private label mortgage- backed		3,423		26		3,163		205		6,586		231
Other asset backed		12,756		18		16,298		90		29,054		108
Obligations of states and political subdivisions		42,186		447		13,787		172		55,973		619
Corporate		8,654		22		2,458		44		11,112		66
Trust preferred		-		-		2,800		128		2,800		128
Foreign government		2,089		9		-		-		2,089		9
Total	$	99,858	$	780	$	75,203	$	1,050	$	175,061	$	1,830

December 31, 2016
U.S. agency	$	4,179	$	41	$	8,217	$	39	$	12,396	$	80
U.S. agency residential mortgage-backed		62,524		732		20,857		205		83,381		937
U.S. agency commercial mortgage-backed		6,079		194		143		1		6,222		195
Private label mortgage-backed		20,545		281		1,413		243		21,958		524
Other asset backed		52,958		172		17,763		219		70,721		391
Obligations of states and political subdivisions		113,078		4,014		14,623		745		127,701		4,759
Corporate		25,546		292		2,810		107		28,356		399
Trust preferred		-		-		2,579		343		2,579		343
Foreign government		1,613		13		-		-		1,613		13
Total	$	286,522	$	5,739	$	68,405	$	1,902	$	354,927	$	7,641

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.

12

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

U.S. agency, U.S. agency residential mortgage-backed securities and U.S. agency commercial mortgage backed securities — at September 30, 2017, we had 33 U.S. agency, 109 U.S. agency residential mortgage-backed and 10 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 September 30, 2017, we had 11 of this type of security whose fair value is less than amortized cost.  The majority of unrealized losses are attributed to three securities purchased prior to 2016.  Two of these three securities has an impairment in excess of 10% and all three of these holdings have been impaired for more than 12 months.  The unrealized losses are largely attributable to credit spread widening on these three securities since their acquisition.

These three securities are receiving principal and interest payments. 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 three private label mortgage-backed securities are periodically 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 all three of these securities whose fair value is less than amortized cost.

As management does not intend to liquidate these securities and it is more likely than not that we will not be required to sell these securities prior to recovery of these unrealized losses, no other declines discussed above are deemed to be other than temporary.

Other asset backed — at September 30, 2017, we had 51 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 September 30, 2017, we had 182 municipal securities whose fair value is less than amortized cost. The unrealized losses are primarily due to wider benchmark pricing spreads 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.

Corporate — at September 30, 2017, we had 11 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.

13

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Trust preferred securities — at September 30, 2017, 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 $0.9 million as of September 30, 2017, continues to have satisfactory credit metrics and make interest payments.

The following table breaks out our trust preferred securities in further detail as of September 30, 2017 and December 31, 2016:

	September 30, 2017					December 31, 2016
	Fair Value		Net Unrealized Loss			Fair Value		Net Unrealized Loss
	(In thousands)
Trust preferred securities
Rated issues	$	1,880	$	(48	)	$	1,800	$	(123	)
Unrated issues		920		(80	)		779		(220	)

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 September 30, 2017, we had two foreign government securities whose fair value is less than amortized cost. The unrealized loss is 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.

We recorded no credit related OTTI charges in our Condensed Consolidated Statements of Operations related to securities available for sale during the three and nine month periods ended September 30, 2017 and 2016, respectively.

At September 30, 2017, 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 September 30, 2017
Fair value	$	1,076	$	1,032	$	65	$	2,173
Amortized cost		937		842		-		1,779
Non-credit unrealized loss		-		-		-		-
Unrealized gain		139		190		65		394
Cumulative credit related OTTI		757		457		380		1,594

14

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Each of these securities is receiving principal and interest payments similar to principal reductions in the underlying collateral.  All three of these securities have unrealized gains at September 30, 2017.  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 these securities is now less than previously recorded credit related OTTI amounts.

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

	Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016
	(In thousands)
Balance at beginning of period	$	1,844	$	1,844	$	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	$	1,844	$	1,844

The amortized cost and fair value of securities available for sale at September 30, 2017, by contractual maturity, follow:

	Amortized Cost		Fair Value
	(In thousands)
Maturing within one year	$	27,811	$	27,865
Maturing after one year but within five years		98,784		99,533
Maturing after five years but within ten years		82,590		83,671
Maturing after ten years		55,596		55,622
		264,781		266,691
U.S. agency residential mortgage-backed		135,293		136,109
U.S. agency commercial mortgage-backed		10,767		10,736
Private label mortgage-backed		26,703		26,990
Other asset backed		108,128		108,339
Total	$	545,672	$	548,865

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

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

			Realized
	Proceeds (1)		Gains		Losses
	(In thousands)
2017	$	9,594	$	125	$	-
2016		56,451		350		52

(1) 2017 includes $0.760 million for trades that did not settle until after September 30, 2017.

15

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

During 2017 and 2016, our trading securities consisted of various preferred stocks.  During the nine months ended September 30, 2017 and 2016, we recognized gains (losses) on trading securities of $(0.063) million and $0.004 million, respectively, that are included in net gains (losses) on securities in the Condensed Consolidated Statements of Operations.  These amounts relate to trading securities still held at each respective period end.

4. Loans

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

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

	Commercial			Mortgage			Installment			Payment Plan Receivables(1)		Subjective Allocation		Total
	(In thousands)
2017
Balance at beginning of period	$	5,100		$	8,145		$	900		$	-	$	6,441	$	20,586
Additions (deductions) Provision for loan losses		(97	)		68			(33	)		-		644		582
Recoveries credited to the allowance		340			587			285			-		-		1,212
Loans charged against the allowance		(92	)		(471	)		(339	)		-		-		(902	)
Balance at end of period	$	5,251		$	8,329		$	813		$	-	$	7,085	$	21,478
2016
Balance at beginning of period	$	6,039		$	9,956		$	1,139		$	52	$	5,526	$	22,712
Additions (deductions) Provision for loan losses		(153	)		(247	)		208			-		17		(175	)
Recoveries credited to the allowance		474			195			236			-		-		905
Loans charged against the allowance		(365	)		(561	)		(473	)		-		-		(1,399	)
Balance at end of period	$	5,995		$	9,343		$	1,110		$	52	$	5,543	$	22,043

(1) Payment plan receivables were reclassified to held for sale at December 31, 2016.  See note #15.

16

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

	Commercial			Mortgage			Installment			Payment Plan Receivables(1)			Subjective Allocation		Total
	(In thousands)
2017
Balance at beginning of period	$	4,880		$	8,681		$	1,011		$	-		$	5,662	$	20,234
Additions (deductions) Provision for loan losses		(197	)		(593	)		173			-			1,423		806
Recoveries credited to the allowance		946			1,264			788			-			-		2,998
Loans charged against the allowance		(378	)		(1,023	)		(1,159	)		-			-		(2,560	)
Balance at end of period	$	5,251		$	8,329		$	813		$	-		$	7,085	$	21,478
2016
Balance at beginning of period	$	5,670		$	10,391		$	1,181		$	56		$	5,272	$	22,570
Additions (deductions) Provision for loan losses		(1,220	)		(885	)		399			(4	)		271		(1,439	)
Recoveries credited to the allowance		1,944			871			808			-			-		3,623
Loans charged against the allowance		(399	)		(1,034	)		(1,278	)		-			-		(2,711	)
Balance at end of period	$	5,995		$	9,343		$	1,110		$	52		$	5,543	$	22,043

(1) Payment plan receivables were reclassified to held for sale at December 31, 2016.  See note #15.

17

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

	Commercial		Mortgage		Installment		Subjective Allocation		Total
	(In thousands)
September 30, 2017
Allowance for loan losses
Individually evaluated for impairment	$	967	$	5,823	$	271	$	-	$	7,061
Collectively evaluated for impairment		4,284		2,506		542		7,085		14,417
Total ending allowance balance	$	5,251	$	8,329	$	813	$	7,085	$	21,478
Loans
Individually evaluated for impairment	$	10,257	$	54,322	$	4,215			$	68,794
Collectively evaluated for impairment		829,073		730,050		315,146				1,874,269
Total loans recorded investment		839,330		784,372		319,361				1,943,063
Accrued interest included in recorded investment		2,080		3,026		863				5,969
Total loans	$	837,250	$	781,346	$	318,498			$	1,937,094
December 31, 2016
Allowance for loan losses
Individually evaluated for impairment	$	2,244	$	6,579	$	329	$	-	$	9,152
Collectively evaluated for impairment		2,636		2,102		682		5,662		11,082
Total ending allowance balance	$	4,880	$	8,681	$	1,011	$	5,662	$	20,234
Loans
Individually evaluated for impairment	$	15,767	$	59,151	$	4,913			$	79,831
Collectively evaluated for impairment		790,228		481,828		261,474				1,533,530
Total loans recorded investment		805,995		540,979		266,387				1,613,361
Accrued interest included in recorded investment		1,978		2,364		771				5,113
Total loans	$	804,017	$	538,615	$	265,616			$	1,608,248

18

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

	90+ and Still Accruing		Non- Accrual		Total Non- Performing Loans
	(In thousands)
September 30, 2017
Commercial
Income producing - real estate	$	-	$	72	$	72
Land, land development and construction - real estate		-		10		10
Commercial and industrial		-		706		706
Mortgage
1-4 family		-		5,207		5,207
Resort lending		-		1,411		1,411
Home equity - 1st lien		-		258		258
Home equity - 2nd lien		-		221		221
Purchased loans		-		-		-
Installment
Home equity - 1st lien		-		97		97
Home equity - 2nd lien		-		224		224
Boat lending		-		69		69
Recreational vehicle lending		-		25		25
Other		-		110		110
Total recorded investment	$	-	$	8,410	$	8,410
Accrued interest included in recorded investment	$	-	$	-	$	-
December 31, 2016
Commercial
Income producing - real estate	$	-	$	628	$	628
Land, land development and construction - real estate		-		105		105
Commercial and industrial		-		4,430		4,430
Mortgage
1-4 family		-		5,248		5,248
Resort lending		-		1,507		1,507
Home equity - 1st lien		-		222		222
Home equity - 2nd lien		-		317		317
Purchased loans		-		-		-
Installment
Home equity - 1st lien		-		266		266
Home equity - 2nd lien		-		289		289
Boat lending		-		219		219
Recreational vehicle lending		-		21		21
Other		-		112		112
Total recorded investment	$	-	$	13,364	$	13,364
Accrued interest included in recorded investment	$	-	$	-	$	-

19

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

An aging analysis of loans by class follows:

	Loans Past Due								Loans not		Total
	30-59 days		60-89 days		90+ days		Total		Past Due		Loans
	(In thousands)
September 30, 2017
Commercial
Income producing - real estate	$	425	$	-	$	30	$	455	$	271,747	$	272,202
Land, land development and construction - real estate		10		-		-		10		67,793		67,803
Commercial and industrial		120		149		65		334		498,991		499,325
Mortgage
1-4 family		1,929		919		5,207		8,055		553,928		561,983
Resort lending		363		135		1,411		1,909		91,370		93,279
Home equity - 1st lien		460		-		258		718		35,826		36,544
Home equity - 2nd lien		597		195		221		1,013		56,677		57,690
Purchased loans		3		1		-		4		34,872		34,876
Installment
Home equity - 1st lien		115		86		97		298		9,925		10,223
Home equity - 2nd lien		161		23		224		408		10,103		10,511
Boat lending		112		69		69		250		131,153		131,403
Recreational vehicle lending		52		4		25		81		93,687		93,768
Other		108		50		110		268		73,188		73,456
Total recorded investment	$	4,455	$	1,631	$	7,717	$	13,803	$	1,929,260	$	1,943,063
Accrued interest included in recorded investment	$	53	$	24	$	-	$	77	$	5,892	$	5,969

December 31, 2016
Commercial
Income producing - real estate	$	-	$	-	$	383	$	383	$	287,255	$	287,638
Land, land development and construction - real estate		74		-		31		105		51,670		51,775
Commercial and industrial		100		1,385		66		1,551		465,031		466,582
Mortgage
1-4 family		2,361		869		5,248		8,478		306,063		314,541
Resort lending		-		-		1,507		1,507		101,541		103,048
Home equity - 1st lien		149		-		222		371		28,645		29,016
Home equity - 2nd lien		470		218		317		1,005		54,232		55,237
Purchased loans		13		2		-		15		39,122		39,137
Installment
Home equity - 1st lien		311		48		266		625		12,025		12,650
Home equity - 2nd lien		238		41		289		568		13,390		13,958
Boat lending		184		33		219		436		102,489		102,925
Recreational vehicle lending		68		33		21		122		74,413		74,535
Other		289		30		112		431		61,888		62,319
Total recorded investment	$	4,257	$	2,659	$	8,681	$	15,597	$	1,597,764	$	1,613,361
Accrued interest included in recorded investment	$	45	$	19	$	-	$	64	$	5,049	$	5,113

20

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Impaired loans are as follows:

	September 30, 2017		December 31, 2016
Impaired loans with no allocated allowance	(In thousands)
TDR	$	349	$	1,782
Non - TDR		186		1,107
Impaired loans with an allocated allowance
TDR - allowance based on collateral		2,320		3,527
TDR - allowance based on present value cash flow		65,449		72,613
Non - TDR - allowance based on collateral		202		491
Total impaired loans	$	68,506	$	79,520
Amount of allowance for loan losses allocated
TDR - allowance based on collateral	$	641	$	1,868
TDR - allowance based on present value cash flow		6,329		7,146
Non - TDR - allowance based on collateral		91		138
Total amount of allowance for loan losses allocated	$	7,061	$	9,152

21

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Impaired loans by class  are as follows (1):

	September 30, 2017						December 31, 2016
	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	$	-	$	-	$	-	$	517	$	768	$	-
Land, land development & construction-real estate		-		-		-		31		709		-
Commercial and industrial		535		557		-		2,341		3,261		-
Mortgage
1-4 family		2		472		-		2		387		-
Resort lending		-		-		-		-		-		-
Home equity - 1st lien		-		-		-		-		-		-
Home equity - 2nd lien		-		-		-		-		-		-
Installment
Home equity - 1st lien		1		71		-		-		66		-
Home equity - 2nd lien		-		-		-		-		-		-
Boat lending		-		-		-		-		-		-
Recreational vehicle lending		-		-		-		-		-		-
Other		-		-		-		-		-		-
		538		1,100		-		2,891		5,191		-
With an allowance recorded:
Commercial
Income producing - real estate		6,975		7,121		482		7,737		7,880		554
Land, land development & construction-real estate		169		197		10		239		244		36
Commercial and industrial		2,578		2,612		475		4,902		5,246		1,654
Mortgage
1-4 family		37,872		39,393		3,517		41,701		43,479		4,100
Resort lending		16,098		16,169		2,264		16,898		16,931		2,453
Home equity - 1st lien		171		238		30		235		242		10
Home equity - 2nd lien		179		213		12		315		398		16
Installment
Home equity - 1st lien		1,791		1,921		85		1,994		2,117		118
Home equity - 2nd lien		1,969		1,994		161		2,415		2,443		182
Boat lending		1		6		1		1		6		-
Recreational vehicle lending		93		93		5		109		108		6
Other		360		377		19		394		426		23
		68,256		70,334		7,061		76,940		79,520		9,152
Total
Commercial
Income producing - real estate		6,975		7,121		482		8,254		8,648		554
Land, land development & construction-real estate		169		197		10		270		953		36
Commercial and industrial		3,113		3,169		475		7,243		8,507		1,654
Mortgage
1-4 family		37,874		39,865		3,517		41,703		43,866		4,100
Resort lending		16,098		16,169		2,264		16,898		16,931		2,453
Home equity - 1st lien		171		238		30		235		242		10
Home equity - 2nd lien		179		213		12		315		398		16
Installment
Home equity - 1st lien		1,792		1,992		85		1,994		2,183		118
Home equity - 2nd lien		1,969		1,994		161		2,415		2,443		182
Boat lending		1		6		1		1		6		-
Recreational vehicle lending		93		93		5		109		108		6
Other		360		377		19		394		426		23
Total	$	68,794	$	71,434	$	7,061	$	79,831	$	84,711	$	9,152
Accrued interest included in recorded investment	$	288					$	311

(1) There were no impaired purchased mortgage loans at September 30, 2017 or December 31, 2016.

22

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

	2017				2016
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded	(In thousands)
Commercial
Income producing - real estate	$	-	$	-	$	551	$	-
Land, land development & construction-real estate		-		-		133		-
Commercial and industrial		445		8		-		-
Mortgage
1-4 family		127		7		12		3
Resort lending		-		-		-		-
Home equity - 1st lien		-		-		-		-
Home equity - 2nd lien		-		-		-		-
Installment
Home equity - 1st lien		1		1		-		3
Home equity - 2nd lien		-		-		-		-
Boat lending		-		-		-		-
Recreational vehicle lending		-		-		-		-
Other		-		1		-		-
		573		17		696		6
With an allowance recorded
Commercial
Income producing - real estate		7,311		91		8,000		111
Land, land development & construction-real estate		171		2		1,117		3
Commercial and industrial		2,878		26		7,145		69
Mortgage
1-4 family		38,533		462		44,256		470
Resort lending		16,175		153		17,372		161
Home equity - 1st lien		201		1		241		2
Home equity - 2nd lien		180		2		280		6
Installment
Home equity - 1st lien		1,808		40		2,140		34
Home equity - 2nd lien		2,058		26		2,585		37
Boat lending		1		-		2		-
Recreational vehicle lending		98		1		114		2
Other		361		6		424		7
		69,775		810		83,676		902
Total
Commercial
Income producing - real estate		7,311		91		8,551		111
Land, land development & construction-real estate		171		2		1,250		3
Commercial and industrial		3,323		34		7,145		69
Mortgage
1-4 family		38,660		469		44,268		473
Resort lending		16,175		153		17,372		161
Home equity - 1st lien		201		1		241		2
Home equity - 2nd lien		180		2		280		6
Installment
Home equity - 1st lien		1,809		41		2,140		37
Home equity - 2nd lien		2,058		26		2,585		37
Boat lending		1		-		2		-
Recreational vehicle lending		98		1		114		2
Other		361		7		424		7
Total	$	70,348	$	827	$	84,372	$	908

(1) There were no impaired purchased mortgage loans during the three month periods ended September 30, 2017 and 2016, respectively.

23

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

	2017				2016
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:	(In thousands)
Commercial
Income producing - real estate	$	222	$	-	$	632	$	2
Land, land development & construction-real estate		8		-		405		7
Commercial and industrial		808		16		616		21
Mortgage
1-4 family		64		16		12		9
Resort lending		-		-		-		-
Home equity - 1st lien		-		-		-		-
Home equity - 2nd lien		-		-		-		-
Installment
Home equity - 1st lien		1		4		-		4
Home equity - 2nd lien		-		-		4		-
Boat lending		-		-		-		-
Recreational vehicle lending		-		-		-		-
Other		-		1		-		-
		1,103		37		1,669		43
With an allowance recorded:
Commercial
Income producing - real estate		7,525		300		8,153		318
Land, land development & construction-real estate		187		6		1,352		29
Commercial and industrial		3,488		98		5,929		151
Mortgage
1-4 family		39,716		1,420		45,728		1,447
Resort lending		16,485		464		17,705		480
Home equity - 1st lien		218		5		223		6
Home equity - 2nd lien		217		5		231		11
Installment
Home equity - 1st lien		1,874		107		2,233		118
Home equity - 2nd lien		2,210		96		2,723		122
Boat lending		1		-		2		-
Recreational vehicle lending		103		4		117		5
Other		373		19		443		23
		72,397		2,524		84,839		2,710
Total
Commercial
Income producing - real estate		7,747		300		8,785		320
Land, land development & construction-real estate		195		6		1,757		36
Commercial and industrial		4,296		114		6,545		172
Mortgage
1-4 family		39,780		1,436		45,740		1,456
Resort lending		16,485		464		17,705		480
Home equity - 1st lien		218		5		223		6
Home equity - 2nd lien		217		5		231		11
Installment
Home equity - 1st lien		1,875		111		2,233		122
Home equity - 2nd lien		2,210		96		2,727		122
Boat lending		1		-		2		-
Recreational vehicle lending		103		4		117		5
Other		373		20		443		23
Total	$	73,500	$	2,561	$	86,508	$	2,753

(1) There were no impaired purchased mortgage loans during the nine month periods ended September 30, 2017 and 2016, respectively.

24

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

Troubled debt restructurings follow:

	September 30, 2017
	Commercial		Retail (1)			Total
	(In thousands)
Performing TDRs	$	9,431	$	53,755		$	63,186
Non-performing TDRs(2)		401		4,531	(3)		4,932
Total	$	9,832	$	58,286		$	68,118
	December 31, 2016
	Commercial		Retail (1)			Total
	(In thousands)
Performing TDRs	$	10,560	$	59,726		$	70,286
Non-performing TDRs(2)		3,565		4,071	(3)		7,636
Total	$	14,125	$	63,797		$	77,922

(1) Retail loans include mortgage and installment portfolio segments.

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

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

We allocated $7.0 million and $9.0 million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of September 30, 2017 and December 31, 2016, respectively.

During the nine months ended September 30, 2017 and 2016, 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.

25

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Loans that have been classified as troubled debt restructurings during the three-month periods endedSeptember 30 follow(1):

	Number of Contracts		Pre-modification Recorded Balance		Post-modification Recorded Balance
	(Dollars in thousands)
2017
Commercial
Income producing - real estate		-	$	-	$	-
Land, land development & construction-real estate		-		-		-
Commercial and industrial		-		-		-
Mortgage
1-4 family		1		93		95
Resort lending		-		-		-
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		2		51		50
Boat lending		-		-		-
Recreational vehicle lending		-		-		-
Other		1		10		10
Total		4	$	154	$	155
2016
Commercial
Income producing - real estate		2	$	180	$	180
Land, land development & construction-real estate		-		-		-
Commercial and industrial		2		175		158
Mortgage
1-4 family		2		204		207
Resort lending		-		-		-
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		2		77		78
Installment
Home equity - 1st lien		2		82		85
Home equity - 2nd lien		1		7		7
Boat lending		-		-		-
Recreational vehicle lending		-		-		-
Other		1		34		34
Total		12	$	759	$	749

(1) There were no purchased mortgage loans classified as troubled debt restructurings during the three month periods ended September 30, 2017 and 2016, respectively.

26

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Loans that have been classified as troubled debt restructurings during the nine-month periods endedSeptember 30 follow(1):

	Number of Contracts		Pre-modification Recorded Balance		Post-modification Recorded Balance
	(Dollars in thousands)
2017
Commercial
Income producing - real estate		-	$	-	$	-
Land, land development & construction-real estate		-		-		-
Commercial and industrial		12		786		786
Mortgage
1-4 family		3		142		144
Resort lending		1		189		189
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		2		34		37
Home equity - 2nd lien		7		300		301
Boat lending		-		-		-
Recreational vehicle lending		-		-		-
Other		1		10		10
Total		26	$	1,461	$	1,467
2016
Commercial
Income producing - real estate		4	$	290	$	290
Land, land development & construction-real estate		-		-		-
Commercial and industrial		6		1,933		1,916
Mortgage
1-4 family		5		396		470
Resort lending		1		116		117
Home equity - 1st lien		1		107		78
Home equity - 2nd lien		2		77		78
Installment
Home equity - 1st lien		6		141		145
Home equity - 2nd lien		5		133		136
Boat lending		-		-		-
Recreational vehicle lending		-		-		-
Other		2		46		46
Total		32	$	3,239	$	3,276

(1) There were no purchased mortgage loans classified as troubled debt restructurings during the nine month periods ended September 30, 2017 and 2016, respectively.

The troubled debt restructurings described above for 2017 increased the allowance for loan losses by $0.02 million and resulted in zero charge offs during the three months ended September 30, 2017, and increased the allowance by $0.08 million and resulted in zero charge offs during the nine months ended September 30, 2017.

27

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The troubled debt restructurings described above for 2016 increased the allowance for loan losses by $0.34 million and resulted in charge offs of $0.02 million during the three months ended September 30, 2016, and increased the allowance by $0.69 million and resulted in charge offs of $0.02 million during the nine months ended September 30, 2016.

Six commercial and industrial loans with a recorded balance of $0.16 million that have been classified as troubled debt restructurings during the past twelve months subsequently defaulted during the three and nine month periods ended September 30, 2017.  These subsequent defaults resulted in an increase in the allowance of $0.02 million and $0.04 million during the three and nine month periods ended September 30, 2017, respectively and resulted in charge-offs of $0.05 million during both the three and nine month periods ended September 30, 2017.  There were no troubled debt restructurings that subsequently defaulted within twelve months following the modification during the three and nine months ended September 30, 2017 for any other loan class.

There were no troubled debt restructurings that subsequently defaulted within twelve months following the modification during the three and nine months ended September 30, 2016.

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

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

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

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

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

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

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

28

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Rating 10 and 11: These loans are generally referred to as our “substandard - non-accrual” and “doubtful” commercial credits, respectively. These ratings include loans to borrowers with weaknesses that make collection of debt in full, on the basis of current facts, conditions and values at best questionable and at worst improbable. All of these loans are placed in non-accrual.

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

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

	Commercial
	Non-watch 1-6		Watch 7-8		Substandard Accrual 9		Non- Accrual 10-11		Total
					(In thousands)
September 30, 2017
Income producing - real estate	$	268,781	$	3,037	$	312	$	72	$	272,202
Land, land development and construction - real estate		67,730		63		-		10		67,803
Commercial and industrial		474,022		22,217		2,380		706		499,325
Total	$	810,533	$	25,317	$	2,692	$	788	$	839,330
Accrued interest included in total	$	1,991	$	80	$	9	$	-	$	2,080
December 31, 2016
Income producing - real estate	$	282,886	$	3,787	$	337	$	628	$	287,638
Land, land development andconstruction - real estate		51,603		67		-		105		51,775
Commercial and industrial		449,365		9,788		2,998		4,431		466,582
Total	$	783,854	$	13,642	$	3,335	$	5,164	$	805,995
Accrued interest included in total	$	1,915	$	52	$	11	$	-	$	1,978

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

29

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

	Mortgage (1)
	1-4 Family		Resort Lending		Home Equity 1st Lien		Home Equity 2nd Lien		Purchased Loans		Total
	(In thousands)
September 30, 2017
800 and above	$	62,145	$	11,336	$	8,491	$	8,896	$	7,790	$	98,658
750-799		227,676		33,287		15,619		21,092		18,559		316,233
700-749		130,480		25,629		6,583		13,819		7,978		184,489
650-699		77,357		12,441		3,304		7,970		429		101,501
600-649		26,947		4,648		1,090		2,439		-		35,124
550-599		15,547		2,777		365		1,507		-		20,196
500-549		8,766		1,404		540		1,319		-		12,029
Under 500		3,692		89		253		169		-		4,203
Unknown		9,373		1,668		299		479		120		11,939
Total	$	561,983	$	93,279	$	36,544	$	57,690	$	34,876	$	784,372
Accrued interest included in total	$	2,134	$	374	$	165	$	260	$	93	$	3,026
December 31, 2016
800 and above	$	36,534	$	10,484	$	6,048	$	8,392	$	8,462	$	69,920
750-799		102,382		41,999		10,006		20,113		20,984		195,484
700-749		69,337		24,727		5,706		12,360		9,115		121,245
650-699		50,621		13,798		4,106		8,167		437		77,129
600-649		25,270		5,769		1,674		3,067		-		35,780
550-599		13,747		3,030		455		1,699		-		18,931
500-549		9,215		1,438		486		981		-		12,120
Under 500		5,145		92		255		279		-		5,771
Unknown		2,290		1,711		280		179		139		4,599
Total	$	314,541	$	103,048	$	29,016	$	55,237	$	39,137	$	540,979
Accrued interest included in total	$	1,466	$	450	$	111	$	226	$	111	$	2,364

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

30

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

	Installment(1)
	Home Equity 1st Lien		Home Equity 2nd Lien		Boat Lending		Recreational Vehicle Lending		Other		Total
	(In thousands)
September 30, 2017
800 and above	$	1,085	$	869	$	26,168	$	26,312	$	10,655	$	65,089
750-799		1,938		2,721		67,402		48,183		26,546		146,790
700-749		1,601		2,236		25,945		14,261		16,433		60,476
650-699		2,193		1,864		9,164		3,627		8,990		25,838
600-649		1,429		1,429		1,730		838		2,334		7,760
550-599		1,252		919		468		244		894		3,777
500-549		616		398		243		125		434		1,816
Under 500		92		56		64		11		130		353
Unknown		17		19		219		167		7,040		7,462
Total	$	10,223	$	10,511	$	131,403	$	93,768	$	73,456	$	319,361
Accrued interest included in total	$	42	$	44	$	322	$	236	$	219	$	863
December 31, 2016
800 and above	$	1,354	$	1,626	$	21,422	$	23,034	$	8,911	$	56,347
750-799		2,478		3,334		50,508		35,827		21,918		114,065
700-749		1,920		2,686		20,045		11,049		13,183		48,883
650-699		2,852		2,541		7,559		3,205		8,913		25,070
600-649		1,691		1,775		1,846		821		2,269		8,402
550-599		1,231		1,063		882		280		833		4,289
500-549		981		692		440		189		511		2,813
Under 500		114		220		73		16		211		634
Unknown		29		21		150		114		5,570		5,884
Total	$	12,650	$	13,958	$	102,925	$	74,535	$	62,319	$	266,387
Accrued interest included in total	$	54	$	59	$	264	$	203	$	191	$	771

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

Foreclosed residential real estate properties included in other real estate and repossessed assets on our Condensed Consolidated Statements of Financial Condition totaled $1.7 million and $1.9 million at September 30, 2017 and December 31, 2016, respectively.  Retail mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process according to local requirements totaled $1.2 million and $1.0 million at  September 30, 2017 and December 31, 2016, respectively.

31

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

5.    Shareholders’ Equity and Earnings Per Common Share

On January 23, 2017, 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, 2017.  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.  We did not repurchase any shares of common stock during the nine months ended September 30, 2017.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
	(In thousands, except per share amounts)
Net income	$	6,859	$	6,373	$	18,764	$	16,911
Weighted average shares outstanding (1)		21,334		21,232		21,325		21,421
Effect of stock options		138		149		144		150
Stock units for deferred compensation plan for non-employee directors		121		116		120		115
Performance share units		59		52		57		42
Restricted stock units		-		-		-		46
Weighted average shares outstanding for calculation of diluted earnings per share		21,652		21,549		21,646		21,774
Net income per common share
Basic (1)	$	0.32	$	0.30	$	0.88	$	0.79
Diluted	$	0.32	$	0.30	$	0.87	$	0.78

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

Weighted average stock options outstanding that were not considered in computing diluted net income per share because they were anti-dilutive were zero for both the three and nine month periods ended September 30, 2017, and totaled 0.03 million for both the three and nine month periods ended September 30, 2016.

6. Derivative Financial Instruments

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

32

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

 (unaudited)

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

	September 30, 2017
	Notional Amount		Average Maturity (years)		Fair Value
	(Dollars in thousands)
Cash flow hedge - pay-fixed interest rate swap agreement	$	15,000		3.9	$	105
No hedge designation
Rate-lock mortgage loan commitments	$	36,580		0.1	$	769
Mandatory commitments to sell mortgage loans		74,750		0.1		26
Pay-fixed interest rate swap agreements		52,586		7.1		52
Pay-variable interest rate swap agreements		52,586		7.1		(52	)
Purchased options		3,119		3.8		277
Written options		3,119		3.8		(277	)
Total	$	222,740		3.5	$	795

	December 31, 2016
	Notional Amount		Average Maturity (years)		Fair Value
	(Dollars in thousands)
No hedge designation
Rate-lock mortgage loan commitments	$	26,658		0.1	$	646
Mandatory commitments to sell mortgage loans		61,954		0.1		630
Pay-fixed interest rate swap agreements		46,121		8.6		249
Pay-variable interest rate swap agreements		46,121		8.6		(249	)
Purchased options		3,119		4.5		238
Written options		3,119		4.5		(238	)
Total	$	187,092		4.4	$	1,276

We use variable-rate and short-term fixed-rate (less than 12 months) debt obligations to fund a portion of our balance sheet, which exposes us to variability in interest rates. To meet our asset/liability management objectives, we may periodically enter into derivative financial instruments to mitigate exposure to fluctuations in cash flows resulting from changes in interest rates (“Cash Flow Hedges”).  The Cash Flow Hedge is a pay-fixed interest-rate swap that converts variable-rate cash flows on debt obligations to fixed-rates.

We record the fair value of Cash Flow Hedges in accrued income and other assets and accrued expenses and other liabilities on our Condensed Consolidated Statements of Financial Condition.  On an ongoing basis, we adjust our Condensed Consolidated Statements of Financial Condition to reflect the then current fair value of Cash Flow Hedges.  The related gains or losses are reported in other comprehensive income or loss and are subsequently reclassified into earnings, as a yield adjustment in the same period in which the related interest on the hedged items (variable-rate debt obligations) affect earnings.  It is anticipated that approximately $0.03 million, of unrealized losses on Cash Flow Hedges at September 30, 2017 will be reclassified to earnings over the next twelve months.  To the extent that the Cash Flow Hedges are not effective, the ineffective portion of the Cash Flow Hedges is immediately recognized in interest expense.  The maximum term of the Cash Flow Hedge at September 30, 2017 is 3.9 years.

33

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

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

We currently offer 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 with no hedge designation relate to this program.

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

34

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Fair Values of Derivative Instruments

Asset Derivatives		Liability Derivatives
September 30, 2017	December 31, 2016	September 30, 2017	December 31, 2016

	Balance  Sheet  Location		Fair Value	Balance  Sheet  Location		Fair Value	Balance  Sheet  Location		Fair Value	Balance  Sheet  Location		Fair Value
	(In thousands)
Derivatives designated as hedging instruments
Pay-fixed interest rate swap agreements	Other assets	$	105	Other assets	$	-	Other  liabilities	$	-	Other liabilities	$	-
Derivatives not designated as hedging instruments
Rate-lock mortgage loan commitments	Other assets		769	Other assets		646	Other liabilities		-	Other liabilities		-
Mandatory commitments to sell mortgage loans	Other assets		26	Other assets		630	Other liabilities		-	Other liabilities		-
Pay-fixed interest rate swap agreements	Other assets		424	Other assets		493	Other liabilities		372	Other liabilities		244
Pay-variable interest rate swap agreements	Other assets		372	Other assets		244	Other liabilities		424	Other liabilities		493
Purchased options	Other assets		277	Other assets		238	Other liabilities		-	Other liabilities		-
Written options	Other assets		-	Other  assets		-	Other liabilities		277	Other liabilities		238
Total			1,868			2,251			1,073			975
Total derivatives		$	1,973		$	2,251		$	1,073		$	975

35

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

Three Month Periods Ended September 30,
	Gain Recognized in Other Comprehensive Income (Effective Portion)						Location of  Gain (Loss)  Reclassified  from  Accumulated  Other  Comprehensive  Loss into  Income  (Effective	Loss Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)							Location of  Gain (Loss)  Recognized	Gain (Loss) Recognized in Income (1)
	2017			2016			Portion)	2017				2016			in Income (1)	2017			2016
	(In thousands)
Cash Flow Hedges
Pay-fixed interest rate swap agreements		$	95		$	-	Interest expense		$	(5	)		$	-		$	5			$	-
Total		$	95		$	-			$	(5	)		$	-		$	5			$	-
No hedge designation
Rate-lock mortgage loan commitments															Net gains on on mortage loans	$	(313	)		$	264
Mandatory commitments to sell mortgage loans															Net gains on on mortage loans		2				94
Pay-fixed interest rate swap agreements															Interest income		52				196
Pay-variable interest rate swap agreements															Interest income		(52	)			(196	)
Purchased options															Interest expense		5				13
Written options															Interest expense		(5	)			(13	)
Total																$	(311	)		$	358

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

36

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Nine Month Periods Ended September 30,
	Gain Recognized in Other Comprehensive Income (Effective Portion)				Location of  Gain (Loss)  Reclassified  from  Accumulated  Other  Comprehensive  Loss into  Income  (Effective	Loss Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)					Location of  Gain (Loss)  Recognized  in Income (1)	Gain (Loss) Recognized in Income (1)
	2017		2016		Portion)	2017			2016			2017			2016
	(In thousands)
Cash Flow Hedges
Pay-fixed interest rate swap agreements	$	95	$	-	Interest expense	$	(5	)	$	-		$	5		$	-
Total	$	95	$	-		$	(5	)	$	-		$	5		$	-
No hedge designation
Rate-lock mortgage loan commitments											Net gains on on mortage loans	$	123		$	613
Mandatory commitments to sell mortgage loans											Net gains on on mortage loans		(604	)		(352	)
Pay-fixed interest rate swap agreements											Interest income		(197	)		(1,512	)
Pay-variable interest rate swap agreements											Interest income		197			1,512
Purchased options											Interest expense		39			94
Written options											Interest expense		(39	)		(94	)
Total												$	(481	)	$	261

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

7. Intangible Assets

The following table summarizes intangible assets, net of amortization:

	September 30, 2017						December 31, 2016
	Gross Carrying Amount			Accumulated Amortization			Gross Carrying Amount			Accumulated Amortization
	(In thousands)
Amortized intangible assets - core deposits		$	6,118		$	4,445		$	6,118		$	4,186

37

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Amortization of other intangibles has been estimated through 2022 in the following table.

	(In thousands)
Three months ending December 31, 2017	$	87
2018		346
2019		346
2020		346
2021		346
2022		202
Total	$	1,673

8. Share Based Compensation

We maintain share based payment plans that include a non-employee director stock purchase plan and a long-term incentive plan that permits the issuance of share based compensation, including stock options and non-vested share awards. The long-term incentive plan, which is shareholder approved, permits the grant of additional share based awards for up to 0.5 million shares of common stock as of September 30, 2017.  The non-employee director stock purchase plan permits the issuance of additional share based payments for up to 0.2 million shares of common stock as of September 30, 2017. 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 the three month periods ended March 31, 2017 and 2016, pursuant to our long-term incentive plan, we granted 0.05 million and 0.07 million shares of restricted stock, respectively and 0.02 million and 0.03 million performance stock units (“PSU”), respectively 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. No long term incentive grants were made during the second or third quarters of 2017 or 2016.

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 0.006 million shares during each nine month period ended September 30, of 2017 and 2016 and expensed their value during those same periods.

Total compensation expense recognized for grants pursuant to our long-term incentive plan was $0.4 million and $1.2 million during the three and nine month periods ended September 30, 2017, respectively, and was $0.3 million and $1.1 million during the same periods in 2016, respectively.  The corresponding tax benefit relating to this expense was $0.1 million and $0.4 million for the three and nine month periods ended September 30, 2017, respectively and $0.1 million and $0.4 million for the same periods in 2016. Total expense recognized for non-employee director share based payments was $0.05 million and $0.12 million during the three and nine month periods ended September 30, 2017, respectively, and was $0.03 million and $0.09 million during the same periods in 2016, respectively.  The corresponding tax benefit relating to this expense was $0.02 million and $0.04 million for the three and nine month periods ended September 30, 2017, respectively and $0.01 million and $0.03 million during the same periods in 2016.

38

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

At September 30, 2017, the total expected compensation cost related to non-vested restricted stock and PSUs not yet recognized was $2.3 million.  The weighted-average period over which this amount will be recognized is 2.2 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, 2017		211,018		$	5.05
Granted		-
Exercised		(28,963	)		4.03
Forfeited		-
Expired		-
Outstanding at September 30, 2017		182,055		$	5.21		4.4	$	3,175
Vested and expected to vest at September 30, 2017		182,055		$	5.21		4.4	$	3,175
Exercisable at September 30, 2017		182,055		$	5.21		4.4	$	3,175

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

	Number of Shares			Weighted- Average Grant Date Fair Value
Outstanding at January 1, 2017		296,422		$	14.52
Granted		68,473			21.07
Vested		(63,799	)		14.91
Forfeited		(8,510	)		15.59
Outstanding at September 30, 2017		292,586		$	15.88

Certain information regarding options exercised during the periods follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
	(In thousands)
Intrinsic value	$	39	$	9	$	513	$	186
Cash proceeds received	$	18	$	5	$	117	$	64
Tax benefit realized	$	14	$	3	$	180	$	65

39

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

9. Income Tax

Income tax expense was $3.2 million and $3.0 million during the three month periods ended September 30, 2017 and 2016, respectively and $8.4 million and $7.5 million during the nine months ended September 30, 2017 and 2016, respectively.

We assess whether a valuation allowance should be established against our deferred tax assets based on the consideration of all available evidence using a “more likely than not” standard.  The ultimate realization of this asset is primarily based on generating future income.  We concluded at both September 30, 2017 and 2016, that the realization of substantially all of our deferred tax assets continues to be more likely than not.

We had maintained a valuation allowance against our deferred tax assets of approximately $1.1 million at December 31, 2016. This valuation allowance on our deferred tax assets related to state income taxes at Mepco.  In this instance, we determined that the future realization of these particular deferred tax assets was not more likely than not.  That conclusion was based on the pending sale of Mepco’s payment plan business.  After accounting for the May 2017 sale of our payment plan business, all that remained of these deferred tax assets were loss carryforwards that we wrote off against the related valuation allowance during the second quarter of 2017 as we will no longer be doing business in those states.

At both September 30, 2017 and December 31, 2016, we had approximately $0.8 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 2017.

10. Regulatory Matters

Capital guidelines adopted by federal and state regulatory agencies and restrictions imposed by law limit the amount of cash dividends our Bank can pay to us. Under these guidelines, the amount of dividends that may be paid in any calendar year is limited to the Bank’s current year net profits, combined with the retained net profits of the preceding two years. Further, the Bank cannot pay a dividend at any time that it has negative undivided profits.  As of September 30, 2017, the Bank had positive undivided profits of $13.0 million.  It is not our intent to have dividends paid in amounts that would reduce the capital of our Bank to levels below those which we consider prudent and in accordance with guidelines of regulatory authorities.

We are also subject to various regulatory capital requirements. The prompt corrective action regulations establish quantitative measures to ensure capital adequacy and require minimum amounts and ratios of total, Tier 1, and common equity Tier 1 capital to risk-weighted assets and Tier 1 capital to average assets. Failure to meet minimum capital requirements can result in certain mandatory, and possibly discretionary, actions by regulators that could have a material effect on our consolidated financial statements. Under capital adequacy guidelines, we must meet specific capital requirements that involve quantitative measures as well as qualitative judgments by the regulators. The most recent regulatory filings as of September 30, 2017 and December 31, 2016, 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.

40

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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 1.25% and 0.625% added to the minimum ratio for adequately capitalized institutions for 2017 and 2016, respectively and 0.625% will be added each subsequent year until fully phased in during 2019.  This capital conservation buffer is not reflected in the table that follows.  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.

41

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Our actual capital amounts and ratios follow:

	Actual					Minimum for Adequately Capitalized Institutions					Minimum for Well-Capitalized Institutions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
September 30, 2017
Total capital to risk-weighted assets
Consolidated	$	307,278		15.14	%	$	162,315		8.00	%	NA		NA
Independent Bank		281,228		13.87			162,210		8.00		$	202,763		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	284,818		14.04	%	$	121,737		6.00	%	NA		NA
Independent Bank		258,768		12.76			121,658		6.00		$	162,210		8.00	%
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	253,101		12.47	%	$	91,302		4.50	%	NA		NA
Independent Bank		258,768		12.76			91,243		4.50		$	131,796		6.50	%
Tier 1 capital to average assets
Consolidated	$	284,818		10.63	%	$	107,154		4.00	%	NA		NA
Independent Bank		258,768		9.67			107,022		4.00		$	133,778		5.00	%
December 31, 2016
Total capital to risk-weighted assets
Consolidated	$	286,289		15.86	%	$	144,413		8.00	%	NA		NA
Independent Bank		270,855		15.02			144,223		8.00		$	180,279		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	265,405		14.70	%	$	108,309		6.00	%	NA		NA
Independent Bank		249,971		13.87			108,167		6.00		$	144,223		8.00	%
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	238,996		13.24	%	$	81,232		4.50	%	NA		NA
Independent Bank		249,971		13.87			81,126		4.50		$	117,181		6.50	%
Tier 1 capital to average assets
Consolidated	$	265,405		10.50	%	$	101,112		4.00	%	NA		NA
Independent Bank		249,971		9.90			101,019		4.00		$	126,274		5.00	%
NA - Not applicable

42

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The components of our regulatory capital are as follows:

	Consolidated						Independent Bank
	September 30, 2017			December 31, 2016			September 30, 2017			December 31, 2016
	(In thousands)
Total shareholders' equity	$	267,710		$	248,980		$	267,406		$	258,814
Add (deduct)
Accumulated other comprehensive (gain) loss for regulatory purposes		(2,140	)		3,310			(2,140	)		3,310
Intangible assets		(1,338	)		(1,159	)		(1,338	)		(1,159	)
Disallowed deferred tax assets		(11,131	)		(12,135	)		(5,160	)		(10,994	)
Common equity tier 1 capital		253,101			238,996			258,768			249,971
Qualifying trust preferred securities		34,500			34,500			-			-
Disallowed deferred tax assets		(2,783	)		(8,091	)		-			-
Tier 1 capital		284,818			265,405			258,768			249,971
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets		22,460			20,884			22,460			20,884
Total risk-based capital	$	307,278		$	286,289		$	281,228		$	270,855

11. Fair Value Disclosures

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

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

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

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

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

43

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, obligations of states and political subdivisions, trust preferred securities, corporate securities and foreign government securities.

Loans held for sale:  The fair value of mortgage loans held for sale is based on mortgage backed security pricing for comparable assets (recurring Level 2).

Impaired loans with specific loss allocations based on collateral value:  From time to time, certain loans are considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. We measure our investment in an impaired loan based on one of three methods: the loan’s observable market price, the fair value of the collateral or the present value of expected future cash flows discounted at the loan’s effective interest rate. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At September 30, 2017 and December 31, 2016, 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 non-interest expense-other in the Condensed Consolidated Statements of Operations. The fair value of the property used at and subsequent to the time of acquisition is typically determined by a third party appraisal of the property.  These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments can be significant and typically result in a Level 3 classification of the inputs for determining fair value.

44

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 residential properties) reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics.   We compare the actual selling price of collateral that has been sold to the most recent appraised value of our properties to determine what additional adjustment, if any, should be made to the appraisal value to arrive at fair value.  For commercial and residential properties we typically discount an appraisal to account for various factors that the appraisal excludes in its assumptions.  These additional discounts generally do not result in material adjustments to the appraised value.

Capitalized mortgage loan servicing rights:  The fair value of capitalized mortgage loan servicing rights is based on a valuation model used by an independent third party that calculates the present value of estimated net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income. Certain model assumptions are generally unobservable and are based upon the best information available including data relating to our own servicing portfolio, reviews of mortgage servicing assumption and valuation surveys and input from various mortgage servicers and, therefore, are recorded as Level 3.  Management evaluates the third party valuation for reasonableness each quarter as part of our financial reporting control processes.  Prior to January 1, 2017, capitalized mortgage loan servicing rights were accounted for using the amortization method of accounting and were measured at fair value on a non-recurring basis.  During the first quarter of 2017, we adopted the fair value method of accounting for our capitalized mortgage loan servicing rights (see note #2) and are now measured at fair value on a recurring basis.

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).

45

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

			Fair Value Measurements Using
	Fair Value Measure- ments		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Un- observable Inputs (Level 3)
	(In thousands)
September 30, 2017:
Measured at Fair Value on a Recurring Basis
Assets
Trading securities	$	347	$	347	$	-	$	-
Securities available for sale
U.S. agency		26,626		-		26,626		-
U.S. agency residential mortgage-backed		136,109		-		136,109		-
U.S. agency commercial mortgage-backed		10,736		-		10,736		-
Private label mortgage-backed		26,990		-		26,990		-
Other asset backed		108,339		-		108,339		-
Obligations of states and political subdivisions		177,176		-		177,176		-
Corporate		58,000		-		58,000		-
Trust preferred		2,800		-		2,800		-
Foreign government		2,089		-		2,089		-
Loans held for sale		47,611		-		47,611		-
Capitalized mortgage loan servicing rights		14,675		-		-		14,675
Derivatives (1)		1,973		-		1,973		-
Liabilities
Derivatives (2)		1,073		-		1,073		-
Measured at Fair Value on a Non-recurring basis:
Assets
Impaired loans (3)
Commercial
Income producing - real estate		185		-		-		185
Land, land development & construction-real estate		11		-		-		11
Commercial and industrial		878		-		-		878
Mortgage 1-4 family		509		-		-		509
Resort lending		207		-		-		207
Other real estate (4)
Mortgage 1-4 family		44		-		-		44
Resort lending		5		-		-		5

(1) Included in accrued income and other assets

(2) Included in accrued expenses and other liabilities

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

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

46

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, 2016:
Measured at Fair Value on a Recurring Basis
Assets
Trading securities	$	410	$	410	$	-	$	-
Securities available for sale
U.S. agency		28,988		-		28,988		-
U.S. agency residential mortgage-backed		156,289		-		156,289		-
U.S. agency commercial mortgage-backed		12,632		-		12,632		-
Private label mortgage-backed		34,727		-		34,727		-
Other asset backed		146,709		-		146,709		-
Obligations of states and political subdivisions		170,899		-		170,899		-
Corporate		56,180		-		56,180		-
Trust preferred		2,579		-		2,579		-
Foreign government		1,613		-		1,613		-
Loans held for sale		35,946		-		35,946		-
Derivatives (1)		2,251		-		2,251		-
Liabilities
Derivatives (2)		975		-		975		-
Measured at Fair Value on a Non-recurring basis:
Assets
Capitalized mortgage loan servicing rights (3)		8,163		-		-		8,163
Impaired loans (4)
Commercial
Income producing - real estate		255		-		-		255
Land, land development & construction-real estate		54		-		-		54
Commercial and industrial		1,342		-		-		1,342
Mortgage 1-4 family		361		-		-		361
Other real estate (5)
Commercial
Income producing - real estate (6)		2,863		-		2,863		-
Land, land development & construction-real estate		176		-		-		176
Mortgage 1-4 family		98		-		-		98
Resort lending		133		-		-		133

(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.

(6) Level 2 valuation is based on a signed purchase agreement.

There were no transfers between Level 1 and Level 2 during the nine months ended September 30, 2017 and 2016.

47

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

		Changes in Fair Values for the Nine-Month Periods Ended September 30 for Items Measured at
		Fair Value Pursuant to Election of the Fair Value Option
		2017											2016
		Net Gains (Losses) on Assets					Mortgage			Total Change in Fair Values Included in Current			Net Gains (Losses) on Assets				Total Change in Fair Values Included in Current
		Securities			Mortgage Loans		Loan Servicing, net			Period Earnings			Securities		Mortgage Loans		Period Earnings
	(In thousands)
Trading securities		$	(63	)	$	-	$	-		$	(63	)	$	4	$	-	$	4
Loans held for sale			-			713		-			713			-		612		612
Capitalized mortgage loan servicing rights			-			-		(2,585	)		(2,585	)		-		-		-

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

The following represent impairment charges recognized during the three and nine month periods ended September 30, 2017 and 2016 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 $8.2 million, which is net of a valuation allowance of $2.3 million, at December 31, 2016.   A recovery (charge) of $0.6 million and $(1.5) million was included in our results of operations for the three and nine month periods ending September 30, 2016.

· Loans which are measured for impairment using the fair value of collateral for collateral dependent loans had a carrying amount of $2.5 million, with a valuation allowance of $0.7 million at September 30, 2017, and had a carrying amount of $4.0 million, with a valuation allowance of $2.0 million at December 31, 2016.  The provision for loan losses included in our results of operations relating to impaired loans was a net expense of $0.3 million and $0.1 million for the three month periods ending September 30, 2017 and 2016, respectively, and a net expense of $0.5 million and $0.3 million for the nine month periods ending September 30, 2017 and 2016, respectively.

· Other real estate, which is measured using the fair value of the property, had a carrying amount of $0.05 million which is net of a valuation allowance of $0.08 million at September 30, 2017, and a carrying amount of $3.2 million, which is net of a valuation allowance of $0.8 million, at December 31, 2016. An additional charge relating to other real estate measured at fair value of $0.03 million and $0.04 million was included in our results of operations during the three and nine month periods ended September 30, 2017, respectively and $0.37 million and $0.41 million during the same periods in 2016.

48

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

	Capitalized Mortgage Loan Servicing Rights
	Three Months Ended September 30,					Nine Months Ended September 30,
	2017			2016		2017			2016
Beginning balance	$	14,515		$	-	$	-		$	-
Change in accounting		-			-		14,213			-
Beginning balance, as adjusted		14,515			-		14,213			-
Total losses realized and unrealized:
Included in results of operations		(1,090	)		-		(2,585	)		-
Included in other comprehensive income		-			-		-			-
Purchases, issuances, settlements, maturities and calls		1,250			-		3,047			-
Transfers in and/or out of Level 3		-			-		-			-
Ending balance	$	14,675		$	-	$	14,675		$	-
Amount of total losses for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at September 30	$	(1,090	)	$	-	$	(2,585	)	$	-

As discussed above we changed the accounting for capitalized mortgage loan servicing rights during the first quarter of 2017 (see note #2) and are now measuring valuation on a recurring basis.   The fair value of our capitalized mortgage loan servicing rights has been determined based on a valuation model used by an independent third party as discussed above.  The significant unobservable inputs used in the fair value measurement of the capitalized mortgage loan servicing rights are discount rate, cost to service, ancillary income and float rate.  Significant changes in all four of these assumptions in isolation would result in significant changes to the value of our capitalized mortgage loan servicing rights.  Quantitative information about our Level 3 fair value measurements measured on a recurring basis follows:

	Asset Fair Value		Valuation Technique	Unobservable Inputs	Weighted Average
	(In thousands)
September 30, 2017
Capitalized mortgage loan servicing rights	$	14,675	Present value of net	Discount rate		10.10	%
			servicing revenue	Cost to service	$	81
				Ancillary income		23
				Float rate		2.00	%

49

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)
September 30, 2017
Impaired loans
Commercial	$	1,074	Sales comparison approach	Adjustment for differences between comparable sales		(2.3	)%
Mortgage		716	Sales comparison approach	Adjustment for differences between comparable sales		0.3
Other real estate
Mortgage		49	Sales comparison approach	Adjustment for differences between comparable sales		5.8
December 31, 2016
Capitalized mortgage loan servicing rights	$	8,163	Present value of net servicing revenue	Discount rate		10.07	%
				Cost to service	$	83
				Ancillary income		24
				Float rate		1.97	%
Impaired loans
Commercial (1)		1,446	Sales comparison approach	Adjustment for differences between comparable sales		(1.5	)%
Mortgage		361	Sales comparison approach	Adjustment for differences between comparable sales		(4.7	)
Other real estate
Commercial		176	Sales comparison  approach	Adjustment for differences between comparable sales		(22.5	)
Mortgage		231	Sales comparison approach	Adjustment for differences between comparable sales		(5.1	)

(1) In addition to the valuation techniques and unobservable inputs discussed above, at December 31, 2016, we had an impaired collateral dependent commercial relationship that totaled $0.2 million that was primarily secured by collateral other than real estate. Collateral securing this relationship primarily included machinery and equipment and inventory. Valuation techniques 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
September 30, 2017	$	47,611	$	1,150	$	46,461
December 31, 2016		35,946		437		35,509

50

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

12. Fair Values of Financial Instruments

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

Estimated fair values have been determined using available data and methodologies that are considered suitable for each category of financial instrument. For instruments with adjustable interest rates which reprice frequently and without significant credit risk, it is presumed that estimated fair values approximate the recorded book balances. Fair value methodologies discussed below do not necessarily represent an exit price in the determination of the fair value of these financial instruments.

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 #11.

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

Net loans and loans held for sale:  The fair value of loans is calculated by discounting estimated future cash flows using estimated market discount rates that reflect credit and interest-rate risk inherent in the loans 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 #11.  Loans held for sale are classified as Level 2 as described in note #11. Payment plan receivables held for sale are also classified as Level 2 based on a signed purchase agreement as described in note #15.

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 #11.

51

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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 time deposits 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.

Federal funds purchased:  The recorded book balance of federal funds purchased, which mature in one day, approximates fair value and is classified as Level 2.

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.

52

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The estimated recorded book balances and fair values follow:

					Fair Value Using
	Recorded Book Balance		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Un- observable Inputs (Level 3)
	(In thousands)
September 30, 2017
Assets
Cash and due from banks	$	31,998	$	31,998	$	31,998	$	-	$	-
Interest bearing deposits		15,605		15,605		15,605		-		-
Interest bearing deposits - time		3,489		3,493		-		3,493		-
Trading securities		347		347		347		-		-
Securities available for sale		548,865		548,865		-		548,865		-
Federal Home Loan Bank and Federal
Reserve Bank Stock		15,543	NA		NA		NA		NA
Net loans and loans held for sale		1,963,227		1,909,662		-		47,611		1,862,051
Accrued interest receivable		8,740		8,740		-		2,850		5,890
Derivative financial instruments		1,973		1,973		-		1,973		-
Liabilities
Deposits with no stated maturity (1)	$	1,808,071	$	1,808,071	$	1,808,071	$	-	$	-
Deposits with stated maturity (1)		535,690		533,045		-		533,045		-
Federal funds purchased		3,000		3,000		-		3,000		-
Other borrowings		72,849		73,405		-		73,405		-
Subordinated debentures		35,569		28,634		-		28,634		-
Accrued interest payable		1,105		1,105		40		1,065		-
Derivative financial instruments		1,073		1,073		-		1,073		-
December 31, 2016
Assets
Cash and due from banks	$	35,238	$	35,238	$	35,238	$	-	$	-
Interest bearing deposits		47,956		47,956		47,956		-		-
Interest bearing deposits - time		5,591		5,611		-		5,611		-
Trading securities		410		410		410		-		-
Securities available for sale		610,616		610,616		-		610,616		-
Federal Home Loan Bank and Federal
Reserve Bank Stock		15,543	NA		NA		NA		NA
Net loans and loans held for sale (2)		1,655,335		1,629,587		-		67,321		1,562,266
Accrued interest receivable		7,316		7,316		5		2,364		4,947
Derivative financial instruments		2,251		2,251		-		2,251		-
Liabilities
Deposits with no stated maturity (1)	$	1,740,601	$	1,740,601	$	1,740,601	$	-	$	-
Deposits with stated maturity (1)		485,118		483,469		-		483,469		-
Other borrowings		9,433		10,371		-		10,371		-
Subordinated debentures		35,569		25,017		-		25,017		-
Accrued interest payable		932		932		21		911		-
Derivative financial instruments		975		975		-		975		-

(1) Deposits with no stated maturity include reciprocal deposits with a recorded book balance of $13.5 million and $7.4 million at September 30, 2017 and December 31, 2016, respectively. Deposits with a stated maturity include reciprocal deposits with a recorded book balance of $35.5 million and $31.3 million September 30, 2017 and December 31, 2016, respectively.

(2) Net loans and loans held for sale include $31.4 million of payment plan receivables and commercial loans held for sale at December 31, 2016.

53

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

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

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

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

13. Contingent Liabilities

In December 2016, we reached a tentative settlement regarding litigation initiated against us in Wayne County, Michigan Circuit Court.  The Court issued a preliminary approval of this settlement in the first quarter of 2017.  This litigation concerned checking account transaction sequencing during a period from February 2009 to June 2011.  Under the terms of the settlement, we have agreed to pay $2.2 million and are also responsible for class notification costs and certain other expenses which are estimated to total approximately $0.1 million (these amounts were accrued for and expensed in the fourth quarter of 2016).  We expect the settlement payment to occur in the fourth quarter of 2017 or first quarter of 2018.  Although, we deny any liability associated with this matter and believe we have meritorious defenses to the allegations in the complaint, given the costs and uncertainty of litigation, it was determined that this settlement was in the best interests of the organization.

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

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

54

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

In connection with the sale of Mepco (see note #15), we agreed to contractually indemnify the purchaser from certain losses it may incur, including as a result of its failure to collect certain receivables it purchased as part of the business as well as breaches of representations and warranties we made in the sale agreement, subject to various limitations. We have not accrued any liability related to these indemnification requirements in our September 30, 2017 Condensed Consolidated Statement of Financial Condition because we believe the likelihood of having to pay any amount as a result of these indemnification obligations is remote. However, if the purchaser is unable to collect the receivables it purchased from Mepco or otherwise encounters difficulties in operating the business, it is possible it could make one or more claims against us pursuant to the sale agreement. In that event, we may incur expenses in defending any such claims and/or amounts paid to such purchaser to resolve such claims. As of September 30, 2017 these receivables balances had declined to $22.5 million and to date the purchaser has made no claims for indemnification.

The provision for loss reimbursement on sold loans was an expense of $0.02 million and $0.07 million in the third quarter and first nine months of 2017, respectively, compared to an expense of $0.05 million and $0.03 million in the third quarter and first nine months of 2016, respectively. This provision represents our estimate of incurred losses related to mortgage loans that we have sold to investors (primarily Fannie Mae, Freddie Mac, Ginnie Mae and the Federal Home Loan Bank of Indianapolis).  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 $0.6 million at both September 30, 2017 and December 31, 2016, respectively. This reserve is included in accrued expenses and other liabilities in our Condensed Consolidated Statements of Financial Condition.

55

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

14. Accumulated Other Comprehensive Loss (“AOCL”)

A summary of changes in AOCL follows:

	Unrealized Gains (Losses) on Securities Available for Sale			Dispropor- tionate Tax Effects from Securities Available for Sale			Unrealized Gains on Cash Flow Hedges		Total
				(In thousands)
For the three months ended September 30,
2017
Balances at beginning of period	$	1,986		$	(5,798	)	$	-	$	(3,812	)
Other comprehensive income before reclassifications		95			-			62		157
Amounts reclassified from AOCL		(5	)		-			3		(2	)
Net current period other comprehensive income		90			-			65		155
Balances at end of period	$	2,076		$	(5,798	)	$	65	$	(3,657	)
2016
Balances at beginning of period	$	2,515		$	(5,798	)	$	-	$	(3,283	)
Other comprehensive income before reclassifications		278			-			-		278
Amounts reclassified from AOCL		(10	)		-			-		(10	)
Net current period other comprehensive income		268			-			-		268
Balances at end of period	$	2,783		$	(5,798	)	$	-	$	(3,015	)
For the Nine months ended September 30,
2017
Balances at beginning of period	$	(3,310	)	$	(5,798	)	$	-	$	(9,108	)
Cumulative effect of change in accounting		300			-			-		300
Balances at beginning of period, as adjusted		(3,010	)		(5,798	)		-		(8,808	)
Other comprehensive income before reclassifications		5,167			-			62		5,229
Amounts reclassified from AOCL		(81	)		-			3		(78	)
Net current period other comprehensive income		5,086			-			65		5,151
Balances at end of period	$	2,076		$	(5,798	)	$	65	$	(3,657	)
2016
Balances at beginning of period	$	(238	)	$	(5,798	)	$	-	$	(6,036	)
Other comprehensive income before reclassifications		3,215			-			-		3,215
Amounts reclassified from AOCL		(194	)		-			-		(194	)
Net current period other comprehensive income		3,021			-			-		3,021
Balances at end of period	$	2,783		$	(5,798	)	$	-	$	(3,015	)

We adopted ASU 2017-08 during the first quarter of 2017 using a modified retrospective approach.  As a result, accumulated other comprehensive loss as of January 1, 2017 was adjusted by $0.30 million (see note #2).

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NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

 (unaudited)

The disproportionate tax effects from securities available for sale arose due to tax effects of other comprehensive income (“OCI”) in the presence of a valuation allowance against our deferred tax assets and a pretax loss from operations.  Generally, the amount of income tax expense or benefit allocated to operations is determined without regard to the tax effects of other categories of income or loss, such as OCI. However, an exception to the general rule is provided when, in the presence of a valuation allowance against deferred tax assets, there is a pretax loss from operations and pretax income from other categories in the current period.  In such instances, income from other categories must offset the current loss from operations, the tax benefit of such offset being reflected in operations.

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

	Amount Reclassified From			Affected Line Item in Condensed
AOCL Component	AOCL			Consolidated Statements of Operations
	(In thousands)
2017
Unrealized gains on securities available for sale
	$	8		Net gains on securities
		-		Net impairment loss recognized in earnings
		8		Total reclassifications before tax
		3		Income tax expense
	$	5		Reclassifications, net of tax
Unrealized gains on cash flow hedges
	$	(5	)	Interest expense
		(2	)	Income tax expense
	$	(3	)	Reclassification, net of tax
	$	2		Total reclassifications for the period, net of tax
2016
Unrealized gains on securities available for sale
	$	15		Net gains on securities
		-		Net impairment loss recognized in earnings
		15		Total reclassifications before tax
		5		Income tax expense
	$	10		Reclassifications, net of tax

57

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

	Amount Reclassified From			Affected Line Item in Condensed
AOCL Component	AOCL			Consolidated Statements of Operations
	(In thousands)
2017
Unrealized gains on securities available for sale
	$	125		Net gains on securities
		-		Net impairment loss recognized in earnings
		125		Total reclassifications before tax
		44		Income tax expense
	$	81		Reclassifications, net of tax
Unrealized gains on cash flow hedges
	$	(5	)	Interest expense
		(2	)	Income tax expense
	$	(3	)	Reclassification, net of tax
	$	78		Total reclassifications for the period, net of tax
2016
Unrealized gains on securities available for sale
	$	298		Net gains on securities
		-		Net impairment loss recognized in earnings
		298		Total reclassifications before tax
		104		Income tax expense
	$	194		Reclassifications, net of tax

15. Payment Plan Receivables and Other Assets Held for Sale

On December 30, 2016 Mepco executed an Asset Purchase Agreement (the “APA”) with Seabury Asset Management LLC (“Seabury”).  Pursuant to the terms of the APA, Mepco sold its payment plan processing business to Seabury effective May 1, 2017.  We received cash totaling $33.4 million and recorded no gain or loss in 2017 as the assets were sold and the liabilities were assumed at book value.

58

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Assets sold and liabilities assumed were as follows:

	May 1, 2017		December 31, 2016
	(In thousands)
Assets sold
Payment plan receivables	$	33,128	$	30,582
Commerical loans		525		794
Other assets		1,765		1,984
Total assets	$	35,418	$	33,360
Liabilities assumed	$	1,972	$	718

These assets and liabilities were categorized as “held for sale” in our December 31, 2016 Condensed Consolidated Statement of Financial Condition.  These assets and corresponding liabilities held for sale were carried at the lower of cost or fair value on an aggregate basis.  Fair value adjustments, if any, were recorded in current earnings.

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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 2016 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 2017, 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.

Recent Developments. Effective on January 1, 2017, we adopted the fair value accounting method for capitalized mortgage loan servicing rights.  The adoption of this accounting method resulted in the following changes to the January 1, 2017 beginning balances: an increase in capitalized mortgage loan servicing rights of $0.54 million; a decrease in deferred income taxes of $0.19 million and a decrease in our accumulated deficit of $0.35 million.  See note 2 to the Condensed Consolidated Financial Statements.

On December 30, 2016, the Bank and its wholly-owned subsidiary, Mepco Finance Corporation (“Mepco”), entered into an Asset Purchase Agreement (“APA”) with Seabury Asset Management LLC (“Seabury”).  Pursuant to the terms of the APA, we sold our payment plan processing business, payment plan receivables, and certain other assets to Seabury, who also assumed certain liabilities of Mepco.  These assets and liabilities were categorized as “held for sale” in the December 31, 2016 Condensed Consolidated Statements of Financial Condition.  We also recorded a $0.32 million loss related to the sale of these assets in the fourth quarter of 2016.  This transaction closed on May 18, 2017, with an effective date of May 1, 2017.  As a result of the closing, Mepco sold $33.1 million of net payment plan receivables, $0.5 million of commercial loans, $0.2 million of furniture and equipment and $1.6 million of other assets to Seabury, who also assumed $2.0 million of specified liabilities.  Mepco was renamed IB Holding Company in May 2017 and was liquidated on June 30, 2017, with the remaining assets and liabilities transferred to the Bank.  We do not believe that the sale of the Mepco business and assets will have a significant impact on our future overall financial condition or results of operations.

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In the fourth quarter of 2016, we reached a tentative settlement regarding litigation initiated against the Bank in Wayne County, Michigan Circuit Court.  The Court issued a preliminary approval of this settlement in the first quarter of 2017.  This litigation concerned the Bank’s checking account transaction sequencing during a period from February 2009 to June 2011.  Under the terms of the settlement, we have agreed to pay $2.2 million and we are also responsible for class notification costs and certain other expenses which are estimated to total approximately $0.1 million.  We recorded a $2.3 million expense in the fourth quarter of 2016 for this settlement.  We expect the settlement payment to occur in the fourth quarter of 2017 or first quarter of 2018.  Although, we deny any liability associated with this matter and believe we have meritorious defenses to the allegations in the complaint, given the costs and uncertainty of litigation, we determined that this settlement was in the best interests of the organization.

Regulation. On July 2, 2013, the Federal Reserve Board 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 ratably over a four-year period that began in 2016.  In 2017, 1.25% is being added to the minimum ratio for adequately capitalized institutions.  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 (now 5.75% in 2017).  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. As of September 30, 2017 and December 31, 2016 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 third quarter and first nine months of 2017 as compared to 2016.

Results of Operations

Summary.  We recorded net income of $6.9 million and $6.4 million, respectively, during the three months ended September 30, 2017 and 2016.  The increase in 2017 results as compared to 2016 primarily reflects an increase in net interest income that was partially offset by increases in the provision for loan losses and in non-interest and income tax expenses and a decrease in non-interest income.

We recorded net income of $18.8 million and $16.9 million, respectively, during the nine months ended September 30, 2017 and 2016.  The increase in 2017 year-to-date results as compared to 2016 is primarily due to increases in net interest income and non-interest income that were partially offset by increases in the provision for loan losses, non-interest expense and income tax expense.

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Key performance ratios

	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Net income (annualized) to
Average assets		1.01	%		1.02	%		0.96	%		0.92	%
Average common shareholders’ equity		10.27			10.20			9.69			9.19
Net income per common share
Basic	$	0.32		$	0.30		$	0.88		$	0.79
Diluted		0.32			0.30			0.87			0.78

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

Our net interest income totaled $22.9 million during the third quarter of 2017, an increase of $2.9 million, or 14.6% from the year-ago period.  This increase primarily reflects a $227.4 million increase in average interest-earning assets as well as a 15 basis point increase in our tax equivalent net interest income as a percent of average interest-earning assets (the “net interest margin”).

For the first nine months of 2017, net interest income totaled $65.9 million, an increase of $6.5 million, or 10.9% from 2016.  This increase primarily reflects a $184.9 million increase in average interest-earning assets as well as an 10 basis point increase in our net interest margin.

The increase in average interest-earning assets primarily reflects loan growth utilizing funds from increases in deposits and borrowed funds.  The increase in the net interest margin reflects a change in the mix of average-interest earning assets (higher percentage of loans) as well as increases in short-term market interest rates.

Our net interest income is also adversely impacted by our level of non-accrual loans.  In the third quarter and first nine months of 2017 non-accrual loans averaged $8.6 million and $9.7 million, respectively compared to $10.7 million and $10.6 million, respectively for the same periods in 2016.  In addition, in the third quarter and first nine months of 2017 we had net recoveries of $0.28 million and $0.90 million, respectively, of previously unpaid interest on loans placed on or taken off non-accrual during each period or on loans previously charged-off compared to net recoveries of $0.07 million and $0.75 million, respectively, during the same periods in 2016.

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Average Balances and Tax Equivalent Rates

	Three Months Ended September 30,
	2017							2016
	Average Balance		Interest		Rate (2)			Average Balance		Interest		Rate (2)
	(Dollars in thousands)
Assets
Taxable loans	$	1,908,497	$	21,801		4.55	%	$	1,613,189	$	18,562		4.59	%
Tax-exempt loans (1)		3,138		47		5.94			3,492		53		6.04
Taxable securities		474,901		2,765		2.33			534,319		2,537		1.90
Tax-exempt securities (1)		90,645		783		3.46			58,694		507		3.46
Interest bearing cash		29,336		63		0.85			69,603		86		0.49
Other investments		15,543		200		5.11			15,347		195		5.05
Interest Earning Assets		2,522,060		25,659		4.05			2,294,644		21,940		3.81
Cash and due from banks		33,019							34,565
Other assets, net		142,283							152,793
Total Assets	$	2,697,362						$	2,482,002
Liabilities
Savings and interest-bearing checking	$	1,048,289		408		0.15		$	1,014,201		284		0.11
Time deposits		531,226		1,425		1.06			438,504		970		0.88
Other borrowings		85,219		626		2.91			47,227		493		4.15
Interest Bearing Liabilities		1,664,734		2,459		0.59			1,499,932		1,747		0.46
Non-interest bearing deposits		736,291							706,282
Other liabilities		31,263							27,110
Shareholders’ equity		265,074							248,678
Total Liabilities and Shareholders’ Equity	$	2,697,362						$	2,482,002
Net Interest Income			$	23,200						$	20,193
Net Interest Income as a Percent of Average Interest Earning Assets						3.66	%						3.51	%

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

(2) Annualized

63

Average Balances and Tax Equivalent Rates

	Nine Months Ended September 30,
	2017							2016
	Average Balance		Interest		Rate (2)			Average Balance		Interest		Rate (2)
	(Dollars in thousands)
Assets
Taxable loans	$	1,792,381	$	61,544		4.59	%	$	1,577,758	$	55,255		4.67	%
Tax-exempt loans (1)		3,410		145		5.69			3,564		163		6.11
Taxable securities		499,886		8,300		2.21			532,576		7,261		1.82
Tax-exempt securities (1)		85,853		2,264		3.52			50,286		1,320		3.50
Interest bearing cash		42,610		229		0.72			75,121		292		0.52
Other investments		15,543		638		5.49			15,456		592		5.12
Interest Earning Assets		2,439,683		73,120		4.00			2,254,761		64,883		3.84
Cash and due from banks		32,492							38,069
Other assets, net		146,753							157,570
Total Assets	$	2,618,928						$	2,450,400
Liabilities
Savings and interest-bearing checking	$	1,051,395		1,007		0.13		$	1,018,727		831		0.11
Time deposits		494,219		3,747		1.01			435,146		2,689		0.83
Other borrowings		66,392		1,659		3.34			47,405		1,455		4.10
Interest Bearing Liabilities		1,612,006		6,413		0.53			1,501,278		4,975		0.44
Non-interest bearing deposits		717,589							677,645
Other liabilities		30,372							25,612
Shareholders’ equity		258,961							245,865
Total liabilities and shareholders’ equity	$	2,618,928						$	2,450,400
Net Interest Income			$	66,707						$	59,908
Net Interest Income as a Percent of Average Interest Earning Assets						3.65	%						3.55	%

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

(2) Annualized

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Reconciliation of Net Interest Margin, Fully Taxable Equivalent ("FTE")

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
	(Dollars in thousands)						(Dollars in thousands)
Net interest income	$	22,912		$	19,998		$	65,870		$	59,391
Add:  taxable equivalent adjustment		288			195			837			517
Net interest income - taxable equivalent	$	23,200		$	20,193		$	66,707		$	59,908
Net interest margin (GAAP) (1)		3.60	%		3.47	%		3.61	%		3.52	%
Net interest margin (FTE) (1)		3.66	%		3.51	%		3.65	%		3.55	%

(1) Annualized

Provision for loan losses.  The provision for loan losses was an expense of $0.6 million and a credit $0.2 million during the three months ended September 30, 2017 and 2016, respectively. During the nine-month periods ended September 30, 2017 and 2016, the provision was an expense of $0.8 million and a credit of $1.4 million, respectively. The provision reflects our assessment of the allowance for loan losses taking into consideration factors such as loan growth, loan mix, levels of non-performing and classified loans and loan net charge-offs.  While we use relevant information to recognize losses on loans, additional provisions for related losses may be necessary based on changes in economic conditions, customer circumstances and other credit risk factors.  See “Portfolio Loans and asset quality” for a discussion of the various components of the allowance for loan losses and their impact on the provision for loan losses in the third quarter and first nine months of 2017.

Non-interest income.  Non-interest income is a significant element in assessing our results of operations. Non-interest income totaled $10.3 million during the third quarter of 2017 compared to $11.7 million in 2016.  For the first nine months of 2017 non-interest income totaled $31.1 million compared to $29.1 million for the first nine months of 2016.  The components of non-interest income are as follows:

Non-Interest Income
	Three months ended September 30,					Nine months ended September 30,
	2017		2016			2017		2016
		(In thousands)
Service charges on deposit accounts	$	3,281	$	3,281		$	9,465	$	9,164
Interchange income		1,942		1,943			5,869		5,797
Net gains (losses) on assets:
Mortgage loans		2,971		3,556			8,886		7,727
Securities		69		(45	)		62		302
Mortgage loan servicing, net		1		858			668		(454	)
Investment and insurance commissions		606		427			1,541		1,278
Bank owned life insurance		283		282			776		870
Other		1,151		1,406			3,822		4,413
Total non-interest income	$	10,304	$	11,708		$	31,089	$	29,097

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Service charges on deposit accounts were unchanged on a comparative quarterly basis and increased on a year-to-date basis in 2017 as compared to 2016.  The year-to-date increase was principally due to higher service charges on commercial accounts and a modest increase in non-sufficient funds occurrences.

Interchange income was unchanged on a comparative quarterly basis and increased slightly on a year-to-date basis in 2017 as compared to 2016.  The year-to-date increase is due primarily to increased debit card transaction activity.

Net gains on mortgage loans decreased on a comparative quarterly basis and increased on a year to date basis in 2017 as compared to 2016. Mortgage loan activity is summarized as follows:

Mortgage Loan Activity
	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
	(Dollars in thousands)
Mortgage loans originated	$	264,177		$	123,124		$	657,345		$	288,592
Mortgage loans sold		120,981			89,349			305,386			215,494
Net gains on mortgage loans		2,971			3,556			8,886			7,727
Net gains as a percent of mortgage loans sold (“Loan Sales Margin”)		2.46	%		3.98	%		2.91	%		3.59	%
Fair value adjustments included in the Loan Sales Margin		(0.22	)		0.55			0.08			0.40

The increase in mortgage loan originations, sales and net gains (for the year-to-date period) in 2017 as compared to 2016 is due primarily to the expansion of our mortgage-banking operations.  The decline in net gains in the third quarter of 2017 compared to the third quarter of 2016 was due to a decline in the Loan Sales Margin as described below.

During the last quarter of 2016 and the first half of 2017, we significantly expanded our mortgage-banking operations by adding new employees and opening new loan production offices (Ann Arbor, Brighton, Dearborn, Grosse Pointe, Traverse City and Troy, Michigan and Columbus and Fairlawn, Ohio).  Overall, we have increased average full-time equivalent employees in mortgage lending sales and operations by 80.8% and by 67.0%, in the third quarter and first nine months of 2017, respectively, over the same periods in 2016.  This business expansion has increased net gains on mortgage loans (on a year-to-date basis) and has accelerated the growth of portfolio mortgage loans and mortgage loans serviced for others, leading to increased mortgage loan interest income and mortgage loan servicing revenue.  However, this expansion has also increased non-interest expenses, particularly compensation and employee benefits and occupancy.  In addition, due to higher interest rates, mortgage loan refinance volume has declined in 2017 on an industry-wide basis.  It is important to our future results of operations that we effectively and successfully manage this business expansion.

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

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Our Loan Sales Margin is impacted by several factors including competition and the manner in which the loan is sold. Net gains on mortgage loans are also impacted by recording fair value accounting adjustments.  Excluding the aforementioned fair value accounting adjustments, the Loan Sales Margin would have been 2.68% and 3.43% in the third quarters of 2017 and 2016, respectively and 2.83% and 3.19% for the comparative 2017 and 2016 year-to-date periods, respectively.  The decrease in the Loan Sales Margin (excluding fair value adjustments) in 2017 was generally due to a narrowing of primary-to-secondary market pricing spreads due to competitive factors throughout the mortgage banking industry (generally higher mortgage loan interest rates and a decline in refinance volume). The changes in the fair value accounting adjustments are primarily due to changes in the amount of commitments to originate mortgage loans for sale.

Net gains (losses) on securities totaled $0.069 million and $0.062 million during the three and nine months ended September 30, 2017, respectively, and $(0.045) million and $0.302 million for the respective comparable periods in 2016.  The third quarter 2017 securities net gains were due to a $0.061 million increase in the fair value of trading securities and $0.008 million of net gains on the sale of $1.8 million of investments.  The year-to-date 2017 securities net gains were due to $0.125 million of net gains on the sale of $9.6 million of investments that were partially offset by a $0.063 million decrease in the fair value of trading securities.  The third quarter 2016 securities net losses were primarily due to a $0.058 million decrease in the fair value of trading securities that was partially offset by $0.013 million of net gains on the sale of $1.1 million of investments.  The year-to-date 2016 securities net gains were due primarily to net gains of $0.298 million on the sale of $56.5 million of investments.  (See “Securities.”)

We recorded no net impairment losses in either 2017 or 2016 for other than temporary impairment of securities available for sale.  (See “Securities.”)

Mortgage loan servicing generated income of $0.001 million and $0.858 million in the third quarters of 2017 and 2016, respectively. For the first nine months of 2017, mortgage loan servicing generated income of $0.668 million as compared to a loss of $0.454 million in 2016. This activity is summarized in the following table:

	Three Months Ended						Nine Months Ended
	9/30/2017			9/30/2016			9/30/2017			9/30/2016
Mortgage loan servicing:	(In thousands)
Revenue, net	$	1,091		$	1,037		$	3,253		$	3,087
Fair value change due to price		(572	)		--			(1,075	)		--
Fair value change due to pay-downs		(518	)		--			(1,510	)		--
Amortization		--			(799	)		--			(2,065	)
Impairment (charge) recovery		--			620			--			(1,476	)
Total	$	1		$	858		$	668		$	(454	)

Effective on January 1, 2017, we adopted the fair value accounting method for capitalized mortgage loan servicing rights. Activity related to capitalized mortgage loan servicing rights is as follows:

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Capitalized Mortgage Loan Servicing Rights

	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
	(In thousands)
Balance at beginning of period	$	14,515		$	10,331		$	13,671		$	12,436
Change in accounting		-			-			542			-
Balance at beginning of period, as adjusted	$	14,515		$	10,331		$	14,213		$	12,436
Originated servicing rights capitalized		1,250			896			3,047			2,153
Amortization		-			(799	)		-			(2,065	)
Change in valuation allowance		-			620			-			(1,476	)
Change in fair value		(1,090	)		-			(2,585	)		-
Balance at end of period	$	14,675		$	11,048		$	14,675		$	11,048
Valuation allowance at end of period	$	-		$	4,748		$	-		$	4,748

At September 30, 2017 we were servicing approximately $1.77 billion in mortgage loans for others on which servicing rights have been capitalized. This servicing portfolio had a weighted average coupon rate of 4.18% and a weighted average service fee of approximately 25.8 basis points. Capitalized mortgage loan servicing rights at September 30, 2017 totaled $14.7 million, representing approximately 83 basis points on the related amount of mortgage loans serviced for others.

Investment and insurance commissions represent revenues generated on the sale or management of investments and insurance for our customers.  These revenues increased on both a quarterly and year-to-date basis in 2017 as compared to 2016, due in part to increased product sales and growth in assets under management.

Income from bank owned life insurance was essentially unchanged on a comparative quarterly basis and declined on a year-to-date basis in 2017 compared to 2016.  The year-to-date decline reflects a lower crediting rate on our cash surrender value.Our separate account is primarily invested in agency mortgage-backed securities and managed by PIMCO. The crediting rate (on which the earnings are based) reflects the performance of the separate account.  The total cash surrender value of our bank owned life insurance was $54.3 million and $54.0 million at September 30, 2017 and December 31, 2016, respectively.

Other non-interest income declined on both a comparative quarterly and year-to-date basis in 2017 compared to 2016.  These declines were due in part to lower ATM fees, check charges, rental income on other real estate and swap fees on commercial loans. In addition, the 2016 year-to-date period included a $0.2 million death benefit related to a life insurance policy on a former director.

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

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Non-interest expense increased by $0.1 million to $22.6 million and by $3.5 million to $68.9 million during the three- and nine-month periods ended September 30, 2017, respectively, compared to the same periods in 2016.  The components of non-interest expense are as follows:

Non-Interest Expense

	Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016
	(In thousands)
Compensation	$	8,494	$	8,310	$	26,872	$	24,355
Performance-based compensation		2,688		2,409		6,819		5,967
Payroll taxes and employee benefits		2,395		2,312		7,413		6,590
Compensation and employee benefits		13,577		13,031		41,104		36,912
Occupancy, net		1,970		1,919		6,032		5,982
Data processing		1,796		1,971		5,670		6,008
Furniture, fixtures and equipment		961		990		2,943		2,939
Communications		685		670		2,046		2,280
Loan and collection		481		568		1,564		1,964
Advertising		526		455		1,551		1,410
Legal and professional		550		420		1,376		1,178
Interchange expense		294		276		869		809
FDIC deposit insurance		208		187		608		852
Supplies		176		178		507		551
Credit card and bank service fees		105		203		432		588
Costs related to unfunded lending commitments		92		73		332		6
Amortization of intangible assets		87		86		260		260
Net losses on other real estate and repossessed assets		30		263		132		98
Provision for loss reimbursement on sold loans		15		45		66		30
Other		1,063		1,194		3,454		3,602
Total non-interest expense	$	22,616	$	22,529	$	68,946	$	65,469

Compensation and employee benefits expenses, in total, increased $0.5 million on a quarterly comparative basis and increased $4.2 million for the first nine months of 2017 compared to the same periods in 2016.

Compensation expense increased by $0.2 million and $2.5 million in the third quarter and first nine months of 2017, respectively, compared to the same periods in 2016.  Average full-time equivalent employees (“FTEs”) increased by approximately 8.4% and  8.6% during the third quarter and first nine months of 2017, respectively, compared to the year ago periods, due primarily to our mortgage banking expansion.  The impact of the FTE increase was moderated (particularly in the third quarter of 2017) by an increased amount of compensation that was deferred as direct loan origination costs due to higher loan origination levels.

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Performance-based compensation increased by $0.3 million and $0.9 million in the third quarter and first nine months of 2017, respectively, versus the same periods in 2016, due primarily to relative comparative changes in the accrual for anticipated incentive compensation (including our mortgage loan officer retention program) based on our estimated full-year performance as compared to goals.

Payroll taxes and employee benefits increased by $0.1 million and $0.8 million in the third quarter and first nine months of 2017, respectively, compared to the same periods in 2016, due primarily to increases in payroll taxes, health insurance (year-to-date period only) and employee recruiting costs principally associated with our mortgage banking expansion.

Occupancy, net, increased by $0.05 million for both the third quarter and first nine months of 2017, respectively, compared to the same periods in 2016.  These increases were primarily due to costs associated with the recently opened loan production offices mentioned earlier that were partially offset by reduced occupancy costs related to the sale of our payment plan processing business (Mepco).

Data processing expenses decreased by $0.2 million and $0.3 million in the third quarter and first nine months of 2017, respectively, compared to the same periods in 2016. These decreases are primarily due to the sale of our payment plan processing business (Mepco).  The third quarter of 2017 also included a $0.1 million refund of certain previously billed and expensed costs from our core data processing vendor. 

Furniture, fixtures and equipment expenses were relatively unchanged in 2017 as compared to 2016.

Communications expenses were relatively unchanged and decreased by $0.2 million in the third quarter and first nine months of 2017, respectively, compared to the same periods in 2016.  The 2017 year-to-date decrease is due primarily to reduced mailing costs, as the first quarter of 2016 included expenses for mailing out new chip enabled debit cards and new deposit product information.

Loan and collection expenses reflect costs related to new lending activity as well as the management and collection of non-performing loans and other problem credits. The quarterly and year-to-date comparative decreases in 2017 versus 2016 are primarily due to the reimbursement of previously incurred expenses related to the resolution and collection of non-accrual or previously charged-off loans.  These declines were partially offset by costs related to new lending activity.

Advertising expenses increased on both a comparative quarterly and year-to-date basis in 2017 versus 2016, due primarily to direct mailing and strategic sponsorship costs.

Legal and professional fees increased on both a comparative quarterly and year-to-date basis in 2017 versus 2016, due primarily to an increase in outsourced internal audit costs, higher consulting fees related to a checking account program and higher legal fees principally associated with employment matters.

Interchange expense primarily represents our third-party cost to process debit card transactions.  This cost increased slightly in 2017 on both a comparative quarterly and year-to-date basis due primarily to higher debit card transaction volume as described above.

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FDIC deposit insurance expense increased slightly and decreased on a comparative quarterly and year-to-date basis, respectively, in 2017 versus 2016.  The comparative quarterly increase was due primarily to growth in our total assets.  The comparative year-to-date decrease reflects a decline in our premium rate that became effective in the third quarter of 2016.  At June 30, 2016, the FDIC Deposit Insurance Fund reserve ratio reached 1.15%, which triggered a new assessment method and generally lower deposit insurance premiums for banks with less than $10 billion in assets.

Supplies expenses were relatively unchanged and decreased slightly on a comparative quarterly and year-to-date basis, respectively, in 2017 versus 2016.  The comparative year-to-date decline was due primarily to initiatives with our various vendors to reduce these costs as well as internal “go green” efforts to reduce printing and paper costs.

Credit card and bank service fees decreased in 2017 versus 2016 on both a comparative quarterly and year-to-date basis primarily due to the sale of our payment plan processing business (Mepco).

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

The 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 $1.7 million and $1.9 million at September 30, 2017 and December 31, 2016, respectively. See Note #7 to the Condensed Consolidated Financial Statements for a schedule of future amortization of intangible assets.

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

The provision for loss reimbursement on sold loans was an expense of $0.015 million and $0.066 million in the third quarter and first nine months of 2017, respectively, compared to an expense of $0.045 million and $0.030 million in the third quarter and first nine months of 2016, respectively. This provision represents our estimate of incurred losses related to mortgage loans that we have sold to investors (primarily Fannie Mae, Freddie Mac, Ginnie Mae and the Federal Home Loan Bank of Indianapolis).  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 $0.56 million at both September 30, 2017 and December 31, 2016, respectively. This reserve is included in accrued expenses and other liabilities in our Condensed Consolidated Statements of Financial Condition.

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Other non-interest expenses declined in both the third quarter and first nine months of 2017 compared to the same periods in 2016 due primarily to lower temporary employee and insurance costs and lower debit card fraud losses.

Income tax expense.  We recorded an income tax expense of $3.2 million and $8.4 million in the third quarter and the first nine months of 2017, respectively. This compares to an income tax expense of $3.0 million and $7.5 million in the third quarter and the first nine months of 2016, respectively.

Year-to-date 2016 included a $0.3 million income tax benefit resulting from the adoption of Financial Accounting Standards Board Accounting Standards Update 2016-09 “Compensation – Stock Compensation (718) Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”) during the second quarter.

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

We assess whether a valuation allowance should be established against our deferred tax assets based on the consideration of all available evidence using a “more likely than not” standard.  The ultimate realization of this asset is primarily based on generating future income.  We concluded at September 30, 2017 and 2016 and at December 31, 2016, that the realization of substantially all of our deferred tax assets continues to be more likely than not.

We had maintained a valuation allowance against our deferred tax assets of approximately $1.1 million at December 31, 2016. This valuation allowance on our deferred tax assets related to state income taxes at Mepco.  In this instance, we determined that the future realization of these particular deferred tax assets was not more likely than not.  That conclusion was based on the pending sale of Mepco’s payment plan business.  After accounting for the May 2017 sale of our payment plan business, all that remained of these deferred tax assets were loss carryforwards that we wrote off against the related valuation allowance as of June 30, 2017 as we will no longer be doing business in those states.

Financial Condition

Summary.  Our total assets increased by $204.5 million during the first nine months of 2017.  Loans, excluding loans held for sale ("Portfolio Loans"), totaled $1.94 billion at September 30, 2017, an increase of $328.8 million, or 20.4%, from December 31, 2016.  (See "Portfolio Loans and asset quality.")

Deposits totaled $2.34 billion at September 30, 2017, compared to $2.23 billion at December 31, 2016.  The $118.0 million increase in total deposits during the period reflects growth in all categories, except time deposits, which declined by $41.3 million.  The decline in time deposits primarily reflects maturities with one municipal customer, where we elected to allow the deposits to run-off rather than rebidding for these funds.

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

Securities

			Unrealized
	Amortized Cost		Gains		Losses		Fair Value
	(In thousands)
Securities available for sale
September 30, 2017	$	545,672	$	5,023	$	1,830	$	548,865
December 31, 2016		615,709		2,548		7,641		610,616

We adopted ASU 2017-08 during the first quarter of 2017 using a modified retrospective approach.  As a result, the amortized cost of securities as of January 1, 2017 was adjusted lower by $0.46 million (see note #2).

Securities available for sale declined by $61.8 million during the first nine months of 2017 as these funds were utilized to support net Portfolio Loan growth.  Our portfolio of securities available for sale is reviewed quarterly for impairment in value. In performing this review, management considers (1) the length of time and extent that fair value has been less than cost, (2) the financial condition and near term prospects of the issuer, (3) the impact of changes in market interest rates on the market value of the security and (4) an assessment of whether we intend to sell, or it is more likely than not that we will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. For securities that do not meet these recovery criteria, the amount of impairment recognized in earnings is limited to the amount related to credit losses, while impairment related to other factors is recognized in other comprehensive income.  We recorded no impairment losses related to other than temporary impairment on securities available for sale in either the first nine months of 2017 or 2016.

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

	Nine months ended September 30,
	2017			2016
	(In thousands)
Proceeds (1)	$	9,594		$	56,451
Gross gains	$	125		$	350
Gross losses		-			(52	)
Net impairment charges		-			-
Fair value adjustments		(63	)		4
Net gains	$	62		$	302

(1)  2017 includes $0.760 million for trades that did not settle until after September 30, 2017.

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

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

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

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Non-performing assets⁽¹⁾

	September 30, 2017			December 31, 2016
	(Dollars in thousands)
Non-accrual loans	$	8,410		$	13,364
Loans 90 days or more past due and still accruing interest		--			--
Total non-performing loans		8,410			13,364
Other real estate and repossessed assets		2,150			5,004
Total non-performing assets	$	10,560		$	18,368
As a percent of Portfolio Loans
Non-performing loans		0.43	%		0.83	%
Allowance for loan losses		1.11			1.26
Non-performing assets to total assets		0.38			0.72
Allowance for loan losses as a percent of non-performing loans		255.39			151.41

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

Non-performing loans decreased by $5.0 million, or 37.1%, during the first nine months of 2017.  This decline primarily reflects the pay-off or liquidation of non-performing commercial loans.  In general, stable 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.

Non-performing loans exclude performing loans that are classified as troubled debt restructurings (“TDRs”). Performing TDRs totaled $63.2 million, or 3.3% of total Portfolio Loans, and $70.3 million, or 4.4% of total Portfolio Loans, at September 30, 2017 and December 31, 2016, respectively. The decrease in the amount of performing TDRs in the first nine months of 2017 primarily reflects pay-downs and payoffs.  See Note #4 to the Condensed Consolidated Financial Statements for additional information on TDRs.

Other real estate and repossessed assets totaled $2.2 million at September 30, 2017, compared to $5.0 million at December 31, 2016.  This decrease is primarily the result of the sale of a group of commercial properties in the second quarter of 2017.

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 0.03% (as a result of net recoveries) on an annualized basis in the first nine months of 2017 compared to a negative 0.08% in the first nine months of 2016.  The $0.5 million decrease in total loan net recoveries is due to a decline in commercial loan net recoveries.

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Allowance for loan losses

	Nine months ended September 30,
	2017					2016
	Loans			Unfunded Commitments		Loans			Unfunded Commitments
	(Dollars in thousands)
Balance at beginning of period	$	20,234		$	650	$	22,570		$	652
Additions (deductions)
Provision for loan losses		806			-		(1,439	)		-
Recoveries credited to allowance		2,998			-		3,623			-
Loans charged against the allowance		(2,560	)		-		(2,711	)		-
Additions included in non-interest expense		-			332		-			6
Balance at end of period	$	21,478		$	982	$	22,043		$	658
Net loans charged against the allowance to average Portfolio Loans		(0.03	)%				(0.08	)%

Allocation of the Allowance for Loan Losses

	September 30, 2017		December 31, 2016
	(In thousands)
Specific allocations	$	7,061	$	9,152
Other adversely rated commercial loans		792		491
Historical loss allocations		6,540		4,929
Additional allocations based on subjective factors		7,085		5,662
Total	$	21,478	$	20,234

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

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

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

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

The allowance for loan losses increased $1.2 million to $21.5 million at September 30, 2017 from $20.2 million at December 31, 2016 and was equal to 1.11% of total Portfolio Loans at September 30, 2017 compared to 1.26% at December 31, 2016.

Three of the four components of the allowance for loan losses outlined above increased in the first nine months of 2017. The allowance for loan losses related to specific loans decreased $2.1 million in 2017 due primarily to a decline in the balance of individually impaired loans as well as charge-offs.  In particular, we received a full payoff in March 2017 on a commercial loan that had a specific reserve of $1.2 million at December 31, 2016. The allowance for loan losses related to other adversely rated commercial loans increased $0.3 million in 2017 primarily due to an increase in the balance of such loans included in this component to $23.2 million at September 30, 2017 from $11.8 million at December 31, 2016. The allowance for loan losses related to historical losses increased $1.6 million during 2017 due principally to slight upward adjustments in our probability of default and expected loss rates for commercial loans, an additional component of approximately $0.6 million added for loans secured by commercial real estate due primarily to emerging risks in this sector (such as retail store closings and potential overdevelopment in certain markets) and loan growth. We also extended our historical lookback period to be more representative of the probability of default and account for infrequent migration events and extremely low levels of watch credits.  The allowance for loan losses related to subjective factors increased $1.4 million during 2017 primarily due to loan growth.

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By comparison, two of the four components of the allowance for loan losses outlined above declined in the first nine months of 2016. The allowance for loan losses related to specific loans decreased $0.6 million in 2016 due primarily to a $7.0 million 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 $0.5 million in 2016 primarily due to a decrease in the balance of such loans included in this component to $13.8 million at September 30, 2016 from $27.8 million at December 31, 2015. The allowance for loan losses related to historical losses increased $0.3 million during 2016 due principally to loan growth. The allowance for loan losses related to subjective factors increased $0.3 million during 2016 also primarily due to overall growth of the loan portfolio.

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

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

Deposits totaled $2.34 billion and $2.23 billion at September 30, 2017 and December 31, 2016, respectively.  The $118.0 million increase in deposits in the first nine months of 2017 is due to growth in all categories of deposits, except time deposits.  Reciprocal deposits totaled $49.1 million and $38.7 million at September 30, 2017 and December 31, 2016, 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 also added $87.6 million of brokered time deposits during the first nine months of 2017.  This increase, replaced in part, the run-off of time deposits with one municipal customer as described earlier.

We cannot be sure that we will be able to maintain our current level of core deposits. In particular, those deposits that are uninsured may be susceptible to outflow. At September 30, 2017, we had approximately $557.9 million of uninsured deposits. A reduction in core deposits would likely increase our need to rely on wholesale funding sources.

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

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Other borrowings, comprised almost entirely of advances from the Federal Home Loan Bank (the “FHLB”), totaled $72.8 million and $9.4 million at September 30, 2017 and December 31, 2016, respectively.  The increase in other borrowings during the first nine months of 2017 was utilized to fund Portfolio Loan growth.

As described above, we utilize wholesale funding, including FHLB borrowings and Brokered CDs to augment our core deposits and fund a portion of our assets. At September 30, 2017, our use of such wholesale funding sources (including reciprocal deposits) amounted to approximately $212.5 million, or 8.8% of total funding (deposits and total borrowings, excluding subordinated debentures). Because wholesale funding sources are affected by general market conditions, the availability of such funding may be dependent on the confidence these sources have in our financial condition and operations. The continued availability to us of these funding sources is not certain, and Brokered CDs may be difficult for us to retain or replace at attractive rates as they mature. Our liquidity may be constrained if we are unable to renew our wholesale funding sources or if adequate financing is not available in the future at acceptable rates of interest or at all.  Our financial performance could also be affected if we are unable to maintain our access to funding sources or if we are required to rely more heavily on more expensive funding sources. In such case, our net interest income and results of operations could be adversely affected.

We historically employed derivative financial instruments to manage our exposure to changes in interest rates. We discontinued the active use of derivative financial instruments during 2008.  We began to again utilize interest-rate swaps in 2014, primarily relating to our commercial lending activities.  During the first nine months of 2017 and 2016, we entered into $14.6 million and $23.0 million (aggregate notional amounts), respectively, of interest rate swaps with commercial loan customers, which were offset with interest rate swaps that the Bank entered into with a broker-dealer. We recorded $0.2 million and $0.4 million of fee income related to these transactions during the first nine months of 2017 and 2016, respectively.  In September 2017 we also entered into a $15.0 million (notional amount) pay fixed interest rate swap that matures in September 2021.  This fixed pay interest rate swap is hedging short-term Brokered CDs.

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, federal funds purchased borrowing facilities with other commercial banks, and access to the capital markets (for Brokered CDs).

At September 30, 2017, we had $432.2 million of time deposits that mature in the next 12 months. Historically, a majority of these maturing time deposits are renewed by our customers. Additionally, $1.81 billion of our deposits at September 30, 2017, were in account types from which the customer could withdraw the funds on demand. Changes in the balances of deposits that can be withdrawn upon demand are usually predictable and the total balances of these accounts have generally grown or have been stable over time as a result of our marketing and promotional activities. However, there can be no assurance that historical patterns of renewing time deposits or overall growth or stability in deposits will continue in the future.

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We have developed contingency funding plans that stress test our liquidity needs that may arise from certain events such as an adverse change in our financial metrics (for example, credit quality or regulatory capital ratios). Our liquidity management also includes periodic monitoring that measures quick assets (defined generally as short-term assets with maturities less than 30 days and loans held for sale) to total assets, short-term liability dependence and basic surplus (defined as quick assets compared to short-term liabilities). Policy limits have been established for our various liquidity measurements and are monitored on a monthly basis. In addition, we also prepare cash flow forecasts that include a variety of different scenarios.

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

We also believe that the available cash on hand at the parent company (including time deposits) of approximately $23.4 million as of September 30, 2017 provides sufficient liquidity resources at the parent company to meet operating expenses, to make interest payments on the subordinated debentures and to pay a cash dividend on our common stock for the foreseeable future.

Effective management of capital resources is critical to our mission to create value for our shareholders. In addition to common stock, our capital structure also currently includes cumulative trust preferred securities.

Capitalization

	September 30, 2017			December 31, 2016
	(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		324,607			323,745
Accumulated deficit		(53,240	)		(65,657	)
Accumulated other comprehensive loss		(3,657	)		(9,108	)
Total shareholders’ equity		267,710			248,980
Total capitalization	$	302,210		$	283,480

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.

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The FRB has issued rules regarding trust preferred securities as a component of the Tier 1 capital of bank holding companies. The aggregate amount of trust preferred securities (and certain other capital elements) are limited to 25 percent of Tier 1 capital elements, net of goodwill (net of any associated deferred tax liability). The amount of trust preferred securities and certain other elements in excess of the limit can be included in Tier 2 capital, subject to restrictions. At the parent company, all of these securities qualified as Tier 1 capital at September 30, 2017 and December 31, 2016. Although the Dodd-Frank Act further limited Tier 1 treatment for trust preferred securities, those new limits did not apply to our outstanding trust preferred securities.  Further, the New Capital Rules grandfathered the treatment of our trust preferred securities as qualifying regulatory capital.

Common shareholders’ equity increased to $267.7 million at September 30, 2017 from $249.0 million at December 31, 2016 due primarily to our net income and a decline in our accumulated other comprehensive loss that were partially offset by dividends that we paid. Our tangible common equity (“TCE”) totaled $266.0 million and $247.0 million, respectively, at those same dates. Our ratio of TCE to tangible assets was 9.67% and 9.70% at September 30, 2017 and December 31, 2016, respectively.  TCE and the ratio of TCE to tangible assets are non-GAAP measures.  TCE represents total common equity less intangible assets.

On January 23, 2017, our Board of Directors authorized a share repurchase plan.  Under the terms of the 2017 share repurchase plan, we are authorized to buy back up to 5% of our outstanding common stock.    This repurchase plan is authorized to last through December 31, 2017.  We did not repurchase any shares during the first nine months of 2017.

In October 2017 and 2016, our Board of Directors increased the quarterly cash dividend on our common stock to 12 cents and ten cents per share, respectively.

As of September 30, 2017 and December 31, 2016, our Bank (and holding company) continued to meet the requirements to be considered “well-capitalized” under federal regulatory standards (also see note #10 to the Condensed Consolidated Financial Statements included within this report).

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

Our asset/liability management efforts identify and evaluate opportunities to structure our 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.

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

Changes in Market Value of Portfolio Equity and Net Interest Income

Change in Interest Rates	Market Value Of Portfolio Equity(1)		Percent Change			Net Interest Income(2)		Percent Change
	(Dollars in thousands)
September 30, 2017
200 basis point rise	$	410,500		(0.02	)%	$	94,100		1.51	%
100 basis point rise		415,900		1.29			94,000		1.40
Base-rate scenario		410,600		-			92,700		-
100 basis point decline		379,800		(7.50	)		87,000		(6.15	)
December 31, 2016
200 basis point rise	$	427,400		6.90	%	$	84,800		6.94	%
100 basis point rise		417,800		4.50			82,500		4.04
Base-rate scenario		399,800		-			79,300		-
100 basis point decline		366,000		(8.45	)		73,500		(7.31	)

(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, derivatives and capitalized mortgage loan servicing rights (as of January 1, 2017) 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 (prior to 2017) 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 #11 to the Condensed Consolidated Financial Statements included within this report for a complete discussion on our use of fair valuation of financial instruments and the related measurement techniques.

 Litigation Matters

As described in “Recent Developments” we settled a litigation matter in December 2016 and recorded a $2.3 million expense in the fourth quarter of 2016.  We are also involved in various other litigation matters in the ordinary course of business. At the present time, we do not believe any of these matters will have a significant impact on our consolidated financial position or results of operations. The aggregate amount we have accrued for losses we consider probable as a result of these litigation matters is immaterial. However, because of the inherent uncertainty of outcomes from any litigation matter, we believe it is reasonably possible we may incur losses in addition to the amounts we have accrued.  At this time, we estimate the maximum amount of additional losses that are reasonably possible is insignificant.  However, because of a number of factors, including the fact that certain of these litigation matters are still in their early stages, this maximum amount may change in the future.

The litigation matters described in the preceding paragraph primarily include claims that have been brought against us for damages, but do not include litigation matters where we seek to collect amounts owed to us by third parties (such as litigation initiated to collect delinquent loans). These excluded, collection-related matters may involve claims or counterclaims by the opposing party or parties, but we have excluded such matters from the disclosure contained in the preceding paragraph in all cases where we believe the possibility of us paying damages to any opposing party is remote. 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 AFLL, capitalized mortgage loan servicing rights, and income taxes are deemed critical since they involve the use of estimates and require significant management judgments. Application of assumptions different than those that we have used could result in material changes in our consolidated financial position or results of operations.  There have been no material changes to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016.

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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 September 30, 2017, have concluded that, as of such date, our disclosure controls and procedures were effective.

(b) Changes in Internal Controls.

During the quarter ended September 30, 2017, 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, 2016.

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

The Company maintains a Deferred Compensation and Stock Purchase Plan for Non-Employee Directors (the "Plan") pursuant to which non-employee directors can elect to receive shares of the Company's common stock in lieu of fees otherwise payable to the director for his or her service as a director.  A director can elect to receive shares on a current basis or to defer receipt of the shares, in which case the shares are issued to a trust to be held for the account of the director and then generally distributed to the director after his or her retirement from the Board.  Pursuant to this Plan, during the third quarter of 2017, the Company issued 677 shares of common stock to non-employee directors on a current basis and 1,697 shares of common stock to the trust for distribution to directors on a deferred basis.  1,705 shares were issued on July 1, 2017, at a price of $21.75 per share and 669 shares were issued on July 19, 2017 at a price of $21.30 per share, representing aggregate fees of $0.05 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 September 30, 2017:

Period	Total Number of Shares Purchased (1)		Average Price Paid Per Share		Total Number of Shares Purchased as Part of a Publicly Announced Plan		Remaining Number of Shares Authorized for Purchase Under the Plan
July 2017		196	$	21.75		-		1,062,905
August 2017		2,080		20.25		-		1,062,905
September 2017		132		20.60		-		1,062,905
Total		2,408	$	20.39		-		1,062,905

(1) Represents 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.

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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:
	3.1	Restated Articles of Incorporation, effective October 26, 2017.
	31.1	Certificate of the Chief Executive Officer of Independent Bank Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
	31.2	Certificate of the Chief Financial Officer of Independent Bank Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
	32.1	Certificate of the Chief Executive Officer of Independent Bank Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
	32.2	Certificate of the Chief Financial Officer of Independent Bank Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
	101.	INS Instance Document
	101.	SCH XBRL Taxonomy Extension Schema Document
	101.	CAL XBRL Taxonomy Extension Calculation Linkbase Document
	101.	DEF XBRL Taxonomy Extension Definition Linkbase Document
	101.	LAB XBRL Taxonomy Extension Label Linkbase Document
	101.	PRE XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES

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

Date	November 3, 2017	By	/s/ Robert N. Shuster
			Robert N. Shuster, Principal Financial Officer
Date	November 3, 2017	By	/s/ James J. Twarozynski
			James J. Twarozynski, Principal Accounting Officer

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EX-3.1

EXHIBIT 3.1

RESTATED ARTICLES OF INCORPORATION

OF

INDEPENDENT BANK CORPORATION

The following Restated Articles of Incorporation are executed by the undersigned Corporation pursuant to the provisions of Act 284, Public Acts of 1972.

1. The present name of the Corporation is Independent Bank Corporation.

2. The identification number assigned by the Bureau is: 136‑863.

3. All former names of the Corporation are: FSB Corporation.

4. The date of filing of the original Articles of Incorporation was September 17, 1973.

The following Restated Articles of Incorporation supersede the Articles of Incorporation, as previously restated and amended, and shall be the Articles of Incorporation of the Corporation.

ARTICLE I

The name of the Corporation is Independent Bank Corporation.

ARTICLE II

The purpose or purposes for which the Corporation is organized are to engage in the business of a bank holding company and, without in any way being limited by the foregoing specifically enumerated purpose, to engage in any activity within the purposes for which corporations may be organized under the Business Corporation Act of Michigan.

ARTICLE III

The total number of shares of all classes of capital stock which the Corporation shall have the authority to issue is five hundred million two hundred thousand (500,200,000) shares, of which five hundred million (500,000,000) shares shall be common stock, without par value, and two hundred thousand (200,000) shares shall be series preferred stock, without par value.

The authorized shares of common stock are all of one class with equal voting power, and each share shall be equal to every other such share.

The shares of preferred stock may be divided into and issued in one or more series. The Board of Directors is hereby authorized to cause the preferred stock to be issued from time to time in one or more series, with such designations and such relative voting, dividend, liquidation and other rights, preferences and limitations as shall be stated and expressed in the resolution or resolutions providing for the issue of such preferred stock adopted by the Board of Directors. The Board of Directors by vote of a majority of the whole Board is expressly authorized to adopt such resolution or resolutions and issue such stock from time to time as it may deem desirable.

ARTICLE IV

The address of the current registered office, which is the same as its current mailing address, is 4200 East Beltline, Grand Rapids, Michigan 49525. The name of the current resident agent is Mark L. Collins.

ARTICLE V

Directors and officers of the Corporation shall be indemnified as of right to the fullest extent now or hereafter permitted by law in connection with any actual or threatened civil, criminal, administrative or investigative action, suit or proceeding (whether brought by or in the name of the Corporation, a subsidiary or otherwise) in which a director or officer is a witness or which is brought against a director or officer in his or her capacity as a director, officer, employee, agent or fiduciary of the Corporation or of any corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which the director or officer was serving at the request of the Corporation. Persons who are not directors or officers of the Corporation may be similarly indemnified in respect of such service to the extent authorized at any time by the Board of Directors of the Corporation. The Corporation may purchase and maintain insurance to protect itself and any such director, officer or other person against liability asserted against him or her and incurred by him or her in respect of such service whether or not the Corporation would have the power to indemnify him or her against such liability by law or under the provisions of this Article. The provisions of this Article shall be applicable to actions, suits or proceedings, whether arising from acts or omissions occurring before or after the adoption hereof, and to directors, officers and other persons who have ceased to render such service, and shall inure to the benefit of the heirs, executors and administrators of the directors, officers and other persons referred to in this Article. The right of indemnity provided pursuant to this Article shall not be exclusive and the Corporation may provide indemnification to any person, by agreement or otherwise, on such terms and conditions as the Board of Directors may approve. Any agreement for indemnification of any director, officer, employee or other person may provide indemnification rights which are broader or otherwise different from those set forth in, or provided pursuant to, or in accordance with, this Article. Any amendment, alteration, modification, repeal or adoption of any provision in the Articles of Incorporation inconsistent with this Article V shall not adversely affect any indemnification right or protection of a director or officer of the Corporation existing at the time of such amendment, alteration, modification, repeal or adoption.

ARTICLE VI

[Deleted June 22, 2000.]

2

ARTICLE VII

A director of the Corporation shall not be personally liable to the Corporation or its shareholders for monetary damages for a breach of fiduciary duty as a director, except for liability: (a) for any breach of the director's duty of loyalty to the Corporation or its shareholders; (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (c) resulting from a violation of § 551(1) of the Michigan Business Corporation Act; (d) for any transaction from which the director derived an improper personal benefit; or (e) for any act or omission occurring prior to March 1, 1987. If, following approval of this Article VII by the shareholders, the Michigan Business Corporation Act is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Michigan Business Corporation Act, as so amended. Any repeal, modification or adoption of any provision in this Articles of Incorporation inconsistent with this Article VII shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal, modification or adoption.

ARTICLE VIII

CLASSIFIED BOARD OF DIRECTORS

Section 1. Authority and Size of Board. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. The number of directors of the Corporation that shall constitute the Board of Directors shall be determined from time to time by resolution adopted by the affirmative vote of (i) at least seventy-five percent (75%) of the Board of Directors, and (ii) a majority of the Continuing Directors (as hereinafter defined).

Section 2. Classification of Board and Filling Vacancies. Subject to applicable law, the directors shall be divided into three (3) classes, each class to be as nearly equal in number as possible. The term of office of directors of the first class shall expire at the annual meeting of shareholders to be held in 1990 and until their respective successors are duly elected and qualified or their resignation or removal. The term of office of directors of the second class shall expire at the annual meeting of shareholders to be held in 1991 and until their respective successors are duly elected and qualified or their resignation or removal. The term of office of directors of the third class shall expire at the annual meeting of shareholders to be held in 1992 and until their respective successors are duly elected and qualified or their resignation or removal. Subject to the foregoing, at each annual meeting of shareholders, commencing at the annual meeting to be held in 1990, the successors to the class of directors whose term shall then expire shall be elected to hold office for a term expiring at the third succeeding annual meeting and until their successors shall be duly elected and qualified or their resignation or removal. Any vacancies in the Board of Directors for any reason, and any newly created directorships resulting from any increase in the number of directors, may be filled only by the Board of Directors, acting by an affirmative vote of a majority of the Continuing Directors (as hereinafter defined) and a seventy-five percent (75%) majority of all of the directors then in office, although less than a quorum, and any directors so chosen shall hold office until the next annual meeting of shareholders and until their respective successors shall be duly elected and qualified or their resignation or removal. No decrease in the number of directors shall shorten the term of any incumbent direct.

3

Section 3. Removal of Directors. Notwithstanding any other provision of these Articles of Incorporation or the Bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law or by these Articles of Incorporation or the Bylaws of the Corporation), any one or more directors of the Corporation may be removed at any time, with or without cause, but only by either: (i) the affirmative vote of a majority of the Continuing Directors and at least a seventy-five percent (75%) majority of the Board of Directors; or (ii) the affirmative vote, at a meeting of the shareholders called for that purpose, of the holders of at least seventy-five percent (75%) of the voting power of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (the "Voting Stock") voting together as a single class.

Section 4. Certain Definitions. For purposes of this Article VIII:

1.          A "person" shall mean any individual, firm, corporation, or other entity.

2.          "Interested Shareholder" shall mean any person (other than the Corporation or any subsidiary) who or which:

(a)          is the beneficial owner, directly or indirectly, of ten percent (10%) or more of the voting power of the outstanding Voting Stock; or

(b)          is an Affiliate (as hereinafter defined) of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of ten percent (10%) or more of the voting power of the then outstanding voting stock; or

(c)          is an assignee of or has otherwise succeeded to any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by any Interested Shareholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933.

3.          A person shall be a "beneficial owner" of any Voting Stock:

(a)          which such person or any of its Affiliates or Associates (as hereinafter defined) beneficially owns, directly or indirectly; or

(b)          which such person or any of its Affiliates or Associates has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or understanding; or

(c)          which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock.

4

4.          For purposes of determining whether a person is an Interested Shareholder pursuant to paragraph 2 of this Section 4, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned through application of paragraph 3 of this Section 4, but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.

5.          "Affiliate" or "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on January 1, 1989.

6.          "Subsidiary" means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Interested Shareholder set forth in paragraph 2 of this Section 4, the term "subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Corporation.

7.          "Continuing Director" means any member of the Board of Directors of the Corporation (the "Board") who is unaffiliated with the Interested Shareholder and was a member of the Board prior to the time that the Interested Shareholder became an Interested Shareholder, and any successor of a Continuing Director who is unaffiliated with the Interested Shareholder and is recommended to succeed a Continuing Director by a majority of Continuing Directors then on the Board.

Section 5. Powers of Continuing Directors. A majority of the Continuing Directors of the Corporation shall have the power and duty to determine, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance with this Article VIII, including without limitation: (i) whether a person is an Interested Shareholder; (ii) the number of shares of Voting Stock beneficially owned by any person; and (iii) whether a person is an Affiliate or Associate of another; and the good faith determination of a majority of the Continuing Directors on such matters shall be conclusive and binding for all purposes of this Article VIII.

Section 6. Nominations for Board. Nominations for the election of directors may be made by the Board of Directors or by a shareholder entitled to vote in the election of directors. A shareholder entitled to vote in the election of directors, however, may make such a nomination only if written notice of such shareholder's intent to do so has been given, either by personal delivery or by United States mail, postage prepaid, and received by the Corporation (a) with respect to an election to be held at an annual meeting of shareholders, not later than sixty (60), nor more than ninety (90) days prior to the first anniversary of the preceding year's Annual Meeting of Shareholders (or, if the date of the Annual Meeting is changed by more than twenty (20) days from such anniversary date, within ten (10) days after the date the Corporation mails or otherwise gives notice of the date of such meeting), and (b) with respect to an election to be held at a special meeting of shareholders called for that purpose, not later than the close of business on the tenth (10th) day following the date on which notice of the special meeting was first mailed to the shareholders by the Corporation.

5

Each shareholder's notice of intent to make a nomination shall set forth:

(a)          the name(s) and address(es) of the shareholder who intends to make the nomination and of the person or persons to be nominated;

(b)          a representation that the shareholder (i) is a holder of record of stock of the Corporation entitled to vote at such meeting; (ii) will continue to hold such stock through the date on which the meeting is held; and (iii) intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice;

(c)          a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination is to be made by the shareholder;

(d)          such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to Regulation 14A promulgated under Section 14 of the Securities Exchange Act of 1934, as amended, as now in effect or hereafter modified, had the nominee been nominated by the Board of Directors; and

(e)          the consent of each nominee to serve as a director of the Corporation if so elected.

The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the qualifications of such person to serve as a director.

Section 7. Amendment, Repeal, etc. Notwithstanding any other provisions of these Articles of Incorporation or the Bylaws of the Corporation (and notwithstanding the fact that a lesser percentage may be specified by law, these Articles of Incorporation or the Bylaws of the Corporation), the affirmative vote of the holders of seventy-five percent (75%) or more of the voting power of the shares of the then outstanding Voting Stock, voting together as a single class, shall be required to amend or repeal, or adopt any provisions inconsistent with, this Article VIII of these Articles of Incorporation; provided, however, that the preceding provisions of this Section 7 shall not be applicable to any amendment to this Article VIII of these Articles of Incorporation, and such amendment shall require only such affirmative vote as is required by law and any other provisions of these Articles of Incorporation if such amendment shall have been approved by a majority of the Continuing Directors.

*  *  *  *  *

6

These Restated Articles of Incorporation were duly adopted by the Board of Directors of the Corporation on October 24, 2017, in accordance with the provisions of Section 642 of the Michigan Business Corporation Act and without a vote of the Corporation's shareholders. These Restated Articles of Incorporation only restate and integrate the provisions of the Corporation's Articles of Incorporation as previously restated and amended and include only amendments adopted under Section 611(2) of the Michigan Business Corporation Act. There is no material discrepancy between the provisions of the Corporation's Articles of Incorporation as previously restated and amended and the provisions of these Restated Articles of Incorporation.

Signed October 24, 2017.
	/s/ Robert N. Shuster
	Robert N. Shuster
	Executive VP and CFO

7

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, William B. Kessel, certify that:

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

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

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

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

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

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

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

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

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

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

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.

	INDEPENDENT BANK CORPORATION
Date:  November 3, 2017	/s/  William B. Kessel
	William B. Kessel
	President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Robert N. Shuster, certify that:

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

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

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

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

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

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

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

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

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

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

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.

	INDEPENDENT BANK CORPORATION
Date:  November  3, 2017	/s/ Robert N. Shuster
		Robert N. Shuster
		Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATE OF THE

CHIEF EXECUTIVE OFFICER OF

INDEPENDENT BANK CORPORATION

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

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

(1)          The quarterly report on Form 10-Q for the quarterly period ended September 30, 2017, which this statement accompanies, fully complies with requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and;

(2)          The information contained in this quarterly report on Form 10-Q for the quarterly period ended September 30, 2017, fairly presents, in all material respects, the financial condition and results of operations of Independent Bank Corporation.

	INDEPENDENT BANK CORPORATION
Date:  November 3, 2017	/s/ William B. Kessel
		William B. Kessel
		President and Chief Executive Officer

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

EX-32.2

EXHIBIT 32.2

CERTIFICATE OF THE

CHIEF FINANCIAL OFFICER OF

INDEPENDENT BANK CORPORATION

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

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

(1)          The quarterly report on Form 10-Q for the quarterly period ended September 30, 2017, which this statement accompanies, fully complies with requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and;

(2)          The information contained in this quarterly report on Form 10-Q for the quarterly period ended September 30, 2017, fairly presents, in all material respects, the financial condition and results of operations of Independent Bank Corporation.

	INDEPENDENT BANK CORPORATION
Date:  November 3, 2017	/s/ Robert N. Shuster
		Robert N. Shuster
		Chief Financial Officer

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

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Nov. 02, 2017
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		21,331,967
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2017

XML

Condensed Consolidated Statements of Financial Condition (unaudited) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Assets
Cash and due from banks	$ 31,998	$ 35,238
Interest bearing deposits	15,605	47,956
Cash and Cash Equivalents	47,603	83,194
Interest bearing deposits - time	3,489	5,591
Trading securities	347	410
Securities available for sale	548,865	610,616
Federal Home Loan Bank and Federal Reserve Bank stock, at cost	15,543	15,543
Loans held for sale, carried at fair value	47,611	35,946
Payment plan receivables and other assets held for sale	0	33,360
Loans
Commercial	837,250	804,017
Mortgage	781,346	538,615
Installment	318,498	265,616
Total Loans	1,937,094	1,608,248
Allowance for loan losses	(21,478)	(20,234)
Net Loans	1,915,616	1,588,014
Other real estate and repossessed assets	2,150	5,004
Property and equipment, net	38,774	40,175
Bank-owned life insurance	54,286	54,033
Deferred tax assets, net	22,433	32,818
Capitalized mortgage loan servicing rights	14,675
Capitalized mortgage loan servicing rights		13,671
Other intangibles	1,673	1,932
Accrued income and other assets	40,381	28,643
Total Assets	2,753,446	2,548,950
Deposits
Non-interest bearing	753,555	717,472
Savings and interest-bearing checking	1,040,974	1,015,724
Reciprocal	49,078	38,657
Time	412,601	453,866
Brokered time	87,553	0
Total Deposits	2,343,761	2,225,719
Federal funds purchased	3,000	0
Other borrowings	72,849	9,433
Subordinated debentures	35,569	35,569
Other liabilities held for sale	0	718
Accrued expenses and other liabilities	30,557	28,531
Total Liabilities	2,485,736	2,299,970
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: 21,332,317 shares at September 30, 2017 and 21,258,092 shares at December 31, 2016	324,607	323,745
Accumulated deficit	(53,240)	(65,657)
Accumulated other comprehensive loss	(3,657)	(9,108)
Total Shareholders' Equity	267,710	248,980
Total Liabilities and Shareholders' Equity	$ 2,753,446	$ 2,548,950

XML

Condensed Consolidated Statements of Financial Condition (unaudited) (Parenthetical) - $ / shares	Sep. 30, 2017	Dec. 31, 2016
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)	21,332,317	21,258,092
Common stock, shares outstanding (in shares)	21,332,317	21,258,092

XML

Condensed Consolidated Statements of Operations (unaudited) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Interest Income
Interest and fees on loans		$ 21,831	$ 18,597	$ 61,638	$ 55,361
Interest on securities
Taxable		2,765	2,537	8,300	7,261
Tax-exempt		512	330	1,478	860
Other investments		263	281	867	884
Total Interest Income		25,371	21,745	72,283	64,366
Interest Expense
Deposits		1,833	1,254	4,754	3,520
Other borrowings and subordinated debentures		626	493	1,659	1,455
Total Interest Expense		2,459	1,747	6,413	4,975
Net Interest Income		22,912	19,998	65,870	59,391
Provision for loan losses		582	(175)	806	(1,439)
Net Interest Income After Provision for Loan Losses		22,330	20,173	65,064	60,830
Non-interest Income
Service charges on deposit accounts		3,281	3,281	9,465	9,164
Interchange income		1,942	1,943	5,869	5,797
Net gains (losses) on assets
Mortgage loans		2,971	3,556	8,886	7,727
Securities		69	(45)	62	302
Mortgage loan servicing, net		1	858	668	(454)
Other		2,040	2,115	6,139	6,561
Total Non-Interest Income		10,304	11,708	31,089	29,097
Non-interest Expense
Compensation and employee benefits		13,577	13,031	41,104	36,912
Occupancy, net		1,970	1,919	6,032	5,982
Data processing		1,796	1,971	5,670	6,008
Furniture, fixtures and equipment		961	990	2,943	2,939
Communications		685	670	2,046	2,280
Loan and collection		481	568	1,564	1,964
Advertising		526	455	1,551	1,410
Legal and professional		550	420	1,376	1,178
Interchange expense		294	276	869	809
FDIC deposit insurance		208	187	608	852
Credit card and bank service fees		105	203	432	588
Other		1,463	1,839	4,751	4,547
Total Non-Interest Expense		22,616	22,529	68,946	65,469
Income Before Income Tax		10,018	9,352	27,207	24,458
Income tax expense		3,159	2,979	8,443	7,547
Net Income		$ 6,859	$ 6,373	$ 18,764	$ 16,911
Net Income Per Common Share
Basic (in dollars per share)	[1]	$ 0.32	$ 0.30	$ 0.88	$ 0.79
Diluted (in dollars per share)		0.32	0.30	0.87	0.78
Dividends Per Common Share
Declared (in dollars per share)		0.10	0.08	0.30	0.24
Paid (in dollars per share)		$ 0.10	$ 0.08	$ 0.30	$ 0.24

[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		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Condensed Consolidated Statements of Comprehensive Income (unaudited) [Abstract]
Net income	$ 6,859	$ 6,373	$ 18,764	$ 16,911
Securities available for sale
Unrealized gains arising during period	20	451	7,738	4,899
Change in unrealized gains for which a portion of other than temporary impairment has been recognized in earnings	126	(24)	211	47
Reclassification adjustments for gains included in earnings	(8)	(15)	(125)	(298)
Unrealized gains recognized in other comprehensive income on securities available for sale	138	412	7,824	4,648
Income tax expense	48	144	2,738	1,627
Unrealized gains recognized in other comprehensive income on securities available for sale, net of tax	90	268	5,086	3,021
Derivative instruments
Unrealized gain arising during period	95	0	95	0
Reclassification adjustment for expense recognized in earnings	5	0	5	0
Unrealized gains recognized in other comprehensive income on derivative instruments	100	0	100	0
Income tax expense	35	0	35	0
Unrealized gains recognized in other comprehensive income on derivative instruments, net of tax	65	0	65	0
Other comprehensive income	155	268	5,151	3,021
Comprehensive income	$ 7,014	$ 6,641	$ 23,915	$ 19,932

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Condensed Consolidated Statements of Cash Flows (unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Condensed Consolidated Statements of Cash Flows (unaudited) [Abstract]
Net income	$ 18,764	$ 16,911
Adjustments to Reconcile Net Income to Net Cash From Operating Activities
Proceeds from sales of loans held for sale	313,559	222,610
Disbursements for loans held for sale	(316,338)	(225,025)
Provision for loan losses	806	(1,439)
Deferred income tax expense	7,422	7,099
Deferred loan fees	(4,588)	(1,634)
Net depreciation, amortization of intangible assets and premiums and accretion of discounts on securities, loans and interest bearing deposits - time	5,079	3,831
Net gains on mortgage loans	(8,886)	(7,727)
Net gains on securities	(62)	(302)
Share based compensation	1,342	1,200
Increase in accrued income and other assets	(13,159)	(3,804)
Increase in accrued expenses and other liabilities	2,274	1,150
Total Adjustments	(12,551)	(4,041)
Net Cash From Operating Activities	6,213	12,870
Cash Flow Used in Investing Activities
Proceeds from the sale of securities available for sale	8,834	56,451
Proceeds from maturities, prepayments and calls of securities available for sale	143,953	150,103
Purchases of securities available for sale	(84,080)	(213,839)
Proceeds from the maturity of interest bearing deposits - time	2,100	4,613
Purchase of Federal Reserve Bank stock	0	(407)
Redemption of Federal Reserve Bank stock	0	371
Net increase in portfolio loans (loans originated, net of principal payments)	(326,089)	(73,673)
Purchase of portfolio loans	0	(15,000)
Cash received from the sale of Mepco Finance Corporation assets, net	33,446	0
Proceeds from bank-owned life insurance	523	2,235
Proceeds from the collection of vehicle service contract counterparty receivables	411	4,671
Proceeds from the sale of other real estate and repossessed assets	4,111	3,854
Capital expenditures	(2,592)	(1,717)
Net Cash Used in Investing Activities	(219,383)	(82,338)
Cash Flow From Financing Activities
Net increase in total deposits	118,042	120,997
Net increase in other borrowings	3,003	5
Proceeds from Federal Home Loan Bank advances	461,000	0
Payments of Federal Home Loan Bank Advances	(397,587)	(432)
Dividends paid	(6,400)	(5,149)
Proceeds from issuance of common stock	57	61
Repurchase of common stock	0	(16,854)
Share based compensation withholding obligation	(536)	(627)
Net Cash From Financing Activities	177,579	98,001
Net Increase (Decrease) in Cash and Cash Equivalents	(35,591)	28,533
Cash and Cash Equivalents at Beginning of Period	83,194	85,783
Cash and Cash Equivalents at End of Period	47,603	114,316
Cash paid during the period for
Interest	6,240	4,811
Income taxes	988	437
Transfers to other real estate and repossessed assets	1,389	1,791
Purchase of securities available for sale not yet settled	1,765	7,440
Sale of securities available for sale not yet settled	$ 760	$ 0

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Condensed Consolidated Statements of Shareholders' Equity (unaudited) $ in Thousands	USD ($)
Balance at beginning of period at Dec. 31, 2015	$ 251,092
Balance at beginning of period, as adjusted at Dec. 31, 2015	252,339
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	16,911
Cash dividends declared	(5,149)
Issuance of common stock	61
Share based compensation	1,200
Share based compensation withholding obligation	(627)
Repurchase of common stock	(16,854)
Net change in accumulated other comprehensive loss, net of related tax effect	3,021
Balance at end of period at Sep. 30, 2016	250,902
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	6,373
Net change in accumulated other comprehensive loss, net of related tax effect	268
Balance at end of period at Sep. 30, 2016	250,902
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative effect of change in accounting	1,247
Balance at beginning of period at Dec. 31, 2016	248,980
Balance at beginning of period, as adjusted at Dec. 31, 2016	249,332
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	18,764
Cash dividends declared	(6,400)
Issuance of common stock	57
Share based compensation	1,342
Share based compensation withholding obligation	(536)
Repurchase of common stock	0
Net change in accumulated other comprehensive loss, net of related tax effect	5,151
Balance at end of period at Sep. 30, 2017	267,710
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	6,859
Net change in accumulated other comprehensive loss, net of related tax effect	155
Balance at end of period at Sep. 30, 2017	267,710
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative effect of change in accounting	$ 352

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Preparation of Financial Statements

9 Months Ended

Sep. 30, 2017

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, 2016 included in our Annual Report on Form 10-K.

In our opinion, the accompanying unaudited condensed consolidated financial statements contain all the adjustments necessary to present fairly our consolidated financial condition as of September 30, 2017 and December 31, 2016, and the results of operations for the three and nine-month periods ended September 30, 2017 and 2016.  The results of operations for the three and nine-month periods ended September 30, 2017, 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 valuation of originated mortgage loan servicing rights and the valuation of deferred tax assets.  Refer to our 2016 Annual Report on Form 10-K for a disclosure of our accounting policies.

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New Accounting Standards

9 Months Ended

Sep. 30, 2017

New Accounting Standards [Abstract]

New Accounting Standards

2. New Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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.  We expect to adopt this ASU using the modified retrospective approach.  Financial instruments for the most part and related contractual rights and obligations which are the sources of the majority of our operating revenue are excluded from the scope of this amended guidance.  In addition, for those operating revenue streams that are included in the scope of this amended guidance, based upon our review of these sources of income we do not believe they will be materially impacted by this amended guidance.

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, require 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, require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset and eliminate 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.  We have reviewed the types of financial instruments impacted by this amended guidance, including certain equity investments and liabilities measured under the fair value election, and have determined that we do not currently own any such instruments.  The balance of this amended guidance is expected to impact certain disclosure items but is not expected to have any 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, require 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.  Based on a review of our operating leases that we currently have in place we do not expect a material change in the recognition, measurement and presentation of lease expense or impact on cash flow.  While the primary impact will be the recognition of certain operating leases on our Condensed Consolidated Statements of Financial Condition this impact is not expected to be material.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments”.  This ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.  This ASU will replace today’s “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. For securities available for sale, allowances will be recorded rather than reducing the carrying amount as is done under the current other-than-temporary impairment model. This ASU also simplifies the accounting model for purchased credit-impaired debt securities and loans. This amended guidance is effective for us on January 1, 2020.  We began evaluating this ASU in 2016 and have formed a committee that includes personnel from various areas of the Bank that meets regularly to discuss the implementation of the ASU.  We are currently in the process of gathering data and reviewing loss methodologies and have engaged third party resources that will assist us in the implementation of this ASU.  While we have not yet determined what the impact will be on our consolidated operating results or financial condition by the nature of the implementation of an expected loss model compared to an incurred loss approach, we would expect our allowance for loan losses (“AFLL”) to increase under this ASU.

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities”.  This new ASU amends the hedge accounting model in Topic 815 to enable entities to better portray the economics of their risk management activities in the financial statements and enhance the transparency and understandability of hedge results. The amendments expand an entity’s ability to hedge nonfinancial and financial risk components and reduce complexity in fair value hedges of interest rate risk. The guidance eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The guidance also eases certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment of hedge effectiveness.  This amended guidance is effective for us on January 1, 2019, and given our current level of derivatives designated as hedges is not expected to have a material impact on our consolidated operating results or financial condition.

In March 2017, the FASB issued ASU 2017-08, “Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20) Premium Amortization on Purchased Callable Debt Securities” (“ASU 2017-08”).  This ASU shortens the amortization period for certain callable debt securities held at a premium.  Specifically, the amendments require the premium to be amortized to the earliest call date.  The amendments do not require an accounting change for securities held at a discount; the discount continues to be accreted to maturity.   This amended guidance is effective for us on January 1, 2019, with early adoption permitted.  We adopted this amended guidance during the first quarter of 2017 using a modified retrospective approach.  The impact of this adoption was to adjust our January 1, 2017 Condensed Consolidated Statement of Financial Position to reflect cumulative effect adjustments as summarized in the table below. The adjustments below reflect the recording of $0.46 million ($0.30 million, net of tax) of additional premium amortization on securities available for sale and a $0.30 million decrease in accumulated other comprehensive loss to reflect the decrease in after tax unrealized losses on securities available for sale as of January 1, 2017 as a result of adopting this amended guidance. After January 1, 2017, premium amortization on certain callable debt securities is now amortized to the first call date.  During the first quarter of 2017 the impact on the Condensed Consolidated Statements of Operations was an increase to premium amortization of $0.03 million.

During the first quarter of 2017, we adopted the fair value method of accounting for our capitalized mortgage loan servicing rights pursuant to FASB Accounting Standards Codification topic 860 – “Transfers and Servicing”.  Prior to January 1, 2017, we were accounting for our capitalized mortgage loan servicing rights under the amortization method.  We adopted the fair value method using a modified retrospective adjustment to beginning accumulated deficit.  The impact of the adoption of the fair value method is summarized in the table below.  The adjustments below reflect the recording of a $0.54 million increase in the fair value of our capitalized mortgage loan servicing rights with a $0.19 million reduction in deferred tax assets, net for a net impact on accumulated deficit and total equity of $0.35 million.

	January 1, 2017 Originally Presented			Cumulative Retrospective Adjustments					January 1, 2017 Adjusted
	(In thousands)
Deferred tax assets, net	$	32,818		$	(190	)	(1	)	$	32,628
Capitalized mortgage loan servicing rights	$	13,671		$	542		(1	)	$	14,213
Total assets	$	2,548,950		$	352				$	2,549,302
Accumulated deficit	$	(65,657	)	$	352		(1	)
				$	(300	)	(2	)	$	(65,605	)
Accumulated other comprehensive loss	$	(9,108	)	$	300		(2	)	$	(8,808	)
Total Shareholders’ Equity	$	248,980		$	352				$	249,332
Total Liabilities and Shareholders’ Equity	$	2,548,950		$	352				$	2,549,302

(1) Represents adjustment to capitalized mortgage loan servicing rights, deferred tax assets, net, and accumulated deficit to reflect the adoption of the fair value method of accounting for our capitalized mortgage loan servicing rights.

(2) Represents  adjustment to accumulated deficit and accumulated other comprehensive loss to reflect the adoption of ASU 2017-08.

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Securities

9 Months Ended

Sep. 30, 2017

Securities [Abstract]

Securities

3. Securities

Securities available for sale consist of the following:

	Amortized		Unrealized
	Cost		Gains		Losses		Fair Value
	(In thousands)
September 30, 2017
U.S. agency	$	26,455	$	210	$	39	$	26,626
U.S. agency residential mortgage-backed		135,293		1,331		515		136,109
U.S. agency commercial mortgage-backed		10,767		84		115		10,736
Private label mortgage-backed		26,703		518		231		26,990
Other asset backed		108,128		319		108		108,339
Obligations of states and political subdivisions		176,087		1,708		619		177,176
Corporate		57,213		853		66		58,000
Trust preferred		2,928		-		128		2,800
Foreign government		2,098		-		9		2,089
Total	$	545,672	$	5,023	$	1,830	$	548,865
December 31, 2016
U.S. agency	$	28,909	$	159	$	80	$	28,988
U.S. agency residential mortgage-backed		156,053		1,173		937		156,289
U.S. agency commercial mortgage-backed		12,799		28		195		12,632
Private label mortgage-backed		35,035		216		524		34,727
Other asset backed		146,829		271		391		146,709
Obligations of states and political subdivisions		175,180		478		4,759		170,899
Corporate		56,356		223		399		56,180
Trust preferred		2,922		-		343		2,579
Foreign government		1,626		-		13		1,613
Total	$	615,709	$	2,548	$	7,641	$	610,616

We adopted ASU 2017-08 during the first quarter of 2017 using a modified retrospective approach.  As a result, the amortized cost of securities as of January 1, 2017 was adjusted lower by $0.46 million (see note #2).

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

	Less Than Twelve Months				Twelve Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In thousands)
September 30, 2017
U.S. agency	$	4,819	$	21	$	4,947	$	18	$	9,766	$	39
U.S. agency residential mortgage-backed		24,116		215		27,817		300		51,933		515
U.S. agency commercial mortgage-backed		1,815		22		3,933		93		5,748		115
Private label mortgage- backed		3,423		26		3,163		205		6,586		231
Other asset backed		12,756		18		16,298		90		29,054		108
Obligations of states and political subdivisions		42,186		447		13,787		172		55,973		619
Corporate		8,654		22		2,458		44		11,112		66
Trust preferred		-		-		2,800		128		2,800		128
Foreign government		2,089		9		-		-		2,089		9
Total	$	99,858	$	780	$	75,203	$	1,050	$	175,061	$	1,830

December 31, 2016
U.S. agency	$	4,179	$	41	$	8,217	$	39	$	12,396	$	80
U.S. agency residential mortgage-backed		62,524		732		20,857		205		83,381		937
U.S. agency commercial mortgage-backed		6,079		194		143		1		6,222		195
Private label mortgage-backed		20,545		281		1,413		243		21,958		524
Other asset backed		52,958		172		17,763		219		70,721		391
Obligations of states and political subdivisions		113,078		4,014		14,623		745		127,701		4,759
Corporate		25,546		292		2,810		107		28,356		399
Trust preferred		-		-		2,579		343		2,579		343
Foreign government		1,613		13		-		-		1,613		13
Total	$	286,522	$	5,739	$	68,405	$	1,902	$	354,927	$	7,641

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

U.S. agency, U.S. agency residential mortgage-backed securities and U.S. agency commercial mortgage backed securities — at September 30, 2017, we had 33 U.S. agency, 109 U.S. agency residential mortgage-backed and 10 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 September 30, 2017, we had 11 of this type of security whose fair value is less than amortized cost.  The majority of unrealized losses are attributed to three securities purchased prior to 2016.  Two of these three securities has an impairment in excess of 10% and all three of these holdings have been impaired for more than 12 months.  The unrealized losses are largely attributable to credit spread widening on these three securities since their acquisition.

These three securities are receiving principal and interest payments. 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 three private label mortgage-backed securities are periodically 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 all three of these securities whose fair value is less than amortized cost.

As management does not intend to liquidate these securities and it is more likely than not that we will not be required to sell these securities prior to recovery of these unrealized losses, no other declines discussed above are deemed to be other than temporary.

Other asset backed — at September 30, 2017, we had 51 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 September 30, 2017, we had 182 municipal securities whose fair value is less than amortized cost. The unrealized losses are primarily due to wider benchmark pricing spreads 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.

Corporate — at September 30, 2017, we had 11 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 September 30, 2017, 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 $0.9 million as of September 30, 2017, continues to have satisfactory credit metrics and make interest payments.

The following table breaks out our trust preferred securities in further detail as of September 30, 2017 and December 31, 2016:

	September 30, 2017					December 31, 2016
	Fair Value		Net Unrealized Loss			Fair Value		Net Unrealized Loss
	(In thousands)
Trust preferred securities
Rated issues	$	1,880	$	(48	)	$	1,800	$	(123	)
Unrated issues		920		(80	)		779		(220	)

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 September 30, 2017, we had two foreign government securities whose fair value is less than amortized cost. The unrealized loss is 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.

We recorded no credit related OTTI charges in our Condensed Consolidated Statements of Operations related to securities available for sale during the three and nine month periods ended September 30, 2017 and 2016, respectively.

At September 30, 2017, 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 September 30, 2017
Fair value	$	1,076	$	1,032	$	65	$	2,173
Amortized cost		937		842		-		1,779
Non-credit unrealized loss		-		-		-		-
Unrealized gain		139		190		65		394
Cumulative credit related OTTI		757		457		380		1,594

Each of these securities is receiving principal and interest payments similar to principal reductions in the underlying collateral.  All three of these securities have unrealized gains at September 30, 2017.  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 these securities is now less than previously recorded credit related OTTI amounts.

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

	Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016
	(In thousands)
Balance at beginning of period	$	1,844	$	1,844	$	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	$	1,844	$	1,844

The amortized cost and fair value of securities available for sale at September 30, 2017, by contractual maturity, follow:

	Amortized Cost		Fair Value
	(In thousands)
Maturing within one year	$	27,811	$	27,865
Maturing after one year but within five years		98,784		99,533
Maturing after five years but within ten years		82,590		83,671
Maturing after ten years		55,596		55,622
		264,781		266,691
U.S. agency residential mortgage-backed		135,293		136,109
U.S. agency commercial mortgage-backed		10,767		10,736
Private label mortgage-backed		26,703		26,990
Other asset backed		108,128		108,339
Total	$	545,672	$	548,865

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

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

			Realized
	Proceeds (1)		Gains		Losses
	(In thousands)
2017	$	9,594	$	125	$	-
2016		56,451		350		52

(1) 2017 includes $0.760 million for trades that did not settle until after September 30, 2017.

During 2017 and 2016, our trading securities consisted of various preferred stocks.  During the nine months ended September 30, 2017 and 2016, we recognized gains (losses) on trading securities of $(0.063) million and $0.004 million, respectively, that are included in net gains (losses) on securities in the Condensed Consolidated Statements of Operations.  These amounts relate to trading securities still held at each respective period end.

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Loans

9 Months Ended

Sep. 30, 2017

Loans [Abstract]

Loans

4. Loans

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

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

	Commercial			Mortgage			Installment			Payment Plan Receivables(1)		Subjective Allocation		Total
	(In thousands)
2017
Balance at beginning of period	$	5,100		$	8,145		$	900		$	-	$	6,441	$	20,586
Additions (deductions) Provision for loan losses		(97	)		68			(33	)		-		644		582
Recoveries credited to the allowance		340			587			285			-		-		1,212
Loans charged against the allowance		(92	)		(471	)		(339	)		-		-		(902	)
Balance at end of period	$	5,251		$	8,329		$	813		$	-	$	7,085	$	21,478
2016
Balance at beginning of period	$	6,039		$	9,956		$	1,139		$	52	$	5,526	$	22,712
Additions (deductions) Provision for loan losses		(153	)		(247	)		208			-		17		(175	)
Recoveries credited to the allowance		474			195			236			-		-		905
Loans charged against the allowance		(365	)		(561	)		(473	)		-		-		(1,399	)
Balance at end of period	$	5,995		$	9,343		$	1,110		$	52	$	5,543	$	22,043

(1) Payment plan receivables were reclassified to held for sale at December 31, 2016.  See note #15.

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

	Commercial			Mortgage			Installment			Payment Plan Receivables(1)			Subjective Allocation		Total
	(In thousands)
2017
Balance at beginning of period	$	4,880		$	8,681		$	1,011		$	-		$	5,662	$	20,234
Additions (deductions) Provision for loan losses		(197	)		(593	)		173			-			1,423		806
Recoveries credited to the allowance		946			1,264			788			-			-		2,998
Loans charged against the allowance		(378	)		(1,023	)		(1,159	)		-			-		(2,560	)
Balance at end of period	$	5,251		$	8,329		$	813		$	-		$	7,085	$	21,478
2016
Balance at beginning of period	$	5,670		$	10,391		$	1,181		$	56		$	5,272	$	22,570
Additions (deductions) Provision for loan losses		(1,220	)		(885	)		399			(4	)		271		(1,439	)
Recoveries credited to the allowance		1,944			871			808			-			-		3,623
Loans charged against the allowance		(399	)		(1,034	)		(1,278	)		-			-		(2,711	)
Balance at end of period	$	5,995		$	9,343		$	1,110		$	52		$	5,543	$	22,043

(1) Payment plan receivables were reclassified to held for sale at December 31, 2016.  See note #15.

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

	Commercial		Mortgage		Installment		Subjective Allocation		Total
	(In thousands)
September 30, 2017
Allowance for loan losses
Individually evaluated for impairment	$	967	$	5,823	$	271	$	-	$	7,061
Collectively evaluated for impairment		4,284		2,506		542		7,085		14,417
Total ending allowance balance	$	5,251	$	8,329	$	813	$	7,085	$	21,478
Loans
Individually evaluated for impairment	$	10,257	$	54,322	$	4,215			$	68,794
Collectively evaluated for impairment		829,073		730,050		315,146				1,874,269
Total loans recorded investment		839,330		784,372		319,361				1,943,063
Accrued interest included in recorded investment		2,080		3,026		863				5,969
Total loans	$	837,250	$	781,346	$	318,498			$	1,937,094
December 31, 2016
Allowance for loan losses
Individually evaluated for impairment	$	2,244	$	6,579	$	329	$	-	$	9,152
Collectively evaluated for impairment		2,636		2,102		682		5,662		11,082
Total ending allowance balance	$	4,880	$	8,681	$	1,011	$	5,662	$	20,234
Loans
Individually evaluated for impairment	$	15,767	$	59,151	$	4,913			$	79,831
Collectively evaluated for impairment		790,228		481,828		261,474				1,533,530
Total loans recorded investment		805,995		540,979		266,387				1,613,361
Accrued interest included in recorded investment		1,978		2,364		771				5,113
Total loans	$	804,017	$	538,615	$	265,616			$	1,608,248

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

	90+ and Still Accruing		Non- Accrual		Total Non- Performing Loans
	(In thousands)
September 30, 2017
Commercial
Income producing - real estate	$	-	$	72	$	72
Land, land development and construction - real estate		-		10		10
Commercial and industrial		-		706		706
Mortgage
1-4 family		-		5,207		5,207
Resort lending		-		1,411		1,411
Home equity - 1st lien		-		258		258
Home equity - 2nd lien		-		221		221
Purchased loans		-		-		-
Installment
Home equity - 1st lien		-		97		97
Home equity - 2nd lien		-		224		224
Boat lending		-		69		69
Recreational vehicle lending		-		25		25
Other		-		110		110
Total recorded investment	$	-	$	8,410	$	8,410
Accrued interest included in recorded investment	$	-	$	-	$	-
December 31, 2016
Commercial
Income producing - real estate	$	-	$	628	$	628
Land, land development and construction - real estate		-		105		105
Commercial and industrial		-		4,430		4,430
Mortgage
1-4 family		-		5,248		5,248
Resort lending		-		1,507		1,507
Home equity - 1st lien		-		222		222
Home equity - 2nd lien		-		317		317
Purchased loans		-		-		-
Installment
Home equity - 1st lien		-		266		266
Home equity - 2nd lien		-		289		289
Boat lending		-		219		219
Recreational vehicle lending		-		21		21
Other		-		112		112
Total recorded investment	$	-	$	13,364	$	13,364
Accrued interest included in recorded investment	$	-	$	-	$	-

An aging analysis of loans by class follows:

	Loans Past Due								Loans not		Total
	30-59 days		60-89 days		90+ days		Total		Past Due		Loans
	(In thousands)
September 30, 2017
Commercial
Income producing - real estate	$	425	$	-	$	30	$	455	$	271,747	$	272,202
Land, land development and construction - real estate		10		-		-		10		67,793		67,803
Commercial and industrial		120		149		65		334		498,991		499,325
Mortgage
1-4 family		1,929		919		5,207		8,055		553,928		561,983
Resort lending		363		135		1,411		1,909		91,370		93,279
Home equity - 1st lien		460		-		258		718		35,826		36,544
Home equity - 2nd lien		597		195		221		1,013		56,677		57,690
Purchased loans		3		1		-		4		34,872		34,876
Installment
Home equity - 1st lien		115		86		97		298		9,925		10,223
Home equity - 2nd lien		161		23		224		408		10,103		10,511
Boat lending		112		69		69		250		131,153		131,403
Recreational vehicle lending		52		4		25		81		93,687		93,768
Other		108		50		110		268		73,188		73,456
Total recorded investment	$	4,455	$	1,631	$	7,717	$	13,803	$	1,929,260	$	1,943,063
Accrued interest included in recorded investment	$	53	$	24	$	-	$	77	$	5,892	$	5,969

December 31, 2016
Commercial
Income producing - real estate	$	-	$	-	$	383	$	383	$	287,255	$	287,638
Land, land development and construction - real estate		74		-		31		105		51,670		51,775
Commercial and industrial		100		1,385		66		1,551		465,031		466,582
Mortgage
1-4 family		2,361		869		5,248		8,478		306,063		314,541
Resort lending		-		-		1,507		1,507		101,541		103,048
Home equity - 1st lien		149		-		222		371		28,645		29,016
Home equity - 2nd lien		470		218		317		1,005		54,232		55,237
Purchased loans		13		2		-		15		39,122		39,137
Installment
Home equity - 1st lien		311		48		266		625		12,025		12,650
Home equity - 2nd lien		238		41		289		568		13,390		13,958
Boat lending		184		33		219		436		102,489		102,925
Recreational vehicle lending		68		33		21		122		74,413		74,535
Other		289		30		112		431		61,888		62,319
Total recorded investment	$	4,257	$	2,659	$	8,681	$	15,597	$	1,597,764	$	1,613,361
Accrued interest included in recorded investment	$	45	$	19	$	-	$	64	$	5,049	$	5,113

Impaired loans are as follows:

	September 30, 2017		December 31, 2016
Impaired loans with no allocated allowance	(In thousands)
TDR	$	349	$	1,782
Non - TDR		186		1,107
Impaired loans with an allocated allowance
TDR - allowance based on collateral		2,320		3,527
TDR - allowance based on present value cash flow		65,449		72,613
Non - TDR - allowance based on collateral		202		491
Total impaired loans	$	68,506	$	79,520
Amount of allowance for loan losses allocated
TDR - allowance based on collateral	$	641	$	1,868
TDR - allowance based on present value cash flow		6,329		7,146
Non - TDR - allowance based on collateral		91		138
Total amount of allowance for loan losses allocated	$	7,061	$	9,152

Impaired loans by class  are as follows (1):

	September 30, 2017						December 31, 2016
	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	$	-	$	-	$	-	$	517	$	768	$	-
Land, land development & construction-real estate		-		-		-		31		709		-
Commercial and industrial		535		557		-		2,341		3,261		-
Mortgage
1-4 family		2		472		-		2		387		-
Resort lending		-		-		-		-		-		-
Home equity - 1st lien		-		-		-		-		-		-
Home equity - 2nd lien		-		-		-		-		-		-
Installment
Home equity - 1st lien		1		71		-		-		66		-
Home equity - 2nd lien		-		-		-		-		-		-
Boat lending		-		-		-		-		-		-
Recreational vehicle lending		-		-		-		-		-		-
Other		-		-		-		-		-		-
		538		1,100		-		2,891		5,191		-
With an allowance recorded:
Commercial
Income producing - real estate		6,975		7,121		482		7,737		7,880		554
Land, land development & construction-real estate		169		197		10		239		244		36
Commercial and industrial		2,578		2,612		475		4,902		5,246		1,654
Mortgage
1-4 family		37,872		39,393		3,517		41,701		43,479		4,100
Resort lending		16,098		16,169		2,264		16,898		16,931		2,453
Home equity - 1st lien		171		238		30		235		242		10
Home equity - 2nd lien		179		213		12		315		398		16
Installment
Home equity - 1st lien		1,791		1,921		85		1,994		2,117		118
Home equity - 2nd lien		1,969		1,994		161		2,415		2,443		182
Boat lending		1		6		1		1		6		-
Recreational vehicle lending		93		93		5		109		108		6
Other		360		377		19		394		426		23
		68,256		70,334		7,061		76,940		79,520		9,152
Total
Commercial
Income producing - real estate		6,975		7,121		482		8,254		8,648		554
Land, land development & construction-real estate		169		197		10		270		953		36
Commercial and industrial		3,113		3,169		475		7,243		8,507		1,654
Mortgage
1-4 family		37,874		39,865		3,517		41,703		43,866		4,100
Resort lending		16,098		16,169		2,264		16,898		16,931		2,453
Home equity - 1st lien		171		238		30		235		242		10
Home equity - 2nd lien		179		213		12		315		398		16
Installment
Home equity - 1st lien		1,792		1,992		85		1,994		2,183		118
Home equity - 2nd lien		1,969		1,994		161		2,415		2,443		182
Boat lending		1		6		1		1		6		-
Recreational vehicle lending		93		93		5		109		108		6
Other		360		377		19		394		426		23
Total	$	68,794	$	71,434	$	7,061	$	79,831	$	84,711	$	9,152
Accrued interest included in recorded investment	$	288					$	311

(1) There were no impaired purchased mortgage loans at September 30, 2017 or December 31, 2016.

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

	2017				2016
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded	(In thousands)
Commercial
Income producing - real estate	$	-	$	-	$	551	$	-
Land, land development & construction-real estate		-		-		133		-
Commercial and industrial		445		8		-		-
Mortgage
1-4 family		127		7		12		3
Resort lending		-		-		-		-
Home equity - 1st lien		-		-		-		-
Home equity - 2nd lien		-		-		-		-
Installment
Home equity - 1st lien		1		1		-		3
Home equity - 2nd lien		-		-		-		-
Boat lending		-		-		-		-
Recreational vehicle lending		-		-		-		-
Other		-		1		-		-
		573		17		696		6
With an allowance recorded
Commercial
Income producing - real estate		7,311		91		8,000		111
Land, land development & construction-real estate		171		2		1,117		3
Commercial and industrial		2,878		26		7,145		69
Mortgage
1-4 family		38,533		462		44,256		470
Resort lending		16,175		153		17,372		161
Home equity - 1st lien		201		1		241		2
Home equity - 2nd lien		180		2		280		6
Installment
Home equity - 1st lien		1,808		40		2,140		34
Home equity - 2nd lien		2,058		26		2,585		37
Boat lending		1		-		2		-
Recreational vehicle lending		98		1		114		2
Other		361		6		424		7
		69,775		810		83,676		902
Total
Commercial
Income producing - real estate		7,311		91		8,551		111
Land, land development & construction-real estate		171		2		1,250		3
Commercial and industrial		3,323		34		7,145		69
Mortgage
1-4 family		38,660		469		44,268		473
Resort lending		16,175		153		17,372		161
Home equity - 1st lien		201		1		241		2
Home equity - 2nd lien		180		2		280		6
Installment
Home equity - 1st lien		1,809		41		2,140		37
Home equity - 2nd lien		2,058		26		2,585		37
Boat lending		1		-		2		-
Recreational vehicle lending		98		1		114		2
Other		361		7		424		7
Total	$	70,348	$	827	$	84,372	$	908

(1) There were no impaired purchased mortgage loans during the three month periods ended September 30, 2017 and 2016, respectively.

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

	2017				2016
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:	(In thousands)
Commercial
Income producing - real estate	$	222	$	-	$	632	$	2
Land, land development & construction-real estate		8		-		405		7
Commercial and industrial		808		16		616		21
Mortgage
1-4 family		64		16		12		9
Resort lending		-		-		-		-
Home equity - 1st lien		-		-		-		-
Home equity - 2nd lien		-		-		-		-
Installment
Home equity - 1st lien		1		4		-		4
Home equity - 2nd lien		-		-		4		-
Boat lending		-		-		-		-
Recreational vehicle lending		-		-		-		-
Other		-		1		-		-
		1,103		37		1,669		43
With an allowance recorded:
Commercial
Income producing - real estate		7,525		300		8,153		318
Land, land development & construction-real estate		187		6		1,352		29
Commercial and industrial		3,488		98		5,929		151
Mortgage
1-4 family		39,716		1,420		45,728		1,447
Resort lending		16,485		464		17,705		480
Home equity - 1st lien		218		5		223		6
Home equity - 2nd lien		217		5		231		11
Installment
Home equity - 1st lien		1,874		107		2,233		118
Home equity - 2nd lien		2,210		96		2,723		122
Boat lending		1		-		2		-
Recreational vehicle lending		103		4		117		5
Other		373		19		443		23
		72,397		2,524		84,839		2,710
Total
Commercial
Income producing - real estate		7,747		300		8,785		320
Land, land development & construction-real estate		195		6		1,757		36
Commercial and industrial		4,296		114		6,545		172
Mortgage
1-4 family		39,780		1,436		45,740		1,456
Resort lending		16,485		464		17,705		480
Home equity - 1st lien		218		5		223		6
Home equity - 2nd lien		217		5		231		11
Installment
Home equity - 1st lien		1,875		111		2,233		122
Home equity - 2nd lien		2,210		96		2,727		122
Boat lending		1		-		2		-
Recreational vehicle lending		103		4		117		5
Other		373		20		443		23
Total	$	73,500	$	2,561	$	86,508	$	2,753

(1) There were no impaired purchased mortgage loans during the nine month periods ended September 30, 2017 and 2016, respectively.

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

Troubled debt restructurings follow:

	September 30, 2017
	Commercial		Retail (1)			Total
	(In thousands)
Performing TDRs	$	9,431	$	53,755		$	63,186
Non-performing TDRs(2)		401		4,531	(3)		4,932
Total	$	9,832	$	58,286		$	68,118
	December 31, 2016
	Commercial		Retail (1)			Total
	(In thousands)
Performing TDRs	$	10,560	$	59,726		$	70,286
Non-performing TDRs(2)		3,565		4,071	(3)		7,636
Total	$	14,125	$	63,797		$	77,922

(1) Retail loans include mortgage and installment portfolio segments.

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

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

We allocated $7.0 million and $9.0 million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of September 30, 2017 and December 31, 2016, respectively.

During the nine months ended September 30, 2017 and 2016, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans generally included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

Modifications involving a reduction of the stated interest rate of the loan have generally been for periods ranging from 9 months to 36 months but have extended to as much as 480 months in certain circumstances. Modifications involving an extension of the maturity date have generally been for periods ranging from 1 month to 60 months but have extended to as much as 230 months in certain circumstances.

Loans that have been classified as troubled debt restructurings during the three-month periods endedSeptember 30 follow(1):

	Number of Contracts		Pre-modification Recorded Balance		Post-modification Recorded Balance
	(Dollars in thousands)
2017
Commercial
Income producing - real estate		-	$	-	$	-
Land, land development & construction-real estate		-		-		-
Commercial and industrial		-		-		-
Mortgage
1-4 family		1		93		95
Resort lending		-		-		-
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		2		51		50
Boat lending		-		-		-
Recreational vehicle lending		-		-		-
Other		1		10		10
Total		4	$	154	$	155
2016
Commercial
Income producing - real estate		2	$	180	$	180
Land, land development & construction-real estate		-		-		-
Commercial and industrial		2		175		158
Mortgage
1-4 family		2		204		207
Resort lending		-		-		-
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		2		77		78
Installment
Home equity - 1st lien		2		82		85
Home equity - 2nd lien		1		7		7
Boat lending		-		-		-
Recreational vehicle lending		-		-		-
Other		1		34		34
Total		12	$	759	$	749

(1) There were no purchased mortgage loans classified as troubled debt restructurings during the three month periods ended September 30, 2017 and 2016, respectively.

Loans that have been classified as troubled debt restructurings during the nine-month periods endedSeptember 30 follow(1):

	Number of Contracts		Pre-modification Recorded Balance		Post-modification Recorded Balance
	(Dollars in thousands)
2017
Commercial
Income producing - real estate		-	$	-	$	-
Land, land development & construction-real estate		-		-		-
Commercial and industrial		12		786		786
Mortgage
1-4 family		3		142		144
Resort lending		1		189		189
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		2		34		37
Home equity - 2nd lien		7		300		301
Boat lending		-		-		-
Recreational vehicle lending		-		-		-
Other		1		10		10
Total		26	$	1,461	$	1,467
2016
Commercial
Income producing - real estate		4	$	290	$	290
Land, land development & construction-real estate		-		-		-
Commercial and industrial		6		1,933		1,916
Mortgage
1-4 family		5		396		470
Resort lending		1		116		117
Home equity - 1st lien		1		107		78
Home equity - 2nd lien		2		77		78
Installment
Home equity - 1st lien		6		141		145
Home equity - 2nd lien		5		133		136
Boat lending		-		-		-
Recreational vehicle lending		-		-		-
Other		2		46		46
Total		32	$	3,239	$	3,276

(1) There were no purchased mortgage loans classified as troubled debt restructurings during the nine month periods ended September 30, 2017 and 2016, respectively.

The troubled debt restructurings described above for 2017 increased the allowance for loan losses by $0.02 million and resulted in zero charge offs during the three months ended September 30, 2017, and increased the allowance by $0.08 million and resulted in zero charge offs during the nine months ended September 30, 2017.

The troubled debt restructurings described above for 2016 increased the allowance for loan losses by $0.34 million and resulted in charge offs of $0.02 million during the three months ended September 30, 2016, and increased the allowance by $0.69 million and resulted in charge offs of $0.02 million during the nine months ended September 30, 2016.

Six commercial and industrial loans with a recorded balance of $0.16 million that have been classified as troubled debt restructurings during the past twelve months subsequently defaulted during the three and nine month periods ended September 30, 2017.  These subsequent defaults resulted in an increase in the allowance of $0.02 million and $0.04 million during the three and nine month periods ended September 30, 2017, respectively and resulted in charge-offs of $0.05 million during both the three and nine month periods ended September 30, 2017.  There were no troubled debt restructurings that subsequently defaulted within twelve months following the modification during the three and nine months ended September 30, 2017 for any other loan class.

There were no troubled debt restructurings that subsequently defaulted within twelve months following the modification during the three and nine months ended September 30, 2016.

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

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

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

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

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

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

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

Rating 10 and 11: These loans are generally referred to as our “substandard - non-accrual” and “doubtful” commercial credits, respectively. These ratings include loans to borrowers with weaknesses that make collection of debt in full, on the basis of current facts, conditions and values at best questionable and at worst improbable. All of these loans are placed in non-accrual.

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

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

	Commercial
	Non-watch 1-6		Watch 7-8		Substandard Accrual 9		Non- Accrual 10-11		Total
					(In thousands)
September 30, 2017
Income producing - real estate	$	268,781	$	3,037	$	312	$	72	$	272,202
Land, land development and construction - real estate		67,730		63		-		10		67,803
Commercial and industrial		474,022		22,217		2,380		706		499,325
Total	$	810,533	$	25,317	$	2,692	$	788	$	839,330
Accrued interest included in total	$	1,991	$	80	$	9	$	-	$	2,080
December 31, 2016
Income producing - real estate	$	282,886	$	3,787	$	337	$	628	$	287,638
Land, land development andconstruction - real estate		51,603		67		-		105		51,775
Commercial and industrial		449,365		9,788		2,998		4,431		466,582
Total	$	783,854	$	13,642	$	3,335	$	5,164	$	805,995
Accrued interest included in total	$	1,915	$	52	$	11	$	-	$	1,978

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)
September 30, 2017
800 and above	$	62,145	$	11,336	$	8,491	$	8,896	$	7,790	$	98,658
750-799		227,676		33,287		15,619		21,092		18,559		316,233
700-749		130,480		25,629		6,583		13,819		7,978		184,489
650-699		77,357		12,441		3,304		7,970		429		101,501
600-649		26,947		4,648		1,090		2,439		-		35,124
550-599		15,547		2,777		365		1,507		-		20,196
500-549		8,766		1,404		540		1,319		-		12,029
Under 500		3,692		89		253		169		-		4,203
Unknown		9,373		1,668		299		479		120		11,939
Total	$	561,983	$	93,279	$	36,544	$	57,690	$	34,876	$	784,372
Accrued interest included in total	$	2,134	$	374	$	165	$	260	$	93	$	3,026
December 31, 2016
800 and above	$	36,534	$	10,484	$	6,048	$	8,392	$	8,462	$	69,920
750-799		102,382		41,999		10,006		20,113		20,984		195,484
700-749		69,337		24,727		5,706		12,360		9,115		121,245
650-699		50,621		13,798		4,106		8,167		437		77,129
600-649		25,270		5,769		1,674		3,067		-		35,780
550-599		13,747		3,030		455		1,699		-		18,931
500-549		9,215		1,438		486		981		-		12,120
Under 500		5,145		92		255		279		-		5,771
Unknown		2,290		1,711		280		179		139		4,599
Total	$	314,541	$	103,048	$	29,016	$	55,237	$	39,137	$	540,979
Accrued interest included in total	$	1,466	$	450	$	111	$	226	$	111	$	2,364

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

	Installment(1)
	Home Equity 1st Lien		Home Equity 2nd Lien		Boat Lending		Recreational Vehicle Lending		Other		Total
	(In thousands)
September 30, 2017
800 and above	$	1,085	$	869	$	26,168	$	26,312	$	10,655	$	65,089
750-799		1,938		2,721		67,402		48,183		26,546		146,790
700-749		1,601		2,236		25,945		14,261		16,433		60,476
650-699		2,193		1,864		9,164		3,627		8,990		25,838
600-649		1,429		1,429		1,730		838		2,334		7,760
550-599		1,252		919		468		244		894		3,777
500-549		616		398		243		125		434		1,816
Under 500		92		56		64		11		130		353
Unknown		17		19		219		167		7,040		7,462
Total	$	10,223	$	10,511	$	131,403	$	93,768	$	73,456	$	319,361
Accrued interest included in total	$	42	$	44	$	322	$	236	$	219	$	863
December 31, 2016
800 and above	$	1,354	$	1,626	$	21,422	$	23,034	$	8,911	$	56,347
750-799		2,478		3,334		50,508		35,827		21,918		114,065
700-749		1,920		2,686		20,045		11,049		13,183		48,883
650-699		2,852		2,541		7,559		3,205		8,913		25,070
600-649		1,691		1,775		1,846		821		2,269		8,402
550-599		1,231		1,063		882		280		833		4,289
500-549		981		692		440		189		511		2,813
Under 500		114		220		73		16		211		634
Unknown		29		21		150		114		5,570		5,884
Total	$	12,650	$	13,958	$	102,925	$	74,535	$	62,319	$	266,387
Accrued interest included in total	$	54	$	59	$	264	$	203	$	191	$	771

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

Foreclosed residential real estate properties included in other real estate and repossessed assets on our Condensed Consolidated Statements of Financial Condition totaled $1.7 million and $1.9 million at September 30, 2017 and December 31, 2016, respectively.  Retail mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process according to local requirements totaled $1.2 million and $1.0 million at  September 30, 2017 and December 31, 2016, respectively.

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Shareholders' Equity and Earnings Per Common Share

9 Months Ended

Sep. 30, 2017

Shareholders' Equity and Earnings Per Common Share [Abstract]

Shareholders' Equity and Earnings Per Common Share

.    Shareholders’ Equity and Earnings Per Common Share

On January 23, 2017, 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, 2017.  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.  We did not repurchase any shares of common stock during the nine months ended September 30, 2017.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
	(In thousands, except per share amounts)
Net income	$	6,859	$	6,373	$	18,764	$	16,911
Weighted average shares outstanding (1)		21,334		21,232		21,325		21,421
Effect of stock options		138		149		144		150
Stock units for deferred compensation plan for non-employee directors		121		116		120		115
Performance share units		59		52		57		42
Restricted stock units		-		-		-		46
Weighted average shares outstanding for calculation of diluted earnings per share		21,652		21,549		21,646		21,774
Net income per common share
Basic (1)	$	0.32	$	0.30	$	0.88	$	0.79
Diluted	$	0.32	$	0.30	$	0.87	$	0.78

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

Weighted average stock options outstanding that were not considered in computing diluted net income per share because they were anti-dilutive were zero for both the three and nine month periods ended September 30, 2017, and totaled 0.03 million for both the three and nine month periods ended September 30, 2016.

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Derivative Financial Instruments

9 Months Ended

Sep. 30, 2017

Derivative Financial Instruments [Abstract]

Derivative Financial Instruments

6. Derivative Financial Instruments

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

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

	September 30, 2017
	Notional Amount		Average Maturity (years)		Fair Value
	(Dollars in thousands)
Cash flow hedge - pay-fixed interest rate swap agreement	$	15,000		3.9	$	105
No hedge designation
Rate-lock mortgage loan commitments	$	36,580		0.1	$	769
Mandatory commitments to sell mortgage loans		74,750		0.1		26
Pay-fixed interest rate swap agreements		52,586		7.1		52
Pay-variable interest rate swap agreements		52,586		7.1		(52	)
Purchased options		3,119		3.8		277
Written options		3,119		3.8		(277	)
Total	$	222,740		3.5	$	795

	December 31, 2016
	Notional Amount		Average Maturity (years)		Fair Value
	(Dollars in thousands)
No hedge designation
Rate-lock mortgage loan commitments	$	26,658		0.1	$	646
Mandatory commitments to sell mortgage loans		61,954		0.1		630
Pay-fixed interest rate swap agreements		46,121		8.6		249
Pay-variable interest rate swap agreements		46,121		8.6		(249	)
Purchased options		3,119		4.5		238
Written options		3,119		4.5		(238	)
Total	$	187,092		4.4	$	1,276

We use variable-rate and short-term fixed-rate (less than 12 months) debt obligations to fund a portion of our balance sheet, which exposes us to variability in interest rates. To meet our asset/liability management objectives, we may periodically enter into derivative financial instruments to mitigate exposure to fluctuations in cash flows resulting from changes in interest rates (“Cash Flow Hedges”).  The Cash Flow Hedge is a pay-fixed interest-rate swap that converts variable-rate cash flows on debt obligations to fixed-rates.

We record the fair value of Cash Flow Hedges in accrued income and other assets and accrued expenses and other liabilities on our Condensed Consolidated Statements of Financial Condition.  On an ongoing basis, we adjust our Condensed Consolidated Statements of Financial Condition to reflect the then current fair value of Cash Flow Hedges.  The related gains or losses are reported in other comprehensive income or loss and are subsequently reclassified into earnings, as a yield adjustment in the same period in which the related interest on the hedged items (variable-rate debt obligations) affect earnings.  It is anticipated that approximately $0.03 million, of unrealized losses on Cash Flow Hedges at September 30, 2017 will be reclassified to earnings over the next twelve months.  To the extent that the Cash Flow Hedges are not effective, the ineffective portion of the Cash Flow Hedges is immediately recognized in interest expense.  The maximum term of the Cash Flow Hedge at September 30, 2017 is 3.9 years.

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

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

We currently offer 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 with no hedge designation relate to this program.

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

Fair Values of Derivative Instruments

Asset Derivatives		Liability Derivatives
September 30, 2017	December 31, 2016	September 30, 2017	December 31, 2016

	Balance  Sheet  Location		Fair Value	Balance  Sheet  Location		Fair Value	Balance  Sheet  Location		Fair Value	Balance  Sheet  Location		Fair Value
	(In thousands)
Derivatives designated as hedging instruments
Pay-fixed interest rate swap agreements	Other assets	$	105	Other assets	$	-	Other  liabilities	$	-	Other liabilities	$	-
Derivatives not designated as hedging instruments
Rate-lock mortgage loan commitments	Other assets		769	Other assets		646	Other liabilities		-	Other liabilities		-
Mandatory commitments to sell mortgage loans	Other assets		26	Other assets		630	Other liabilities		-	Other liabilities		-
Pay-fixed interest rate swap agreements	Other assets		424	Other assets		493	Other liabilities		372	Other liabilities		244
Pay-variable interest rate swap agreements	Other assets		372	Other assets		244	Other liabilities		424	Other liabilities		493
Purchased options	Other assets		277	Other assets		238	Other liabilities		-	Other liabilities		-
Written options	Other assets		-	Other  assets		-	Other liabilities		277	Other liabilities		238
Total			1,868			2,251			1,073			975
Total derivatives		$	1,973		$	2,251		$	1,073		$	975

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

Three Month Periods Ended September 30,
	Gain Recognized in Other Comprehensive Income (Effective Portion)						Location of  Gain (Loss)  Reclassified  from  Accumulated  Other  Comprehensive  Loss into  Income  (Effective	Loss Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)							Location of  Gain (Loss)  Recognized	Gain (Loss) Recognized in Income (1)
	2017			2016			Portion)	2017				2016			in Income (1)	2017			2016
	(In thousands)
Cash Flow Hedges
Pay-fixed interest rate swap agreements		$	95		$	-	Interest expense		$	(5	)		$	-		$	5			$	-
Total		$	95		$	-			$	(5	)		$	-		$	5			$	-
No hedge designation
Rate-lock mortgage loan commitments															Net gains on on mortage loans	$	(313	)		$	264
Mandatory commitments to sell mortgage loans															Net gains on on mortage loans		2				94
Pay-fixed interest rate swap agreements															Interest income		52				196
Pay-variable interest rate swap agreements															Interest income		(52	)			(196	)
Purchased options															Interest expense		5				13
Written options															Interest expense		(5	)			(13	)
Total																$	(311	)		$	358

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

Nine Month Periods Ended September 30,
	Gain Recognized in Other Comprehensive Income (Effective Portion)				Location of  Gain (Loss)  Reclassified  from  Accumulated  Other  Comprehensive  Loss into  Income  (Effective	Loss Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)					Location of  Gain (Loss)  Recognized  in Income (1)	Gain (Loss) Recognized in Income (1)
	2017		2016		Portion)	2017			2016			2017			2016
	(In thousands)
Cash Flow Hedges
Pay-fixed interest rate swap agreements	$	95	$	-	Interest expense	$	(5	)	$	-		$	5		$	-
Total	$	95	$	-		$	(5	)	$	-		$	5		$	-
No hedge designation
Rate-lock mortgage loan commitments											Net gains on on mortage loans	$	123		$	613
Mandatory commitments to sell mortgage loans											Net gains on on mortage loans		(604	)		(352	)
Pay-fixed interest rate swap agreements											Interest income		(197	)		(1,512	)
Pay-variable interest rate swap agreements											Interest income		197			1,512
Purchased options											Interest expense		39			94
Written options											Interest expense		(39	)		(94	)
Total												$	(481	)	$	261

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

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Intangible Assets

9 Months Ended

Sep. 30, 2017

Intangible Assets [Abstract]

Intangible Assets

7. Intangible Assets

The following table summarizes intangible assets, net of amortization:

	September 30, 2017						December 31, 2016
	Gross Carrying Amount			Accumulated Amortization			Gross Carrying Amount			Accumulated Amortization
	(In thousands)
Amortized intangible assets - core deposits		$	6,118		$	4,445		$	6,118		$	4,186

Amortization of other intangibles has been estimated through 2022 in the following table.

	(In thousands)
Three months ending December 31, 2017	$	87
2018		346
2019		346
2020		346
2021		346
2022		202
Total	$	1,673

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Share Based Compensation

9 Months Ended

Sep. 30, 2017

Share Based Compensation [Abstract]

Share Based Compensation

8. Share Based Compensation

We maintain share based payment plans that include a non-employee director stock purchase plan and a long-term incentive plan that permits the issuance of share based compensation, including stock options and non-vested share awards. The long-term incentive plan, which is shareholder approved, permits the grant of additional share based awards for up to 0.5 million shares of common stock as of September 30, 2017.  The non-employee director stock purchase plan permits the issuance of additional share based payments for up to 0.2 million shares of common stock as of September 30, 2017. 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 the three month periods ended March 31, 2017 and 2016, pursuant to our long-term incentive plan, we granted 0.05 million and 0.07 million shares of restricted stock, respectively and 0.02 million and 0.03 million performance stock units (“PSU”), respectively 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. No long term incentive grants were made during the second or third quarters of 2017 or 2016.

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 0.006 million shares during each nine month period ended September 30, of 2017 and 2016 and expensed their value during those same periods.

Total compensation expense recognized for grants pursuant to our long-term incentive plan was $0.4 million and $1.2 million during the three and nine month periods ended September 30, 2017, respectively, and was $0.3 million and $1.1 million during the same periods in 2016, respectively.  The corresponding tax benefit relating to this expense was $0.1 million and $0.4 million for the three and nine month periods ended September 30, 2017, respectively and $0.1 million and $0.4 million for the same periods in 2016. Total expense recognized for non-employee director share based payments was $0.05 million and $0.12 million during the three and nine month periods ended September 30, 2017, respectively, and was $0.03 million and $0.09 million during the same periods in 2016, respectively.  The corresponding tax benefit relating to this expense was $0.02 million and $0.04 million for the three and nine month periods ended September 30, 2017, respectively and $0.01 million and $0.03 million during the same periods in 2016.

At September 30, 2017, the total expected compensation cost related to non-vested restricted stock and PSUs not yet recognized was $2.3 million.  The weighted-average period over which this amount will be recognized is 2.2 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, 2017		211,018		$	5.05
Granted		-
Exercised		(28,963	)		4.03
Forfeited		-
Expired		-
Outstanding at September 30, 2017		182,055		$	5.21		4.4	$	3,175
Vested and expected to vest at September 30, 2017		182,055		$	5.21		4.4	$	3,175
Exercisable at September 30, 2017		182,055		$	5.21		4.4	$	3,175

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

	Number of Shares			Weighted- Average Grant Date Fair Value
Outstanding at January 1, 2017		296,422		$	14.52
Granted		68,473			21.07
Vested		(63,799	)		14.91
Forfeited		(8,510	)		15.59
Outstanding at September 30, 2017		292,586		$	15.88

Certain information regarding options exercised during the periods follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
	(In thousands)
Intrinsic value	$	39	$	9	$	513	$	186
Cash proceeds received	$	18	$	5	$	117	$	64
Tax benefit realized	$	14	$	3	$	180	$	65

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Income Tax

9 Months Ended

Sep. 30, 2017

Income Tax [Abstract]

Income Tax

9. Income Tax

Income tax expense was $3.2 million and $3.0 million during the three month periods ended September 30, 2017 and 2016, respectively and $8.4 million and $7.5 million during the nine months ended September 30, 2017 and 2016, respectively.

We assess whether a valuation allowance should be established against our deferred tax assets based on the consideration of all available evidence using a “more likely than not” standard.  The ultimate realization of this asset is primarily based on generating future income.  We concluded at both September 30, 2017 and 2016, that the realization of substantially all of our deferred tax assets continues to be more likely than not.

We had maintained a valuation allowance against our deferred tax assets of approximately $1.1 million at December 31, 2016. This valuation allowance on our deferred tax assets related to state income taxes at Mepco.  In this instance, we determined that the future realization of these particular deferred tax assets was not more likely than not.  That conclusion was based on the pending sale of Mepco’s payment plan business.  After accounting for the May 2017 sale of our payment plan business, all that remained of these deferred tax assets were loss carryforwards that we wrote off against the related valuation allowance during the second quarter of 2017 as we will no longer be doing business in those states.

At both September 30, 2017 and December 31, 2016, we had approximately $0.8 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 2017.

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Regulatory Matters

9 Months Ended

Sep. 30, 2017

Regulatory Matters [Abstract]

Regulatory Matters

10. Regulatory Matters

Capital guidelines adopted by federal and state regulatory agencies and restrictions imposed by law limit the amount of cash dividends our Bank can pay to us. Under these guidelines, the amount of dividends that may be paid in any calendar year is limited to the Bank’s current year net profits, combined with the retained net profits of the preceding two years. Further, the Bank cannot pay a dividend at any time that it has negative undivided profits.  As of September 30, 2017, the Bank had positive undivided profits of $13.0 million.  It is not our intent to have dividends paid in amounts that would reduce the capital of our Bank to levels below those which we consider prudent and in accordance with guidelines of regulatory authorities.

We are also subject to various regulatory capital requirements. The prompt corrective action regulations establish quantitative measures to ensure capital adequacy and require minimum amounts and ratios of total, Tier 1, and common equity Tier 1 capital to risk-weighted assets and Tier 1 capital to average assets. Failure to meet minimum capital requirements can result in certain mandatory, and possibly discretionary, actions by regulators that could have a material effect on our consolidated financial statements. Under capital adequacy guidelines, we must meet specific capital requirements that involve quantitative measures as well as qualitative judgments by the regulators. The most recent regulatory filings as of September 30, 2017 and December 31, 2016, 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 1.25% and 0.625% added to the minimum ratio for adequately capitalized institutions for 2017 and 2016, respectively and 0.625% will be added each subsequent year until fully phased in during 2019.  This capital conservation buffer is not reflected in the table that follows.  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.

Our actual capital amounts and ratios follow:

	Actual					Minimum for Adequately Capitalized Institutions					Minimum for Well-Capitalized Institutions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
September 30, 2017
Total capital to risk-weighted assets
Consolidated	$	307,278		15.14	%	$	162,315		8.00	%	NA		NA
Independent Bank		281,228		13.87			162,210		8.00		$	202,763		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	284,818		14.04	%	$	121,737		6.00	%	NA		NA
Independent Bank		258,768		12.76			121,658		6.00		$	162,210		8.00	%
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	253,101		12.47	%	$	91,302		4.50	%	NA		NA
Independent Bank		258,768		12.76			91,243		4.50		$	131,796		6.50	%
Tier 1 capital to average assets
Consolidated	$	284,818		10.63	%	$	107,154		4.00	%	NA		NA
Independent Bank		258,768		9.67			107,022		4.00		$	133,778		5.00	%
December 31, 2016
Total capital to risk-weighted assets
Consolidated	$	286,289		15.86	%	$	144,413		8.00	%	NA		NA
Independent Bank		270,855		15.02			144,223		8.00		$	180,279		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	265,405		14.70	%	$	108,309		6.00	%	NA		NA
Independent Bank		249,971		13.87			108,167		6.00		$	144,223		8.00	%
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	238,996		13.24	%	$	81,232		4.50	%	NA		NA
Independent Bank		249,971		13.87			81,126		4.50		$	117,181		6.50	%
Tier 1 capital to average assets
Consolidated	$	265,405		10.50	%	$	101,112		4.00	%	NA		NA
Independent Bank		249,971		9.90			101,019		4.00		$	126,274		5.00	%
NA - Not applicable

The components of our regulatory capital are as follows:

	Consolidated						Independent Bank
	September 30, 2017			December 31, 2016			September 30, 2017			December 31, 2016
	(In thousands)
Total shareholders' equity	$	267,710		$	248,980		$	267,406		$	258,814
Add (deduct)
Accumulated other comprehensive (gain) loss for regulatory purposes		(2,140	)		3,310			(2,140	)		3,310
Intangible assets		(1,338	)		(1,159	)		(1,338	)		(1,159	)
Disallowed deferred tax assets		(11,131	)		(12,135	)		(5,160	)		(10,994	)
Common equity tier 1 capital		253,101			238,996			258,768			249,971
Qualifying trust preferred securities		34,500			34,500			-			-
Disallowed deferred tax assets		(2,783	)		(8,091	)		-			-
Tier 1 capital		284,818			265,405			258,768			249,971
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets		22,460			20,884			22,460			20,884
Total risk-based capital	$	307,278		$	286,289		$	281,228		$	270,855

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Fair Value Disclosures

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

Fair Value Disclosures

11. Fair Value Disclosures

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

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

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

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

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

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

Securities:  Where quoted market prices are available in an active market, securities (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, obligations of states and political subdivisions, trust preferred securities, corporate securities and foreign government securities.

Loans held for sale:  The fair value of mortgage loans held for sale is based on mortgage backed security pricing for comparable assets (recurring Level 2).

Impaired loans with specific loss allocations based on collateral value:  From time to time, certain loans are considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. We measure our investment in an impaired loan based on one of three methods: the loan’s observable market price, the fair value of the collateral or the present value of expected future cash flows discounted at the loan’s effective interest rate. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At September 30, 2017 and December 31, 2016, 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 non-interest expense-other in the Condensed Consolidated Statements of Operations. The fair value of the property used at and subsequent to the time of acquisition is typically determined by a third party appraisal of the property.  These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments can be significant and typically result in a Level 3 classification of the inputs for determining fair value.

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

Capitalized mortgage loan servicing rights:  The fair value of capitalized mortgage loan servicing rights is based on a valuation model used by an independent third party that calculates the present value of estimated net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income. Certain model assumptions are generally unobservable and are based upon the best information available including data relating to our own servicing portfolio, reviews of mortgage servicing assumption and valuation surveys and input from various mortgage servicers and, therefore, are recorded as Level 3.  Management evaluates the third party valuation for reasonableness each quarter as part of our financial reporting control processes.  Prior to January 1, 2017, capitalized mortgage loan servicing rights were accounted for using the amortization method of accounting and were measured at fair value on a non-recurring basis.  During the first quarter of 2017, we adopted the fair value method of accounting for our capitalized mortgage loan servicing rights (see note #2) and are now measured at fair value on a recurring basis.

Derivatives:  The fair value of rate-lock mortgage loan commitments and mandatory commitments to sell mortgage loans is based on mortgage backed security pricing for comparable assets (recurring Level 2).  The fair value of interest rate swap agreements is based on a discounted cash flow analysis whose significant fair value inputs can generally be observed in the market place and do not typically involve judgment by management (recurring Level 2).  The fair value of purchased and written options is based on prices of financial instruments with similar characteristics and do not typically involve judgment by management (recurring Level 2).

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

			Fair Value Measurements Using
	Fair Value Measure- ments		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Un- observable Inputs (Level 3)
	(In thousands)
September 30, 2017:
Measured at Fair Value on a Recurring Basis
Assets
Trading securities	$	347	$	347	$	-	$	-
Securities available for sale
U.S. agency		26,626		-		26,626		-
U.S. agency residential mortgage-backed		136,109		-		136,109		-
U.S. agency commercial mortgage-backed		10,736		-		10,736		-
Private label mortgage-backed		26,990		-		26,990		-
Other asset backed		108,339		-		108,339		-
Obligations of states and political subdivisions		177,176		-		177,176		-
Corporate		58,000		-		58,000		-
Trust preferred		2,800		-		2,800		-
Foreign government		2,089		-		2,089		-
Loans held for sale		47,611		-		47,611		-
Capitalized mortgage loan servicing rights		14,675		-		-		14,675
Derivatives (1)		1,973		-		1,973		-
Liabilities
Derivatives (2)		1,073		-		1,073		-
Measured at Fair Value on a Non-recurring basis:
Assets
Impaired loans (3)
Commercial
Income producing - real estate		185		-		-		185
Land, land development & construction-real estate		11		-		-		11
Commercial and industrial		878		-		-		878
Mortgage 1-4 family		509		-		-		509
Resort lending		207		-		-		207
Other real estate (4)
Mortgage 1-4 family		44		-		-		44
Resort lending		5		-		-		5

(1) Included in accrued income and other assets

(2) Included in accrued expenses and other liabilities

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

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

			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, 2016:
Measured at Fair Value on a Recurring Basis
Assets
Trading securities	$	410	$	410	$	-	$	-
Securities available for sale
U.S. agency		28,988		-		28,988		-
U.S. agency residential mortgage-backed		156,289		-		156,289		-
U.S. agency commercial mortgage-backed		12,632		-		12,632		-
Private label mortgage-backed		34,727		-		34,727		-
Other asset backed		146,709		-		146,709		-
Obligations of states and political subdivisions		170,899		-		170,899		-
Corporate		56,180		-		56,180		-
Trust preferred		2,579		-		2,579		-
Foreign government		1,613		-		1,613		-
Loans held for sale		35,946		-		35,946		-
Derivatives (1)		2,251		-		2,251		-
Liabilities
Derivatives (2)		975		-		975		-
Measured at Fair Value on a Non-recurring basis:
Assets
Capitalized mortgage loan servicing rights (3)		8,163		-		-		8,163
Impaired loans (4)
Commercial
Income producing - real estate		255		-		-		255
Land, land development & construction-real estate		54		-		-		54
Commercial and industrial		1,342		-		-		1,342
Mortgage 1-4 family		361		-		-		361
Other real estate (5)
Commercial
Income producing - real estate (6)		2,863		-		2,863		-
Land, land development & construction-real estate		176		-		-		176
Mortgage 1-4 family		98		-		-		98
Resort lending		133		-		-		133

(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.

(6) Level 2 valuation is based on a signed purchase agreement.

There were no transfers between Level 1 and Level 2 during the nine months ended September 30, 2017 and 2016.

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

		Changes in Fair Values for the Nine-Month Periods Ended September 30 for Items Measured at
		Fair Value Pursuant to Election of the Fair Value Option
		2017											2016
		Net Gains (Losses) on Assets					Mortgage			Total Change in Fair Values Included in Current			Net Gains (Losses) on Assets				Total Change in Fair Values Included in Current
		Securities			Mortgage Loans		Loan Servicing, net			Period Earnings			Securities		Mortgage Loans		Period Earnings
	(In thousands)
Trading securities		$	(63	)	$	-	$	-		$	(63	)	$	4	$	-	$	4
Loans held for sale			-			713		-			713			-		612		612
Capitalized mortgage loan servicing rights			-			-		(2,585	)		(2,585	)		-		-		-

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

The following represent impairment charges recognized during the three and nine month periods ended September 30, 2017 and 2016 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 $8.2 million, which is net of a valuation allowance of $2.3 million, at December 31, 2016.   A recovery (charge) of $0.6 million and $(1.5) million was included in our results of operations for the three and nine month periods ending September 30, 2016.

· Loans which are measured for impairment using the fair value of collateral for collateral dependent loans had a carrying amount of $2.5 million, with a valuation allowance of $0.7 million at September 30, 2017, and had a carrying amount of $4.0 million, with a valuation allowance of $2.0 million at December 31, 2016.  The provision for loan losses included in our results of operations relating to impaired loans was a net expense of $0.3 million and $0.1 million for the three month periods ending September 30, 2017 and 2016, respectively, and a net expense of $0.5 million and $0.3 million for the nine month periods ending September 30, 2017 and 2016, respectively.

· Other real estate, which is measured using the fair value of the property, had a carrying amount of $0.05 million which is net of a valuation allowance of $0.08 million at September 30, 2017, and a carrying amount of $3.2 million, which is net of a valuation allowance of $0.8 million, at December 31, 2016. An additional charge relating to other real estate measured at fair value of $0.03 million and $0.04 million was included in our results of operations during the three and nine month periods ended September 30, 2017, respectively and $0.37 million and $0.41 million during the same periods in 2016.

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

	Capitalized Mortgage Loan Servicing Rights
	Three Months Ended September 30,					Nine Months Ended September 30,
	2017			2016		2017			2016
Beginning balance	$	14,515		$	-	$	-		$	-
Change in accounting		-			-		14,213			-
Beginning balance, as adjusted		14,515			-		14,213			-
Total losses realized and unrealized:
Included in results of operations		(1,090	)		-		(2,585	)		-
Included in other comprehensive income		-			-		-			-
Purchases, issuances, settlements, maturities and calls		1,250			-		3,047			-
Transfers in and/or out of Level 3		-			-		-			-
Ending balance	$	14,675		$	-	$	14,675		$	-
Amount of total losses for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at September 30	$	(1,090	)	$	-	$	(2,585	)	$	-

As discussed above we changed the accounting for capitalized mortgage loan servicing rights during the first quarter of 2017 (see note #2) and are now measuring valuation on a recurring basis.   The fair value of our capitalized mortgage loan servicing rights has been determined based on a valuation model used by an independent third party as discussed above.  The significant unobservable inputs used in the fair value measurement of the capitalized mortgage loan servicing rights are discount rate, cost to service, ancillary income and float rate.  Significant changes in all four of these assumptions in isolation would result in significant changes to the value of our capitalized mortgage loan servicing rights.  Quantitative information about our Level 3 fair value measurements measured on a recurring basis follows:

	Asset Fair Value		Valuation Technique	Unobservable Inputs	Weighted Average
	(In thousands)
September 30, 2017
Capitalized mortgage loan servicing rights	$	14,675	Present value of net	Discount rate		10.10	%
			servicing revenue	Cost to service	$	81
				Ancillary income		23
				Float rate		2.00	%

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)
September 30, 2017
Impaired loans
Commercial	$	1,074	Sales comparison approach	Adjustment for differences between comparable sales		(2.3	)%
Mortgage		716	Sales comparison approach	Adjustment for differences between comparable sales		0.3
Other real estate
Mortgage		49	Sales comparison approach	Adjustment for differences between comparable sales		5.8
December 31, 2016
Capitalized mortgage loan servicing rights	$	8,163	Present value of net servicing revenue	Discount rate		10.07	%
				Cost to service	$	83
				Ancillary income		24
				Float rate		1.97	%
Impaired loans
Commercial (1)		1,446	Sales comparison approach	Adjustment for differences between comparable sales		(1.5	)%
Mortgage		361	Sales comparison approach	Adjustment for differences between comparable sales		(4.7	)
Other real estate
Commercial		176	Sales comparison  approach	Adjustment for differences between comparable sales		(22.5	)
Mortgage		231	Sales comparison approach	Adjustment for differences between comparable sales		(5.1	)

(1) In addition to the valuation techniques and unobservable inputs discussed above, at December 31, 2016, we had an impaired collateral dependent commercial relationship that totaled $0.2 million that was primarily secured by collateral other than real estate. Collateral securing this relationship primarily included machinery and equipment and inventory. Valuation techniques 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
September 30, 2017	$	47,611	$	1,150	$	46,461
December 31, 2016		35,946		437		35,509

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Fair Values of Financial Instruments

9 Months Ended

Sep. 30, 2017

Fair Values of Financial Instruments [Abstract]

Fair Values of Financial Instruments

12. Fair Values of Financial Instruments

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

Estimated fair values have been determined using available data and methodologies that are considered suitable for each category of financial instrument. For instruments with adjustable interest rates which reprice frequently and without significant credit risk, it is presumed that estimated fair values approximate the recorded book balances. Fair value methodologies discussed below do not necessarily represent an exit price in the determination of the fair value of these financial instruments.

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 #11.

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

Net loans and loans held for sale:  The fair value of loans is calculated by discounting estimated future cash flows using estimated market discount rates that reflect credit and interest-rate risk inherent in the loans 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 #11.  Loans held for sale are classified as Level 2 as described in note #11. Payment plan receivables held for sale are also classified as Level 2 based on a signed purchase agreement as described in note #15.

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 #11.

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 time deposits 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.

Federal funds purchased:  The recorded book balance of federal funds purchased, which mature in one day, approximates fair value and is classified as Level 2.

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

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

The estimated recorded book balances and fair values follow:

					Fair Value Using
	Recorded Book Balance		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Un- observable Inputs (Level 3)
	(In thousands)
September 30, 2017
Assets
Cash and due from banks	$	31,998	$	31,998	$	31,998	$	-	$	-
Interest bearing deposits		15,605		15,605		15,605		-		-
Interest bearing deposits - time		3,489		3,493		-		3,493		-
Trading securities		347		347		347		-		-
Securities available for sale		548,865		548,865		-		548,865		-
Federal Home Loan Bank and Federal
Reserve Bank Stock		15,543	NA		NA		NA		NA
Net loans and loans held for sale		1,963,227		1,909,662		-		47,611		1,862,051
Accrued interest receivable		8,740		8,740		-		2,850		5,890
Derivative financial instruments		1,973		1,973		-		1,973		-
Liabilities
Deposits with no stated maturity (1)	$	1,808,071	$	1,808,071	$	1,808,071	$	-	$	-
Deposits with stated maturity (1)		535,690		533,045		-		533,045		-
Federal funds purchased		3,000		3,000		-		3,000		-
Other borrowings		72,849		73,405		-		73,405		-
Subordinated debentures		35,569		28,634		-		28,634		-
Accrued interest payable		1,105		1,105		40		1,065		-
Derivative financial instruments		1,073		1,073		-		1,073		-
December 31, 2016
Assets
Cash and due from banks	$	35,238	$	35,238	$	35,238	$	-	$	-
Interest bearing deposits		47,956		47,956		47,956		-		-
Interest bearing deposits - time		5,591		5,611		-		5,611		-
Trading securities		410		410		410		-		-
Securities available for sale		610,616		610,616		-		610,616		-
Federal Home Loan Bank and Federal
Reserve Bank Stock		15,543	NA		NA		NA		NA
Net loans and loans held for sale (2)		1,655,335		1,629,587		-		67,321		1,562,266
Accrued interest receivable		7,316		7,316		5		2,364		4,947
Derivative financial instruments		2,251		2,251		-		2,251		-
Liabilities
Deposits with no stated maturity (1)	$	1,740,601	$	1,740,601	$	1,740,601	$	-	$	-
Deposits with stated maturity (1)		485,118		483,469		-		483,469		-
Other borrowings		9,433		10,371		-		10,371		-
Subordinated debentures		35,569		25,017		-		25,017		-
Accrued interest payable		932		932		21		911		-
Derivative financial instruments		975		975		-		975		-

(1) Deposits with no stated maturity include reciprocal deposits with a recorded book balance of $13.5 million and $7.4 million at September 30, 2017 and December 31, 2016, respectively. Deposits with a stated maturity include reciprocal deposits with a recorded book balance of $35.5 million and $31.3 million September 30, 2017 and December 31, 2016, respectively.

(2) Net loans and loans held for sale include $31.4 million of payment plan receivables and commercial loans held for sale at December 31, 2016.

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

9 Months Ended

Sep. 30, 2017

Contingent Liabilities [Abstract]

Contingent Liabilities

13. Contingent Liabilities

In December 2016, we reached a tentative settlement regarding litigation initiated against us in Wayne County, Michigan Circuit Court.  The Court issued a preliminary approval of this settlement in the first quarter of 2017.  This litigation concerned checking account transaction sequencing during a period from February 2009 to June 2011.  Under the terms of the settlement, we have agreed to pay $2.2 million and are also responsible for class notification costs and certain other expenses which are estimated to total approximately $0.1 million (these amounts were accrued for and expensed in the fourth quarter of 2016).  We expect the settlement payment to occur in the fourth quarter of 2017 or first quarter of 2018.  Although, we deny any liability associated with this matter and believe we have meritorious defenses to the allegations in the complaint, given the costs and uncertainty of litigation, it was determined that this settlement was in the best interests of the organization.

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

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

In connection with the sale of Mepco (see note #15), we agreed to contractually indemnify the purchaser from certain losses it may incur, including as a result of its failure to collect certain receivables it purchased as part of the business as well as breaches of representations and warranties we made in the sale agreement, subject to various limitations. We have not accrued any liability related to these indemnification requirements in our September 30, 2017 Condensed Consolidated Statement of Financial Condition because we believe the likelihood of having to pay any amount as a result of these indemnification obligations is remote. However, if the purchaser is unable to collect the receivables it purchased from Mepco or otherwise encounters difficulties in operating the business, it is possible it could make one or more claims against us pursuant to the sale agreement. In that event, we may incur expenses in defending any such claims and/or amounts paid to such purchaser to resolve such claims. As of September 30, 2017 these receivables balances had declined to $22.5 million and to date the purchaser has made no claims for indemnification.

The provision for loss reimbursement on sold loans was an expense of $0.02 million and $0.07 million in the third quarter and first nine months of 2017, respectively, compared to an expense of $0.05 million and $0.03 million in the third quarter and first nine months of 2016, respectively. This provision represents our estimate of incurred losses related to mortgage loans that we have sold to investors (primarily Fannie Mae, Freddie Mac, Ginnie Mae and the Federal Home Loan Bank of Indianapolis).  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 $0.6 million at both September 30, 2017 and December 31, 2016, respectively. This reserve is included in accrued expenses and other liabilities in our Condensed Consolidated Statements of Financial Condition.

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Accumulated Other Comprehensive Loss ("AOCL")

9 Months Ended

Sep. 30, 2017

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

Accumulated Other Comprehensive Loss ("AOCL")

14. Accumulated Other Comprehensive Loss (“AOCL”)

A summary of changes in AOCL follows:

	Unrealized Gains (Losses) on Securities Available for Sale			Dispropor- tionate Tax Effects from Securities Available for Sale			Unrealized Gains on Cash Flow Hedges		Total
				(In thousands)
For the three months ended September 30,
2017
Balances at beginning of period	$	1,986		$	(5,798	)	$	-	$	(3,812	)
Other comprehensive income before reclassifications		95			-			62		157
Amounts reclassified from AOCL		(5	)		-			3		(2	)
Net current period other comprehensive income		90			-			65		155
Balances at end of period	$	2,076		$	(5,798	)	$	65	$	(3,657	)
2016
Balances at beginning of period	$	2,515		$	(5,798	)	$	-	$	(3,283	)
Other comprehensive income before reclassifications		278			-			-		278
Amounts reclassified from AOCL		(10	)		-			-		(10	)
Net current period other comprehensive income		268			-			-		268
Balances at end of period	$	2,783		$	(5,798	)	$	-	$	(3,015	)
For the Nine months ended September 30,
2017
Balances at beginning of period	$	(3,310	)	$	(5,798	)	$	-	$	(9,108	)
Cumulative effect of change in accounting		300			-			-		300
Balances at beginning of period, as adjusted		(3,010	)		(5,798	)		-		(8,808	)
Other comprehensive income before reclassifications		5,167			-			62		5,229
Amounts reclassified from AOCL		(81	)		-			3		(78	)
Net current period other comprehensive income		5,086			-			65		5,151
Balances at end of period	$	2,076		$	(5,798	)	$	65	$	(3,657	)
2016
Balances at beginning of period	$	(238	)	$	(5,798	)	$	-	$	(6,036	)
Other comprehensive income before reclassifications		3,215			-			-		3,215
Amounts reclassified from AOCL		(194	)		-			-		(194	)
Net current period other comprehensive income		3,021			-			-		3,021
Balances at end of period	$	2,783		$	(5,798	)	$	-	$	(3,015	)

We adopted ASU 2017-08 during the first quarter of 2017 using a modified retrospective approach.  As a result, accumulated other comprehensive loss as of January 1, 2017 was adjusted by $0.30 million (see note #2).

The disproportionate tax effects from securities available for sale arose due to tax effects of other comprehensive income (“OCI”) in the presence of a valuation allowance against our deferred tax assets and a pretax loss from operations.  Generally, the amount of income tax expense or benefit allocated to operations is determined without regard to the tax effects of other categories of income or loss, such as OCI. However, an exception to the general rule is provided when, in the presence of a valuation allowance against deferred tax assets, there is a pretax loss from operations and pretax income from other categories in the current period.  In such instances, income from other categories must offset the current loss from operations, the tax benefit of such offset being reflected in operations.

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

	Amount Reclassified From			Affected Line Item in Condensed
AOCL Component	AOCL			Consolidated Statements of Operations
	(In thousands)
2017
Unrealized gains on securities available for sale
	$	8		Net gains on securities
		-		Net impairment loss recognized in earnings
		8		Total reclassifications before tax
		3		Income tax expense
	$	5		Reclassifications, net of tax
Unrealized gains on cash flow hedges
	$	(5	)	Interest expense
		(2	)	Income tax expense
	$	(3	)	Reclassification, net of tax
	$	2		Total reclassifications for the period, net of tax
2016
Unrealized gains on securities available for sale
	$	15		Net gains on securities
		-		Net impairment loss recognized in earnings
		15		Total reclassifications before tax
		5		Income tax expense
	$	10		Reclassifications, net of tax

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

	Amount Reclassified From			Affected Line Item in Condensed
AOCL Component	AOCL			Consolidated Statements of Operations
	(In thousands)
2017
Unrealized gains on securities available for sale
	$	125		Net gains on securities
		-		Net impairment loss recognized in earnings
		125		Total reclassifications before tax
		44		Income tax expense
	$	81		Reclassifications, net of tax
Unrealized gains on cash flow hedges
	$	(5	)	Interest expense
		(2	)	Income tax expense
	$	(3	)	Reclassification, net of tax
	$	78		Total reclassifications for the period, net of tax
2016
Unrealized gains on securities available for sale
	$	298		Net gains on securities
		-		Net impairment loss recognized in earnings
		298		Total reclassifications before tax
		104		Income tax expense
	$	194		Reclassifications, net of tax

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Payment Plan Receivables and Other Assets Held for Sale

9 Months Ended

Sep. 30, 2017

Payment Plan Receivables and Other Assets Held for Sale [Abstract]

Payment Plan Receivables and Other Assets Held for Sale

15. Payment Plan Receivables and Other Assets Held for Sale

On December 30, 2016 Mepco executed an Asset Purchase Agreement (the “APA”) with Seabury Asset Management LLC (“Seabury”).  Pursuant to the terms of the APA, Mepco sold its payment plan processing business to Seabury effective May 1, 2017.  We received cash totaling $33.4 million and recorded no gain or loss in 2017 as the assets were sold and the liabilities were assumed at book value.

Assets sold and liabilities assumed were as follows:

	May 1, 2017		December 31, 2016
	(In thousands)
Assets sold
Payment plan receivables	$	33,128	$	30,582
Commerical loans		525		794
Other assets		1,765		1,984
Total assets	$	35,418	$	33,360
Liabilities assumed	$	1,972	$	718

These assets and liabilities were categorized as “held for sale” in our December 31, 2016 Condensed Consolidated Statement of Financial Condition.  These assets and corresponding liabilities held for sale were carried at the lower of cost or fair value on an aggregate basis.  Fair value adjustments, if any, were recorded in current earnings.

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New Accounting Standards (Policies)

9 Months Ended

Sep. 30, 2017

New Accounting Standards [Abstract]

New Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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.  We expect to adopt this ASU using the modified retrospective approach.  Financial instruments for the most part and related contractual rights and obligations which are the sources of the majority of our operating revenue are excluded from the scope of this amended guidance.  In addition, for those operating revenue streams that are included in the scope of this amended guidance, based upon our review of these sources of income we do not believe they will be materially impacted by this amended guidance.

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, require 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, require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset and eliminate 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.  We have reviewed the types of financial instruments impacted by this amended guidance, including certain equity investments and liabilities measured under the fair value election, and have determined that we do not currently own any such instruments.  The balance of this amended guidance is expected to impact certain disclosure items but is not expected to have any 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, require 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.  Based on a review of our operating leases that we currently have in place we do not expect a material change in the recognition, measurement and presentation of lease expense or impact on cash flow.  While the primary impact will be the recognition of certain operating leases on our Condensed Consolidated Statements of Financial Condition this impact is not expected to be material.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments”.  This ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.  This ASU will replace today’s “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. For securities available for sale, allowances will be recorded rather than reducing the carrying amount as is done under the current other-than-temporary impairment model. This ASU also simplifies the accounting model for purchased credit-impaired debt securities and loans. This amended guidance is effective for us on January 1, 2020.  We began evaluating this ASU in 2016 and have formed a committee that includes personnel from various areas of the Bank that meets regularly to discuss the implementation of the ASU.  We are currently in the process of gathering data and reviewing loss methodologies and have engaged third party resources that will assist us in the implementation of this ASU.  While we have not yet determined what the impact will be on our consolidated operating results or financial condition by the nature of the implementation of an expected loss model compared to an incurred loss approach, we would expect our allowance for loan losses (“AFLL”) to increase under this ASU.

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities”.  This new ASU amends the hedge accounting model in Topic 815 to enable entities to better portray the economics of their risk management activities in the financial statements and enhance the transparency and understandability of hedge results. The amendments expand an entity’s ability to hedge nonfinancial and financial risk components and reduce complexity in fair value hedges of interest rate risk. The guidance eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The guidance also eases certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment of hedge effectiveness.  This amended guidance is effective for us on January 1, 2019, and given our current level of derivatives designated as hedges is not expected to have a material impact on our consolidated operating results or financial condition.

In March 2017, the FASB issued ASU 2017-08, “Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20) Premium Amortization on Purchased Callable Debt Securities” (“ASU 2017-08”).  This ASU shortens the amortization period for certain callable debt securities held at a premium.  Specifically, the amendments require the premium to be amortized to the earliest call date.  The amendments do not require an accounting change for securities held at a discount; the discount continues to be accreted to maturity.   This amended guidance is effective for us on January 1, 2019, with early adoption permitted.  We adopted this amended guidance during the first quarter of 2017 using a modified retrospective approach.  The impact of this adoption was to adjust our January 1, 2017 Condensed Consolidated Statement of Financial Position to reflect cumulative effect adjustments as summarized in the table below. The adjustments below reflect the recording of $0.46 million ($0.30 million, net of tax) of additional premium amortization on securities available for sale and a $0.30 million decrease in accumulated other comprehensive loss to reflect the decrease in after tax unrealized losses on securities available for sale as of January 1, 2017 as a result of adopting this amended guidance. After January 1, 2017, premium amortization on certain callable debt securities is now amortized to the first call date.  During the first quarter of 2017 the impact on the Condensed Consolidated Statements of Operations was an increase to premium amortization of $0.03 million.

During the first quarter of 2017, we adopted the fair value method of accounting for our capitalized mortgage loan servicing rights pursuant to FASB Accounting Standards Codification topic 860 – “Transfers and Servicing”.  Prior to January 1, 2017, we were accounting for our capitalized mortgage loan servicing rights under the amortization method.  We adopted the fair value method using a modified retrospective adjustment to beginning accumulated deficit.  The impact of the adoption of the fair value method is summarized in the table below.  The adjustments below reflect the recording of a $0.54 million increase in the fair value of our capitalized mortgage loan servicing rights with a $0.19 million reduction in deferred tax assets, net for a net impact on accumulated deficit and total equity of $0.35 million.

	January 1, 2017 Originally Presented			Cumulative Retrospective Adjustments					January 1, 2017 Adjusted
	(In thousands)
Deferred tax assets, net	$	32,818		$	(190	)	(1	)	$	32,628
Capitalized mortgage loan servicing rights	$	13,671		$	542		(1	)	$	14,213
Total assets	$	2,548,950		$	352				$	2,549,302
Accumulated deficit	$	(65,657	)	$	352		(1	)
				$	(300	)	(2	)	$	(65,605	)
Accumulated other comprehensive loss	$	(9,108	)	$	300		(2	)	$	(8,808	)
Total Shareholders’ Equity	$	248,980		$	352				$	249,332
Total Liabilities and Shareholders’ Equity	$	2,548,950		$	352				$	2,549,302

(1) Represents adjustment to capitalized mortgage loan servicing rights, deferred tax assets, net, and accumulated deficit to reflect the adoption of the fair value method of accounting for our capitalized mortgage loan servicing rights.

(2) Represents  adjustment to accumulated deficit and accumulated other comprehensive loss to reflect the adoption of ASU 2017-08.

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New Accounting Standards (Tables)

9 Months Ended

Sep. 30, 2017

New Accounting Standards [Abstract]

Condensed consolidated statement of financial position to reflect cumulative effect of adjustments

The impact of the adoption of the fair value method is summarized in the table below.  The adjustments below reflect the recording of a $0.54 million increase in the fair value of our capitalized mortgage loan servicing rights with a $0.19 million reduction in deferred tax assets, net for a net impact on accumulated deficit and total equity of $0.35 million.

	January 1, 2017 Originally Presented			Cumulative Retrospective Adjustments					January 1, 2017 Adjusted
	(In thousands)
Deferred tax assets, net	$	32,818		$	(190	)	(1	)	$	32,628
Capitalized mortgage loan servicing rights	$	13,671		$	542		(1	)	$	14,213
Total assets	$	2,548,950		$	352				$	2,549,302
Accumulated deficit	$	(65,657	)	$	352		(1	)
				$	(300	)	(2	)	$	(65,605	)
Accumulated other comprehensive loss	$	(9,108	)	$	300		(2	)	$	(8,808	)
Total Shareholders’ Equity	$	248,980		$	352				$	249,332
Total Liabilities and Shareholders’ Equity	$	2,548,950		$	352				$	2,549,302

(1) Represents adjustment to capitalized mortgage loan servicing rights, deferred tax assets, net, and accumulated deficit to reflect the adoption of the fair value method of accounting for our capitalized mortgage loan servicing rights.

(2) Represents  adjustment to accumulated deficit and accumulated other comprehensive loss to reflect the adoption of ASU 2017-08.

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Securities (Tables)

9 Months Ended

Sep. 30, 2017

Securities [Abstract]

Securities available for sale

Securities available for sale consist of the following:

	Amortized		Unrealized
	Cost		Gains		Losses		Fair Value
	(In thousands)
September 30, 2017
U.S. agency	$	26,455	$	210	$	39	$	26,626
U.S. agency residential mortgage-backed		135,293		1,331		515		136,109
U.S. agency commercial mortgage-backed		10,767		84		115		10,736
Private label mortgage-backed		26,703		518		231		26,990
Other asset backed		108,128		319		108		108,339
Obligations of states and political subdivisions		176,087		1,708		619		177,176
Corporate		57,213		853		66		58,000
Trust preferred		2,928		-		128		2,800
Foreign government		2,098		-		9		2,089
Total	$	545,672	$	5,023	$	1,830	$	548,865
December 31, 2016
U.S. agency	$	28,909	$	159	$	80	$	28,988
U.S. agency residential mortgage-backed		156,053		1,173		937		156,289
U.S. agency commercial mortgage-backed		12,799		28		195		12,632
Private label mortgage-backed		35,035		216		524		34,727
Other asset backed		146,829		271		391		146,709
Obligations of states and political subdivisions		175,180		478		4,759		170,899
Corporate		56,356		223		399		56,180
Trust preferred		2,922		-		343		2,579
Foreign government		1,626		-		13		1,613
Total	$	615,709	$	2,548	$	7,641	$	610,616

Investments in a continuous unrealized loss position

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

	Less Than Twelve Months				Twelve Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In thousands)
September 30, 2017
U.S. agency	$	4,819	$	21	$	4,947	$	18	$	9,766	$	39
U.S. agency residential mortgage-backed		24,116		215		27,817		300		51,933		515
U.S. agency commercial mortgage-backed		1,815		22		3,933		93		5,748		115
Private label mortgage- backed		3,423		26		3,163		205		6,586		231
Other asset backed		12,756		18		16,298		90		29,054		108
Obligations of states and political subdivisions		42,186		447		13,787		172		55,973		619
Corporate		8,654		22		2,458		44		11,112		66
Trust preferred		-		-		2,800		128		2,800		128
Foreign government		2,089		9		-		-		2,089		9
Total	$	99,858	$	780	$	75,203	$	1,050	$	175,061	$	1,830

December 31, 2016
U.S. agency	$	4,179	$	41	$	8,217	$	39	$	12,396	$	80
U.S. agency residential mortgage-backed		62,524		732		20,857		205		83,381		937
U.S. agency commercial mortgage-backed		6,079		194		143		1		6,222		195
Private label mortgage-backed		20,545		281		1,413		243		21,958		524
Other asset backed		52,958		172		17,763		219		70,721		391
Obligations of states and political subdivisions		113,078		4,014		14,623		745		127,701		4,759
Corporate		25,546		292		2,810		107		28,356		399
Trust preferred		-		-		2,579		343		2,579		343
Foreign government		1,613		13		-		-		1,613		13
Total	$	286,522	$	5,739	$	68,405	$	1,902	$	354,927	$	7,641

Trust preferred securities

The following table breaks out our trust preferred securities in further detail as of September 30, 2017 and December 31, 2016:

	September 30, 2017					December 31, 2016
	Fair Value		Net Unrealized Loss			Fair Value		Net Unrealized Loss
	(In thousands)
Trust preferred securities
Rated issues	$	1,880	$	(48	)	$	1,800	$	(123	)
Unrated issues		920		(80	)		779		(220	)

Private label mortgage backed securities below investment grade

At September 30, 2017, 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 September 30, 2017
Fair value	$	1,076	$	1,032	$	65	$	2,173
Amortized cost		937		842		-		1,779
Non-credit unrealized loss		-		-		-		-
Unrealized gain		139		190		65		394
Cumulative credit related OTTI		757		457		380		1,594

Credit losses recognized in earnings on securities available for sale

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

	Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016
	(In thousands)
Balance at beginning of period	$	1,844	$	1,844	$	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	$	1,844	$	1,844

Amortized cost and fair value of securities available for sale by contractual maturity

The amortized cost and fair value of securities available for sale at September 30, 2017, by contractual maturity, follow:

	Amortized Cost		Fair Value
	(In thousands)
Maturing within one year	$	27,811	$	27,865
Maturing after one year but within five years		98,784		99,533
Maturing after five years but within ten years		82,590		83,671
Maturing after ten years		55,596		55,622
		264,781		266,691
U.S. agency residential mortgage-backed		135,293		136,109
U.S. agency commercial mortgage-backed		10,767		10,736
Private label mortgage-backed		26,703		26,990
Other asset backed		108,128		108,339
Total	$	545,672	$	548,865

Gains and losses realized on sale of securities available for sale

A summary of proceeds from the sale of securities available for sale and gains and losses for the nine month periods ending September 30, follows:

			Realized
	Proceeds (1)		Gains		Losses
	(In thousands)
2017	$	9,594	$	125	$	-
2016		56,451		350		52

(1) 2017 includes $0.760 million for trades that did not settle until after September 30, 2017.

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Loans (Tables)

9 Months Ended

Sep. 30, 2017

Loans [Abstract]

Analysis of allowance for loan losses by portfolio segment

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

	Commercial			Mortgage			Installment			Payment Plan Receivables(1)		Subjective Allocation		Total
	(In thousands)
2017
Balance at beginning of period	$	5,100		$	8,145		$	900		$	-	$	6,441	$	20,586
Additions (deductions) Provision for loan losses		(97	)		68			(33	)		-		644		582
Recoveries credited to the allowance		340			587			285			-		-		1,212
Loans charged against the allowance		(92	)		(471	)		(339	)		-		-		(902	)
Balance at end of period	$	5,251		$	8,329		$	813		$	-	$	7,085	$	21,478
2016
Balance at beginning of period	$	6,039		$	9,956		$	1,139		$	52	$	5,526	$	22,712
Additions (deductions) Provision for loan losses		(153	)		(247	)		208			-		17		(175	)
Recoveries credited to the allowance		474			195			236			-		-		905
Loans charged against the allowance		(365	)		(561	)		(473	)		-		-		(1,399	)
Balance at end of period	$	5,995		$	9,343		$	1,110		$	52	$	5,543	$	22,043

(1) Payment plan receivables were reclassified to held for sale at December 31, 2016.  See note #15.

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

	Commercial			Mortgage			Installment			Payment Plan Receivables(1)			Subjective Allocation		Total
	(In thousands)
2017
Balance at beginning of period	$	4,880		$	8,681		$	1,011		$	-		$	5,662	$	20,234
Additions (deductions) Provision for loan losses		(197	)		(593	)		173			-			1,423		806
Recoveries credited to the allowance		946			1,264			788			-			-		2,998
Loans charged against the allowance		(378	)		(1,023	)		(1,159	)		-			-		(2,560	)
Balance at end of period	$	5,251		$	8,329		$	813		$	-		$	7,085	$	21,478
2016
Balance at beginning of period	$	5,670		$	10,391		$	1,181		$	56		$	5,272	$	22,570
Additions (deductions) Provision for loan losses		(1,220	)		(885	)		399			(4	)		271		(1,439	)
Recoveries credited to the allowance		1,944			871			808			-			-		3,623
Loans charged against the allowance		(399	)		(1,034	)		(1,278	)		-			-		(2,711	)
Balance at end of period	$	5,995		$	9,343		$	1,110		$	52		$	5,543	$	22,043

(1) Payment plan receivables were reclassified to held for sale at December 31, 2016.  See note #15.

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

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

	Commercial		Mortgage		Installment		Subjective Allocation		Total
	(In thousands)
September 30, 2017
Allowance for loan losses
Individually evaluated for impairment	$	967	$	5,823	$	271	$	-	$	7,061
Collectively evaluated for impairment		4,284		2,506		542		7,085		14,417
Total ending allowance balance	$	5,251	$	8,329	$	813	$	7,085	$	21,478
Loans
Individually evaluated for impairment	$	10,257	$	54,322	$	4,215			$	68,794
Collectively evaluated for impairment		829,073		730,050		315,146				1,874,269
Total loans recorded investment		839,330		784,372		319,361				1,943,063
Accrued interest included in recorded investment		2,080		3,026		863				5,969
Total loans	$	837,250	$	781,346	$	318,498			$	1,937,094
December 31, 2016
Allowance for loan losses
Individually evaluated for impairment	$	2,244	$	6,579	$	329	$	-	$	9,152
Collectively evaluated for impairment		2,636		2,102		682		5,662		11,082
Total ending allowance balance	$	4,880	$	8,681	$	1,011	$	5,662	$	20,234
Loans
Individually evaluated for impairment	$	15,767	$	59,151	$	4,913			$	79,831
Collectively evaluated for impairment		790,228		481,828		261,474				1,533,530
Total loans recorded investment		805,995		540,979		266,387				1,613,361
Accrued interest included in recorded investment		1,978		2,364		771				5,113
Total loans	$	804,017	$	538,615	$	265,616			$	1,608,248

Loans on non-accrual status and past due more than 90 days

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

	90+ and Still Accruing		Non- Accrual		Total Non- Performing Loans
	(In thousands)
September 30, 2017
Commercial
Income producing - real estate	$	-	$	72	$	72
Land, land development and construction - real estate		-		10		10
Commercial and industrial		-		706		706
Mortgage
1-4 family		-		5,207		5,207
Resort lending		-		1,411		1,411
Home equity - 1st lien		-		258		258
Home equity - 2nd lien		-		221		221
Purchased loans		-		-		-
Installment
Home equity - 1st lien		-		97		97
Home equity - 2nd lien		-		224		224
Boat lending		-		69		69
Recreational vehicle lending		-		25		25
Other		-		110		110
Total recorded investment	$	-	$	8,410	$	8,410
Accrued interest included in recorded investment	$	-	$	-	$	-
December 31, 2016
Commercial
Income producing - real estate	$	-	$	628	$	628
Land, land development and construction - real estate		-		105		105
Commercial and industrial		-		4,430		4,430
Mortgage
1-4 family		-		5,248		5,248
Resort lending		-		1,507		1,507
Home equity - 1st lien		-		222		222
Home equity - 2nd lien		-		317		317
Purchased loans		-		-		-
Installment
Home equity - 1st lien		-		266		266
Home equity - 2nd lien		-		289		289
Boat lending		-		219		219
Recreational vehicle lending		-		21		21
Other		-		112		112
Total recorded investment	$	-	$	13,364	$	13,364
Accrued interest included in recorded investment	$	-	$	-	$	-

Aging analysis of loans by class

An aging analysis of loans by class follows:

	Loans Past Due								Loans not		Total
	30-59 days		60-89 days		90+ days		Total		Past Due		Loans
	(In thousands)
September 30, 2017
Commercial
Income producing - real estate	$	425	$	-	$	30	$	455	$	271,747	$	272,202
Land, land development and construction - real estate		10		-		-		10		67,793		67,803
Commercial and industrial		120		149		65		334		498,991		499,325
Mortgage
1-4 family		1,929		919		5,207		8,055		553,928		561,983
Resort lending		363		135		1,411		1,909		91,370		93,279
Home equity - 1st lien		460		-		258		718		35,826		36,544
Home equity - 2nd lien		597		195		221		1,013		56,677		57,690
Purchased loans		3		1		-		4		34,872		34,876
Installment
Home equity - 1st lien		115		86		97		298		9,925		10,223
Home equity - 2nd lien		161		23		224		408		10,103		10,511
Boat lending		112		69		69		250		131,153		131,403
Recreational vehicle lending		52		4		25		81		93,687		93,768
Other		108		50		110		268		73,188		73,456
Total recorded investment	$	4,455	$	1,631	$	7,717	$	13,803	$	1,929,260	$	1,943,063
Accrued interest included in recorded investment	$	53	$	24	$	-	$	77	$	5,892	$	5,969

December 31, 2016
Commercial
Income producing - real estate	$	-	$	-	$	383	$	383	$	287,255	$	287,638
Land, land development and construction - real estate		74		-		31		105		51,670		51,775
Commercial and industrial		100		1,385		66		1,551		465,031		466,582
Mortgage
1-4 family		2,361		869		5,248		8,478		306,063		314,541
Resort lending		-		-		1,507		1,507		101,541		103,048
Home equity - 1st lien		149		-		222		371		28,645		29,016
Home equity - 2nd lien		470		218		317		1,005		54,232		55,237
Purchased loans		13		2		-		15		39,122		39,137
Installment
Home equity - 1st lien		311		48		266		625		12,025		12,650
Home equity - 2nd lien		238		41		289		568		13,390		13,958
Boat lending		184		33		219		436		102,489		102,925
Recreational vehicle lending		68		33		21		122		74,413		74,535
Other		289		30		112		431		61,888		62,319
Total recorded investment	$	4,257	$	2,659	$	8,681	$	15,597	$	1,597,764	$	1,613,361
Accrued interest included in recorded investment	$	45	$	19	$	-	$	64	$	5,049	$	5,113

Impaired loans

Impaired loans are as follows:

	September 30, 2017		December 31, 2016
Impaired loans with no allocated allowance	(In thousands)
TDR	$	349	$	1,782
Non - TDR		186		1,107
Impaired loans with an allocated allowance
TDR - allowance based on collateral		2,320		3,527
TDR - allowance based on present value cash flow		65,449		72,613
Non - TDR - allowance based on collateral		202		491
Total impaired loans	$	68,506	$	79,520
Amount of allowance for loan losses allocated
TDR - allowance based on collateral	$	641	$	1,868
TDR - allowance based on present value cash flow		6,329		7,146
Non - TDR - allowance based on collateral		91		138
Total amount of allowance for loan losses allocated	$	7,061	$	9,152

Impaired loans by class  are as follows (1):

	September 30, 2017						December 31, 2016
	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	$	-	$	-	$	-	$	517	$	768	$	-
Land, land development & construction-real estate		-		-		-		31		709		-
Commercial and industrial		535		557		-		2,341		3,261		-
Mortgage
1-4 family		2		472		-		2		387		-
Resort lending		-		-		-		-		-		-
Home equity - 1st lien		-		-		-		-		-		-
Home equity - 2nd lien		-		-		-		-		-		-
Installment
Home equity - 1st lien		1		71		-		-		66		-
Home equity - 2nd lien		-		-		-		-		-		-
Boat lending		-		-		-		-		-		-
Recreational vehicle lending		-		-		-		-		-		-
Other		-		-		-		-		-		-
		538		1,100		-		2,891		5,191		-
With an allowance recorded:
Commercial
Income producing - real estate		6,975		7,121		482		7,737		7,880		554
Land, land development & construction-real estate		169		197		10		239		244		36
Commercial and industrial		2,578		2,612		475		4,902		5,246		1,654
Mortgage
1-4 family		37,872		39,393		3,517		41,701		43,479		4,100
Resort lending		16,098		16,169		2,264		16,898		16,931		2,453
Home equity - 1st lien		171		238		30		235		242		10
Home equity - 2nd lien		179		213		12		315		398		16
Installment
Home equity - 1st lien		1,791		1,921		85		1,994		2,117		118
Home equity - 2nd lien		1,969		1,994		161		2,415		2,443		182
Boat lending		1		6		1		1		6		-
Recreational vehicle lending		93		93		5		109		108		6
Other		360		377		19		394		426		23
		68,256		70,334		7,061		76,940		79,520		9,152
Total
Commercial
Income producing - real estate		6,975		7,121		482		8,254		8,648		554
Land, land development & construction-real estate		169		197		10		270		953		36
Commercial and industrial		3,113		3,169		475		7,243		8,507		1,654
Mortgage
1-4 family		37,874		39,865		3,517		41,703		43,866		4,100
Resort lending		16,098		16,169		2,264		16,898		16,931		2,453
Home equity - 1st lien		171		238		30		235		242		10
Home equity - 2nd lien		179		213		12		315		398		16
Installment
Home equity - 1st lien		1,792		1,992		85		1,994		2,183		118
Home equity - 2nd lien		1,969		1,994		161		2,415		2,443		182
Boat lending		1		6		1		1		6		-
Recreational vehicle lending		93		93		5		109		108		6
Other		360		377		19		394		426		23
Total	$	68,794	$	71,434	$	7,061	$	79,831	$	84,711	$	9,152
Accrued interest included in recorded investment	$	288					$	311

(1) There were no impaired purchased mortgage loans at September 30, 2017 or December 31, 2016.

Average recorded investment in and interest income earned on impaired loans by class

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

	2017				2016
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded	(In thousands)
Commercial
Income producing - real estate	$	-	$	-	$	551	$	-
Land, land development & construction-real estate		-		-		133		-
Commercial and industrial		445		8		-		-
Mortgage
1-4 family		127		7		12		3
Resort lending		-		-		-		-
Home equity - 1st lien		-		-		-		-
Home equity - 2nd lien		-		-		-		-
Installment
Home equity - 1st lien		1		1		-		3
Home equity - 2nd lien		-		-		-		-
Boat lending		-		-		-		-
Recreational vehicle lending		-		-		-		-
Other		-		1		-		-
		573		17		696		6
With an allowance recorded
Commercial
Income producing - real estate		7,311		91		8,000		111
Land, land development & construction-real estate		171		2		1,117		3
Commercial and industrial		2,878		26		7,145		69
Mortgage
1-4 family		38,533		462		44,256		470
Resort lending		16,175		153		17,372		161
Home equity - 1st lien		201		1		241		2
Home equity - 2nd lien		180		2		280		6
Installment
Home equity - 1st lien		1,808		40		2,140		34
Home equity - 2nd lien		2,058		26		2,585		37
Boat lending		1		-		2		-
Recreational vehicle lending		98		1		114		2
Other		361		6		424		7
		69,775		810		83,676		902
Total
Commercial
Income producing - real estate		7,311		91		8,551		111
Land, land development & construction-real estate		171		2		1,250		3
Commercial and industrial		3,323		34		7,145		69
Mortgage
1-4 family		38,660		469		44,268		473
Resort lending		16,175		153		17,372		161
Home equity - 1st lien		201		1		241		2
Home equity - 2nd lien		180		2		280		6
Installment
Home equity - 1st lien		1,809		41		2,140		37
Home equity - 2nd lien		2,058		26		2,585		37
Boat lending		1		-		2		-
Recreational vehicle lending		98		1		114		2
Other		361		7		424		7
Total	$	70,348	$	827	$	84,372	$	908

(1) There were no impaired purchased mortgage loans during the three month periods ended September 30, 2017 and 2016, respectively.

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

	2017				2016
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:	(In thousands)
Commercial
Income producing - real estate	$	222	$	-	$	632	$	2
Land, land development & construction-real estate		8		-		405		7
Commercial and industrial		808		16		616		21
Mortgage
1-4 family		64		16		12		9
Resort lending		-		-		-		-
Home equity - 1st lien		-		-		-		-
Home equity - 2nd lien		-		-		-		-
Installment
Home equity - 1st lien		1		4		-		4
Home equity - 2nd lien		-		-		4		-
Boat lending		-		-		-		-
Recreational vehicle lending		-		-		-		-
Other		-		1		-		-
		1,103		37		1,669		43
With an allowance recorded:
Commercial
Income producing - real estate		7,525		300		8,153		318
Land, land development & construction-real estate		187		6		1,352		29
Commercial and industrial		3,488		98		5,929		151
Mortgage
1-4 family		39,716		1,420		45,728		1,447
Resort lending		16,485		464		17,705		480
Home equity - 1st lien		218		5		223		6
Home equity - 2nd lien		217		5		231		11
Installment
Home equity - 1st lien		1,874		107		2,233		118
Home equity - 2nd lien		2,210		96		2,723		122
Boat lending		1		-		2		-
Recreational vehicle lending		103		4		117		5
Other		373		19		443		23
		72,397		2,524		84,839		2,710
Total
Commercial
Income producing - real estate		7,747		300		8,785		320
Land, land development & construction-real estate		195		6		1,757		36
Commercial and industrial		4,296		114		6,545		172
Mortgage
1-4 family		39,780		1,436		45,740		1,456
Resort lending		16,485		464		17,705		480
Home equity - 1st lien		218		5		223		6
Home equity - 2nd lien		217		5		231		11
Installment
Home equity - 1st lien		1,875		111		2,233		122
Home equity - 2nd lien		2,210		96		2,727		122
Boat lending		1		-		2		-
Recreational vehicle lending		103		4		117		5
Other		373		20		443		23
Total	$	73,500	$	2,561	$	86,508	$	2,753

(1) There were no impaired purchased mortgage loans during the nine month periods ended September 30, 2017 and 2016, respectively.

Troubled debt restructurings

Troubled debt restructurings follow:

	September 30, 2017
	Commercial		Retail (1)			Total
	(In thousands)
Performing TDRs	$	9,431	$	53,755		$	63,186
Non-performing TDRs(2)		401		4,531	(3)		4,932
Total	$	9,832	$	58,286		$	68,118
	December 31, 2016
	Commercial		Retail (1)			Total
	(In thousands)
Performing TDRs	$	10,560	$	59,726		$	70,286
Non-performing TDRs(2)		3,565		4,071	(3)		7,636
Total	$	14,125	$	63,797		$	77,922

(1) Retail loans include mortgage and installment portfolio segments.

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

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

Troubled debt restructuring during the period

Loans that have been classified as troubled debt restructurings during the three-month periods endedSeptember 30 follow(1):

	Number of Contracts		Pre-modification Recorded Balance		Post-modification Recorded Balance
	(Dollars in thousands)
2017
Commercial
Income producing - real estate		-	$	-	$	-
Land, land development & construction-real estate		-		-		-
Commercial and industrial		-		-		-
Mortgage
1-4 family		1		93		95
Resort lending		-		-		-
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		2		51		50
Boat lending		-		-		-
Recreational vehicle lending		-		-		-
Other		1		10		10
Total		4	$	154	$	155
2016
Commercial
Income producing - real estate		2	$	180	$	180
Land, land development & construction-real estate		-		-		-
Commercial and industrial		2		175		158
Mortgage
1-4 family		2		204		207
Resort lending		-		-		-
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		2		77		78
Installment
Home equity - 1st lien		2		82		85
Home equity - 2nd lien		1		7		7
Boat lending		-		-		-
Recreational vehicle lending		-		-		-
Other		1		34		34
Total		12	$	759	$	749

(1) There were no purchased mortgage loans classified as troubled debt restructurings during the three month periods ended September 30, 2017 and 2016, respectively.

Loans that have been classified as troubled debt restructurings during the nine-month periods endedSeptember 30 follow(1):

	Number of Contracts		Pre-modification Recorded Balance		Post-modification Recorded Balance
	(Dollars in thousands)
2017
Commercial
Income producing - real estate		-	$	-	$	-
Land, land development & construction-real estate		-		-		-
Commercial and industrial		12		786		786
Mortgage
1-4 family		3		142		144
Resort lending		1		189		189
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		2		34		37
Home equity - 2nd lien		7		300		301
Boat lending		-		-		-
Recreational vehicle lending		-		-		-
Other		1		10		10
Total		26	$	1,461	$	1,467
2016
Commercial
Income producing - real estate		4	$	290	$	290
Land, land development & construction-real estate		-		-		-
Commercial and industrial		6		1,933		1,916
Mortgage
1-4 family		5		396		470
Resort lending		1		116		117
Home equity - 1st lien		1		107		78
Home equity - 2nd lien		2		77		78
Installment
Home equity - 1st lien		6		141		145
Home equity - 2nd lien		5		133		136
Boat lending		-		-		-
Recreational vehicle lending		-		-		-
Other		2		46		46
Total		32	$	3,239	$	3,276

(1) There were no purchased mortgage loans classified as troubled debt restructurings during the nine month periods ended September 30, 2017 and 2016, respectively.

Summary of loan ratings by loan class

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

	Commercial
	Non-watch 1-6		Watch 7-8		Substandard Accrual 9		Non- Accrual 10-11		Total
					(In thousands)
September 30, 2017
Income producing - real estate	$	268,781	$	3,037	$	312	$	72	$	272,202
Land, land development and construction - real estate		67,730		63		-		10		67,803
Commercial and industrial		474,022		22,217		2,380		706		499,325
Total	$	810,533	$	25,317	$	2,692	$	788	$	839,330
Accrued interest included in total	$	1,991	$	80	$	9	$	-	$	2,080
December 31, 2016
Income producing - real estate	$	282,886	$	3,787	$	337	$	628	$	287,638
Land, land development andconstruction - real estate		51,603		67		-		105		51,775
Commercial and industrial		449,365		9,788		2,998		4,431		466,582
Total	$	783,854	$	13,642	$	3,335	$	5,164	$	805,995
Accrued interest included in total	$	1,915	$	52	$	11	$	-	$	1,978

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)
September 30, 2017
800 and above	$	62,145	$	11,336	$	8,491	$	8,896	$	7,790	$	98,658
750-799		227,676		33,287		15,619		21,092		18,559		316,233
700-749		130,480		25,629		6,583		13,819		7,978		184,489
650-699		77,357		12,441		3,304		7,970		429		101,501
600-649		26,947		4,648		1,090		2,439		-		35,124
550-599		15,547		2,777		365		1,507		-		20,196
500-549		8,766		1,404		540		1,319		-		12,029
Under 500		3,692		89		253		169		-		4,203
Unknown		9,373		1,668		299		479		120		11,939
Total	$	561,983	$	93,279	$	36,544	$	57,690	$	34,876	$	784,372
Accrued interest included in total	$	2,134	$	374	$	165	$	260	$	93	$	3,026
December 31, 2016
800 and above	$	36,534	$	10,484	$	6,048	$	8,392	$	8,462	$	69,920
750-799		102,382		41,999		10,006		20,113		20,984		195,484
700-749		69,337		24,727		5,706		12,360		9,115		121,245
650-699		50,621		13,798		4,106		8,167		437		77,129
600-649		25,270		5,769		1,674		3,067		-		35,780
550-599		13,747		3,030		455		1,699		-		18,931
500-549		9,215		1,438		486		981		-		12,120
Under 500		5,145		92		255		279		-		5,771
Unknown		2,290		1,711		280		179		139		4,599
Total	$	314,541	$	103,048	$	29,016	$	55,237	$	39,137	$	540,979
Accrued interest included in total	$	1,466	$	450	$	111	$	226	$	111	$	2,364

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

	Installment(1)
	Home Equity 1st Lien		Home Equity 2nd Lien		Boat Lending		Recreational Vehicle Lending		Other		Total
	(In thousands)
September 30, 2017
800 and above	$	1,085	$	869	$	26,168	$	26,312	$	10,655	$	65,089
750-799		1,938		2,721		67,402		48,183		26,546		146,790
700-749		1,601		2,236		25,945		14,261		16,433		60,476
650-699		2,193		1,864		9,164		3,627		8,990		25,838
600-649		1,429		1,429		1,730		838		2,334		7,760
550-599		1,252		919		468		244		894		3,777
500-549		616		398		243		125		434		1,816
Under 500		92		56		64		11		130		353
Unknown		17		19		219		167		7,040		7,462
Total	$	10,223	$	10,511	$	131,403	$	93,768	$	73,456	$	319,361
Accrued interest included in total	$	42	$	44	$	322	$	236	$	219	$	863
December 31, 2016
800 and above	$	1,354	$	1,626	$	21,422	$	23,034	$	8,911	$	56,347
750-799		2,478		3,334		50,508		35,827		21,918		114,065
700-749		1,920		2,686		20,045		11,049		13,183		48,883
650-699		2,852		2,541		7,559		3,205		8,913		25,070
600-649		1,691		1,775		1,846		821		2,269		8,402
550-599		1,231		1,063		882		280		833		4,289
500-549		981		692		440		189		511		2,813
Under 500		114		220		73		16		211		634
Unknown		29		21		150		114		5,570		5,884
Total	$	12,650	$	13,958	$	102,925	$	74,535	$	62,319	$	266,387
Accrued interest included in total	$	54	$	59	$	264	$	203	$	191	$	771

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

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Shareholders' Equity and Earnings Per Common Share (Tables)

9 Months Ended

Sep. 30, 2017

Shareholders' Equity and Earnings Per Common Share [Abstract]

Reconciliation of basic and diluted net income per share

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
	(In thousands, except per share amounts)
Net income	$	6,859	$	6,373	$	18,764	$	16,911
Weighted average shares outstanding (1)		21,334		21,232		21,325		21,421
Effect of stock options		138		149		144		150
Stock units for deferred compensation plan for non-employee directors		121		116		120		115
Performance share units		59		52		57		42
Restricted stock units		-		-		-		46
Weighted average shares outstanding for calculation of diluted earnings per share		21,652		21,549		21,646		21,774
Net income per common share
Basic (1)	$	0.32	$	0.30	$	0.88	$	0.79
Diluted	$	0.32	$	0.30	$	0.87	$	0.78

⁽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)

9 Months Ended

Sep. 30, 2017

Derivative Financial Instruments [Abstract]

Derivative financial instruments according to type of hedge designation

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

	September 30, 2017
	Notional Amount		Average Maturity (years)		Fair Value
	(Dollars in thousands)
Cash flow hedge - pay-fixed interest rate swap agreement	$	15,000		3.9	$	105
No hedge designation
Rate-lock mortgage loan commitments	$	36,580		0.1	$	769
Mandatory commitments to sell mortgage loans		74,750		0.1		26
Pay-fixed interest rate swap agreements		52,586		7.1		52
Pay-variable interest rate swap agreements		52,586		7.1		(52	)
Purchased options		3,119		3.8		277
Written options		3,119		3.8		(277	)
Total	$	222,740		3.5	$	795

	December 31, 2016
	Notional Amount		Average Maturity (years)		Fair Value
	(Dollars in thousands)
No hedge designation
Rate-lock mortgage loan commitments	$	26,658		0.1	$	646
Mandatory commitments to sell mortgage loans		61,954		0.1		630
Pay-fixed interest rate swap agreements		46,121		8.6		249
Pay-variable interest rate swap agreements		46,121		8.6		(249	)
Purchased options		3,119		4.5		238
Written options		3,119		4.5		(238	)
Total	$	187,092		4.4	$	1,276

Fair value of derivative instruments

Fair Values of Derivative Instruments

Asset Derivatives		Liability Derivatives
September 30, 2017	December 31, 2016	September 30, 2017	December 31, 2016

	Balance  Sheet  Location		Fair Value	Balance  Sheet  Location		Fair Value	Balance  Sheet  Location		Fair Value	Balance  Sheet  Location		Fair Value
	(In thousands)
Derivatives designated as hedging instruments
Pay-fixed interest rate swap agreements	Other assets	$	105	Other assets	$	-	Other  liabilities	$	-	Other liabilities	$	-
Derivatives not designated as hedging instruments
Rate-lock mortgage loan commitments	Other assets		769	Other assets		646	Other liabilities		-	Other liabilities		-
Mandatory commitments to sell mortgage loans	Other assets		26	Other assets		630	Other liabilities		-	Other liabilities		-
Pay-fixed interest rate swap agreements	Other assets		424	Other assets		493	Other liabilities		372	Other liabilities		244
Pay-variable interest rate swap agreements	Other assets		372	Other assets		244	Other liabilities		424	Other liabilities		493
Purchased options	Other assets		277	Other assets		238	Other liabilities		-	Other liabilities		-
Written options	Other assets		-	Other  assets		-	Other liabilities		277	Other liabilities		238
Total			1,868			2,251			1,073			975
Total derivatives		$	1,973		$	2,251		$	1,073		$	975

Effect of derivative financial instruments on condensed consolidated statement of operation

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

Three Month Periods Ended September 30,
	Gain Recognized in Other Comprehensive Income (Effective Portion)						Location of  Gain (Loss)  Reclassified  from  Accumulated  Other  Comprehensive  Loss into  Income  (Effective	Loss Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)							Location of  Gain (Loss)  Recognized	Gain (Loss) Recognized in Income (1)
	2017			2016			Portion)	2017				2016			in Income (1)	2017			2016
	(In thousands)
Cash Flow Hedges
Pay-fixed interest rate swap agreements		$	95		$	-	Interest expense		$	(5	)		$	-		$	5			$	-
Total		$	95		$	-			$	(5	)		$	-		$	5			$	-
No hedge designation
Rate-lock mortgage loan commitments															Net gains on on mortage loans	$	(313	)		$	264
Mandatory commitments to sell mortgage loans															Net gains on on mortage loans		2				94
Pay-fixed interest rate swap agreements															Interest income		52				196
Pay-variable interest rate swap agreements															Interest income		(52	)			(196	)
Purchased options															Interest expense		5				13
Written options															Interest expense		(5	)			(13	)
Total																$	(311	)		$	358

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

Nine Month Periods Ended September 30,
	Gain Recognized in Other Comprehensive Income (Effective Portion)				Location of  Gain (Loss)  Reclassified  from  Accumulated  Other  Comprehensive  Loss into  Income  (Effective	Loss Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)					Location of  Gain (Loss)  Recognized  in Income (1)	Gain (Loss) Recognized in Income (1)
	2017		2016		Portion)	2017			2016			2017			2016
	(In thousands)
Cash Flow Hedges
Pay-fixed interest rate swap agreements	$	95	$	-	Interest expense	$	(5	)	$	-		$	5		$	-
Total	$	95	$	-		$	(5	)	$	-		$	5		$	-
No hedge designation
Rate-lock mortgage loan commitments											Net gains on on mortage loans	$	123		$	613
Mandatory commitments to sell mortgage loans											Net gains on on mortage loans		(604	)		(352	)
Pay-fixed interest rate swap agreements											Interest income		(197	)		(1,512	)
Pay-variable interest rate swap agreements											Interest income		197			1,512
Purchased options											Interest expense		39			94
Written options											Interest expense		(39	)		(94	)
Total												$	(481	)	$	261

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

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Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2017

Intangible Assets [Abstract]

Other intangible assets, net of amortization

The following table summarizes intangible assets, net of amortization:

	September 30, 2017						December 31, 2016
	Gross Carrying Amount			Accumulated Amortization			Gross Carrying Amount			Accumulated Amortization
	(In thousands)
Amortized intangible assets - core deposits		$	6,118		$	4,445		$	6,118		$	4,186

Estimated amortization of other intangible assets

Amortization of other intangibles has been estimated through 2022 in the following table.

	(In thousands)
Three months ending December 31, 2017	$	87
2018		346
2019		346
2020		346
2021		346
2022		202
Total	$	1,673

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Share Based Compensation (Tables)

9 Months Ended

Sep. 30, 2017

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, 2017		211,018		$	5.05
Granted		-
Exercised		(28,963	)		4.03
Forfeited		-
Expired		-
Outstanding at September 30, 2017		182,055		$	5.21		4.4	$	3,175
Vested and expected to vest at September 30, 2017		182,055		$	5.21		4.4	$	3,175
Exercisable at September 30, 2017		182,055		$	5.21		4.4	$	3,175

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

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

	Number of Shares			Weighted- Average Grant Date Fair Value
Outstanding at January 1, 2017		296,422		$	14.52
Granted		68,473			21.07
Vested		(63,799	)		14.91
Forfeited		(8,510	)		15.59
Outstanding at September 30, 2017		292,586		$	15.88

Information regarding options exercised

Certain information regarding options exercised during the periods follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
	(In thousands)
Intrinsic value	$	39	$	9	$	513	$	186
Cash proceeds received	$	18	$	5	$	117	$	64
Tax benefit realized	$	14	$	3	$	180	$	65

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Regulatory Matters (Tables)

9 Months Ended

Sep. 30, 2017

Regulatory Matters [Abstract]

Actual capital amounts and ratios

Our actual capital amounts and ratios follow:

	Actual					Minimum for Adequately Capitalized Institutions					Minimum for Well-Capitalized Institutions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
September 30, 2017
Total capital to risk-weighted assets
Consolidated	$	307,278		15.14	%	$	162,315		8.00	%	NA		NA
Independent Bank		281,228		13.87			162,210		8.00		$	202,763		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	284,818		14.04	%	$	121,737		6.00	%	NA		NA
Independent Bank		258,768		12.76			121,658		6.00		$	162,210		8.00	%
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	253,101		12.47	%	$	91,302		4.50	%	NA		NA
Independent Bank		258,768		12.76			91,243		4.50		$	131,796		6.50	%
Tier 1 capital to average assets
Consolidated	$	284,818		10.63	%	$	107,154		4.00	%	NA		NA
Independent Bank		258,768		9.67			107,022		4.00		$	133,778		5.00	%
December 31, 2016
Total capital to risk-weighted assets
Consolidated	$	286,289		15.86	%	$	144,413		8.00	%	NA		NA
Independent Bank		270,855		15.02			144,223		8.00		$	180,279		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	265,405		14.70	%	$	108,309		6.00	%	NA		NA
Independent Bank		249,971		13.87			108,167		6.00		$	144,223		8.00	%
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	238,996		13.24	%	$	81,232		4.50	%	NA		NA
Independent Bank		249,971		13.87			81,126		4.50		$	117,181		6.50	%
Tier 1 capital to average assets
Consolidated	$	265,405		10.50	%	$	101,112		4.00	%	NA		NA
Independent Bank		249,971		9.90			101,019		4.00		$	126,274		5.00	%
NA - Not applicable

Components of regulatory capital

The components of our regulatory capital are as follows:

	Consolidated						Independent Bank
	September 30, 2017			December 31, 2016			September 30, 2017			December 31, 2016
	(In thousands)
Total shareholders' equity	$	267,710		$	248,980		$	267,406		$	258,814
Add (deduct)
Accumulated other comprehensive (gain) loss for regulatory purposes		(2,140	)		3,310			(2,140	)		3,310
Intangible assets		(1,338	)		(1,159	)		(1,338	)		(1,159	)
Disallowed deferred tax assets		(11,131	)		(12,135	)		(5,160	)		(10,994	)
Common equity tier 1 capital		253,101			238,996			258,768			249,971
Qualifying trust preferred securities		34,500			34,500			-			-
Disallowed deferred tax assets		(2,783	)		(8,091	)		-			-
Tier 1 capital		284,818			265,405			258,768			249,971
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets		22,460			20,884			22,460			20,884
Total risk-based capital	$	307,278		$	286,289		$	281,228		$	270,855

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Fair Value Disclosures (Tables)

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

Assets and liabilities measured at fair value

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

			Fair Value Measurements Using
	Fair Value Measure- ments		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Un- observable Inputs (Level 3)
	(In thousands)
September 30, 2017:
Measured at Fair Value on a Recurring Basis
Assets
Trading securities	$	347	$	347	$	-	$	-
Securities available for sale
U.S. agency		26,626		-		26,626		-
U.S. agency residential mortgage-backed		136,109		-		136,109		-
U.S. agency commercial mortgage-backed		10,736		-		10,736		-
Private label mortgage-backed		26,990		-		26,990		-
Other asset backed		108,339		-		108,339		-
Obligations of states and political subdivisions		177,176		-		177,176		-
Corporate		58,000		-		58,000		-
Trust preferred		2,800		-		2,800		-
Foreign government		2,089		-		2,089		-
Loans held for sale		47,611		-		47,611		-
Capitalized mortgage loan servicing rights		14,675		-		-		14,675
Derivatives (1)		1,973		-		1,973		-
Liabilities
Derivatives (2)		1,073		-		1,073		-
Measured at Fair Value on a Non-recurring basis:
Assets
Impaired loans (3)
Commercial
Income producing - real estate		185		-		-		185
Land, land development & construction-real estate		11		-		-		11
Commercial and industrial		878		-		-		878
Mortgage 1-4 family		509		-		-		509
Resort lending		207		-		-		207
Other real estate (4)
Mortgage 1-4 family		44		-		-		44
Resort lending		5		-		-		5

(1) Included in accrued income and other assets

(2) Included in accrued expenses and other liabilities

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

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

			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, 2016:
Measured at Fair Value on a Recurring Basis
Assets
Trading securities	$	410	$	410	$	-	$	-
Securities available for sale
U.S. agency		28,988		-		28,988		-
U.S. agency residential mortgage-backed		156,289		-		156,289		-
U.S. agency commercial mortgage-backed		12,632		-		12,632		-
Private label mortgage-backed		34,727		-		34,727		-
Other asset backed		146,709		-		146,709		-
Obligations of states and political subdivisions		170,899		-		170,899		-
Corporate		56,180		-		56,180		-
Trust preferred		2,579		-		2,579		-
Foreign government		1,613		-		1,613		-
Loans held for sale		35,946		-		35,946		-
Derivatives (1)		2,251		-		2,251		-
Liabilities
Derivatives (2)		975		-		975		-
Measured at Fair Value on a Non-recurring basis:
Assets
Capitalized mortgage loan servicing rights (3)		8,163		-		-		8,163
Impaired loans (4)
Commercial
Income producing - real estate		255		-		-		255
Land, land development & construction-real estate		54		-		-		54
Commercial and industrial		1,342		-		-		1,342
Mortgage 1-4 family		361		-		-		361
Other real estate (5)
Commercial
Income producing - real estate (6)		2,863		-		2,863		-
Land, land development & construction-real estate		176		-		-		176
Mortgage 1-4 family		98		-		-		98
Resort lending		133		-		-		133

(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.

(6) Level 2 valuation is based on a signed purchase agreement.

Changes in fair value for financial assets

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

		Changes in Fair Values for the Nine-Month Periods Ended September 30 for Items Measured at
		Fair Value Pursuant to Election of the Fair Value Option
		2017											2016
		Net Gains (Losses) on Assets					Mortgage			Total Change in Fair Values Included in Current			Net Gains (Losses) on Assets				Total Change in Fair Values Included in Current
		Securities			Mortgage Loans		Loan Servicing, net			Period Earnings			Securities		Mortgage Loans		Period Earnings
	(In thousands)
Trading securities		$	(63	)	$	-	$	-		$	(63	)	$	4	$	-	$	4
Loans held for sale			-			713		-			713			-		612		612
Capitalized mortgage loan servicing rights			-			-		(2,585	)		(2,585	)		-		-		-

Reconciliation for all assets and (liabilities) measured at fair value on a recurring basis using significant unobservable inputs (Level 3)

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

	Capitalized Mortgage Loan Servicing Rights
	Three Months Ended September 30,					Nine Months Ended September 30,
	2017			2016		2017			2016
Beginning balance	$	14,515		$	-	$	-		$	-
Change in accounting		-			-		14,213			-
Beginning balance, as adjusted		14,515			-		14,213			-
Total losses realized and unrealized:
Included in results of operations		(1,090	)		-		(2,585	)		-
Included in other comprehensive income		-			-		-			-
Purchases, issuances, settlements, maturities and calls		1,250			-		3,047			-
Transfers in and/or out of Level 3		-			-		-			-
Ending balance	$	14,675		$	-	$	14,675		$	-
Amount of total losses for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at September 30	$	(1,090	)	$	-	$	(2,585	)	$	-

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

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

	Asset Fair Value		Valuation Technique	Unobservable Inputs	Weighted Average
	(In thousands)
September 30, 2017
Capitalized mortgage loan servicing rights	$	14,675	Present value of net	Discount rate		10.10	%
			servicing revenue	Cost to service	$	81
				Ancillary income		23
				Float rate		2.00	%

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)
September 30, 2017
Impaired loans
Commercial	$	1,074	Sales comparison approach	Adjustment for differences between comparable sales		(2.3	)%
Mortgage		716	Sales comparison approach	Adjustment for differences between comparable sales		0.3
Other real estate
Mortgage		49	Sales comparison approach	Adjustment for differences between comparable sales		5.8
December 31, 2016
Capitalized mortgage loan servicing rights	$	8,163	Present value of net servicing revenue	Discount rate		10.07	%
				Cost to service	$	83
				Ancillary income		24
				Float rate		1.97	%
Impaired loans
Commercial (1)		1,446	Sales comparison approach	Adjustment for differences between comparable sales		(1.5	)%
Mortgage		361	Sales comparison approach	Adjustment for differences between comparable sales		(4.7	)
Other real estate
Commercial		176	Sales comparison  approach	Adjustment for differences between comparable sales		(22.5	)
Mortgage		231	Sales comparison approach	Adjustment for differences between comparable sales		(5.1	)

(1) In addition to the valuation techniques and unobservable inputs discussed above, at December 31, 2016, we had an impaired collateral dependent commercial relationship that totaled $0.2 million that was primarily secured by collateral other than real estate. Collateral securing this relationship primarily included machinery and equipment and inventory. Valuation techniques 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
September 30, 2017	$	47,611	$	1,150	$	46,461
December 31, 2016		35,946		437		35,509

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Fair Values of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2017

Fair Values of Financial Instruments [Abstract]

Estimated recorded book balances and fair values

The estimated recorded book balances and fair values follow:

					Fair Value Using
	Recorded Book Balance		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Un- observable Inputs (Level 3)
	(In thousands)
September 30, 2017
Assets
Cash and due from banks	$	31,998	$	31,998	$	31,998	$	-	$	-
Interest bearing deposits		15,605		15,605		15,605		-		-
Interest bearing deposits - time		3,489		3,493		-		3,493		-
Trading securities		347		347		347		-		-
Securities available for sale		548,865		548,865		-		548,865		-
Federal Home Loan Bank and Federal
Reserve Bank Stock		15,543	NA		NA		NA		NA
Net loans and loans held for sale		1,963,227		1,909,662		-		47,611		1,862,051
Accrued interest receivable		8,740		8,740		-		2,850		5,890
Derivative financial instruments		1,973		1,973		-		1,973		-
Liabilities
Deposits with no stated maturity (1)	$	1,808,071	$	1,808,071	$	1,808,071	$	-	$	-
Deposits with stated maturity (1)		535,690		533,045		-		533,045		-
Federal funds purchased		3,000		3,000		-		3,000		-
Other borrowings		72,849		73,405		-		73,405		-
Subordinated debentures		35,569		28,634		-		28,634		-
Accrued interest payable		1,105		1,105		40		1,065		-
Derivative financial instruments		1,073		1,073		-		1,073		-
December 31, 2016
Assets
Cash and due from banks	$	35,238	$	35,238	$	35,238	$	-	$	-
Interest bearing deposits		47,956		47,956		47,956		-		-
Interest bearing deposits - time		5,591		5,611		-		5,611		-
Trading securities		410		410		410		-		-
Securities available for sale		610,616		610,616		-		610,616		-
Federal Home Loan Bank and Federal
Reserve Bank Stock		15,543	NA		NA		NA		NA
Net loans and loans held for sale (2)		1,655,335		1,629,587		-		67,321		1,562,266
Accrued interest receivable		7,316		7,316		5		2,364		4,947
Derivative financial instruments		2,251		2,251		-		2,251		-
Liabilities
Deposits with no stated maturity (1)	$	1,740,601	$	1,740,601	$	1,740,601	$	-	$	-
Deposits with stated maturity (1)		485,118		483,469		-		483,469		-
Other borrowings		9,433		10,371		-		10,371		-
Subordinated debentures		35,569		25,017		-		25,017		-
Accrued interest payable		932		932		21		911		-
Derivative financial instruments		975		975		-		975		-

(1) Deposits with no stated maturity include reciprocal deposits with a recorded book balance of $13.5 million and $7.4 million at September 30, 2017 and December 31, 2016, respectively. Deposits with a stated maturity include reciprocal deposits with a recorded book balance of $35.5 million and $31.3 million September 30, 2017 and December 31, 2016, respectively.

(2) Net loans and loans held for sale include $31.4 million of payment plan receivables and commercial loans held for sale at December 31, 2016.

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Accumulated Other Comprehensive Loss ("AOCL") (Tables)

9 Months Ended

Sep. 30, 2017

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

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

A summary of changes in AOCL follows:

	Unrealized Gains (Losses) on Securities Available for Sale			Dispropor- tionate Tax Effects from Securities Available for Sale			Unrealized Gains on Cash Flow Hedges		Total
				(In thousands)
For the three months ended September 30,
2017
Balances at beginning of period	$	1,986		$	(5,798	)	$	-	$	(3,812	)
Other comprehensive income before reclassifications		95			-			62		157
Amounts reclassified from AOCL		(5	)		-			3		(2	)
Net current period other comprehensive income		90			-			65		155
Balances at end of period	$	2,076		$	(5,798	)	$	65	$	(3,657	)
2016
Balances at beginning of period	$	2,515		$	(5,798	)	$	-	$	(3,283	)
Other comprehensive income before reclassifications		278			-			-		278
Amounts reclassified from AOCL		(10	)		-			-		(10	)
Net current period other comprehensive income		268			-			-		268
Balances at end of period	$	2,783		$	(5,798	)	$	-	$	(3,015	)
For the Nine months ended September 30,
2017
Balances at beginning of period	$	(3,310	)	$	(5,798	)	$	-	$	(9,108	)
Cumulative effect of change in accounting		300			-			-		300
Balances at beginning of period, as adjusted		(3,010	)		(5,798	)		-		(8,808	)
Other comprehensive income before reclassifications		5,167			-			62		5,229
Amounts reclassified from AOCL		(81	)		-			3		(78	)
Net current period other comprehensive income		5,086			-			65		5,151
Balances at end of period	$	2,076		$	(5,798	)	$	65	$	(3,657	)
2016
Balances at beginning of period	$	(238	)	$	(5,798	)	$	-	$	(6,036	)
Other comprehensive income before reclassifications		3,215			-			-		3,215
Amounts reclassified from AOCL		(194	)		-			-		(194	)
Net current period other comprehensive income		3,021			-			-		3,021
Balances at end of period	$	2,783		$	(5,798	)	$	-	$	(3,015	)

Summary of reclassifications out of each component of AOCL

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

	Amount Reclassified From			Affected Line Item in Condensed
AOCL Component	AOCL			Consolidated Statements of Operations
	(In thousands)
2017
Unrealized gains on securities available for sale
	$	8		Net gains on securities
		-		Net impairment loss recognized in earnings
		8		Total reclassifications before tax
		3		Income tax expense
	$	5		Reclassifications, net of tax
Unrealized gains on cash flow hedges
	$	(5	)	Interest expense
		(2	)	Income tax expense
	$	(3	)	Reclassification, net of tax
	$	2		Total reclassifications for the period, net of tax
2016
Unrealized gains on securities available for sale
	$	15		Net gains on securities
		-		Net impairment loss recognized in earnings
		15		Total reclassifications before tax
		5		Income tax expense
	$	10		Reclassifications, net of tax

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

	Amount Reclassified From			Affected Line Item in Condensed
AOCL Component	AOCL			Consolidated Statements of Operations
	(In thousands)
2017
Unrealized gains on securities available for sale
	$	125		Net gains on securities
		-		Net impairment loss recognized in earnings
		125		Total reclassifications before tax
		44		Income tax expense
	$	81		Reclassifications, net of tax
Unrealized gains on cash flow hedges
	$	(5	)	Interest expense
		(2	)	Income tax expense
	$	(3	)	Reclassification, net of tax
	$	78		Total reclassifications for the period, net of tax
2016
Unrealized gains on securities available for sale
	$	298		Net gains on securities
		-		Net impairment loss recognized in earnings
		298		Total reclassifications before tax
		104		Income tax expense
	$	194		Reclassifications, net of tax

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Payment Plan Receivables and Other Assets Held for Sale (Tables)

9 Months Ended

Sep. 30, 2017

Payment Plan Receivables and Other Assets Held for Sale [Abstract]

Assets sold and liabilities assumed

Assets sold and liabilities assumed were as follows:

	May 1, 2017		December 31, 2016
	(In thousands)
Assets sold
Payment plan receivables	$	33,128	$	30,582
Commerical loans		525		794
Other assets		1,765		1,984
Total assets	$	35,418	$	33,360
Liabilities assumed	$	1,972	$	718

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New Accounting Standards (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2017	Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016	Dec. 31, 2015
Cumulative Effect Adjustments to Condensed Consolidated Statement of Financial Position [Abstract]
Deferred tax assets, net			$ 22,433	$ 32,818
Capitalized mortgage loan servicing rights			14,675
Total assets			2,753,446	2,548,950
Accumulated deficit			(53,240)	(65,657)
Accumulated other comprehensive loss			(3,657)	(9,108)
Total Shareholders' Equity			267,710	248,980	$ 250,902	$ 251,092
Total Liabilities and Shareholders' Equity			$ 2,753,446	2,548,950
Originally Presented [Member]
Cumulative Effect Adjustments to Condensed Consolidated Statement of Financial Position [Abstract]
Deferred tax assets, net				32,818
Capitalized mortgage loan servicing rights				13,671
Total assets				2,548,950
Accumulated deficit				(65,657)
Accumulated other comprehensive loss				(9,108)
Total Shareholders' Equity				248,980
Total Liabilities and Shareholders' Equity				2,548,950
Cumulative Retrospective Adjustments [Member]
Cumulative Effect Adjustments to Condensed Consolidated Statement of Financial Position [Abstract]
Total Shareholders' Equity				352
Total Liabilities and Shareholders' Equity				352
Change in Accounting Method and ASU 2017-08 [Member]
Cumulative Effect Adjustments to Condensed Consolidated Statement of Financial Position [Abstract]
Total Shareholders' Equity				249,332
Total Liabilities and Shareholders' Equity				2,549,302
Change in Accounting Method [Member]
Cumulative Effect Adjustments to Condensed Consolidated Statement of Financial Position [Abstract]
Deferred tax assets, net				32,628
Capitalized mortgage loan servicing rights				14,213
Total assets				2,549,302
Change in Accounting Method [Member] | Cumulative Retrospective Adjustments [Member]
Cumulative Effect Adjustments to Condensed Consolidated Statement of Financial Position [Abstract]
Deferred tax assets, net	[1]			(190)
Capitalized mortgage loan servicing rights	[1]			542
Total assets				352
Accumulated deficit	[1]			352
New Accounting Pronouncement, Effect of Early Adoption [Member] | Additional Premium Amortization on AFS Securities, Pre-tax [Member]
Cumulative Effect Adjustments to Condensed Consolidated Statement of Financial Position [Abstract]
Cumulative effect of adjustments				460
New Accounting Pronouncement, Effect of Early Adoption [Member] | Additional Premium Amortization on AFS Securities, Net of Tax [Member]
Cumulative Effect Adjustments to Condensed Consolidated Statement of Financial Position [Abstract]
Cumulative effect of adjustments				300
New Accounting Pronouncement, Effect of Early Adoption [Member] | AOCI Decrease, Unrealized Losses AFS Securities, After Tax [Member]
Cumulative Effect Adjustments to Condensed Consolidated Statement of Financial Position [Abstract]
Cumulative effect of adjustments				300
ASU 2017-08 [Member]
Cumulative Effect Adjustments to Condensed Consolidated Statement of Financial Position [Abstract]
Accumulated deficit				(65,605)
Accumulated other comprehensive loss				(8,808)
Increase in premium amortization on securities available for sale		$ 30
ASU 2017-08 [Member] | Cumulative Retrospective Adjustments [Member]
Cumulative Effect Adjustments to Condensed Consolidated Statement of Financial Position [Abstract]
Accumulated deficit	[2]			(300)
Accumulated other comprehensive loss	[2]			$ 300

[1] Represents adjustment to capitalized mortgage loan servicing rights, deferred tax assets, net, and accumulated deficit to reflect the adoption of the fair value method of accounting for our capitalized mortgage loan servicing rights.

[2] Represents adjustment to accumulated deficit and accumulated other comprehensive loss to reflect the adoption of ASU 2017-08.

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Securities (Details) $ in Thousands		3 Months Ended		9 Months Ended		12 Months Ended
		Sep. 30, 2017 USD ($) Security	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($) Security	Sep. 30, 2016 USD ($)	Dec. 31, 2016 USD ($)
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost		$ 545,672		$ 545,672		$ 615,709
Unrealized Gains		5,023		5,023		2,548
Unrealized Losses		1,830		1,830		7,641
Fair Value		548,865		548,865		610,616
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value		99,858		99,858		286,522
Less Than Twelve Months, Unrealized Losses		780		780		5,739
Twelve Months or More, Fair Value		75,203		75,203		68,405
Twelve Months or More, Unrealized Losses		1,050		1,050		1,902
Total, Fair Value		175,061		175,061		354,927
Total, Unrealized Losses		1,830		1,830		7,641
Private Label Mortgage Backed Securities Below Investment Grade [Abstract]
Fair value		2,173		2,173
Amortized cost		1,779		1,779
Non-credit unrealized loss		0		0
Unrealized gain		394		394
Cumulative credit related OTTI		1,594		1,594
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Roll Forward]
Balance at beginning of period		1,844	$ 1,844	1,844	$ 1,844	1,844
Additions to credit losses on securities for which no previous OTTI was recognized		0	0	0	0
Increases to credit losses on securities for which OTTI was previously recognized		0	0	0	0
Balance at end of period		1,844	1,844	1,844	1,844	1,844
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis, Fiscal Year Maturity [Abstract]
Maturing within one year		27,811		27,811
Maturing after one year but within five years		98,784		98,784
Maturing after five years but within ten years		82,590		82,590
Maturing after ten years		55,596		55,596
Available-for-sale securities, debt maturities, amortized cost basis		264,781		264,781
U.S. agency residential mortgage-backed		135,293		135,293
U.S. agency commercial mortgage-backed		10,767		10,767
Private label mortgage-backed		26,703		26,703
Other asset backed		108,128		108,128
Total		545,672		545,672
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Maturing within one year		27,865		27,865
Maturing after one year but within five years		99,533		99,533
Maturing after five years but within ten years		83,671		83,671
Maturing after ten years		55,622		55,622
Total available-for-sale securities fair value		266,691		266,691
U.S. agency residential mortgage-backed		136,109		136,109
U.S. agency commercial mortgage-backed		10,736		10,736
Private label mortgage-backed		26,990		26,990
Other asset backed		108,339		108,339
Total		548,865		548,865
Gain and losses realized on sale of securities available for sale [Abstract]
Proceeds	[1]			9,594	56,451
Realized gains				125	350
Realized losses				0	52
Sale of securities available for sale not yet settled				760	0
Credit related OTTI recognized in earnings		0	$ 0	0	0
Trading securities, realized gains (losses)				(63)	$ 4
Cumulative Retrospective Adjustments [Member] | ASU 2017-08 [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Adjustment in amortized cost of available for sale securities						(460)
U.S. Agency [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost		26,455		26,455		28,909
Unrealized Gains		210		210		159
Unrealized Losses		39		39		80
Fair Value		26,626		26,626		28,988
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value		4,819		4,819		4,179
Less Than Twelve Months, Unrealized Losses		21		21		41
Twelve Months or More, Fair Value		4,947		4,947		8,217
Twelve Months or More, Unrealized Losses		18		18		39
Total, Fair Value		9,766		9,766		12,396
Total, Unrealized Losses		$ 39		$ 39		80
Number of securities with market fair value less than amortized cost | Security		33		33
U.S. Agency Residential Mortgage-Backed [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost		$ 135,293		$ 135,293		156,053
Unrealized Gains		1,331		1,331		1,173
Unrealized Losses		515		515		937
Fair Value		136,109		136,109		156,289
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value		24,116		24,116		62,524
Less Than Twelve Months, Unrealized Losses		215		215		732
Twelve Months or More, Fair Value		27,817		27,817		20,857
Twelve Months or More, Unrealized Losses		300		300		205
Total, Fair Value		51,933		51,933		83,381
Total, Unrealized Losses		$ 515		$ 515		937
Number of securities with market fair value less than amortized cost | Security		109		109
U.S. Agency Commercial Mortgage-Backed [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost		$ 10,767		$ 10,767		12,799
Unrealized Gains		84		84		28
Unrealized Losses		115		115		195
Fair Value		10,736		10,736		12,632
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value		1,815		1,815		6,079
Less Than Twelve Months, Unrealized Losses		22		22		194
Twelve Months or More, Fair Value		3,933		3,933		143
Twelve Months or More, Unrealized Losses		93		93		1
Total, Fair Value		5,748		5,748		6,222
Total, Unrealized Losses		$ 115		$ 115		195
Number of securities with market fair value less than amortized cost | Security		10		10
Private Label Mortgage-Backed [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost		$ 26,703		$ 26,703		35,035
Unrealized Gains		518		518		216
Unrealized Losses		231		231		524
Fair Value		26,990		26,990		34,727
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value		3,423		3,423		20,545
Less Than Twelve Months, Unrealized Losses		26		26		281
Twelve Months or More, Fair Value		3,163		3,163		1,413
Twelve Months or More, Unrealized Losses		205		205		243
Total, Fair Value		6,586		6,586		21,958
Total, Unrealized Losses		$ 231		$ 231		524
Number of securities with market fair value less than amortized cost | Security		11		11
Number of securities purchased prior to 2016 | Security		3		3
Number of securities with impairment in excess of ten percent | Security		2		2
Percentage of excess impairment on securities		10.00%		10.00%
Number of securities with impairment for more than 12 months | Security		3		3
Private Label Mortgage Backed Securities Below Investment Grade [Abstract]
Number of private label mortgage backed securities currently with OTTI unrealized gains | Security		3		3
Number of private label mortgage backed securities complete recovery of cost basis | Security		3		3
Senior Security [Member]
Private Label Mortgage Backed Securities Below Investment Grade [Abstract]
Fair value		$ 1,076		$ 1,076
Amortized cost		937		937
Non-credit unrealized loss		0		0
Unrealized gain		139		139
Cumulative credit related OTTI		757		757
Super Senior Security [Member]
Private Label Mortgage Backed Securities Below Investment Grade [Abstract]
Fair value		1,032		1,032
Amortized cost		842		842
Non-credit unrealized loss		0		0
Unrealized gain		190		190
Cumulative credit related OTTI		457		457
Senior Support Security [Member]
Private Label Mortgage Backed Securities Below Investment Grade [Abstract]
Fair value		65		65
Amortized cost		0		0
Non-credit unrealized loss		0		0
Unrealized gain		65		65
Cumulative credit related OTTI		380		380
Other Asset Backed [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost		108,128		108,128		146,829
Unrealized Gains		319		319		271
Unrealized Losses		108		108		391
Fair Value		108,339		108,339		146,709
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value		12,756		12,756		52,958
Less Than Twelve Months, Unrealized Losses		18		18		172
Twelve Months or More, Fair Value		16,298		16,298		17,763
Twelve Months or More, Unrealized Losses		90		90		219
Total, Fair Value		29,054		29,054		70,721
Total, Unrealized Losses		$ 108		$ 108		391
Number of securities with market fair value less than amortized cost | Security		51		51
Obligations of States and Political Subdivisions [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost		$ 176,087		$ 176,087		175,180
Unrealized Gains		1,708		1,708		478
Unrealized Losses		619		619		4,759
Fair Value		177,176		177,176		170,899
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value		42,186		42,186		113,078
Less Than Twelve Months, Unrealized Losses		447		447		4,014
Twelve Months or More, Fair Value		13,787		13,787		14,623
Twelve Months or More, Unrealized Losses		172		172		745
Total, Fair Value		55,973		55,973		127,701
Total, Unrealized Losses		$ 619		$ 619		4,759
Number of securities with market fair value less than amortized cost | Security		182		182
Corporate [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost		$ 57,213		$ 57,213		56,356
Unrealized Gains		853		853		223
Unrealized Losses		66		66		399
Fair Value		58,000		58,000		56,180
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value		8,654		8,654		25,546
Less Than Twelve Months, Unrealized Losses		22		22		292
Twelve Months or More, Fair Value		2,458		2,458		2,810
Twelve Months or More, Unrealized Losses		44		44		107
Total, Fair Value		11,112		11,112		28,356
Total, Unrealized Losses		$ 66		$ 66		399
Number of securities with market fair value less than amortized cost | Security		11		11
Trust Preferred [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost		$ 2,928		$ 2,928		2,922
Unrealized Gains		0		0		0
Unrealized Losses		128		128		343
Fair Value		2,800		2,800		2,579
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value		0		0		0
Less Than Twelve Months, Unrealized Losses		0		0		0
Twelve Months or More, Fair Value		2,800		2,800		2,579
Twelve Months or More, Unrealized Losses		128		128		343
Total, Fair Value		2,800		2,800		2,579
Total, Unrealized Losses		$ 128		$ 128		343
Number of securities with market fair value less than amortized cost | Security		3		3
Number of issues rated as investment grade | Security		1		1
Number of securities rated as below investment grade | Security		1		1
Number of major credit rating agencies rating securities with fair value less than amortized cost | Security		2		2
Number of securities non-rated | Security		1		1
Non-rated trust preferred securities, amortized cost		$ 1,000		$ 1,000
Non-rated trust preferred securities, fair value		900		900
Rated Issues [Member]
Trust preferred securities [Abstract]
Fair Value		1,880		1,880		1,800
Net Unrealized Loss				(48)		(123)
Unrated Issues [Member]
Trust preferred securities [Abstract]
Fair Value		920		920		779
Net Unrealized Loss				(80)		(220)
Foreign Government [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized Cost		2,098		2,098		1,626
Unrealized Gains		0		0		0
Unrealized Losses		9		9		13
Fair Value		2,089		2,089		1,613
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value		2,089		2,089		1,613
Less Than Twelve Months, Unrealized Losses		9		9		13
Twelve Months or More, Fair Value		0		0		0
Twelve Months or More, Unrealized Losses		0		0		0
Total, Fair Value		2,089		2,089		1,613
Total, Unrealized Losses		$ 9		$ 9		$ 13
Number of securities with market fair value less than amortized cost | Security		2		2

[1] 2017 includes $0.760 million for trades that did not settle until after September 30, 2017.

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Loans (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Analysis of allowance for loan losses by portfolio segment [Roll Forward]
Balance at beginning of period		$ 20,586	$ 22,712	$ 20,234	$ 22,570
Additions (deductions) [Abstract]
Provision for loan losses		582	(175)	806	(1,439)
Recoveries credited to the allowance		1,212	905	2,998	3,623
Loans charged against the allowance		(902)	(1,399)	(2,560)	(2,711)
Balance at end of period		21,478	22,043	21,478	22,043
Allowance for loan losses [Abstract]
Individually evaluated for impairment		7,061		7,061		$ 9,152
Collectively evaluated for impairment		14,417		14,417		11,082
Total ending allowance balance		21,478		21,478		20,234
Loans [Abstract]
Individually evaluated for impairment		68,794		68,794		79,831
Collectively evaluated for impairment		1,874,269		1,874,269		1,533,530
Total loans recorded investment		1,943,063		1,943,063		1,613,361
Accrued interest included in recorded investment		5,969		5,969		5,113
Total loans		1,937,094		1,937,094		1,608,248
Commercial [Member]
Analysis of allowance for loan losses by portfolio segment [Roll Forward]
Balance at beginning of period		5,100	6,039	4,880	5,670
Additions (deductions) [Abstract]
Provision for loan losses		(97)	(153)	(197)	(1,220)
Recoveries credited to the allowance		340	474	946	1,944
Loans charged against the allowance		(92)	(365)	(378)	(399)
Balance at end of period		5,251	5,995	5,251	5,995
Allowance for loan losses [Abstract]
Individually evaluated for impairment		967		967		2,244
Collectively evaluated for impairment		4,284		4,284		2,636
Total ending allowance balance		5,251		5,251		4,880
Loans [Abstract]
Individually evaluated for impairment		10,257		10,257		15,767
Collectively evaluated for impairment		829,073		829,073		790,228
Total loans recorded investment		839,330		839,330		805,995
Accrued interest included in recorded investment		2,080		2,080		1,978
Total loans		837,250		837,250		804,017
Mortgage [Member]
Analysis of allowance for loan losses by portfolio segment [Roll Forward]
Balance at beginning of period		8,145	9,956	8,681	10,391
Additions (deductions) [Abstract]
Provision for loan losses		68	(247)	(593)	(885)
Recoveries credited to the allowance		587	195	1,264	871
Loans charged against the allowance		(471)	(561)	(1,023)	(1,034)
Balance at end of period		8,329	9,343	8,329	9,343
Allowance for loan losses [Abstract]
Individually evaluated for impairment		5,823		5,823		6,579
Collectively evaluated for impairment		2,506		2,506		2,102
Total ending allowance balance		8,329		8,329		8,681
Loans [Abstract]
Individually evaluated for impairment		54,322		54,322		59,151
Collectively evaluated for impairment		730,050		730,050		481,828
Total loans recorded investment		784,372		784,372		540,979
Accrued interest included in recorded investment	[1]	3,026		3,026		2,364
Total loans		781,346		781,346		538,615
Installment [Member]
Analysis of allowance for loan losses by portfolio segment [Roll Forward]
Balance at beginning of period		900	1,139	1,011	1,181
Additions (deductions) [Abstract]
Provision for loan losses		(33)	208	173	399
Recoveries credited to the allowance		285	236	788	808
Loans charged against the allowance		(339)	(473)	(1,159)	(1,278)
Balance at end of period		813	1,110	813	1,110
Allowance for loan losses [Abstract]
Individually evaluated for impairment		271		271		329
Collectively evaluated for impairment		542		542		682
Total ending allowance balance		813		813		1,011
Loans [Abstract]
Individually evaluated for impairment		4,215		4,215		4,913
Collectively evaluated for impairment		315,146		315,146		261,474
Total loans recorded investment		319,361		319,361		266,387
Accrued interest included in recorded investment	[1]	863		863		771
Total loans		318,498		318,498		265,616
Payment Plan Receivables [Member]
Analysis of allowance for loan losses by portfolio segment [Roll Forward]
Balance at beginning of period	[2]	0	52	0	56
Additions (deductions) [Abstract]
Provision for loan losses	[2]	0	0	0	(4)
Recoveries credited to the allowance	[2]	0	0	0	0
Loans charged against the allowance	[2]	0	0	0	0
Balance at end of period	[2]	0	52	0	52
Subjective Allocation [Member]
Analysis of allowance for loan losses by portfolio segment [Roll Forward]
Balance at beginning of period		6,441	5,526	5,662	5,272
Additions (deductions) [Abstract]
Provision for loan losses		644	17	1,423	271
Recoveries credited to the allowance		0	0	0	0
Loans charged against the allowance		0	0	0	0
Balance at end of period		7,085	$ 5,543	7,085	$ 5,543
Allowance for loan losses [Abstract]
Individually evaluated for impairment		0		0		0
Collectively evaluated for impairment		7,085		7,085		5,662
Total ending allowance balance		$ 7,085		$ 7,085		$ 5,662

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

[2] Payment plan receivables were reclassified to held for sale at December 31, 2016. See note #15.

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Loans, Receivables Past Due (Details) - USD ($) $ in Thousands		Sep. 30, 2017	Dec. 31, 2016
Non performing loans [Abstract]
90+ and Still Accruing		$ 0	$ 0
Non-Accrual		8,410	13,364
Total Non-performing Loans		8,410	13,364
Accrued interest included in recorded investment		0	0
Aging analysis of loans by class [Abstract]
Total		13,803	15,597
Loans not Past Due		1,929,260	1,597,764
Total loans recorded investment		1,943,063	1,613,361
Accrued interest included in recorded investment		5,969	5,113
Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		4,455	4,257
Accrued interest included in recorded investment		53	45
Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		1,631	2,659
Accrued interest included in recorded investment		24	19
Loans Past Due, 90+ days [Member]
Non performing loans [Abstract]
Accrued interest included in recorded investment		0	0
Aging analysis of loans by class [Abstract]
Total		7,717	8,681
Accrued interest included in recorded investment		0	0
Loans Past Due Total [Member]
Aging analysis of loans by class [Abstract]
Accrued interest included in recorded investment		77	64
Loans Not Past Due [Member]
Aging analysis of loans by class [Abstract]
Accrued interest included in recorded investment		5,892	5,049
Commercial [Member]
Aging analysis of loans by class [Abstract]
Total loans recorded investment		839,330	805,995
Accrued interest included in recorded investment		2,080	1,978
Commercial [Member] | Income Producing - Real Estate [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		72	628
Total Non-performing Loans		72	628
Aging analysis of loans by class [Abstract]
Total		455	383
Loans not Past Due		271,747	287,255
Total loans recorded investment		272,202	287,638
Commercial [Member] | Income Producing - Real Estate [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		425	0
Commercial [Member] | Income Producing - Real Estate [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		0	0
Commercial [Member] | Income Producing - Real Estate [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		30	383
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		10	105
Total Non-performing Loans		10	105
Aging analysis of loans by class [Abstract]
Total		10	105
Loans not Past Due		67,793	51,670
Total loans recorded investment		67,803	51,775
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		10	74
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		0	31
Commercial [Member] | Commercial and Industrial [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		706	4,430
Total Non-performing Loans		706	4,430
Aging analysis of loans by class [Abstract]
Total		334	1,551
Loans not Past Due		498,991	465,031
Total loans recorded investment		499,325	466,582
Commercial [Member] | Commercial and Industrial [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		120	100
Commercial [Member] | Commercial and Industrial [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		149	1,385
Commercial [Member] | Commercial and Industrial [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		65	66
Mortgage [Member]
Aging analysis of loans by class [Abstract]
Total loans recorded investment		784,372	540,979
Accrued interest included in recorded investment	[1]	3,026	2,364
Mortgage [Member] | 1-4 Family [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		5,207	5,248
Total Non-performing Loans		5,207	5,248
Aging analysis of loans by class [Abstract]
Total		8,055	8,478
Loans not Past Due		553,928	306,063
Total loans recorded investment		561,983	314,541
Accrued interest included in recorded investment	[1]	2,134	1,466
Mortgage [Member] | 1-4 Family [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		1,929	2,361
Mortgage [Member] | 1-4 Family [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		919	869
Mortgage [Member] | 1-4 Family [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		5,207	5,248
Mortgage [Member] | Resort Lending [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		1,411	1,507
Total Non-performing Loans		1,411	1,507
Aging analysis of loans by class [Abstract]
Total		1,909	1,507
Loans not Past Due		91,370	101,541
Total loans recorded investment		93,279	103,048
Accrued interest included in recorded investment	[1]	374	450
Mortgage [Member] | Resort Lending [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		363	0
Mortgage [Member] | Resort Lending [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		135	0
Mortgage [Member] | Resort Lending [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		1,411	1,507
Mortgage [Member] | Home Equity - 1st Lien [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		258	222
Total Non-performing Loans		258	222
Aging analysis of loans by class [Abstract]
Total		718	371
Loans not Past Due		35,826	28,645
Total loans recorded investment		36,544	29,016
Accrued interest included in recorded investment	[1]	165	111
Mortgage [Member] | Home Equity - 1st Lien [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		460	149
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		258	222
Mortgage [Member] | Home Equity - 2nd Lien [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		221	317
Total Non-performing Loans		221	317
Aging analysis of loans by class [Abstract]
Total		1,013	1,005
Loans not Past Due		56,677	54,232
Total loans recorded investment		57,690	55,237
Accrued interest included in recorded investment	[1]	260	226
Mortgage [Member] | Home Equity - 2nd Lien [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		597	470
Mortgage [Member] | Home Equity - 2nd Lien [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		195	218
Mortgage [Member] | Home Equity - 2nd Lien [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		221	317
Mortgage [Member] | Purchased Loans [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		0	0
Total Non-performing Loans		0	0
Aging analysis of loans by class [Abstract]
Total		4	15
Loans not Past Due		34,872	39,122
Total loans recorded investment		34,876	39,137
Accrued interest included in recorded investment	[1]	93	111
Mortgage [Member] | Purchased Loans [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		3	13
Mortgage [Member] | Purchased Loans [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		1	2
Mortgage [Member] | Purchased Loans [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		0	0
Installment [Member]
Aging analysis of loans by class [Abstract]
Total loans recorded investment		319,361	266,387
Accrued interest included in recorded investment	[1]	863	771
Installment [Member] | Home Equity - 1st Lien [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		97	266
Total Non-performing Loans		97	266
Aging analysis of loans by class [Abstract]
Total		298	625
Loans not Past Due		9,925	12,025
Total loans recorded investment		10,223	12,650
Accrued interest included in recorded investment	[1]	42	54
Installment [Member] | Home Equity - 1st Lien [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		115	311
Installment [Member] | Home Equity - 1st Lien [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		86	48
Installment [Member] | Home Equity - 1st Lien [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		97	266
Installment [Member] | Home Equity - 2nd Lien [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		224	289
Total Non-performing Loans		224	289
Aging analysis of loans by class [Abstract]
Total		408	568
Loans not Past Due		10,103	13,390
Total loans recorded investment		10,511	13,958
Accrued interest included in recorded investment	[1]	44	59
Installment [Member] | Home Equity - 2nd Lien [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		161	238
Installment [Member] | Home Equity - 2nd Lien [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		23	41
Installment [Member] | Home Equity - 2nd Lien [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		224	289
Installment [Member] | Boat Lending [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		69	219
Total Non-performing Loans		69	219
Aging analysis of loans by class [Abstract]
Total		250	436
Loans not Past Due		131,153	102,489
Total loans recorded investment		131,403	102,925
Accrued interest included in recorded investment	[1]	322	264
Installment [Member] | Boat Lending [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		112	184
Installment [Member] | Boat Lending [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		69	33
Installment [Member] | Boat Lending [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		69	219
Installment [Member] | Recreational Vehicle Lending [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		25	21
Total Non-performing Loans		25	21
Aging analysis of loans by class [Abstract]
Total		81	122
Loans not Past Due		93,687	74,413
Total loans recorded investment		93,768	74,535
Accrued interest included in recorded investment	[1]	236	203
Installment [Member] | Recreational Vehicle Lending [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		52	68
Installment [Member] | Recreational Vehicle Lending [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		4	33
Installment [Member] | Recreational Vehicle Lending [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		25	21
Installment [Member] | Other [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		110	112
Total Non-performing Loans		110	112
Aging analysis of loans by class [Abstract]
Total		268	431
Loans not Past Due		73,188	61,888
Total loans recorded investment		73,456	62,319
Accrued interest included in recorded investment	[1]	219	191
Installment [Member] | Other [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		108	289
Installment [Member] | Other [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		50	30
Installment [Member] | Other [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		$ 110	$ 112

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

XML

Loans, Impaired Financing Receivables (Details) - USD ($) $ in Thousands		3 Months Ended				9 Months Ended
		Sep. 30, 2017		Sep. 30, 2016	[2]	Sep. 30, 2017		Sep. 30, 2016	[3]	Dec. 31, 2016
Impaired loan with no allocated allowance [Abstract]
TDR		$ 349				$ 349				$ 1,782
Non - TDR		186				186				1,107
Impaired loans with an allocated allowance [Abstract]
TDR - allowance based on collateral		2,320				2,320				3,527
TDR - allowance based on present value cash flow		65,449				65,449				72,613
Non - TDR - allowance based on collateral		202				202				491
Total impaired loans		68,506				68,506				79,520
Amount of allowance for loan losses allocated [Abstract]
TDR - allowance based on collateral		641				641				1,868
TDR - allowance based on present value cash flow		6,329				6,329				7,146
Non - TDR - allowance based on collateral		91				91				138
Total amount of allowance for loan losses allocated		7,061				7,061				9,152
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	538				538				2,891
Unpaid Principal Balance, with no related allowance	[1]	1,100				1,100				5,191
No Related Allowance	[1]	0				0				0
Recorded Investment, with an allowance recorded	[1]	68,256				68,256				76,940
Unpaid Principal Balance, with an allowance recorded	[1]	70,334				70,334				79,520
Recorded Investment	[1]	68,794				68,794				79,831
Unpaid Principal Balance	[1]	71,434				71,434				84,711
Related Allowance	[1]	7,061				7,061				9,152
Accrued interest included in recorded investment	[1]	288				288				311
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance		573	[2]	$ 696		1,103	[3]	$ 1,669
Interest Income Recognized, with No Related Allowance		17	[2]	6		37	[3]	43
Average Recorded Investment, with Related Allowance		69,775	[2]	83,676		72,397	[3]	84,839
Interest Income Recognized, with Related Allowance		810	[2]	902		2,524	[3]	2,710
Average Recorded Investment		70,348	[2]	84,372		73,500	[3]	86,508
Interest Income Recognized		827	[2]	908		2,561	[3]	2,753
Commercial [Member] | Income Producing - Real Estate [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	0				0				517
Unpaid Principal Balance, with no related allowance	[1]	0				0				768
No Related Allowance	[1]	0				0				0
Recorded Investment, with an allowance recorded	[1]	6,975				6,975				7,737
Unpaid Principal Balance, with an allowance recorded	[1]	7,121				7,121				7,880
Recorded Investment	[1]	6,975				6,975				8,254
Unpaid Principal Balance	[1]	7,121				7,121				8,648
Related Allowance	[1]	482				482				554
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance		0	[2]	551		222	[3]	632
Interest Income Recognized, with No Related Allowance		0	[2]	0		0	[3]	2
Average Recorded Investment, with Related Allowance		7,311	[2]	8,000		7,525	[3]	8,153
Interest Income Recognized, with Related Allowance		91	[2]	111		300	[3]	318
Average Recorded Investment		7,311	[2]	8,551		7,747	[3]	8,785
Interest Income Recognized		91	[2]	111		300	[3]	320
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	0				0				31
Unpaid Principal Balance, with no related allowance	[1]	0				0				709
No Related Allowance	[1]	0				0				0
Recorded Investment, with an allowance recorded	[1]	169				169				239
Unpaid Principal Balance, with an allowance recorded	[1]	197				197				244
Recorded Investment	[1]	169				169				270
Unpaid Principal Balance	[1]	197				197				953
Related Allowance	[1]	10				10				36
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance		0	[2]	133		8	[3]	405
Interest Income Recognized, with No Related Allowance		0	[2]	0		0	[3]	7
Average Recorded Investment, with Related Allowance		171	[2]	1,117		187	[3]	1,352
Interest Income Recognized, with Related Allowance		2	[2]	3		6	[3]	29
Average Recorded Investment		171	[2]	1,250		195	[3]	1,757
Interest Income Recognized		2	[2]	3		6	[3]	36
Commercial [Member] | Commercial and Industrial [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	535				535				2,341
Unpaid Principal Balance, with no related allowance	[1]	557				557				3,261
No Related Allowance	[1]	0				0				0
Recorded Investment, with an allowance recorded	[1]	2,578				2,578				4,902
Unpaid Principal Balance, with an allowance recorded	[1]	2,612				2,612				5,246
Recorded Investment	[1]	3,113				3,113				7,243
Unpaid Principal Balance	[1]	3,169				3,169				8,507
Related Allowance	[1]	475				475				1,654
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance		445	[2]	0		808	[3]	616
Interest Income Recognized, with No Related Allowance		8	[2]	0		16	[3]	21
Average Recorded Investment, with Related Allowance		2,878	[2]	7,145		3,488	[3]	5,929
Interest Income Recognized, with Related Allowance		26	[2]	69		98	[3]	151
Average Recorded Investment		3,323	[2]	7,145		4,296	[3]	6,545
Interest Income Recognized		34	[2]	69		114	[3]	172
Mortgage [Member] | 1-4 Family [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	2				2				2
Unpaid Principal Balance, with no related allowance	[1]	472				472				387
No Related Allowance	[1]	0				0				0
Recorded Investment, with an allowance recorded	[1]	37,872				37,872				41,701
Unpaid Principal Balance, with an allowance recorded	[1]	39,393				39,393				43,479
Recorded Investment	[1]	37,874				37,874				41,703
Unpaid Principal Balance	[1]	39,865				39,865				43,866
Related Allowance	[1]	3,517				3,517				4,100
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance		127	[2]	12		64	[3]	12
Interest Income Recognized, with No Related Allowance		7	[2]	3		16	[3]	9
Average Recorded Investment, with Related Allowance		38,533	[2]	44,256		39,716	[3]	45,728
Interest Income Recognized, with Related Allowance		462	[2]	470		1,420	[3]	1,447
Average Recorded Investment		38,660	[2]	44,268		39,780	[3]	45,740
Interest Income Recognized		469	[2]	473		1,436	[3]	1,456
Mortgage [Member] | Resort Lending [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	0				0				0
Unpaid Principal Balance, with no related allowance	[1]	0				0				0
No Related Allowance	[1]	0				0				0
Recorded Investment, with an allowance recorded	[1]	16,098				16,098				16,898
Unpaid Principal Balance, with an allowance recorded	[1]	16,169				16,169				16,931
Recorded Investment	[1]	16,098				16,098				16,898
Unpaid Principal Balance	[1]	16,169				16,169				16,931
Related Allowance	[1]	2,264				2,264				2,453
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance		0	[2]	0		0	[3]	0
Interest Income Recognized, with No Related Allowance		0	[2]	0		0	[3]	0
Average Recorded Investment, with Related Allowance		16,175	[2]	17,372		16,485	[3]	17,705
Interest Income Recognized, with Related Allowance		153	[2]	161		464	[3]	480
Average Recorded Investment		16,175	[2]	17,372		16,485	[3]	17,705
Interest Income Recognized		153	[2]	161		464	[3]	480
Mortgage [Member] | Home Equity - 1st Lien [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	0				0				0
Unpaid Principal Balance, with no related allowance	[1]	0				0				0
No Related Allowance	[1]	0				0				0
Recorded Investment, with an allowance recorded	[1]	171				171				235
Unpaid Principal Balance, with an allowance recorded	[1]	238				238				242
Recorded Investment	[1]	171				171				235
Unpaid Principal Balance	[1]	238				238				242
Related Allowance	[1]	30				30				10
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance		0	[2]	0		0	[3]	0
Interest Income Recognized, with No Related Allowance		0	[2]	0		0	[3]	0
Average Recorded Investment, with Related Allowance		201	[2]	241		218	[3]	223
Interest Income Recognized, with Related Allowance		1	[2]	2		5	[3]	6
Average Recorded Investment		201	[2]	241		218	[3]	223
Interest Income Recognized		1	[2]	2		5	[3]	6
Mortgage [Member] | Home Equity - 2nd Lien [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	0				0				0
Unpaid Principal Balance, with no related allowance	[1]	0				0				0
No Related Allowance	[1]	0				0				0
Recorded Investment, with an allowance recorded	[1]	179				179				315
Unpaid Principal Balance, with an allowance recorded	[1]	213				213				398
Recorded Investment	[1]	179				179				315
Unpaid Principal Balance	[1]	213				213				398
Related Allowance	[1]	12				12				16
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance		0	[2]	0		0	[3]	0
Interest Income Recognized, with No Related Allowance		0	[2]	0		0	[3]	0
Average Recorded Investment, with Related Allowance		180	[2]	280		217	[3]	231
Interest Income Recognized, with Related Allowance		2	[2]	6		5	[3]	11
Average Recorded Investment		180	[2]	280		217	[3]	231
Interest Income Recognized		2	[2]	6		5	[3]	11
Installment [Member] | Home Equity - 1st Lien [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	1				1				0
Unpaid Principal Balance, with no related allowance	[1]	71				71				66
No Related Allowance	[1]	0				0				0
Recorded Investment, with an allowance recorded	[1]	1,791				1,791				1,994
Unpaid Principal Balance, with an allowance recorded	[1]	1,921				1,921				2,117
Recorded Investment	[1]	1,792				1,792				1,994
Unpaid Principal Balance	[1]	1,992				1,992				2,183
Related Allowance	[1]	85				85				118
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance		1	[2]	0		1	[3]	0
Interest Income Recognized, with No Related Allowance		1	[2]	3		4	[3]	4
Average Recorded Investment, with Related Allowance		1,808	[2]	2,140		1,874	[3]	2,233
Interest Income Recognized, with Related Allowance		40	[2]	34		107	[3]	118
Average Recorded Investment		1,809	[2]	2,140		1,875	[3]	2,233
Interest Income Recognized		41	[2]	37		111	[3]	122
Installment [Member] | Home Equity - 2nd Lien [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	0				0				0
Unpaid Principal Balance, with no related allowance	[1]	0				0				0
No Related Allowance	[1]	0				0				0
Recorded Investment, with an allowance recorded	[1]	1,969				1,969				2,415
Unpaid Principal Balance, with an allowance recorded	[1]	1,994				1,994				2,443
Recorded Investment	[1]	1,969				1,969				2,415
Unpaid Principal Balance	[1]	1,994				1,994				2,443
Related Allowance	[1]	161				161				182
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance		0	[2]	0		0	[3]	4
Interest Income Recognized, with No Related Allowance		0	[2]	0		0	[3]	0
Average Recorded Investment, with Related Allowance		2,058	[2]	2,585		2,210	[3]	2,723
Interest Income Recognized, with Related Allowance		26	[2]	37		96	[3]	122
Average Recorded Investment		2,058	[2]	2,585		2,210	[3]	2,727
Interest Income Recognized		26	[2]	37		96	[3]	122
Installment [Member] | Boat Lending [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	0				0				0
Unpaid Principal Balance, with no related allowance	[1]	0				0				0
No Related Allowance	[1]	0				0				0
Recorded Investment, with an allowance recorded	[1]	1				1				1
Unpaid Principal Balance, with an allowance recorded	[1]	6				6				6
Recorded Investment	[1]	1				1				1
Unpaid Principal Balance	[1]	6				6				6
Related Allowance	[1]	1				1				0
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance		0	[2]	0		0	[3]	0
Interest Income Recognized, with No Related Allowance		0	[2]	0		0	[3]	0
Average Recorded Investment, with Related Allowance		1	[2]	2		1	[3]	2
Interest Income Recognized, with Related Allowance		0	[2]	0		0	[3]	0
Average Recorded Investment		1	[2]	2		1	[3]	2
Interest Income Recognized		0	[2]	0		0	[3]	0
Installment [Member] | Recreational Vehicle Lending [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	0				0				0
Unpaid Principal Balance, with no related allowance	[1]	0				0				0
No Related Allowance	[1]	0				0				0
Recorded Investment, with an allowance recorded	[1]	93				93				109
Unpaid Principal Balance, with an allowance recorded	[1]	93				93				108
Recorded Investment	[1]	93				93				109
Unpaid Principal Balance	[1]	93				93				108
Related Allowance	[1]	5				5				6
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance		0	[2]	0		0	[3]	0
Interest Income Recognized, with No Related Allowance		0	[2]	0		0	[3]	0
Average Recorded Investment, with Related Allowance		98	[2]	114		103	[3]	117
Interest Income Recognized, with Related Allowance		1	[2]	2		4	[3]	5
Average Recorded Investment		98	[2]	114		103	[3]	117
Interest Income Recognized		1	[2]	2		4	[3]	5
Installment [Member] | Other [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance	[1]	0				0				0
Unpaid Principal Balance, with no related allowance	[1]	0				0				0
No Related Allowance	[1]	0				0				0
Recorded Investment, with an allowance recorded	[1]	360				360				394
Unpaid Principal Balance, with an allowance recorded	[1]	377				377				426
Recorded Investment	[1]	360				360				394
Unpaid Principal Balance	[1]	377				377				426
Related Allowance	[1]	19				19				$ 23
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with No Related Allowance		0	[2]	0		0	[3]	0
Interest Income Recognized, with No Related Allowance		1	[2]	0		1	[3]	0
Average Recorded Investment, with Related Allowance		361	[2]	424		373	[3]	443
Interest Income Recognized, with Related Allowance		6	[2]	7		19	[3]	23
Average Recorded Investment		361	[2]	424		373	[3]	443
Interest Income Recognized		$ 7	[2]	$ 7		$ 20	[3]	$ 23

[1] There were no impaired purchased mortgage loans at September 30, 2017 or December 31, 2016.

[2] There were no impaired purchased mortgage loans during the three month periods ended September 30, 2017 and 2016, respectively.

[3] There were no impaired purchased mortgage loans during the nine month periods ended September 30, 2017 and 2016, respectively.

XML

Loans, Troubled Debt Restructurings (Details) $ in Thousands		3 Months Ended				9 Months Ended
		Sep. 30, 2017 USD ($) Contract		Sep. 30, 2016 USD ($) Contract		Sep. 30, 2017 USD ($) Payment Contract Loan		Sep. 30, 2016 USD ($) Contract		Dec. 31, 2016 USD ($)
Financing Receivable, Modifications [Line Items]
Troubled debt restructuring		$ 68,118				$ 68,118				$ 77,922
Troubled debt restructuring, specific reserve		$ 7,000				$ 7,000				9,000
Number of Consecutive Timely Payments Required | Payment						6
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		4	[1]	12	[1]	26	[2]	32	[2]
Pre-modification recorded balance		$ 154	[1]	$ 759	[1]	$ 1,461	[2]	$ 3,239	[2]
Post-modification recorded balance		155	[1]	749	[1]	1,467	[2]	3,276	[2]
Increase (decrease) in allowance for loan losses		20		340		80		690
Charge offs due to troubled debt restructurings		0		20		$ 0		20
TDR that subsequently defaulted [Abstract]
Charge-offs on TDRs that subsequently defaulted				$ 0				$ 0
Past due period for modified loans						90 days
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
Modification of stated interest rate of loans, range of period in certain circumstances						480 months
Modifications involving extension of maturity date, period range						60 months
Modifications involving extension of maturity date, period range in certain circumstances						230 months
Performing TDRs [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructuring		63,186				$ 63,186				70,286
Non-performing TDRs [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructuring	[3]	4,932				$ 4,932				7,636
Commercial and Industrial [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of loans subsequently defaulted | Loan						6
TDR that subsequently defaulted [Abstract]
Recorded balance		160				$ 160
Increase (decrease) in allowance for loan loss due to TDRs that subsequently defaulted		20				40
Charge-offs on TDRs that subsequently defaulted		50				50
Other Loan Classes, Not Including Commercial and Industrial Loans [Member]
TDR that subsequently defaulted [Abstract]
Charge-offs on TDRs that subsequently defaulted		0				0
Commercial [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructuring		9,832				9,832				14,125
Commercial [Member] | Performing TDRs [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructuring		9,431				9,431				10,560
Commercial [Member] | Non-performing TDRs [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructuring	[3]	$ 401				$ 401				3,565
Commercial [Member] | Income Producing - Real Estate [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		0	[1]	2	[1]	0	[2]	4	[2]
Pre-modification recorded balance		$ 0	[1]	$ 180	[1]	$ 0	[2]	$ 290	[2]
Post-modification recorded balance		$ 0	[1]	$ 180	[1]	$ 0	[2]	$ 290	[2]
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		0	[1]	0	[1]	0	[2]	0	[2]
Pre-modification recorded balance		$ 0	[1]	$ 0	[1]	$ 0	[2]	$ 0	[2]
Post-modification recorded balance		$ 0	[1]	$ 0	[1]	$ 0	[2]	$ 0	[2]
Commercial [Member] | Commercial and Industrial [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		0	[1]	2	[1]	12	[2]	6	[2]
Pre-modification recorded balance		$ 0	[1]	$ 175	[1]	$ 786	[2]	$ 1,933	[2]
Post-modification recorded balance		$ 0	[1]	$ 158	[1]	$ 786	[2]	$ 1,916	[2]
Mortgage [Member] | 1-4 Family [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		1	[1]	2	[1]	3	[2]	5	[2]
Pre-modification recorded balance		$ 93	[1]	$ 204	[1]	$ 142	[2]	$ 396	[2]
Post-modification recorded balance		$ 95	[1]	$ 207	[1]	$ 144	[2]	$ 470	[2]
Mortgage [Member] | Resort Lending [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		0	[1]	0	[1]	1	[2]	1	[2]
Pre-modification recorded balance		$ 0	[1]	$ 0	[1]	$ 189	[2]	$ 116	[2]
Post-modification recorded balance		$ 0	[1]	$ 0	[1]	$ 189	[2]	$ 117	[2]
Mortgage [Member] | Home Equity - 1st Lien [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		0	[1]	0	[1]	0	[2]	1	[2]
Pre-modification recorded balance		$ 0	[1]	$ 0	[1]	$ 0	[2]	$ 107	[2]
Post-modification recorded balance		$ 0	[1]	$ 0	[1]	$ 0	[2]	$ 78	[2]
Mortgage [Member] | Home Equity - 2nd Lien [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		0	[1]	2	[1]	0	[2]	2	[2]
Pre-modification recorded balance		$ 0	[1]	$ 77	[1]	$ 0	[2]	$ 77	[2]
Post-modification recorded balance		$ 0	[1]	$ 78	[1]	$ 0	[2]	$ 78	[2]
Installment [Member] | Home Equity - 1st Lien [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		0	[1]	2	[1]	2	[2]	6	[2]
Pre-modification recorded balance		$ 0	[1]	$ 82	[1]	$ 34	[2]	$ 141	[2]
Post-modification recorded balance		$ 0	[1]	$ 85	[1]	$ 37	[2]	$ 145	[2]
Installment [Member] | Home Equity - 2nd Lien [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		2	[1]	1	[1]	7	[2]	5	[2]
Pre-modification recorded balance		$ 51	[1]	$ 7	[1]	$ 300	[2]	$ 133	[2]
Post-modification recorded balance		$ 50	[1]	$ 7	[1]	$ 301	[2]	$ 136	[2]
Installment [Member] | Boat Lending [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		0	[1]	0	[1]	0	[2]	0	[2]
Pre-modification recorded balance		$ 0	[1]	$ 0	[1]	$ 0	[2]	$ 0	[2]
Post-modification recorded balance		$ 0	[1]	$ 0	[1]	$ 0	[2]	$ 0	[2]
Installment [Member] | Recreational Vehicle Lending [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		0	[1]	0	[1]	0	[2]	0	[2]
Pre-modification recorded balance		$ 0	[1]	$ 0	[1]	$ 0	[2]	$ 0	[2]
Post-modification recorded balance		$ 0	[1]	$ 0	[1]	$ 0	[2]	$ 0	[2]
Installment [Member] | Other [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		1	[1]	1	[1]	1	[2]	2	[2]
Pre-modification recorded balance		$ 10	[1]	$ 34	[1]	$ 10	[2]	$ 46	[2]
Post-modification recorded balance		10	[1]	$ 34	[1]	10	[2]	$ 46	[2]
Retail [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructuring	[4]	58,286				58,286				63,797
Retail [Member] | Performing TDRs [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructuring	[4]	53,755				53,755				59,726
Retail [Member] | Non-performing TDRs [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructuring	[3],[4],[5]	$ 4,531				$ 4,531				$ 4,071

[1] There were no purchased mortgage loans classified as troubled debt restructurings during the three month periods ended September 30, 2017 and 2016, respectively.

[2] There were no purchased mortgage loans classified as troubled debt restructurings during the nine month periods ended September 30, 2017 and 2016, respectively.

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

[4] Retail loans include mortgage and installment portfolio segments.

[5] 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, Mortgage and Installment Segments (Details) - USD ($) $ in Thousands		Sep. 30, 2017	Dec. 31, 2016
Loan ratings/credit scores by loan class [Abstract]
Commercial		$ 837,250	$ 804,017
Accrued interest included in total		5,969	5,113
Other Real Estate and Foreclosed Assets [Abstract]
Foreclosed residential real estate properties		1,700	1,900
Retail mortgage loans in process of foreclosure		1,200	1,000
Commercial [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		839,330	805,995
Accrued interest included in total		2,080	1,978
Commercial [Member] | Non-Watch 1-6 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		810,533	783,854
Accrued interest included in total		1,991	1,915
Commercial [Member] | Watch 7-8 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		25,317	13,642
Accrued interest included in total		80	52
Commercial [Member] | Substandard Accrual 9 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		2,692	3,335
Accrued interest included in total		9	11
Commercial [Member] | Non-Accrual 10-11 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		788	5,164
Accrued interest included in total		0	0
Commercial [Member] | Income Producing - Real Estate [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		272,202	287,638
Commercial [Member] | Income Producing - Real Estate [Member] | Non-Watch 1-6 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		268,781	282,886
Commercial [Member] | Income Producing - Real Estate [Member] | Watch 7-8 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		3,037	3,787
Commercial [Member] | Income Producing - Real Estate [Member] | Substandard Accrual 9 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		312	337
Commercial [Member] | Income Producing - Real Estate [Member] | Non-Accrual 10-11 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		72	628
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		67,803	51,775
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member] | Non-Watch 1-6 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		67,730	51,603
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member] | Watch 7-8 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		63	67
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member] | Substandard Accrual 9 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		0	0
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member] | Non-Accrual 10-11 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		10	105
Commercial [Member] | Commercial and Industrial [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		499,325	466,582
Commercial [Member] | Commercial and Industrial [Member] | Non-Watch 1-6 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		474,022	449,365
Commercial [Member] | Commercial and Industrial [Member] | Watch 7-8 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		22,217	9,788
Commercial [Member] | Commercial and Industrial [Member] | Substandard Accrual 9 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		2,380	2,998
Commercial [Member] | Commercial and Industrial [Member] | Non-Accrual 10-11 [Member]
Loan ratings/credit scores by loan class [Abstract]
Commercial		706	4,431
Mortgage [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	98,658	69,920
750-799	[1]	316,233	195,484
700-749	[1]	184,489	121,245
650-699	[1]	101,501	77,129
600-649	[1]	35,124	35,780
550-599	[1]	20,196	18,931
500-549	[1]	12,029	12,120
Under 500	[1]	4,203	5,771
Unknown	[1]	11,939	4,599
Total	[1]	784,372	540,979
Accrued interest included in total	[1]	3,026	2,364
Mortgage [Member] | 1-4 Family [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	62,145	36,534
750-799	[1]	227,676	102,382
700-749	[1]	130,480	69,337
650-699	[1]	77,357	50,621
600-649	[1]	26,947	25,270
550-599	[1]	15,547	13,747
500-549	[1]	8,766	9,215
Under 500	[1]	3,692	5,145
Unknown	[1]	9,373	2,290
Total	[1]	561,983	314,541
Accrued interest included in total	[1]	2,134	1,466
Mortgage [Member] | Resort Lending [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	11,336	10,484
750-799	[1]	33,287	41,999
700-749	[1]	25,629	24,727
650-699	[1]	12,441	13,798
600-649	[1]	4,648	5,769
550-599	[1]	2,777	3,030
500-549	[1]	1,404	1,438
Under 500	[1]	89	92
Unknown	[1]	1,668	1,711
Total	[1]	93,279	103,048
Accrued interest included in total	[1]	374	450
Mortgage [Member] | Home Equity - 1st Lien [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	8,491	6,048
750-799	[1]	15,619	10,006
700-749	[1]	6,583	5,706
650-699	[1]	3,304	4,106
600-649	[1]	1,090	1,674
550-599	[1]	365	455
500-549	[1]	540	486
Under 500	[1]	253	255
Unknown	[1]	299	280
Total	[1]	36,544	29,016
Accrued interest included in total	[1]	165	111
Mortgage [Member] | Home Equity - 2nd Lien [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	8,896	8,392
750-799	[1]	21,092	20,113
700-749	[1]	13,819	12,360
650-699	[1]	7,970	8,167
600-649	[1]	2,439	3,067
550-599	[1]	1,507	1,699
500-549	[1]	1,319	981
Under 500	[1]	169	279
Unknown	[1]	479	179
Total	[1]	57,690	55,237
Accrued interest included in total	[1]	260	226
Mortgage [Member] | Purchased Loans [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	7,790	8,462
750-799	[1]	18,559	20,984
700-749	[1]	7,978	9,115
650-699	[1]	429	437
600-649	[1]	0	0
550-599	[1]	0	0
500-549	[1]	0	0
Under 500	[1]	0	0
Unknown	[1]	120	139
Total	[1]	34,876	39,137
Accrued interest included in total	[1]	93	111
Installment [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	65,089	56,347
750-799	[1]	146,790	114,065
700-749	[1]	60,476	48,883
650-699	[1]	25,838	25,070
600-649	[1]	7,760	8,402
550-599	[1]	3,777	4,289
500-549	[1]	1,816	2,813
Under 500	[1]	353	634
Unknown	[1]	7,462	5,884
Total	[1]	319,361	266,387
Accrued interest included in total	[1]	863	771
Installment [Member] | Home Equity - 1st Lien [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	1,085	1,354
750-799	[1]	1,938	2,478
700-749	[1]	1,601	1,920
650-699	[1]	2,193	2,852
600-649	[1]	1,429	1,691
550-599	[1]	1,252	1,231
500-549	[1]	616	981
Under 500	[1]	92	114
Unknown	[1]	17	29
Total	[1]	10,223	12,650
Accrued interest included in total	[1]	42	54
Installment [Member] | Home Equity - 2nd Lien [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	869	1,626
750-799	[1]	2,721	3,334
700-749	[1]	2,236	2,686
650-699	[1]	1,864	2,541
600-649	[1]	1,429	1,775
550-599	[1]	919	1,063
500-549	[1]	398	692
Under 500	[1]	56	220
Unknown	[1]	19	21
Total	[1]	10,511	13,958
Accrued interest included in total	[1]	44	59
Installment [Member] | Boat Lending [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	26,168	21,422
750-799	[1]	67,402	50,508
700-749	[1]	25,945	20,045
650-699	[1]	9,164	7,559
600-649	[1]	1,730	1,846
550-599	[1]	468	882
500-549	[1]	243	440
Under 500	[1]	64	73
Unknown	[1]	219	150
Total	[1]	131,403	102,925
Accrued interest included in total	[1]	322	264
Installment [Member] | Recreational Vehicle Lending [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	26,312	23,034
750-799	[1]	48,183	35,827
700-749	[1]	14,261	11,049
650-699	[1]	3,627	3,205
600-649	[1]	838	821
550-599	[1]	244	280
500-549	[1]	125	189
Under 500	[1]	11	16
Unknown	[1]	167	114
Total	[1]	93,768	74,535
Accrued interest included in total	[1]	236	203
Installment [Member] | Other [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]	10,655	8,911
750-799	[1]	26,546	21,918
700-749	[1]	16,433	13,183
650-699	[1]	8,990	8,913
600-649	[1]	2,334	2,269
550-599	[1]	894	833
500-549	[1]	434	511
Under 500	[1]	130	211
Unknown	[1]	7,040	5,570
Total	[1]	73,456	62,319
Accrued interest included in total	[1]	$ 219	$ 191

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

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Shareholders' Equity and Earnings Per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Jan. 23, 2017
Earnings Per Share Reconciliation [Abstract]
Net income		$ 6,859	$ 6,373	$ 18,764	$ 16,911
Weighted average shares outstanding (in shares)	[1]	21,334	21,232	21,325	21,421
Effect of stock options (in shares)		138	149	144	150
Stock units for deferred compensation plan for non-employee directors (in shares)		121	116	120	115
Performance share units (in shares)		59	52	57	42
Restricted stock units (in shares)		0	0	0	46
Weighted average shares outstanding for calculation of diluted earnings per share (in shares)		21,652	21,549	21,646	21,774
Net income per common share [Abstract]
Basic (in dollars per share)	[1]	$ 0.32	$ 0.30	$ 0.88	$ 0.79
Diluted (in dollars per share)		$ 0.32	$ 0.30	$ 0.87	$ 0.78
Common Stock [Member]
Class of Stock [Line Items]
Stock repurchase program percentage of shares authorized to be repurchased						5.00%
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)		0	30	0	30

[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	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Derivative financial instrument according to type of hedge[ Abstract]
Expected unrealized loss on cash flow hedges to be reclassified in the next twelve months	$ (30)
The maximum term of cash flow hedge	3 years 10 months 24 days
Fair value of derivative instruments, balance sheet location [Abstract]
Asset Derivatives	$ 1,973	$ 2,251
Liability Derivatives	1,073	975
Cash Flow Hedge [Member] | Pay-fixed Interest Rate Swap [Member]
Derivative financial instrument according to type of hedge[ Abstract]
Notional Amount	$ 15,000
Average Maturity	3 years 10 months 24 days
Fair Value	$ 105
No Hedge Designation [Member]
Derivative financial instrument according to type of hedge[ Abstract]
Notional Amount	$ 222,740	$ 187,092
Average Maturity	3 years 6 months	4 years 4 months 24 days
Fair Value	$ 795	$ 1,276
Fair value of derivative instruments, balance sheet location [Abstract]
Asset Derivatives	1,868	2,251
Liability Derivatives	1,073	975
No Hedge Designation [Member] | Rate-Lock Mortgage Loan Commitments [Member]
Derivative financial instrument according to type of hedge[ Abstract]
Notional Amount	$ 36,580	$ 26,658
Average Maturity	1 month 6 days	1 month 6 days
Fair Value	$ 769	$ 646
No Hedge Designation [Member] | Mandatory Commitments to Sell Mortgage Loans [Member]
Derivative financial instrument according to type of hedge[ Abstract]
Notional Amount	$ 74,750	$ 61,954
Average Maturity	1 month 6 days	1 month 6 days
Fair Value	$ 26	$ 630
No Hedge Designation [Member] | Pay-fixed Interest Rate Swap [Member]
Derivative financial instrument according to type of hedge[ Abstract]
Notional Amount	$ 52,586	$ 46,121
Average Maturity	7 years 1 month 6 days	8 years 7 months 6 days
Fair Value	$ 52	$ 249
No Hedge Designation [Member] | Pay-variable Interest Rate Swap [Member]
Derivative financial instrument according to type of hedge[ Abstract]
Notional Amount	$ 52,586	$ 46,121
Average Maturity	7 years 1 month 6 days	8 years 7 months 6 days
Fair Value	$ (52)	$ (249)
No Hedge Designation [Member] | Purchased Options [Member]
Derivative financial instrument according to type of hedge[ Abstract]
Notional Amount	$ 3,119	$ 3,119
Average Maturity	3 years 9 months 18 days	4 years 6 months
Fair Value	$ 277	$ 238
No Hedge Designation [Member] | Written Options [Member]
Derivative financial instrument according to type of hedge[ Abstract]
Notional Amount	$ 3,119	$ 3,119
Average Maturity	3 years 9 months 18 days	4 years 6 months
Fair Value	$ (277)	$ (238)
Other Assets [Member] | Designated as Hedging Instrument [Member] | Pay-fixed Interest Rate Swap [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Asset Derivatives	105	0
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	646
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	26	630
Other Assets [Member] | No Hedge Designation [Member] | Pay-fixed Interest Rate Swap [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Asset Derivatives	424	493
Other Assets [Member] | No Hedge Designation [Member] | Pay-variable Interest Rate Swap [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Asset Derivatives	372	244
Other Assets [Member] | No Hedge Designation [Member] | Purchased Options [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Asset Derivatives	277	238
Other Assets [Member] | No Hedge Designation [Member] | Written Options [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Asset Derivatives	0	0
Other Liabilities [Member] | Designated as Hedging Instrument [Member] | Pay-fixed Interest Rate Swap [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Liability Derivatives	0	0
Other Liabilities [Member] | No Hedge Designation [Member] | Rate-Lock Mortgage Loan Commitments [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Liability Derivatives	0	0
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	0	0
Other Liabilities [Member] | No Hedge Designation [Member] | Pay-fixed Interest Rate Swap [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Liability Derivatives	372	244
Other Liabilities [Member] | No Hedge Designation [Member] | Pay-variable Interest Rate Swap [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Liability Derivatives	424	493
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	$ 277	$ 238

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Derivative Financial Instruments, Effect on Statement of Operations (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Cash Flow Hedge [Member]
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]
Gain Recognized in Other Comprehensive Income (Effective Portion)		$ 95	$ 0	$ 95	$ 0
Loss Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)		(5)	0	(5)	0
Gain (Loss) Recognized in Income	[1]	5	0	5	0
Cash Flow Hedge [Member] | Pay-fixed Interest Rate Swap [Member]
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]
Gain Recognized in Other Comprehensive Income (Effective Portion)		95	0	95	0
Cash Flow Hedge [Member] | Pay-fixed Interest Rate Swap [Member] | Interest Expense [Member]
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]
Loss Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)		(5)	0	(5)	0
Gain (Loss) Recognized in Income	[1]	5	0	5	0
No Hedge Designation [Member]
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]
Gain (Loss) Recognized in Income	[1]	(311)	358	(481)	261
No Hedge Designation [Member] | 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	[1]	(313)	264	123	613
No Hedge Designation [Member] | 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	[1]	2	94	(604)	(352)
No Hedge Designation [Member] | Pay-fixed 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]	52	196	(197)	(1,512)
No Hedge Designation [Member] | Pay-variable 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]	(52)	(196)	197	1,512
No Hedge Designation [Member] | Purchased Options [Member] | Interest Expense [Member]
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]
Gain (Loss) Recognized in Income	[1]	5	13	39	94
No Hedge Designation [Member] | Written Options [Member] | Interest Expense [Member]
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]
Gain (Loss) Recognized in Income	[1]	$ (5)	$ (13)	$ (39)	$ (94)

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

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Intangible Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Amortized intangible assets - core deposits [Abstract]
Gross Carrying Amount	$ 6,118	$ 6,118
Accumulated Amortization	4,445	$ 4,186
Summary of estimated intangible amortization [Abstract]
Three months ending December 31, 2017	87
2018	346
2019	346
2020	346
2021	346
2022	202
Total	$ 1,673

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Share Based Compensation (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				9 Months Ended
	Sep. 30, 2017	Mar. 31, 2017	Sep. 30, 2016	Mar. 31, 2016	Sep. 30, 2017	Sep. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of additional shares approved for grant (in shares)					500,000
Total compensation cost not yet recognized	$ 2,300				$ 2,300
Total compensation cost not yet recognized, period for recognition					2 years 2 months 12 days
Information regarding options exercised [Abstract]
Intrinsic value	39		$ 9		$ 513	$ 186
Cash proceeds received	18		5		117	64
Tax benefit realized	$ 14		$ 3		180	65
Long-Term Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of stock units or restricted shares issued in period (in shares)	0		0
Total compensation expense recognized	$ 400		$ 300		1,200	1,100
Tax benefit relating to compensation expense recognized	$ 100		100		$ 400	$ 400
Stock Options [Member]
Number of Shares [Roll Forward]
Outstanding, beginning balance (in shares)		211,018			211,018
Granted (in shares)					0
Exercised (in shares)					(28,963)
Forfeited (in shares)					0
Expired (in shares)					0
Outstanding, ending balance (in shares)	182,055				182,055
Vested and expected to vest, period end (in shares)	182,055				182,055
Exercisable, period end (in shares)	182,055				182,055
Average Exercise Price [Roll Forward]
Outstanding, beginning balance (in dollars per share)		$ 5.05			$ 5.05
Exercised (in dollars per share)					4.03
Outstanding, ending balance (in dollars per share)	$ 5.21				5.21
Vested and expected to vest, period end (in dollars per share)	5.21				5.21
Exercisable, period end (in dollars per share)	$ 5.21				$ 5.21
Weighted-Average Remaining Contractual Term (Years) [Abstract]
Outstanding, Weighted Average Remaining Contractual Term					4 years 4 months 24 days
Vested and Expected to Vest, Weighted-Average Remaining Contractual Term					4 years 4 months 24 days
Exercisable, Weighted Average Remaining Contractual Term					4 years 4 months 24 days
Aggregate Intrinsic Value [Abstract]
Outstanding, Aggregate Intrinsic Value	$ 3,175				$ 3,175
Vested and Expected to Vest, Aggregate Intrinsic Value	3,175				3,175
Exercisable, Aggregate Intrinsic Value	$ 3,175				$ 3,175
Non-Vested Restricted Stock and PSUs [Member]
Number of Shares [Roll Forward]
Outstanding, beginning balance (in shares)		296,422			296,422
Granted (in shares)					68,473
Vested (in shares)					(63,799)
Forfeited (in shares)					(8,510)
Outstanding, ending balance (in shares)	292,586				292,586
Weighted Average Grant Date Fair Value [Roll Forward]
Outstanding, beginning balance (in dollars per share)		$ 14.52			$ 14.52
Granted (in dollars per share)					21.07
Vested (in dollars per share)					14.91
Forfeited (in dollars per share)					15.59
Outstanding, ending balance (in dollars per share)	$ 15.88				$ 15.88
Directors [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares issues as retainer fees (in shares)					6,000	6,000
Non-Employee Directors [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of additional shares approved for grant (in shares)					200,000
Total compensation expense recognized	$ 50		30		$ 120	$ 90
Tax benefit relating to compensation expense recognized	$ 20		$ 10		$ 40	$ 30
Officers [Member] | Restricted Stock [Member] | Long-Term Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of stock units or restricted shares issued in period (in shares)		50,000		70,000
Vesting period					3 years	3 years
Officers [Member] | Performance Stock Units [Member] | Long-Term Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of stock units or restricted shares issued in period (in shares)		20,000		30,000
Vesting period					3 years	3 years

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Income Tax (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Income Tax [Abstract]
Income tax expense	$ 3,159	$ 2,979	$ 8,443	$ 7,547
Gross unrecognized tax benefits	$ 800		$ 800		$ 800
Mepco [Member]
Valuation Allowance [Line Items]
Valuation allowance against deferred tax assets					$ 1,100

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Regulatory Matters (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016	Dec. 31, 2015
Regulatory Matters [Abstract]
Undivided profits	$ 13,000
Components of regulatory capital [Abstract]
Total shareholders' equity	267,710	$ 248,980	$ 250,902	$ 251,092
Add (deduct) [Abstract]
Accumulated other comprehensive (gain) loss for regulatory purposes	(3,657)	(9,108)
Intangible assets	(1,673)	(1,932)
Consolidated [Member]
Total capital to risk-weighted assets [Abstract]
Total risk-based capital	307,278	286,289
Minimum for Adequately Capitalized Institutions, Amount	$ 162,315	$ 144,413
Actual, Ratio	15.14%	15.86%
Minimum for Adequately Capitalized Institutions, Ratio	8.00%	8.00%
Tier 1 capital to risk-weighted assets [Abstract]
Actual, Amount	$ 284,818	$ 265,405
Minimum for Adequately Capitalized Institutions, Amount	$ 121,737	$ 108,309
Actual, Ratio	14.04%	14.70%
Minimum for Adequately Capitalized Institutions, Ratio	6.00%	6.00%
Common equity tier 1 capital to risk-weighted assets [Abstract]
Actual, Amount	$ 253,101	$ 238,996
Minimum for Adequately Capitalized Institutions, Amount	$ 91,302	$ 81,232
Actual, Ratio	12.47%	13.24%
Minimum for Adequately Capitalized Institutions, Ratio	4.50%	4.50%
Tier 1 capital to average assets [Abstract]
Tier 1 capital	$ 284,818	$ 265,405
Minimum for Adequately Capitalized Institutions, Amount	$ 107,154	$ 101,112
Actual, Ratio	10.63%	10.50%
Minimum for Adequately Capitalized Institutions, Ratio	4.00%	4.00%
Components of regulatory capital [Abstract]
Total shareholders' equity	$ 267,710	$ 248,980
Add (deduct) [Abstract]
Accumulated other comprehensive (gain) loss for regulatory purposes	(2,140)	3,310
Intangible assets	(1,338)	(1,159)
Disallowed deferred tax assets	(11,131)	(12,135)
Common equity tier 1 capital	253,101	238,996
Qualifying trust preferred securities	34,500	34,500
Disallowed deferred tax assets	(2,783)	(8,091)
Tier 1 capital	284,818	265,405
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets	22,460	20,884
Total risk-based capital	307,278	286,289
Independent Bank [Member]
Total capital to risk-weighted assets [Abstract]
Total risk-based capital	281,228	270,855
Minimum for Adequately Capitalized Institutions, Amount	162,210	144,223
Minimum for Well Capitalized Institutions, Amount	$ 202,763	$ 180,279
Actual, Ratio	13.87%	15.02%
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	$ 258,768	$ 249,971
Minimum for Adequately Capitalized Institutions, Amount	121,658	108,167
Minimum for Well-Capitalized Institutions, Amount	$ 162,210	$ 144,223
Actual, Ratio	12.76%	13.87%
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	$ 258,768	$ 249,971
Minimum for Adequately Capitalized Institutions, Amount	91,243	81,126
Minimum for Well-Capitalized Institutions, Amount	$ 131,796	$ 117,181
Actual, Ratio	12.76%	13.87%
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	$ 258,768	$ 249,971
Minimum for Adequately Capitalized Institutions, Amount	107,022	101,019
Minimum for Well-Capitalized Institutions, Amount	$ 133,778	$ 126,274
Actual, Ratio	9.67%	9.90%
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	$ 267,406	$ 258,814
Add (deduct) [Abstract]
Accumulated other comprehensive (gain) loss for regulatory purposes	(2,140)	3,310
Intangible assets	(1,338)	(1,159)
Disallowed deferred tax assets	(5,160)	(10,994)
Common equity tier 1 capital	258,768	249,971
Qualifying trust preferred securities	0	0
Disallowed deferred tax assets	0	0
Tier 1 capital	258,768	249,971
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets	22,460	20,884
Total risk-based capital	$ 281,228	$ 270,855

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Fair Value Disclosures, Significant Assumptions (Details) - USD ($) $ in Thousands		Sep. 30, 2017	Dec. 31, 2016
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		347	$ 410
Securities available for sale		548,865	610,616
Loans held for sale		47,611	35,946
U.S. Agency [Member]
Assets [Abstract]
Securities available for sale		26,626	28,988
U.S. Agency Residential Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		136,109	156,289
U.S. Agency Commercial Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		10,736	12,632
Private Label Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		26,990	34,727
Other Asset Backed [Member]
Assets [Abstract]
Securities available for sale		108,339	146,709
Obligations of States and Political Subdivisions [Member]
Assets [Abstract]
Securities available for sale		177,176	170,899
Corporate [Member]
Assets [Abstract]
Securities available for sale		58,000	56,180
Trust Preferred [Member]
Assets [Abstract]
Securities available for sale		2,800	2,579
Foreign Government [Member]
Assets [Abstract]
Securities available for sale		2,089	1,613
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets [Abstract]
Trading securities		347	410
Securities available for sale		0	0
Derivatives		0	0
Liabilities [Abstract]
Derivatives		0	0
Significant Other Observable Inputs (Level 2) [Member]
Assets [Abstract]
Trading securities		0	0
Securities available for sale		548,865	610,616
Derivatives		1,973	2,251
Liabilities [Abstract]
Derivatives		1,073	975
Significant Un-observable Inputs (Level 3) [Member]
Assets [Abstract]
Trading securities		0	0
Securities available for sale		0	0
Capitalized mortgage loan servicing rights		14,675	8,163
Derivatives		0	0
Liabilities [Abstract]
Derivatives		0	0
Fair Value, Measurements, Recurring [Member]
Assets [Abstract]
Trading securities		347	410
Loans held for sale		47,611	35,946
Capitalized mortgage loan servicing rights		14,675
Derivatives	[1]	1,973	2,251
Liabilities [Abstract]
Derivatives	[2]	1,073	975
Fair Value, Measurements, Recurring [Member] | U.S. Agency [Member]
Assets [Abstract]
Securities available for sale		26,626	28,988
Fair Value, Measurements, Recurring [Member] | U.S. Agency Residential Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		136,109	156,289
Fair Value, Measurements, Recurring [Member] | U.S. Agency Commercial Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		10,736	12,632
Fair Value, Measurements, Recurring [Member] | Private Label Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		26,990	34,727
Fair Value, Measurements, Recurring [Member] | Other Asset Backed [Member]
Assets [Abstract]
Securities available for sale		108,339	146,709
Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions [Member]
Assets [Abstract]
Securities available for sale		177,176	170,899
Fair Value, Measurements, Recurring [Member] | Corporate [Member]
Assets [Abstract]
Securities available for sale		58,000	56,180
Fair Value, Measurements, Recurring [Member] | Trust Preferred [Member]
Assets [Abstract]
Securities available for sale		2,800	2,579
Fair Value, Measurements, Recurring [Member] | Foreign Government [Member]
Assets [Abstract]
Securities available for sale		2,089	1,613
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets [Abstract]
Trading securities		347	410
Loans held for sale		0	0
Capitalized mortgage loan servicing rights		0
Derivatives	[1]	0	0
Liabilities [Abstract]
Derivatives	[2]	0	0
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | U.S. Agency [Member]
Assets [Abstract]
Securities available for sale		0	0
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | U.S. Agency Residential Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		0	0
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | U.S. Agency Commercial Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		0	0
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Private Label Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		0	0
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Other Asset Backed [Member]
Assets [Abstract]
Securities available for sale		0	0
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Obligations of States and Political Subdivisions [Member]
Assets [Abstract]
Securities available for sale		0	0
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Corporate [Member]
Assets [Abstract]
Securities available for sale		0	0
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Trust Preferred [Member]
Assets [Abstract]
Securities available for sale		0	0
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Foreign Government [Member]
Assets [Abstract]
Securities available for sale		0	0
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Assets [Abstract]
Trading securities		0	0
Loans held for sale		47,611	35,946
Capitalized mortgage loan servicing rights		0
Derivatives	[1]	1,973	2,251
Liabilities [Abstract]
Derivatives	[2]	1,073	975
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | U.S. Agency [Member]
Assets [Abstract]
Securities available for sale		26,626	28,988
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | U.S. Agency Residential Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		136,109	156,289
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | U.S. Agency Commercial Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		10,736	12,632
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Private Label Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		26,990	34,727
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Other Asset Backed [Member]
Assets [Abstract]
Securities available for sale		108,339	146,709
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Obligations of States and Political Subdivisions [Member]
Assets [Abstract]
Securities available for sale		177,176	170,899
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Corporate [Member]
Assets [Abstract]
Securities available for sale		58,000	56,180
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Trust Preferred [Member]
Assets [Abstract]
Securities available for sale		2,800	2,579
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Foreign Government [Member]
Assets [Abstract]
Securities available for sale		2,089	1,613
Fair Value, Measurements, Recurring [Member] | Significant Un-observable Inputs (Level 3) [Member]
Assets [Abstract]
Trading securities		0	0
Loans held for sale		0	0
Capitalized mortgage loan servicing rights		14,675
Derivatives	[1]	0	0
Liabilities [Abstract]
Derivatives	[2]	0	0
Fair Value, Measurements, Recurring [Member] | Significant Un-observable Inputs (Level 3) [Member] | U.S. Agency [Member]
Assets [Abstract]
Securities available for sale		0	0
Fair Value, Measurements, Recurring [Member] | Significant Un-observable Inputs (Level 3) [Member] | U.S. Agency Residential Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		0	0
Fair Value, Measurements, Recurring [Member] | Significant Un-observable Inputs (Level 3) [Member] | U.S. Agency Commercial Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		0	0
Fair Value, Measurements, Recurring [Member] | Significant Un-observable Inputs (Level 3) [Member] | Private Label Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		0	0
Fair Value, Measurements, Recurring [Member] | Significant Un-observable Inputs (Level 3) [Member] | Other Asset Backed [Member]
Assets [Abstract]
Securities available for sale		0	0
Fair Value, Measurements, Recurring [Member] | Significant Un-observable Inputs (Level 3) [Member] | Obligations of States and Political Subdivisions [Member]
Assets [Abstract]
Securities available for sale		0	0
Fair Value, Measurements, Recurring [Member] | Significant Un-observable Inputs (Level 3) [Member] | Corporate [Member]
Assets [Abstract]
Securities available for sale		0	0
Fair Value, Measurements, Recurring [Member] | Significant Un-observable Inputs (Level 3) [Member] | Trust Preferred [Member]
Assets [Abstract]
Securities available for sale		0	0
Fair Value, Measurements, Recurring [Member] | Significant Un-observable Inputs (Level 3) [Member] | Foreign Government [Member]
Assets [Abstract]
Securities available for sale		0	0
Fair Value, Measurements, Nonrecurring [Member]
Assets [Abstract]
Capitalized mortgage loan servicing rights	[3]		8,163
Fair Value, Measurements, Nonrecurring [Member] | Impaired Loans [Member]
Commercial [Abstract]
Income producing - real estate	[4]	185	255
Land, land development & construction - real estate	[4]	11	54
Commercial and industrial	[4]	878	1,342
Mortgage [Abstract]
1-4 Family	[4]	509	361
Resort Lending	[4]	207
Fair Value, Measurements, Nonrecurring [Member] | Other Real Estate [Member]
Commercial [Abstract]
Income producing - real estate	[5],[6]		2,863
Land, land development & construction - real estate	[6]		176
Mortgage [Abstract]
1-4 Family	[6]	44	98
Resort Lending	[6]	5	133
Fair Value, Measurements, Nonrecurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets [Abstract]
Capitalized mortgage loan servicing rights	[3]		0
Fair Value, Measurements, Nonrecurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [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
Fair Value, Measurements, Nonrecurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Other Real Estate [Member]
Commercial [Abstract]
Income producing - real estate	[5],[6]		0
Land, land development & construction - real estate	[6]		0
Mortgage [Abstract]
1-4 Family	[6]	0	0
Resort Lending	[6]	0	0
Fair Value, Measurements, Nonrecurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Assets [Abstract]
Capitalized mortgage loan servicing rights	[3]		0
Fair Value, Measurements, Nonrecurring [Member] | Significant Other Observable Inputs (Level 2) [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
Fair Value, Measurements, Nonrecurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Other Real Estate [Member]
Commercial [Abstract]
Income producing - real estate	[5],[6]		2,863
Land, land development & construction - real estate	[6]		0
Mortgage [Abstract]
1-4 Family	[6]	0	0
Resort Lending	[6]	0	0
Fair Value, Measurements, Nonrecurring [Member] | Significant Un-observable Inputs (Level 3) [Member]
Assets [Abstract]
Capitalized mortgage loan servicing rights	[3]		8,163
Fair Value, Measurements, Nonrecurring [Member] | Significant Un-observable Inputs (Level 3) [Member] | Impaired Loans [Member]
Commercial [Abstract]
Income producing - real estate	[4]	185	255
Land, land development & construction - real estate	[4]	11	54
Commercial and industrial	[4]	878	1,342
Mortgage [Abstract]
1-4 Family	[4]	509	361
Resort Lending	[4]	207
Fair Value, Measurements, Nonrecurring [Member] | Significant Un-observable Inputs (Level 3) [Member] | Other Real Estate [Member]
Commercial [Abstract]
Income producing - real estate	[5],[6]		0
Land, land development & construction - real estate	[6]		176
Mortgage [Abstract]
1-4 Family	[6]	44	98
Resort Lending	[6]	$ 5	$ 133

[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] Level 2 valuation is based on a signed purchase agreement.

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

XML

Fair Value Disclosures, Changes in Fair Value for Financial Assets (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Impairment charges recognized [Abstract]
Capitalized mortgage loan servicing rights, carrying amount					$ 8,200
Capitalized mortgage loan servicing rights, valuation allowance					2,300
Capitalized mortgage loan servicing rights		$ 600		$ (1,500)
Collateral dependent loans, carrying amount	$ 2,500		$ 2,500		4,000
Collateral dependent loans, valuation allowance	700		700		2,000
Additional provision for loan losses on impaired loans	300	100	500	300
Other real estate, carrying amount	50		50		3,200
Other real estate, valuation allowance	80		80		$ 800
Other real estate, additional charge	$ 30	$ 370	40	410
Trading Securities [Member]
Changes in fair value for financial assets [Abstract]
Net Gains (Losses) on Assets			(63)	4
Total Change in Fair Values Included in Current Period Earnings			(63)	4
Loans Held For Sale [Member]
Changes in fair value for financial assets [Abstract]
Net Gains (Losses) on Assets			713	612
Total Change in Fair Values Included in Current Period Earnings			713	$ 612
Capitalized Mortgage Loan Servicing Rights [Member]
Changes in fair value for financial assets [Abstract]
Mortgage Loan Servicing, net			(2,585)
Total Change in Fair Values Included in Current Period Earnings			$ (2,585)

XML

Fair Value Disclosures, Reconciliation for all Assets and Liabilities Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Jun. 30, 2017	Dec. 31, 2016	Jun. 30, 2016	Dec. 31, 2015
Reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) [Roll Forward]
Change in accounting	$ 14,675		$ 14,675
Capitalized Mortgage Loan Servicing Rights [Member]
Reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) [Roll Forward]
Beginning balance	14,515	$ 0	0	$ 0
Change in accounting					$ 0	$ 14,213	$ 0	$ 0
Total losses realized and unrealized [Abstract]
Included in results of operations	(1,090)	0	(2,585)	0
Included in other comprehensive income	0	0	0	0
Purchases, issuances, settlements, maturities and calls	1,250	0	3,047	0
Transfers in and/or out of Level 3	0	0	0	0
Ending balance	14,675	0	14,675	0
Amount of total losses for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at September 30	(1,090)	0	(2,585)	0
Capitalized Mortgage Loan Servicing Rights [Member] | As Adjusted [Member]
Reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) [Roll Forward]
Beginning balance	$ 14,515	$ 0	$ 14,213	$ 0

XML

Fair Value Disclosures, Quantitative Information About Level 3 (Details) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Impaired Loans Commercial [Member]
Unobservable Inputs Weighted Average [Abstract]
Total impaired collateral value		$ 200,000
Impaired Loans Commercial [Member] | Minimum [Member]
Unobservable Inputs Weighted Average [Abstract]
Discount rate		0.00%
Impaired Loans Commercial [Member] | Maximum [Member]
Unobservable Inputs Weighted Average [Abstract]
Discount rate		100.00%
Significant Un-observable Inputs (Level 3) [Member]
Asset (Liability) Fair Value [Abstract]
Capitalized mortgage loan servicing rights	$ 14,675,000	$ 8,163,000
Impaired loan [Abstract]
Commercial	1,074,000	1,446,000	[1]
Mortgage	716,000	361,000
Other real estate [Abstract]
Commercial		176,000
Mortgage	$ 49,000	$ 231,000
Present Value of Net Servicing Revenue [Member]
Unobservable Inputs Weighted Average [Abstract]
Discount rate	10.10%	10.07%
Cost to service	$ 81	$ 83
Ancillary income	$ 23	$ 24
Float rate	2.00%	1.97%
Sales Comparison Approach [Member] | Impaired Loans Commercial [Member]
Unobservable Inputs Weighted Average [Abstract]
Adjustment for differences between comparable sales	(2.30%)	(1.50%)	[1]
Sales Comparison Approach [Member] | Impaired Loans Mortgage [Member]
Unobservable Inputs Weighted Average [Abstract]
Adjustment for differences between comparable sales	0.30%	(4.70%)
Sales Comparison Approach [Member] | Other Real Estate Commercial [Member]
Unobservable Inputs Weighted Average [Abstract]
Adjustment for differences between comparable sales		(22.50%)
Sales Comparison Approach [Member] | Other Real Estate Mortgage [Member]
Unobservable Inputs Weighted Average [Abstract]
Adjustment for differences between comparable sales	5.80%	(5.10%)

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

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Fair Value Disclosures, Difference Between Aggregate Fair Value and Aggregate Remaining Contractual Principal (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Loans held for sale [Abstract]
Aggregate Fair Value	$ 47,611	$ 35,946
Difference	1,150	437
Contractual Principal	$ 46,461	$ 35,509

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Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands		Sep. 30, 2017	Dec. 31, 2016
Assets [Abstract]
Interest bearing deposits - time		$ 3,489	$ 5,591
Trading securities		347	410
Securities available for sale		548,865	610,616
Federal Home Loan Bank and Federal Reserve Bank Stock		15,543	15,543
Liabilities [Abstract]
Federal funds purchased		3,000	0
Other borrowings		72,849	9,433
Subordinated debentures		35,569	35,569
Payment plan receivables and commercial loans held for sale			31,400
Reciprocal deposits included in deposits with no stated maturity		13,500	7,400
Reciprocal deposits included in deposits with stated maturity		35,500	31,300
Recorded Book Balance [Member]
Assets [Abstract]
Cash and due from banks		31,998	35,238
Interest bearing deposits		15,605	47,956
Interest bearing deposits - time		3,489	5,591
Trading securities		347	410
Securities available for sale		548,865	610,616
Federal Home Loan Bank and Federal Reserve Bank Stock		15,543	15,543
Net loans and loans held for sale		1,963,227	1,655,335	[1]
Accrued interest receivable		8,740	7,316
Derivative financial instruments		1,973	2,251
Liabilities [Abstract]
Deposits with no stated maturity	[2]	1,808,071	1,740,601
Deposits with stated maturity	[2]	535,690	485,118
Federal funds purchased		3,000
Other borrowings		72,849	9,433
Subordinated debentures		35,569	35,569
Accrued interest payable		1,105	932
Derivative financial instruments		1,073	975
Fair Value [Member]
Assets [Abstract]
Cash and due from banks		31,998	35,238
Interest bearing deposits		15,605	47,956
Interest bearing deposits - time		3,493	5,611
Trading securities		347	410
Securities available for sale		548,865	610,616
Net loans and loans held for sale		1,909,662	1,629,587	[1]
Accrued interest receivable		8,740	7,316
Derivative financial instruments		1,973	2,251
Liabilities [Abstract]
Deposits with no stated maturity	[2]	1,808,071	1,740,601
Deposits with stated maturity	[2]	533,045	483,469
Federal funds purchased		3,000
Other borrowings		73,405	10,371
Subordinated debentures		28,634	25,017
Accrued interest payable		1,105	932
Derivative financial instruments		1,073	975
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets [Abstract]
Cash and due from banks		31,998	35,238
Interest bearing deposits		15,605	47,956
Interest bearing deposits - time		0	0
Trading securities		347	410
Securities available for sale		0	0
Net loans and loans held for sale		0	0	[1]
Accrued interest receivable		0	5
Derivative financial instruments		0	0
Liabilities [Abstract]
Deposits with no stated maturity	[2]	1,808,071	1,740,601
Deposits with stated maturity	[2]	0	0
Federal funds purchased		0
Other borrowings		0	0
Subordinated debentures		0	0
Accrued interest payable		40	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		3,493	5,611
Trading securities		0	0
Securities available for sale		548,865	610,616
Net loans and loans held for sale		47,611	67,321	[1]
Accrued interest receivable		2,850	2,364
Derivative financial instruments		1,973	2,251
Liabilities [Abstract]
Deposits with no stated maturity	[2]	0	0
Deposits with stated maturity	[2]	533,045	483,469
Federal funds purchased		3,000
Other borrowings		73,405	10,371
Subordinated debentures		28,634	25,017
Accrued interest payable		1,065	911
Derivative financial instruments		1,073	975
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		1,862,051	1,562,266	[1]
Accrued interest receivable		5,890	4,947
Derivative financial instruments		0	0
Liabilities [Abstract]
Deposits with no stated maturity	[2]	0	0
Deposits with stated maturity	[2]	0	0
Federal funds purchased		0
Other borrowings		0	0
Subordinated debentures		0	0
Accrued interest payable		0	0
Derivative financial instruments		$ 0	$ 0

[1] Net loans and loans held for sale include $31.4 million of payment plan receivables and commercial loans held for sale at December 31, 2016.

[2] Deposits with no stated maturity include reciprocal deposits with a recorded book balance of $13.5 million and $7.4 million at September 30, 2017 and December 31, 2016, respectively. Deposits with a stated maturity include reciprocal deposits with a recorded book balance of $35.5 million and $31.3 million September 30, 2017 and December 31, 2016, respectively.

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Contingent Liabilities (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Loss Contingencies [Line Items]
Litigation settlement expense					$ 2,200
Notification costs and other estimated expenses					100
Receivables balance decline	$ 22,500		$ 22,500
Provision for loss reimbursement on sold loans	20	$ 50	70	$ 30
Reserve for loss reimbursement on sold mortgage loans	$ 600		$ 600		$ 600

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Accumulated Other Comprehensive Loss ("AOCL"), Summary of Changes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at beginning of period			$ 248,980	$ 251,092
Cumulative effect of change in accounting	$ 352	$ 1,247	352	1,247
Balance at beginning of period, as adjusted			249,332	252,339
Other comprehensive income before reclassifications	157	278	5,229	3,215
Amounts reclassified from AOCL	(2)	(10)	(78)	(194)
Other comprehensive income	155	268	5,151	3,021
Balance at end of period	267,710	250,902	267,710	250,902
Accumulated Other Comprehensive Loss [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at beginning of period	(3,812)	(3,283)	(9,108)	(6,036)
Cumulative effect of change in accounting	300		300
Balance at beginning of period, as adjusted			(8,808)
Balance at end of period	(3,657)	(3,015)	(3,657)	(3,015)
Unrealized Gains (Losses) on Securities Available For Sale [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at beginning of period	1,986	2,515	(3,310)	(238)
Cumulative effect of change in accounting	300		300
Balance at beginning of period, as adjusted			(3,010)
Other comprehensive income before reclassifications	95	278	5,167	3,215
Amounts reclassified from AOCL	(5)	(10)	(81)	(194)
Other comprehensive income	90	268	5,086	3,021
Balance at end of period	2,076	2,783	2,076	2,783
Disproportionate Tax Effects from Securities Available for Sale [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at beginning of period	(5,798)	(5,798)	(5,798)	(5,798)
Cumulative effect of change in accounting	0		0
Balance at beginning of period, as adjusted			(5,798)
Other comprehensive income before reclassifications	0	0	0	0
Amounts reclassified from AOCL	0	0	0	0
Other comprehensive income	0	0	0	0
Balance at end of period	(5,798)	(5,798)	(5,798)	(5,798)
Unrealized Gains on Cash Flow Hedges [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at beginning of period	0	0	0	0
Cumulative effect of change in accounting	0		0
Balance at beginning of period, as adjusted			0
Other comprehensive income before reclassifications	62	0	62	0
Amounts reclassified from AOCL	3	0	3	0
Other comprehensive income	65	0	65	0
Balance at end of period	$ 65	$ 0	$ 65	$ 0

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Accumulated Other Comprehensive Loss ("AOCL"), Reclassification Out of Each components (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Total reclassifications before tax	$ 10,018	$ 9,352	$ 27,207	$ 24,458
Interest expense	(2,459)	(1,747)	(6,413)	(4,975)
Income tax expense	3,159	2,979	8,443	7,547
Reclassifications, net of tax	6,859	6,373	18,764	16,911
Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Reclassifications, net of tax	2		78
Unrealized Gains on Securities Available For Sale [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net gains on securities	8	15	125	298
Net impairment loss recognized in earnings	0	0	0	0
Total reclassifications before tax	8	15	125	298
Income tax expense	3	5	44	104
Reclassifications, net of tax	5	$ 10	81	$ 194
Unrealized Gains on Cash Flow Hedges [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Interest expense	(5)		(5)
Income tax expense	(2)		(2)
Reclassifications, net of tax	$ (3)		$ (3)

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Payment Plan Receivables and Other Assets Held for Sale (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	May 01, 2017	Dec. 31, 2016
Payment Plan Receivables And Other Assets Held For Sale [Line Items]
Cash proceeds from sale of assets	$ 33,446	$ 0
Assets sold [Abstract]
Commercial loans	837,250			$ 804,017
Mepco [Member]
Payment Plan Receivables And Other Assets Held For Sale [Line Items]
Cash proceeds from sale of assets	33,400
Gain (loss) on sale of assets	$ 0
Assets sold [Abstract]
Payment plan receivables			$ 33,128	30,582
Commercial loans			525	794
Other assets			1,765	1,984
Total assets			35,418	33,360
Liabilities assumed			$ 1,972	$ 718