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, 2019

Commission file number   0-7818

INDEPENDENT BANK CORPORATION

(Exact name of registrant as specified in its charter)

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

4200 East Beltline, Grand Rapids, Michigan  49525

(Address of principal executive offices)

(616) 527-5820

(Registrant’s telephone number, including area code)

NONE

Former name, address and fiscal year, if changed since last report.

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

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES  ☒   NO  ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, non-accelerated filer, smaller reporting company or an emerging growth company.

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

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

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

YES  ☐   NO  ☒         

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: common stock, no par value, 22,481,485 as of October 31, 2019.

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

INDEX

		Number(s)
PART I -	Financial Information
Item 1.	Condensed Consolidated Statements of Financial Condition September 30, 2019 and December 31, 2018	3
	Condensed Consolidated Statements of Operations Three- and Nine-month periods ended September 30, 2019 and 2018	4
	Condensed Consolidated Statements of Comprehensive Income Three- and Nine-month periods ended September 30, 2019 and 2018	5
	Condensed Consolidated Statements of Cash Flows Nine-month periods ended September 30, 2019 and 2018	6
	Condensed Consolidated Statements of Shareholders’ Equity Three- and Nine-month periods ended September 30, 2019 and 2018	7
	Notes to Interim Condensed Consolidated Financial Statements	8-68
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	69-91
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	92
Item 4.	Controls and Procedures	92
PART II	Other Information
Item 1A	Risk Factors	93
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	93
Item 6.	Exhibits	94

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, 2018, 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 - Item1. INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Financial Condition

	September 30, 2019			December 31, 2018
	(unaudited)
	(In thousands, except share amounts)
Assets
Cash and due from banks	$	38,662		$	23,350
Interest bearing deposits		43,755			46,894
Cash and Cash Equivalents		82,417			70,244
Interest bearing deposits - time		499			595
Equity securities at fair value		-			393
Securities available for sale		439,592			427,926
Federal Home Loan Bank and Federal Reserve Bank stock, at cost		18,359			18,359
Loans held for sale, carried at fair value		87,358			44,753
Loans held for sale, carried at lower of cost or fair value		36,622			41,471
Loans
Commercial		1,189,017			1,144,481
Mortgage		1,070,035			1,042,890
Installment		463,394			395,149
Total Loans		2,722,446			2,582,520
Allowance for loan losses		(26,148	)		(24,888	)
Net Loans		2,696,298			2,557,632
Other real estate and repossessed assets, net		1,789			1,299
Property and equipment, net		37,424			38,777
Bank-owned life insurance		55,412			55,068
Deferred tax assets, net		2,773			5,779
Capitalized mortgage loan servicing rights, carried at fair value		16,906			21,400
Other intangibles		5,598			6,415
Goodwill		28,300			28,300
Accrued income and other assets		41,490			34,870
Total Assets	$	3,550,837		$	3,353,281
Liabilities and Shareholders’ Equity
Deposits
Non-interest bearing	$	883,138		$	879,549
Savings and interest-bearing checking		1,178,695			1,194,865
Reciprocal		416,200			182,072
Time		374,579			385,981
Brokered time		199,700			270,961
Total Deposits		3,052,312			2,913,428
Other borrowings		63,974			25,700
Subordinated debentures		39,439			39,388
Accrued expenses and other liabilities		54,867			35,771
Total Liabilities		3,210,592			3,014,287
Commitments and contingent liabilities
Shareholders’ Equity
Preferred stock, no par value, 200,000 shares authorized;  none issued or outstanding		-			-
Common stock, no par value, 500,000,000 shares authorized; issued and outstanding: 22,480,748 shares at September 30, 2019 and 23,579,725 shares at December 31, 2018		351,839			377,372
Accumulated deficit		(8,221	)		(28,270	)
Accumulated other comprehensive loss		(3,373	)		(10,108	)
Total Shareholders’ Equity		340,245			338,994
Total Liabilities and Shareholders’ Equity	$	3,550,837		$	3,353,281

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,
	2019			2018			2019			2018
	(unaudited)						(unaudited)
	(In thousands, except per share amounts)
Interest Income
Interest and fees on loans	$	34,226		$	31,000		$	100,743		$	84,027
Interest on securities
Taxable		2,771			2,737			8,811			8,092
Tax-exempt		319			412			1,017			1,335
Other investments		495			303			1,449			898
Total Interest Income		37,811			34,452			112,020			94,352
Interest Expense
Deposits		6,236			3,976			17,938			9,472
Other borrowings and subordinated debentures		703			779			2,211			2,267
Total Interest Expense		6,939			4,755			20,149			11,739
Net Interest Income		30,872			29,697			91,871			82,613
Provision for loan losses		(271	)		(53	)		1,045			912
Net Interest Income After Provision for Loan Losses		31,143			29,750			90,826			81,701
Non-interest Income
Service charges on deposit accounts		2,883			3,166			8,323			9,166
Interchange income		2,785			2,486			7,744			7,236
Net gains (losses) on assets
Mortgage loans		5,677			2,745			13,590			8,571
Securities		-			93			304			(71	)
Mortgage loan servicing, net		(1,562	)		1,212			(4,684	)		4,668
Other		2,492			2,134			6,862			6,294
Total Non-interest Income		12,275			11,836			32,139			35,864
Non-interest Expense
Compensation and employee benefits		16,673			16,169			48,955			46,506
Occupancy, net		2,161			2,233			6,797			6,667
Data processing		2,282			2,051			6,597			6,180
Furniture, fixtures and equipment		1,023			1,043			3,058			3,029
Communications		733			727			2,219			2,111
Interchange expense		891			715			2,332			1,974
Loan and collection		714			531			1,976			1,900
Advertising		636			594			1,935			1,578
Legal and professional		541			477			1,281			1,311
FDIC deposit insurance		13			270			723			750
Merger related expenses		-			98			-			3,354
Other		2,181			1,832			6,557			5,276
Total Non-interest Expense		27,848			26,740			82,430			80,636
Income Before Income Tax		15,570			14,846			40,535			36,929
Income tax expense		3,125			2,921			7,979			7,026
Net Income	$	12,445		$	11,925		$	32,556		$	29,903
Net Income Per Common Share
Basic	$	0.55		$	0.49		$	1.41		$	1.29
Diluted	$	0.55		$	0.49		$	1.40		$	1.27

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,
	2019			2018			2019			2018
	(unaudited - In thousands)
Net income	$	12,445		$	11,925		$	32,556		$	29,903
Other comprehensive income (loss)
Securities available for sale
Unrealized gains (losses) arising during period		1,567			(1,157	)		10,851			(6,220	)
Change in unrealized losses for which a portion of other than temporary impairment has been recognized in earnings		(53	)		(14	)		(55	)		(17	)
Reclassification adjustments for (gains) losses included in earnings		-			-			(137	)		45
Unrealized gains (losses) recognized in other comprehensive income (loss) on securities available for sale		1,514			(1,171	)		10,659			(6,192	)
Income tax expense (benefit)		318			(246	)		2,238			(1,300	)
Unrealized gains (losses) recognized in other comprehensive income (loss) on securities available for sale, net of tax		1,196			(925	)		8,421			(4,892	)
Derivative instruments
Unrealized gain (loss) arising during period		(72	)		389			(1,740	)		1,400
Reclassification adjustment for income recognized in earnings		(102	)		(73	)		(393	)		(132	)
Unrealized gains (losses) recognized in other comprehensive income (loss) on derivative instruments		(174	)		316			(2,133	)		1,268
Income tax expense (benefit)		(36	)		66			(447	)		266
Unrealized gains (losses) recognized in other comprehensive income (loss) on derivative instruments, net of tax		(138	)		250			(1,686	)		1,002
Other comprehensive income (loss)		1,058			(675	)		6,735			(3,890	)
Comprehensive income	$	13,503		$	11,250		$	39,291		$	26,013

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,
	2019			2018
	(unaudited - In thousands)
Net Income	$	32,556		$	29,903
Adjustments to Reconcile Net Income to Net Cash From Operating Activities
Proceeds from the sale of equity securities at fair value		560			-
Proceeds from sales of loans held for sale		422,557			351,486
Disbursements for loans held for sale		(451,572	)		(343,462	)
Provision for loan losses		1,045			912
Deferred income tax expense		1,216			6,972
Deferred loan fees and costs		(3,122	)		(3,681	)
Net depreciation, amortization of intangible assets and premiums and accretion of discounts on securities, loans and interest bearing deposits - time		4,427			4,560
Net gains on mortgage loans		(13,590	)		(8,571	)
Net (gains) losses on securities		(304	)		71
Share based compensation		1,348			1,293
Increase in accrued income and other assets		(2,149	)		(16,925	)
Increase (decrease) in accrued expenses and other liabilities		13,088			(1,930	)
Total Adjustments		(26,496	)		(9,275	)
Net Cash From Operating Activities		6,060			20,628
Cash Flow Used in Investing Activities
Proceeds from the sale of securities available for sale		44,305			31,445
Proceeds from maturities, prepayments and calls of securities available for sale		110,517			125,275
Purchases of securities available for sale		(123,238	)		(71,067	)
Proceeds from the sale of interest bearing deposits - time		-			2,474
Proceeds from the maturity of interest bearing deposits - time		100			3,728
Purchase of Federal Reserve Bank Stock		-			(2,034	)
Net increase in portfolio loans (loans originated, net of principal payments)		(213,116	)		(272,084	)
Proceeds from the sale of portfolio loans		50,516			27,577
Acquisition of TCSB Bancorp Inc., less cash received		-			23,516
Proceeds from bank-owned life insurance		470			474
Proceeds from the sale of other real estate and repossessed assets		1,438			1,777
Capital expenditures		(2,587	)		(2,812	)
Net Cash Used in Investing Activities		(131,595	)		(131,731	)
Cash Flow From Financing Activities
Net increase in total deposits		138,884			110,400
Net increase in other borrowings		18,355			18,903
Proceeds from Federal Home Loan Bank Advances		57,000			1,202,000
Payments of Federal Home Loan Bank Advances		(37,143	)		(1,210,197	)
Dividends paid		(12,507	)		(10,446	)
Proceeds from issuance of common stock		282			202
Repurchase of common stock		(26,284	)		-
Share based compensation withholding obligation		(879	)		(1,327	)
Net Cash From Financing Activities		137,708			109,535
Net Increase (Decrease) in Cash and Cash Equivalents		12,173			(1,568	)
Cash and Cash Equivalents at Beginning of Period		70,244			54,738
Cash and Cash Equivalents at End of Period	$	82,417		$	53,170
Cash paid during the period for
Interest	$	20,185		$	11,168
Income taxes		5,934			120
Operating leases		1,692			-
Transfers to other real estate and repossessed assets		1,901			960
Purchase of securities available for sale not yet settled		3,075			1,000
Securitization of portfolio loans		29,790			-
Right of use assets obtained in exchange for lease obligations		7,767			-
Transfer of loans to held for sale		36,622			27,577

See notes to interim condensed consolidated financial statements (unaudited)

6

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Shareholders’ Equity

	Common Stock			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
	(Dollars in thousands, except per share amounts)
Balances at July 1, 2019	$	351,894		$	(16,617	)	$	(4,431	)	$	330,846
Net income, three months ended September 30, 2019		-			12,445			-			12,445
Cash dividends declared, $.18 per share		-			(4,049	)		-			(4,049	)
Repurchase of 25,000 shares of common stock		(502	)		-			-			(502	)
Issuance of 1,900 shares of common stock		-			-			-			-
Share based compensation (issuance of 5,991 shares of common stock)		460			-			-			460
Share based compensation withholding obligation (withholding of 919 shares of common stock)		(13	)		-			-			(13	)
Other comprehensive income		-			-			1,058			1,058
Balances at September 30, 2019	$	351,839		$	(8,221	)	$	(3,373	)	$	340,245
Balances at July 1, 2018	$	389,196		$	(42,899	)	$	(9,214	)	$	337,083
Net income, three months ended September 30, 2018		-			11,925			-			11,925
Cash dividends declared, $.15 per share		-			(3,623	)		-			(3,623	)
Issuance of 8,340 shares of common stock		55			-			-			55
Share based compensation (issuance of zero shares of common stock)		445			-			-			445
Share based compensation withholding obligation (withholding of 382 shares of common stock)		(6	)		-			-			(6	)
Other comprehensive loss		-			-			(675	)		(675	)
Balances at September 30, 2018	$	389,690		$	(34,597	)	$	(9,889	)	$	345,204
Balances at January 1, 2019	$	377,372		$	(28,270	)	$	(10,108	)	$	338,994
Net income, nine months ended September 30, 2019		-			32,556			-			32,556
Cash dividends declared, $.54 per share		-			(12,507	)		-			(12,507	)
Repurchase of 1,204,688 shares of common stock		(26,284	)		-			-			(26,284	)
Issuance of 70,299 shares of common stock		282			-			-			282
Share based compensation (issuance of 92,617 shares of common stock)		1,348			-			-			1,348
Share based compensation withholding obligation (withholding of 57,205 shares of common stock)		(879	)		-			-			(879	)
Other comprehensive income		-			-			6,735			6,735
Balances at September 30, 2019	$	351,839		$	(8,221	)	$	(3,373	)	$	340,245
Balances at January 1, 2018	$	324,986		$	(54,054	)	$	(5,999	)	$	264,933
Net income, nine months ended September 30, 2018		-			29,903			-			29,903
Cash dividends declared, $.45 per share		-			(10,446	)		-			(10,446	)
Acquisition of TCSB Bancorp, Inc.		64,536			-			-			64,536
Issuance of 113,548 shares of common stock		202			-			-			202
Share based compensation (issuance of 81,919 shares of common stock)		1,293			-			-			1,293
Share based compensation withholding obligation (withholding of 87,767 shares of common stock)		(1,327	)		-			-			(1,327	)
Other comprehensive loss		-			-			(3,890	)		(3,890	)
Balances at September 30, 2018	$	389,690		$	(34,597	)	$	(9,889	)	$	345,204

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, 2018 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, 2019 and December 31, 2018, and the results of operations for the three and nine-month periods ended September 30, 2019 and 2018.  The results of operations for the three and nine-month periods ended September 30, 2019, 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 and the valuation of capitalized mortgage loan servicing rights.  Refer to our 2018 Annual Report on Form 10-K for a disclosure of our accounting policies.

2. New Accounting Standards

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

• Replaces the existing incurred loss impairment guidance and establishes a single allowance framework for financial assets carried at amortized cost, which will reflect our estimate of credit losses over the full remaining expected life of the financial assets and will consider expected future changes in macroeconomic conditions.

• Eliminates existing guidance for purchase credit impaired (“PCI”) loans, and requires recognition of the nonaccretable difference as an increase to the allowance for expected credit losses on financial assets purchased with more than insignificant credit deterioration since origination, which will be offset by an increase in the recorded investment of the related loans.

• Requires inclusion of expected recoveries, limited to the cumulative amount of prior write-offs, when estimating the allowance for credit losses for in scope financial assets (including collateral dependent assets).

• Amends existing impairment guidance for securities available for sale to incorporate an allowance, which will allow for reversals of credit impairments in the event that the credit of an issuer improves. Credit losses on securities available for sale are limited to the amount of the decline in fair value regardless of what the credit loss model would show for impairment.

• Generally requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption.

• Is effective for us on January 1, 2020.

8

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

We began evaluating this ASU in 2016 and established a company-wide, cross-discipline governance structure, which provides implementation oversight. We continue to test and refine our current expected credit loss models that satisfy the requirements of this ASU. Oversight and testing, as well as efforts to meet expanded disclosure requirements, will extend through the remainder of 2019.  We expect that the allowance related to our loans will increase as it will cover credit losses over the full remaining expected life of the portfolio. We currently intend to estimate losses over approximately a two year forecast period using the Federal Open Market Committee median economic projections (which are typically published in March of each year) as well as considering other economic forecast sources, and then revert to longer term historical loss experience to estimate losses over more extended periods. We currently expect the increase in the allowance for loan losses to be in the range of $9.0 million to $11.0 million, primarily driven by the longer contractual maturities of our mortgage and consumer installment loan segments.  This estimated range is based on our September 30, 2019 loan portfolio and currently available economic forecasts. The mid-point of the range utilizes a two year forecast period and a two year reversion period. This estimated range also includes a qualitative adjustment to the allowance for loan losses. In addition, we currently expect this ASU to increase the allowance for losses related to unfunded loan commitments between $0.5 million and $1.5 million.  These estimates are subject to further refinement based on continuing reviews, testing, enhancements and approvals of models, methodologies and judgments. The ultimate impact will depend upon the nature and characteristics of our loan portfolio at the adoption date, the macroeconomic conditions and forecasts at that date, further regulatory or accounting guidance and other management judgments.  We currently do not expect to record any allowance for loss on available for sale securities. The ultimate impact will depend upon the nature and characteristics of our securities available for sale (including issuer specific matters) at the adoption date, the macroeconomic conditions and forecasts at that date, and other management judgments.

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

9

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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 was effective for us on January 1, 2019 and did not have a material impact on our consolidated operating results or financial condition.  Based on 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.  The primary impact was the recognition of certain operating leases on our Condensed Consolidated Statements of Financial Condition which resulted in the recording of right of use (“ROU”) assets and offsetting lease liabilities each totaling approximately $7.7 million at January 1, 2019.  See note #16.

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 was effective for us on January 1, 2019, and did not have a material impact on our consolidated operating results or financial condition.

10

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

3. Securities

Securities available for sale consist of the following:

	Amortized		Unrealized
	Cost		Gains		Losses		Fair Value
	(In thousands)
September 30, 2019
U.S. agency	$	15,145	$	153	$	15	$	15,283
U.S. agency residential mortgage-backed		146,128		1,806		214		147,720
U.S. agency commercial mortgage-backed		11,182		155		18		11,319
Private label mortgage-backed		31,195		686		55		31,826
Other asset backed		94,799		185		199		94,785
Obligations of states and political subdivisions		99,352		1,880		93		101,139
Corporate		32,444		1,237		3		33,678
Trust preferred		1,966		-		146		1,820
Foreign government		2,020		4		2		2,022
Total	$	434,231	$	6,106	$	745	$	439,592
December 31, 2018
U.S. agency	$	20,198	$	9	$	193	$	20,014
U.S. agency residential mortgage-backed		124,777		817		1,843		123,751
U.S. agency commercial mortgage-backed		5,909		1		184		5,726
Private label mortgage-backed		29,735		321		637		29,419
Other asset backed		83,481		86		248		83,319
Obligations of states and political subdivisions		130,244		257		2,946		127,555
Corporate		34,866		29		586		34,309
Trust preferred		1,964		-		145		1,819
Foreign government		2,050		-		36		2,014
Total	$	433,224	$	1,520	$	6,818	$	427,926

11

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

	Less Than Twelve Months				Twelve Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In thousands)
September 30, 2019
U.S. agency	$	2,189	$	4	$	2,888	$	11	$	5,077	$	15
U.S. agency residential mortgage-backed		26,084		33		16,902		181		42,986		214
U.S. agency commercial mortgage-backed		1,987		12		882		6		2,869		18
Private label mortgage- backed		5,636		6		612		49		6,248		55
Other asset backed		23,926		100		11,487		99		35,413		199
Obligations of states and political subdivisions		14,457		37		4,362		56		18,819		93
Corporate		285		2		999		1		1,284		3
Trust preferred		900		100		920		46		1,820		146
Foreign government		-		-		1,519		2		1,519		2
Total	$	75,464	$	294	$	40,571	$	451	$	116,035	$	745
December 31, 2018
U.S. agency	$	7,150	$	46	$	11,945	$	147	$	19,095	$	193
U.S. agency residential mortgage-backed		18,374		180		48,184		1,663		66,558		1,843
U.S. agency commercial mortgage-backed		566		3		5,094		181		5,660		184
Private label mortgage-backed		8,273		57		16,145		580		24,418		637
Other asset backed		53,043		160		10,235		88		63,278		248
Obligations of states and political subdivisions		25,423		262		80,701		2,684		106,124		2,946
Corporate		17,758		343		9,222		243		26,980		586
Trust preferred		939		61		880		84		1,819		145
Foreign government		-		-		2,014		36		2,014		36
Total	$	131,526	$	1,112	$	184,420	$	5,706	$	315,946	$	6,818

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 (loss).

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, 2019, we had 26 U.S. agency, 98 U.S. agency residential mortgage-backed and eight 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, 2019, we had 12 of this type of security whose fair value is less than amortized cost. Unrealized losses are primarily due to credit spread widening and increases in interest rates since their acquisition.

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

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

Other asset backed — at September 30, 2019, we had 40 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, 2019, we had 59 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, 2019, we had two 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, 2019, we had two trust preferred securities whose fair value is less than amortized cost. Both of our trust preferred securities are single issue securities issued by a trust subsidiary of a bank holding company. The pricing of trust preferred securities has suffered from credit spread widening. One of the securities is rated by a major rating agency as investment grade while the other one is non-rated. The non-rated issue is a relatively small bank and was never rated. The issuer of this non-rated trust preferred security, which had a total amortized cost of $1.0 million and total fair value of $0.90 million as of September 30, 2019, continues to have satisfactory credit metrics and make interest payments. As management does not intend to liquidate this security and it is more likely than not that we will not be required to sell this security prior to recovery of the unrealized loss, this decline is not deemed to be other than temporary.

Foreign government — at September 30, 2019, we had one foreign government security 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 this security and it is more likely than not that we will not be required to sell this security prior to recovery of this unrealized loss, this decline is not deemed to be other than temporary.

We recorded no credit related OTTI charges in our Condensed Consolidated Statements of Operations related to securities available for sale during the three and nine month periods ended September 30, 2019 and 2018, respectively.

At September 30, 2019, two private label mortgage-backed securities had credit related OTTI and are summarized as follows:

	Senior Security		Super Senior Security		Total
	(In thousands)
Fair value	$	645	$	647	$	1,292
Amortized cost		552		479		1,031
Non-credit unrealized loss		-		-		-
Unrealized gain		93		168		261
Cumulative credit related OTTI		757		457		1,214

Both of these securities are receiving principal and interest payments similar to principal reductions in the underlying collateral and have unrealized gains at September 30, 2019. The original amortized cost (current amortized cost excluding cumulative credit related OTTI) for each of these securities has been permanently adjusted downward for previously recorded credit related OTTI. The unrealized loss (based on original amortized cost) for these securities is now less than previously recorded credit related OTTI amounts.

14

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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,
	2019			2018		2019			2018
	(In thousands)					(In thousands)
Balance at beginning of period	$	1,594		$	1,594	$	1,594		$	1,594
Additions to credit losses on securities for which no previous OTTI was recognized		-			-		-			-
Increases to credit losses on securities for which OTTI was previously recognized		-			-		-			-
Reduction(1)		(380	)		-		(380	)		-
Balance at end of period	$	1,214		$	1,594	$	1,214		$	1,594

⁽¹⁾During the third quarter of 2019 one security with previously recorded OTTI was settled and balance is now zero.

The amortized cost and fair value of securities available for sale at September 30, 2019, by contractual maturity, follow:

	Amortized Cost		Fair Value
	(In thousands)
Maturing within one year	$	13,331	$	13,347
Maturing after one year but within five years		53,809		54,524
Maturing after five years but within ten years		47,726		49,239
Maturing after ten years		36,061		36,832
		150,927		153,942
U.S. agency residential mortgage-backed		146,128		147,720
U.S. agency commercial mortgage-backed		11,182		11,319
Private label mortgage-backed		31,195		31,826
Other asset backed		94,799		94,785
Total	$	434,231	$	439,592

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

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

			Realized
	Proceeds		Gains (1)		Losses
	(In thousands)
2019	$	44,305	$	169	$	32
2018	$	31,445	$	81	$	126

(1) 2018 excludes a $0.144 million gain on the sale of 1,000 VISA class B shares.

15

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Certain preferred stocks which were all sold during the first quarter of 2019 had been classified as equity securities at fair value in our Condensed Consolidated Statement of Financial Condition.  During the nine months ended September 30, 2019 and 2018 we recognized gains (losses) on these preferred stocks of $0.167 million and $(0.170) million, respectively, that are included in net gains (losses) on securities in the Condensed Consolidated Statements of Operations.  Zero and $(0.170) million of these gains (losses) during the nine months ended September 30, 2019 and 2018, respectively relate to preferred stock 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 and historical loss experience, current economic conditions and other pertinent factors.

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

	Commercial			Mortgage			Installment			Subjective Allocation		Total
	(In thousands)
2019
Balance at beginning of period	$	8,121		$	8,062		$	1,293		$	8,427	$	25,903
Additions (deductions)
Provision for loan losses		(810	)		83			289			167		(271	)
Recoveries credited to the allowance		1,215			235			202			-		1,652
Loans charged against the allowance		(303	)		(397	)		(436	)		-		(1,136	)
Balance at end of period	$	8,223		$	7,983		$	1,348		$	8,594	$	26,148
2018
Balance at beginning of period	$	6,073		$	8,296		$	848		$	8,287	$	23,504
Additions (deductions)
Provision for loan losses		(907	)		415			(25	)		464		(53	)
Recoveries credited to the allowance		1,418			192			298			-		1,908
Loans charged against the allowance		(225	)		(448	)		(285	)		-		(958	)
Balance at end of period	$	6,359		$	8,455		$	836		$	8,751	$	24,401

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			Subjective Allocation			Total
	(In thousands)
2019
Balance at beginning of period	$	7,090		$	7,978		$	895		$	8,925		$	24,888
Additions (deductions)
Provision for loan losses		85			270			1,021			(331	)		1,045
Recoveries credited to the allowance		1,720			786			603			-			3,109
Loans charged against the allowance		(672	)		(1,051	)		(1,171	)		-			(2,894	)
Balance at end of period	$	8,223		$	7,983		$	1,348		$	8,594		$	26,148
2018
Balance at beginning of period	$	5,595		$	8,733		$	864		$	7,395		$	22,587
Additions (deductions)
Provision for loan losses		(1,404	)		778			182			1,356			912
Recoveries credited to the allowance		2,458			549			761			-			3,768
Loans charged against the allowance		(290	)		(1,605	)		(971	)		-			(2,866	)
Balance at end of period	$	6,359		$	8,455		$	836		$	8,751		$	24,401

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, 2019
Allowance for loan losses:
Individually evaluated for impairment	$	871	$	4,610	$	297	$	-	$	5,778
Collectively evaluated for impairment		7,352		3,373		1,051		8,594		20,370
Loans acquired with deteriorated credit quality		-		-		-		-		-
Total ending allowance for loan losses balance	$	8,223	$	7,983	$	1,348	$	8,594	$	26,148
Loans
Individually evaluated for impairment	$	7,776	$	42,590	$	3,223			$	53,589
Collectively evaluated for impairment		1,182,825		1,031,163		460,973				2,674,961
Loans acquired with deteriorated credit quality		1,421		582		329				2,332
Total loans recorded investment		1,192,022		1,074,335		464,525				2,730,882
Accrued interest included in recorded investment		3,005		4,300		1,131				8,436
Total loans	$	1,189,017	$	1,070,035	$	463,394			$	2,722,446
December 31, 2018
Allowance for loan losses:
Individually evaluated for impairment	$	1,305	$	4,799	$	206	$	-	$	6,310
Collectively evaluated for impairment		5,785		3,179		689		8,925		18,578
Loans acquired with deteriorated credit quality		-		-		-		-		-
Total ending allowance for loan losses balance	$	7,090	$	7,978	$	895	$	8,925	$	24,888
Loans
Individually evaluated for impairment	$	8,697	$	46,394	$	3,370			$	58,461
Collectively evaluated for impairment		1,137,586		1,000,038		392,460				2,530,084
Loans acquired with deteriorated credit quality		1,609		555		349				2,513
Total loans recorded investment		1,147,892		1,046,987		396,179				2,591,058
Accrued interest included in recorded investment		3,411		4,097		1,030				8,538
Total loans	$	1,144,481	$	1,042,890	$	395,149			$	2,582,520

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, 2019
Commercial
Income producing - real estate	$	-	$	-	$	-
Land, land development and construction - real estate		-		654		654
Commercial and industrial		-		87		87
Mortgage
1-4 family		-		3,873		3,873
Resort lending		-		227		227
Home equity - 1st lien		-		208		208
Home equity - 2nd lien		-		665		665
Installment
Home equity - 1st lien		-		125		125
Home equity - 2nd lien		-		269		269
Boat lending		-		378		378
Recreational vehicle lending		-		2		2
Other		-		161		161
Total recorded investment	$	-	$	6,649	$	6,649
Accrued interest included in recorded investment	$	-	$	-	$	-
December 31, 2018
Commercial
Income producing - real estate	$	-	$	-	$	-
Land, land development and construction - real estate		-		-		-
Commercial and industrial		-		2,123		2,123
Mortgage
1-4 family		5		4,332		4,337
Resort lending		-		755		755
Home equity - 1st lien		-		159		159
Home equity - 2nd lien		-		419		419
Installment
Home equity - 1st lien		-		178		178
Home equity - 2nd lien		-		226		226
Boat lending		-		166		166
Recreational vehicle lending		-		7		7
Other		-		204		204
Total recorded investment	$	5	$	8,569	$	8,574
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, 2019
Commercial
Income producing - real estate	$	44	$	-	$	-	$	44	$	424,472	$	424,516
Land, land development and construction - real estate		-		-		-		-		102,227		102,227
Commercial and industrial		483		26		-		509		664,770		665,279
Mortgage
1-4 family		3,098		973		1,359		5,430		841,658		847,088
Resort lending		703		81		93		877		69,949		70,826
Home equity - 1st lien		87		101		79		267		37,069		37,336
Home equity - 2nd lien		765		344		231		1,340		117,745		119,085
Installment
Home equity - 1st lien		83		19		10		112		5,871		5,983
Home equity - 2nd lien		118		3		166		287		4,832		5,119
Boat lending		625		49		140		814		205,526		206,340
Recreational vehicle lending		92		33		2		127		152,904		153,031
Other		233		85		104		422		93,630		94,052
Total recorded investment	$	6,331	$	1,714	$	2,184	$	10,229	$	2,720,653	$	2,730,882
Accrued interest included in recorded investment	$	65	$	17	$	-	$	82	$	8,354	$	8,436
December 31, 2018
Commercial
Income producing - real estate	$	44	$	-	$	-	$	44	$	388,729	$	388,773
Land, land development and construction - real estate		-		-		-		-		84,458		84,458
Commercial and industrial		1,538		-		-		1,538		673,123		674,661
Mortgage
1-4 family		1,608		194		4,882		6,684		833,760		840,444
Resort lending		252		-		755		1,007		80,774		81,781
Home equity - 1st lien		176		-		159		335		38,909		39,244
Home equity - 2nd lien		446		100		419		965		84,553		85,518
Installment
Home equity - 1st lien		200		55		197		452		6,985		7,437
Home equity - 2nd lien		111		24		226		361		6,683		7,044
Boat lending		316		295		166		777		169,117		169,894
Recreational vehicle lending		28		21		7		56		125,780		125,836
Other		241		131		204		576		85,392		85,968
Total recorded investment	$	4,960	$	820	$	7,015	$	12,795	$	2,578,263	$	2,591,058
Accrued interest included in recorded investment	$	44	$	11	$	-	$	55	$	8,483	$	8,538

20

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Impaired loans are as follows:

	September 30, 2019		December 31, 2018
Impaired loans with no allocated allowance for loan losses	(In thousands)
Troubled debt restructurings (“TDR”)	$	-	$	-
Non - TDR		1,144		-
Impaired loans with an allocated allowance for loan losses
TDR - allowance based on collateral		1,129		2,787
TDR - allowance based on present value cash flow		49,094		53,258
Non - TDR - allowance based on collateral		1,969		2,145
Total impaired loans	$	53,336	$	58,190
Amount of allowance for loan losses allocated
TDR - allowance based on collateral	$	230	$	769
TDR - allowance based on present value cash flow		4,865		4,849
Non - TDR - allowance based on collateral		683		692
Total amount of allowance for loan losses allocated	$	5,778	$	6,310

21

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Impaired loans by class  are as follows:

	September 30, 2019						December 31, 2018
	Recorded Investment		Unpaid Principal Balance		Related Allowance For Loan Losses		Recorded Investment		Unpaid Principal Balance		Related Allowance For Loan Losses
With no related allowance for loan losses recorded:	(In thousands)
Commercial
Income producing - real estate	$	-	$	-	$	-	$	-	$	-	$	-
Land, land development & construction-real estate		654		734		-		-		-		-
Commercial and industrial		-		-		-		-		-		-
Mortgage
1-4 family		490		774		-		3		474		-
Resort lending		-		-		-		-		-		-
Home equity - 1st lien		-		-		-		-		-		-
Home equity - 2nd lien		-		-		-		-		-		-
Installment
Home equity - 1st lien		-		-		-		1		122		-
Home equity - 2nd lien		-		15		-		-		-		-
Boat lending		-		5		-		-		5		-
Recreational vehicle lending		-		-		-		-		-		-
Other		-		24		-		-		15		-
		1,144		1,552		-		4		616		-
With an allowance for loan losses recorded:
Commercial
Income producing - real estate	$	5,859	$	5,837		619		4,770		4,758		303
Land, land development & construction-real estate		113		113		25		290		289		35
Commercial and industrial		1,150		1,244		227		3,637		3,735		967
Mortgage
1-4 family		29,521		31,657		3,164		32,842		34,427		2,859
Resort lending		11,741		11,949		1,197		13,328		13,354		1,927
Home equity - 1st lien		190		219		49		65		64		4
Home equity - 2nd lien		648		657		200		156		155		9
Installment
Home equity - 1st lien		1,219		1,395		77		1,440		1,524		89
Home equity - 2nd lien		1,406		1,417		116		1,471		1,491		92
Boat lending		140		177		37		-		-		-
Recreational vehicle lending		49		50		3		79		79		4
Other		409		477		64		379		406		21
		52,445		55,192		5,778		58,457		60,282		6,310
Total
Commercial
Income producing - real estate		5,859		5,837		619		4,770		4,758		303
Land, land development & construction-real estate		767		847		25		290		289		35
Commercial and industrial		1,150		1,244		227		3,637		3,735		967
Mortgage
1-4 family		30,011		32,431		3,164		32,845		34,901		2,859
Resort lending		11,741		11,949		1,197		13,328		13,354		1,927
Home equity - 1st lien		190		219		49		65		64		4
Home equity - 2nd lien		648		657		200		156		155		9
Installment
Home equity - 1st lien		1,219		1,395		77		1,441		1,646		89
Home equity - 2nd lien		1,406		1,432		116		1,471		1,491		92
Boat lending		140		182		37		-		5		-
Recreational vehicle lending		49		50		3		79		79		4
Other		409		501		64		379		421		21
Total	$	53,589	$	56,744	$	5,778	$	58,461	$	60,898	$	6,310
Accrued interest included in recorded investment	$	253					$	271

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:

	2019				2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance for loan losses recorded:	(In thousands)
Commercial
Income producing - real estate	$	-	$	-	$	-	$	-
Land, land development & construction-real estate		327		5		2,402		-
Commercial and industrial		-		-		425		7
Mortgage
1-4 family		552		7		121		9
Resort lending		-		-		-		-
Home equity - 1st lien		-		-		-		-
Home equity - 2nd lien		-		-		-		-
Installment
Home equity - 1st lien		-		-		1		1
Home equity - 2nd lien		-		-		-		-
Boat lending		-		-		-		-
Recreational vehicle lending		-		-		-		-
Other		-		1		-		-
		879		13		2,949		17
With an allowance for loan losses recorded:
Commercial
Income producing - real estate		5,867		68		4,968		64
Land, land development & construction-real estate		202		3		153		3
Commercial and industrial		1,534		16		2,264		24
Mortgage
1-4 family		29,966		420		34,731		458
Resort lending		12,067		171		14,276		161
Home equity - 1st lien		158		1		67		1
Home equity - 2nd lien		601		8		157		2
Installment
Home equity - 1st lien		1,242		27		1,545		27
Home equity - 2nd lien		1,420		20		1,679		24
Boat lending		86		2		1		-
Recreational vehicle lending		50		1		83		1
Other		443		3		406		5
		53,636		740		60,330		770
Total
Commercial
Income producing - real estate		5,867		68		4,968		64
Land, land development & construction-real estate		529		8		2,555		3
Commercial and industrial		1,534		16		2,689		31
Mortgage
1-4 family		30,518		427		34,852		467
Resort lending		12,067		171		14,276		161
Home equity - 1st lien		158		1		67		1
Home equity - 2nd lien		601		8		157		2
Installment
Home equity - 1st lien		1,242		27		1,546		28
Home equity - 2nd lien		1,420		20		1,679		24
Boat lending		86		2		1		-
Recreational vehicle lending		50		1		83		1
Other		443		4		406		5
Total	$	54,515	$	753	$	63,279	$	787

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:

	2019				2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance for loan losses recorded:	(In thousands)
Commercial
Income producing - real estate	$	-	$	-	$	-	$	-
Land, land development & construction-real estate		164		5		1,201		-
Commercial and industrial		-		-		472		20
Mortgage
1-4 family		365		9		70		18
Resort lending		-		-		-		-
Home equity - 1st lien		-		-		-		-
Home equity - 2nd lien		-		-		-		-
Installment
Home equity - 1st lien		-		-		1		5
Home equity - 2nd lien		-		-		-		-
Boat lending		-		-		-		-
Recreational vehicle lending		-		-		-		-
Other		-		1		-		1
		529		15		1,744		44
With an allowance for loan losses recorded:
Commercial
Income producing - real estate		5,306		214		5,077		202
Land, land development & construction-real estate		246		7		157		7
Commercial and industrial		2,406		52		2,391		90
Mortgage
1-4 family		31,273		1,280		35,549		1,347
Resort lending		12,607		493		15,027		475
Home equity - 1st lien		125		4		115		4
Home equity - 2nd lien		479		14		167		5
Installment
Home equity - 1st lien		1,328		70		1,595		81
Home equity - 2nd lien		1,446		61		1,728		76
Boat lending		68		2		1		-
Recreational vehicle lending		65		2		86		3
Other		437		14		406		18
		55,786		2,213		62,299		2,308
Total
Commercial
Income producing - real estate		5,306		214		5,077		202
Land, land development & construction-real estate		410		12		1,358		7
Commercial and industrial		2,406		52		2,863		110
Mortgage
1-4 family		31,638		1,289		35,619		1,365
Resort lending		12,607		493		15,027		475
Home equity - 1st lien		125		4		115		4
Home equity - 2nd lien		479		14		167		5
Installment
Home equity - 1st lien		1,328		70		1,596		86
Home equity - 2nd lien		1,446		61		1,728		76
Boat lending		68		2		1		-
Recreational vehicle lending		65		2		86		3
Other		437		15		406		19
Total	$	56,315	$	2,228	$	64,043	$	2,352

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.

TDRs follow:

	September 30, 2019
	Commercial		Retail (1)			Total
	(In thousands)
Performing TDRs	$	6,947	$	40,873		$	47,820
Non-performing TDRs(2)		46		2,357	(3)		2,403
Total	$	6,993	$	43,230		$	50,223
	December 31, 2018
	Commercial		Retail (1)			Total
	(In thousands)
Performing TDRs	$	6,460	$	46,627		$	53,087
Non-performing TDRs(2)		74		2,884	(3)		2,958
Total	$	6,534	$	49,511		$	56,045

(1) Retail loans include mortgage and installment loan 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 $5.1 million and $5.6 million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of September 30, 2019 and December 31, 2018, respectively.

During the nine months ended September 30, 2019 and 2018, 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 ended September 30 follow:

	Number of Contracts		Pre-modification Recorded Balance		Post-modification Recorded Balance
	(Dollars in thousands)
2019
Commercial
Income producing - real estate		-	$	-	$	-
Land, land development & construction-real estate		-		-		-
Commercial and industrial		2		137		137
Mortgage
1-4 family		1		198		202
Resort lending		-		-		-
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		3		75		75
Installment
Home equity - 1st lien		1		28		28
Home equity - 2nd lien		-		-		-
Boat lending		-		-		-
Recreational vehicle lending		-		-		-
Other		-		-		-
Total		7	$	438	$	442
2018
Commercial
Income producing - real estate		-	$	-	$	-
Land, land development & construction-real estate		-		-		-
Commercial and industrial		1		24		24
Mortgage
1-4 family		3		609		609
Resort lending		1		115		114
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		1		15		15
Home equity - 2nd lien		1		20		21
Boat lending		-		-		-
Recreational vehicle lending		-		-		-
Other		-		-		-
Total		7	$	783	$	783

26

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

	Number of Contracts		Pre-modification Recorded Balance		Post-modification Recorded Balance
	(Dollars in thousands)
2019
Commercial
Income producing - real estate		2	$	1,329	$	1,329
Land, land development & construction-real estate		-		-		-
Commercial and industrial		3		186		186
Mortgage
1-4 family		3		985		988
Resort lending		-		-		-
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		3		75		75
Installment
Home equity - 1st lien		3		77		79
Home equity - 2nd lien		4		111		112
Boat lending		-		-		-
Recreational vehicle lending		-		-		-
Other		-		-		-
Total		18	$	2,763	$	2,769
2018
Commercial
Income producing - real estate		1	$	67	$	67
Land, land development & construction-real estate		-		-		-
Commercial and industrial		6		611		611
Mortgage
1-4 family		7		903		889
Resort lending		1		115		114
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		6		203		205
Home equity - 2nd lien		3		113		114
Boat lending		-		-		-
Recreational vehicle lending		-		-		-
Other		2		76		73
Total		26	$	2,088	$	2,073

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

The troubled debt restructurings described above for 2018 decreased the allowance for loan losses by $0.01 million and resulted in zero charge offs during the three months ended September 30, 2018, and decreased the allowance by $0.004 million and resulted in zero charge offs during the nine months ended September 30, 2018.

27

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

There were no troubled debt restructurings that subsequently defaulted within twelve months following the modification during the three and nine months periods ended September 30, 2019 and 2018.

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. Our doubtful rating includes a sub classification for a loss rate other than 50% (which is the standard doubtful loss rate).  These ratings include loans to borrowers with weaknesses that make collection of debt in full, on the basis of current facts, conditions and values at best questionable and at worst improbable. All of these loans are placed in non-accrual.

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

28

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

	Commercial
	Non-watch 1-6		Watch 7-8		Substandard Accrual 9		Non- Accrual 10-11		Total
					(In thousands)
September 30, 2019
Income producing - real estate	$	408,132	$	15,619	$	765	$	-	$	424,516
Land, land development and construction - real estate		93,563		8,010		-		654		102,227
Commercial and industrial		604,311		59,425		1,456		87		665,279
Total	$	1,106,006	$	83,054	$	2,221	$	741	$	1,192,022
Accrued interest included in total	$	2,713	$	284	$	8	$	-	$	3,005
December 31, 2018
Income producing - real estate	$	375,142	$	13,387	$	200	$	44	$	388,773
Land, land development and construction - real estate		76,120		8,328		-		10		84,458
Commercial and industrial		631,345		35,469		5,577		2,270		674,661
Total	$	1,082,607	$	57,184	$	5,777	$	2,324	$	1,147,892
Accrued interest included in total	$	3,107	$	174	$	130	$	-	$	3,411

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

29

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

	Mortgage (1)
	1-4 Family		Resort Lending		Home Equity 1st Lien		Home Equity 2nd Lien		Total
	(In thousands)
September 30, 2019
800 and above	$	101,927	$	11,151	$	6,165	$	12,177	$	131,420
750-799		385,243		31,372		16,300		52,564		485,479
700-749		204,241		15,323		9,209		32,897		261,670
650-699		84,458		7,612		3,747		13,168		108,985
600-649		30,819		2,241		668		4,196		37,924
550-599		16,410		1,171		663		1,881		20,125
500-549		10,972		620		330		1,072		12,994
Under 500		3,718		80		254		372		4,424
Unknown		9,300		1,256		-		758		11,314
Total	$	847,088	$	70,826	$	37,336	$	119,085	$	1,074,335
Accrued interest included in total	$	3,327	$	343	$	166	$	464	$	4,300
December 31, 2018
800 and above	$	94,492	$	10,898	$	6,784	$	8,838	$	121,012
750-799		384,344		36,542		17,303		38,295		476,484
700-749		202,440		17,282		9,155		23,249		252,126
650-699		91,847		9,945		3,987		8,681		114,460
600-649		34,342		3,088		959		3,359		41,748
550-599		13,771		1,867		427		1,236		17,301
500-549		8,439		106		418		826		9,789
Under 500		2,533		143		98		381		3,155
Unknown		8,236		1,910		113		653		10,912
Total	$	840,444	$	81,781	$	39,244	$	85,518	$	1,046,987
Accrued interest included in total	$	3,079	$	363	$	199	$	456	$	4,097

(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, 2019
800 and above	$	380	$	219	$	29,581	$	24,296	$	7,140	$	61,616
750-799		1,104		1,265		120,085		90,692		35,671		248,817
700-749		1,323		1,123		42,869		29,990		25,052		100,357
650-699		1,399		1,104		10,536		5,560		10,324		28,923
600-649		934		678		1,783		1,692		2,762		7,849
550-599		526		457		808		617		735		3,143
500-549		299		208		455		145		748		1,855
Under 500		18		50		223		39		156		486
Unknown		-		15		-		-		11,464		11,479
Total	$	5,983	$	5,119	$	206,340	$	153,031	$	94,052	$	464,525
Accrued interest included in total	$	21	$	16	$	467	$	350	$	277	$	1,131
December 31, 2018
800 and above	$	555	$	235	$	20,767	$	20,197	$	6,272	$	48,026
750-799		1,502		1,642		100,191		74,154		31,483		208,972
700-749		1,582		1,682		35,455		24,890		24,369		87,978
650-699		1,606		1,217		10,581		4,918		9,840		28,162
600-649		996		1,272		1,657		992		2,751		7,668
550-599		759		658		652		453		838		3,360
500-549		384		229		286		225		651		1,775
Under 500		51		6		266		7		218		548
Unknown		2		103		39		-		9,546		9,690
Total	$	7,437	$	7,044	$	169,894	$	125,836	$	85,968	$	396,179
Accrued interest included in total	$	28	$	25	$	403	$	311	$	263	$	1,030

(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 $1.2 million at both September 30, 2019 and December 31, 2018, respectively.  Retail mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process according to local requirements totaled $0.2 million and $0.3 million at September 30, 2019 and December 31, 2018, respectively.

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

31

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

During the first and third quarters of 2018, we sold $16.5 million and $11.1 million, respectively, of residential fixed and adjustable rate portfolio mortgage loans servicing retained to another financial institution and recognized a gain (loss) on sale of $0.05 million and ($0.01) million, respectively.  These mortgage loans were sold primarily for asset/liability management purposes.

Purchase Credit Impaired (“PCI”) Loans

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

As a result of our acquisition of TCSB Bancorp, Inc. (“TCSB”) (see note #17) we purchased loans for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. For these loans that meet the criteria of ASC 310-30 treatment, the carrying amount was as follows:

	September 30, 2019		December 31, 2018
	(In thousands)
Commercial	$	1,421	$	1,609
Mortgage		582		555
Installment		329		349
Total carrying amount		2,332		2,513
Allowance for loan losses		-		-
Carrying amount, net of allowance for loan losses	$	2,332	$	2,513

32

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
	(unaudited)						(unaudited)
	(In thousands)						(In thousands)
Balance at beginning of period	$	749		$	533		$	462		$	-
New loans purchased		-			-			-			568
Accretion recorded as loan interest income		(56	)		(32	)		(134	)		(67	)
Reclassification from (to) nonaccretable difference		-			-			365			-
Displosals/other adjustments		-			-			-			-
Balance at end of period	$	693		$	501		$	693		$	501

5. Shareholders’ Equity and Earnings Per Common Share

In December, 2018, 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, 2019.  In May 2019, we completed the repurchase of 5% of our outstanding common shares.  In June 2019, our Board of Directors authorized a 300,000 share expansion of the 2019 repurchase plan.  We expect to accomplish any remaining repurchases through open market transactions, though we could execute repurchases through other means, such as privately negotiated transactions.  The timing and amount of any share repurchases will depend on a variety of factors, including, among others, securities law restrictions, the trading price of our common stock, regulatory requirements, potential alternative uses for capital, and our financial performance. The Repurchase Plan does not obligate us to acquire any particular amount of common stock, and it may be modified or suspended at any time at our discretion. We expect to fund any repurchases from cash on hand.  During the nine month periods ended September 30, 2019 and 2018 repurchases were made totaling 1,204,688 shares and zero shares of common stock, respectively for an aggregate purchase price of $26.3 million and zero, respectively.

33

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
	(In thousands, except per share data)
Net income	$	12,445	$	11,925	$	32,556	$	29,903
Weighted average shares outstanding (1)		22,486		24,149		23,033		23,218
Stock units for deferred compensation plan for non-employee directors		132		129		131		126
Effect of stock options		110		182		116		180
Performance share units		42		55		39		52
Weighted average shares outstanding for calculation of diluted earnings per share		22,770		24,515		23,319		23,576
Net income per common share
Basic (1)	$	0.55	$	0.49	$	1.41	$	1.29
Diluted	$	0.55	$	0.49	$	1.40	$	1.27

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

Weighted average stock options outstanding that were not considered in computing diluted net income per common share because they were anti-dilutive were zero for the three and nine month periods ended September 30, 2019 and 2018, respectively.

6. Derivative Financial Instruments

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

34

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, 2019
	Notional Amount		Average Maturity (years)		Fair Value
	(Dollars in thousands)
Fair value hedge designation - Pay-fixed interest rate swap agreements	$	7,117		9.6	$	(391	)
Cash flow hedge designation
Pay-fixed interest rate swap agreements	$	25,000		1.8	$	(220	)
Interest rate cap agreements		150,000		2.8		318
Total	$	175,000		2.7	$	98
No hedge designation
Rate-lock mortgage loan commitments	$	79,446		0.1	$	2,051
Mandatory commitments to sell mortgage loans		137,315		0.1		(27	)
Pay-fixed interest rate swap agreements - commercial		141,427		5.4		(4,849	)
Pay-variable interest rate swap agreements - commercial		141,427		5.4		4,849
Purchased options		3,088		1.8		125
Written options		3,028		1.8		(124	)
Total	$	505,731		3.1	$	2,025

	December 31, 2018
	Notional Amount		Average Maturity (years)		Fair Value
	(Dollars in thousands)
Cash flow hedge designation
Pay-fixed interest rate swap agreements	$	25,000		2.6	$	280
Interest rate cap agreements		150,000		3.6		2,245
Total	$	175,000		3.5	$	2,525
No hedge designation
Rate-lock mortgage loan commitments	$	32,473		0.1	$	687
Mandatory commitments to sell mortgage loans		57,583		0.1		(383	)
Pay-fixed interest rate swap agreements - commercial		94,451		5.5		405
Pay-variable interest rate swap agreements - commercial		94,451		5.5		(405	)
Purchased options		3,095		2.5		116
Written options		3,095		2.5		(116	)
Total	$	285,148		3.7	$	304

35

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

We use variable-rate and short-term fixed-rate (less than 12 months) debt obligations to fund a portion of our Condensed Consolidated Statements of Financial Condition, which exposes us to variability in interest rates. To meet our asset/liability management objectives, we may periodically enter into derivative financial instruments to mitigate exposure to fluctuations in cash flows resulting from changes in interest rates (“Cash Flow Hedges”).  Cash Flow Hedges included certain pay-fixed interest rate swaps and interest rate cap agreements.  Pay-fixed interest rate swaps convert the variable-rate cash flows on debt obligations to fixed-rates.  Under interest-rate cap agreements, we will receive cash if interest rates rise above a predetermined level. As a result, we effectively have variable-rate debt with an established maximum rate. We pay an upfront premium on interest rate caps which is recognized in earnings in the same period in which the hedged item affects earnings.  Unrecognized premiums from interest rate caps aggregated to $2.4 million at September 30, 2019 and $2.7 million at December 31, 2018.

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, 2019 will be reclassified to earnings over the next twelve months.  The maximum term of the Cash Flow Hedge at September 30, 2019 is 4.0 years.

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

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

36

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

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

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

37

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

Fair Values of Derivative Instruments

	Asset Derivatives						Liability Derivatives
	September 30, 2019			December 31, 2018			September 30, 2019			December 31, 2018
	Balance  Sheet  Location	Fair Value		Balance  Sheet  Location	Fair Value		Balance  Sheet  Location	Fair Value		Balance  Sheet  Location	Fair Value
	(In thousands)
Derivatives designated as hedging instruments
Pay-fixed interest rate swap agreements	Other assets	$	-	Other assets	$	280	Other liabilities	$	611	Other liabilities	$	-
Interest rate cap agreements	Other assets		318	Other assets		2,245	Other liabilities		-	Other liabilities		-
			318			2,525			611			-
Derivatives not designated as hedging instruments
Rate-lock mortgage loan commitments	Other assets		2,051	Other assets		687	Other liabilities		-	Other liabilities		-
Mandatory commitments to sell mortgage loans	Other assets		-	Other assets		-	Other liabilities		27	Other liabilities		383
Pay-fixed interest rate swap agreements - commercial	Other assets		23	Other assets		1,116	Other liabilities		4,872	Other liabilities		711
Pay-variable interest rate swap agreements - commercial	Other assets		4,872	Other assets		711	Other liabilities		23	Other liabilities		1,116
Purchased options	Other assets		125	Other assets		116	Other liabilities		-	Other liabilities		-
Written options	Other assets		-	Other assets		-	Other liabilities		124	Other liabilities		116
			7,071			2,630			5,046			2,326
Total derivatives		$	7,389		$	5,155		$	5,657		$	2,326

38

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

Three Month Periods Ended September 30,
	Gain (Loss) Recognized in Other Comprehensive Income (Loss) (Effective Portion)					Location of  Gain  Reclassified  from  Accumulated  Other  Comprehensive  Loss into  Income  (Effective	Gain Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)				Location of  Gain (Loss)  Recognized	Gain (Loss) Recognized in Income (1)
	2019			2018		Portion)	2019		2018		in Income (1)	2019			2018
	(In thousands)
Fair Value Hedges
Pay-fixed interest rate swap agreements											Non-interest income-other	$	(188	)	$	-
Cash Flow Hedges
Interest rate cap agreements	$	(37	)	$	297	Interest expense	$	88	$	67	Interest expense	$	-		$	-
Pay-fixed interest rate swap agreements		(35	)		92	Interest expense		14		6	Interest expense		-			16
Total	$	(72	)	$	389		$	102	$	73		$	-		$	16
No hedge designation
Rate-lock mortgage loan commitments											Net gains on mortgage loans	$	(96	)	$	(318	)
Mandatory commitments to sell mortgage loans											Net gains on mortgage loans		307			415
Pay-fixed interest rate swap agreements - commercial											Interest income		(1,670	)		407
Pay-variable interest rate swap agreements - commercial											Interest income		1,670			(407	)
Purchased options											Interest income		(46	)		(45	)
Written options											Interest income		46			45
Total												$	211		$	97

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

39

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Nine Month Periods Ended September 30,
	Gain (Loss) Recognized in Other Comprehensive Income (Loss) (Effective Portion)					Location of  Gain  Reclassified  from  Accumulated  Other  Comprehensive  Loss into  Income  (Effective	Gain Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)				Location of  Gain (Loss)  Recognized	Gain (Loss) Recognized in Income (1)
	2019			2018		Portion)	2019		2018		in Income (1)	2019			2018
	(In thousands)
Fair Value Hedges
Pay-fixed interest rate swap agreements											Non-interest income-other	$	(391	)	$	-
Cash Flow Hedges
Interest rate cap agreements	$	(1,311	)	$	1,054	Interest expense	$	321	$	119	Interest expense	$	-		$	-
Pay-fixed interest rate swap agreements		(429	)		346	Interest expense		72		13	Interest expense		-			4
Total	$	(1,740	)	$	1,400		$	393	$	132		$	-		$	4
No hedge designation
Rate-lock mortgage loan commitments											Net gains on mortgage loans	$	1,364		$	354
Mandatory commitments to sell mortgage loans											Net gains on mortgage loans		356			145
Pay-fixed interest rate swap agreements - commercial											Interest income		(5,254	)		1,950
Pay-variable interest rate swap agreements - commercial											Interest income		5,254			(1,950	)
Purchased options											Interest expense		9			(144	)
Written options											Interest expense		(8	)		144
Total												$	1,721		$	499

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

40

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

7. Goodwill and other Intangibles

The following table summarizes intangible assets, net of amortization:

	September 30, 2019				December 31, 2018
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
	(In thousands)
Amortized intangible assets - core deposits	$	11,916	$	6,318	$	11,916	$	5,501
Unamortized intangible assets - goodwill	$	28,300			$	28,300

A summary of estimated core deposit intangible amortization at September 30, 2019 follows:

	(In thousands)
Three months ending December 31, 2019	$	272
2020		1,020
2021		970
2022		785
2023		547
2024 and thereafter		2,004
Total	$	5,598

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, 2019.  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, 2019. Share based awards and payments are measured at fair value at the date of grant and are expensed over the requisite service period. Common shares issued upon exercise of stock options come from currently authorized but unissued shares.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Restricted stock		8,000		-		64,267		53,420
PSU		-		-		22,016		19,986

Except for 0.008 million shares of restricted stock issued during the third quarter of 2019 and 0.002 million shares of restricted stock issued during the first quarters of 2019 and 2018  that vest ratably over three years, the shares of restricted stock and PSUs shown in the above table cliff vest after a period of three years.  The performance feature of the PSUs is based on a comparison of our total shareholder return over the three year period starting on the grant date to the total shareholder return over that period for a banking index of our peers.

41

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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 0.008 million and 0.007 million shares during the nine month periods ended September 30, 2019 and 2018, respectively, pursuant to this plan 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, 2019, respectively, and was $0.4 million and $1.1 million during the same periods in 2018, respectively.  The corresponding tax benefit relating to this expense was $0.1 million and $0.2 million for the three and nine month periods ended September 30, 2019, respectively and $0.1 million and $0.2 million for the same periods in 2018. Total expense recognized for non-employee director share based payments was $0.06 million and $0.18 million during the three and nine month periods ended September 30, 2019, respectively, and was $0.05 million and $0.16 million during the same periods in 2018, respectively.  The corresponding tax benefit relating to this expense was $0.01 million and $0.04 million for the three and nine month periods ended September 30, 2019, respectively and $0.01 million and $0.03 million during the same periods in 2018.

At September 30, 2019, the total expected compensation cost related to non-vested restricted stock and PSUs not yet recognized was $2.5 million.  The weighted-average period over which this amount will be recognized is 1.9 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, 2019		211,421		$	6.48
Granted		-
Exercised		(70,299	)		9.98
Forfeited		-
Expired		(1,116	)		22.35
Outstanding at September 30, 2019		140,006		$	4.60		3.2	$	2,340
Vested and expected to vest at September 30, 2019		140,006		$	4.60		3.2	$	2,340
Exercisable at September 30, 2019		140,006		$	4.60		3.2	$	2,340

42

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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, 2019		258,419		$	19.00
Granted		86,283			22.87
Vested		(85,978	)		14.57
Forfeited		(12,998	)		22.85
Outstanding at September 30, 2019		245,726		$	21.72

Certain information regarding options exercised during the periods follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
	(In thousands)
Intrinsic value	$	32	$	153	$	868	$	1,827
Cash proceeds received	$	6	$	58	$	701	$	1,042
Tax benefit realized	$	6	$	32	$	182	$	384

9. Income Tax

Income tax expense was $3.1 million and $2.9 million during the three month periods ended September 30, 2019 and 2018, respectively and $8.0 million and $7.0 million during the nine months ended September 30, 2019 and 2018, respectively.  Our actual federal income tax expense is different than the amount computed by applying our statutory income tax rate to our income before income tax primarily due to tax-exempt interest income and tax-exempt income from the increase in the cash surrender value on life insurance.  In addition, the three and nine month periods ending September 30, 2019 include reductions of $0.01 million and $0.18 million, respectively, of income tax expense related to the impact of the excess value of stock awards that vested and stock options that were exercised as compared to the initial fair values that were expensed.  These amounts during the same periods in 2018 were $0.01 million and $0.33 million, respectively.

We assess whether a valuation allowance should be established against our deferred tax assets based on the consideration of all available evidence using a “more likely than not” standard.  The ultimate realization of this asset is primarily based on generating future income.  We concluded at September 30, 2019, September 30, 2018 and December 31, 2018 that the realization of substantially all of our deferred tax assets continues to be more likely than not.

At both September 30, 2019 and December 31, 2018, we had approximately $0.6 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 2019.

43

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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, 2019, the Bank had positive undivided profits of $38.3 million.  It is not our intent to have dividends paid in amounts that would reduce the capital of our Bank to levels below those which we consider prudent and in accordance with guidelines of regulatory authorities.

We are also subject to various regulatory capital requirements. The prompt corrective action regulations establish quantitative measures to ensure capital adequacy and require minimum amounts and ratios of total, Tier 1, and common equity Tier 1 capital to risk-weighted assets and Tier 1 capital to average assets. Failure to meet minimum capital requirements can result in certain mandatory, and possibly discretionary, actions by regulators that could have a material effect on our interim condensed consolidated financial statements. 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, 2019 and December 31, 2018, 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.

44

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Our actual capital amounts and ratios follow (1):

	Actual					Minimum for Adequately Capitalized Institutions					Minimum for Well-Capitalized Institutions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
September 30, 2019
Total capital to risk-weighted assets
Consolidated	$	369,923		13.39	%	$	221,065		8.00	%	NA		NA
Independent Bank		352,432		12.76			220,984		8.00		$	276,230		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	342,138		12.38	%	$	165,799		6.00	%	NA		NA
Independent Bank		324,647		11.75			165,738		6.00		$	220,984		8.00	%
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	303,923		11.00	%	$	124,349		4.50	%	NA		NA
Independent Bank		324,647		11.75			124,304		4.50		$	179,550		6.50	%
Tier 1 capital to average assets
Consolidated	$	342,138		9.93	%	$	137,762		4.00	%	NA		NA
Independent Bank		324,647		9.43			137,736		4.00		$	172,170		5.00	%
December 31, 2018
Total capital to risk-weighted assets
Consolidated	$	371,603		14.25	%	$	208,572		8.00	%	NA		NA
Independent Bank		337,227		12.94			208,456		8.00		$	260,569		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	345,419		13.25	%	$	156,429		6.00	%	NA		NA
Independent Bank		311,043		11.94			156,342		6.00		$	208,456		8.00	%
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	307,255		11.79	%	$	117,322		4.50	%	NA		NA
Independent Bank		311,043		11.94			117,256		4.50		$	169,370		6.50	%
Tier 1 capital to average assets
Consolidated	$	345,419		10.47	%	$	131,930		4.00	%	NA		NA
Independent Bank		311,043		9.44			131,778		4.00		$	164,723		5.00	%

(1) These ratios do not reflect a capital conservation buffer of 2.50% and 1.875% at September 30, 2019 and December 31, 2018, respectively.

NA - Not applicable

45

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The components of our regulatory capital are as follows:

	Consolidated						Independent Bank
	September 30, 2019			December 31, 2018			September 30, 2019			December 31, 2018
	(In thousands)
Total shareholders’ equity	$	340,245		$	338,994		$	360,969		$	341,496
Add (deduct)
Accumulated other comprehensive (income) loss for regulatory purposes		(2,424	)		4,311			(2,424	)		4,311
Goodwill and other intangibles		(33,898	)		(34,715	)		(33,898	)		(34,715	)
Disallowed deferred tax assets		-			(1,335	)		-			(49	)
Common equity tier 1 capital		303,923			307,255			324,647			311,043
Qualifying trust preferred securities		38,215			38,164			-			-
Tier 1 capital		342,138			345,419			324,647			311,043
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets		27,785			26,184			27,785			26,184
Total risk-based capital	$	369,923		$	371,603		$	352,432		$	337,227

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.

46

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 (equity securities at fair value or available for sale) are classified as Level 1 of the valuation hierarchy.  Level 1 securities include certain preferred stocks included in our equity securities at fair value for which there are quoted prices in active markets (at December 31, 2018).  If quoted market prices are not available for the specific security, then fair values are estimated by (1) using quoted market prices of securities with similar characteristics, (2) matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices, or (3) a discounted cash flow analysis whose significant fair value inputs can generally be verified and do not typically involve judgment by management. These securities are classified as Level 2 of the valuation hierarchy and primarily include agency securities, private label mortgage-backed securities, other asset backed securities, obligations of states and political subdivisions, trust preferred securities, corporate securities and foreign government securities.

Loans held for sale:  The fair value of mortgage loans held for sale, carried at fair value is based on agency cash window loan pricing for comparable assets (recurring Level 2) and the fair value of mortgage loans held for sale, carried at the lower of cost or fair value (December 31, 2018) is based on a quoted sales price (non-recurring Level 1).  The fair value of Loans held for sale, carried at the lower of cost or fair value at September 30, 2019 exceeded their cost and therefore were carried at cost and not included in the table that follows.

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 for loan losses represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At September 30, 2019 and December 31, 2018, 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.

47

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

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

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

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

48

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, 2019:
Measured at Fair Value on a Recurring Basis
Assets
Securities available for sale
U.S. agency	$	15,283	$	-	$	15,283	$	-
U.S. agency residential mortgage-backed		147,720		-		147,720		-
U.S. agency commercial mortgage-backed		11,319		-		11,319		-
Private label mortgage-backed		31,826		-		31,826		-
Other asset backed		94,785		-		94,785		-
Obligations of states and political subdivisions		101,139		-		101,139		-
Corporate		33,678		-		33,678		-
Trust preferred		1,820		-		1,820		-
Foreign government		2,022		-		2,022		-
Loans held for sale, carried at fair value		87,358		-		87,358		-
Capitalized mortgage loan servicing rights		16,906		-		-		16,906
Derivatives (1)		7,389		-		7,389		-
Liabilities
Derivatives (2)		5,657		-		5,657		-
Measured at Fair Value on a Non-recurring Basis:
Assets
Impaired loans (3)
Commercial
Income producing - real estate		115		-		-		115
Land, land development & construction-real estate		87		-		-		87
Commercial and industrial		706		-		-		706
Mortgage
1-4 family		666		-		-		666
Resort lending		60		-		-		60
Home equity - 1st lien		83		-		-		83
Home equity - 2nd lien		199		-		-		199
Installment
Home equity - 1st lien		9		-		-		9
Home equity - 2nd lien		70		-		-		70
Boat lending		103		-		-		103
Recreational vehicle lending		1		-		-		1
Other		86		-		-		86
Other real estate (4)
Mortgage
1-4 family		23		-		-		23
Home equity - 2nd lien		57		-		-		57

(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.

49

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, 2018:
Measured at Fair Value on a Recurring Basis
Assets
Equity securities at fair value	$	393	$	393	$	-	$	-
Securities available for sale
U.S. agency		20,014		-		20,014		-
U.S. agency residential mortgage-backed		123,751		-		123,751		-
U.S. agency commercial mortgage-backed		5,726		-		5,726		-
Private label mortgage-backed		29,419		-		29,419		-
Other asset backed		83,319		-		83,319		-
Obligations of states and political subdivisions		127,555		-		127,555		-
Corporate		34,309		-		34,309		-
Trust preferred		1,819		-		1,819		-
Foreign government		2,014		-		2,014		-
Loans held for sale, carried at fair value		44,753		-		44,753		-
Capitalized mortgage loan servicing rights		21,400		-		-		21,400
Derivatives (1)		5,155		-		5,155		-
Liabilities
Derivatives (2)		2,326		-		2,326		-
Measured at Fair Value on a Non-recurring Basis:
Assets
Loans held for sale, carried at the lower of cost or fair value		41,471		41,471		-		-
Impaired loans (3)
Commercial
Income producing - real estate		217		-		-		217
Land, land development & construction-real estate		106		-		-		106
Commercial and industrial		2,243		-		-		2,243
Mortgage
1-4 family		333		-		-		333
Resort lending		572		-		-		572
Other real estate (4)
Mortgage
1-4 family		95		-		-		95
Home equity - 2nd lien		59		-		-		59

(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.

There were no transfers between Level 1 and Level 2 during the nine months ended September 30, 2019 and 2018.

50

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

	Changes in Fair Values for the Nine-Month Periods Ended September 30 for Items Measured at Fair Value Pursuant to Election of the Fair Value Option
	Net Gains (Losses) on Assets						Mortgage			Total Change in Fair Values Included in Current
	Securities			Mortgage Loans			Loan Servicing, net			Period Earnings
	(In thousands)
2019
Equity securities at fair value	$	167		$	-		$	-		$	167
Loans held for sale		-			822			-			822
Capitalized mortgage loan servicing rights		-			-			(9,258	)		(9,258	)
2018
Equity securities at fair value	$	(170	)	$	-		$	-		$	(170	)
Loans held for sale		-			(120	)		-			(120	)
Capitalized mortgage loan servicing rights		-			-			694			694

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, 2019 and 2018 relating to assets measured at fair value on a non-recurring basis:

• Loans which are measured for impairment using the fair value of collateral for collateral dependent loans had a carrying amount of $2.2 million, which is net of a valuation allowance of $0.9 million at September 30, 2019, and had a carrying amount of $3.5 million, which is net of a valuation allowance of $1.5 million at December 31, 2018.  The provision for loan losses included in our results of operations relating to impaired loans was a net expense of $0.5 million and $0.1 million for the three month periods ending September 30, 2019 and 2018, respectively, and a net expense of $0.8 million and $0.5 million for the nine month periods ending September 30, 2019 and 2018, respectively.

• Other real estate, which is measured using the fair value of the property, had a carrying amount of $0.1 million which is net of a valuation allowance of $0.1 million at September 30, 2019, and a carrying amount of $0.2 million, which is net of a valuation allowance of $0.1 million, at December 31, 2018. Charges included in our results of operations relating to other real estate measured at fair value were $0.07 million and $0.08 million during the three and nine month periods ended September 30, 2019, and were $0.04 million during each of the three and nine month periods ended September 30, 2018.

51

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

	Capitalized Mortgage Loan Servicing Rights
	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
	(In thousands)						(In thousands)
Beginning balance	$	17,894		$	21,848		$	21,400		$	15,699
Total gains (losses) realized and unrealized:
Included in results of operations		(3,145	)		(198	)		(9,258	)		694
Included in other comprehensive income (loss)		-			-			-			-
Purchases, issuances, settlements, maturities and calls		2,157			1,501			4,764			6,758
Transfers in and/or out of Level 3		-			-			-			-
Ending balance	$	16,906		$	23,151		$	16,906		$	23,151
Amount of total gains (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	$	(3,145	)	$	(198	)	$	(9,258	)	$	694

The fair value of our capitalized mortgage loan servicing rights has been determined based on a valuation model used by an independent third party as discussed above.  The significant unobservable inputs used in the fair value measurement of the capitalized mortgage loan servicing rights are discount rate, cost to service, ancillary income, float rate and prepayment rate.  Significant changes in all 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	Range			Weighted Average
	(In thousands)
September 30, 2019
Capitalized mortgage loan servicing rights	$	16,906	Present value of net	Discount rate	10.00% to 13.00		%		10.14	%
			servicing revenue	Cost to service	$	63 to $216		$	80
				Ancillary income	20 to 36				22
				Float rate		1.50	%		1.50	%
				Prepayment rate	7.01% to 29.80		%		16.08	%
December 31, 2018
Capitalized mortgage loan servicing rights	$	21,400	Present value of net	Discount rate	10.00% to 13.00		%		10.15	%
			servicing revenue	Cost to service	$	68 to $216		$	81
				Ancillary income	20 to 36				23
				Float rate		2.57	%		2.57	%
				Prepayment rate	6.68% to 78.78		%		10.54	%

52

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

	Asset Fair Value		Valuation Technique	Unobservable Inputs	Range		Weighted Average
	(In thousands)
September 30, 2019
Impaired loans
Commercial	$	908	Sales comparison approach	Adjustment for differences between comparable sales	(48.0)% to 6.3	%		(12.3	)%
Mortgage and Installment(1)		1,277	Sales comparison approach	Adjustment for differences between comparable sales	(61.4) to 65.2			(6.8	)
Other real estate
Mortgage		80	Sales comparison approach	Adjustment for differences between comparable sales	(36.4) to 16.3			(20.3	)
December 31, 2018
Impaired loans
Commercial(2)	$	2,566	Sales comparison approach	Adjustment for differences between comparable sales	(32.5)% to 60.0	%		(1.9	)%
Mortgage		905	Sales comparison approach	Adjustment for differences between comparable sales	(40.1) to 25.6			0.7
Other real estate
Mortgage		154	Sales comparison approach	Adjustment for differences between comparable sales	0.0 to 34.1			11.2

(1) In addition to the valuation techniques and unobservable inputs discussed above, at September 30, 2019 certain impaired collateral dependent installment loans totaling approximately $0.2 million are secured by collateral other than real estate.  For the majority of these loans, we apply internal discount rates to industry valuation guides.

(2) In addition to the valuation techniques and unobservable inputs discussed above, at December 31, 2018, we had an impaired collateral dependent commercial relationship that totaled $0.7 million that was secured by collateral other than real estate. Collateral securing this relationship primarily included accounts receivable, inventory and cash at December 31, 2018. Valuation techniques at December 31, 2018, included discounting financial statement values for each particular asset type. Discount rates used ranged from 20% to 80% of stated values at December 31, 2018.

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, 2019	$	87,358	$	2,079	$	85,279
December 31, 2018		44,753		1,257		43,496

53

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.

54

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, 2019
Assets
Cash and due from banks	$	38,662	$	38,662	$	38,662	$	-	$	-
Interest bearing deposits		43,755		43,755		43,755		-		-
Interest bearing deposits - time		499		500		-		500		-
Securities available for sale		439,592		439,592		-		439,592		-
Federal Home Loan Bank and Federal Reserve Bank Stock		18,359	NA		NA		NA		NA
Net loans and loans held for sale		2,820,278		2,841,484		-		125,013		2,716,471
Accrued interest receivable		10,480		10,480		1		1,995		8,484
Derivative financial instruments		7,389		7,389		-		7,389		-
Liabilities
Deposits with no stated maturity (1)	$	2,429,013	$	2,429,013	$	2,429,013	$	-	$	-
Deposits with stated maturity (1)		623,299		623,916		-		623,916		-
Other borrowings		63,974		63,930		-		63,930		-
Subordinated debentures		39,439		32,427		-		32,427		-
Accrued interest payable		1,610		1,610		100		1,510		-
Derivative financial instruments		5,657		5,657		-		5,657		-
December 31, 2018
Assets
Cash and due from banks	$	23,350	$	23,350	$	23,350	$	-	$	-
Interest bearing deposits		46,894		46,894		46,894		-		-
Interest bearing deposits - time		595		594		-		594		-
Equity securities at fair value		393		393		393		-		-
Securities available for sale		427,926		427,926		-		427,926		-
Federal Home Loan Bank and Federal Reserve Bank Stock		18,359	NA		NA		NA		NA
Net loans and loans held for sale		2,643,856		2,606,256		41,471		44,753		2,520,032
Accrued interest receivable		10,164		10,164		22		1,789		8,353
Derivative financial instruments		5,155		5,155		-		5,155		-
Liabilities
Deposits with no stated maturity (1)	$	2,197,494	$	2,197,494	$	2,197,494	$	-	$	-
Deposits with stated maturity (1)		715,934		711,312		-		711,312		-
Other borrowings		25,700		25,706		-		25,706		-
Subordinated debentures		39,388		35,021		-		35,021		-
Accrued interest payable		1,646		1,646		114		1,532		-
Derivative financial instruments		2,326		2,326		-		2,326		-

(1) Deposits with no stated maturity include reciprocal deposits with a recorded book balance of $367.180 million and $123.080 million at September 30, 2019 and December 31, 2018, respectively. Deposits with a stated maturity include reciprocal deposits with a recorded book balance of $49.020 million and $58.992 million at September 30, 2019 and December 31, 2018, respectively.

55

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

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

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

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

13. Contingencies

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

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

56

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The provision for loss reimbursement on sold loans represents our estimate of incurred losses related to mortgage loans that we have sold to investors (primarily Fannie Mae, Freddie Mac, Ginnie Mae and the Federal Home Loan Bank of Indianapolis). Since we sell mortgage loans without recourse, loss reimbursements only occur in those instances where we have breached a representation or warranty or other contractual requirement related to the loan sale. The provision for loss reimbursement on sold loans was an expense of $0.03 million and $0.05 million for the three month periods ended September 30, 2019 and 2018, respectively and an expense of $0.18 million and $0.08 million for the nine month periods ended September 30, 2019 and 2018, respectively. The reserve for loss reimbursements on sold mortgage loans totaled $0.85 million and $0.78 million at September 30, 2019 and December 31, 2018, respectively. This reserve is included in accrued expenses and other liabilities in our Condensed Consolidated Statements of Financial Condition. This reserve is based on an analysis of mortgage loans that we have sold which are further categorized by delinquency status, loan to value, and year of origination. The calculation includes factors such as probability of default, probability of loss reimbursement (breach of representation or warranty) and estimated loss severity. We believe that the amounts that we have accrued for incurred losses on sold mortgage loans are appropriate given our analyses. However, future losses could exceed our current estimate.

We own 12,566 shares of VISA Class B common stock. At the present time, these shares can only be sold to other Class B shareholders. As a result, there has generally been limited transfer activity in private transactions between buyers and sellers. Given the limited activity that we have become aware of  and the continuing uncertainty regarding the likelihood, ultimate timing and eventual exchange rate for Class B shares into Class A shares, we continue to carry these shares at zero, representing cost basis less impairment. However, given the current conversion ratio of 1.6228 to Class A shares and the closing price of VISA Class A shares on October 17, 2019 of $177.94 per share, our 12,566 Class B shares would have a current “value” of approximately $3.6 million. We continue to monitor Class B trading activity and the status of the resolution of certain litigation matters at VISA that would trigger the conversion of Class B common shares into Class A common shares that would have no trading restrictions.

57

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 (Losses) on Cash Flow Hedges			Total
	(In thousands)
For the three months ended September 30,
2019
Balances at beginning of period	$	3,040		$	(5,798	)	$	(1,673	)	$	(4,431	)
Other comprehensive income (loss) before reclassifications		1,196			-			(58	)		1,138
Amounts reclassified from AOCL		-			-			(80	)		(80	)
Net current period other comprehensive income (loss)		1,196			-			(138	)		1,058
Balances at end of period	$	4,236		$	(5,798	)	$	(1,811	)	$	(3,373	)
2018
Balances at beginning of period	$	(4,437	)	$	(5,798	)	$	1,021		$	(9,214	)
Other comprehensive income (loss) before reclassifications		(925	)		-			307			(618	)
Amounts reclassified from AOCL		-			-			(57	)		(57	)
Net current period other comprehensive income (loss)		(925	)		-			250			(675	)
Balances at end of period	$	(5,362	)	$	(5,798	)	$	1,271		$	(9,889	)
For the nine months ended September 30,
2019
Balances at beginning of period	$	(4,185	)	$	(5,798	)	$	(125	)	$	(10,108	)
Other comprehensive income (loss) before reclassifications		8,529			-			(1,376	)		7,153
Amounts reclassified from AOCL		(108	)		-			(310	)		(418	)
Net current period other comprehensive income (loss)		8,421			-			(1,686	)		6,735
Balances at end of period	$	4,236		$	(5,798	)	$	(1,811	)	$	(3,373	)
2018
Balances at beginning of period	$	(470	)	$	(5,798	)	$	269		$	(5,999	)
Other comprehensive income (loss) before reclassifications		(4,928	)		-			1,106			(3,822	)
Amounts reclassified from AOCL		36			-			(104	)		(68	)
Net current period other comprehensive income (loss)		(4,892	)		-			1,002			(3,890	)
Balances at end of period	$	(5,362	)	$	(5,798	)	$	1,271		$	(9,889	)

58

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

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

AOCL Component	Amount Reclassified From AOCL			Affected Line Item in Condensed  Consolidated Statements of Operations
	(In thousands)
2019
Unrealized gains (losses) on securities available for sale
	$	-		Net gains (losses) on securities
		-		Net impairment loss recognized in earnings
		-		Total reclassifications before tax
		-		Income tax expense
	$	-		Reclassifications, net of tax
Unrealized gains (losses) on cash flow hedges
	$	(102	)	Interest expense
		(22	)	Income tax expense
	$	(80	)	Reclassification, net of tax
	$	80		Total reclassifications for the period, net of tax
2018
Unrealized gains (losses) on securities available for sale
	$	-		Net gains (losses) on securities
		-		Net impairment loss recognized in earnings
		-		Total reclassifications before tax
		-		Income tax expense
	$	-		Reclassifications, net of tax
Unrealized gains (losses) on cash flow hedges
	$	(73	)	Interest expense
		(16	)	Income tax expense
	$	(57	)	Reclassification, net of tax
	$	57		Total reclassifications for the period, net of tax

59

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

AOCL Component	Amount Reclassified From AOCL			Affected Line Item in Condensed  Consolidated Statements of Operations
	(In thousands)
2019
Unrealized gains (losses) on securities available for sale
	$	137		Net gains (losses) on securities
		-		Net impairment loss recognized in earnings
		137		Total reclassifications before tax
		29		Income tax expense
	$	108		Reclassifications, net of tax
Unrealized gains (losses) on cash flow hedges
	$	(393	)	Interest expense
		(83	)	Income tax expense
	$	(310	)	Reclassification, net of tax
	$	418		Total reclassifications for the period, net of tax
2018
Unrealized gains (losses) on securities available for sale
	$	(45	)	Net gains (losses) on securities
		-		Net impairment loss recognized in earnings
		(45	)	Total reclassifications before tax
		(9	)	Income tax expense
	$	(36	)	Reclassifications, net of tax
Unrealized gains (losses) on cash flow hedges
	$	(132	)	Interest expense
		(28	)	Income tax expense
	$	(104	)	Reclassification, net of tax
	$	68		Total reclassifications for the period, net of tax

15. Revenue from Contracts with Customers

We account for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. We derive the majority of our revenue from financial instruments and their related contractual rights and obligations which for the most part are excluded from the scope of this topic.  These sources of revenue that are excluded from the scope of this topic include interest income, net gains on mortgage loans, net gains (losses) on securities, mortgage loan servicing, net and bank owned life insurance and were approximately 84.7% and 83.1% of total revenues at September 30, 2019 and 2018, respectively.

60

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Material sources of revenue that are included in the scope of this topic include service charges on deposit accounts, other deposit related income, interchange income and investment and insurance commissions and are discussed in the following paragraphs.  Generally these sources of revenue are earned at the time the service is delivered or over the course of a monthly period and do not result in any contract asset or liability balance at any given period end.  As a result, there were no contract assets or liabilities recorded as of September 30, 2019 and December 31, 2018.

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

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

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

Net (gains) losses on other real estate and repossessed assets:  We record a gain or loss from the sale of other real estate when control of the property transfers to the buyer, which generally occurs at the time of an executed deed.  If we were to finance the sale of other real estate to the buyer, we would assess whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction is probable.  Once these criteria are met, the other real estate asset would be derecognized and the gain or loss on sale would be recorded upon the transfer of control of the property to the buyer.  There were no other real estate properties sold during the three and nine month periods ending September 30, 2019 and 2018 that were financed by us.

61

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Disaggregation of our revenue sources by attribute follows:

Three months ending September 30, 2019

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

62

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Three months ending September 30, 2018

	Service Charges on Deposit Accounts		Other Deposit Related Income		Interchange Income		Investment and Insurance Commissions		Total
	(In thousands)
Retail
Overdraft fees	$	2,161	$	-	$	-	$	-	$	2,161
Account service charges		519		-		-		-		519
ATM fees		-		374		-		-		374
Other		-		219		-		-		219
Business
Overdraft fees		408		-		-		-		408
Account service charges		78		-		-		-		78
ATM fees		-		10		-		-		10
Other		-		124		-		-		124
Interchange income		-		-		2,486		-		2,486
Asset management revenue		-		-		-		274		274
Transaction based revenue		-		-		-		239		239
Total	$	3,166	$	727	$	2,486	$	513	$	6,892
Reconciliation to Condensed Consolidated Statement of Operations:
Non-interest income - other:
Other deposit related income									$	727
Investment and insurance commissions										513
Bank owned life insurance										237
Other										657
Total									$	2,134

63

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Nine months ending September 30, 2019

	Service Charges on Deposit Accounts		Other Deposit Related Income		Interchange Income		Investment and Insurance Commissions		Total
	(In thousands)
Retail
Overdraft fees	$	5,582	$	-	$	-	$	-	$	5,582
Account service charges		1,609		-		-		-		1,609
ATM fees		-		1,041		-		-		1,041
Other		-		703		-		-		703
Business
Overdraft fees		1,123		-		-		-		1,123
Account service charges		9		-		-		-		9
ATM fees		-		26		-		-		26
Other		-		309		-		-		309
Interchange income		-		-		7,744		-		7,744
Asset management revenue		-		-		-		823		823
Transaction based revenue		-		-		-		374		374
Total	$	8,323	$	2,079	$	7,744	$	1,197	$	19,343
Reconciliation to Condensed Consolidated Statement of Operations:
Non-interest income - other:
Other deposit related income									$	2,079
Investment and insurance commissions										1,197
Bank owned life insurance										813
Other										2,773
Total									$	6,862

64

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Nine months ending September 30, 2018

	Service Charges on Deposit Accounts		Other Deposit Related Income		Interchange Income		Investment and Insurance Commissions		Total
	(In thousands)
Retail
Overdraft fees	$	6,177	$	-	$	-	$	-	$	6,177
Account service charges		1,607		-		-		-		1,607
ATM fees		-		1,077		-		-		1,077
Other		-		656		-		-		656
Business
Overdraft fees		1,153		-		-		-		1,153
Account service charges		229		-		-		-		229
ATM fees		-		26		-		-		26
Other		-		399		-		-		399
Interchange income		-		-		7,236		-		7,236
Asset management revenue		-		-		-		826		826
Transaction based revenue		-		-		-		608		608
Total	$	9,166	$	2,158	$	7,236	$	1,434	$	19,994
Reconciliation to Condensed Consolidated Statement of Operations:
Non-interest income - other:
Other deposit related income									$	2,158
Investment and insurance commissions										1,434
Bank owned life insurance										713
Other										1,989
Total									$	6,294

16.  Leases

We have operating leases, primarily relating to certain office facilities, some of which include renewal options and escalation clauses.  Certain leases also include both lease components (fixed payments including rent, taxes and insurance costs) and non-lease components (common area or other maintenance costs) which are accounted for as a single lease component as we have elected the practical expedient to group lease and non-lease components for all leases.  Most of our leases include one or more options to renew. The exercise of lease renewal options is typically at our sole discretion and are included in our ROU assets and lease liabilities if they are reasonably certain of exercise.  As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments.

The cost components of our operating leases follows:

	Three Months Ended		Nine Months Ended
	September 30, 2019
	(In thousands)
Operating lease cost	$	565	$	1,692
Variable lease cost		43		115
Short-term lease cost		4		14
Total	$	612	$	1,821

65

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

Supplemental balance sheet information related to our operating leases follows:

	September 30, 2019
	(In thousands)
Lease right of use asset (1)	$	6,244
Lease liabilities (2)	$	6,257
Weighted average remaining lease term (years)		5.50
Weighted average discount rate		3.2	%

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

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

Maturity analysis of our lease liabilities at September 30, 2019 based on required contractual payments follows:

	(In thousands)
Three months ending December 31, 2019	$	543
2020		1,790
2021		1,269
2022		963
2023		925
2024 and thereafter		1,381
Total lease payments		6,871
Less imputed interest		(614	)
Total	$	6,257

66

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

17.  Recent Acquisition

Effective April 1, 2018, we completed the acquisition of all of the issued and outstanding shares of common stock of TCSB through a merger of TCSB into Independent Bank Corporation (“IBCP”), with IBCP as the surviving corporation (the ‘‘Merger’’).  On that same date we also consolidated Traverse City State Bank, TCSB’s wholly-owned subsidiary bank, into Independent Bank (with Independent Bank as the surviving institution).  Under the terms of the merger agreement each holder of TCSB common stock received 1.1166 shares of IBCP common stock plus cash in lieu of fractional shares totaling $0.005 million.  TCSB option holders had their options converted into IBCP stock options.  As a result we issued 2.71 million shares of common stock and 0.19 million stock options with a fair value of approximately $64.5 million to the shareholders and option holders of TCSB.  The fair value of common stock and stock options issued as the consideration paid for TCSB was determined using the closing price of our common stock on the acquisition date.  This acquisition was accounted for under the acquisition method of accounting.  Accordingly, we recognized amounts for identifiable assets acquired and liabilities assumed at their estimated acquisition date fair values.  TCSB results of operations are included in our results beginning April 1, 2018.

The following table reflects our final valuation of the assets acquired and liabilities assumed:

	(In thousands)
Cash and cash equivalents	$	23,521
Interest bearing deposits - time		4,054
Securities available for sale		6,066
Federal Home Loan Bank stock		778
Loans, net		295,799
Property and equipement, net		1,067
Capitalized mortgage loan servicing rights		3,047
Accrued income and other assets		3,362
Other intangibles (1)		5,798
Total assets acquired		343,492
Deposits		287,710
Other borrowings		14,345
Subordinated debentures		3,768
Accrued expenses and other liabilities		1,429
Total liabilities assumed		307,252
Net assets acquired		36,240
Goodwill		28,300
Purchase price (fair value of consideration)	$	64,540

(1) Relates to core deposit intangibles (see note #7).

67

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Management views the disclosed fair values presented above to be final as the one-year measurement period for finalizing acquisition-date fair values has expired.  During this measurement period we had one adjustment to our acquisition date fair values.  During the third quarter of 2018, goodwill was reduced by $0.7 million (to $28.3 million) related to the collection of a TCSB acquired loan that had been charged off in full prior to the Merger.  Because of the status of the collection activities related to this loan at the time of the Merger, we determined that this transaction was a measurement period adjustment and reduced goodwill accordingly.

Goodwill related to this acquisition will not be deductible for tax purposes and consists largely of synergies and cost savings resulting from the combining of the operations of TCSB into ours as well as expansion into a new market.

The estimated fair value of the core deposit intangible was $5.8 million and is being amortized over an estimated useful life of 10 years.

The fair value of net assets acquired includes fair value adjustments to certain receivables that were not considered impaired as of the acquisition date. The fair value adjustments were determined using discounted contractual cash flows.  However, we believe that all contractual cash flows related to these financial instruments will be collected.  As such, these receivables were not considered impaired at the acquisition date and were not subject to the guidance relating to purchased credit impaired loans which have shown evidence of credit deterioration since origination.  Receivables acquired that are not subject to these requirements included non-impaired customer receivables with a fair value and gross contractual amounts receivable of $292.9 million and $298.6 million on the date of acquisition.

68

ITEM 2.

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

Introduction. The following section presents additional information to assess the financial condition and results of operations of Independent Bank Corporation (“IBCP”), its wholly-owned bank, Independent Bank (the “Bank”), and their subsidiaries. This section should be read in conjunction with the Condensed Consolidated Financial Statements. We also encourage you to read our 2018 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”). That report includes a list of risk factors that you should consider in connection with any decision to buy or sell our securities.

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

Recent Developments. On December 4, 2017, we entered into an Agreement and Plan of Merger with TCSB Bancorp, Inc. (“TCSB”) (the “Merger Agreement”) providing for a business combination of IBCP and TCSB.  On April 1, 2018, TCSB was merged with and into IBCP, with IBCP as the surviving corporation (the “Merger”).  In connection with the Merger, on April 1, 2018, IBCP consolidated Traverse City State Bank, TCSB’s wholly-owned subsidiary bank, with and into Independent Bank (with Independent Bank as the surviving institution). See note #17.

It is against this backdrop that we discuss our results of operations and financial condition in the third quarter and first nine months of 2019 as compared to 2018.

Results of Operations

Summary.  We recorded net income of $12.4 million and $11.9 million, respectively, during the three months ended September 30, 2019 and 2018.  The increase in 2019 third quarter results as compared to 2018 reflects increases in net interest income and non-interest income as well as a decrease in the provision for loan losses that were partially offset by increases in non-interest expense and income tax expense.

We recorded net income of $32.6 million and $29.9 million, respectively, during the nine months ended September 30, 2019 and 2018.  The increase in 2019 year-to-date results as compared to 2018 is due to an increase in net interest income that was partially offset by a decrease in non-interest income and by increases in the provision for loan losses, non-interest expense and income tax expense.

69

Key performance ratios

	Three months ended  September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Net income (annualized) to
Average assets		1.42	%		1.46	%		1.28	%		1.30	%
Average common shareholders’ equity		14.64			13.83			12.84			12.73
Net income per common share
Basic	$	0.55		$	0.49		$	1.41		$	1.29
Diluted		0.55			0.49			1.40			1.27

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 or interest-rate risk, in particular, can adversely impact our net interest income.

Our net interest income totaled $30.9 million during the third quarter of 2019, an increase of $1.2 million, or 4.0% from the year-ago period.  This increase primarily reflects a $246.9 million increase in average interest-earning assets that was partially offset by a 15 basis point decrease in our tax equivalent net interest income as a percent of average interest-earning assets (the “net interest margin”).

For the first nine months of 2019, net interest income totaled $91.9 million, an increase of $9.3 million, or 11.2% from 2018.  This increase primarily reflects a $336.8 million increase in average interest-earning assets that was partially offset by a three basis point decrease in our net interest margin.

Interest and fees on loans include $0.4 million and $1.1 million for the third quarter and first nine months of 2019, respectively, and include $0.6 million and $1.2 million for the third quarter and first nine months of 2018, respectively, of accretion of the discount recorded on loans acquired in the Merger.

The increase in average interest-earning assets primarily reflects loan growth utilizing funds from increases in deposits and borrowed funds as well as the impact of the Merger (for the year-to-date comparative periods).  The decrease in the net interest margin reflects the impact of lower market interest rates and a flattening of the yield curve during 2019.

Our net interest income is also adversely impacted by our level of non-accrual loans.  In the third quarter and first nine months of 2019 non-accrual loans averaged $6.9 million and $8.1 million, respectively, compared to $9.2 million and $8.1 million, respectively for the same periods in 2018.  In addition, in the third quarter and first nine months of 2019 we had net (charge-offs)/recoveries of $0.23 million and $0.66 million, respectively, of unpaid interest on loans placed on or taken off non-accrual during each period or on loans previously charged-off compared to net (charge-offs)/recoveries of $(0.01) million and $0.35 million, respectively, during the same periods in 2018.

70

Average Balances and Tax Equivalent Rates

	Three Months Ended September 30,
	2019							2018
	Average Balance		Interest		Rate (2)			Average Balance		Interest		Rate (2)
	(Dollars in thousands)
Assets
Taxable loans	$	2,779,132	$	34,151		4.89	%	$	2,543,712	$	30,936		4.84	%
Tax-exempt loans (1)		7,412		94		5.03			6,590		81		4.88
Taxable securities		371,157		2,771		2.99			379,985		2,737		2.88
Tax-exempt securities (1)		52,098		400		3.07			62,964		518		3.29
Interest bearing cash		56,923		229		1.60			27,477		66		0.95
Other investments		18,359		266		5.75			17,493		237		5.38
Interest Earning Assets		3,285,081		37,911		4.60			3,038,221		34,575		4.53
Cash and due from banks		34,598							35,874
Other assets, net		163,617							173,508
Total Assets	$	3,483,296						$	3,247,603
Liabilities
Savings and interest- bearing checking	$	1,487,820		2,818		0.75		$	1,241,868		1,223		0.39
Time deposits		658,426		3,418		2.06			664,098		2,753		1.64
Other borrowings		72,887		703		3.83			80,939		779		3.82
Interest Bearing Liabilities		2,219,133		6,939		1.24			1,986,905		4,755		0.95
Non-interest bearing deposits		877,088							884,003
Other liabilities		49,913							34,697
Shareholders’ equity		337,162							341,998
Total liabilities and shareholders’ equity	$	3,483,296						$	3,247,603
Net Interest Income			$	30,972						$	29,820
Net Interest Income as a Percent of Average Interest Earning Assets						3.76	%						3.91	%

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

(2) Annualized

71

Average Balances and Tax Equivalent Rates

	Nine Months Ended September 30,
	2019							2018
	Average Balance		Interest		Rate (2)			Average Balance		Interest		Rate (2)
Assets	(Dollars in thousands)
Taxable loans	$	2,695,435	$	100,513		4.98	%	$	2,350,883	$	83,881		4.77	%
Tax-exempt loans (1)		7,856		291		4.95			5,221		185		4.74
Taxable securities		384,291		8,811		3.06			400,957		8,092		2.69
Tax-exempt securities (1)		52,794		1,275		3.22			70,155		1,680		3.19
Interest bearing cash		51,260		655		1.71			29,502		214		0.97
Other investments		18,359		794		5.78			16,457		684		5.56
Interest Earning Assets		3,209,995		112,339		4.67			2,873,175		94,736		4.40
Cash and due from banks		34,032							33,204
Other assets, net		166,037							159,844
Total Assets	$	3,410,064						$	3,066,223
Liabilities
Savings and interest- bearing checking	$	1,421,114		7,787		0.73		$	1,193,388		2,785		0.31
Time deposits		670,479		10,151		2.02			611,103		6,687		1.46
Other borrowings		72,233		2,211		4.09			82,253		2,267		3.68
Interest Bearing Liabilities		2,163,826		20,149		1.24			1,886,744		11,739		0.83
Non-interest bearing deposits		862,929							833,283
Other liabilities		44,323							32,177
Shareholders’ equity		338,986							314,019
Total liabilities and shareholders’ equity	$	3,410,064						$	3,066,223
Net Interest Income			$	92,190						$	82,997
Net Interest Income as a Percent of Average Interest Earning Assets						3.83	%						3.86	%

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

(2) Annualized

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Reconciliation of Non-GAAP Financial Measures

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
	(Dollars in thousands)
Net Interest Margin, Fully Taxable Equivalent (“FTE”)
Net interest income	$	30,872		$	29,697		$	91,871		$	82,613
Add:  taxable equivalent adjustment		100			123			319			384
Net interest income - taxable equivalent	$	30,972		$	29,820		$	92,190		$	82,997
Net interest margin (GAAP) (1)		3.74	%		3.88	%		3.82	%		3.84	%
Net interest margin (FTE) (1)		3.76	%		3.91	%		3.83	%		3.86	%

(1) Annualized.

Provision for loan losses.  The provision for loan losses was a credit of $0.3 million and $0.1 million during the three months ended September 30, 2019 and 2018, respectively. During the nine-month periods ended September 30, 2019 and 2018, the provision was an expense of $1.0 million and $0.9 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 2019.

Non-interest income.  Non-interest income is a significant element in assessing our results of operations. Non-interest income totaled $12.3 million during the third quarter of 2019 compared to $11.8 million in 2018.  For the first nine months of 2019 non-interest income totaled $32.1 million compared to $35.9 million for the first nine months of 2018.

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The components of non-interest income are as follows:

Non-Interest Income

	Three months ended September 30,					Nine months ended September 30,
	2019			2018		2019			2018
	(In thousands)
Service charges on deposit accounts	$	2,883		$	3,166	$	8,323		$	9,166
Interchange income		2,785			2,486		7,744			7,236
Net gains (losses) on assets:
Mortgage loans		5,677			2,745		13,590			8,571
Securities		--			93		304			(71	)
Mortgage loan servicing, net		(1,562	)		1,212		(4,684	)		4,668
Investment and insurance commissions		450			513		1,197			1,434
Bank owned life insurance		301			237		813			713
Other		1,741			1,384		4,852			4,147
Total non-interest income	$	12,275		$	11,836	$	32,139		$	35,864

Service charges on deposit accounts decreased on both a comparative quarterly and year-to-date basis in 2019 as compared to 2018.  These decreases were principally due to a decrease in non-sufficient funds occurrences.

Interchange income increased on both a comparative quarterly and year-to-date basis in 2019 as compared to 2018 due primarily to an increase in debit card transaction volume as well as the timing of the receipt of a volume incentive from our debit card brand partner.  In 2019 this volume incentive ($0.2 million) was received in the third quarter; however, in 2018, the comparable volume incentive was not received until the fourth quarter.

Net gains on mortgage loans increased from 2018 on both a quarterly and a year to date basis. Mortgage loan activity is summarized as follows:

Mortgage Loan Activity

	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
	(Dollars in thousands)
Mortgage loans originated	$	329,461		$	231,849		$	708,621		$	617,080
Mortgage loans sold		204,058			148,730			490,219			370,372
Net gains on mortgage loans		5,677			2,745			13,590			8,571
Net gains as a percent of mortgage loans sold (“Loan Sales Margin”)		2.78	%		1.85	%		2.77	%		2.31	%
Fair value adjustments included in the Loan Sales Margin		0.22			(0.26	)		0.48			0.10

The increase in mortgage loans originated is due primarily to lower interest rates spurring higher mortgage loan refinance volumes. Mortgage loans sold increased due to a higher mix of salable loans in our origination volumes, the rise in mortgage loan refinance activity and some portfolio mortgage loan sales that were completed during 2019. These factors resulted in net gains on mortgage loans increasing in 2019 as compared to 2018.

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

Our Loan Sales Margin is impacted by several factors including competition and the manner in which the loan is sold. Net gains on mortgage loans are also impacted by recording fair value accounting adjustments.  Excluding the aforementioned fair value accounting adjustments, the Loan Sales Margin would have been 2.56% and 2.11% in the third quarters of 2019 and 2018, respectively and 2.29% and 2.21% for the comparative 2019 and 2018 year-to-date periods, respectively.  The increase in the Loan Sales Margin (excluding fair value adjustments) in 2019 was generally due to a widening of primary-to-secondary market pricing spreads due to competitive factors throughout the mortgage banking industry (lower mortgage loan interest rates and an increase 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 were relatively nominal for the comparative quarterly periods.  We recorded a net gain of $0.3 million and a net loss of $0.1 million on securities for the first nine months of 2019 and 2018, respectively.  We recorded no net impairment losses in either 2019 or 2018 for other than temporary impairment of securities available for sale.  See “Securities” below and note #3 to the Condensed Consolidated Financial Statements.

Mortgage loan servicing, net, generated a loss of $1.6 million and income of $1.2 million in the third quarters of 2019 and 2018, respectively. For the first nine months of 2019, mortgage loan servicing, net, generated a loss of $4.7 million as compared to income of $4.7 million in 2018. The significant variances in mortgage loan servicing, net are primarily due to changes in the fair value of capitalized mortgage loan servicing rights associated with changes in mortgage loan interest rates (a decline in 2019 as compared to an increase in 2018) and expected future prepayment levels.  This activity is summarized in the following table:

	Three Months Ended						Nine Months Ended
	9/30/2019			9/30/2018			9/30/2019			9/30/2018
Mortgage loan servicing, net:	(In thousands)
Revenue, net	$	1,583		$	1,410		$	4,574		$	3,974
Fair value change due to price		(2,163	)		610			(7,036	)		2,586
Fair value change due to pay-downs		(982	)		(808	)		(2,222	)		(1,892	)
Total	$	(1,562	)	$	1,212		$	(4,684	)	$	4,668

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

Capitalized Mortgage Loan Servicing Rights

	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
	(In thousands)
Balance at beginning of period	$	17,894		$	21,848		$	21,400		$	15,699
Servicing rights acquired		-			-			-			3,047
Originated servicing rights capitalized		2,157			1,501			4,764			3,711
Change in fair value		(3,145	)		(198	)		(9,258	)		694
Balance at end of period	$	16,906		$	23,151		$	16,906		$	23,151

At September 30, 2019 we were servicing approximately $2.48 billion in mortgage loans for others on which servicing rights have been capitalized. This servicing portfolio had a weighted average coupon rate of 4.25% and a weighted average service fee of approximately 25.8 basis points. Capitalized mortgage loan servicing rights at September 30, 2019 totaled $16.9 million, representing approximately 68.2 basis points on the related amount of mortgage loans serviced for others.

Investment and insurance commissions represent revenues generated on the sale or management of investments and insurance for our customers.  These revenues were relatively comparable on a quarterly basis, but declined on a year-to-date basis in 2019 as compared to 2018.  The year-to-date decline in 2019 was primarily due to slower sales in the first quarter of 2019, principally reflecting market volatility and uncertainty.

Income from bank owned life insurance (“BOLI”) increased on both a comparative quarterly and year-to-date basis in 2019 compared to 2018 reflecting a higher crediting rate on our cash surrender value. Our BOLI separate account is primarily invested in agency mortgage-backed securities. The crediting rate (on which the earnings are based) reflects the performance of the separate account.  The total cash surrender value of our BOLI was $55.4 million and $55.1 million at September 30, 2019 and December 31, 2018, respectively.

Other non-interest income increased on both a comparative quarterly and year-to-date basis in 2019 compared to 2018, due primarily to increases in fees on interest rate swaps, merchant processing, and credit cards. The year-to-date increase in 2019 compared to 2018 is also due to $0.38 million of recoveries recorded in the first quarter of 2019 on TCSB loans that had been charged-off prior to the Merger.

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

Non-interest expense increased by $1.1 million to $27.8 million and by $1.8 million to $82.4 million during the three- and nine-month periods ended September 30, 2019, respectively, compared to the same periods in 2018.

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The components of non-interest expense are as follows:

Non-Interest Expense

	Three months ended September 30,					Nine months ended September 30,
	2019		2018			2019			2018
	(In thousands)
Compensation	$	10,327	$	9,582		$	30,993		$	28,086
Performance-based compensation		3,214		3,305			7,730			9,238
Payroll taxes and employee benefits		3,132		3,282			10,232			9,182
Compensation and employee benefits		16,673		16,169			48,955			46,506
Occupancy, net		2,161		2,233			6,797			6,667
Data processing		2,282		2,051			6,597			6,180
Furniture, fixtures and equipment		1,023		1,043			3,058			3,029
Interchange expense		891		715			2,332			1,974
Communications		733		727			2,219			2,111
Loan and collection		714		531			1,976			1,900
Advertising		636		594			1,935			1,578
Legal and professional		541		477			1,281			1,311
Amortization of intangible assets		272		295			817			676
FDIC deposit insurance		13		270			723			750
Supplies		163		173			474			516
Costs (recoveries) related to unfunded lending commitments		154		71			341			(6	)
Credit card and bank service fees		100		108			300			310
Provision for loss reimbursement on sold loans		33		47			179			78
Net (gains) losses on other real estate and repossessed assets		52		(325	)		(27	)		(619	)
Merger related expenses		--		98			--			3,354
Other		1,407		1,463			4,473			4,321
Total non-interest expense	$	27,848	$	26,740		$	82,430		$	80,636

Compensation and employee benefits expenses, in total, increased $0.5 million on a quarterly comparative basis and increased $2.4 million for the first nine months of 2019 compared to the same periods in 2018.

Compensation expense increased by $0.7 million and $2.9 million in the third quarter and first nine months of 2019, respectively, compared to the same periods in 2018.  The quarterly and year-to-date comparative increase in 2019 is primarily due to salary increases that were predominantly effective on January 1, 2019 and growth in the number of full-time equivalent employees.  The year-to-date comparative increase in 2019 also reflects the impact of the Merger.

Performance-based compensation decreased by $0.1 million and $1.5 million in the third quarter and first nine months of 2019, respectively, versus the same periods in 2018, due primarily to relative comparative changes in the accrual for anticipated incentive compensation based on our estimated full-year performance as compared to goals.

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Payroll taxes and employee benefits decreased by $0.2 million and increased by $1.1 million in the third quarter and first nine months of 2019, respectively, compared to the same periods in 2018.  The quarterly comparative decrease is due primarily to a decline in health care costs.  The year-to-date comparative increase is due primarily to increases in health care costs (due to increased claims in the first six months of 2019), payroll taxes and workers’ compensation insurance costs.

Occupancy, net, furniture, fixtures and equipment, communications, legal and professional, supplies, and credit card and bank service fees expenses were all relatively unchanged on a comparative quarterly and year-to-date basis in 2019 as compared to 2018.

Data processing expenses increased on both a comparative quarterly and year-to-date basis in 2019 as compared to 2018.  These increases were due primarily to several new products or services implemented in 2019 as well as increases in mobile-banking related costs (due to higher usage) and certain software licensing costs (due principally to more users).

Interchange expense primarily represents our third-party cost to process debit card transactions.  This cost increased in 2019 on both a comparative quarterly and year-to-date basis as compared to 2018 due principally to an increase in transaction volume.

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 increased expenses in 2019 as compared to 2018 primarily reflects lower recoveries of previously incurred collection expenses on non-performing and previously charged-off loans.

Total advertising expenses increased in 2019 on both a comparative quarterly and year-to-date basis as compared to 2018 due primarily to an increase in outdoor (billboard) advertising.

The amortization of intangible assets relates to the Merger and prior branch acquisitions and the amortization of the deposit customer relationship value, including core deposit value, which was acquired in connection with those acquisitions. We had remaining unamortized intangible assets of $5.6 million and $6.4 million at September 30, 2019 and December 31, 2018, respectively. See note #7 to the Condensed Consolidated Financial Statements for a schedule of future amortization of intangible assets.

FDIC deposit insurance expense decreased in 2019 on a comparative quarterly basis and was relatively unchanged on a year-to-date basis. This quarterly decrease is related to the use of our Small Bank Assessment Credit (the “Assessment Credit”).  After the application of the Assessment Credit against the Company’s June 30, 2019 FDIC deposit insurance expense billing, approximately $0.4 million of Assessment Credit remains available to offset future expense.  Absent the use of the Assessment Credit, FDIC deposit insurance expense would be higher in 2019 due primarily to growth in our total assets.

The changes in cost (recoveries) 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.

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The provision for loss reimbursement on sold loans was an expense of $0.03 million and $0.18 million in the third quarter and first nine months of 2019, respectively, compared to an expense of $0.05 million and $0.08 million in the third quarter and first nine months of 2018, respectively. This provision represents our estimate of incurred losses related to mortgage loans that we have sold to investors (primarily Fannie Mae, Freddie Mac, Ginnie Mae and the Federal Home Loan Bank of Indianapolis).  The small expense provisions in 2019 and 2018 are primarily due to growth in the balance of loans serviced for investors.  Since we sell mortgage loans without recourse, loss reimbursements only occur in those instances where we have breached a representation or warranty or other contractual requirement related to the loan sale.  The reserve for loss reimbursements on sold mortgage loans totaled $0.85 million and $0.78 million at September 30, 2019 and December 31, 2018, respectively. This reserve is included in accrued expenses and other liabilities in our Condensed Consolidated Statements of Financial Condition.

Net (gains) losses on other real estate and repossessed assets primarily represent the gain or loss on the sale or additional write downs on these assets subsequent to the transfer of the asset from our loan portfolio. This transfer occurs at the time we acquire the collateral that secured the loan. At the time of acquisition, the other real estate or repossessed asset is valued at fair value, less estimated costs to sell, which becomes the new basis for the asset. Any write-downs at the time of acquisition are charged to the allowance for loan losses.  The gains in 2018 were primarily related to the sale of several residential properties.

Merger related expenses totaled $0.1 million and $3.4 million for the third quarter and first nine months of 2018, respectively.  These expenses included our investment banking fees, certain accounting and legal costs, various contract termination fees, data processing conversion costs, payments made on officer change-in-control contracts, and employee severance costs.

Other non-interest expenses were relatively unchanged in 2019 on a comparative quarterly basis and increased on a year-to-date basis as compared to 2018 due primarily to an increase in deposit account/debit card fraud costs.

Income tax expense.  We recorded an income tax expense of $3.1 million and $8.0 million in the third quarter and the first nine months of 2019, respectively. This compares to an income tax expense of $2.9 million and $7.0 million in the third quarter and the first nine months of 2018, respectively.

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

We assess whether a valuation allowance should be established against our deferred tax assets based on the consideration of all available evidence using a “more likely than not” standard.  The ultimate realization of this asset is primarily based on generating future income.  We concluded at September 30, 2019 and 2018 and at December 31, 2018, that the realization of substantially all of our deferred tax assets continues to be more likely than not.

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Financial Condition

Summary.  Our total assets increased by $197.6 million during the first nine months of 2019.  Loans, excluding loans held for sale (“Portfolio Loans”), totaled $2.72 billion at September 30, 2019, an increase of $139.9 million, or 5.4%, from December 31, 2018.  (See “Portfolio Loans and asset quality.”)

Deposits totaled $3.05 billion at September 30, 2019, compared to $2.91 billion at December 31, 2018.  The $138.9 million increase in total deposits during the period is due primarily to growth in reciprocal deposits.

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, 2019	$	434,231	$	6,106	$	745	$	439,592
December 31, 2018		433,224		1,520		6,818		427,926

Securities available for sale increased $11.7 million during the first nine months of 2019.  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 (loss).  We recorded no impairment losses related to other than temporary impairment on securities available for sale in either of the first nine months of 2019 or 2018.

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

	Nine months ended September 30,
	2019			2018
	(In thousands)
Proceeds	$	44,305		$	31,445
Gross gains	$	169		$	225
Gross losses		(32	)		(126	)
Net impairment charges		--			-
Fair value adjustments		167			(170	)
Net gains (losses)	$	304		$	(71	)

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 continue to sell some fixed rate jumbo and other  portfolio mortgage loans in the future.

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A summary of our Portfolio Loans follows:

	September 30, 2019		December 31, 2018
	(In thousands)
Real estate(1)
Residential first mortgages	$	821,531	$	811,719
Residential home equity and other junior mortgages		173,099		177,574
Construction and land development		220,822		180,286
Other(2)		721,042		707,347
Consumer		451,025		379,607
Commercial		330,073		319,058
Agricultural		4,854		6,929
Total loans	$	2,722,446	$	2,582,520

(1) Includes both residential and non-residential commercial loans secured by real estate.

(2) Includes loans secured by multi-family residential and non-farm, non-residential property.

Non-performing assets⁽¹⁾

	September 30, 2019			December 31, 2018
	(Dollars in thousands)
Non-accrual loans	$	7,124		$	9,029
Loans 90 days or more past due and still accruing interest		--			5
Less - government guaranteed loans		(475	)		(460	)
Total non-performing loans		6,649			8,574
Other real estate and repossessed assets		1,789			1,299
Total non-performing assets	$	8,438		$	9,873
As a percent of Portfolio Loans
Non-performing loans		0.24	%		0.33	%
Allowance for loan losses		0.96			0.96
Non-performing assets to total assets		0.24			0.29
Allowance for loan losses as a percent of non-performing loans		393.26			290.27

⁽¹⁾ Excludes loans classified as “troubled debt restructured” that are not past due.

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Troubled debt restructurings (“TDR”)

	September 30, 2019
	Commercial		Retail (1)			Total
	(In thousands)
Performing TDR’s	$	6,947	$	40,873		$	47,820
Non-performing TDR’s (2)		46		2,357	(3)		2,403
Total	$	6,993	$	43,230		$	50,223

	December 31, 2018
	Commercial		Retail (1)			Total
	(In thousands)
Performing TDR’s	$	6,460	$	46,627		$	53,087
Non-performing TDR’s (2)		74		2,884	(3)		2,958
Total	$	6,534	$	49,511		$	56,045

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

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

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

Non-performing loans decreased by $1.9 million during the first nine months of 2019 due principally to a decline in non-performing commercial and mortgage loans. This decline primarily reflects reduced levels of new loan defaults as well as loan charge-offs, pay-offs, negotiated transactions, and the migration of loans into other real estate. In general, 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 $47.8 million, or 1.8% of total Portfolio Loans, and $53.1 million, or 2.1% of total Portfolio Loans, at September 30, 2019 and December 31, 2018, respectively. The decrease in the amount of performing TDRs in the first nine months of 2019 primarily reflects pay downs and payoffs.

Other real estate and repossessed assets totaled $1.8 million and $1.3 million at September 30, 2019 and December 31, 2018, respectively. This increase is primarily due to the addition of a $0.6 million commercial office building located in Grand Rapids, Michigan during the second quarter of 2019.

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

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We had loan net recoveries in both the first nine months of 2019 and 2018 due primarily to recoveries on previously charged-off commercial loans.  The following tables reflect activity in and the allocation of the allowance for loan losses (“AFLL”).

Allowance for loan losses

	Nine months ended September 30,
	2019					2018
	Loans			Unfunded Commitments		Loans			Unfunded Commitments
	(Dollars in thousands)
Balance at beginning of period	$	24,888		$	1,296	$	22,587		$	1,125
Additions (deductions)
Provision for loan losses		1,045			-		912			-
Recoveries credited to allowance		3,109			-		3,768			-
Loans charged against the allowance		(2,894	)		-		(2,866	)		-
Additions included in non-interest expense		-			341		-			(6	)
Balance at end of period	$	26,148		$	1,637	$	24,401		$	1,119
Net loans charged against the allowance to average Portfolio Loans		(0.01	)%				(0.04	)%

Allocation of the Allowance for Loan Losses

	September 30, 2019		December 31, 2018
	(In thousands)
Specific allocations	$	5,779	$	6,310
Other adversely rated commercial loans		3,022		1,861
Historical loss allocations		8,752		7,792
Additional allocations based on subjective factors		8,595		8,925
Total	$	26,148	$	24,888

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

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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 AFLL increased $1.3 million to $26.1 million at September 30, 2019 from $24.9 million at December 31, 2018 and was equal to 0.96% of total Portfolio Loans at both September 30, 2019 and December 31, 2018, respectively.

During the first quarter of 2019, we deployed a third-party software solution (we previously used spreadsheet software) to assist in the determination of our AFLL.  This new third-party software will also assist us in moving to the expected loss framework that is required to be implemented on January 1, 2020.  Although the use of this new third-party software did not have any material impact on our overall AFLL, it did result in some classification shifts from the AFLL related to subjective factors into the AFLL related to historical losses as the new software model allowed us to capture longer historical look-back periods (previously this was being captured in the subjective portion of the AFLL).

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Two of the four components of the AFLL outlined above increased during the first nine months of 2019. The AFLL related to specific loans decreased $0.5 million during the first nine months of 2019 due primarily to a $4.9 million decline in the amount of such loans.  The AFLL related to other adversely rated commercial loans increased $1.2 million during the first nine months of 2019, primarily due to an increase in the balance of such loans included in this component to $67.2 million at September 30, 2019 from $44.7 million at December 31, 2018.  The increase in other adversely rated commercial loans was primarily in early watch credit categories and these loans are largely performing.  We do not believe that we will experience any significant loan losses as a result of this rise in other adversely rated commercial loans.  The AFLL related to historical losses increased $1.0 million during the first nine months of 2019, and the AFLL related to subjective factors decreased $0.3 million during the first nine months of 2019, due in part to the classification shifts discussed above, as well as loan growth, for the AFLL related to historical losses.

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 $3.05 billion and $2.91 billion at September 30, 2019 and December 31, 2018, respectively.  The $138.9 million increase in deposits during the first nine months of 2019 is primarily due to growth in reciprocal deposits.  Reciprocal deposits totaled $416.2 million and $182.1 million at September 30, 2019 and December 31, 2018, respectively.  These deposits represent demand, money market and time deposits from our customers that have been placed through Promontory Interfinancial Network’s Insured Cash Sweep^® service and Certificate of Deposit Account Registry Service^®.  These services allow our customers to access multi-million dollar FDIC deposit insurance on deposit balances greater than the standard FDIC insurance maximum.  The significant increase in reciprocal deposits is due in part to an automated sweep product that we introduced in mid-2018 as well as the marketing and sales efforts of our treasury management team.

We cannot be sure that we will be able to maintain our current level of core deposits. In particular, those deposits that are uninsured may be susceptible to outflow. At September 30, 2019, we had approximately $554.3 million of uninsured deposits. A reduction in core deposits would likely increase our need to rely on wholesale funding sources.

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

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Other borrowings, comprised primarily of advances from the FHLB and federal funds sold, totaled $64.0 million and $25.7 million at September 30, 2019 and December 31, 2018, respectively.

As described above, we utilize wholesale funding, including federal funds purchased, FHLB borrowings and Brokered CDs to augment our core deposits and fund a portion of our assets. At September 30, 2019, our use of such wholesale funding sources (including reciprocal deposits) amounted to approximately $679.9 million, or 21.8% of total funding (deposits and all 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.  During the first nine months of 2019 and 2018, we entered into $55.4 million and $16.6 million (aggregate notional amounts), respectively, of interest rate swaps with commercial loan customers, which were offset with interest rate swaps that the Bank entered into with a broker-dealer. We recorded $0.7 million and $0.4 million of fee income related to these transactions during the first nine months of 2019 and 2018, respectively. See note #6 to the Condensed Consolidated Financial Statements included within this report for more information on our derivative financial instruments.

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

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

At September 30, 2019, we had $508.1 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, $2.43 billion of our deposits at September 30, 2019, 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 highly liquid or short-term assets) to total assets, short-term liability dependence and basic surplus (defined as quick assets less volatile liabilities to total assets). Policy limits have been established for our various liquidity measurements and are monitored on a quarterly basis. In addition, we also prepare cash flow forecasts that include a variety of different scenarios.

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

We also believe that the available cash on hand at the parent company (including time deposits) of approximately $16.3 million as of September 30, 2019 provides sufficient liquidity resources at the parent company to meet operating expenses, to make interest payments on the subordinated debentures, and to pay projected cash dividends on our common stock.

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, 2019			December 31, 2018
	(In thousands)
Subordinated debentures	$	39,439		$	39,388
Amount not qualifying as regulatory capital		(1,224	)		(1,224	)
Amount qualifying as regulatory capital		38,215			38,164
Shareholders’ equity
Common stock		351,839			377,372
Accumulated deficit		(8,221	)		(28,270	)
Accumulated other comprehensive loss		(3,373	)		(10,108	)
Total shareholders’ equity		340,245			338,994
Total capitalization	$	378,460		$	377,158

We currently have four special purpose entities with $38.2 million of outstanding cumulative trust preferred securities as of September 30, 2019.  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, 2019 and December 31, 2018.

Common shareholders’ equity increased to $340.2 million at September 30, 2019, from $339.0 million at December 31, 2018, due primarily to our net income and a decrease in our accumulated other comprehensive loss that were partially offset by share repurchases and cash dividend payments. Our tangible common equity (“TCE”) totaled $306.3 million and $304.3 million, respectively, at those same dates. Our ratio of TCE to tangible assets was 8.71% and 9.17% at September 30, 2019, and December 31, 2018, respectively.  TCE and the ratio of TCE to tangible assets are non-GAAP measures.  TCE represents total common equity less goodwill and other intangible assets.

In December 2018, our Board of Directors authorized a 2019 share repurchase plan.  Under the terms of the original 2019 share repurchase plan, we were authorized to buy back up to 5% of our outstanding common stock.  In June 2019, our Board of Directors supplemented the 2019 share repurchase plan and authorized the repurchase of up to 300,000 additional common shares. The 2019 share repurchase plan is authorized to last through December 31, 2019.  During the first nine months of 2019, the Company repurchased 1,204,688 shares at a weighted average purchase price of $21.82 per share (including 25,000 shares at a weighted average purchase price of $20.09 per share in the third quarter of 2019).

We pay a quarterly cash dividend on our common stock.  These dividends totaled $0.18 per share in each of the first, second and third quarters of 2019 and $0.15 per share in each of the comparable quarters in 2018.    We generally favor a dividend payout ratio between 30% and 50% of net income.

As of September 30, 2019 and December 31, 2018, our Bank (and holding company) continued to meet the requirements to be considered “well-capitalized” under federal regulatory standards (also see note #10 to the Condensed Consolidated Financial Statements included within this report).

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

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

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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, 2019
200 basis point rise	$	447,100		1.02	%	$	125,300		1.54	%
100 basis point rise		455,900		3.00			124,800		1.13
Base-rate scenario		442,600		-			123,400		-
100 basis point decline		387,700		(12.40	)		119,500		(3.16	)
December 31, 2018
200 basis point rise	$	481,100		(3.37	)%	$	126,200		3.27	%
100 basis point rise		495,400		(0.50	)		124,800		2.13
Base-rate scenario		497,900		-			122,200		-
100 basis point decline		482,800		(3.03	)		119,600		(2.13	)

(1) Simulation analyses calculate the change in the net present value of our assets and liabilities, including debt and related financial derivative instruments, under parallel shifts in interest rates by discounting the estimated future cash flows using a market-based discount rate. Cash flow estimates incorporate anticipated changes in prepayment speeds and other embedded options.

(2) Simulation analyses calculate the change in net interest income under immediate parallel shifts in interest rates over the next twelve months, based upon a static statement of financial condition, which includes debt and related financial derivative instruments, and do not consider loan fees.

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

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

We utilize fair value measurements to record fair value adjustments to certain financial instruments and to determine fair value disclosures. FASB ASC topic 820 differentiates between those assets and liabilities required to be carried at fair value at every reporting period (“recurring”) and those assets and liabilities that are only required to be adjusted to fair value under certain circumstances (“nonrecurring”). Certain equity securities (at December 31, 2018), securities available for sale, loans held for sale, carried at fair value, derivatives and capitalized mortgage loan servicing rights are financial instruments recorded at fair value on a recurring basis. Additionally, from time to time, we may be required to record at fair value other financial assets on a nonrecurring basis, such as loans held for investment and certain other assets. These nonrecurring fair value adjustments typically involve application of lower of cost or fair value accounting or write-downs of individual assets. See note #11 to the Condensed Consolidated Financial Statements included within this report for a complete discussion on our use of fair valuation of financial instruments and the related measurement techniques.

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Litigation Matters

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

The litigation matters described in the preceding paragraph primarily include claims that have been brought against us for damages, but do not include litigation matters where we seek to collect amounts owed to us by third parties (such as litigation initiated to collect delinquent loans). These excluded, collection-related matters may involve claims or counterclaims by the opposing party or parties, but we have excluded such matters from the disclosure contained in the preceding paragraph in all cases where we believe the possibility of us paying damages to any opposing party is remote. 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 and capitalized mortgage loan servicing rights are deemed critical since they involve the use of estimates and require significant management judgments. Application of assumptions different than those that we have used could result in material changes in our consolidated financial position or results of operations.  There have been no material changes to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018.

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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, 2019, 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, 2019, 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, 2018.

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 2019, the Company issued 722 shares of common stock to non-employee directors on a current basis and 2,065 shares of common stock to the trust for distribution to directors on a deferred basis.  These shares were issued on July 1, 2019 representing aggregate fees of $0.06 million. The shares on a current basis were issued at a price of $21.79 per share and the shares on a deferred basis were issued at a price of $19.61 per share, representing 90% of the fair value of the shares on the credit date.  The price per share was the consolidated closing bid price per share of the Company’s common stock as of the date of issuance, as determined in accordance with NASDAQ Marketplace Rules.  The Company issued the shares pursuant to an exemption from registration under Section 4(2) of the Securities Act of 1933 due to the fact that the issuance of the shares was made on a private basis pursuant to the Plan.

The following table shows certain information relating to repurchases of common stock for the three-months ended September 30, 2019:

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 2019		--	$	--		--		299,298
August 2019		25,919		20.09		25,000		274,298
September 2019		--		--		--		274,298
Total		25,919	$	20.09		25,000		274,298

(1) August includes 919 shares withheld from the shares that would otherwise have been issued to certain officers in order to satisfy tax withholding obligations resulting from the vesting of restricted stock as well as satisfy tax withholding obligations and stock option exercise price resulting from the exercise of stock options.

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Item 6. Exhibits

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

31.1	Certificate of the Chief Executive Officer of Independent Bank Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
31.2	Certificate of the Chief Financial Officer of Independent Bank Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
32.1	Certificate of the Chief Executive Officer of Independent Bank Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
32.2	Certificate of the Chief Financial Officer of Independent Bank Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

101.INS Instance Document

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES

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

Date	November 1, 2019	By	/s/ Robert N. Shuster
			Robert N. Shuster, Principal Financial Officer
Date	November 1, 2019	By	/s/ James J. Twarozynski
			James J. Twarozynski, Principal Accounting Officer

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EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, William B. Kessel, certify that:

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

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

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

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

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

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

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

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

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

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

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

	INDEPENDENT BANK CORPORATION
Date:  November 1, 2019	/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 1, 2019	/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, 2019, 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, 2019, fairly presents, in all material respects, the financial condition and results of operations of Independent Bank Corporation.

	INDEPENDENT BANK CORPORATION
Date:  November 1, 2019	/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, 2019, 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, 2019, fairly presents, in all material respects, the financial condition and results of operations of Independent Bank Corporation.

	INDEPENDENT BANK CORPORATION
Date:  November 1, 2019	/s/ Robert N. Shuster
	Robert N. Shuster
	Chief Financial Officer

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

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Loans, Troubled Debt Restructurings (Details) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2019 USD ($) Contract	Sep. 30, 2018 USD ($) Contract	Sep. 30, 2019 USD ($) Payment Contract	Sep. 30, 2018 USD ($) Contract	Dec. 31, 2018 USD ($)
Troubled Debt Restructuring [Abstract]
Troubled debt restructuring		$ 50,223		$ 50,223		$ 56,045
Number of consecutive timely payments required | Payment				6
Troubled debt restructuring, specific reserve		$ 5,100		$ 5,100		5,600
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		7	7	18	26
Pre-modification recorded balance		$ 438	$ 783	$ 2,763	$ 2,088
Post-modification recorded balance		442	783	2,769	2,073
Increase (decrease) in allowance for loan losses		40	(10)	90	(4)
Charge offs due to troubled debt restructurings		0	0	$ 0	0
Past due period for modified loans				90 days
Charge-offs on TDRs that subsequently defaulted		0	$ 0	$ 0	$ 0
Minimum [Member]
Troubled Debt Restructuring [Abstract]
Modification of stated interest rate of loans, range of period				9 months
Modifications involving extension of maturity date, period range				1 month
Maximum [Member]
Troubled Debt Restructuring [Abstract]
Modification of stated interest rate of loans, range of period				36 months
Modification of stated interest rate of loans, range of period in certain circumstances				480 months
Modifications involving extension of maturity date, period range				60 months
Modifications involving extension of maturity date, period range in certain circumstances				230 months
Performing TDRs [Member]
Troubled Debt Restructuring [Abstract]
Troubled debt restructuring		47,820		$ 47,820		53,087
Non-performing TDRs [Member]
Troubled Debt Restructuring [Abstract]
Troubled debt restructuring	[1]	2,403		2,403		2,958
Commercial [Member]
Troubled Debt Restructuring [Abstract]
Troubled debt restructuring		6,993		6,993		6,534
Commercial [Member] | Performing TDRs [Member]
Troubled Debt Restructuring [Abstract]
Troubled debt restructuring		6,947		6,947		6,460
Commercial [Member] | Non-performing TDRs [Member]
Troubled Debt Restructuring [Abstract]
Troubled debt restructuring	[1]	$ 46		$ 46		74
Commercial [Member] | Income Producing - Real Estate [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		0	0	2	1
Pre-modification recorded balance		$ 0	$ 0	$ 1,329	$ 67
Post-modification recorded balance		$ 0	$ 0	$ 1,329	$ 67
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		0	0	0	0
Pre-modification recorded balance		$ 0	$ 0	$ 0	$ 0
Post-modification recorded balance		$ 0	$ 0	$ 0	$ 0
Commercial [Member] | Commercial and Industrial [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		2	1	3	6
Pre-modification recorded balance		$ 137	$ 24	$ 186	$ 611
Post-modification recorded balance		$ 137	$ 24	$ 186	$ 611
Mortgage [Member] | 1-4 Family [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		1	3	3	7
Pre-modification recorded balance		$ 198	$ 609	$ 985	$ 903
Post-modification recorded balance		$ 202	$ 609	$ 988	$ 889
Mortgage [Member] | Resort Lending [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		0	1	0	1
Pre-modification recorded balance		$ 0	$ 115	$ 0	$ 115
Post-modification recorded balance		$ 0	$ 114	$ 0	$ 114
Mortgage [Member] | Home Equity - 1st Lien [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		0	0	0	0
Pre-modification recorded balance		$ 0	$ 0	$ 0	$ 0
Post-modification recorded balance		$ 0	$ 0	$ 0	$ 0
Mortgage [Member] | Home Equity - 2nd Lien [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		3	0	3	0
Pre-modification recorded balance		$ 75	$ 0	$ 75	$ 0
Post-modification recorded balance		$ 75	$ 0	$ 75	$ 0
Installment [Member] | Home Equity - 1st Lien [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		1	1	3	6
Pre-modification recorded balance		$ 28	$ 15	$ 77	$ 203
Post-modification recorded balance		$ 28	$ 15	$ 79	$ 205
Installment [Member] | Home Equity - 2nd Lien [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		0	1	4	3
Pre-modification recorded balance		$ 0	$ 20	$ 111	$ 113
Post-modification recorded balance		$ 0	$ 21	$ 112	$ 114
Installment [Member] | Boat Lending [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		0	0	0	0
Pre-modification recorded balance		$ 0	$ 0	$ 0	$ 0
Post-modification recorded balance		$ 0	$ 0	$ 0	$ 0
Installment [Member] | Recreational Vehicle Lending [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		0	0	0	0
Pre-modification recorded balance		$ 0	$ 0	$ 0	$ 0
Post-modification recorded balance		$ 0	$ 0	$ 0	$ 0
Installment [Member] | Other [Member]
Loans classified as troubled debt restructurings [Abstract]
Number of contracts | Contract		0	0	0	2
Pre-modification recorded balance		$ 0	$ 0	$ 0	$ 76
Post-modification recorded balance		0	$ 0	0	$ 73
Retail [Member]
Troubled Debt Restructuring [Abstract]
Troubled debt restructuring	[2]	43,230		43,230		49,511
Retail [Member] | Performing TDRs [Member]
Troubled Debt Restructuring [Abstract]
Troubled debt restructuring	[2]	40,873		40,873		46,627
Retail [Member] | Non-performing TDRs [Member]
Troubled Debt Restructuring [Abstract]
Troubled debt restructuring	[1],[2],[3]	$ 2,357		$ 2,357		$ 2,884

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

[2] Retail loans include mortgage and installment loan segments.

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

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Securities, Gains and Losses Realized on Sale of Securities Available for Sale (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Gain and losses realized on sale of securities available for sale [Abstract]
Proceeds			$ 44,305	$ 31,445	[1]
Realized gains			169	81	[1]
Realized losses			32	126	[1]
Trading securities, realized gain (loss)			167	(170)
Gains (losses) related to preferred stock held for sale			0	(170)
Realized gain on investment excluded from gains and losses realized on sale of securities available for sale	$ 0	$ 93	$ 304	(71)
VISA Class B Common Stock [Member]
Gain and losses realized on sale of securities available for sale [Abstract]
Realized gain on investment excluded from gains and losses realized on sale of securities available for sale				$ 144
Number of securities sold (in shares)				1,000

[1] 2018 excludes a $0.144 million gain on the sale of 1,000 VISA class B shares.

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Revenue from Contracts with Customers (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019 USD ($) Asset	Sep. 30, 2018 USD ($) Asset	Sep. 30, 2019 USD ($) Asset	Sep. 30, 2018 USD ($) Asset	Dec. 31, 2018 USD ($)
Revenue from Contracts with Customers [Abstract]
Percentage of revenues excluded from ASC Topic 606	84.70%	83.10%	84.70%	83.10%
Contract assets	$ 0		$ 0		$ 0
Contract liabilities	$ 0		$ 0		$ 0
Number of real estate assets sold during the period | Asset	0	0	0	0
Disaggregation of Revenue Sources by Attributes [Abstract]
Revenue from contracts with customers	$ 6,831	$ 6,892	$ 19,343	$ 19,994
Bank owned life insurance	301	237	813	713
Other	1,028	657	2,773	1,989
Total	2,492	2,134	6,862	6,294
Service Charges on Deposit Accounts
Disaggregation of Revenue Sources by Attributes [Abstract]
Revenue from contracts with customers	2,883	3,166	8,323	9,166
Overdraft Fees [Member] | Retail [Member]
Disaggregation of Revenue Sources by Attributes [Abstract]
Revenue from contracts with customers	1,970	2,161	5,582	6,177
Overdraft Fees [Member] | Business [Member]
Disaggregation of Revenue Sources by Attributes [Abstract]
Revenue from contracts with customers	361	408	1,123	1,153
Account Service Charges [Member] | Retail [Member]
Disaggregation of Revenue Sources by Attributes [Abstract]
Revenue from contracts with customers	552	519	1,609	1,607
Account Service Charges [Member] | Business [Member]
Disaggregation of Revenue Sources by Attributes [Abstract]
Revenue from contracts with customers	0	78	9	229
Other Deposit Related Income [Member]
Disaggregation of Revenue Sources by Attributes [Abstract]
Revenue from contracts with customers	713	727	2,079	2,158
ATM Fees [Member] | Retail [Member]
Disaggregation of Revenue Sources by Attributes [Abstract]
Revenue from contracts with customers	373	374	1,041	1,077
ATM Fees [Member] | Business [Member]
Disaggregation of Revenue Sources by Attributes [Abstract]
Revenue from contracts with customers	9	10	26	26
Other [Member] | Retail [Member]
Disaggregation of Revenue Sources by Attributes [Abstract]
Revenue from contracts with customers	240	219	703	656
Other [Member] | Business [Member]
Disaggregation of Revenue Sources by Attributes [Abstract]
Revenue from contracts with customers	91	124	309	399
Interchange Income [Member]
Disaggregation of Revenue Sources by Attributes [Abstract]
Revenue from contracts with customers	2,785	2,486	7,744	7,236
Investment and Insurance Commissions [Member]
Disaggregation of Revenue Sources by Attributes [Abstract]
Revenue from contracts with customers	450	513	1,197	1,434
Asset Management Revenue [Member]
Disaggregation of Revenue Sources by Attributes [Abstract]
Revenue from contracts with customers	292	274	823	826
Transaction Based Revenue [Member]
Disaggregation of Revenue Sources by Attributes [Abstract]
Revenue from contracts with customers	$ 158	$ 239	$ 374	$ 608

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Fair Value Disclosures, Changes in Fair Value for Financial Assets (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Changes in fair value for financial assets [Abstract]
Equity Securities at fair value, net gains (losses)			$ 167	$ (170)
Loans held for sale, net gains (losses)			822	(120)
Capitalized mortgage loan servicing rights, net gains (losses)			(9,258)	694
Impairment charges recognized [Abstract]
Collateral dependent loans, carrying amount	$ 2,200		2,200		$ 3,500
Collateral dependent loans, valuation allowance	900		900		1,500
Additional provision for loan losses on impaired loans	500	$ 100	800	500
Other real estate, carrying amount	100		100		200
Other real estate, valuation allowance	100		100		$ 100
Other real estate, additional charge	$ 70	$ 40	80	40
Securities [Member]
Changes in fair value for financial assets [Abstract]
Equity Securities at fair value, net gains (losses)			167	(170)
Mortgage Loans [Member]
Changes in fair value for financial assets [Abstract]
Loans held for sale, net gains (losses)			822	(120)
Mortgage Loan Servicing, Net [Member]
Changes in fair value for financial assets [Abstract]
Capitalized mortgage loan servicing rights, net gains (losses)			$ (9,258)	$ 694

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Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands		Sep. 30, 2019	Dec. 31, 2018
Assets [Abstract]
Interest bearing deposits - time		$ 499	$ 595
Equity securities at fair value		0	393
Securities available for sale		439,592	427,926
Federal Home Loan Bank and Federal Reserve Bank Stock		18,359	18,359
Liabilities [Abstract]
Other borrowings		63,974	25,700
Subordinated debentures		39,439	39,388
Reciprocal deposits included in deposits with no stated maturity		367,180	123,080
Reciprocal deposits included in deposits with stated maturity		49,020	58,992
Recorded Book Balance [Member]
Assets [Abstract]
Cash and due from banks		38,662	23,350
Interest bearing deposits		43,755	46,894
Interest bearing deposits - time		499	595
Equity securities at fair value			393
Securities available for sale		439,592	427,926
Federal Home Loan Bank and Federal Reserve Bank Stock		18,359	18,359
Net loans and loans held for sale		2,820,278	2,643,856
Accrued interest receivable		10,480	10,164
Derivative financial instruments		7,389	5,155
Liabilities [Abstract]
Deposits with no stated maturity	[1]	2,429,013	2,197,494
Deposits with stated maturity	[1]	623,299	715,934
Other borrowings		63,974	25,700
Subordinated debentures		39,439	39,388
Accrued interest payable		1,610	1,646
Derivative financial instruments		5,657	2,326
Fair Value [Member]
Assets [Abstract]
Cash and due from banks		38,662	23,350
Interest bearing deposits		43,755	46,894
Interest bearing deposits - time		500	594
Equity securities at fair value			393
Securities available for sale		439,592	427,926
Net loans and loans held for sale		2,841,484	2,606,256
Accrued interest receivable		10,480	10,164
Derivative financial instruments		7,389	5,155
Liabilities [Abstract]
Deposits with no stated maturity		2,429,013	2,197,494
Deposits with stated maturity		623,916	711,312
Other borrowings		63,930	25,706
Subordinated debentures		32,427	35,021
Accrued interest payable		1,610	1,646
Derivative financial instruments		5,657	2,326
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets [Abstract]
Cash and due from banks		38,662	23,350
Interest bearing deposits		43,755	46,894
Interest bearing deposits - time		0	0
Equity securities at fair value			393
Securities available for sale		0	0
Net loans and loans held for sale		0	41,471
Accrued interest receivable		1	22
Derivative financial instruments		0	0
Liabilities [Abstract]
Deposits with no stated maturity		2,429,013	2,197,494
Deposits with stated maturity		0	0
Other borrowings		0	0
Subordinated debentures		0	0
Accrued interest payable		100	114
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		500	594
Equity securities at fair value			0
Securities available for sale		439,592	427,926
Net loans and loans held for sale		125,013	44,753
Accrued interest receivable		1,995	1,789
Derivative financial instruments		7,389	5,155
Liabilities [Abstract]
Deposits with no stated maturity		0	0
Deposits with stated maturity		623,916	711,312
Other borrowings		63,930	25,706
Subordinated debentures		32,427	35,021
Accrued interest payable		1,510	1,532
Derivative financial instruments		5,657	2,326
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
Equity securities at fair value			0
Securities available for sale		0	0
Net loans and loans held for sale		2,716,471	2,520,032
Accrued interest receivable		8,484	8,353
Derivative financial instruments		0	0
Liabilities [Abstract]
Deposits with no stated maturity		0	0
Deposits with stated maturity		0	0
Other borrowings		0	0
Subordinated debentures		0	0
Accrued interest payable		0	0
Derivative financial instruments		$ 0	$ 0

[1] Deposits with no stated maturity include reciprocal deposits with a recorded book balance of $367.180 million and $123.080 million at September 30, 2019 and December 31, 2018, respectively. Deposits with a stated maturity include reciprocal deposits with a recorded book balance of $49.020 million and $58.992 million at September 30, 2019 and December 31, 2018, respectively.

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Revenue from Contracts with Customers

9 Months Ended

Sep. 30, 2019

Revenue from Contracts with Customers [Abstract]

Revenue from Contracts with Customers

15. Revenue from Contracts with Customers

We account for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. We derive the majority of our revenue from financial instruments and their related contractual rights and obligations which for the most part are excluded from the scope of this topic.  These sources of revenue that are excluded from the scope of this topic include interest income, net gains on mortgage loans, net gains (losses) on securities, mortgage loan servicing, net and bank owned life insurance and were approximately 84.7% and 83.1% of total revenues at September 30, 2019 and 2018, respectively.

Material sources of revenue that are included in the scope of this topic include service charges on deposit accounts, other deposit related income, interchange income and investment and insurance commissions and are discussed in the following paragraphs.  Generally these sources of revenue are earned at the time the service is delivered or over the course of a monthly period and do not result in any contract asset or liability balance at any given period end.  As a result, there were no contract assets or liabilities recorded as of September 30, 2019 and December 31, 2018.

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

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

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

Net (gains) losses on other real estate and repossessed assets:  We record a gain or loss from the sale of other real estate when control of the property transfers to the buyer, which generally occurs at the time of an executed deed.  If we were to finance the sale of other real estate to the buyer, we would assess whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction is probable.  Once these criteria are met, the other real estate asset would be derecognized and the gain or loss on sale would be recorded upon the transfer of control of the property to the buyer.  There were no other real estate properties sold during the three and nine month periods ending September 30, 2019 and 2018 that were financed by us.

Disaggregation of our revenue sources by attribute follows:

Three months ending September 30, 2019

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

Three months ending September 30, 2018

	Service Charges on Deposit Accounts		Other Deposit Related Income		Interchange Income		Investment and Insurance Commissions		Total
	(In thousands)
Retail
Overdraft fees	$	2,161	$	-	$	-	$	-	$	2,161
Account service charges		519		-		-		-		519
ATM fees		-		374		-		-		374
Other		-		219		-		-		219
Business
Overdraft fees		408		-		-		-		408
Account service charges		78		-		-		-		78
ATM fees		-		10		-		-		10
Other		-		124		-		-		124
Interchange income		-		-		2,486		-		2,486
Asset management revenue		-		-		-		274		274
Transaction based revenue		-		-		-		239		239
Total	$	3,166	$	727	$	2,486	$	513	$	6,892
Reconciliation to Condensed Consolidated Statement of Operations:
Non-interest income - other:
Other deposit related income									$	727
Investment and insurance commissions										513
Bank owned life insurance										237
Other										657
Total									$	2,134

Nine months ending September 30, 2019

	Service Charges on Deposit Accounts		Other Deposit Related Income		Interchange Income		Investment and Insurance Commissions		Total
	(In thousands)
Retail
Overdraft fees	$	5,582	$	-	$	-	$	-	$	5,582
Account service charges		1,609		-		-		-		1,609
ATM fees		-		1,041		-		-		1,041
Other		-		703		-		-		703
Business
Overdraft fees		1,123		-		-		-		1,123
Account service charges		9		-		-		-		9
ATM fees		-		26		-		-		26
Other		-		309		-		-		309
Interchange income		-		-		7,744		-		7,744
Asset management revenue		-		-		-		823		823
Transaction based revenue		-		-		-		374		374
Total	$	8,323	$	2,079	$	7,744	$	1,197	$	19,343
Reconciliation to Condensed Consolidated Statement of Operations:
Non-interest income - other:
Other deposit related income									$	2,079
Investment and insurance commissions										1,197
Bank owned life insurance										813
Other										2,773
Total									$	6,862

Nine months ending September 30, 2018

	Service Charges on Deposit Accounts		Other Deposit Related Income		Interchange Income		Investment and Insurance Commissions		Total
	(In thousands)
Retail
Overdraft fees	$	6,177	$	-	$	-	$	-	$	6,177
Account service charges		1,607		-		-		-		1,607
ATM fees		-		1,077		-		-		1,077
Other		-		656		-		-		656
Business
Overdraft fees		1,153		-		-		-		1,153
Account service charges		229		-		-		-		229
ATM fees		-		26		-		-		26
Other		-		399		-		-		399
Interchange income		-		-		7,236		-		7,236
Asset management revenue		-		-		-		826		826
Transaction based revenue		-		-		-		608		608
Total	$	9,166	$	2,158	$	7,236	$	1,434	$	19,994
Reconciliation to Condensed Consolidated Statement of Operations:
Non-interest income - other:
Other deposit related income									$	2,158
Investment and insurance commissions										1,434
Bank owned life insurance										713
Other										1,989
Total									$	6,294

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Securities (Tables)

9 Months Ended

Sep. 30, 2019

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, 2019
U.S. agency	$	15,145	$	153	$	15	$	15,283
U.S. agency residential mortgage-backed		146,128		1,806		214		147,720
U.S. agency commercial mortgage-backed		11,182		155		18		11,319
Private label mortgage-backed		31,195		686		55		31,826
Other asset backed		94,799		185		199		94,785
Obligations of states and political subdivisions		99,352		1,880		93		101,139
Corporate		32,444		1,237		3		33,678
Trust preferred		1,966		-		146		1,820
Foreign government		2,020		4		2		2,022
Total	$	434,231	$	6,106	$	745	$	439,592
December 31, 2018
U.S. agency	$	20,198	$	9	$	193	$	20,014
U.S. agency residential mortgage-backed		124,777		817		1,843		123,751
U.S. agency commercial mortgage-backed		5,909		1		184		5,726
Private label mortgage-backed		29,735		321		637		29,419
Other asset backed		83,481		86		248		83,319
Obligations of states and political subdivisions		130,244		257		2,946		127,555
Corporate		34,866		29		586		34,309
Trust preferred		1,964		-		145		1,819
Foreign government		2,050		-		36		2,014
Total	$	433,224	$	1,520	$	6,818	$	427,926

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, 2019
U.S. agency	$	2,189	$	4	$	2,888	$	11	$	5,077	$	15
U.S. agency residential mortgage-backed		26,084		33		16,902		181		42,986		214
U.S. agency commercial mortgage-backed		1,987		12		882		6		2,869		18
Private label mortgage- backed		5,636		6		612		49		6,248		55
Other asset backed		23,926		100		11,487		99		35,413		199
Obligations of states and political subdivisions		14,457		37		4,362		56		18,819		93
Corporate		285		2		999		1		1,284		3
Trust preferred		900		100		920		46		1,820		146
Foreign government		-		-		1,519		2		1,519		2
Total	$	75,464	$	294	$	40,571	$	451	$	116,035	$	745
December 31, 2018
U.S. agency	$	7,150	$	46	$	11,945	$	147	$	19,095	$	193
U.S. agency residential mortgage-backed		18,374		180		48,184		1,663		66,558		1,843
U.S. agency commercial mortgage-backed		566		3		5,094		181		5,660		184
Private label mortgage-backed		8,273		57		16,145		580		24,418		637
Other asset backed		53,043		160		10,235		88		63,278		248
Obligations of states and political subdivisions		25,423		262		80,701		2,684		106,124		2,946
Corporate		17,758		343		9,222		243		26,980		586
Trust preferred		939		61		880		84		1,819		145
Foreign government		-		-		2,014		36		2,014		36
Total	$	131,526	$	1,112	$	184,420	$	5,706	$	315,946	$	6,818

Private Label Mortgage Backed Securities Below Investment Grade

At September 30, 2019, two private label mortgage-backed securities had credit related OTTI and are summarized as follows:

	Senior Security		Super Senior Security		Total
	(In thousands)
Fair value	$	645	$	647	$	1,292
Amortized cost		552		479		1,031
Non-credit unrealized loss		-		-		-
Unrealized gain		93		168		261
Cumulative credit related OTTI		757		457		1,214

Credit Losses Recognized in Earnings on Securities Available for Sale

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

	Three months ended September 30,					Nine months ended September 30,
	2019			2018		2019			2018
	(In thousands)					(In thousands)
Balance at beginning of period	$	1,594		$	1,594	$	1,594		$	1,594
Additions to credit losses on securities for which no previous OTTI was recognized		-			-		-			-
Increases to credit losses on securities for which OTTI was previously recognized		-			-		-			-
Reduction(1)		(380	)		-		(380	)		-
Balance at end of period	$	1,214		$	1,594	$	1,214		$	1,594

⁽¹⁾During the third quarter of 2019 one security with previously recorded OTTI was settled and balance is now zero.

Amortized Cost and Fair Value of Securities Available for Sale by Contractual Maturity

The amortized cost and fair value of securities available for sale at September 30, 2019, by contractual maturity, follow:

	Amortized Cost		Fair Value
	(In thousands)
Maturing within one year	$	13,331	$	13,347
Maturing after one year but within five years		53,809		54,524
Maturing after five years but within ten years		47,726		49,239
Maturing after ten years		36,061		36,832
		150,927		153,942
U.S. agency residential mortgage-backed		146,128		147,720
U.S. agency commercial mortgage-backed		11,182		11,319
Private label mortgage-backed		31,195		31,826
Other asset backed		94,799		94,785
Total	$	434,231	$	439,592

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		Gains (1)		Losses
	(In thousands)
2019	$	44,305	$	169	$	32
2018	$	31,445	$	81	$	126

(1) 2018 excludes a $0.144 million gain on the sale of 1,000 VISA class B shares.

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Fair Value Disclosures

9 Months Ended

Sep. 30, 2019

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 (equity securities at fair value or available for sale) are classified as Level 1 of the valuation hierarchy.  Level 1 securities include certain preferred stocks included in our equity securities at fair value for which there are quoted prices in active markets (at December 31, 2018).  If quoted market prices are not available for the specific security, then fair values are estimated by (1) using quoted market prices of securities with similar characteristics, (2) matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices, or (3) a discounted cash flow analysis whose significant fair value inputs can generally be verified and do not typically involve judgment by management. These securities are classified as Level 2 of the valuation hierarchy and primarily include agency securities, private label mortgage-backed securities, other asset backed securities, obligations of states and political subdivisions, trust preferred securities, corporate securities and foreign government securities.

Loans held for sale:  The fair value of mortgage loans held for sale, carried at fair value is based on agency cash window loan pricing for comparable assets (recurring Level 2) and the fair value of mortgage loans held for sale, carried at the lower of cost or fair value (December 31, 2018) is based on a quoted sales price (non-recurring Level 1).  The fair value of Loans held for sale, carried at the lower of cost or fair value at September 30, 2019 exceeded their cost and therefore were carried at cost and not included in the table that follows.

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 for loan losses represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At September 30, 2019 and December 31, 2018, all of our impaired loans were evaluated based on either the fair value of the collateral or the present value of expected future cash flows discounted at the loan’s effective interest rate. When the fair value of the collateral is based on an appraised value or when an appraised value is not available we record the impaired loan as nonrecurring Level 3.  These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments can be significant and thus will typically result in a Level 3 classification of the inputs for determining fair value.

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

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

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

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

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

			Fair Value Measurements Using
	Fair Value Measure- ments		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Un- observable Inputs (Level 3)
	(In thousands)
September 30, 2019:
Measured at Fair Value on a Recurring Basis
Assets
Securities available for sale
U.S. agency	$	15,283	$	-	$	15,283	$	-
U.S. agency residential mortgage-backed		147,720		-		147,720		-
U.S. agency commercial mortgage-backed		11,319		-		11,319		-
Private label mortgage-backed		31,826		-		31,826		-
Other asset backed		94,785		-		94,785		-
Obligations of states and political subdivisions		101,139		-		101,139		-
Corporate		33,678		-		33,678		-
Trust preferred		1,820		-		1,820		-
Foreign government		2,022		-		2,022		-
Loans held for sale, carried at fair value		87,358		-		87,358		-
Capitalized mortgage loan servicing rights		16,906		-		-		16,906
Derivatives (1)		7,389		-		7,389		-
Liabilities
Derivatives (2)		5,657		-		5,657		-
Measured at Fair Value on a Non-recurring Basis:
Assets
Impaired loans (3)
Commercial
Income producing - real estate		115		-		-		115
Land, land development & construction-real estate		87		-		-		87
Commercial and industrial		706		-		-		706
Mortgage
1-4 family		666		-		-		666
Resort lending		60		-		-		60
Home equity - 1st lien		83		-		-		83
Home equity - 2nd lien		199		-		-		199
Installment
Home equity - 1st lien		9		-		-		9
Home equity - 2nd lien		70		-		-		70
Boat lending		103		-		-		103
Recreational vehicle lending		1		-		-		1
Other		86		-		-		86
Other real estate (4)
Mortgage
1-4 family		23		-		-		23
Home equity - 2nd lien		57		-		-		57

(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, 2018:
Measured at Fair Value on a Recurring Basis
Assets
Equity securities at fair value	$	393	$	393	$	-	$	-
Securities available for sale
U.S. agency		20,014		-		20,014		-
U.S. agency residential mortgage-backed		123,751		-		123,751		-
U.S. agency commercial mortgage-backed		5,726		-		5,726		-
Private label mortgage-backed		29,419		-		29,419		-
Other asset backed		83,319		-		83,319		-
Obligations of states and political subdivisions		127,555		-		127,555		-
Corporate		34,309		-		34,309		-
Trust preferred		1,819		-		1,819		-
Foreign government		2,014		-		2,014		-
Loans held for sale, carried at fair value		44,753		-		44,753		-
Capitalized mortgage loan servicing rights		21,400		-		-		21,400
Derivatives (1)		5,155		-		5,155		-
Liabilities
Derivatives (2)		2,326		-		2,326		-
Measured at Fair Value on a Non-recurring Basis:
Assets
Loans held for sale, carried at the lower of cost or fair value		41,471		41,471		-		-
Impaired loans (3)
Commercial
Income producing - real estate		217		-		-		217
Land, land development & construction-real estate		106		-		-		106
Commercial and industrial		2,243		-		-		2,243
Mortgage
1-4 family		333		-		-		333
Resort lending		572		-		-		572
Other real estate (4)
Mortgage
1-4 family		95		-		-		95
Home equity - 2nd lien		59		-		-		59

(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.

There were no transfers between Level 1 and Level 2 during the nine months ended September 30, 2019 and 2018.

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

	Changes in Fair Values for the Nine-Month Periods Ended September 30 for Items Measured at Fair Value Pursuant to Election of the Fair Value Option
	Net Gains (Losses) on Assets						Mortgage			Total Change in Fair Values Included in Current
	Securities			Mortgage Loans			Loan Servicing, net			Period Earnings
	(In thousands)
2019
Equity securities at fair value	$	167		$	-		$	-		$	167
Loans held for sale		-			822			-			822
Capitalized mortgage loan servicing rights		-			-			(9,258	)		(9,258	)
2018
Equity securities at fair value	$	(170	)	$	-		$	-		$	(170	)
Loans held for sale		-			(120	)		-			(120	)
Capitalized mortgage loan servicing rights		-			-			694			694

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, 2019 and 2018 relating to assets measured at fair value on a non-recurring basis:

• Loans which are measured for impairment using the fair value of collateral for collateral dependent loans had a carrying amount of $2.2 million, which is net of a valuation allowance of $0.9 million at September 30, 2019, and had a carrying amount of $3.5 million, which is net of a valuation allowance of $1.5 million at December 31, 2018.  The provision for loan losses included in our results of operations relating to impaired loans was a net expense of $0.5 million and $0.1 million for the three month periods ending September 30, 2019 and 2018, respectively, and a net expense of $0.8 million and $0.5 million for the nine month periods ending September 30, 2019 and 2018, respectively.

• Other real estate, which is measured using the fair value of the property, had a carrying amount of $0.1 million which is net of a valuation allowance of $0.1 million at September 30, 2019, and a carrying amount of $0.2 million, which is net of a valuation allowance of $0.1 million, at December 31, 2018. Charges included in our results of operations relating to other real estate measured at fair value were $0.07 million and $0.08 million during the three and nine month periods ended September 30, 2019, and were $0.04 million during each of the three and nine month periods ended September 30, 2018.

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

	Capitalized Mortgage Loan Servicing Rights
	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
	(In thousands)						(In thousands)
Beginning balance	$	17,894		$	21,848		$	21,400		$	15,699
Total gains (losses) realized and unrealized:
Included in results of operations		(3,145	)		(198	)		(9,258	)		694
Included in other comprehensive income (loss)		-			-			-			-
Purchases, issuances, settlements, maturities and calls		2,157			1,501			4,764			6,758
Transfers in and/or out of Level 3		-			-			-			-
Ending balance	$	16,906		$	23,151		$	16,906		$	23,151
Amount of total gains (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	$	(3,145	)	$	(198	)	$	(9,258	)	$	694

The fair value of our capitalized mortgage loan servicing rights has been determined based on a valuation model used by an independent third party as discussed above.  The significant unobservable inputs used in the fair value measurement of the capitalized mortgage loan servicing rights are discount rate, cost to service, ancillary income, float rate and prepayment rate.  Significant changes in all 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	Range			Weighted Average
	(In thousands)
September 30, 2019
Capitalized mortgage loan servicing rights	$	16,906	Present value of net	Discount rate	10.00% to 13.00		%		10.14	%
			servicing revenue	Cost to service	$	63 to $216		$	80
				Ancillary income	20 to 36				22
				Float rate		1.50	%		1.50	%
				Prepayment rate	7.01% to 29.80		%		16.08	%
December 31, 2018
Capitalized mortgage loan servicing rights	$	21,400	Present value of net	Discount rate	10.00% to 13.00		%		10.15	%
			servicing revenue	Cost to service	$	68 to $216		$	81
				Ancillary income	20 to 36				23
				Float rate		2.57	%		2.57	%
				Prepayment rate	6.68% to 78.78		%		10.54	%

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

	Asset Fair Value		Valuation Technique	Unobservable Inputs	Range		Weighted Average
	(In thousands)
September 30, 2019
Impaired loans
Commercial	$	908	Sales comparison approach	Adjustment for differences between comparable sales	(48.0)% to 6.3	%		(12.3	)%
Mortgage and Installment(1)		1,277	Sales comparison approach	Adjustment for differences between comparable sales	(61.4) to 65.2			(6.8	)
Other real estate
Mortgage		80	Sales comparison approach	Adjustment for differences between comparable sales	(36.4) to 16.3			(20.3	)
December 31, 2018
Impaired loans
Commercial(2)	$	2,566	Sales comparison approach	Adjustment for differences between comparable sales	(32.5)% to 60.0	%		(1.9	)%
Mortgage		905	Sales comparison approach	Adjustment for differences between comparable sales	(40.1) to 25.6			0.7
Other real estate
Mortgage		154	Sales comparison approach	Adjustment for differences between comparable sales	0.0 to 34.1			11.2

(1) In addition to the valuation techniques and unobservable inputs discussed above, at September 30, 2019 certain impaired collateral dependent installment loans totaling approximately $0.2 million are secured by collateral other than real estate.  For the majority of these loans, we apply internal discount rates to industry valuation guides.

(2) In addition to the valuation techniques and unobservable inputs discussed above, at December 31, 2018, we had an impaired collateral dependent commercial relationship that totaled $0.7 million that was secured by collateral other than real estate. Collateral securing this relationship primarily included accounts receivable, inventory and cash at December 31, 2018. Valuation techniques at December 31, 2018, included discounting financial statement values for each particular asset type. Discount rates used ranged from 20% to 80% of stated values at December 31, 2018.

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, 2019	$	87,358	$	2,079	$	85,279
December 31, 2018		44,753		1,257		43,496

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Securities

9 Months Ended

Sep. 30, 2019

Securities [Abstract]

Securities

3. Securities

Securities available for sale consist of the following:

	Amortized		Unrealized
	Cost		Gains		Losses		Fair Value
	(In thousands)
September 30, 2019
U.S. agency	$	15,145	$	153	$	15	$	15,283
U.S. agency residential mortgage-backed		146,128		1,806		214		147,720
U.S. agency commercial mortgage-backed		11,182		155		18		11,319
Private label mortgage-backed		31,195		686		55		31,826
Other asset backed		94,799		185		199		94,785
Obligations of states and political subdivisions		99,352		1,880		93		101,139
Corporate		32,444		1,237		3		33,678
Trust preferred		1,966		-		146		1,820
Foreign government		2,020		4		2		2,022
Total	$	434,231	$	6,106	$	745	$	439,592
December 31, 2018
U.S. agency	$	20,198	$	9	$	193	$	20,014
U.S. agency residential mortgage-backed		124,777		817		1,843		123,751
U.S. agency commercial mortgage-backed		5,909		1		184		5,726
Private label mortgage-backed		29,735		321		637		29,419
Other asset backed		83,481		86		248		83,319
Obligations of states and political subdivisions		130,244		257		2,946		127,555
Corporate		34,866		29		586		34,309
Trust preferred		1,964		-		145		1,819
Foreign government		2,050		-		36		2,014
Total	$	433,224	$	1,520	$	6,818	$	427,926

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, 2019
U.S. agency	$	2,189	$	4	$	2,888	$	11	$	5,077	$	15
U.S. agency residential mortgage-backed		26,084		33		16,902		181		42,986		214
U.S. agency commercial mortgage-backed		1,987		12		882		6		2,869		18
Private label mortgage- backed		5,636		6		612		49		6,248		55
Other asset backed		23,926		100		11,487		99		35,413		199
Obligations of states and political subdivisions		14,457		37		4,362		56		18,819		93
Corporate		285		2		999		1		1,284		3
Trust preferred		900		100		920		46		1,820		146
Foreign government		-		-		1,519		2		1,519		2
Total	$	75,464	$	294	$	40,571	$	451	$	116,035	$	745
December 31, 2018
U.S. agency	$	7,150	$	46	$	11,945	$	147	$	19,095	$	193
U.S. agency residential mortgage-backed		18,374		180		48,184		1,663		66,558		1,843
U.S. agency commercial mortgage-backed		566		3		5,094		181		5,660		184
Private label mortgage-backed		8,273		57		16,145		580		24,418		637
Other asset backed		53,043		160		10,235		88		63,278		248
Obligations of states and political subdivisions		25,423		262		80,701		2,684		106,124		2,946
Corporate		17,758		343		9,222		243		26,980		586
Trust preferred		939		61		880		84		1,819		145
Foreign government		-		-		2,014		36		2,014		36
Total	$	131,526	$	1,112	$	184,420	$	5,706	$	315,946	$	6,818

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 (loss).

U.S. agency, U.S. agency residential mortgage-backed securities and U.S. agency commercial mortgage backed securities — at September 30, 2019, we had 26 U.S. agency, 98 U.S. agency residential mortgage-backed and eight 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, 2019, we had 12 of this type of security whose fair value is less than amortized cost. Unrealized losses are primarily due to credit spread widening and increases in interest rates since their acquisition.

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

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

Other asset backed — at September 30, 2019, we had 40 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, 2019, we had 59 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, 2019, we had two 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, 2019, we had two trust preferred securities whose fair value is less than amortized cost. Both of our trust preferred securities are single issue securities issued by a trust subsidiary of a bank holding company. The pricing of trust preferred securities has suffered from credit spread widening. One of the securities is rated by a major rating agency as investment grade while the other one is non-rated. The non-rated issue is a relatively small bank and was never rated. The issuer of this non-rated trust preferred security, which had a total amortized cost of $1.0 million and total fair value of $0.90 million as of September 30, 2019, continues to have satisfactory credit metrics and make interest payments. As management does not intend to liquidate this security and it is more likely than not that we will not be required to sell this security prior to recovery of the unrealized loss, this decline is not deemed to be other than temporary.

Foreign government — at September 30, 2019, we had one foreign government security 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 this security and it is more likely than not that we will not be required to sell this security prior to recovery of this unrealized loss, this decline is not deemed to be other than temporary.

We recorded no credit related OTTI charges in our Condensed Consolidated Statements of Operations related to securities available for sale during the three and nine month periods ended September 30, 2019 and 2018, respectively.

At September 30, 2019, two private label mortgage-backed securities had credit related OTTI and are summarized as follows:

	Senior Security		Super Senior Security		Total
	(In thousands)
Fair value	$	645	$	647	$	1,292
Amortized cost		552		479		1,031
Non-credit unrealized loss		-		-		-
Unrealized gain		93		168		261
Cumulative credit related OTTI		757		457		1,214

Both of these securities are receiving principal and interest payments similar to principal reductions in the underlying collateral and have unrealized gains at September 30, 2019. The original amortized cost (current amortized cost excluding cumulative credit related OTTI) for each of these securities has been permanently adjusted downward for previously recorded credit related OTTI. The unrealized loss (based on original amortized cost) for 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,
	2019			2018		2019			2018
	(In thousands)					(In thousands)
Balance at beginning of period	$	1,594		$	1,594	$	1,594		$	1,594
Additions to credit losses on securities for which no previous OTTI was recognized		-			-		-			-
Increases to credit losses on securities for which OTTI was previously recognized		-			-		-			-
Reduction(1)		(380	)		-		(380	)		-
Balance at end of period	$	1,214		$	1,594	$	1,214		$	1,594

⁽¹⁾During the third quarter of 2019 one security with previously recorded OTTI was settled and balance is now zero.

The amortized cost and fair value of securities available for sale at September 30, 2019, by contractual maturity, follow:

	Amortized Cost		Fair Value
	(In thousands)
Maturing within one year	$	13,331	$	13,347
Maturing after one year but within five years		53,809		54,524
Maturing after five years but within ten years		47,726		49,239
Maturing after ten years		36,061		36,832
		150,927		153,942
U.S. agency residential mortgage-backed		146,128		147,720
U.S. agency commercial mortgage-backed		11,182		11,319
Private label mortgage-backed		31,195		31,826
Other asset backed		94,799		94,785
Total	$	434,231	$	439,592

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

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

			Realized
	Proceeds		Gains (1)		Losses
	(In thousands)
2019	$	44,305	$	169	$	32
2018	$	31,445	$	81	$	126

(1) 2018 excludes a $0.144 million gain on the sale of 1,000 VISA class B shares.

Certain preferred stocks which were all sold during the first quarter of 2019 had been classified as equity securities at fair value in our Condensed Consolidated Statement of Financial Condition.  During the nine months ended September 30, 2019 and 2018 we recognized gains (losses) on these preferred stocks of $0.167 million and $(0.170) million, respectively, that are included in net gains (losses) on securities in the Condensed Consolidated Statements of Operations.  Zero and $(0.170) million of these gains (losses) during the nine months ended September 30, 2019 and 2018, respectively relate to preferred stock still held at each respective period end.

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Goodwill and Other Intangibles

9 Months Ended

Sep. 30, 2019

Goodwill and Other Intangibles [Abstract]

Goodwill and other Intangibles

7. Goodwill and other Intangibles

The following table summarizes intangible assets, net of amortization:

	September 30, 2019				December 31, 2018
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
	(In thousands)
Amortized intangible assets - core deposits	$	11,916	$	6,318	$	11,916	$	5,501
Unamortized intangible assets - goodwill	$	28,300			$	28,300

A summary of estimated core deposit intangible amortization at September 30, 2019 follows:

	(In thousands)
Three months ending December 31, 2019	$	272
2020		1,020
2021		970
2022		785
2023		547
2024 and thereafter		2,004
Total	$	5,598

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Condensed Consolidated Statements of Financial Condition (unaudited) (Parenthetical) - $ / shares	Sep. 30, 2019	Dec. 31, 2018
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)	22,480,748	23,579,725
Common stock, shares outstanding (in shares)	22,480,748	23,579,725

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

9 Months Ended

Sep. 30, 2019

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

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 (Losses) on Cash Flow Hedges			Total
	(In thousands)
For the three months ended September 30,
2019
Balances at beginning of period	$	3,040		$	(5,798	)	$	(1,673	)	$	(4,431	)
Other comprehensive income (loss) before reclassifications		1,196			-			(58	)		1,138
Amounts reclassified from AOCL		-			-			(80	)		(80	)
Net current period other comprehensive income (loss)		1,196			-			(138	)		1,058
Balances at end of period	$	4,236		$	(5,798	)	$	(1,811	)	$	(3,373	)
2018
Balances at beginning of period	$	(4,437	)	$	(5,798	)	$	1,021		$	(9,214	)
Other comprehensive income (loss) before reclassifications		(925	)		-			307			(618	)
Amounts reclassified from AOCL		-			-			(57	)		(57	)
Net current period other comprehensive income (loss)		(925	)		-			250			(675	)
Balances at end of period	$	(5,362	)	$	(5,798	)	$	1,271		$	(9,889	)
For the nine months ended September 30,
2019
Balances at beginning of period	$	(4,185	)	$	(5,798	)	$	(125	)	$	(10,108	)
Other comprehensive income (loss) before reclassifications		8,529			-			(1,376	)		7,153
Amounts reclassified from AOCL		(108	)		-			(310	)		(418	)
Net current period other comprehensive income (loss)		8,421			-			(1,686	)		6,735
Balances at end of period	$	4,236		$	(5,798	)	$	(1,811	)	$	(3,373	)
2018
Balances at beginning of period	$	(470	)	$	(5,798	)	$	269		$	(5,999	)
Other comprehensive income (loss) before reclassifications		(4,928	)		-			1,106			(3,822	)
Amounts reclassified from AOCL		36			-			(104	)		(68	)
Net current period other comprehensive income (loss)		(4,892	)		-			1,002			(3,890	)
Balances at end of period	$	(5,362	)	$	(5,798	)	$	1,271		$	(9,889	)

Reclassifications Out of Each Component of AOCL

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

AOCL Component	Amount Reclassified From AOCL			Affected Line Item in Condensed  Consolidated Statements of Operations
	(In thousands)
2019
Unrealized gains (losses) on securities available for sale
	$	-		Net gains (losses) on securities
		-		Net impairment loss recognized in earnings
		-		Total reclassifications before tax
		-		Income tax expense
	$	-		Reclassifications, net of tax
Unrealized gains (losses) on cash flow hedges
	$	(102	)	Interest expense
		(22	)	Income tax expense
	$	(80	)	Reclassification, net of tax
	$	80		Total reclassifications for the period, net of tax
2018
Unrealized gains (losses) on securities available for sale
	$	-		Net gains (losses) on securities
		-		Net impairment loss recognized in earnings
		-		Total reclassifications before tax
		-		Income tax expense
	$	-		Reclassifications, net of tax
Unrealized gains (losses) on cash flow hedges
	$	(73	)	Interest expense
		(16	)	Income tax expense
	$	(57	)	Reclassification, net of tax
	$	57		Total reclassifications for the period, net of tax

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

AOCL Component	Amount Reclassified From AOCL			Affected Line Item in Condensed  Consolidated Statements of Operations
	(In thousands)
2019
Unrealized gains (losses) on securities available for sale
	$	137		Net gains (losses) on securities
		-		Net impairment loss recognized in earnings
		137		Total reclassifications before tax
		29		Income tax expense
	$	108		Reclassifications, net of tax
Unrealized gains (losses) on cash flow hedges
	$	(393	)	Interest expense
		(83	)	Income tax expense
	$	(310	)	Reclassification, net of tax
	$	418		Total reclassifications for the period, net of tax
2018
Unrealized gains (losses) on securities available for sale
	$	(45	)	Net gains (losses) on securities
		-		Net impairment loss recognized in earnings
		(45	)	Total reclassifications before tax
		(9	)	Income tax expense
	$	(36	)	Reclassifications, net of tax
Unrealized gains (losses) on cash flow hedges
	$	(132	)	Interest expense
		(28	)	Income tax expense
	$	(104	)	Reclassification, net of tax
	$	68		Total reclassifications for the period, net of tax

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Share Based Compensation (Tables)

9 Months Ended

Sep. 30, 2019

Share Based Compensation [Abstract]

Restricted Stock and Performance Stock Units Granted

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Restricted stock		8,000		-		64,267		53,420
PSU		-		-		22,016		19,986

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, 2019		211,421		$	6.48
Granted		-
Exercised		(70,299	)		9.98
Forfeited		-
Expired		(1,116	)		22.35
Outstanding at September 30, 2019		140,006		$	4.60		3.2	$	2,340
Vested and expected to vest at September 30, 2019		140,006		$	4.60		3.2	$	2,340
Exercisable at September 30, 2019		140,006		$	4.60		3.2	$	2,340

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, 2019		258,419		$	19.00
Granted		86,283			22.87
Vested		(85,978	)		14.57
Forfeited		(12,998	)		22.85
Outstanding at September 30, 2019		245,726		$	21.72

Information Regarding Options Exercised

Certain information regarding options exercised during the periods follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
	(In thousands)
Intrinsic value	$	32	$	153	$	868	$	1,827
Cash proceeds received	$	6	$	58	$	701	$	1,042
Tax benefit realized	$	6	$	32	$	182	$	384

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Condensed Consolidated Statements of Shareholders' Equity (unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Accumulated Deficit [Member]	Accumulated Other Comprehensive Loss [Member]	Total
Balance at beginning of period at Dec. 31, 2017	$ 324,986	$ (54,054)	$ (5,999)	$ 264,933
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income		29,903		29,903
Cash dividends declared	0	(10,446)	0	(10,446)
Acquisition of TCSB Bancorp, Inc.	64,536	0	0	64,536
Repurchase of common stock	0
Issuance of common stock	202	0	0	202
Share based compensation	1,293	0	0	1,293
Share based compensation withholding obligation	(1,327)	0	0	(1,327)
Other comprehensive income (loss)	0	0	(3,890)	(3,890)
Balances at end of period at Sep. 30, 2018	389,690	(34,597)	(9,889)	345,204
Balance at beginning of period at Jun. 30, 2018	389,196	(42,899)	(9,214)	337,083
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income		11,925		11,925
Cash dividends declared	0	(3,623)	0	(3,623)
Issuance of common stock	55	0	0	55
Share based compensation	445	0	0	445
Share based compensation withholding obligation	(6)	0	0	(6)
Other comprehensive income (loss)	0	0	(675)	(675)
Balances at end of period at Sep. 30, 2018	389,690	(34,597)	(9,889)	345,204
Balance at beginning of period at Dec. 31, 2018	377,372	(28,270)	(10,108)	338,994
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income		32,556		32,556
Cash dividends declared	0	(12,507)	0	(12,507)
Repurchase of common stock	(26,284)	0	0	(26,284)
Issuance of common stock	282	0	0	282
Share based compensation	1,348	0	0	1,348
Share based compensation withholding obligation	(879)	0	0	(879)
Other comprehensive income (loss)	0	0	6,735	6,735
Balances at end of period at Sep. 30, 2019	351,839	(8,221)	(3,373)	340,245
Balance at beginning of period at Jun. 30, 2019	351,894	(16,617)	(4,431)	330,846
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income		12,445		12,445
Cash dividends declared	0	(4,049)	0	(4,049)
Repurchase of common stock	(502)	0	0	(502)
Issuance of common stock	0	0	0	0
Share based compensation	460	0	0	460
Share based compensation withholding obligation	(13)	0	0	(13)
Other comprehensive income (loss)	0	0	1,058	1,058
Balances at end of period at Sep. 30, 2019	$ 351,839	$ (8,221)	$ (3,373)	$ 340,245

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Goodwill and Other Intangibles (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Amortized intangible assets - core deposits [Abstract]
Gross Carrying Amount	$ 11,916	$ 11,916
Accumulated Amortization	6,318	5,501
Unamortized intangible assets - goodwill [Abstract]
Gross Carrying Amount	28,300	$ 28,300
Summary of estimated core deposit intangible amortization [Abstract]
Three months ending December 31, 2019	272
2020	1,020
2021	970
2022	785
2023	547
2024 and thereafter	2,004
Total	$ 5,598

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Share Based Compensation, Options Exercised During the Periods (Details) - Stock Options [Member] - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Information regarding options exercised [Abstract]
Intrinsic value	$ 32	$ 153	$ 868	$ 1,827
Cash proceeds received	6	58	701	1,042
Tax benefit realized	$ 6	$ 32	$ 182	$ 384

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Leases (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019 USD ($)		Sep. 30, 2019 USD ($)
Components of operating leases [Abstract]
Operating lease cost	$ 565		$ 1,692
Variable lease cost	43		115
Short-term lease cost	4		14
Total	612		1,821
Supplemental balance sheet information related to operating leases [Abstract]
Lease right of use asset	6,244	[1]	6,244	[1]
Lease liabilities	$ 6,257	[2]	$ 6,257	[2]
Weighted average remaining lease term (years)	5 years 6 months		5 years 6 months
Weighted average discount rate	3.20%		3.20%
Maturities of lease liabilities [Abstract]
Three months ending December 31, 2019	$ 543		$ 543
2020	1,790		1,790
2021	1,269		1,269
2022	963		963
2023	925		925
2024 and thereafter	1,381		1,381
Total lease payments	6,871		6,871
Less imputed interest	(614)		(614)
Total	$ 6,257	[2]	$ 6,257	[2]

[1] Included in Accrued income and other assets in our Condensed Consolidated Statements of Financial Condition.

[2] Included in Accrued expenses and other liabilities in our Condensed Consolidated Statements of Financial Condition.

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New Accounting Standards

9 Months Ended

Sep. 30, 2019

New Accounting Standards [Abstract]

New Accounting Standards

2. New Accounting Standards

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

• Replaces the existing incurred loss impairment guidance and establishes a single allowance framework for financial assets carried at amortized cost, which will reflect our estimate of credit losses over the full remaining expected life of the financial assets and will consider expected future changes in macroeconomic conditions.

• Eliminates existing guidance for purchase credit impaired (“PCI”) loans, and requires recognition of the nonaccretable difference as an increase to the allowance for expected credit losses on financial assets purchased with more than insignificant credit deterioration since origination, which will be offset by an increase in the recorded investment of the related loans.

• Requires inclusion of expected recoveries, limited to the cumulative amount of prior write-offs, when estimating the allowance for credit losses for in scope financial assets (including collateral dependent assets).

• Amends existing impairment guidance for securities available for sale to incorporate an allowance, which will allow for reversals of credit impairments in the event that the credit of an issuer improves. Credit losses on securities available for sale are limited to the amount of the decline in fair value regardless of what the credit loss model would show for impairment.

• Generally requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption.

• Is effective for us on January 1, 2020.

We began evaluating this ASU in 2016 and established a company-wide, cross-discipline governance structure, which provides implementation oversight. We continue to test and refine our current expected credit loss models that satisfy the requirements of this ASU. Oversight and testing, as well as efforts to meet expanded disclosure requirements, will extend through the remainder of 2019.  We expect that the allowance related to our loans will increase as it will cover credit losses over the full remaining expected life of the portfolio. We currently intend to estimate losses over approximately a two year forecast period using the Federal Open Market Committee median economic projections (which are typically published in March of each year) as well as considering other economic forecast sources, and then revert to longer term historical loss experience to estimate losses over more extended periods. We currently expect the increase in the allowance for loan losses to be in the range of $9.0 million to $11.0 million, primarily driven by the longer contractual maturities of our mortgage and consumer installment loan segments.  This estimated range is based on our September 30, 2019 loan portfolio and currently available economic forecasts. The mid-point of the range utilizes a two year forecast period and a two year reversion period. This estimated range also includes a qualitative adjustment to the allowance for loan losses. In addition, we currently expect this ASU to increase the allowance for losses related to unfunded loan commitments between $0.5 million and $1.5 million.  These estimates are subject to further refinement based on continuing reviews, testing, enhancements and approvals of models, methodologies and judgments. The ultimate impact will depend upon the nature and characteristics of our loan portfolio at the adoption date, the macroeconomic conditions and forecasts at that date, further regulatory or accounting guidance and other management judgments.  We currently do not expect to record any allowance for loss on available for sale securities. The ultimate impact will depend upon the nature and characteristics of our securities available for sale (including issuer specific matters) at the adoption date, the macroeconomic conditions and forecasts at that date, and other management judgments.

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

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”.  This ASU amends existing guidance related to the accounting for leases. These amendments, among other things, 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 was effective for us on January 1, 2019 and did not have a material impact on our consolidated operating results or financial condition.  Based on 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.  The primary impact was the recognition of certain operating leases on our Condensed Consolidated Statements of Financial Condition which resulted in the recording of right of use (“ROU”) assets and offsetting lease liabilities each totaling approximately $7.7 million at January 1, 2019.  See note #16.

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 was effective for us on January 1, 2019, and did not have a material impact on our consolidated operating results or financial condition.

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Derivative Financial Instruments

9 Months Ended

Sep. 30, 2019

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, 2019
	Notional Amount		Average Maturity (years)		Fair Value
	(Dollars in thousands)
Fair value hedge designation - Pay-fixed interest rate swap agreements	$	7,117		9.6	$	(391	)
Cash flow hedge designation
Pay-fixed interest rate swap agreements	$	25,000		1.8	$	(220	)
Interest rate cap agreements		150,000		2.8		318
Total	$	175,000		2.7	$	98
No hedge designation
Rate-lock mortgage loan commitments	$	79,446		0.1	$	2,051
Mandatory commitments to sell mortgage loans		137,315		0.1		(27	)
Pay-fixed interest rate swap agreements - commercial		141,427		5.4		(4,849	)
Pay-variable interest rate swap agreements - commercial		141,427		5.4		4,849
Purchased options		3,088		1.8		125
Written options		3,028		1.8		(124	)
Total	$	505,731		3.1	$	2,025

	December 31, 2018
	Notional Amount		Average Maturity (years)		Fair Value
	(Dollars in thousands)
Cash flow hedge designation
Pay-fixed interest rate swap agreements	$	25,000		2.6	$	280
Interest rate cap agreements		150,000		3.6		2,245
Total	$	175,000		3.5	$	2,525
No hedge designation
Rate-lock mortgage loan commitments	$	32,473		0.1	$	687
Mandatory commitments to sell mortgage loans		57,583		0.1		(383	)
Pay-fixed interest rate swap agreements - commercial		94,451		5.5		405
Pay-variable interest rate swap agreements - commercial		94,451		5.5		(405	)
Purchased options		3,095		2.5		116
Written options		3,095		2.5		(116	)
Total	$	285,148		3.7	$	304

We use variable-rate and short-term fixed-rate (less than 12 months) debt obligations to fund a portion of our Condensed Consolidated Statements of Financial Condition, which exposes us to variability in interest rates. To meet our asset/liability management objectives, we may periodically enter into derivative financial instruments to mitigate exposure to fluctuations in cash flows resulting from changes in interest rates (“Cash Flow Hedges”).  Cash Flow Hedges included certain pay-fixed interest rate swaps and interest rate cap agreements.  Pay-fixed interest rate swaps convert the variable-rate cash flows on debt obligations to fixed-rates.  Under interest-rate cap agreements, we will receive cash if interest rates rise above a predetermined level. As a result, we effectively have variable-rate debt with an established maximum rate. We pay an upfront premium on interest rate caps which is recognized in earnings in the same period in which the hedged item affects earnings.  Unrecognized premiums from interest rate caps aggregated to $2.4 million at September 30, 2019 and $2.7 million at December 31, 2018.

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, 2019 will be reclassified to earnings over the next twelve months.  The maximum term of the Cash Flow Hedge at September 30, 2019 is 4.0 years.

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

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

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

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

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

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

Fair Values of Derivative Instruments

	Asset Derivatives						Liability Derivatives
	September 30, 2019			December 31, 2018			September 30, 2019			December 31, 2018
	Balance  Sheet  Location	Fair Value		Balance  Sheet  Location	Fair Value		Balance  Sheet  Location	Fair Value		Balance  Sheet  Location	Fair Value
	(In thousands)
Derivatives designated as hedging instruments
Pay-fixed interest rate swap agreements	Other assets	$	-	Other assets	$	280	Other liabilities	$	611	Other liabilities	$	-
Interest rate cap agreements	Other assets		318	Other assets		2,245	Other liabilities		-	Other liabilities		-
			318			2,525			611			-
Derivatives not designated as hedging instruments
Rate-lock mortgage loan commitments	Other assets		2,051	Other assets		687	Other liabilities		-	Other liabilities		-
Mandatory commitments to sell mortgage loans	Other assets		-	Other assets		-	Other liabilities		27	Other liabilities		383
Pay-fixed interest rate swap agreements - commercial	Other assets		23	Other assets		1,116	Other liabilities		4,872	Other liabilities		711
Pay-variable interest rate swap agreements - commercial	Other assets		4,872	Other assets		711	Other liabilities		23	Other liabilities		1,116
Purchased options	Other assets		125	Other assets		116	Other liabilities		-	Other liabilities		-
Written options	Other assets		-	Other assets		-	Other liabilities		124	Other liabilities		116
			7,071			2,630			5,046			2,326
Total derivatives		$	7,389		$	5,155		$	5,657		$	2,326

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

Three Month Periods Ended September 30,
	Gain (Loss) Recognized in Other Comprehensive Income (Loss) (Effective Portion)					Location of  Gain  Reclassified  from  Accumulated  Other  Comprehensive  Loss into  Income  (Effective	Gain Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)				Location of  Gain (Loss)  Recognized	Gain (Loss) Recognized in Income (1)
	2019			2018		Portion)	2019		2018		in Income (1)	2019			2018
	(In thousands)
Fair Value Hedges
Pay-fixed interest rate swap agreements											Non-interest income-other	$	(188	)	$	-
Cash Flow Hedges
Interest rate cap agreements	$	(37	)	$	297	Interest expense	$	88	$	67	Interest expense	$	-		$	-
Pay-fixed interest rate swap agreements		(35	)		92	Interest expense		14		6	Interest expense		-			16
Total	$	(72	)	$	389		$	102	$	73		$	-		$	16
No hedge designation
Rate-lock mortgage loan commitments											Net gains on mortgage loans	$	(96	)	$	(318	)
Mandatory commitments to sell mortgage loans											Net gains on mortgage loans		307			415
Pay-fixed interest rate swap agreements - commercial											Interest income		(1,670	)		407
Pay-variable interest rate swap agreements - commercial											Interest income		1,670			(407	)
Purchased options											Interest income		(46	)		(45	)
Written options											Interest income		46			45
Total												$	211		$	97

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

Nine Month Periods Ended September 30,
	Gain (Loss) Recognized in Other Comprehensive Income (Loss) (Effective Portion)					Location of  Gain  Reclassified  from  Accumulated  Other  Comprehensive  Loss into  Income  (Effective	Gain Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)				Location of  Gain (Loss)  Recognized	Gain (Loss) Recognized in Income (1)
	2019			2018		Portion)	2019		2018		in Income (1)	2019			2018
	(In thousands)
Fair Value Hedges
Pay-fixed interest rate swap agreements											Non-interest income-other	$	(391	)	$	-
Cash Flow Hedges
Interest rate cap agreements	$	(1,311	)	$	1,054	Interest expense	$	321	$	119	Interest expense	$	-		$	-
Pay-fixed interest rate swap agreements		(429	)		346	Interest expense		72		13	Interest expense		-			4
Total	$	(1,740	)	$	1,400		$	393	$	132		$	-		$	4
No hedge designation
Rate-lock mortgage loan commitments											Net gains on mortgage loans	$	1,364		$	354
Mandatory commitments to sell mortgage loans											Net gains on mortgage loans		356			145
Pay-fixed interest rate swap agreements - commercial											Interest income		(5,254	)		1,950
Pay-variable interest rate swap agreements - commercial											Interest income		5,254			(1,950	)
Purchased options											Interest expense		9			(144	)
Written options											Interest expense		(8	)		144
Total												$	1,721		$	499

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

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Regulatory Matters

9 Months Ended

Sep. 30, 2019

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, 2019, the Bank had positive undivided profits of $38.3 million.  It is not our intent to have dividends paid in amounts that would reduce the capital of our Bank to levels below those which we consider prudent and in accordance with guidelines of regulatory authorities.

We are also subject to various regulatory capital requirements. The prompt corrective action regulations establish quantitative measures to ensure capital adequacy and require minimum amounts and ratios of total, Tier 1, and common equity Tier 1 capital to risk-weighted assets and Tier 1 capital to average assets. Failure to meet minimum capital requirements can result in certain mandatory, and possibly discretionary, actions by regulators that could have a material effect on our interim condensed consolidated financial statements. 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, 2019 and December 31, 2018, categorized our Bank as well capitalized. Management is not aware of any conditions or events that would have changed the most recent Federal Deposit Insurance Corporation (“FDIC”) categorization.

Our actual capital amounts and ratios follow (1):

	Actual					Minimum for Adequately Capitalized Institutions					Minimum for Well-Capitalized Institutions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
September 30, 2019
Total capital to risk-weighted assets
Consolidated	$	369,923		13.39	%	$	221,065		8.00	%	NA		NA
Independent Bank		352,432		12.76			220,984		8.00		$	276,230		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	342,138		12.38	%	$	165,799		6.00	%	NA		NA
Independent Bank		324,647		11.75			165,738		6.00		$	220,984		8.00	%
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	303,923		11.00	%	$	124,349		4.50	%	NA		NA
Independent Bank		324,647		11.75			124,304		4.50		$	179,550		6.50	%
Tier 1 capital to average assets
Consolidated	$	342,138		9.93	%	$	137,762		4.00	%	NA		NA
Independent Bank		324,647		9.43			137,736		4.00		$	172,170		5.00	%
December 31, 2018
Total capital to risk-weighted assets
Consolidated	$	371,603		14.25	%	$	208,572		8.00	%	NA		NA
Independent Bank		337,227		12.94			208,456		8.00		$	260,569		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	345,419		13.25	%	$	156,429		6.00	%	NA		NA
Independent Bank		311,043		11.94			156,342		6.00		$	208,456		8.00	%
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	307,255		11.79	%	$	117,322		4.50	%	NA		NA
Independent Bank		311,043		11.94			117,256		4.50		$	169,370		6.50	%
Tier 1 capital to average assets
Consolidated	$	345,419		10.47	%	$	131,930		4.00	%	NA		NA
Independent Bank		311,043		9.44			131,778		4.00		$	164,723		5.00	%

(1) These ratios do not reflect a capital conservation buffer of 2.50% and 1.875% at September 30, 2019 and December 31, 2018, respectively.

NA - Not applicable

The components of our regulatory capital are as follows:

	Consolidated						Independent Bank
	September 30, 2019			December 31, 2018			September 30, 2019			December 31, 2018
	(In thousands)
Total shareholders’ equity	$	340,245		$	338,994		$	360,969		$	341,496
Add (deduct)
Accumulated other comprehensive (income) loss for regulatory purposes		(2,424	)		4,311			(2,424	)		4,311
Goodwill and other intangibles		(33,898	)		(34,715	)		(33,898	)		(34,715	)
Disallowed deferred tax assets		-			(1,335	)		-			(49	)
Common equity tier 1 capital		303,923			307,255			324,647			311,043
Qualifying trust preferred securities		38,215			38,164			-			-
Tier 1 capital		342,138			345,419			324,647			311,043
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets		27,785			26,184			27,785			26,184
Total risk-based capital	$	369,923		$	371,603		$	352,432		$	337,227

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Revenue from Contracts with Customers (Tables)

9 Months Ended

Sep. 30, 2019

Revenue from Contracts with Customers [Abstract]

Disaggregation of Revenue Sources by Attribute

Disaggregation of our revenue sources by attribute follows:

Three months ending September 30, 2019

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

Three months ending September 30, 2018

	Service Charges on Deposit Accounts		Other Deposit Related Income		Interchange Income		Investment and Insurance Commissions		Total
	(In thousands)
Retail
Overdraft fees	$	2,161	$	-	$	-	$	-	$	2,161
Account service charges		519		-		-		-		519
ATM fees		-		374		-		-		374
Other		-		219		-		-		219
Business
Overdraft fees		408		-		-		-		408
Account service charges		78		-		-		-		78
ATM fees		-		10		-		-		10
Other		-		124		-		-		124
Interchange income		-		-		2,486		-		2,486
Asset management revenue		-		-		-		274		274
Transaction based revenue		-		-		-		239		239
Total	$	3,166	$	727	$	2,486	$	513	$	6,892
Reconciliation to Condensed Consolidated Statement of Operations:
Non-interest income - other:
Other deposit related income									$	727
Investment and insurance commissions										513
Bank owned life insurance										237
Other										657
Total									$	2,134

Nine months ending September 30, 2019

	Service Charges on Deposit Accounts		Other Deposit Related Income		Interchange Income		Investment and Insurance Commissions		Total
	(In thousands)
Retail
Overdraft fees	$	5,582	$	-	$	-	$	-	$	5,582
Account service charges		1,609		-		-		-		1,609
ATM fees		-		1,041		-		-		1,041
Other		-		703		-		-		703
Business
Overdraft fees		1,123		-		-		-		1,123
Account service charges		9		-		-		-		9
ATM fees		-		26		-		-		26
Other		-		309		-		-		309
Interchange income		-		-		7,744		-		7,744
Asset management revenue		-		-		-		823		823
Transaction based revenue		-		-		-		374		374
Total	$	8,323	$	2,079	$	7,744	$	1,197	$	19,343
Reconciliation to Condensed Consolidated Statement of Operations:
Non-interest income - other:
Other deposit related income									$	2,079
Investment and insurance commissions										1,197
Bank owned life insurance										813
Other										2,773
Total									$	6,862

Nine months ending September 30, 2018

	Service Charges on Deposit Accounts		Other Deposit Related Income		Interchange Income		Investment and Insurance Commissions		Total
	(In thousands)
Retail
Overdraft fees	$	6,177	$	-	$	-	$	-	$	6,177
Account service charges		1,607		-		-		-		1,607
ATM fees		-		1,077		-		-		1,077
Other		-		656		-		-		656
Business
Overdraft fees		1,153		-		-		-		1,153
Account service charges		229		-		-		-		229
ATM fees		-		26		-		-		26
Other		-		399		-		-		399
Interchange income		-		-		7,236		-		7,236
Asset management revenue		-		-		-		826		826
Transaction based revenue		-		-		-		608		608
Total	$	9,166	$	2,158	$	7,236	$	1,434	$	19,994
Reconciliation to Condensed Consolidated Statement of Operations:
Non-interest income - other:
Other deposit related income									$	2,158
Investment and insurance commissions										1,434
Bank owned life insurance										713
Other										1,989
Total									$	6,294

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Condensed Consolidated Statements of Financial Condition (unaudited) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Assets
Cash and due from banks	$ 38,662	$ 23,350
Interest bearing deposits	43,755	46,894
Cash and Cash Equivalents	82,417	70,244
Interest bearing deposits - time	499	595
Equity securities at fair value	0	393
Securities available for sale	439,592	427,926
Federal Home Loan Bank and Federal Reserve Bank stock, at cost	18,359	18,359
Loans held for sale, carried at fair value	87,358	44,753
Loans held for sale, carried at lower of cost or fair value	36,622	41,471
Loans
Loans	2,722,446	2,582,520
Allowance for loan losses	(26,148)	(24,888)
Net Loans	2,696,298	2,557,632
Other real estate and repossessed assets, net	1,789	1,299
Property and equipment, net	37,424	38,777
Bank-owned life insurance	55,412	55,068
Deferred tax assets, net	2,773	5,779
Capitalized mortgage loan servicing rights, carried at fair value	16,906	21,400
Other intangibles	5,598	6,415
Goodwill	28,300	28,300
Accrued income and other assets	41,490	34,870
Total Assets	3,550,837	3,353,281
Deposits
Non-interest bearing	883,138	879,549
Savings and interest-bearing checking	1,178,695	1,194,865
Reciprocal	416,200	182,072
Time	374,579	385,981
Brokered time	199,700	270,961
Total Deposits	3,052,312	2,913,428
Other borrowings	63,974	25,700
Subordinated debentures	39,439	39,388
Accrued expenses and other liabilities	54,867	35,771
Total Liabilities	3,210,592	3,014,287
Commitments and contingent liabilities
Shareholders' Equity
Preferred stock, no par value, 200,000 shares authorized; none issued or outstanding	0	0
Common stock, no par value, 500,000,000 shares authorized; issued and outstanding: 22,480,748 shares at September 30, 2019 and 23,579,725 shares at December 31, 2018	351,839	377,372
Accumulated deficit	(8,221)	(28,270)
Accumulated other comprehensive loss	(3,373)	(10,108)
Total Shareholders' Equity	340,245	338,994
Total Liabilities and Shareholders' Equity	3,550,837	3,353,281
Commercial [Member]
Loans
Loans	1,189,017	1,144,481
Allowance for loan losses	(8,223)	(7,090)
Mortgage [Member]
Loans
Loans	1,070,035	1,042,890
Allowance for loan losses	(7,983)	(7,978)
Installment [Member]
Loans
Loans	463,394	395,149
Allowance for loan losses	$ (1,348)	$ (895)

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Condensed Consolidated Statements of Cash Flows (unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Condensed Consolidated Statements of Cash Flows (unaudited) [Abstract]
Net Income	$ 32,556	$ 29,903
Adjustments to Reconcile Net Income to Net Cash From Operating Activities
Proceeds from the sale of equity securities at fair value	560	0
Proceeds from sales of loans held for sale	422,557	351,486
Disbursements for loans held for sale	(451,572)	(343,462)
Provision for loan losses	1,045	912
Deferred income tax expense	1,216	6,972
Deferred loan fees and costs	(3,122)	(3,681)
Net depreciation, amortization of intangible assets and premiums and accretion of discounts on securities, loans and interest bearing deposits - time	4,427	4,560
Net gains on mortgage loans	(13,590)	(8,571)
Net (gains) losses on securities	(304)	71
Share based compensation	1,348	1,293
Increase in accrued income and other assets	(2,149)	(16,925)
Increase (decrease) in accrued expenses and other liabilities	13,088	(1,930)
Total Adjustments	(26,496)	(9,275)
Net Cash From Operating Activities	6,060	20,628
Cash Flow Used in Investing Activities
Proceeds from the sale of securities available for sale	44,305	31,445
Proceeds from maturities, prepayments and calls of securities available for sale	110,517	125,275
Purchases of securities available for sale	(123,238)	(71,067)
Proceeds from the sale of interest bearing deposits - time	0	2,474
Proceeds from the maturity of interest bearing deposits - time	100	3,728
Purchase of Federal Reserve Bank stock	0	(2,034)
Net increase in portfolio loans (loans originated, net of principal payments)	(213,116)	(272,084)
Proceeds from the sale of portfolio loans	50,516	27,577
Acquisition of TCSB Bancorp Inc., less cash received	0	23,516
Proceeds from bank-owned life insurance	470	474
Proceeds from the sale of other real estate and repossessed assets	1,438	1,777
Capital expenditures	(2,587)	(2,812)
Net Cash Used in Investing Activities	(131,595)	(131,731)
Cash Flow From Financing Activities
Net increase in total deposits	138,884	110,400
Net increase in other borrowings	18,355	18,903
Proceeds from Federal Home Loan Bank Advances	57,000	1,202,000
Payments of Federal Home Loan Bank Advances	(37,143)	(1,210,197)
Dividends paid	(12,507)	(10,446)
Proceeds from issuance of common stock	282	202
Repurchase of common stock	(26,284)	0
Share based compensation withholding obligation	(879)	(1,327)
Net Cash From Financing Activities	137,708	109,535
Net Increase (Decrease) in Cash and Cash Equivalents	12,173	(1,568)
Cash and Cash Equivalents at Beginning of Period	70,244	54,738
Cash and Cash Equivalents at End of Period	82,417	53,170
Cash paid during the period for
Interest	20,185	11,168
Income taxes	5,934	120
Operating leases	1,692	0
Transfers to other real estate and repossessed assets	1,901	960
Purchase of securities available for sale not yet settled	3,075	1,000
Securitization of portfolio loans	29,790	0
Right of use assets obtained in exchange for lease obligations	7,767	0
Transfer of loans to held for sale	$ 36,622	$ 27,577

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Regulatory Matters (Tables)

9 Months Ended

Sep. 30, 2019

Regulatory Matters [Abstract]

Actual Capital Amounts and Ratios

Our actual capital amounts and ratios follow (1):

	Actual					Minimum for Adequately Capitalized Institutions					Minimum for Well-Capitalized Institutions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
September 30, 2019
Total capital to risk-weighted assets
Consolidated	$	369,923		13.39	%	$	221,065		8.00	%	NA		NA
Independent Bank		352,432		12.76			220,984		8.00		$	276,230		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	342,138		12.38	%	$	165,799		6.00	%	NA		NA
Independent Bank		324,647		11.75			165,738		6.00		$	220,984		8.00	%
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	303,923		11.00	%	$	124,349		4.50	%	NA		NA
Independent Bank		324,647		11.75			124,304		4.50		$	179,550		6.50	%
Tier 1 capital to average assets
Consolidated	$	342,138		9.93	%	$	137,762		4.00	%	NA		NA
Independent Bank		324,647		9.43			137,736		4.00		$	172,170		5.00	%
December 31, 2018
Total capital to risk-weighted assets
Consolidated	$	371,603		14.25	%	$	208,572		8.00	%	NA		NA
Independent Bank		337,227		12.94			208,456		8.00		$	260,569		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	345,419		13.25	%	$	156,429		6.00	%	NA		NA
Independent Bank		311,043		11.94			156,342		6.00		$	208,456		8.00	%
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	307,255		11.79	%	$	117,322		4.50	%	NA		NA
Independent Bank		311,043		11.94			117,256		4.50		$	169,370		6.50	%
Tier 1 capital to average assets
Consolidated	$	345,419		10.47	%	$	131,930		4.00	%	NA		NA
Independent Bank		311,043		9.44			131,778		4.00		$	164,723		5.00	%

(1) These ratios do not reflect a capital conservation buffer of 2.50% and 1.875% at September 30, 2019 and December 31, 2018, respectively.

NA - Not applicable

Regulatory Capital

The components of our regulatory capital are as follows:

	Consolidated						Independent Bank
	September 30, 2019			December 31, 2018			September 30, 2019			December 31, 2018
	(In thousands)
Total shareholders’ equity	$	340,245		$	338,994		$	360,969		$	341,496
Add (deduct)
Accumulated other comprehensive (income) loss for regulatory purposes		(2,424	)		4,311			(2,424	)		4,311
Goodwill and other intangibles		(33,898	)		(34,715	)		(33,898	)		(34,715	)
Disallowed deferred tax assets		-			(1,335	)		-			(49	)
Common equity tier 1 capital		303,923			307,255			324,647			311,043
Qualifying trust preferred securities		38,215			38,164			-			-
Tier 1 capital		342,138			345,419			324,647			311,043
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets		27,785			26,184			27,785			26,184
Total risk-based capital	$	369,923		$	371,603		$	352,432		$	337,227

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Derivative Financial Instruments, Effect on Statement of Operations (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]
Gain (Loss) Recognized in Other Comprehensive Income (Loss) (Effective Portion)		$ (72)	$ 389	$ (1,740)	$ 1,400
Fair Value Hedge Designation [Member] | Interest Rate Swap [Member] | Non-Interest Income-Other [Member]
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]
Gain (Loss) Recognized in Income	[1]	(188)	0	(391)	0
Cash Flow Hedge Designation [Member]
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]
Gain (Loss) Recognized in Other Comprehensive Income (Loss) (Effective Portion)		(72)	389	(1,740)	1,400
Gain Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)		102	73	393	132
Gain (Loss) Recognized in Income	[1]	0	16	0	4
Cash Flow Hedge Designation [Member] | Interest-Rate Cap Agreements [Member]
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]
Gain (Loss) Recognized in Other Comprehensive Income (Loss) (Effective Portion)		(37)	297	(1,311)	1,054
Cash Flow Hedge Designation [Member] | Interest-Rate Cap Agreements [Member] | Interest Expense [Member]
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]
Gain Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)		88	67	321	119
Gain (Loss) Recognized in Income	[1]	0	0	0	0
Cash Flow Hedge Designation [Member] | Fixed Income Interest Rate [Member] | Interest Rate Swap [Member]
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]
Gain (Loss) Recognized in Other Comprehensive Income (Loss) (Effective Portion)		(35)	92	(429)	346
Cash Flow Hedge Designation [Member] | Fixed Income Interest Rate [Member] | Interest Rate Swap [Member] | Interest Expense [Member]
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]
Gain Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)		14	6	72	13
Gain (Loss) Recognized in Income	[1]	0	16	0	4
No Hedge Designation [Member]
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]
Gain (Loss) Recognized in Income		211	97	1,721	499
No Hedge Designation [Member] | Rate-Lock Mortgage Loan Commitments [Member] | Mortgage Loan Gains [Member]
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]
Gain (Loss) Recognized in Income		(96)	(318)	1,364	354
No Hedge Designation [Member] | Mandatory Commitments to Sell Mortgage Loans [Member] | Mortgage Loan Gains [Member]
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]
Gain (Loss) Recognized in Income		307	415	356	145
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				9	(144)
No Hedge Designation [Member] | Purchased Options [Member] | Interest Income [Member]
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]
Gain (Loss) Recognized in Income		(46)	(45)
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				(8)	144
No Hedge Designation [Member] | Written Options [Member] | Interest Income [Member]
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]
Gain (Loss) Recognized in Income		46	45
No Hedge Designation [Member] | Fixed Income Interest Rate [Member] | Interest Rate Swap [Member] | Interest Income [Member]
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]
Gain (Loss) Recognized in Income		(1,670)	407	(5,254)	1,950
No Hedge Designation [Member] | Variable Income Interest Rate [Member] | Interest Rate Swap [Member] | Interest Income [Member]
Effect of derivative financial instruments on the condensed consolidated financial statements of operations [Abstract]
Gain (Loss) Recognized in Income		$ 1,670	$ (407)	$ 5,254	$ (1,950)

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

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Share Based Compensation, Outstanding Non-vested Restricted Stock and PSUs and Related Transactions (Details) - Non-Vested Restricted Stock and PSUs [Member]	9 Months Ended
	Sep. 30, 2019 $ / shares shares
Number of Shares [Roll Forward]
Outstanding, beginning balance (in shares) | shares	258,419
Granted (in shares) | shares	86,283
Vested (in shares) | shares	(85,978)
Forfeited (in shares) | shares	(12,998)
Outstanding, ending balance (in shares) | shares	245,726
Weighted Average Grant Date Fair Value [Roll Forward]
Outstanding, beginning balance (in dollars per share) | $ / shares	$ 19.00
Granted (in dollars per share) | $ / shares	22.87
Vested (in dollars per share) | $ / shares	14.57
Forfeited (in dollars per share) | $ / shares	22.85
Outstanding, ending balance (in dollars per share) | $ / shares	$ 21.72

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Recent Acquisition (Details) - USD ($) $ in Thousands			3 Months Ended	9 Months Ended
		Apr. 01, 2018	Sep. 30, 2018	Sep. 30, 2019	Dec. 31, 2018	Mar. 31, 2018
Valuation of the assets acquired and liabilities assumed [Abstract]
Goodwill				$ 28,300	$ 28,300
TCSB Bancorp, Inc. [Member]
Recent Acquisition [Abstract]
Equity interest issued to each holder of common stock under merger agreement (in shares)		1.1166
Total value of common stock and cash paid in lieu of fractional shares		$ 5
Equity issued under merger agreement (in shares)		2,710,000
Options issued under merger agreement (in shares)		190,000
Fair value of equity issued under merger agreement		$ 64,500
Valuation of the assets acquired and liabilities assumed [Abstract]
Cash and cash equivalents						$ 23,521
Interest bearing deposits - time						4,054
Securities available for sale						6,066
Federal Home Loan Bank stock						778
Loans, net						295,799
Property and equipment, net						1,067
Capitalized mortgage loan servicing rights						3,047
Accrued income and other assets						3,362
Other intangibles	[1]					5,798
Total assets acquired						343,492
Deposits						287,710
Other borrowings						14,345
Subordinated debentures						3,768
Accrued expenses and other liabilities						1,429
Total liabilities assumed						307,252
Net assets acquired						36,240
Goodwill						28,300
Purchase price (fair value of consideration)						64,540
Decrease in goodwill			$ (700)
Fair value of acquired receivables						292,900
Gross contractual amounts receivable						$ 298,600
TCSB Bancorp, Inc. [Member] | Core Deposits [Member]
Valuation of the assets acquired and liabilities assumed [Abstract]
Estimated fair value of intangible assets		$ 5,800
Estimated useful life				10 years

[1] Relates to core deposit intangibles (see note #7).

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Loans, Loan Ratings by Loan Class, Commercial (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Summary of Loan Ratings by Loan Class [Abstract]
Commercial	$ 2,730,882	$ 2,591,058
Accrued interest included in total	8,436	8,538
Commercial [Member]
Summary of Loan Ratings by Loan Class [Abstract]
Commercial	1,192,022	1,147,892
Accrued interest included in total	3,005	3,411
Commercial [Member] | Non-Watch 1-6 [Member]
Summary of Loan Ratings by Loan Class [Abstract]
Commercial	1,106,006	1,082,607
Accrued interest included in total	2,713	3,107
Commercial [Member] | Watch 7-8 [Member]
Summary of Loan Ratings by Loan Class [Abstract]
Commercial	83,054	57,184
Accrued interest included in total	284	174
Commercial [Member] | Substandard Accrual 9 [Member]
Summary of Loan Ratings by Loan Class [Abstract]
Commercial	2,221	5,777
Accrued interest included in total	8	130
Commercial [Member] | Non-Accrual 10-11 [Member]
Summary of Loan Ratings by Loan Class [Abstract]
Commercial	741	2,324
Accrued interest included in total	0	0
Commercial [Member] | Income Producing - Real Estate [Member]
Summary of Loan Ratings by Loan Class [Abstract]
Commercial	424,516	388,773
Commercial [Member] | Income Producing - Real Estate [Member] | Non-Watch 1-6 [Member]
Summary of Loan Ratings by Loan Class [Abstract]
Commercial	408,132	375,142
Commercial [Member] | Income Producing - Real Estate [Member] | Watch 7-8 [Member]
Summary of Loan Ratings by Loan Class [Abstract]
Commercial	15,619	13,387
Commercial [Member] | Income Producing - Real Estate [Member] | Substandard Accrual 9 [Member]
Summary of Loan Ratings by Loan Class [Abstract]
Commercial	765	200
Commercial [Member] | Income Producing - Real Estate [Member] | Non-Accrual 10-11 [Member]
Summary of Loan Ratings by Loan Class [Abstract]
Commercial	0	44
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member]
Summary of Loan Ratings by Loan Class [Abstract]
Commercial	102,227	84,458
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member] | Non-Watch 1-6 [Member]
Summary of Loan Ratings by Loan Class [Abstract]
Commercial	93,563	76,120
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member] | Watch 7-8 [Member]
Summary of Loan Ratings by Loan Class [Abstract]
Commercial	8,010	8,328
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member] | Substandard Accrual 9 [Member]
Summary of Loan Ratings by Loan Class [Abstract]
Commercial	0	0
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member] | Non-Accrual 10-11 [Member]
Summary of Loan Ratings by Loan Class [Abstract]
Commercial	654	10
Commercial [Member] | Commercial and Industrial [Member]
Summary of Loan Ratings by Loan Class [Abstract]
Commercial	665,279	674,661
Commercial [Member] | Commercial and Industrial [Member] | Non-Watch 1-6 [Member]
Summary of Loan Ratings by Loan Class [Abstract]
Commercial	604,311	631,345
Commercial [Member] | Commercial and Industrial [Member] | Watch 7-8 [Member]
Summary of Loan Ratings by Loan Class [Abstract]
Commercial	59,425	35,469
Commercial [Member] | Commercial and Industrial [Member] | Substandard Accrual 9 [Member]
Summary of Loan Ratings by Loan Class [Abstract]
Commercial	1,456	5,577
Commercial [Member] | Commercial and Industrial [Member] | Non-Accrual 10-11 [Member]
Summary of Loan Ratings by Loan Class [Abstract]
Commercial	$ 87	$ 2,270

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Loans, Allowance for Loan Losses (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Analysis of allowance for loan losses by portfolio segment [Roll Forward]
Balance at beginning of period		$ 25,903	$ 23,504	$ 24,888	$ 22,587
Additions (deductions) [Abstract]
Provision for loan losses		(271)	(53)	1,045	912
Recoveries credited to the allowance		1,652	1,908	3,109	3,768
Loans charged against the allowance		(1,136)	(958)	(2,894)	(2,866)
Balance at end of period		26,148	24,401	26,148	24,401
Allowance for loan losses [Abstract]
Individually evaluated for impairment		5,778		5,778		$ 6,310
Collectively evaluated for impairment		20,370		20,370		18,578
Total ending allowance for loan losses balance		26,148		26,148		24,888
Loans [Abstract]
Individually evaluated for impairment		53,589		53,589		58,461
Collectively evaluated for impairment		2,674,961		2,674,961		2,530,084
Total loans recorded investment		2,730,882		2,730,882		2,591,058
Accrued interest included in recorded investment		8,436		8,436		8,538
Total loans		2,722,446		2,722,446		2,582,520
Loans Acquired with Deteriorated Credit Quality [Member]
Allowance for loan losses [Abstract]
Loans acquired with deteriorated credit quality		0		0		0
Loans [Abstract]
Loans acquired with deteriorated credit quality		2,332		2,332		2,513
Commercial [Member]
Analysis of allowance for loan losses by portfolio segment [Roll Forward]
Balance at beginning of period		8,121	6,073	7,090	5,595
Additions (deductions) [Abstract]
Provision for loan losses		(810)	(907)	85	(1,404)
Recoveries credited to the allowance		1,215	1,418	1,720	2,458
Loans charged against the allowance		(303)	(225)	(672)	(290)
Balance at end of period		8,223	6,359	8,223	6,359
Allowance for loan losses [Abstract]
Individually evaluated for impairment		871		871		1,305
Collectively evaluated for impairment		7,352		7,352		5,785
Total ending allowance for loan losses balance		8,223		8,223		7,090
Loans [Abstract]
Individually evaluated for impairment		7,776		7,776		8,697
Collectively evaluated for impairment		1,182,825		1,182,825		1,137,586
Total loans recorded investment		1,192,022		1,192,022		1,147,892
Accrued interest included in recorded investment		3,005		3,005		3,411
Total loans		1,189,017		1,189,017		1,144,481
Commercial [Member] | Loans Acquired with Deteriorated Credit Quality [Member]
Allowance for loan losses [Abstract]
Loans acquired with deteriorated credit quality		0		0		0
Loans [Abstract]
Loans acquired with deteriorated credit quality		1,421		1,421		1,609
Mortgage [Member]
Analysis of allowance for loan losses by portfolio segment [Roll Forward]
Balance at beginning of period		8,062	8,296	7,978	8,733
Additions (deductions) [Abstract]
Provision for loan losses		83	415	270	778
Recoveries credited to the allowance		235	192	786	549
Loans charged against the allowance		(397)	(448)	(1,051)	(1,605)
Balance at end of period		7,983	8,455	7,983	8,455
Allowance for loan losses [Abstract]
Individually evaluated for impairment		4,610		4,610		4,799
Collectively evaluated for impairment		3,373		3,373		3,179
Total ending allowance for loan losses balance		7,983		7,983		7,978
Loans [Abstract]
Individually evaluated for impairment		42,590		42,590		46,394
Collectively evaluated for impairment		1,031,163		1,031,163		1,000,038
Total loans recorded investment		1,074,335		1,074,335		1,046,987
Accrued interest included in recorded investment	[1]	4,300		4,300		4,097
Total loans		1,070,035		1,070,035		1,042,890
Mortgage [Member] | Loans Acquired with Deteriorated Credit Quality [Member]
Allowance for loan losses [Abstract]
Loans acquired with deteriorated credit quality		0		0		0
Loans [Abstract]
Loans acquired with deteriorated credit quality		582		582		555
Installment [Member]
Analysis of allowance for loan losses by portfolio segment [Roll Forward]
Balance at beginning of period		1,293	848	895	864
Additions (deductions) [Abstract]
Provision for loan losses		289	(25)	1,021	182
Recoveries credited to the allowance		202	298	603	761
Loans charged against the allowance		(436)	(285)	(1,171)	(971)
Balance at end of period		1,348	836	1,348	836
Allowance for loan losses [Abstract]
Individually evaluated for impairment		297		297		206
Collectively evaluated for impairment		1,051		1,051		689
Total ending allowance for loan losses balance		1,348		1,348		895
Loans [Abstract]
Individually evaluated for impairment		3,223		3,223		3,370
Collectively evaluated for impairment		460,973		460,973		392,460
Total loans recorded investment		464,525		464,525		396,179
Accrued interest included in recorded investment	[1]	1,131		1,131		1,030
Total loans		463,394		463,394		395,149
Installment [Member] | Loans Acquired with Deteriorated Credit Quality [Member]
Allowance for loan losses [Abstract]
Loans acquired with deteriorated credit quality		0		0		0
Loans [Abstract]
Loans acquired with deteriorated credit quality		329		329		349
Subjective Allocation [Member]
Analysis of allowance for loan losses by portfolio segment [Roll Forward]
Balance at beginning of period		8,427	8,287	8,925	7,395
Additions (deductions) [Abstract]
Provision for loan losses		167	464	(331)	1,356
Recoveries credited to the allowance		0	0	0	0
Loans charged against the allowance		0	0	0	0
Balance at end of period		8,594	$ 8,751	8,594	$ 8,751
Allowance for loan losses [Abstract]
Individually evaluated for impairment		0		0		0
Collectively evaluated for impairment		8,594		8,594		8,925
Total ending allowance for loan losses balance		8,594		8,594		8,925
Subjective Allocation [Member] | Loans Acquired with Deteriorated Credit Quality [Member]
Allowance for loan losses [Abstract]
Loans acquired with deteriorated credit quality		$ 0		$ 0		$ 0

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

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Fair Value Disclosures, Significant Assumptions (Details) - USD ($) $ in Thousands		Sep. 30, 2019	Dec. 31, 2018
Assets [Abstract]
Equity securities at fair value		$ 0	$ 393
Securities available for sale		439,592	427,926
Loans held for sale, carried at fair value		87,358	44,753
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets [Abstract]
Equity securities at fair value			393
Securities available for sale		0	0
Derivatives		0	0
Liabilities [Abstract]
Derivatives		0	0
Significant Other Observable Inputs (Level 2) [Member]
Assets [Abstract]
Equity securities at fair value			0
Securities available for sale		439,592	427,926
Derivatives		7,389	5,155
Liabilities [Abstract]
Derivatives		5,657	2,326
Significant Un-observable Inputs (Level 3) [Member]
Assets [Abstract]
Equity securities at fair value			0
Securities available for sale		0	0
Derivatives		0	0
Liabilities [Abstract]
Derivatives		0	0
Recurring Basis [Member]
Assets [Abstract]
Equity securities at fair value			393
Loans held for sale, carried at fair value		87,358	44,753
Capitalized mortgage loan servicing rights		16,906	21,400
Derivatives	[1]	7,389	5,155
Liabilities [Abstract]
Derivatives	[2]	5,657	2,326
Recurring Basis [Member] | U.S. Agency [Member]
Assets [Abstract]
Securities available for sale		15,283	20,014
Recurring Basis [Member] | U.S. Agency Residential Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		147,720	123,751
Recurring Basis [Member] | U.S. Agency Commercial Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		11,319	5,726
Recurring Basis [Member] | Private Label Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		31,826	29,419
Recurring Basis [Member] | Other Asset Backed [Member]
Assets [Abstract]
Securities available for sale		94,785	83,319
Recurring Basis [Member] | Obligations of States and Political Subdivisions [Member]
Assets [Abstract]
Securities available for sale		101,139	127,555
Recurring Basis [Member] | Corporate [Member]
Assets [Abstract]
Securities available for sale		33,678	34,309
Recurring Basis [Member] | Trust Preferred [Member]
Assets [Abstract]
Securities available for sale		1,820	1,819
Recurring Basis [Member] | Foreign Government [Member]
Assets [Abstract]
Securities available for sale		2,022	2,014
Recurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets [Abstract]
Equity securities at fair value			393
Loans held for sale, carried at fair value		0	0
Capitalized mortgage loan servicing rights		0	0
Derivatives	[1]	0	0
Liabilities [Abstract]
Derivatives	[2]	0	0
Recurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | U.S. Agency [Member]
Assets [Abstract]
Securities available for sale		0	0
Recurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | U.S. Agency Residential Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		0	0
Recurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | U.S. Agency Commercial Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		0	0
Recurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Private Label Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		0	0
Recurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Other Asset Backed [Member]
Assets [Abstract]
Securities available for sale		0	0
Recurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Obligations of States and Political Subdivisions [Member]
Assets [Abstract]
Securities available for sale		0	0
Recurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Corporate [Member]
Assets [Abstract]
Securities available for sale		0	0
Recurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Trust Preferred [Member]
Assets [Abstract]
Securities available for sale		0	0
Recurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Foreign Government [Member]
Assets [Abstract]
Securities available for sale		0	0
Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member]
Assets [Abstract]
Equity securities at fair value			0
Loans held for sale, carried at fair value		87,358	44,753
Capitalized mortgage loan servicing rights		0	0
Derivatives	[1]	7,389	5,155
Liabilities [Abstract]
Derivatives	[2]	5,657	2,326
Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | U.S. Agency [Member]
Assets [Abstract]
Securities available for sale		15,283	20,014
Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | U.S. Agency Residential Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		147,720	123,751
Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | U.S. Agency Commercial Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		11,319	5,726
Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Private Label Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		31,826	29,419
Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Other Asset Backed [Member]
Assets [Abstract]
Securities available for sale		94,785	83,319
Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Obligations of States and Political Subdivisions [Member]
Assets [Abstract]
Securities available for sale		101,139	127,555
Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Corporate [Member]
Assets [Abstract]
Securities available for sale		33,678	34,309
Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Trust Preferred [Member]
Assets [Abstract]
Securities available for sale		1,820	1,819
Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Foreign Government [Member]
Assets [Abstract]
Securities available for sale		2,022	2,014
Recurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member]
Assets [Abstract]
Equity securities at fair value			0
Loans held for sale, carried at fair value		0	0
Capitalized mortgage loan servicing rights		16,906	21,400
Derivatives	[1]	0	0
Liabilities [Abstract]
Derivatives	[2]	0	0
Recurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | U.S. Agency [Member]
Assets [Abstract]
Securities available for sale		0	0
Recurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | U.S. Agency Residential Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		0	0
Recurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | U.S. Agency Commercial Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		0	0
Recurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Private Label Mortgage-Backed [Member]
Assets [Abstract]
Securities available for sale		0	0
Recurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Other Asset Backed [Member]
Assets [Abstract]
Securities available for sale		0	0
Recurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Obligations of States and Political Subdivisions [Member]
Assets [Abstract]
Securities available for sale		0	0
Recurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Corporate [Member]
Assets [Abstract]
Securities available for sale		0	0
Recurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Trust Preferred [Member]
Assets [Abstract]
Securities available for sale		0	0
Recurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Foreign Government [Member]
Assets [Abstract]
Securities available for sale		0	0
Nonrecurring Basis [Member]
Assets [Abstract]
Loans held for sale, carried at fair value			41,471
Nonrecurring Basis [Member] | Impaired Loans [Member] | Commercial [Member] | Income Producing - Real Estate [Member]
Impaired loans [Abstract]
Loans receivable	[3]	115	217
Nonrecurring Basis [Member] | Impaired Loans [Member] | Commercial [Member] | Land, Land Development and Construction - Real Estate [Member]
Impaired loans [Abstract]
Loans receivable	[3]	87	106
Nonrecurring Basis [Member] | Impaired Loans [Member] | Commercial [Member] | Commercial and Industrial [Member]
Impaired loans [Abstract]
Loans receivable	[3]	706	2,243
Nonrecurring Basis [Member] | Impaired Loans [Member] | Mortgage [Member] | 1-4 Family [Member]
Impaired loans [Abstract]
Loans receivable	[3]	666	333
Nonrecurring Basis [Member] | Impaired Loans [Member] | Mortgage [Member] | Resort Lending [Member]
Impaired loans [Abstract]
Loans receivable	[3]	60	572
Nonrecurring Basis [Member] | Impaired Loans [Member] | Mortgage [Member] | Home Equity - 1st Lien [Member]
Impaired loans [Abstract]
Loans receivable	[3]	83
Nonrecurring Basis [Member] | Impaired Loans [Member] | Mortgage [Member] | Home Equity - 2nd Lien [Member]
Impaired loans [Abstract]
Loans receivable	[3]	199
Nonrecurring Basis [Member] | Impaired Loans [Member] | Installment [Member] | Home Equity - 1st Lien [Member]
Impaired loans [Abstract]
Loans receivable	[3]	9
Nonrecurring Basis [Member] | Impaired Loans [Member] | Installment [Member] | Home Equity - 2nd Lien [Member]
Impaired loans [Abstract]
Loans receivable	[3]	70
Nonrecurring Basis [Member] | Impaired Loans [Member] | Installment [Member] | Boat Lending [Member]
Impaired loans [Abstract]
Loans receivable	[3]	103
Nonrecurring Basis [Member] | Impaired Loans [Member] | Installment [Member] | Recreational Vehicle Lending [Member]
Impaired loans [Abstract]
Loans receivable	[3]	1
Nonrecurring Basis [Member] | Impaired Loans [Member] | Installment [Member] | Other [Member]
Impaired loans [Abstract]
Loans receivable	[3]	86
Nonrecurring Basis [Member] | Other Real Estate [Member] | Mortgage [Member] | 1-4 Family [Member]
Impaired loans [Abstract]
Loans receivable	[4]	23	95
Nonrecurring Basis [Member] | Other Real Estate [Member] | Mortgage [Member] | Home Equity - 2nd Lien [Member]
Impaired loans [Abstract]
Loans receivable	[4]	57	59
Nonrecurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets [Abstract]
Loans held for sale, carried at fair value			41,471
Nonrecurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired Loans [Member] | Commercial [Member] | Income Producing - Real Estate [Member]
Impaired loans [Abstract]
Loans receivable	[3]	0	0
Nonrecurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired Loans [Member] | Commercial [Member] | Land, Land Development and Construction - Real Estate [Member]
Impaired loans [Abstract]
Loans receivable	[3]	0	0
Nonrecurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired Loans [Member] | Commercial [Member] | Commercial and Industrial [Member]
Impaired loans [Abstract]
Loans receivable	[3]	0	0
Nonrecurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired Loans [Member] | Mortgage [Member] | 1-4 Family [Member]
Impaired loans [Abstract]
Loans receivable	[3]	0	0
Nonrecurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired Loans [Member] | Mortgage [Member] | Resort Lending [Member]
Impaired loans [Abstract]
Loans receivable	[3]	0	0
Nonrecurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired Loans [Member] | Mortgage [Member] | Home Equity - 1st Lien [Member]
Impaired loans [Abstract]
Loans receivable	[3]	0
Nonrecurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired Loans [Member] | Mortgage [Member] | Home Equity - 2nd Lien [Member]
Impaired loans [Abstract]
Loans receivable	[3]	0
Nonrecurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired Loans [Member] | Installment [Member] | Home Equity - 1st Lien [Member]
Impaired loans [Abstract]
Loans receivable	[3]	0
Nonrecurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired Loans [Member] | Installment [Member] | Home Equity - 2nd Lien [Member]
Impaired loans [Abstract]
Loans receivable	[3]	0
Nonrecurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired Loans [Member] | Installment [Member] | Boat Lending [Member]
Impaired loans [Abstract]
Loans receivable	[3]	0
Nonrecurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired Loans [Member] | Installment [Member] | Recreational Vehicle Lending [Member]
Impaired loans [Abstract]
Loans receivable	[3]	0
Nonrecurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired Loans [Member] | Installment [Member] | Other [Member]
Impaired loans [Abstract]
Loans receivable	[3]	0
Nonrecurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Other Real Estate [Member] | Mortgage [Member] | 1-4 Family [Member]
Impaired loans [Abstract]
Loans receivable	[4]	0	0
Nonrecurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Other Real Estate [Member] | Mortgage [Member] | Home Equity - 2nd Lien [Member]
Impaired loans [Abstract]
Loans receivable	[4]	0	0
Nonrecurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member]
Assets [Abstract]
Loans held for sale, carried at fair value			0
Nonrecurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Impaired Loans [Member] | Commercial [Member] | Income Producing - Real Estate [Member]
Impaired loans [Abstract]
Loans receivable	[3]	0	0
Nonrecurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Impaired Loans [Member] | Commercial [Member] | Land, Land Development and Construction - Real Estate [Member]
Impaired loans [Abstract]
Loans receivable	[3]	0	0
Nonrecurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Impaired Loans [Member] | Commercial [Member] | Commercial and Industrial [Member]
Impaired loans [Abstract]
Loans receivable	[3]	0	0
Nonrecurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Impaired Loans [Member] | Mortgage [Member] | 1-4 Family [Member]
Impaired loans [Abstract]
Loans receivable	[3]	0	0
Nonrecurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Impaired Loans [Member] | Mortgage [Member] | Resort Lending [Member]
Impaired loans [Abstract]
Loans receivable	[3]	0	0
Nonrecurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Impaired Loans [Member] | Mortgage [Member] | Home Equity - 1st Lien [Member]
Impaired loans [Abstract]
Loans receivable	[3]	0
Nonrecurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Impaired Loans [Member] | Mortgage [Member] | Home Equity - 2nd Lien [Member]
Impaired loans [Abstract]
Loans receivable	[3]	0
Nonrecurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Impaired Loans [Member] | Installment [Member] | Home Equity - 1st Lien [Member]
Impaired loans [Abstract]
Loans receivable	[3]	0
Nonrecurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Impaired Loans [Member] | Installment [Member] | Home Equity - 2nd Lien [Member]
Impaired loans [Abstract]
Loans receivable	[3]	0
Nonrecurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Impaired Loans [Member] | Installment [Member] | Boat Lending [Member]
Impaired loans [Abstract]
Loans receivable	[3]	0
Nonrecurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Impaired Loans [Member] | Installment [Member] | Recreational Vehicle Lending [Member]
Impaired loans [Abstract]
Loans receivable	[3]	0
Nonrecurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Impaired Loans [Member] | Installment [Member] | Other [Member]
Impaired loans [Abstract]
Loans receivable	[3]	0
Nonrecurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Other Real Estate [Member] | Mortgage [Member] | 1-4 Family [Member]
Impaired loans [Abstract]
Loans receivable	[4]	0	0
Nonrecurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Other Real Estate [Member] | Mortgage [Member] | Home Equity - 2nd Lien [Member]
Impaired loans [Abstract]
Loans receivable	[4]	0	0
Nonrecurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member]
Assets [Abstract]
Loans held for sale, carried at fair value			0
Nonrecurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Impaired Loans [Member] | Commercial [Member] | Income Producing - Real Estate [Member]
Impaired loans [Abstract]
Loans receivable	[3]	115	217
Nonrecurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Impaired Loans [Member] | Commercial [Member] | Land, Land Development and Construction - Real Estate [Member]
Impaired loans [Abstract]
Loans receivable	[3]	87	106
Nonrecurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Impaired Loans [Member] | Commercial [Member] | Commercial and Industrial [Member]
Impaired loans [Abstract]
Loans receivable	[3]	706	2,243
Nonrecurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Impaired Loans [Member] | Mortgage [Member] | 1-4 Family [Member]
Impaired loans [Abstract]
Loans receivable	[3]	666	333
Nonrecurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Impaired Loans [Member] | Mortgage [Member] | Resort Lending [Member]
Impaired loans [Abstract]
Loans receivable	[3]	60	572
Nonrecurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Impaired Loans [Member] | Mortgage [Member] | Home Equity - 1st Lien [Member]
Impaired loans [Abstract]
Loans receivable	[3]	83
Nonrecurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Impaired Loans [Member] | Mortgage [Member] | Home Equity - 2nd Lien [Member]
Impaired loans [Abstract]
Loans receivable	[3]	199
Nonrecurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Impaired Loans [Member] | Installment [Member] | Home Equity - 1st Lien [Member]
Impaired loans [Abstract]
Loans receivable	[3]	9
Nonrecurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Impaired Loans [Member] | Installment [Member] | Home Equity - 2nd Lien [Member]
Impaired loans [Abstract]
Loans receivable	[3]	70
Nonrecurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Impaired Loans [Member] | Installment [Member] | Boat Lending [Member]
Impaired loans [Abstract]
Loans receivable	[3]	103
Nonrecurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Impaired Loans [Member] | Installment [Member] | Recreational Vehicle Lending [Member]
Impaired loans [Abstract]
Loans receivable	[3]	1
Nonrecurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Impaired Loans [Member] | Installment [Member] | Other [Member]
Impaired loans [Abstract]
Loans receivable	[3]	86
Nonrecurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Other Real Estate [Member] | Mortgage [Member] | 1-4 Family [Member]
Impaired loans [Abstract]
Loans receivable	[4]	23	95
Nonrecurring Basis [Member] | Significant Un-observable Inputs (Level 3) [Member] | Other Real Estate [Member] | Mortgage [Member] | Home Equity - 2nd Lien [Member]
Impaired loans [Abstract]
Loans receivable	[4]	$ 57	$ 59

[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.

XML

Fair Value Disclosures, Difference Between Aggregate Fair Value and Aggregate Remaining Contractual Principal (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Loans held for sale [Abstract]
Aggregate Fair Value	$ 87,358	$ 44,753
Difference	2,079	1,257
Contractual Principal	$ 85,279	$ 43,496

XML

Accumulated Other Comprehensive Loss ("AOCL"), Reclassification Out of Each Components (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Reclassifications out of AOCL [Abstract]
Total reclassifications before tax	$ 15,570	$ 14,846	$ 40,535	$ 36,929
Interest expense	(6,939)	(4,755)	(20,149)	(11,739)
Income tax expense	3,125	2,921	7,979	7,026
Reclassifications, net of tax	12,445	11,925	32,556	29,903
Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassifications out of AOCL [Abstract]
Reclassifications, net of tax	80	57	418	68
Unrealized Gains (Losses) on Securities Available For Sale [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassifications out of AOCL [Abstract]
Net gains (losses) on securities	0	0	137	(45)
Net impairment loss recognized in earnings	0	0	0	0
Total reclassifications before tax	0	0	137	(45)
Income tax expense	0	0	29	(9)
Reclassifications, net of tax	0	0	108	(36)
Unrealized Gains (Losses) on Cash Flow Hedges [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassifications out of AOCL [Abstract]
Interest expense	(102)	(73)	(393)	(132)
Income tax expense	(22)	(16)	(83)	(28)
Reclassifications, net of tax	$ (80)	$ (57)	$ (310)	$ (104)

XML

Accumulated Other Comprehensive Loss ("AOCL")

9 Months Ended

Sep. 30, 2019

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 (Losses) on Cash Flow Hedges			Total
	(In thousands)
For the three months ended September 30,
2019
Balances at beginning of period	$	3,040		$	(5,798	)	$	(1,673	)	$	(4,431	)
Other comprehensive income (loss) before reclassifications		1,196			-			(58	)		1,138
Amounts reclassified from AOCL		-			-			(80	)		(80	)
Net current period other comprehensive income (loss)		1,196			-			(138	)		1,058
Balances at end of period	$	4,236		$	(5,798	)	$	(1,811	)	$	(3,373	)
2018
Balances at beginning of period	$	(4,437	)	$	(5,798	)	$	1,021		$	(9,214	)
Other comprehensive income (loss) before reclassifications		(925	)		-			307			(618	)
Amounts reclassified from AOCL		-			-			(57	)		(57	)
Net current period other comprehensive income (loss)		(925	)		-			250			(675	)
Balances at end of period	$	(5,362	)	$	(5,798	)	$	1,271		$	(9,889	)
For the nine months ended September 30,
2019
Balances at beginning of period	$	(4,185	)	$	(5,798	)	$	(125	)	$	(10,108	)
Other comprehensive income (loss) before reclassifications		8,529			-			(1,376	)		7,153
Amounts reclassified from AOCL		(108	)		-			(310	)		(418	)
Net current period other comprehensive income (loss)		8,421			-			(1,686	)		6,735
Balances at end of period	$	4,236		$	(5,798	)	$	(1,811	)	$	(3,373	)
2018
Balances at beginning of period	$	(470	)	$	(5,798	)	$	269		$	(5,999	)
Other comprehensive income (loss) before reclassifications		(4,928	)		-			1,106			(3,822	)
Amounts reclassified from AOCL		36			-			(104	)		(68	)
Net current period other comprehensive income (loss)		(4,892	)		-			1,002			(3,890	)
Balances at end of period	$	(5,362	)	$	(5,798	)	$	1,271		$	(9,889	)

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

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

AOCL Component	Amount Reclassified From AOCL			Affected Line Item in Condensed  Consolidated Statements of Operations
	(In thousands)
2019
Unrealized gains (losses) on securities available for sale
	$	-		Net gains (losses) on securities
		-		Net impairment loss recognized in earnings
		-		Total reclassifications before tax
		-		Income tax expense
	$	-		Reclassifications, net of tax
Unrealized gains (losses) on cash flow hedges
	$	(102	)	Interest expense
		(22	)	Income tax expense
	$	(80	)	Reclassification, net of tax
	$	80		Total reclassifications for the period, net of tax
2018
Unrealized gains (losses) on securities available for sale
	$	-		Net gains (losses) on securities
		-		Net impairment loss recognized in earnings
		-		Total reclassifications before tax
		-		Income tax expense
	$	-		Reclassifications, net of tax
Unrealized gains (losses) on cash flow hedges
	$	(73	)	Interest expense
		(16	)	Income tax expense
	$	(57	)	Reclassification, net of tax
	$	57		Total reclassifications for the period, net of tax

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

AOCL Component	Amount Reclassified From AOCL			Affected Line Item in Condensed  Consolidated Statements of Operations
	(In thousands)
2019
Unrealized gains (losses) on securities available for sale
	$	137		Net gains (losses) on securities
		-		Net impairment loss recognized in earnings
		137		Total reclassifications before tax
		29		Income tax expense
	$	108		Reclassifications, net of tax
Unrealized gains (losses) on cash flow hedges
	$	(393	)	Interest expense
		(83	)	Income tax expense
	$	(310	)	Reclassification, net of tax
	$	418		Total reclassifications for the period, net of tax
2018
Unrealized gains (losses) on securities available for sale
	$	(45	)	Net gains (losses) on securities
		-		Net impairment loss recognized in earnings
		(45	)	Total reclassifications before tax
		(9	)	Income tax expense
	$	(36	)	Reclassifications, net of tax
Unrealized gains (losses) on cash flow hedges
	$	(132	)	Interest expense
		(28	)	Income tax expense
	$	(104	)	Reclassification, net of tax
	$	68		Total reclassifications for the period, net of tax

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New Accounting Standards (Policies)

9 Months Ended

Sep. 30, 2019

New Accounting Standards [Abstract]

New Accounting Standards

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

• Replaces the existing incurred loss impairment guidance and establishes a single allowance framework for financial assets carried at amortized cost, which will reflect our estimate of credit losses over the full remaining expected life of the financial assets and will consider expected future changes in macroeconomic conditions.

• Eliminates existing guidance for purchase credit impaired (“PCI”) loans, and requires recognition of the nonaccretable difference as an increase to the allowance for expected credit losses on financial assets purchased with more than insignificant credit deterioration since origination, which will be offset by an increase in the recorded investment of the related loans.

• Requires inclusion of expected recoveries, limited to the cumulative amount of prior write-offs, when estimating the allowance for credit losses for in scope financial assets (including collateral dependent assets).

• Amends existing impairment guidance for securities available for sale to incorporate an allowance, which will allow for reversals of credit impairments in the event that the credit of an issuer improves. Credit losses on securities available for sale are limited to the amount of the decline in fair value regardless of what the credit loss model would show for impairment.

• Generally requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption.

• Is effective for us on January 1, 2020.

We began evaluating this ASU in 2016 and established a company-wide, cross-discipline governance structure, which provides implementation oversight. We continue to test and refine our current expected credit loss models that satisfy the requirements of this ASU. Oversight and testing, as well as efforts to meet expanded disclosure requirements, will extend through the remainder of 2019.  We expect that the allowance related to our loans will increase as it will cover credit losses over the full remaining expected life of the portfolio. We currently intend to estimate losses over approximately a two year forecast period using the Federal Open Market Committee median economic projections (which are typically published in March of each year) as well as considering other economic forecast sources, and then revert to longer term historical loss experience to estimate losses over more extended periods. We currently expect the increase in the allowance for loan losses to be in the range of $9.0 million to $11.0 million, primarily driven by the longer contractual maturities of our mortgage and consumer installment loan segments.  This estimated range is based on our September 30, 2019 loan portfolio and currently available economic forecasts. The mid-point of the range utilizes a two year forecast period and a two year reversion period. This estimated range also includes a qualitative adjustment to the allowance for loan losses. In addition, we currently expect this ASU to increase the allowance for losses related to unfunded loan commitments between $0.5 million and $1.5 million.  These estimates are subject to further refinement based on continuing reviews, testing, enhancements and approvals of models, methodologies and judgments. The ultimate impact will depend upon the nature and characteristics of our loan portfolio at the adoption date, the macroeconomic conditions and forecasts at that date, further regulatory or accounting guidance and other management judgments.  We currently do not expect to record any allowance for loss on available for sale securities. The ultimate impact will depend upon the nature and characteristics of our securities available for sale (including issuer specific matters) at the adoption date, the macroeconomic conditions and forecasts at that date, and other management judgments.

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

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”.  This ASU amends existing guidance related to the accounting for leases. These amendments, among other things, 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 was effective for us on January 1, 2019 and did not have a material impact on our consolidated operating results or financial condition.  Based on 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.  The primary impact was the recognition of certain operating leases on our Condensed Consolidated Statements of Financial Condition which resulted in the recording of right of use (“ROU”) assets and offsetting lease liabilities each totaling approximately $7.7 million at January 1, 2019.  See note #16.

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 was effective for us on January 1, 2019, and did not have a material impact on our consolidated operating results or financial condition.

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Fair Values of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2019

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, 2019
Assets
Cash and due from banks	$	38,662	$	38,662	$	38,662	$	-	$	-
Interest bearing deposits		43,755		43,755		43,755		-		-
Interest bearing deposits - time		499		500		-		500		-
Securities available for sale		439,592		439,592		-		439,592		-
Federal Home Loan Bank and Federal Reserve Bank Stock		18,359	NA		NA		NA		NA
Net loans and loans held for sale		2,820,278		2,841,484		-		125,013		2,716,471
Accrued interest receivable		10,480		10,480		1		1,995		8,484
Derivative financial instruments		7,389		7,389		-		7,389		-
Liabilities
Deposits with no stated maturity (1)	$	2,429,013	$	2,429,013	$	2,429,013	$	-	$	-
Deposits with stated maturity (1)		623,299		623,916		-		623,916		-
Other borrowings		63,974		63,930		-		63,930		-
Subordinated debentures		39,439		32,427		-		32,427		-
Accrued interest payable		1,610		1,610		100		1,510		-
Derivative financial instruments		5,657		5,657		-		5,657		-
December 31, 2018
Assets
Cash and due from banks	$	23,350	$	23,350	$	23,350	$	-	$	-
Interest bearing deposits		46,894		46,894		46,894		-		-
Interest bearing deposits - time		595		594		-		594		-
Equity securities at fair value		393		393		393		-		-
Securities available for sale		427,926		427,926		-		427,926		-
Federal Home Loan Bank and Federal Reserve Bank Stock		18,359	NA		NA		NA		NA
Net loans and loans held for sale		2,643,856		2,606,256		41,471		44,753		2,520,032
Accrued interest receivable		10,164		10,164		22		1,789		8,353
Derivative financial instruments		5,155		5,155		-		5,155		-
Liabilities
Deposits with no stated maturity (1)	$	2,197,494	$	2,197,494	$	2,197,494	$	-	$	-
Deposits with stated maturity (1)		715,934		711,312		-		711,312		-
Other borrowings		25,700		25,706		-		25,706		-
Subordinated debentures		39,388		35,021		-		35,021		-
Accrued interest payable		1,646		1,646		114		1,532		-
Derivative financial instruments		2,326		2,326		-		2,326		-

(1) Deposits with no stated maturity include reciprocal deposits with a recorded book balance of $367.180 million and $123.080 million at September 30, 2019 and December 31, 2018, respectively. Deposits with a stated maturity include reciprocal deposits with a recorded book balance of $49.020 million and $58.992 million at September 30, 2019 and December 31, 2018, respectively.

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Goodwill and Other Intangibles (Tables)

9 Months Ended

Sep. 30, 2019

Goodwill and Other Intangibles [Abstract]

Other Intangible Assets, Net of Amortization

The following table summarizes intangible assets, net of amortization:

	September 30, 2019				December 31, 2018
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
	(In thousands)
Amortized intangible assets - core deposits	$	11,916	$	6,318	$	11,916	$	5,501
Unamortized intangible assets - goodwill	$	28,300			$	28,300

Estimated Core Deposit Intangible Amortization

A summary of estimated core deposit intangible amortization at September 30, 2019 follows:

	(In thousands)
Three months ending December 31, 2019	$	272
2020		1,020
2021		970
2022		785
2023		547
2024 and thereafter		2,004
Total	$	5,598

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Condensed Consolidated Statements of Operations (unaudited) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Interest Income
Interest and fees on loans		$ 34,226	$ 31,000	$ 100,743	$ 84,027
Interest on securities
Taxable		2,771	2,737	8,811	8,092
Tax-exempt		319	412	1,017	1,335
Other investments		495	303	1,449	898
Total Interest Income		37,811	34,452	112,020	94,352
Interest Expense
Deposits		6,236	3,976	17,938	9,472
Other borrowings and subordinated debentures		703	779	2,211	2,267
Total Interest Expense		6,939	4,755	20,149	11,739
Net Interest Income		30,872	29,697	91,871	82,613
Provision for loan losses		(271)	(53)	1,045	912
Net Interest Income After Provision for Loan Losses		31,143	29,750	90,826	81,701
Non-interest Income
Service charges on deposit accounts		2,883	3,166	8,323	9,166
Interchange income		2,785	2,486	7,744	7,236
Net gains (losses) on assets
Mortgage loans		5,677	2,745	13,590	8,571
Securities		0	93	304	(71)
Mortgage loan servicing, net		(1,562)	1,212	(4,684)	4,668
Other		2,492	2,134	6,862	6,294
Total Non-interest Income		12,275	11,836	32,139	35,864
Non-interest Expense
Compensation and employee benefits		16,673	16,169	48,955	46,506
Occupancy, net		2,161	2,233	6,797	6,667
Data processing		2,282	2,051	6,597	6,180
Furniture, fixtures and equipment		1,023	1,043	3,058	3,029
Communications		733	727	2,219	2,111
Interchange expense		891	715	2,332	1,974
Loan and collection		714	531	1,976	1,900
Advertising		636	594	1,935	1,578
Legal and professional		541	477	1,281	1,311
FDIC deposit insurance		13	270	723	750
Merger related expenses		0	98	0	3,354
Other		2,181	1,832	6,557	5,276
Total Non-interest Expense		27,848	26,740	82,430	80,636
Income Before Income Tax		15,570	14,846	40,535	36,929
Income tax expense		3,125	2,921	7,979	7,026
Net Income		$ 12,445	$ 11,925	$ 32,556	$ 29,903
Net Income Per Common Share
Basic (in dollars per share)	[1]	$ 0.55	$ 0.49	$ 1.41	$ 1.29
Diluted (in dollars per share)		$ 0.55	$ 0.49	$ 1.40	$ 1.27

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

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Recent Acquisition (Tables)

9 Months Ended

Sep. 30, 2019

Recent Acquisition [Abstract]

Final Valuation of Assets Acquired and Liabilities Assumed

The following table reflects our final valuation of the assets acquired and liabilities assumed:

	(In thousands)
Cash and cash equivalents	$	23,521
Interest bearing deposits - time		4,054
Securities available for sale		6,066
Federal Home Loan Bank stock		778
Loans, net		295,799
Property and equipement, net		1,067
Capitalized mortgage loan servicing rights		3,047
Accrued income and other assets		3,362
Other intangibles (1)		5,798
Total assets acquired		343,492
Deposits		287,710
Other borrowings		14,345
Subordinated debentures		3,768
Accrued expenses and other liabilities		1,429
Total liabilities assumed		307,252
Net assets acquired		36,240
Goodwill		28,300
Purchase price (fair value of consideration)	$	64,540

(1) Relates to core deposit intangibles (see note #7).

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Condensed Consolidated Statements of Shareholders' Equity (unaudited) (Parenthetical) - $ / shares	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Condensed Consolidated Statements of Shareholders' Equity (unaudited) [Abstract]
Cash dividends declared (in dollars per share)	$ 0.18	$ 0.15	$ 0.54	$ 0.45
Repurchase of shares of common stock (in shares)	25,000		1,204,688
Issuance of shares of common stock (in shares)	1,900	8,340	70,299	113,548
Share based compensation, common stock (in shares)	5,991	0	92,617	81,919
Share based compensation withholding obligation, common stock (in shares)	919	382	57,205	87,767

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Loans

9 Months Ended

Sep. 30, 2019

Loans [Abstract]

Loans

4. Loans

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

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

	Commercial			Mortgage			Installment			Subjective Allocation		Total
	(In thousands)
2019
Balance at beginning of period	$	8,121		$	8,062		$	1,293		$	8,427	$	25,903
Additions (deductions)
Provision for loan losses		(810	)		83			289			167		(271	)
Recoveries credited to the allowance		1,215			235			202			-		1,652
Loans charged against the allowance		(303	)		(397	)		(436	)		-		(1,136	)
Balance at end of period	$	8,223		$	7,983		$	1,348		$	8,594	$	26,148
2018
Balance at beginning of period	$	6,073		$	8,296		$	848		$	8,287	$	23,504
Additions (deductions)
Provision for loan losses		(907	)		415			(25	)		464		(53	)
Recoveries credited to the allowance		1,418			192			298			-		1,908
Loans charged against the allowance		(225	)		(448	)		(285	)		-		(958	)
Balance at end of period	$	6,359		$	8,455		$	836		$	8,751	$	24,401

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

	Commercial			Mortgage			Installment			Subjective Allocation			Total
	(In thousands)
2019
Balance at beginning of period	$	7,090		$	7,978		$	895		$	8,925		$	24,888
Additions (deductions)
Provision for loan losses		85			270			1,021			(331	)		1,045
Recoveries credited to the allowance		1,720			786			603			-			3,109
Loans charged against the allowance		(672	)		(1,051	)		(1,171	)		-			(2,894	)
Balance at end of period	$	8,223		$	7,983		$	1,348		$	8,594		$	26,148
2018
Balance at beginning of period	$	5,595		$	8,733		$	864		$	7,395		$	22,587
Additions (deductions)
Provision for loan losses		(1,404	)		778			182			1,356			912
Recoveries credited to the allowance		2,458			549			761			-			3,768
Loans charged against the allowance		(290	)		(1,605	)		(971	)		-			(2,866	)
Balance at end of period	$	6,359		$	8,455		$	836		$	8,751		$	24,401

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

	Commercial		Mortgage		Installment		Subjective Allocation		Total
	(In thousands)
September 30, 2019
Allowance for loan losses:
Individually evaluated for impairment	$	871	$	4,610	$	297	$	-	$	5,778
Collectively evaluated for impairment		7,352		3,373		1,051		8,594		20,370
Loans acquired with deteriorated credit quality		-		-		-		-		-
Total ending allowance for loan losses balance	$	8,223	$	7,983	$	1,348	$	8,594	$	26,148
Loans
Individually evaluated for impairment	$	7,776	$	42,590	$	3,223			$	53,589
Collectively evaluated for impairment		1,182,825		1,031,163		460,973				2,674,961
Loans acquired with deteriorated credit quality		1,421		582		329				2,332
Total loans recorded investment		1,192,022		1,074,335		464,525				2,730,882
Accrued interest included in recorded investment		3,005		4,300		1,131				8,436
Total loans	$	1,189,017	$	1,070,035	$	463,394			$	2,722,446
December 31, 2018
Allowance for loan losses:
Individually evaluated for impairment	$	1,305	$	4,799	$	206	$	-	$	6,310
Collectively evaluated for impairment		5,785		3,179		689		8,925		18,578
Loans acquired with deteriorated credit quality		-		-		-		-		-
Total ending allowance for loan losses balance	$	7,090	$	7,978	$	895	$	8,925	$	24,888
Loans
Individually evaluated for impairment	$	8,697	$	46,394	$	3,370			$	58,461
Collectively evaluated for impairment		1,137,586		1,000,038		392,460				2,530,084
Loans acquired with deteriorated credit quality		1,609		555		349				2,513
Total loans recorded investment		1,147,892		1,046,987		396,179				2,591,058
Accrued interest included in recorded investment		3,411		4,097		1,030				8,538
Total loans	$	1,144,481	$	1,042,890	$	395,149			$	2,582,520

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, 2019
Commercial
Income producing - real estate	$	-	$	-	$	-
Land, land development and construction - real estate		-		654		654
Commercial and industrial		-		87		87
Mortgage
1-4 family		-		3,873		3,873
Resort lending		-		227		227
Home equity - 1st lien		-		208		208
Home equity - 2nd lien		-		665		665
Installment
Home equity - 1st lien		-		125		125
Home equity - 2nd lien		-		269		269
Boat lending		-		378		378
Recreational vehicle lending		-		2		2
Other		-		161		161
Total recorded investment	$	-	$	6,649	$	6,649
Accrued interest included in recorded investment	$	-	$	-	$	-
December 31, 2018
Commercial
Income producing - real estate	$	-	$	-	$	-
Land, land development and construction - real estate		-		-		-
Commercial and industrial		-		2,123		2,123
Mortgage
1-4 family		5		4,332		4,337
Resort lending		-		755		755
Home equity - 1st lien		-		159		159
Home equity - 2nd lien		-		419		419
Installment
Home equity - 1st lien		-		178		178
Home equity - 2nd lien		-		226		226
Boat lending		-		166		166
Recreational vehicle lending		-		7		7
Other		-		204		204
Total recorded investment	$	5	$	8,569	$	8,574
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, 2019
Commercial
Income producing - real estate	$	44	$	-	$	-	$	44	$	424,472	$	424,516
Land, land development and construction - real estate		-		-		-		-		102,227		102,227
Commercial and industrial		483		26		-		509		664,770		665,279
Mortgage
1-4 family		3,098		973		1,359		5,430		841,658		847,088
Resort lending		703		81		93		877		69,949		70,826
Home equity - 1st lien		87		101		79		267		37,069		37,336
Home equity - 2nd lien		765		344		231		1,340		117,745		119,085
Installment
Home equity - 1st lien		83		19		10		112		5,871		5,983
Home equity - 2nd lien		118		3		166		287		4,832		5,119
Boat lending		625		49		140		814		205,526		206,340
Recreational vehicle lending		92		33		2		127		152,904		153,031
Other		233		85		104		422		93,630		94,052
Total recorded investment	$	6,331	$	1,714	$	2,184	$	10,229	$	2,720,653	$	2,730,882
Accrued interest included in recorded investment	$	65	$	17	$	-	$	82	$	8,354	$	8,436
December 31, 2018
Commercial
Income producing - real estate	$	44	$	-	$	-	$	44	$	388,729	$	388,773
Land, land development and construction - real estate		-		-		-		-		84,458		84,458
Commercial and industrial		1,538		-		-		1,538		673,123		674,661
Mortgage
1-4 family		1,608		194		4,882		6,684		833,760		840,444
Resort lending		252		-		755		1,007		80,774		81,781
Home equity - 1st lien		176		-		159		335		38,909		39,244
Home equity - 2nd lien		446		100		419		965		84,553		85,518
Installment
Home equity - 1st lien		200		55		197		452		6,985		7,437
Home equity - 2nd lien		111		24		226		361		6,683		7,044
Boat lending		316		295		166		777		169,117		169,894
Recreational vehicle lending		28		21		7		56		125,780		125,836
Other		241		131		204		576		85,392		85,968
Total recorded investment	$	4,960	$	820	$	7,015	$	12,795	$	2,578,263	$	2,591,058
Accrued interest included in recorded investment	$	44	$	11	$	-	$	55	$	8,483	$	8,538

Impaired loans are as follows:

	September 30, 2019		December 31, 2018
Impaired loans with no allocated allowance for loan losses	(In thousands)
Troubled debt restructurings (“TDR”)	$	-	$	-
Non - TDR		1,144		-
Impaired loans with an allocated allowance for loan losses
TDR - allowance based on collateral		1,129		2,787
TDR - allowance based on present value cash flow		49,094		53,258
Non - TDR - allowance based on collateral		1,969		2,145
Total impaired loans	$	53,336	$	58,190
Amount of allowance for loan losses allocated
TDR - allowance based on collateral	$	230	$	769
TDR - allowance based on present value cash flow		4,865		4,849
Non - TDR - allowance based on collateral		683		692
Total amount of allowance for loan losses allocated	$	5,778	$	6,310

Impaired loans by class  are as follows:

	September 30, 2019						December 31, 2018
	Recorded Investment		Unpaid Principal Balance		Related Allowance For Loan Losses		Recorded Investment		Unpaid Principal Balance		Related Allowance For Loan Losses
With no related allowance for loan losses recorded:	(In thousands)
Commercial
Income producing - real estate	$	-	$	-	$	-	$	-	$	-	$	-
Land, land development & construction-real estate		654		734		-		-		-		-
Commercial and industrial		-		-		-		-		-		-
Mortgage
1-4 family		490		774		-		3		474		-
Resort lending		-		-		-		-		-		-
Home equity - 1st lien		-		-		-		-		-		-
Home equity - 2nd lien		-		-		-		-		-		-
Installment
Home equity - 1st lien		-		-		-		1		122		-
Home equity - 2nd lien		-		15		-		-		-		-
Boat lending		-		5		-		-		5		-
Recreational vehicle lending		-		-		-		-		-		-
Other		-		24		-		-		15		-
		1,144		1,552		-		4		616		-
With an allowance for loan losses recorded:
Commercial
Income producing - real estate	$	5,859	$	5,837		619		4,770		4,758		303
Land, land development & construction-real estate		113		113		25		290		289		35
Commercial and industrial		1,150		1,244		227		3,637		3,735		967
Mortgage
1-4 family		29,521		31,657		3,164		32,842		34,427		2,859
Resort lending		11,741		11,949		1,197		13,328		13,354		1,927
Home equity - 1st lien		190		219		49		65		64		4
Home equity - 2nd lien		648		657		200		156		155		9
Installment
Home equity - 1st lien		1,219		1,395		77		1,440		1,524		89
Home equity - 2nd lien		1,406		1,417		116		1,471		1,491		92
Boat lending		140		177		37		-		-		-
Recreational vehicle lending		49		50		3		79		79		4
Other		409		477		64		379		406		21
		52,445		55,192		5,778		58,457		60,282		6,310
Total
Commercial
Income producing - real estate		5,859		5,837		619		4,770		4,758		303
Land, land development & construction-real estate		767		847		25		290		289		35
Commercial and industrial		1,150		1,244		227		3,637		3,735		967
Mortgage
1-4 family		30,011		32,431		3,164		32,845		34,901		2,859
Resort lending		11,741		11,949		1,197		13,328		13,354		1,927
Home equity - 1st lien		190		219		49		65		64		4
Home equity - 2nd lien		648		657		200		156		155		9
Installment
Home equity - 1st lien		1,219		1,395		77		1,441		1,646		89
Home equity - 2nd lien		1,406		1,432		116		1,471		1,491		92
Boat lending		140		182		37		-		5		-
Recreational vehicle lending		49		50		3		79		79		4
Other		409		501		64		379		421		21
Total	$	53,589	$	56,744	$	5,778	$	58,461	$	60,898	$	6,310
Accrued interest included in recorded investment	$	253					$	271

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

	2019				2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance for loan losses recorded:	(In thousands)
Commercial
Income producing - real estate	$	-	$	-	$	-	$	-
Land, land development & construction-real estate		327		5		2,402		-
Commercial and industrial		-		-		425		7
Mortgage
1-4 family		552		7		121		9
Resort lending		-		-		-		-
Home equity - 1st lien		-		-		-		-
Home equity - 2nd lien		-		-		-		-
Installment
Home equity - 1st lien		-		-		1		1
Home equity - 2nd lien		-		-		-		-
Boat lending		-		-		-		-
Recreational vehicle lending		-		-		-		-
Other		-		1		-		-
		879		13		2,949		17
With an allowance for loan losses recorded:
Commercial
Income producing - real estate		5,867		68		4,968		64
Land, land development & construction-real estate		202		3		153		3
Commercial and industrial		1,534		16		2,264		24
Mortgage
1-4 family		29,966		420		34,731		458
Resort lending		12,067		171		14,276		161
Home equity - 1st lien		158		1		67		1
Home equity - 2nd lien		601		8		157		2
Installment
Home equity - 1st lien		1,242		27		1,545		27
Home equity - 2nd lien		1,420		20		1,679		24
Boat lending		86		2		1		-
Recreational vehicle lending		50		1		83		1
Other		443		3		406		5
		53,636		740		60,330		770
Total
Commercial
Income producing - real estate		5,867		68		4,968		64
Land, land development & construction-real estate		529		8		2,555		3
Commercial and industrial		1,534		16		2,689		31
Mortgage
1-4 family		30,518		427		34,852		467
Resort lending		12,067		171		14,276		161
Home equity - 1st lien		158		1		67		1
Home equity - 2nd lien		601		8		157		2
Installment
Home equity - 1st lien		1,242		27		1,546		28
Home equity - 2nd lien		1,420		20		1,679		24
Boat lending		86		2		1		-
Recreational vehicle lending		50		1		83		1
Other		443		4		406		5
Total	$	54,515	$	753	$	63,279	$	787

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

	2019				2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance for loan losses recorded:	(In thousands)
Commercial
Income producing - real estate	$	-	$	-	$	-	$	-
Land, land development & construction-real estate		164		5		1,201		-
Commercial and industrial		-		-		472		20
Mortgage
1-4 family		365		9		70		18
Resort lending		-		-		-		-
Home equity - 1st lien		-		-		-		-
Home equity - 2nd lien		-		-		-		-
Installment
Home equity - 1st lien		-		-		1		5
Home equity - 2nd lien		-		-		-		-
Boat lending		-		-		-		-
Recreational vehicle lending		-		-		-		-
Other		-		1		-		1
		529		15		1,744		44
With an allowance for loan losses recorded:
Commercial
Income producing - real estate		5,306		214		5,077		202
Land, land development & construction-real estate		246		7		157		7
Commercial and industrial		2,406		52		2,391		90
Mortgage
1-4 family		31,273		1,280		35,549		1,347
Resort lending		12,607		493		15,027		475
Home equity - 1st lien		125		4		115		4
Home equity - 2nd lien		479		14		167		5
Installment
Home equity - 1st lien		1,328		70		1,595		81
Home equity - 2nd lien		1,446		61		1,728		76
Boat lending		68		2		1		-
Recreational vehicle lending		65		2		86		3
Other		437		14		406		18
		55,786		2,213		62,299		2,308
Total
Commercial
Income producing - real estate		5,306		214		5,077		202
Land, land development & construction-real estate		410		12		1,358		7
Commercial and industrial		2,406		52		2,863		110
Mortgage
1-4 family		31,638		1,289		35,619		1,365
Resort lending		12,607		493		15,027		475
Home equity - 1st lien		125		4		115		4
Home equity - 2nd lien		479		14		167		5
Installment
Home equity - 1st lien		1,328		70		1,596		86
Home equity - 2nd lien		1,446		61		1,728		76
Boat lending		68		2		1		-
Recreational vehicle lending		65		2		86		3
Other		437		15		406		19
Total	$	56,315	$	2,228	$	64,043	$	2,352

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

TDRs follow:

	September 30, 2019
	Commercial		Retail (1)			Total
	(In thousands)
Performing TDRs	$	6,947	$	40,873		$	47,820
Non-performing TDRs(2)		46		2,357	(3)		2,403
Total	$	6,993	$	43,230		$	50,223
	December 31, 2018
	Commercial		Retail (1)			Total
	(In thousands)
Performing TDRs	$	6,460	$	46,627		$	53,087
Non-performing TDRs(2)		74		2,884	(3)		2,958
Total	$	6,534	$	49,511		$	56,045

(1) Retail loans include mortgage and installment loan 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 $5.1 million and $5.6 million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of September 30, 2019 and December 31, 2018, respectively.

During the nine months ended September 30, 2019 and 2018, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans generally included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

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

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

	Number of Contracts		Pre-modification Recorded Balance		Post-modification Recorded Balance
	(Dollars in thousands)
2019
Commercial
Income producing - real estate		-	$	-	$	-
Land, land development & construction-real estate		-		-		-
Commercial and industrial		2		137		137
Mortgage
1-4 family		1		198		202
Resort lending		-		-		-
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		3		75		75
Installment
Home equity - 1st lien		1		28		28
Home equity - 2nd lien		-		-		-
Boat lending		-		-		-
Recreational vehicle lending		-		-		-
Other		-		-		-
Total		7	$	438	$	442
2018
Commercial
Income producing - real estate		-	$	-	$	-
Land, land development & construction-real estate		-		-		-
Commercial and industrial		1		24		24
Mortgage
1-4 family		3		609		609
Resort lending		1		115		114
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		1		15		15
Home equity - 2nd lien		1		20		21
Boat lending		-		-		-
Recreational vehicle lending		-		-		-
Other		-		-		-
Total		7	$	783	$	783

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

	Number of Contracts		Pre-modification Recorded Balance		Post-modification Recorded Balance
	(Dollars in thousands)
2019
Commercial
Income producing - real estate		2	$	1,329	$	1,329
Land, land development & construction-real estate		-		-		-
Commercial and industrial		3		186		186
Mortgage
1-4 family		3		985		988
Resort lending		-		-		-
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		3		75		75
Installment
Home equity - 1st lien		3		77		79
Home equity - 2nd lien		4		111		112
Boat lending		-		-		-
Recreational vehicle lending		-		-		-
Other		-		-		-
Total		18	$	2,763	$	2,769
2018
Commercial
Income producing - real estate		1	$	67	$	67
Land, land development & construction-real estate		-		-		-
Commercial and industrial		6		611		611
Mortgage
1-4 family		7		903		889
Resort lending		1		115		114
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		6		203		205
Home equity - 2nd lien		3		113		114
Boat lending		-		-		-
Recreational vehicle lending		-		-		-
Other		2		76		73
Total		26	$	2,088	$	2,073

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

The troubled debt restructurings described above for 2018 decreased the allowance for loan losses by $0.01 million and resulted in zero charge offs during the three months ended September 30, 2018, and decreased the allowance by $0.004 million and resulted in zero charge offs during the nine months ended September 30, 2018.

There were no troubled debt restructurings that subsequently defaulted within twelve months following the modification during the three and nine months periods ended September 30, 2019 and 2018.

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. Our doubtful rating includes a sub classification for a loss rate other than 50% (which is the standard doubtful loss rate).  These ratings include loans to borrowers with weaknesses that make collection of 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, 2019
Income producing - real estate	$	408,132	$	15,619	$	765	$	-	$	424,516
Land, land development and construction - real estate		93,563		8,010		-		654		102,227
Commercial and industrial		604,311		59,425		1,456		87		665,279
Total	$	1,106,006	$	83,054	$	2,221	$	741	$	1,192,022
Accrued interest included in total	$	2,713	$	284	$	8	$	-	$	3,005
December 31, 2018
Income producing - real estate	$	375,142	$	13,387	$	200	$	44	$	388,773
Land, land development and construction - real estate		76,120		8,328		-		10		84,458
Commercial and industrial		631,345		35,469		5,577		2,270		674,661
Total	$	1,082,607	$	57,184	$	5,777	$	2,324	$	1,147,892
Accrued interest included in total	$	3,107	$	174	$	130	$	-	$	3,411

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

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

	Mortgage (1)
	1-4 Family		Resort Lending		Home Equity 1st Lien		Home Equity 2nd Lien		Total
	(In thousands)
September 30, 2019
800 and above	$	101,927	$	11,151	$	6,165	$	12,177	$	131,420
750-799		385,243		31,372		16,300		52,564		485,479
700-749		204,241		15,323		9,209		32,897		261,670
650-699		84,458		7,612		3,747		13,168		108,985
600-649		30,819		2,241		668		4,196		37,924
550-599		16,410		1,171		663		1,881		20,125
500-549		10,972		620		330		1,072		12,994
Under 500		3,718		80		254		372		4,424
Unknown		9,300		1,256		-		758		11,314
Total	$	847,088	$	70,826	$	37,336	$	119,085	$	1,074,335
Accrued interest included in total	$	3,327	$	343	$	166	$	464	$	4,300
December 31, 2018
800 and above	$	94,492	$	10,898	$	6,784	$	8,838	$	121,012
750-799		384,344		36,542		17,303		38,295		476,484
700-749		202,440		17,282		9,155		23,249		252,126
650-699		91,847		9,945		3,987		8,681		114,460
600-649		34,342		3,088		959		3,359		41,748
550-599		13,771		1,867		427		1,236		17,301
500-549		8,439		106		418		826		9,789
Under 500		2,533		143		98		381		3,155
Unknown		8,236		1,910		113		653		10,912
Total	$	840,444	$	81,781	$	39,244	$	85,518	$	1,046,987
Accrued interest included in total	$	3,079	$	363	$	199	$	456	$	4,097

(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, 2019
800 and above	$	380	$	219	$	29,581	$	24,296	$	7,140	$	61,616
750-799		1,104		1,265		120,085		90,692		35,671		248,817
700-749		1,323		1,123		42,869		29,990		25,052		100,357
650-699		1,399		1,104		10,536		5,560		10,324		28,923
600-649		934		678		1,783		1,692		2,762		7,849
550-599		526		457		808		617		735		3,143
500-549		299		208		455		145		748		1,855
Under 500		18		50		223		39		156		486
Unknown		-		15		-		-		11,464		11,479
Total	$	5,983	$	5,119	$	206,340	$	153,031	$	94,052	$	464,525
Accrued interest included in total	$	21	$	16	$	467	$	350	$	277	$	1,131
December 31, 2018
800 and above	$	555	$	235	$	20,767	$	20,197	$	6,272	$	48,026
750-799		1,502		1,642		100,191		74,154		31,483		208,972
700-749		1,582		1,682		35,455		24,890		24,369		87,978
650-699		1,606		1,217		10,581		4,918		9,840		28,162
600-649		996		1,272		1,657		992		2,751		7,668
550-599		759		658		652		453		838		3,360
500-549		384		229		286		225		651		1,775
Under 500		51		6		266		7		218		548
Unknown		2		103		39		-		9,546		9,690
Total	$	7,437	$	7,044	$	169,894	$	125,836	$	85,968	$	396,179
Accrued interest included in total	$	28	$	25	$	403	$	311	$	263	$	1,030

(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 $1.2 million at both September 30, 2019 and December 31, 2018, respectively.  Retail mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process according to local requirements totaled $0.2 million and $0.3 million at September 30, 2019 and December 31, 2018, respectively.

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

During the first and third quarters of 2018, we sold $16.5 million and $11.1 million, respectively, of residential fixed and adjustable rate portfolio mortgage loans servicing retained to another financial institution and recognized a gain (loss) on sale of $0.05 million and ($0.01) million, respectively.  These mortgage loans were sold primarily for asset/liability management purposes.

Purchase Credit Impaired (“PCI”) Loans

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

As a result of our acquisition of TCSB Bancorp, Inc. (“TCSB”) (see note #17) we purchased loans for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. For these loans that meet the criteria of ASC 310-30 treatment, the carrying amount was as follows:

	September 30, 2019		December 31, 2018
	(In thousands)
Commercial	$	1,421	$	1,609
Mortgage		582		555
Installment		329		349
Total carrying amount		2,332		2,513
Allowance for loan losses		-		-
Carrying amount, net of allowance for loan losses	$	2,332	$	2,513

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

	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
	(unaudited)						(unaudited)
	(In thousands)						(In thousands)
Balance at beginning of period	$	749		$	533		$	462		$	-
New loans purchased		-			-			-			568
Accretion recorded as loan interest income		(56	)		(32	)		(134	)		(67	)
Reclassification from (to) nonaccretable difference		-			-			365			-
Displosals/other adjustments		-			-			-			-
Balance at end of period	$	693		$	501		$	693		$	501

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Share Based Compensation

9 Months Ended

Sep. 30, 2019

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, 2019.  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, 2019. Share based awards and payments are measured at fair value at the date of grant and are expensed over the requisite service period. Common shares issued upon exercise of stock options come from currently authorized but unissued shares.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Restricted stock		8,000		-		64,267		53,420
PSU		-		-		22,016		19,986

Except for 0.008 million shares of restricted stock issued during the third quarter of 2019 and 0.002 million shares of restricted stock issued during the first quarters of 2019 and 2018  that vest ratably over three years, the shares of restricted stock and PSUs shown in the above table cliff vest after a period of three years.  The performance feature of the PSUs is based on a comparison of our total shareholder return over the three year period starting on the grant date to the total shareholder return over that period for a banking index of our peers.

Our directors may elect to receive a portion of their quarterly cash retainer fees in the form of common stock (either on a current basis or on a deferred basis pursuant to the non-employee director stock purchase plan referenced above). Shares equal in value to that portion of each director’s fees that he or she has elected to receive in stock are issued each quarter and vest immediately.  We issued 0.008 million and 0.007 million shares during the nine month periods ended September 30, 2019 and 2018, respectively, pursuant to this plan 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, 2019, respectively, and was $0.4 million and $1.1 million during the same periods in 2018, respectively.  The corresponding tax benefit relating to this expense was $0.1 million and $0.2 million for the three and nine month periods ended September 30, 2019, respectively and $0.1 million and $0.2 million for the same periods in 2018. Total expense recognized for non-employee director share based payments was $0.06 million and $0.18 million during the three and nine month periods ended September 30, 2019, respectively, and was $0.05 million and $0.16 million during the same periods in 2018, respectively.  The corresponding tax benefit relating to this expense was $0.01 million and $0.04 million for the three and nine month periods ended September 30, 2019, respectively and $0.01 million and $0.03 million during the same periods in 2018.

At September 30, 2019, the total expected compensation cost related to non-vested restricted stock and PSUs not yet recognized was $2.5 million.  The weighted-average period over which this amount will be recognized is 1.9 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, 2019		211,421		$	6.48
Granted		-
Exercised		(70,299	)		9.98
Forfeited		-
Expired		(1,116	)		22.35
Outstanding at September 30, 2019		140,006		$	4.60		3.2	$	2,340
Vested and expected to vest at September 30, 2019		140,006		$	4.60		3.2	$	2,340
Exercisable at September 30, 2019		140,006		$	4.60		3.2	$	2,340

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, 2019		258,419		$	19.00
Granted		86,283			22.87
Vested		(85,978	)		14.57
Forfeited		(12,998	)		22.85
Outstanding at September 30, 2019		245,726		$	21.72

Certain information regarding options exercised during the periods follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
	(In thousands)
Intrinsic value	$	32	$	153	$	868	$	1,827
Cash proceeds received	$	6	$	58	$	701	$	1,042
Tax benefit realized	$	6	$	32	$	182	$	384

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Income Tax (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Income Tax [Abstract]
Income tax expense	$ 3,125	$ 2,921	$ 7,979	$ 7,026
Decrease in income tax expense	10	$ 10	180	$ 330
Gross unrecognized tax benefits	$ 600		$ 600		$ 600

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Shareholders' Equity and Earnings Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands		1 Months Ended	3 Months Ended		9 Months Ended
		May 31, 2019	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Jun. 30, 2019	Dec. 18, 2018
Share Repurchase Plan [Abstract]
Share repurchase plan percentage of shares authorized to be repurchased								5.00%
Stock repurchased (in shares)			25,000		1,204,688
Stock repurchased			$ 502		$ 26,284
Earnings Per Share Reconciliation [Abstract]
Net Income			$ 12,445	$ 11,925	$ 32,556	$ 29,903
Weighted average shares outstanding (in shares)	[1]		22,486,000	24,149,000	23,033,000	23,218,000
Stock units for deferred compensation plan for non-employee directors (in shares)			132,000	129,000	131,000	126,000
Effect of stock options (in shares)			110,000	182,000	116,000	180,000
Performance share units (in shares)			42,000	55,000	39,000	52,000
Weighted average shares outstanding for calculation of diluted earnings per share (in shares)			22,770,000	24,515,000	23,319,000	23,576,000
Net income per common share [Abstract]
Basic (in dollars per share)	[1]		$ 0.55	$ 0.49	$ 1.41	$ 1.29
Diluted (in dollars per share)			$ 0.55	$ 0.49	$ 1.40	$ 1.27
Common Stock [Member]
Share Repurchase Plan [Abstract]
Share repurchase plan percentage of shares repurchased		5.00%
Number of shares authorized for repurchase (in shares)							300,000
Stock repurchased (in shares)					1,204,688	0
Stock repurchased			$ 502		$ 26,284	$ 0
Stock Options [Member]
Antidilutive Securities [Abstract]
Antidilutive shares excluded from computation of diluted loss per share (in shares)			0	0	0	0

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

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Share Based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended				9 Months Ended
	Sep. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Mar. 31, 2018	Sep. 30, 2019	Sep. 30, 2018
Share Based Compensation [Abstract]
Number of additional shares approved for grant (in shares)					500,000
Total compensation cost not yet recognized	$ 2,500				$ 2,500
Total compensation cost not yet recognized, period for recognition					1 year 10 months 24 days
Long-Term Incentive Plan [Member]
Share Based Compensation [Abstract]
Total compensation expense recognized	400		$ 400		$ 1,200	$ 1,100
Tax benefit relating to compensation expense recognized	$ 100		$ 100		$ 200	$ 200
Restricted Stock [Member] | Long-Term Incentive Plan [Member]
Share Based Compensation [Abstract]
Restricted stock and Performance stock units granted (in shares)	8,000	2,000	0	2,000	64,267	53,420
Vesting period	3 years	3 years		3 years
Performance Stock Units [Member] | Long-Term Incentive Plan [Member]
Share Based Compensation [Abstract]
Restricted stock and Performance stock units granted (in shares)	0		0		22,016	19,986
Non-Employee Directors [Member]
Share Based Compensation [Abstract]
Number of additional shares approved for grant (in shares)					200,000
Total compensation expense recognized	$ 60		$ 50		$ 180	$ 160
Tax benefit relating to compensation expense recognized	$ 10		$ 10		$ 40	$ 30
Executive Officers [Member] | Restricted Stock [Member] | Long-Term Incentive Plan [Member]
Share Based Compensation [Abstract]
Vesting period					3 years	3 years
Executive Officers [Member] | Performance Stock Units [Member] | Long-Term Incentive Plan [Member]
Share Based Compensation [Abstract]
Vesting period					3 years	3 years
Performance feature comparison period					3 years
Directors [Member]
Share Based Compensation [Abstract]
Shares issues as retainer fees (in shares)					8,000	7,000

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Fair Value Disclosures, Reconciliation for all Assets Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3) (Details) - Capitalized Mortgage Loan Servicing Rights [Member] - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Reconciliation for all assets and (liabilities) measured at fair value on a recurring basis using significant unobservable inputs (Level 3) [Roll Forward]
Beginning balance	$ 17,894	$ 21,848	$ 21,400	$ 15,699
Total gains (losses) realized and unrealized [Abstract]
Included in results of operations	(3,145)	(198)	(9,258)	694
Included in other comprehensive income (loss)	0	0	0	0
Purchases, issuances, settlements, maturities and calls	2,157	1,501	4,764	6,758
Transfers in and/or out of Level 3	0	0	0	0
Ending balance	16,906	23,151	16,906	23,151
Amount of total gains (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	$ (3,145)	$ (198)	$ (9,258)	$ 694

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Contingencies (Details) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019 USD ($) shares	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($) shares	Sep. 30, 2018 USD ($)	Oct. 17, 2019 USD ($) $ / shares	Dec. 31, 2018 USD ($)
Contingencies [Abstract]
Provision for loss reimbursement on sold loans	$ 30	$ 50	$ 180	$ 80
Reserve for loss reimbursement on sold mortgage loans	$ 850		$ 850			$ 780
VISA Class B Common Stock [Member]
Investment Owned [Abstract]
Number of shares owned (in shares) | shares	12,566		12,566
Current conversion ratio			1.6228
VISA Class B Common Stock [Member] | Subsequent Event [Member]
Investment Owned [Abstract]
Closing price (in dollars per share) | $ / shares					$ 177.94
Current value of shares owned					$ 3,600

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Loans, Impaired Financing Receivables (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Impaired loans with no allocated allowance for loan losses [Abstract]
Troubled debt restructurings ("TDR")	$ 0		$ 0		$ 0
Non - TDR	1,144		1,144		0
Impaired loans with an allocated allowance for loan losses [Abstract]
TDR - allowance based on collateral	1,129		1,129		2,787
TDR - allowance based on present value cash flow	49,094		49,094		53,258
Non - TDR - allowance based on collateral	1,969		1,969		2,145
Total impaired loans	53,336		53,336		58,190
Amount of allowance for loan losses allocated [Abstract]
TDR - allowance based on collateral	230		230		769
TDR - allowance based on present value cash flow	4,865		4,865		4,849
Non - TDR - allowance based on collateral	683		683		692
Total amount of allowance for loan losses allocated	5,778		5,778		6,310
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance for loan losses recorded	1,144		1,144		4
Unpaid Principal Balance, with no related allowance for loan losses recorded	1,552		1,552		616
With no related allowance for loan losses recorded	0		0		0
Recorded Investment, with an allowance for loan losses recorded	52,445		52,445		58,457
Unpaid Principal Balance, with an allowance for loan losses recorded	55,192		55,192		60,282
Recorded Investment	53,589		53,589		58,461
Unpaid Principal Balance	56,744		56,744		60,898
Related Allowance	5,778		5,778		6,310
Accrued interest included in recorded investment	253		253		271
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with no related allowance for loan losses recorded	879	$ 2,949	529	$ 1,744
Interest Income Recognized, with no related allowance for loan losses recorded	13	17	15	44
Average Recorded Investment, with an allowance for loan losses recorded	53,636	60,330	55,786	62,299
Interest Income Recognized, with an allowance for loan losses recorded	740	770	2,213	2,308
Average Recorded Investment	54,515	63,279	56,315	64,043
Interest Income Recognized	753	787	2,228	2,352
Commercial [Member] | Income Producing - Real Estate [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance for loan losses recorded	0		0		0
Unpaid Principal Balance, with no related allowance for loan losses recorded	0		0		0
With no related allowance for loan losses recorded	0		0		0
Recorded Investment, with an allowance for loan losses recorded	5,859		5,859		4,770
Unpaid Principal Balance, with an allowance for loan losses recorded	5,837		5,837		4,758
Recorded Investment	5,859		5,859		4,770
Unpaid Principal Balance	5,837		5,837		4,758
Related Allowance	619		619		303
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with no related allowance for loan losses recorded	0	0	0	0
Interest Income Recognized, with no related allowance for loan losses recorded	0	0	0	0
Average Recorded Investment, with an allowance for loan losses recorded	5,867	4,968	5,306	5,077
Interest Income Recognized, with an allowance for loan losses recorded	68	64	214	202
Average Recorded Investment	5,867	4,968	5,306	5,077
Interest Income Recognized	68	64	214	202
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance for loan losses recorded	654		654		0
Unpaid Principal Balance, with no related allowance for loan losses recorded	734		734		0
With no related allowance for loan losses recorded	0		0		0
Recorded Investment, with an allowance for loan losses recorded	113		113		290
Unpaid Principal Balance, with an allowance for loan losses recorded	113		113		289
Recorded Investment	767		767		290
Unpaid Principal Balance	847		847		289
Related Allowance	25		25		35
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with no related allowance for loan losses recorded	327	2,402	164	1,201
Interest Income Recognized, with no related allowance for loan losses recorded	5	0	5	0
Average Recorded Investment, with an allowance for loan losses recorded	202	153	246	157
Interest Income Recognized, with an allowance for loan losses recorded	3	3	7	7
Average Recorded Investment	529	2,555	410	1,358
Interest Income Recognized	8	3	12	7
Commercial [Member] | Commercial and Industrial [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance for loan losses recorded	0		0		0
Unpaid Principal Balance, with no related allowance for loan losses recorded	0		0		0
With no related allowance for loan losses recorded	0		0		0
Recorded Investment, with an allowance for loan losses recorded	1,150		1,150		3,637
Unpaid Principal Balance, with an allowance for loan losses recorded	1,244		1,244		3,735
Recorded Investment	1,150		1,150		3,637
Unpaid Principal Balance	1,244		1,244		3,735
Related Allowance	227		227		967
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with no related allowance for loan losses recorded	0	425	0	472
Interest Income Recognized, with no related allowance for loan losses recorded	0	7	0	20
Average Recorded Investment, with an allowance for loan losses recorded	1,534	2,264	2,406	2,391
Interest Income Recognized, with an allowance for loan losses recorded	16	24	52	90
Average Recorded Investment	1,534	2,689	2,406	2,863
Interest Income Recognized	16	31	52	110
Mortgage [Member] | 1-4 Family [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance for loan losses recorded	490		490		3
Unpaid Principal Balance, with no related allowance for loan losses recorded	774		774		474
With no related allowance for loan losses recorded	0		0		0
Recorded Investment, with an allowance for loan losses recorded	29,521		29,521		32,842
Unpaid Principal Balance, with an allowance for loan losses recorded	31,657		31,657		34,427
Recorded Investment	30,011		30,011		32,845
Unpaid Principal Balance	32,431		32,431		34,901
Related Allowance	3,164		3,164		2,859
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with no related allowance for loan losses recorded	552	121	365	70
Interest Income Recognized, with no related allowance for loan losses recorded	7	9	9	18
Average Recorded Investment, with an allowance for loan losses recorded	29,966	34,731	31,273	35,549
Interest Income Recognized, with an allowance for loan losses recorded	420	458	1,280	1,347
Average Recorded Investment	30,518	34,852	31,638	35,619
Interest Income Recognized	427	467	1,289	1,365
Mortgage [Member] | Resort Lending [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance for loan losses recorded	0		0		0
Unpaid Principal Balance, with no related allowance for loan losses recorded	0		0		0
With no related allowance for loan losses recorded	0		0		0
Recorded Investment, with an allowance for loan losses recorded	11,741		11,741		13,328
Unpaid Principal Balance, with an allowance for loan losses recorded	11,949		11,949		13,354
Recorded Investment	11,741		11,741		13,328
Unpaid Principal Balance	11,949		11,949		13,354
Related Allowance	1,197		1,197		1,927
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with no related allowance for loan losses recorded	0	0	0	0
Interest Income Recognized, with no related allowance for loan losses recorded	0	0	0	0
Average Recorded Investment, with an allowance for loan losses recorded	12,067	14,276	12,607	15,027
Interest Income Recognized, with an allowance for loan losses recorded	171	161	493	475
Average Recorded Investment	12,067	14,276	12,607	15,027
Interest Income Recognized	171	161	493	475
Mortgage [Member] | Home Equity - 1st Lien [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance for loan losses recorded	0		0		0
Unpaid Principal Balance, with no related allowance for loan losses recorded	0		0		0
With no related allowance for loan losses recorded	0		0		0
Recorded Investment, with an allowance for loan losses recorded	190		190		65
Unpaid Principal Balance, with an allowance for loan losses recorded	219		219		64
Recorded Investment	190		190		65
Unpaid Principal Balance	219		219		64
Related Allowance	49		49		4
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with no related allowance for loan losses recorded	0	0	0	0
Interest Income Recognized, with no related allowance for loan losses recorded	0	0	0	0
Average Recorded Investment, with an allowance for loan losses recorded	158	67	125	115
Interest Income Recognized, with an allowance for loan losses recorded	1	1	4	4
Average Recorded Investment	158	67	125	115
Interest Income Recognized	1	1	4	4
Mortgage [Member] | Home Equity - 2nd Lien [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance for loan losses recorded	0		0		0
Unpaid Principal Balance, with no related allowance for loan losses recorded	0		0		0
With no related allowance for loan losses recorded	0		0		0
Recorded Investment, with an allowance for loan losses recorded	648		648		156
Unpaid Principal Balance, with an allowance for loan losses recorded	657		657		155
Recorded Investment	648		648		156
Unpaid Principal Balance	657		657		155
Related Allowance	200		200		9
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with no related allowance for loan losses recorded	0	0	0	0
Interest Income Recognized, with no related allowance for loan losses recorded	0	0	0	0
Average Recorded Investment, with an allowance for loan losses recorded	601	157	479	167
Interest Income Recognized, with an allowance for loan losses recorded	8	2	14	5
Average Recorded Investment	601	157	479	167
Interest Income Recognized	8	2	14	5
Installment [Member] | Home Equity - 1st Lien [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance for loan losses recorded	0		0		1
Unpaid Principal Balance, with no related allowance for loan losses recorded	0		0		122
With no related allowance for loan losses recorded	0		0		0
Recorded Investment, with an allowance for loan losses recorded	1,219		1,219		1,440
Unpaid Principal Balance, with an allowance for loan losses recorded	1,395		1,395		1,524
Recorded Investment	1,219		1,219		1,441
Unpaid Principal Balance	1,395		1,395		1,646
Related Allowance	77		77		89
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with no related allowance for loan losses recorded	0	1	0	1
Interest Income Recognized, with no related allowance for loan losses recorded	0	1	0	5
Average Recorded Investment, with an allowance for loan losses recorded	1,242	1,545	1,328	1,595
Interest Income Recognized, with an allowance for loan losses recorded	27	27	70	81
Average Recorded Investment	1,242	1,546	1,328	1,596
Interest Income Recognized	27	28	70	86
Installment [Member] | Home Equity - 2nd Lien [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance for loan losses recorded	0		0		0
Unpaid Principal Balance, with no related allowance for loan losses recorded	15		15		0
With no related allowance for loan losses recorded	0		0		0
Recorded Investment, with an allowance for loan losses recorded	1,406		1,406		1,471
Unpaid Principal Balance, with an allowance for loan losses recorded	1,417		1,417		1,491
Recorded Investment	1,406		1,406		1,471
Unpaid Principal Balance	1,432		1,432		1,491
Related Allowance	116		116		92
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with no related allowance for loan losses recorded	0	0	0	0
Interest Income Recognized, with no related allowance for loan losses recorded	0	0	0	0
Average Recorded Investment, with an allowance for loan losses recorded	1,420	1,679	1,446	1,728
Interest Income Recognized, with an allowance for loan losses recorded	20	24	61	76
Average Recorded Investment	1,420	1,679	1,446	1,728
Interest Income Recognized	20	24	61	76
Installment [Member] | Boat Lending [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance for loan losses recorded	0		0		0
Unpaid Principal Balance, with no related allowance for loan losses recorded	5		5		5
With no related allowance for loan losses recorded	0		0		0
Recorded Investment, with an allowance for loan losses recorded	140		140		0
Unpaid Principal Balance, with an allowance for loan losses recorded	177		177		0
Recorded Investment	140		140		0
Unpaid Principal Balance	182		182		5
Related Allowance	37		37		0
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with no related allowance for loan losses recorded	0	0	0	0
Interest Income Recognized, with no related allowance for loan losses recorded	0	0	0	0
Average Recorded Investment, with an allowance for loan losses recorded	86	1	68	1
Interest Income Recognized, with an allowance for loan losses recorded	2	0	2	0
Average Recorded Investment	86	1	68	1
Interest Income Recognized	2	0	2	0
Installment [Member] | Recreational Vehicle Lending [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance for loan losses recorded	0		0		0
Unpaid Principal Balance, with no related allowance for loan losses recorded	0		0		0
With no related allowance for loan losses recorded	0		0		0
Recorded Investment, with an allowance for loan losses recorded	49		49		79
Unpaid Principal Balance, with an allowance for loan losses recorded	50		50		79
Recorded Investment	49		49		79
Unpaid Principal Balance	50		50		79
Related Allowance	3		3		4
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with no related allowance for loan losses recorded	0	0	0	0
Interest Income Recognized, with no related allowance for loan losses recorded	0	0	0	0
Average Recorded Investment, with an allowance for loan losses recorded	50	83	65	86
Interest Income Recognized, with an allowance for loan losses recorded	1	1	2	3
Average Recorded Investment	50	83	65	86
Interest Income Recognized	1	1	2	3
Installment [Member] | Other [Member]
Impaired Loans by class [Abstract]
Recorded Investment, with no related allowance for loan losses recorded	0		0		0
Unpaid Principal Balance, with no related allowance for loan losses recorded	24		24		15
With no related allowance for loan losses recorded	0		0		0
Recorded Investment, with an allowance for loan losses recorded	409		409		379
Unpaid Principal Balance, with an allowance for loan losses recorded	477		477		406
Recorded Investment	409		409		379
Unpaid Principal Balance	501		501		421
Related Allowance	64		64		$ 21
Average recorded investment in and interest income earned on impaired loans by class [Abstract]
Average Recorded Investment, with no related allowance for loan losses recorded	0	0	0	0
Interest Income Recognized, with no related allowance for loan losses recorded	1	0	1	1
Average Recorded Investment, with an allowance for loan losses recorded	443	406	437	406
Interest Income Recognized, with an allowance for loan losses recorded	3	5	14	18
Average Recorded Investment	443	406	437	406
Interest Income Recognized	$ 4	$ 5	$ 15	$ 19

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Securities (Details) $ in Thousands	3 Months Ended			9 Months Ended
	Sep. 30, 2019 USD ($) Security		Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($) Security		Sep. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized cost	$ 434,231			$ 434,231			$ 433,224
Unrealized Gains	6,106			6,106			1,520
Unrealized Losses	745			745			6,818
Fair Value	439,592			439,592			427,926
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value	75,464			75,464			131,526
Less Than Twelve Months, Unrealized Losses	294			294			1,112
Twelve Months or More, Fair Value	40,571			40,571			184,420
Twelve Months or More, Unrealized Losses	451			451			5,706
Total, Fair Value	116,035			116,035			315,946
Total, Unrealized Losses	745			745			6,818
Private Label Mortgage Backed Securities Below Investment Grade [Abstract]
Fair value	1,292			1,292
Amortized cost	1,031			1,031
Non-credit unrealized loss	0			0
Unrealized gain	261			261
Cumulative credit related OTTI	1,214			1,214
Credit related OTTI recognized in earnings	0		$ 0	0		$ 0
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Roll Forward]
Balance at beginning of period	1,594		1,594	1,594		1,594
Additions to credit losses on securities for which no previous OTTI was recognized	0		0	0		0
Increases to credit losses on securities for which OTTI was previously recognized	0		0	0		0
Reduction	(380)	[1]	0	(380)	[1]	0
Balance at end of period	$ 1,214		$ 1,594	1,214		$ 1,594
Number of securities settled which were recorded under OTTI | Security	1
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis, Fiscal Year Maturity [Abstract]
Maturing within one year	$ 13,331			13,331
Maturing after one year but within five years	53,809			53,809
Maturing after five years but within ten years	47,726			47,726
Maturing after ten years	36,061			36,061
Amortized cost	150,927			150,927
U.S. agency residential mortgage-backed	146,128			146,128
U.S. agency commercial mortgage-backed	11,182			11,182
Private label mortgage-backed	31,195			31,195
Other asset backed	94,799			94,799
Amortized cost	434,231			434,231			433,224
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Maturing within one year	13,347			13,347
Maturing after one year but within five years	54,524			54,524
Maturing after five years but within ten years	49,239			49,239
Maturing after ten years	36,832			36,832
Total available-for-sale securities fair value	153,942			153,942
U.S. agency residential mortgage-backed	147,720			147,720
U.S. agency commercial mortgage-backed	11,319			11,319
Private label mortgage-backed	31,826			31,826
Other asset backed	94,785			94,785
Total	439,592			439,592			427,926
U.S. Agency [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized cost	15,145			15,145			20,198
Unrealized Gains	153			153			9
Unrealized Losses	15			15			193
Fair Value	15,283			15,283			20,014
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value	2,189			2,189			7,150
Less Than Twelve Months, Unrealized Losses	4			4			46
Twelve Months or More, Fair Value	2,888			2,888			11,945
Twelve Months or More, Unrealized Losses	11			11			147
Total, Fair Value	5,077			5,077			19,095
Total, Unrealized Losses	$ 15			$ 15			193
Number of securities with market fair value less than amortized cost | Security	26			26
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis, Fiscal Year Maturity [Abstract]
Amortized cost	$ 15,145			$ 15,145			20,198
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Total	15,283			15,283			20,014
U.S. Agency Residential Mortgage-Backed [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized cost	146,128			146,128			124,777
Unrealized Gains	1,806			1,806			817
Unrealized Losses	214			214			1,843
Fair Value	147,720			147,720			123,751
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value	26,084			26,084			18,374
Less Than Twelve Months, Unrealized Losses	33			33			180
Twelve Months or More, Fair Value	16,902			16,902			48,184
Twelve Months or More, Unrealized Losses	181			181			1,663
Total, Fair Value	42,986			42,986			66,558
Total, Unrealized Losses	$ 214			$ 214			1,843
Number of securities with market fair value less than amortized cost | Security	98			98
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis, Fiscal Year Maturity [Abstract]
Amortized cost	$ 146,128			$ 146,128			124,777
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Total	147,720			147,720			123,751
U.S. Agency Commercial Mortgage-Backed [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized cost	11,182			11,182			5,909
Unrealized Gains	155			155			1
Unrealized Losses	18			18			184
Fair Value	11,319			11,319			5,726
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value	1,987			1,987			566
Less Than Twelve Months, Unrealized Losses	12			12			3
Twelve Months or More, Fair Value	882			882			5,094
Twelve Months or More, Unrealized Losses	6			6			181
Total, Fair Value	2,869			2,869			5,660
Total, Unrealized Losses	$ 18			$ 18			184
Number of securities with market fair value less than amortized cost | Security	8			8
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis, Fiscal Year Maturity [Abstract]
Amortized cost	$ 11,182			$ 11,182			5,909
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Total	11,319			11,319			5,726
Private Label Mortgage-Backed [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized cost	31,195			31,195			29,735
Unrealized Gains	686			686			321
Unrealized Losses	55			55			637
Fair Value	31,826			31,826			29,419
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value	5,636			5,636			8,273
Less Than Twelve Months, Unrealized Losses	6			6			57
Twelve Months or More, Fair Value	612			612			16,145
Twelve Months or More, Unrealized Losses	49			49			580
Total, Fair Value	6,248			6,248			24,418
Total, Unrealized Losses	$ 55			$ 55			637
Number of securities with market fair value less than amortized cost | Security	12			12
Private Label Mortgage Backed Securities Below Investment Grade [Abstract]
Number of private label mortgage backed securities currently with OTTI unrealized gains | Security	2			2
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis, Fiscal Year Maturity [Abstract]
Amortized cost	$ 31,195			$ 31,195			29,735
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Total	31,826			31,826			29,419
Senior Security [Member]
Private Label Mortgage Backed Securities Below Investment Grade [Abstract]
Fair value	645			645
Amortized cost	552			552
Non-credit unrealized loss	0			0
Unrealized gain	93			93
Cumulative credit related OTTI	757			757
Super Senior Security [Member]
Private Label Mortgage Backed Securities Below Investment Grade [Abstract]
Fair value	647			647
Amortized cost	479			479
Non-credit unrealized loss	0			0
Unrealized gain	168			168
Cumulative credit related OTTI	457			457
Other Asset Backed [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized cost	94,799			94,799			83,481
Unrealized Gains	185			185			86
Unrealized Losses	199			199			248
Fair Value	94,785			94,785			83,319
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value	23,926			23,926			53,043
Less Than Twelve Months, Unrealized Losses	100			100			160
Twelve Months or More, Fair Value	11,487			11,487			10,235
Twelve Months or More, Unrealized Losses	99			99			88
Total, Fair Value	35,413			35,413			63,278
Total, Unrealized Losses	$ 199			$ 199			248
Number of securities with market fair value less than amortized cost | Security	40			40
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis, Fiscal Year Maturity [Abstract]
Amortized cost	$ 94,799			$ 94,799			83,481
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Total	94,785			94,785			83,319
Obligations of States and Political Subdivisions [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized cost	99,352			99,352			130,244
Unrealized Gains	1,880			1,880			257
Unrealized Losses	93			93			2,946
Fair Value	101,139			101,139			127,555
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value	14,457			14,457			25,423
Less Than Twelve Months, Unrealized Losses	37			37			262
Twelve Months or More, Fair Value	4,362			4,362			80,701
Twelve Months or More, Unrealized Losses	56			56			2,684
Total, Fair Value	18,819			18,819			106,124
Total, Unrealized Losses	$ 93			$ 93			2,946
Number of securities with market fair value less than amortized cost | Security	59			59
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis, Fiscal Year Maturity [Abstract]
Amortized cost	$ 99,352			$ 99,352			130,244
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Total	101,139			101,139			127,555
Corporate [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized cost	32,444			32,444			34,866
Unrealized Gains	1,237			1,237			29
Unrealized Losses	3			3			586
Fair Value	33,678			33,678			34,309
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value	285			285			17,758
Less Than Twelve Months, Unrealized Losses	2			2			343
Twelve Months or More, Fair Value	999			999			9,222
Twelve Months or More, Unrealized Losses	1			1			243
Total, Fair Value	1,284			1,284			26,980
Total, Unrealized Losses	$ 3			$ 3			586
Number of securities with market fair value less than amortized cost | Security	2			2
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis, Fiscal Year Maturity [Abstract]
Amortized cost	$ 32,444			$ 32,444			34,866
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Total	33,678			33,678			34,309
Trust Preferred [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized cost	1,966			1,966			1,964
Unrealized Gains	0			0			0
Unrealized Losses	146			146			145
Fair Value	1,820			1,820			1,819
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value	900			900			939
Less Than Twelve Months, Unrealized Losses	100			100			61
Twelve Months or More, Fair Value	920			920			880
Twelve Months or More, Unrealized Losses	46			46			84
Total, Fair Value	1,820			1,820			1,819
Total, Unrealized Losses	$ 146			$ 146			145
Number of securities with market fair value less than amortized cost | Security	2			2
Number of issues rated as investment grade | Security	1			1
Number of securities not rated | Security	1			1
Non-rated securities, amortized cost	$ 1,000			$ 1,000
Fair value of non-rated trust preferred securities	900			900
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis, Fiscal Year Maturity [Abstract]
Amortized cost	1,966			1,966			1,964
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Total	1,820			1,820			1,819
Foreign Government [Member]
Available-for-sale Securities, Amortized Cost Basis [Abstract]
Amortized cost	2,020			2,020			2,050
Unrealized Gains	4			4			0
Unrealized Losses	2			2			36
Fair Value	2,022			2,022			2,014
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Less Than Twelve Months, Fair Value	0			0			0
Less Than Twelve Months, Unrealized Losses	0			0			0
Twelve Months or More, Fair Value	1,519			1,519			2,014
Twelve Months or More, Unrealized Losses	2			2			36
Total, Fair Value	1,519			1,519			2,014
Total, Unrealized Losses	$ 2			$ 2			36
Number of securities with market fair value less than amortized cost | Security	1			1
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis, Fiscal Year Maturity [Abstract]
Amortized cost	$ 2,020			$ 2,020			2,050
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Total	$ 2,022			$ 2,022			$ 2,014

[1] During the third quarter of 2019 one security with previously recorded OTTI was settled and balance is now zero.

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Loans, Purchase Credit Impaired ("PCI") Loans (Details) - TCSB Bancorp, Inc. [Member] - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Carrying amount of loans that meet the criteria of ASC 310-30 treatment [Abstract]
Total carrying amount	$ 2,332		$ 2,332		$ 2,513
Allowance for loan losses	0		0		0
Carrying amount, net of allowance for loan losses	2,332		2,332		2,513
Accretable yield of PCI loans, or income expected to be collected [Roll Forward]
Balance at beginning of period	749	$ 533	462	$ 0
New loans purchased	0	0	0	568
Accretion recorded as loan interest income	(56)	(32)	(134)	(67)
Reclassification from (to) nonaccretable difference	0	0	365	0
Disposals/other adjustments	0	0	0	0
Balance at end of period	693	$ 501	693	$ 501
Commercial [Member]
Carrying amount of loans that meet the criteria of ASC 310-30 treatment [Abstract]
Total carrying amount	1,421		1,421		1,609
Mortgage [Member]
Carrying amount of loans that meet the criteria of ASC 310-30 treatment [Abstract]
Total carrying amount	582		582		555
Installment [Member]
Carrying amount of loans that meet the criteria of ASC 310-30 treatment [Abstract]
Total carrying amount	$ 329		$ 329		$ 349

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Loans (Tables)

9 Months Ended

Sep. 30, 2019

Loans [Abstract]

Analysis of Allowance for Loan Losses by Portfolio Segment

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

	Commercial			Mortgage			Installment			Subjective Allocation		Total
	(In thousands)
2019
Balance at beginning of period	$	8,121		$	8,062		$	1,293		$	8,427	$	25,903
Additions (deductions)
Provision for loan losses		(810	)		83			289			167		(271	)
Recoveries credited to the allowance		1,215			235			202			-		1,652
Loans charged against the allowance		(303	)		(397	)		(436	)		-		(1,136	)
Balance at end of period	$	8,223		$	7,983		$	1,348		$	8,594	$	26,148
2018
Balance at beginning of period	$	6,073		$	8,296		$	848		$	8,287	$	23,504
Additions (deductions)
Provision for loan losses		(907	)		415			(25	)		464		(53	)
Recoveries credited to the allowance		1,418			192			298			-		1,908
Loans charged against the allowance		(225	)		(448	)		(285	)		-		(958	)
Balance at end of period	$	6,359		$	8,455		$	836		$	8,751	$	24,401

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

	Commercial			Mortgage			Installment			Subjective Allocation			Total
	(In thousands)
2019
Balance at beginning of period	$	7,090		$	7,978		$	895		$	8,925		$	24,888
Additions (deductions)
Provision for loan losses		85			270			1,021			(331	)		1,045
Recoveries credited to the allowance		1,720			786			603			-			3,109
Loans charged against the allowance		(672	)		(1,051	)		(1,171	)		-			(2,894	)
Balance at end of period	$	8,223		$	7,983		$	1,348		$	8,594		$	26,148
2018
Balance at beginning of period	$	5,595		$	8,733		$	864		$	7,395		$	22,587
Additions (deductions)
Provision for loan losses		(1,404	)		778			182			1,356			912
Recoveries credited to the allowance		2,458			549			761			-			3,768
Loans charged against the allowance		(290	)		(1,605	)		(971	)		-			(2,866	)
Balance at end of period	$	6,359		$	8,455		$	836		$	8,751		$	24,401

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, 2019
Allowance for loan losses:
Individually evaluated for impairment	$	871	$	4,610	$	297	$	-	$	5,778
Collectively evaluated for impairment		7,352		3,373		1,051		8,594		20,370
Loans acquired with deteriorated credit quality		-		-		-		-		-
Total ending allowance for loan losses balance	$	8,223	$	7,983	$	1,348	$	8,594	$	26,148
Loans
Individually evaluated for impairment	$	7,776	$	42,590	$	3,223			$	53,589
Collectively evaluated for impairment		1,182,825		1,031,163		460,973				2,674,961
Loans acquired with deteriorated credit quality		1,421		582		329				2,332
Total loans recorded investment		1,192,022		1,074,335		464,525				2,730,882
Accrued interest included in recorded investment		3,005		4,300		1,131				8,436
Total loans	$	1,189,017	$	1,070,035	$	463,394			$	2,722,446
December 31, 2018
Allowance for loan losses:
Individually evaluated for impairment	$	1,305	$	4,799	$	206	$	-	$	6,310
Collectively evaluated for impairment		5,785		3,179		689		8,925		18,578
Loans acquired with deteriorated credit quality		-		-		-		-		-
Total ending allowance for loan losses balance	$	7,090	$	7,978	$	895	$	8,925	$	24,888
Loans
Individually evaluated for impairment	$	8,697	$	46,394	$	3,370			$	58,461
Collectively evaluated for impairment		1,137,586		1,000,038		392,460				2,530,084
Loans acquired with deteriorated credit quality		1,609		555		349				2,513
Total loans recorded investment		1,147,892		1,046,987		396,179				2,591,058
Accrued interest included in recorded investment		3,411		4,097		1,030				8,538
Total loans	$	1,144,481	$	1,042,890	$	395,149			$	2,582,520

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, 2019
Commercial
Income producing - real estate	$	-	$	-	$	-
Land, land development and construction - real estate		-		654		654
Commercial and industrial		-		87		87
Mortgage
1-4 family		-		3,873		3,873
Resort lending		-		227		227
Home equity - 1st lien		-		208		208
Home equity - 2nd lien		-		665		665
Installment
Home equity - 1st lien		-		125		125
Home equity - 2nd lien		-		269		269
Boat lending		-		378		378
Recreational vehicle lending		-		2		2
Other		-		161		161
Total recorded investment	$	-	$	6,649	$	6,649
Accrued interest included in recorded investment	$	-	$	-	$	-
December 31, 2018
Commercial
Income producing - real estate	$	-	$	-	$	-
Land, land development and construction - real estate		-		-		-
Commercial and industrial		-		2,123		2,123
Mortgage
1-4 family		5		4,332		4,337
Resort lending		-		755		755
Home equity - 1st lien		-		159		159
Home equity - 2nd lien		-		419		419
Installment
Home equity - 1st lien		-		178		178
Home equity - 2nd lien		-		226		226
Boat lending		-		166		166
Recreational vehicle lending		-		7		7
Other		-		204		204
Total recorded investment	$	5	$	8,569	$	8,574
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, 2019
Commercial
Income producing - real estate	$	44	$	-	$	-	$	44	$	424,472	$	424,516
Land, land development and construction - real estate		-		-		-		-		102,227		102,227
Commercial and industrial		483		26		-		509		664,770		665,279
Mortgage
1-4 family		3,098		973		1,359		5,430		841,658		847,088
Resort lending		703		81		93		877		69,949		70,826
Home equity - 1st lien		87		101		79		267		37,069		37,336
Home equity - 2nd lien		765		344		231		1,340		117,745		119,085
Installment
Home equity - 1st lien		83		19		10		112		5,871		5,983
Home equity - 2nd lien		118		3		166		287		4,832		5,119
Boat lending		625		49		140		814		205,526		206,340
Recreational vehicle lending		92		33		2		127		152,904		153,031
Other		233		85		104		422		93,630		94,052
Total recorded investment	$	6,331	$	1,714	$	2,184	$	10,229	$	2,720,653	$	2,730,882
Accrued interest included in recorded investment	$	65	$	17	$	-	$	82	$	8,354	$	8,436
December 31, 2018
Commercial
Income producing - real estate	$	44	$	-	$	-	$	44	$	388,729	$	388,773
Land, land development and construction - real estate		-		-		-		-		84,458		84,458
Commercial and industrial		1,538		-		-		1,538		673,123		674,661
Mortgage
1-4 family		1,608		194		4,882		6,684		833,760		840,444
Resort lending		252		-		755		1,007		80,774		81,781
Home equity - 1st lien		176		-		159		335		38,909		39,244
Home equity - 2nd lien		446		100		419		965		84,553		85,518
Installment
Home equity - 1st lien		200		55		197		452		6,985		7,437
Home equity - 2nd lien		111		24		226		361		6,683		7,044
Boat lending		316		295		166		777		169,117		169,894
Recreational vehicle lending		28		21		7		56		125,780		125,836
Other		241		131		204		576		85,392		85,968
Total recorded investment	$	4,960	$	820	$	7,015	$	12,795	$	2,578,263	$	2,591,058
Accrued interest included in recorded investment	$	44	$	11	$	-	$	55	$	8,483	$	8,538

Impaired Loans

Impaired loans are as follows:

	September 30, 2019		December 31, 2018
Impaired loans with no allocated allowance for loan losses	(In thousands)
Troubled debt restructurings (“TDR”)	$	-	$	-
Non - TDR		1,144		-
Impaired loans with an allocated allowance for loan losses
TDR - allowance based on collateral		1,129		2,787
TDR - allowance based on present value cash flow		49,094		53,258
Non - TDR - allowance based on collateral		1,969		2,145
Total impaired loans	$	53,336	$	58,190
Amount of allowance for loan losses allocated
TDR - allowance based on collateral	$	230	$	769
TDR - allowance based on present value cash flow		4,865		4,849
Non - TDR - allowance based on collateral		683		692
Total amount of allowance for loan losses allocated	$	5,778	$	6,310

Impaired loans by class  are as follows:

	September 30, 2019						December 31, 2018
	Recorded Investment		Unpaid Principal Balance		Related Allowance For Loan Losses		Recorded Investment		Unpaid Principal Balance		Related Allowance For Loan Losses
With no related allowance for loan losses recorded:	(In thousands)
Commercial
Income producing - real estate	$	-	$	-	$	-	$	-	$	-	$	-
Land, land development & construction-real estate		654		734		-		-		-		-
Commercial and industrial		-		-		-		-		-		-
Mortgage
1-4 family		490		774		-		3		474		-
Resort lending		-		-		-		-		-		-
Home equity - 1st lien		-		-		-		-		-		-
Home equity - 2nd lien		-		-		-		-		-		-
Installment
Home equity - 1st lien		-		-		-		1		122		-
Home equity - 2nd lien		-		15		-		-		-		-
Boat lending		-		5		-		-		5		-
Recreational vehicle lending		-		-		-		-		-		-
Other		-		24		-		-		15		-
		1,144		1,552		-		4		616		-
With an allowance for loan losses recorded:
Commercial
Income producing - real estate	$	5,859	$	5,837		619		4,770		4,758		303
Land, land development & construction-real estate		113		113		25		290		289		35
Commercial and industrial		1,150		1,244		227		3,637		3,735		967
Mortgage
1-4 family		29,521		31,657		3,164		32,842		34,427		2,859
Resort lending		11,741		11,949		1,197		13,328		13,354		1,927
Home equity - 1st lien		190		219		49		65		64		4
Home equity - 2nd lien		648		657		200		156		155		9
Installment
Home equity - 1st lien		1,219		1,395		77		1,440		1,524		89
Home equity - 2nd lien		1,406		1,417		116		1,471		1,491		92
Boat lending		140		177		37		-		-		-
Recreational vehicle lending		49		50		3		79		79		4
Other		409		477		64		379		406		21
		52,445		55,192		5,778		58,457		60,282		6,310
Total
Commercial
Income producing - real estate		5,859		5,837		619		4,770		4,758		303
Land, land development & construction-real estate		767		847		25		290		289		35
Commercial and industrial		1,150		1,244		227		3,637		3,735		967
Mortgage
1-4 family		30,011		32,431		3,164		32,845		34,901		2,859
Resort lending		11,741		11,949		1,197		13,328		13,354		1,927
Home equity - 1st lien		190		219		49		65		64		4
Home equity - 2nd lien		648		657		200		156		155		9
Installment
Home equity - 1st lien		1,219		1,395		77		1,441		1,646		89
Home equity - 2nd lien		1,406		1,432		116		1,471		1,491		92
Boat lending		140		182		37		-		5		-
Recreational vehicle lending		49		50		3		79		79		4
Other		409		501		64		379		421		21
Total	$	53,589	$	56,744	$	5,778	$	58,461	$	60,898	$	6,310
Accrued interest included in recorded investment	$	253					$	271

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:

	2019				2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance for loan losses recorded:	(In thousands)
Commercial
Income producing - real estate	$	-	$	-	$	-	$	-
Land, land development & construction-real estate		327		5		2,402		-
Commercial and industrial		-		-		425		7
Mortgage
1-4 family		552		7		121		9
Resort lending		-		-		-		-
Home equity - 1st lien		-		-		-		-
Home equity - 2nd lien		-		-		-		-
Installment
Home equity - 1st lien		-		-		1		1
Home equity - 2nd lien		-		-		-		-
Boat lending		-		-		-		-
Recreational vehicle lending		-		-		-		-
Other		-		1		-		-
		879		13		2,949		17
With an allowance for loan losses recorded:
Commercial
Income producing - real estate		5,867		68		4,968		64
Land, land development & construction-real estate		202		3		153		3
Commercial and industrial		1,534		16		2,264		24
Mortgage
1-4 family		29,966		420		34,731		458
Resort lending		12,067		171		14,276		161
Home equity - 1st lien		158		1		67		1
Home equity - 2nd lien		601		8		157		2
Installment
Home equity - 1st lien		1,242		27		1,545		27
Home equity - 2nd lien		1,420		20		1,679		24
Boat lending		86		2		1		-
Recreational vehicle lending		50		1		83		1
Other		443		3		406		5
		53,636		740		60,330		770
Total
Commercial
Income producing - real estate		5,867		68		4,968		64
Land, land development & construction-real estate		529		8		2,555		3
Commercial and industrial		1,534		16		2,689		31
Mortgage
1-4 family		30,518		427		34,852		467
Resort lending		12,067		171		14,276		161
Home equity - 1st lien		158		1		67		1
Home equity - 2nd lien		601		8		157		2
Installment
Home equity - 1st lien		1,242		27		1,546		28
Home equity - 2nd lien		1,420		20		1,679		24
Boat lending		86		2		1		-
Recreational vehicle lending		50		1		83		1
Other		443		4		406		5
Total	$	54,515	$	753	$	63,279	$	787

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

	2019				2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance for loan losses recorded:	(In thousands)
Commercial
Income producing - real estate	$	-	$	-	$	-	$	-
Land, land development & construction-real estate		164		5		1,201		-
Commercial and industrial		-		-		472		20
Mortgage
1-4 family		365		9		70		18
Resort lending		-		-		-		-
Home equity - 1st lien		-		-		-		-
Home equity - 2nd lien		-		-		-		-
Installment
Home equity - 1st lien		-		-		1		5
Home equity - 2nd lien		-		-		-		-
Boat lending		-		-		-		-
Recreational vehicle lending		-		-		-		-
Other		-		1		-		1
		529		15		1,744		44
With an allowance for loan losses recorded:
Commercial
Income producing - real estate		5,306		214		5,077		202
Land, land development & construction-real estate		246		7		157		7
Commercial and industrial		2,406		52		2,391		90
Mortgage
1-4 family		31,273		1,280		35,549		1,347
Resort lending		12,607		493		15,027		475
Home equity - 1st lien		125		4		115		4
Home equity - 2nd lien		479		14		167		5
Installment
Home equity - 1st lien		1,328		70		1,595		81
Home equity - 2nd lien		1,446		61		1,728		76
Boat lending		68		2		1		-
Recreational vehicle lending		65		2		86		3
Other		437		14		406		18
		55,786		2,213		62,299		2,308
Total
Commercial
Income producing - real estate		5,306		214		5,077		202
Land, land development & construction-real estate		410		12		1,358		7
Commercial and industrial		2,406		52		2,863		110
Mortgage
1-4 family		31,638		1,289		35,619		1,365
Resort lending		12,607		493		15,027		475
Home equity - 1st lien		125		4		115		4
Home equity - 2nd lien		479		14		167		5
Installment
Home equity - 1st lien		1,328		70		1,596		86
Home equity - 2nd lien		1,446		61		1,728		76
Boat lending		68		2		1		-
Recreational vehicle lending		65		2		86		3
Other		437		15		406		19
Total	$	56,315	$	2,228	$	64,043	$	2,352

Troubled Debt Restructurings

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

TDRs follow:

	September 30, 2019
	Commercial		Retail (1)			Total
	(In thousands)
Performing TDRs	$	6,947	$	40,873		$	47,820
Non-performing TDRs(2)		46		2,357	(3)		2,403
Total	$	6,993	$	43,230		$	50,223
	December 31, 2018
	Commercial		Retail (1)			Total
	(In thousands)
Performing TDRs	$	6,460	$	46,627		$	53,087
Non-performing TDRs(2)		74		2,884	(3)		2,958
Total	$	6,534	$	49,511		$	56,045

(1) Retail loans include mortgage and installment loan 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 ended September 30 follow:

	Number of Contracts		Pre-modification Recorded Balance		Post-modification Recorded Balance
	(Dollars in thousands)
2019
Commercial
Income producing - real estate		-	$	-	$	-
Land, land development & construction-real estate		-		-		-
Commercial and industrial		2		137		137
Mortgage
1-4 family		1		198		202
Resort lending		-		-		-
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		3		75		75
Installment
Home equity - 1st lien		1		28		28
Home equity - 2nd lien		-		-		-
Boat lending		-		-		-
Recreational vehicle lending		-		-		-
Other		-		-		-
Total		7	$	438	$	442
2018
Commercial
Income producing - real estate		-	$	-	$	-
Land, land development & construction-real estate		-		-		-
Commercial and industrial		1		24		24
Mortgage
1-4 family		3		609		609
Resort lending		1		115		114
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		1		15		15
Home equity - 2nd lien		1		20		21
Boat lending		-		-		-
Recreational vehicle lending		-		-		-
Other		-		-		-
Total		7	$	783	$	783

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

	Number of Contracts		Pre-modification Recorded Balance		Post-modification Recorded Balance
	(Dollars in thousands)
2019
Commercial
Income producing - real estate		2	$	1,329	$	1,329
Land, land development & construction-real estate		-		-		-
Commercial and industrial		3		186		186
Mortgage
1-4 family		3		985		988
Resort lending		-		-		-
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		3		75		75
Installment
Home equity - 1st lien		3		77		79
Home equity - 2nd lien		4		111		112
Boat lending		-		-		-
Recreational vehicle lending		-		-		-
Other		-		-		-
Total		18	$	2,763	$	2,769
2018
Commercial
Income producing - real estate		1	$	67	$	67
Land, land development & construction-real estate		-		-		-
Commercial and industrial		6		611		611
Mortgage
1-4 family		7		903		889
Resort lending		1		115		114
Home equity - 1st lien		-		-		-
Home equity - 2nd lien		-		-		-
Installment
Home equity - 1st lien		6		203		205
Home equity - 2nd lien		3		113		114
Boat lending		-		-		-
Recreational vehicle lending		-		-		-
Other		2		76		73
Total		26	$	2,088	$	2,073

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, 2019
Income producing - real estate	$	408,132	$	15,619	$	765	$	-	$	424,516
Land, land development and construction - real estate		93,563		8,010		-		654		102,227
Commercial and industrial		604,311		59,425		1,456		87		665,279
Total	$	1,106,006	$	83,054	$	2,221	$	741	$	1,192,022
Accrued interest included in total	$	2,713	$	284	$	8	$	-	$	3,005
December 31, 2018
Income producing - real estate	$	375,142	$	13,387	$	200	$	44	$	388,773
Land, land development and construction - real estate		76,120		8,328		-		10		84,458
Commercial and industrial		631,345		35,469		5,577		2,270		674,661
Total	$	1,082,607	$	57,184	$	5,777	$	2,324	$	1,147,892
Accrued interest included in total	$	3,107	$	174	$	130	$	-	$	3,411

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

	Mortgage (1)
	1-4 Family		Resort Lending		Home Equity 1st Lien		Home Equity 2nd Lien		Total
	(In thousands)
September 30, 2019
800 and above	$	101,927	$	11,151	$	6,165	$	12,177	$	131,420
750-799		385,243		31,372		16,300		52,564		485,479
700-749		204,241		15,323		9,209		32,897		261,670
650-699		84,458		7,612		3,747		13,168		108,985
600-649		30,819		2,241		668		4,196		37,924
550-599		16,410		1,171		663		1,881		20,125
500-549		10,972		620		330		1,072		12,994
Under 500		3,718		80		254		372		4,424
Unknown		9,300		1,256		-		758		11,314
Total	$	847,088	$	70,826	$	37,336	$	119,085	$	1,074,335
Accrued interest included in total	$	3,327	$	343	$	166	$	464	$	4,300
December 31, 2018
800 and above	$	94,492	$	10,898	$	6,784	$	8,838	$	121,012
750-799		384,344		36,542		17,303		38,295		476,484
700-749		202,440		17,282		9,155		23,249		252,126
650-699		91,847		9,945		3,987		8,681		114,460
600-649		34,342		3,088		959		3,359		41,748
550-599		13,771		1,867		427		1,236		17,301
500-549		8,439		106		418		826		9,789
Under 500		2,533		143		98		381		3,155
Unknown		8,236		1,910		113		653		10,912
Total	$	840,444	$	81,781	$	39,244	$	85,518	$	1,046,987
Accrued interest included in total	$	3,079	$	363	$	199	$	456	$	4,097

(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, 2019
800 and above	$	380	$	219	$	29,581	$	24,296	$	7,140	$	61,616
750-799		1,104		1,265		120,085		90,692		35,671		248,817
700-749		1,323		1,123		42,869		29,990		25,052		100,357
650-699		1,399		1,104		10,536		5,560		10,324		28,923
600-649		934		678		1,783		1,692		2,762		7,849
550-599		526		457		808		617		735		3,143
500-549		299		208		455		145		748		1,855
Under 500		18		50		223		39		156		486
Unknown		-		15		-		-		11,464		11,479
Total	$	5,983	$	5,119	$	206,340	$	153,031	$	94,052	$	464,525
Accrued interest included in total	$	21	$	16	$	467	$	350	$	277	$	1,131
December 31, 2018
800 and above	$	555	$	235	$	20,767	$	20,197	$	6,272	$	48,026
750-799		1,502		1,642		100,191		74,154		31,483		208,972
700-749		1,582		1,682		35,455		24,890		24,369		87,978
650-699		1,606		1,217		10,581		4,918		9,840		28,162
600-649		996		1,272		1,657		992		2,751		7,668
550-599		759		658		652		453		838		3,360
500-549		384		229		286		225		651		1,775
Under 500		51		6		266		7		218		548
Unknown		2		103		39		-		9,546		9,690
Total	$	7,437	$	7,044	$	169,894	$	125,836	$	85,968	$	396,179
Accrued interest included in total	$	28	$	25	$	403	$	311	$	263	$	1,030

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

Purchase Credit Impaired (PCI) Loans

For these loans that meet the criteria of ASC 310-30 treatment, the carrying amount was as follows:

	September 30, 2019		December 31, 2018
	(In thousands)
Commercial	$	1,421	$	1,609
Mortgage		582		555
Installment		329		349
Total carrying amount		2,332		2,513
Allowance for loan losses		-		-
Carrying amount, net of allowance for loan losses	$	2,332	$	2,513

Accretable yield of PCI loans, or income expected to be collected follows:

	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
	(unaudited)						(unaudited)
	(In thousands)						(In thousands)
Balance at beginning of period	$	749		$	533		$	462		$	-
New loans purchased		-			-			-			568
Accretion recorded as loan interest income		(56	)		(32	)		(134	)		(67	)
Reclassification from (to) nonaccretable difference		-			-			365			-
Displosals/other adjustments		-			-			-			-
Balance at end of period	$	693		$	501		$	693		$	501

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Fair Values of Financial Instruments

9 Months Ended

Sep. 30, 2019

Fair Values of Financial Instruments [Abstract]

Fair Values of Financial Instruments

12. Fair Values of Financial Instruments

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

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

The estimated recorded book balances and fair values follow:

					Fair Value Using
	Recorded Book Balance		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Un- observable Inputs (Level 3)
	(In thousands)
September 30, 2019
Assets
Cash and due from banks	$	38,662	$	38,662	$	38,662	$	-	$	-
Interest bearing deposits		43,755		43,755		43,755		-		-
Interest bearing deposits - time		499		500		-		500		-
Securities available for sale		439,592		439,592		-		439,592		-
Federal Home Loan Bank and Federal Reserve Bank Stock		18,359	NA		NA		NA		NA
Net loans and loans held for sale		2,820,278		2,841,484		-		125,013		2,716,471
Accrued interest receivable		10,480		10,480		1		1,995		8,484
Derivative financial instruments		7,389		7,389		-		7,389		-
Liabilities
Deposits with no stated maturity (1)	$	2,429,013	$	2,429,013	$	2,429,013	$	-	$	-
Deposits with stated maturity (1)		623,299		623,916		-		623,916		-
Other borrowings		63,974		63,930		-		63,930		-
Subordinated debentures		39,439		32,427		-		32,427		-
Accrued interest payable		1,610		1,610		100		1,510		-
Derivative financial instruments		5,657		5,657		-		5,657		-
December 31, 2018
Assets
Cash and due from banks	$	23,350	$	23,350	$	23,350	$	-	$	-
Interest bearing deposits		46,894		46,894		46,894		-		-
Interest bearing deposits - time		595		594		-		594		-
Equity securities at fair value		393		393		393		-		-
Securities available for sale		427,926		427,926		-		427,926		-
Federal Home Loan Bank and Federal Reserve Bank Stock		18,359	NA		NA		NA		NA
Net loans and loans held for sale		2,643,856		2,606,256		41,471		44,753		2,520,032
Accrued interest receivable		10,164		10,164		22		1,789		8,353
Derivative financial instruments		5,155		5,155		-		5,155		-
Liabilities
Deposits with no stated maturity (1)	$	2,197,494	$	2,197,494	$	2,197,494	$	-	$	-
Deposits with stated maturity (1)		715,934		711,312		-		711,312		-
Other borrowings		25,700		25,706		-		25,706		-
Subordinated debentures		39,388		35,021		-		35,021		-
Accrued interest payable		1,646		1,646		114		1,532		-
Derivative financial instruments		2,326		2,326		-		2,326		-

(1) Deposits with no stated maturity include reciprocal deposits with a recorded book balance of $367.180 million and $123.080 million at September 30, 2019 and December 31, 2018, respectively. Deposits with a stated maturity include reciprocal deposits with a recorded book balance of $49.020 million and $58.992 million at September 30, 2019 and December 31, 2018, respectively.

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

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

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

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

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Leases

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Leases

16.  Leases

We have operating leases, primarily relating to certain office facilities, some of which include renewal options and escalation clauses.  Certain leases also include both lease components (fixed payments including rent, taxes and insurance costs) and non-lease components (common area or other maintenance costs) which are accounted for as a single lease component as we have elected the practical expedient to group lease and non-lease components for all leases.  Most of our leases include one or more options to renew. The exercise of lease renewal options is typically at our sole discretion and are included in our ROU assets and lease liabilities if they are reasonably certain of exercise.  As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments.

The cost components of our operating leases follows:

	Three Months Ended		Nine Months Ended
	September 30, 2019
	(In thousands)
Operating lease cost	$	565	$	1,692
Variable lease cost		43		115
Short-term lease cost		4		14
Total	$	612	$	1,821

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

Supplemental balance sheet information related to our operating leases follows:

	September 30, 2019
	(In thousands)
Lease right of use asset (1)	$	6,244
Lease liabilities (2)	$	6,257
Weighted average remaining lease term (years)		5.50
Weighted average discount rate		3.2	%

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

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

Maturity analysis of our lease liabilities at September 30, 2019 based on required contractual payments follows:

	(In thousands)
Three months ending December 31, 2019	$	543
2020		1,790
2021		1,269
2022		963
2023		925
2024 and thereafter		1,381
Total lease payments		6,871
Less imputed interest		(614	)
Total	$	6,257

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Fair Value Disclosures, Quantitative Information About Level 3 (Details)		9 Months Ended	12 Months Ended
		Sep. 30, 2019 USD ($)	Dec. 31, 2018 USD ($)
Impaired Loans Commercial [Member]
Ranges and Weighted Average [Abstract]
Total Impaired collateral value			$ 700,000
Impaired Loans Commercial [Member] | Minimum [Member]
Ranges and Weighted Average [Abstract]
Discount rate			20.00%
Impaired Loans Commercial [Member] | Maximum [Member]
Ranges and Weighted Average [Abstract]
Discount rate			80.00%
Impaired Loans Mortgage and Installment [Member]
Ranges and Weighted Average [Abstract]
Total Impaired collateral value		$ 200,000
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Significant Un-observable Inputs (Level 3) [Member]
Asset Fair Value [Abstract]
Servicing asset fair value		$ 16,906,000	$ 21,400,000
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Present Value of Net Servicing Revenue [Member] | Significant Un-observable Inputs (Level 3) [Member] | Float Rate [Member]
Ranges and Weighted Average [Abstract]
Servicing asset measurement input		0.0150	0.0257
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Minimum [Member] | Significant Un-observable Inputs (Level 3) [Member] | Cost to Service [Member]
Ranges and Weighted Average [Abstract]
Servicing asset measurement input		63	68
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Minimum [Member] | Significant Un-observable Inputs (Level 3) [Member] | Ancillary Income [Member]
Ranges and Weighted Average [Abstract]
Servicing asset measurement input		20	20
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Minimum [Member] | Present Value of Net Servicing Revenue [Member] | Significant Un-observable Inputs (Level 3) [Member] | Discount Rate [Member]
Ranges and Weighted Average [Abstract]
Servicing asset measurement input		0.1000	0.1000
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Minimum [Member] | Present Value of Net Servicing Revenue [Member] | Significant Un-observable Inputs (Level 3) [Member] | Prepayment Rate [Member]
Ranges and Weighted Average [Abstract]
Servicing asset measurement input		0.0701	0.0668
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Maximum [Member] | Significant Un-observable Inputs (Level 3) [Member] | Cost to Service [Member]
Ranges and Weighted Average [Abstract]
Servicing asset measurement input		216	216
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Maximum [Member] | Significant Un-observable Inputs (Level 3) [Member] | Ancillary Income [Member]
Ranges and Weighted Average [Abstract]
Servicing asset measurement input		36	36
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Maximum [Member] | Present Value of Net Servicing Revenue [Member] | Significant Un-observable Inputs (Level 3) [Member] | Discount Rate [Member]
Ranges and Weighted Average [Abstract]
Servicing asset measurement input		0.1300	0.1300
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Maximum [Member] | Present Value of Net Servicing Revenue [Member] | Significant Un-observable Inputs (Level 3) [Member] | Prepayment Rate [Member]
Ranges and Weighted Average [Abstract]
Servicing asset measurement input		0.2980	0.7878
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Weighted Average [Member] | Significant Un-observable Inputs (Level 3) [Member] | Cost to Service [Member]
Ranges and Weighted Average [Abstract]
Servicing asset measurement input		80	81
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Weighted Average [Member] | Significant Un-observable Inputs (Level 3) [Member] | Ancillary Income [Member]
Ranges and Weighted Average [Abstract]
Servicing asset measurement input		22	23
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Weighted Average [Member] | Present Value of Net Servicing Revenue [Member] | Significant Un-observable Inputs (Level 3) [Member] | Discount Rate [Member]
Ranges and Weighted Average [Abstract]
Servicing asset measurement input		0.1014	0.1015
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Weighted Average [Member] | Present Value of Net Servicing Revenue [Member] | Significant Un-observable Inputs (Level 3) [Member] | Float Rate [Member]
Ranges and Weighted Average [Abstract]
Servicing asset measurement input		0.0150	0.0257
Recurring Basis [Member] | Capitalized Mortgage Loan Servicing Rights [Member] | Weighted Average [Member] | Present Value of Net Servicing Revenue [Member] | Significant Un-observable Inputs (Level 3) [Member] | Prepayment Rate [Member]
Ranges and Weighted Average [Abstract]
Servicing asset measurement input		0.1608	0.1054
Nonrecurring Basis [Member] | Impaired Loans Commercial [Member] | Significant Un-observable Inputs (Level 3) [Member]
Asset Fair Value [Abstract]
Impaired loans fair value		$ 908,000	$ 2,566,000	[1]
Nonrecurring Basis [Member] | Impaired Loans Commercial [Member] | Minimum [Member] | Sales Comparison Approach [Member] | Significant Un-observable Inputs (Level 3) [Member] | Adjustment for Differences Between Comparable Sales [Member]
Ranges and Weighted Average [Abstract]
Impaired loans measurement input		(0.480)	(0.325)	[1]
Nonrecurring Basis [Member] | Impaired Loans Commercial [Member] | Maximum [Member] | Sales Comparison Approach [Member] | Significant Un-observable Inputs (Level 3) [Member] | Adjustment for Differences Between Comparable Sales [Member]
Ranges and Weighted Average [Abstract]
Impaired loans measurement input		0.063	0.600	[1]
Nonrecurring Basis [Member] | Impaired Loans Commercial [Member] | Weighted Average [Member] | Sales Comparison Approach [Member] | Significant Un-observable Inputs (Level 3) [Member] | Adjustment for Differences Between Comparable Sales [Member]
Ranges and Weighted Average [Abstract]
Impaired loans measurement input		(0.123)	(0.019)	[1]
Nonrecurring Basis [Member] | Impaired Loans Mortgage and Installment [Member] | Significant Un-observable Inputs (Level 3) [Member]
Asset Fair Value [Abstract]
Impaired loans fair value	[2]	$ 1,277,000
Nonrecurring Basis [Member] | Impaired Loans Mortgage and Installment [Member] | Minimum [Member] | Sales Comparison Approach [Member] | Significant Un-observable Inputs (Level 3) [Member] | Adjustment for Differences Between Comparable Sales [Member]
Ranges and Weighted Average [Abstract]
Impaired loans measurement input	[2]	(0.614)
Nonrecurring Basis [Member] | Impaired Loans Mortgage and Installment [Member] | Maximum [Member] | Sales Comparison Approach [Member] | Significant Un-observable Inputs (Level 3) [Member] | Adjustment for Differences Between Comparable Sales [Member]
Ranges and Weighted Average [Abstract]
Impaired loans measurement input	[2]	0.652
Nonrecurring Basis [Member] | Impaired Loans Mortgage and Installment [Member] | Weighted Average [Member] | Sales Comparison Approach [Member] | Significant Un-observable Inputs (Level 3) [Member] | Adjustment for Differences Between Comparable Sales [Member]
Ranges and Weighted Average [Abstract]
Impaired loans measurement input	[2]	(0.068)
Nonrecurring Basis [Member] | Impaired Loans Mortgage [Member] | Significant Un-observable Inputs (Level 3) [Member]
Asset Fair Value [Abstract]
Impaired loans fair value			$ 905,000
Nonrecurring Basis [Member] | Impaired Loans Mortgage [Member] | Minimum [Member] | Sales Comparison Approach [Member] | Significant Un-observable Inputs (Level 3) [Member] | Adjustment for Differences Between Comparable Sales [Member]
Ranges and Weighted Average [Abstract]
Impaired loans measurement input			(0.401)
Nonrecurring Basis [Member] | Impaired Loans Mortgage [Member] | Maximum [Member] | Sales Comparison Approach [Member] | Significant Un-observable Inputs (Level 3) [Member] | Adjustment for Differences Between Comparable Sales [Member]
Ranges and Weighted Average [Abstract]
Impaired loans measurement input			0.256
Nonrecurring Basis [Member] | Impaired Loans Mortgage [Member] | Weighted Average [Member] | Sales Comparison Approach [Member] | Significant Un-observable Inputs (Level 3) [Member] | Adjustment for Differences Between Comparable Sales [Member]
Ranges and Weighted Average [Abstract]
Impaired loans measurement input			0.007
Nonrecurring Basis [Member] | Other Real Estate Mortgage [Member] | Significant Un-observable Inputs (Level 3) [Member]
Asset Fair Value [Abstract]
Other real estate fair value		$ 80,000	$ 154,000
Nonrecurring Basis [Member] | Other Real Estate Mortgage [Member] | Minimum [Member] | Sales Comparison Approach [Member] | Significant Un-observable Inputs (Level 3) [Member] | Adjustment for Differences Between Comparable Sales [Member]
Ranges and Weighted Average [Abstract]
Other real estate measurement input		(0.364)	0
Nonrecurring Basis [Member] | Other Real Estate Mortgage [Member] | Maximum [Member] | Sales Comparison Approach [Member] | Significant Un-observable Inputs (Level 3) [Member] | Adjustment for Differences Between Comparable Sales [Member]
Ranges and Weighted Average [Abstract]
Other real estate measurement input		0.163	0.341
Nonrecurring Basis [Member] | Other Real Estate Mortgage [Member] | Weighted Average [Member] | Sales Comparison Approach [Member] | Significant Un-observable Inputs (Level 3) [Member] | Adjustment for Differences Between Comparable Sales [Member]
Ranges and Weighted Average [Abstract]
Other real estate measurement input		(0.203)	0.112

[1] In addition to the valuation techniques and unobservable inputs discussed above, at December 31, 2018, we had an impaired collateral dependent commercial relationship that totaled $0.7 million that was secured by collateral other than real estate. Collateral securing this relationship primarily included accounts receivable, inventory and cash at December 31, 2018. Valuation techniques at December 31, 2018, included discounting financial statement values for each particular asset type. Discount rates used ranged from 20% to 80% of stated values at December 31, 2018.

[2] In addition to the valuation techniques and unobservable inputs discussed above, at September 30, 2019 certain impaired collateral dependent installment loans totaling approximately $0.2 million are secured by collateral other than real estate. For the majority of these loans, we apply internal discount rates to industry valuation guides.

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Accumulated Other Comprehensive Loss ("AOCL"), Summary of Changes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Changes in AOCL [Roll Forward]
Balance at beginning of period	$ 330,846	$ 337,083	$ 338,994	$ 264,933
Other comprehensive income (loss) before reclassifications	1,138	(618)	7,153	(3,822)
Amounts reclassified from AOCL	(80)	(57)	(418)	(68)
Other comprehensive income (loss)	1,058	(675)	6,735	(3,890)
Balances at end of period	340,245	345,204	340,245	345,204
Accumulated Other Comprehensive Loss [Member]
Changes in AOCL [Roll Forward]
Balance at beginning of period	(4,431)	(9,214)	(10,108)	(5,999)
Other comprehensive income (loss)	1,058	(675)	6,735	(3,890)
Balances at end of period	(3,373)	(9,889)	(3,373)	(9,889)
Unrealized Gains (Losses) on Securities Available For Sale [Member]
Changes in AOCL [Roll Forward]
Balance at beginning of period	3,040	(4,437)	(4,185)	(470)
Other comprehensive income (loss) before reclassifications	1,196	(925)	8,529	(4,928)
Amounts reclassified from AOCL	0	0	(108)	36
Other comprehensive income (loss)	1,196	(925)	8,421	(4,892)
Balances at end of period	4,236	(5,362)	4,236	(5,362)
Disproportionate Tax Effects from Securities Available for Sale [Member]
Changes in AOCL [Roll Forward]
Balance at beginning of period	(5,798)	(5,798)	(5,798)	(5,798)
Other comprehensive income (loss) before reclassifications	0	0	0	0
Amounts reclassified from AOCL	0	0	0	0
Other comprehensive income (loss)	0	0	0	0
Balances at end of period	(5,798)	(5,798)	(5,798)	(5,798)
Unrealized Gains (Losses) on Cash Flow Hedges [Member]
Changes in AOCL [Roll Forward]
Balance at beginning of period	(1,673)	1,021	(125)	269
Other comprehensive income (loss) before reclassifications	(58)	307	(1,376)	1,106
Amounts reclassified from AOCL	(80)	(57)	(310)	(104)
Other comprehensive income (loss)	(138)	250	(1,686)	1,002
Balances at end of period	$ (1,811)	$ 1,271	$ (1,811)	$ 1,271

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Loans, Credit Scores by Loan Class, Mortgage and Installment Segments (Details) - USD ($) $ in Thousands		3 Months Ended					9 Months Ended
		Dec. 31, 2019	Sep. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Mar. 31, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Loan ratings/credit scores by loan class [Abstract]
Accrued interest included in total			$ 8,436				$ 8,436		$ 8,538
Other Real Estate and Foreclosed Assets [Abstract]
Foreclosed residential real estate properties			1,200				1,200		1,200
Retail mortgage loans in process of foreclosure			200				200		300
Sale of Mortgage Loans [Abstract]
Proceeds from sale of mortgage loan							50,516	$ 27,577
Net gain (loss) on mortgage loans			5,677		$ 2,745		13,590	8,571
Transfer of portfolio loans to loans held for sale							36,622	$ 27,577
Fixed Rate Residential Mortgage and Adjustable Rate Residential Mortgage [Member]
Sale of Mortgage Loans [Abstract]
Proceeds from sale of mortgage loan			9,900		11,100	$ 16,500
Net gain (loss) on mortgage loans			70		$ (10)	$ 50
Residential Adjustable Rate Mortgage Loans [Member]
Sale of Mortgage Loans [Abstract]
Proceeds from sale of mortgage loan				$ 40,600
Net gain (loss) on mortgage loans				10
Residential Fixed Rate Mortgage Loans [Member]
Sale of Mortgage Loans [Abstract]
Transfer of portfolio loans to loans held for sale			36,600
Residential Fixed Rate Mortgage Loans [Member] | Freddie Mac [Member]
Sale of Mortgage Loans [Abstract]
Proceeds from sale of mortgage loan				29,800
Net gain (loss) on mortgage loans				$ 530
Residential Fixed Rate Mortgage Loans [Member] | Freddie Mac [Member] | Subsequent Event [Member]
Sale of Mortgage Loans [Abstract]
Net gain (loss) on mortgage loans		$ 1,000
Mortgage [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]		131,420				131,420		121,012
750-799	[1]		485,479				485,479		476,484
700-749	[1]		261,670				261,670		252,126
650-699	[1]		108,985				108,985		114,460
600-649	[1]		37,924				37,924		41,748
550-599	[1]		20,125				20,125		17,301
500-549	[1]		12,994				12,994		9,789
Under 500	[1]		4,424				4,424		3,155
Unknown	[1]		11,314				11,314		10,912
Total	[1]		1,074,335				1,074,335		1,046,987
Accrued interest included in total	[1]		4,300				4,300		4,097
Mortgage [Member] | 1-4 Family [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]		101,927				101,927		94,492
750-799	[1]		385,243				385,243		384,344
700-749	[1]		204,241				204,241		202,440
650-699	[1]		84,458				84,458		91,847
600-649	[1]		30,819				30,819		34,342
550-599	[1]		16,410				16,410		13,771
500-549	[1]		10,972				10,972		8,439
Under 500	[1]		3,718				3,718		2,533
Unknown	[1]		9,300				9,300		8,236
Total	[1]		847,088				847,088		840,444
Accrued interest included in total	[1]		3,327				3,327		3,079
Mortgage [Member] | Resort Lending [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]		11,151				11,151		10,898
750-799	[1]		31,372				31,372		36,542
700-749	[1]		15,323				15,323		17,282
650-699	[1]		7,612				7,612		9,945
600-649	[1]		2,241				2,241		3,088
550-599	[1]		1,171				1,171		1,867
500-549	[1]		620				620		106
Under 500	[1]		80				80		143
Unknown	[1]		1,256				1,256		1,910
Total	[1]		70,826				70,826		81,781
Accrued interest included in total	[1]		343				343		363
Mortgage [Member] | Home Equity - 1st Lien [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]		6,165				6,165		6,784
750-799	[1]		16,300				16,300		17,303
700-749	[1]		9,209				9,209		9,155
650-699	[1]		3,747				3,747		3,987
600-649	[1]		668				668		959
550-599	[1]		663				663		427
500-549	[1]		330				330		418
Under 500	[1]		254				254		98
Unknown	[1]		0				0		113
Total	[1]		37,336				37,336		39,244
Accrued interest included in total	[1]		166				166		199
Mortgage [Member] | Home Equity - 2nd Lien [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]		12,177				12,177		8,838
750-799	[1]		52,564				52,564		38,295
700-749	[1]		32,897				32,897		23,249
650-699	[1]		13,168				13,168		8,681
600-649	[1]		4,196				4,196		3,359
550-599	[1]		1,881				1,881		1,236
500-549	[1]		1,072				1,072		826
Under 500	[1]		372				372		381
Unknown	[1]		758				758		653
Total	[1]		119,085				119,085		85,518
Accrued interest included in total	[1]		464				464		456
Installment [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]		61,616				61,616		48,026
750-799	[1]		248,817				248,817		208,972
700-749	[1]		100,357				100,357		87,978
650-699	[1]		28,923				28,923		28,162
600-649	[1]		7,849				7,849		7,668
550-599	[1]		3,143				3,143		3,360
500-549	[1]		1,855				1,855		1,775
Under 500	[1]		486				486		548
Unknown	[1]		11,479				11,479		9,690
Total	[1]		464,525				464,525		396,179
Accrued interest included in total	[1]		1,131				1,131		1,030
Installment [Member] | Home Equity - 1st Lien [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]		380				380		555
750-799	[1]		1,104				1,104		1,502
700-749	[1]		1,323				1,323		1,582
650-699	[1]		1,399				1,399		1,606
600-649	[1]		934				934		996
550-599	[1]		526				526		759
500-549	[1]		299				299		384
Under 500	[1]		18				18		51
Unknown	[1]		0				0		2
Total	[1]		5,983				5,983		7,437
Accrued interest included in total	[1]		21				21		28
Installment [Member] | Home Equity - 2nd Lien [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]		219				219		235
750-799	[1]		1,265				1,265		1,642
700-749	[1]		1,123				1,123		1,682
650-699	[1]		1,104				1,104		1,217
600-649	[1]		678				678		1,272
550-599	[1]		457				457		658
500-549	[1]		208				208		229
Under 500	[1]		50				50		6
Unknown	[1]		15				15		103
Total	[1]		5,119				5,119		7,044
Accrued interest included in total	[1]		16				16		25
Installment [Member] | Boat Lending [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]		29,581				29,581		20,767
750-799	[1]		120,085				120,085		100,191
700-749	[1]		42,869				42,869		35,455
650-699	[1]		10,536				10,536		10,581
600-649	[1]		1,783				1,783		1,657
550-599	[1]		808				808		652
500-549	[1]		455				455		286
Under 500	[1]		223				223		266
Unknown	[1]		0				0		39
Total	[1]		206,340				206,340		169,894
Accrued interest included in total	[1]		467				467		403
Installment [Member] | Recreational Vehicle Lending [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]		24,296				24,296		20,197
750-799	[1]		90,692				90,692		74,154
700-749	[1]		29,990				29,990		24,890
650-699	[1]		5,560				5,560		4,918
600-649	[1]		1,692				1,692		992
550-599	[1]		617				617		453
500-549	[1]		145				145		225
Under 500	[1]		39				39		7
Unknown	[1]		0				0		0
Total	[1]		153,031				153,031		125,836
Accrued interest included in total	[1]		350				350		311
Installment [Member] | Other [Member]
Loan ratings/credit scores by loan class [Abstract]
800 and above	[1]		7,140				7,140		6,272
750-799	[1]		35,671				35,671		31,483
700-749	[1]		25,052				25,052		24,369
650-699	[1]		10,324				10,324		9,840
600-649	[1]		2,762				2,762		2,751
550-599	[1]		735				735		838
500-549	[1]		748				748		651
Under 500	[1]		156				156		218
Unknown	[1]		11,464				11,464		9,546
Total	[1]		94,052				94,052		85,968
Accrued interest included in total	[1]		$ 277				$ 277		$ 263

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

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Loans, Receivables Past Due (Details) - USD ($) $ in Thousands		Sep. 30, 2019	Dec. 31, 2018
Non performing loans [Abstract]
90+ and Still Accruing		$ 0	$ 5
Non-Accrual		6,649	8,569
Total Non-performing Loans		6,649	8,574
Accrued interest included in recorded investment		0	0
Aging analysis of loans by class [Abstract]
Total		10,229	12,795
Loans not Past Due		2,720,653	2,578,263
Total loans recorded investment		2,730,882	2,591,058
Accrued interest included in recorded investment		8,436	8,538
Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		6,331	4,960
Accrued interest included in recorded investment		65	44
Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		1,714	820
Accrued interest included in recorded investment		17	11
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		2,184	7,015
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		82	55
Loans Not Past Due [Member]
Aging analysis of loans by class [Abstract]
Accrued interest included in recorded investment		8,354	8,483
Commercial [Member]
Aging analysis of loans by class [Abstract]
Accrued interest included in recorded investment		3,005	3,411
Commercial [Member] | Income Producing - Real Estate [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		44	44
Loans not Past Due		424,472	388,729
Total loans recorded investment		424,516	388,773
Commercial [Member] | Income Producing - Real Estate [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		44	44
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		0	0
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		654	0
Total Non-performing Loans		654	0
Aging analysis of loans by class [Abstract]
Total		0	0
Loans not Past Due		102,227	84,458
Total loans recorded investment		102,227	84,458
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		0	0
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		0	0
Commercial [Member] | Land, Land Development and Construction - Real Estate [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		0	0
Commercial [Member] | Commercial and Industrial [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		87	2,123
Total Non-performing Loans		87	2,123
Aging analysis of loans by class [Abstract]
Total		509	1,538
Loans not Past Due		664,770	673,123
Total loans recorded investment		665,279	674,661
Commercial [Member] | Commercial and Industrial [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		483	1,538
Commercial [Member] | Commercial and Industrial [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		26	0
Commercial [Member] | Commercial and Industrial [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		0	0
Mortgage [Member]
Aging analysis of loans by class [Abstract]
Accrued interest included in recorded investment	[1]	4,300	4,097
Mortgage [Member] | 1-4 Family [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	5
Non-Accrual		3,873	4,332
Total Non-performing Loans		3,873	4,337
Aging analysis of loans by class [Abstract]
Total		5,430	6,684
Loans not Past Due		841,658	833,760
Total loans recorded investment		847,088	840,444
Accrued interest included in recorded investment	[1]	3,327	3,079
Mortgage [Member] | 1-4 Family [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		3,098	1,608
Mortgage [Member] | 1-4 Family [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		973	194
Mortgage [Member] | 1-4 Family [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		1,359	4,882
Mortgage [Member] | Resort Lending [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		227	755
Total Non-performing Loans		227	755
Aging analysis of loans by class [Abstract]
Total		877	1,007
Loans not Past Due		69,949	80,774
Total loans recorded investment		70,826	81,781
Accrued interest included in recorded investment	[1]	343	363
Mortgage [Member] | Resort Lending [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		703	252
Mortgage [Member] | Resort Lending [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		81	0
Mortgage [Member] | Resort Lending [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		93	755
Mortgage [Member] | Home Equity - 1st Lien [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		208	159
Total Non-performing Loans		208	159
Aging analysis of loans by class [Abstract]
Total		267	335
Loans not Past Due		37,069	38,909
Total loans recorded investment		37,336	39,244
Accrued interest included in recorded investment	[1]	166	199
Mortgage [Member] | Home Equity - 1st Lien [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		87	176
Mortgage [Member] | Home Equity - 1st Lien [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		101	0
Mortgage [Member] | Home Equity - 1st Lien [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		79	159
Mortgage [Member] | Home Equity - 2nd Lien [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		665	419
Total Non-performing Loans		665	419
Aging analysis of loans by class [Abstract]
Total		1,340	965
Loans not Past Due		117,745	84,553
Total loans recorded investment		119,085	85,518
Accrued interest included in recorded investment	[1]	464	456
Mortgage [Member] | Home Equity - 2nd Lien [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		765	446
Mortgage [Member] | Home Equity - 2nd Lien [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		344	100
Mortgage [Member] | Home Equity - 2nd Lien [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		231	419
Installment [Member]
Aging analysis of loans by class [Abstract]
Accrued interest included in recorded investment	[1]	1,131	1,030
Installment [Member] | Home Equity - 1st Lien [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		125	178
Total Non-performing Loans		125	178
Aging analysis of loans by class [Abstract]
Total		112	452
Loans not Past Due		5,871	6,985
Total loans recorded investment		5,983	7,437
Accrued interest included in recorded investment	[1]	21	28
Installment [Member] | Home Equity - 1st Lien [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		83	200
Installment [Member] | Home Equity - 1st Lien [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		19	55
Installment [Member] | Home Equity - 1st Lien [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		10	197
Installment [Member] | Home Equity - 2nd Lien [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		269	226
Total Non-performing Loans		269	226
Aging analysis of loans by class [Abstract]
Total		287	361
Loans not Past Due		4,832	6,683
Total loans recorded investment		5,119	7,044
Accrued interest included in recorded investment	[1]	16	25
Installment [Member] | Home Equity - 2nd Lien [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		118	111
Installment [Member] | Home Equity - 2nd Lien [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		3	24
Installment [Member] | Home Equity - 2nd Lien [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		166	226
Installment [Member] | Boat Lending [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		378	166
Total Non-performing Loans		378	166
Aging analysis of loans by class [Abstract]
Total		814	777
Loans not Past Due		205,526	169,117
Total loans recorded investment		206,340	169,894
Accrued interest included in recorded investment	[1]	467	403
Installment [Member] | Boat Lending [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		625	316
Installment [Member] | Boat Lending [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		49	295
Installment [Member] | Boat Lending [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		140	166
Installment [Member] | Recreational Vehicle Lending [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		2	7
Total Non-performing Loans		2	7
Aging analysis of loans by class [Abstract]
Total		127	56
Loans not Past Due		152,904	125,780
Total loans recorded investment		153,031	125,836
Accrued interest included in recorded investment	[1]	350	311
Installment [Member] | Recreational Vehicle Lending [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		92	28
Installment [Member] | Recreational Vehicle Lending [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		33	21
Installment [Member] | Recreational Vehicle Lending [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		2	7
Installment [Member] | Other [Member]
Non performing loans [Abstract]
90+ and Still Accruing		0	0
Non-Accrual		161	204
Total Non-performing Loans		161	204
Aging analysis of loans by class [Abstract]
Total		422	576
Loans not Past Due		93,630	85,392
Total loans recorded investment		94,052	85,968
Accrued interest included in recorded investment	[1]	277	263
Installment [Member] | Other [Member] | Loans Past Due, 30-59 days [Member]
Aging analysis of loans by class [Abstract]
Total		233	241
Installment [Member] | Other [Member] | Loans Past Due, 60-89 days [Member]
Aging analysis of loans by class [Abstract]
Total		85	131
Installment [Member] | Other [Member] | Loans Past Due, 90+ days [Member]
Aging analysis of loans by class [Abstract]
Total		$ 104	$ 204

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

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New Accounting Standards (Details) - USD ($) $ in Thousands		9 Months Ended
		Sep. 30, 2019	Dec. 31, 2018
New Accounting Standards [Abstract]
Right of use asset	[1]	$ 6,244
Lease liability	[2]	$ 6,257
ASU 2016-13 [Member]
New Accounting Standards [Abstract]
Allowance for loan losses forecast period		2 years
Allowance for loan losses reversion period		2 years
ASU 2016-13 [Member] | Minimum [Member]
New Accounting Standards [Abstract]
Expected increase in the allowance for loan losses		$ 9,000
Expected increase to the allowance for losses related to unfunded loan commitments		500
ASU 2016-13 [Member] | Maximum [Member]
New Accounting Standards [Abstract]
Expected increase in the allowance for loan losses		11,000
Expected increase to the allowance for losses related to unfunded loan commitments		$ 1,500
ASU 2016-02 [Member]
New Accounting Standards [Abstract]
Right of use asset			$ 7,700
Lease liability			$ 7,700

[1] Included in Accrued income and other assets in our Condensed Consolidated Statements of Financial Condition.

[2] Included in Accrued expenses and other liabilities in our Condensed Consolidated Statements of Financial Condition.

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Contingencies

9 Months Ended

Sep. 30, 2019

Contingencies [Abstract]

Contingencies

13. Contingencies

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

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

The provision for loss reimbursement on sold loans represents our estimate of incurred losses related to mortgage loans that we have sold to investors (primarily Fannie Mae, Freddie Mac, Ginnie Mae and the Federal Home Loan Bank of Indianapolis). Since we sell mortgage loans without recourse, loss reimbursements only occur in those instances where we have breached a representation or warranty or other contractual requirement related to the loan sale. The provision for loss reimbursement on sold loans was an expense of $0.03 million and $0.05 million for the three month periods ended September 30, 2019 and 2018, respectively and an expense of $0.18 million and $0.08 million for the nine month periods ended September 30, 2019 and 2018, respectively. The reserve for loss reimbursements on sold mortgage loans totaled $0.85 million and $0.78 million at September 30, 2019 and December 31, 2018, respectively. This reserve is included in accrued expenses and other liabilities in our Condensed Consolidated Statements of Financial Condition. This reserve is based on an analysis of mortgage loans that we have sold which are further categorized by delinquency status, loan to value, and year of origination. The calculation includes factors such as probability of default, probability of loss reimbursement (breach of representation or warranty) and estimated loss severity. We believe that the amounts that we have accrued for incurred losses on sold mortgage loans are appropriate given our analyses. However, future losses could exceed our current estimate.

We own 12,566 shares of VISA Class B common stock. At the present time, these shares can only be sold to other Class B shareholders. As a result, there has generally been limited transfer activity in private transactions between buyers and sellers. Given the limited activity that we have become aware of  and the continuing uncertainty regarding the likelihood, ultimate timing and eventual exchange rate for Class B shares into Class A shares, we continue to carry these shares at zero, representing cost basis less impairment. However, given the current conversion ratio of 1.6228 to Class A shares and the closing price of VISA Class A shares on October 17, 2019 of $177.94 per share, our 12,566 Class B shares would have a current “value” of approximately $3.6 million. We continue to monitor Class B trading activity and the status of the resolution of certain litigation matters at VISA that would trigger the conversion of Class B common shares into Class A common shares that would have no trading restrictions.

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Recent Acquisition

9 Months Ended

Sep. 30, 2019

Recent Acquisition [Abstract]

Recent Acquisition

17.  Recent Acquisition

Effective April 1, 2018, we completed the acquisition of all of the issued and outstanding shares of common stock of TCSB through a merger of TCSB into Independent Bank Corporation (“IBCP”), with IBCP as the surviving corporation (the ‘‘Merger’’).  On that same date we also consolidated Traverse City State Bank, TCSB’s wholly-owned subsidiary bank, into Independent Bank (with Independent Bank as the surviving institution).  Under the terms of the merger agreement each holder of TCSB common stock received 1.1166 shares of IBCP common stock plus cash in lieu of fractional shares totaling $0.005 million.  TCSB option holders had their options converted into IBCP stock options.  As a result we issued 2.71 million shares of common stock and 0.19 million stock options with a fair value of approximately $64.5 million to the shareholders and option holders of TCSB.  The fair value of common stock and stock options issued as the consideration paid for TCSB was determined using the closing price of our common stock on the acquisition date.  This acquisition was accounted for under the acquisition method of accounting.  Accordingly, we recognized amounts for identifiable assets acquired and liabilities assumed at their estimated acquisition date fair values.  TCSB results of operations are included in our results beginning April 1, 2018.

The following table reflects our final valuation of the assets acquired and liabilities assumed:

	(In thousands)
Cash and cash equivalents	$	23,521
Interest bearing deposits - time		4,054
Securities available for sale		6,066
Federal Home Loan Bank stock		778
Loans, net		295,799
Property and equipement, net		1,067
Capitalized mortgage loan servicing rights		3,047
Accrued income and other assets		3,362
Other intangibles (1)		5,798
Total assets acquired		343,492
Deposits		287,710
Other borrowings		14,345
Subordinated debentures		3,768
Accrued expenses and other liabilities		1,429
Total liabilities assumed		307,252
Net assets acquired		36,240
Goodwill		28,300
Purchase price (fair value of consideration)	$	64,540

(1) Relates to core deposit intangibles (see note #7).

Management views the disclosed fair values presented above to be final as the one-year measurement period for finalizing acquisition-date fair values has expired.  During this measurement period we had one adjustment to our acquisition date fair values.  During the third quarter of 2018, goodwill was reduced by $0.7 million (to $28.3 million) related to the collection of a TCSB acquired loan that had been charged off in full prior to the Merger.  Because of the status of the collection activities related to this loan at the time of the Merger, we determined that this transaction was a measurement period adjustment and reduced goodwill accordingly.

Goodwill related to this acquisition will not be deductible for tax purposes and consists largely of synergies and cost savings resulting from the combining of the operations of TCSB into ours as well as expansion into a new market.

The estimated fair value of the core deposit intangible was $5.8 million and is being amortized over an estimated useful life of 10 years.

The fair value of net assets acquired includes fair value adjustments to certain receivables that were not considered impaired as of the acquisition date. The fair value adjustments were determined using discounted contractual cash flows.  However, we believe that all contractual cash flows related to these financial instruments will be collected.  As such, these receivables were not considered impaired at the acquisition date and were not subject to the guidance relating to purchased credit impaired loans which have shown evidence of credit deterioration since origination.  Receivables acquired that are not subject to these requirements included non-impaired customer receivables with a fair value and gross contractual amounts receivable of $292.9 million and $298.6 million on the date of acquisition.

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Shareholders' Equity and Earnings Per Common Share (Tables)

9 Months Ended

Sep. 30, 2019

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,
	2019		2018		2019		2018
	(In thousands, except per share data)
Net income	$	12,445	$	11,925	$	32,556	$	29,903
Weighted average shares outstanding (1)		22,486		24,149		23,033		23,218
Stock units for deferred compensation plan for non-employee directors		132		129		131		126
Effect of stock options		110		182		116		180
Performance share units		42		55		39		52
Weighted average shares outstanding for calculation of diluted earnings per share		22,770		24,515		23,319		23,576
Net income per common share
Basic (1)	$	0.55	$	0.49	$	1.41	$	1.29
Diluted	$	0.55	$	0.49	$	1.40	$	1.27

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

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Leases (Tables)

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Components of Operating Leases

The cost components of our operating leases follows:

	Three Months Ended		Nine Months Ended
	September 30, 2019
	(In thousands)
Operating lease cost	$	565	$	1,692
Variable lease cost		43		115
Short-term lease cost		4		14
Total	$	612	$	1,821

Supplemental Balance Sheet Information Related to Operating Leases

Supplemental balance sheet information related to our operating leases follows:

	September 30, 2019
	(In thousands)
Lease right of use asset (1)	$	6,244
Lease liabilities (2)	$	6,257
Weighted average remaining lease term (years)		5.50
Weighted average discount rate		3.2	%

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

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

Maturity Analysis of Lease Liabilities

Maturity analysis of our lease liabilities at September 30, 2019 based on required contractual payments follows:

	(In thousands)
Three months ending December 31, 2019	$	543
2020		1,790
2021		1,269
2022		963
2023		925
2024 and thereafter		1,381
Total lease payments		6,871
Less imputed interest		(614	)
Total	$	6,257

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Preparation of Financial Statements

9 Months Ended

Sep. 30, 2019

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, 2018 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, 2019 and December 31, 2018, and the results of operations for the three and nine-month periods ended September 30, 2019 and 2018.  The results of operations for the three and nine-month periods ended September 30, 2019, 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 and the valuation of capitalized mortgage loan servicing rights.  Refer to our 2018 Annual Report on Form 10-K for a disclosure of our accounting policies.

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Fair Value Disclosures (Tables)

9 Months Ended

Sep. 30, 2019

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, 2019:
Measured at Fair Value on a Recurring Basis
Assets
Securities available for sale
U.S. agency	$	15,283	$	-	$	15,283	$	-
U.S. agency residential mortgage-backed		147,720		-		147,720		-
U.S. agency commercial mortgage-backed		11,319		-		11,319		-
Private label mortgage-backed		31,826		-		31,826		-
Other asset backed		94,785		-		94,785		-
Obligations of states and political subdivisions		101,139		-		101,139		-
Corporate		33,678		-		33,678		-
Trust preferred		1,820		-		1,820		-
Foreign government		2,022		-		2,022		-
Loans held for sale, carried at fair value		87,358		-		87,358		-
Capitalized mortgage loan servicing rights		16,906		-		-		16,906
Derivatives (1)		7,389		-		7,389		-
Liabilities
Derivatives (2)		5,657		-		5,657		-
Measured at Fair Value on a Non-recurring Basis:
Assets
Impaired loans (3)
Commercial
Income producing - real estate		115		-		-		115
Land, land development & construction-real estate		87		-		-		87
Commercial and industrial		706		-		-		706
Mortgage
1-4 family		666		-		-		666
Resort lending		60		-		-		60
Home equity - 1st lien		83		-		-		83
Home equity - 2nd lien		199		-		-		199
Installment
Home equity - 1st lien		9		-		-		9
Home equity - 2nd lien		70		-		-		70
Boat lending		103		-		-		103
Recreational vehicle lending		1		-		-		1
Other		86		-		-		86
Other real estate (4)
Mortgage
1-4 family		23		-		-		23
Home equity - 2nd lien		57		-		-		57

(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, 2018:
Measured at Fair Value on a Recurring Basis
Assets
Equity securities at fair value	$	393	$	393	$	-	$	-
Securities available for sale
U.S. agency		20,014		-		20,014		-
U.S. agency residential mortgage-backed		123,751		-		123,751		-
U.S. agency commercial mortgage-backed		5,726		-		5,726		-
Private label mortgage-backed		29,419		-		29,419		-
Other asset backed		83,319		-		83,319		-
Obligations of states and political subdivisions		127,555		-		127,555		-
Corporate		34,309		-		34,309		-
Trust preferred		1,819		-		1,819		-
Foreign government		2,014		-		2,014		-
Loans held for sale, carried at fair value		44,753		-		44,753		-
Capitalized mortgage loan servicing rights		21,400		-		-		21,400
Derivatives (1)		5,155		-		5,155		-
Liabilities
Derivatives (2)		2,326		-		2,326		-
Measured at Fair Value on a Non-recurring Basis:
Assets
Loans held for sale, carried at the lower of cost or fair value		41,471		41,471		-		-
Impaired loans (3)
Commercial
Income producing - real estate		217		-		-		217
Land, land development & construction-real estate		106		-		-		106
Commercial and industrial		2,243		-		-		2,243
Mortgage
1-4 family		333		-		-		333
Resort lending		572		-		-		572
Other real estate (4)
Mortgage
1-4 family		95		-		-		95
Home equity - 2nd lien		59		-		-		59

(1) Included in accrued income and other assets

(2) Included in accrued expenses and other liabilities

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

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

Changes in Fair Value for Financial Assets

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

	Changes in Fair Values for the Nine-Month Periods Ended September 30 for Items Measured at Fair Value Pursuant to Election of the Fair Value Option
	Net Gains (Losses) on Assets						Mortgage			Total Change in Fair Values Included in Current
	Securities			Mortgage Loans			Loan Servicing, net			Period Earnings
	(In thousands)
2019
Equity securities at fair value	$	167		$	-		$	-		$	167
Loans held for sale		-			822			-			822
Capitalized mortgage loan servicing rights		-			-			(9,258	)		(9,258	)
2018
Equity securities at fair value	$	(170	)	$	-		$	-		$	(170	)
Loans held for sale		-			(120	)		-			(120	)
Capitalized mortgage loan servicing rights		-			-			694			694

Reconciliation for all Assets Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)

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

	Capitalized Mortgage Loan Servicing Rights
	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
	(In thousands)						(In thousands)
Beginning balance	$	17,894		$	21,848		$	21,400		$	15,699
Total gains (losses) realized and unrealized:
Included in results of operations		(3,145	)		(198	)		(9,258	)		694
Included in other comprehensive income (loss)		-			-			-			-
Purchases, issuances, settlements, maturities and calls		2,157			1,501			4,764			6,758
Transfers in and/or out of Level 3		-			-			-			-
Ending balance	$	16,906		$	23,151		$	16,906		$	23,151
Amount of total gains (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	$	(3,145	)	$	(198	)	$	(9,258	)	$	694

Quantitative Information About Level 3 Fair Value Measurements Measured on a Recurring Basis and 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	Range			Weighted Average
	(In thousands)
September 30, 2019
Capitalized mortgage loan servicing rights	$	16,906	Present value of net	Discount rate	10.00% to 13.00		%		10.14	%
			servicing revenue	Cost to service	$	63 to $216		$	80
				Ancillary income	20 to 36				22
				Float rate		1.50	%		1.50	%
				Prepayment rate	7.01% to 29.80		%		16.08	%
December 31, 2018
Capitalized mortgage loan servicing rights	$	21,400	Present value of net	Discount rate	10.00% to 13.00		%		10.15	%
			servicing revenue	Cost to service	$	68 to $216		$	81
				Ancillary income	20 to 36				23
				Float rate		2.57	%		2.57	%
				Prepayment rate	6.68% to 78.78		%		10.54	%

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

	Asset Fair Value		Valuation Technique	Unobservable Inputs	Range		Weighted Average
	(In thousands)
September 30, 2019
Impaired loans
Commercial	$	908	Sales comparison approach	Adjustment for differences between comparable sales	(48.0)% to 6.3	%		(12.3	)%
Mortgage and Installment(1)		1,277	Sales comparison approach	Adjustment for differences between comparable sales	(61.4) to 65.2			(6.8	)
Other real estate
Mortgage		80	Sales comparison approach	Adjustment for differences between comparable sales	(36.4) to 16.3			(20.3	)
December 31, 2018
Impaired loans
Commercial(2)	$	2,566	Sales comparison approach	Adjustment for differences between comparable sales	(32.5)% to 60.0	%		(1.9	)%
Mortgage		905	Sales comparison approach	Adjustment for differences between comparable sales	(40.1) to 25.6			0.7
Other real estate
Mortgage		154	Sales comparison approach	Adjustment for differences between comparable sales	0.0 to 34.1			11.2

(1) In addition to the valuation techniques and unobservable inputs discussed above, at September 30, 2019 certain impaired collateral dependent installment loans totaling approximately $0.2 million are secured by collateral other than real estate.  For the majority of these loans, we apply internal discount rates to industry valuation guides.

(2) In addition to the valuation techniques and unobservable inputs discussed above, at December 31, 2018, we had an impaired collateral dependent commercial relationship that totaled $0.7 million that was secured by collateral other than real estate. Collateral securing this relationship primarily included accounts receivable, inventory and cash at December 31, 2018. Valuation techniques at December 31, 2018, included discounting financial statement values for each particular asset type. Discount rates used ranged from 20% to 80% of stated values at December 31, 2018.

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, 2019	$	87,358	$	2,079	$	85,279
December 31, 2018		44,753		1,257		43,496

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2019	Oct. 31, 2019
Cover [Abstract]
Entity Registrant Name	INDEPENDENT BANK CORP /MI/
Entity Central Index Key	0000039311
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Shell Company	false
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		22,481,485
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Entity Address, State or Province	MI

XML

Condensed Consolidated Statements of Comprehensive Income (unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Condensed Consolidated Statements of Comprehensive Income (unaudited) [Abstract]
Net income	$ 12,445	$ 11,925	$ 32,556	$ 29,903
Securities available for sale
Unrealized gains (losses) arising during period	1,567	(1,157)	10,851	(6,220)
Change in unrealized losses for which a portion of other than temporary impairment has been recognized in earnings	(53)	(14)	(55)	(17)
Reclassification adjustments for (gains) losses included in earnings	0	0	(137)	45
Unrealized gains (losses) recognized in other comprehensive income (loss) on securities available for sale	1,514	(1,171)	10,659	(6,192)
Income tax expense (benefit)	318	(246)	2,238	(1,300)
Unrealized gains (losses) recognized in other comprehensive income (loss) on securities available for sale, net of tax	1,196	(925)	8,421	(4,892)
Derivative instruments
Unrealized gain (loss) arising during period	(72)	389	(1,740)	1,400
Reclassification adjustment for income recognized in earnings	(102)	(73)	(393)	(132)
Unrealized gains (losses) recognized in other comprehensive income (loss) on derivative instruments	(174)	316	(2,133)	1,268
Income tax expense (benefit)	(36)	66	(447)	266
Unrealized gains (losses) recognized in other comprehensive income (loss) on derivative instruments, net of tax	(138)	250	(1,686)	1,002
Other comprehensive income (loss)	1,058	(675)	6,735	(3,890)
Comprehensive income	$ 13,503	$ 11,250	$ 39,291	$ 26,013

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Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2019

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, 2019
	Notional Amount		Average Maturity (years)		Fair Value
	(Dollars in thousands)
Fair value hedge designation - Pay-fixed interest rate swap agreements	$	7,117		9.6	$	(391	)
Cash flow hedge designation
Pay-fixed interest rate swap agreements	$	25,000		1.8	$	(220	)
Interest rate cap agreements		150,000		2.8		318
Total	$	175,000		2.7	$	98
No hedge designation
Rate-lock mortgage loan commitments	$	79,446		0.1	$	2,051
Mandatory commitments to sell mortgage loans		137,315		0.1		(27	)
Pay-fixed interest rate swap agreements - commercial		141,427		5.4		(4,849	)
Pay-variable interest rate swap agreements - commercial		141,427		5.4		4,849
Purchased options		3,088		1.8		125
Written options		3,028		1.8		(124	)
Total	$	505,731		3.1	$	2,025

	December 31, 2018
	Notional Amount		Average Maturity (years)		Fair Value
	(Dollars in thousands)
Cash flow hedge designation
Pay-fixed interest rate swap agreements	$	25,000		2.6	$	280
Interest rate cap agreements		150,000		3.6		2,245
Total	$	175,000		3.5	$	2,525
No hedge designation
Rate-lock mortgage loan commitments	$	32,473		0.1	$	687
Mandatory commitments to sell mortgage loans		57,583		0.1		(383	)
Pay-fixed interest rate swap agreements - commercial		94,451		5.5		405
Pay-variable interest rate swap agreements - commercial		94,451		5.5		(405	)
Purchased options		3,095		2.5		116
Written options		3,095		2.5		(116	)
Total	$	285,148		3.7	$	304

Fair Value of Derivative Instruments

Fair Values of Derivative Instruments

	Asset Derivatives						Liability Derivatives
	September 30, 2019			December 31, 2018			September 30, 2019			December 31, 2018
	Balance  Sheet  Location	Fair Value		Balance  Sheet  Location	Fair Value		Balance  Sheet  Location	Fair Value		Balance  Sheet  Location	Fair Value
	(In thousands)
Derivatives designated as hedging instruments
Pay-fixed interest rate swap agreements	Other assets	$	-	Other assets	$	280	Other liabilities	$	611	Other liabilities	$	-
Interest rate cap agreements	Other assets		318	Other assets		2,245	Other liabilities		-	Other liabilities		-
			318			2,525			611			-
Derivatives not designated as hedging instruments
Rate-lock mortgage loan commitments	Other assets		2,051	Other assets		687	Other liabilities		-	Other liabilities		-
Mandatory commitments to sell mortgage loans	Other assets		-	Other assets		-	Other liabilities		27	Other liabilities		383
Pay-fixed interest rate swap agreements - commercial	Other assets		23	Other assets		1,116	Other liabilities		4,872	Other liabilities		711
Pay-variable interest rate swap agreements - commercial	Other assets		4,872	Other assets		711	Other liabilities		23	Other liabilities		1,116
Purchased options	Other assets		125	Other assets		116	Other liabilities		-	Other liabilities		-
Written options	Other assets		-	Other assets		-	Other liabilities		124	Other liabilities		116
			7,071			2,630			5,046			2,326
Total derivatives		$	7,389		$	5,155		$	5,657		$	2,326

Effect of Derivative Financial Instruments on Condensed Consolidated Statement of Operations

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

Three Month Periods Ended September 30,
	Gain (Loss) Recognized in Other Comprehensive Income (Loss) (Effective Portion)					Location of  Gain  Reclassified  from  Accumulated  Other  Comprehensive  Loss into  Income  (Effective	Gain Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)				Location of  Gain (Loss)  Recognized	Gain (Loss) Recognized in Income (1)
	2019			2018		Portion)	2019		2018		in Income (1)	2019			2018
	(In thousands)
Fair Value Hedges
Pay-fixed interest rate swap agreements											Non-interest income-other	$	(188	)	$	-
Cash Flow Hedges
Interest rate cap agreements	$	(37	)	$	297	Interest expense	$	88	$	67	Interest expense	$	-		$	-
Pay-fixed interest rate swap agreements		(35	)		92	Interest expense		14		6	Interest expense		-			16
Total	$	(72	)	$	389		$	102	$	73		$	-		$	16
No hedge designation
Rate-lock mortgage loan commitments											Net gains on mortgage loans	$	(96	)	$	(318	)
Mandatory commitments to sell mortgage loans											Net gains on mortgage loans		307			415
Pay-fixed interest rate swap agreements - commercial											Interest income		(1,670	)		407
Pay-variable interest rate swap agreements - commercial											Interest income		1,670			(407	)
Purchased options											Interest income		(46	)		(45	)
Written options											Interest income		46			45
Total												$	211		$	97

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

Nine Month Periods Ended September 30,
	Gain (Loss) Recognized in Other Comprehensive Income (Loss) (Effective Portion)					Location of  Gain  Reclassified  from  Accumulated  Other  Comprehensive  Loss into  Income  (Effective	Gain Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)				Location of  Gain (Loss)  Recognized	Gain (Loss) Recognized in Income (1)
	2019			2018		Portion)	2019		2018		in Income (1)	2019			2018
	(In thousands)
Fair Value Hedges
Pay-fixed interest rate swap agreements											Non-interest income-other	$	(391	)	$	-
Cash Flow Hedges
Interest rate cap agreements	$	(1,311	)	$	1,054	Interest expense	$	321	$	119	Interest expense	$	-		$	-
Pay-fixed interest rate swap agreements		(429	)		346	Interest expense		72		13	Interest expense		-			4
Total	$	(1,740	)	$	1,400		$	393	$	132		$	-		$	4
No hedge designation
Rate-lock mortgage loan commitments											Net gains on mortgage loans	$	1,364		$	354
Mandatory commitments to sell mortgage loans											Net gains on mortgage loans		356			145
Pay-fixed interest rate swap agreements - commercial											Interest income		(5,254	)		1,950
Pay-variable interest rate swap agreements - commercial											Interest income		5,254			(1,950	)
Purchased options											Interest expense		9			(144	)
Written options											Interest expense		(8	)		144
Total												$	1,721		$	499

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

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Shareholders' Equity and Earnings Per Common Share

9 Months Ended

Sep. 30, 2019

Shareholders' Equity and Earnings Per Common Share [Abstract]

Shareholders' Equity and Earnings Per Common Share

5. Shareholders’ Equity and Earnings Per Common Share

In December, 2018, 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, 2019.  In May 2019, we completed the repurchase of 5% of our outstanding common shares.  In June 2019, our Board of Directors authorized a 300,000 share expansion of the 2019 repurchase plan.  We expect to accomplish any remaining repurchases through open market transactions, though we could execute repurchases through other means, such as privately negotiated transactions.  The timing and amount of any share repurchases will depend on a variety of factors, including, among others, securities law restrictions, the trading price of our common stock, regulatory requirements, potential alternative uses for capital, and our financial performance. The Repurchase Plan does not obligate us to acquire any particular amount of common stock, and it may be modified or suspended at any time at our discretion. We expect to fund any repurchases from cash on hand.  During the nine month periods ended September 30, 2019 and 2018 repurchases were made totaling 1,204,688 shares and zero shares of common stock, respectively for an aggregate purchase price of $26.3 million and zero, respectively.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
	(In thousands, except per share data)
Net income	$	12,445	$	11,925	$	32,556	$	29,903
Weighted average shares outstanding (1)		22,486		24,149		23,033		23,218
Stock units for deferred compensation plan for non-employee directors		132		129		131		126
Effect of stock options		110		182		116		180
Performance share units		42		55		39		52
Weighted average shares outstanding for calculation of diluted earnings per share		22,770		24,515		23,319		23,576
Net income per common share
Basic (1)	$	0.55	$	0.49	$	1.41	$	1.29
Diluted	$	0.55	$	0.49	$	1.40	$	1.27

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

Weighted average stock options outstanding that were not considered in computing diluted net income per common share because they were anti-dilutive were zero for the three and nine month periods ended September 30, 2019 and 2018, respectively.

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Income Tax

9 Months Ended

Sep. 30, 2019

Income Tax [Abstract]

Income Tax

9. Income Tax

Income tax expense was $3.1 million and $2.9 million during the three month periods ended September 30, 2019 and 2018, respectively and $8.0 million and $7.0 million during the nine months ended September 30, 2019 and 2018, respectively.  Our actual federal income tax expense is different than the amount computed by applying our statutory income tax rate to our income before income tax primarily due to tax-exempt interest income and tax-exempt income from the increase in the cash surrender value on life insurance.  In addition, the three and nine month periods ending September 30, 2019 include reductions of $0.01 million and $0.18 million, respectively, of income tax expense related to the impact of the excess value of stock awards that vested and stock options that were exercised as compared to the initial fair values that were expensed.  These amounts during the same periods in 2018 were $0.01 million and $0.33 million, respectively.

We assess whether a valuation allowance should be established against our deferred tax assets based on the consideration of all available evidence using a “more likely than not” standard.  The ultimate realization of this asset is primarily based on generating future income.  We concluded at September 30, 2019, September 30, 2018 and December 31, 2018 that the realization of substantially all of our deferred tax assets continues to be more likely than not.

At both September 30, 2019 and December 31, 2018, we had approximately $0.6 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 2019.

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Derivative Financial Instruments (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Derivative financial instrument according to type of hedge [Abstract]
Unrealized losses on cash flow hedges, net of tax	$ (30)
Fair value of derivative instruments, balance sheet location [Abstract]
Asset Derivatives	7,389	$ 5,155
Liability Derivatives	5,657	2,326
Interest-Rate Cap Agreements [Member]
Derivative financial instrument according to type of hedge [Abstract]
Unrecognized premiums	$ 2,400	2,700
Maximum [Member]
Derivative financial instrument according to type of hedge [Abstract]
Term of cash flow hedge	4 years
Cash Flow Hedge Designation [Member]
Derivative financial instrument according to type of hedge [Abstract]
Notional Amount	$ 175,000	$ 175,000
Average Maturity	2 years 8 months 12 days	3 years 6 months
Fair Value	$ 98	$ 2,525
Cash Flow Hedge Designation [Member] | Interest-Rate Cap Agreements [Member]
Derivative financial instrument according to type of hedge [Abstract]
Notional Amount	$ 150,000	$ 150,000
Average Maturity	2 years 9 months 18 days	3 years 7 months 6 days
Fair Value	$ 318	$ 2,245
Designated as Hedging Instrument [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Asset Derivatives	318	2,525
Liability Derivatives	611	0
No Hedge Designation [Member]
Derivative financial instrument according to type of hedge [Abstract]
Notional Amount	$ 505,731	$ 285,148
Average Maturity	3 years 1 month 6 days	3 years 8 months 12 days
Fair Value	$ 2,025	$ 304
Fair value of derivative instruments, balance sheet location [Abstract]
Asset Derivatives	7,071	2,630
Liability Derivatives	5,046	2,326
No Hedge Designation [Member] | Rate-Lock Mortgage Loan Commitments [Member]
Derivative financial instrument according to type of hedge [Abstract]
Notional Amount	$ 79,446	$ 32,473
Average Maturity	1 month 6 days	1 month 6 days
Fair Value	$ 2,051	$ 687
No Hedge Designation [Member] | Mandatory Commitments to Sell Mortgage Loans [Member]
Derivative financial instrument according to type of hedge [Abstract]
Notional Amount	$ 137,315	$ 57,583
Average Maturity	1 month 6 days	1 month 6 days
Fair Value	$ (27)	$ (383)
No Hedge Designation [Member] | Purchased Options [Member]
Derivative financial instrument according to type of hedge [Abstract]
Notional Amount	$ 3,088	$ 3,095
Average Maturity	1 year 9 months 18 days	2 years 6 months
Fair Value	$ 125	$ 116
No Hedge Designation [Member] | Written Options [Member]
Derivative financial instrument according to type of hedge [Abstract]
Notional Amount	$ 3,028	$ 3,095
Average Maturity	1 year 9 months 18 days	2 years 6 months
Fair Value	$ (124)	$ (116)
Fixed Income Interest Rate [Member] | Fair Value Hedge Designation [Member] | Interest Rate Swap [Member]
Derivative financial instrument according to type of hedge [Abstract]
Notional Amount	$ 7,117
Average Maturity	9 years 7 months 6 days
Fair Value	$ (391)
Fixed Income Interest Rate [Member] | Cash Flow Hedge Designation [Member] | Interest Rate Swap [Member]
Derivative financial instrument according to type of hedge [Abstract]
Notional Amount	$ 25,000	$ 25,000
Average Maturity	1 year 9 months 18 days	2 years 7 months 6 days
Fair Value	$ (220)	$ 280
Fixed Income Interest Rate [Member] | No Hedge Designation [Member] | Interest Rate Swap [Member]
Derivative financial instrument according to type of hedge [Abstract]
Notional Amount	$ 141,427	$ 94,451
Average Maturity	5 years 4 months 24 days	5 years 6 months
Fair Value	$ (4,849)	$ 405
Variable Income Interest Rate [Member] | No Hedge Designation [Member] | Interest Rate Swap [Member]
Derivative financial instrument according to type of hedge [Abstract]
Notional Amount	$ 141,427	$ 94,451
Average Maturity	5 years 4 months 24 days	5 years 6 months
Fair Value	$ 4,849	$ (405)
Other Assets [Member] | Designated as Hedging Instrument [Member] | Interest-Rate Cap Agreements [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Asset Derivatives	318	2,245
Other Assets [Member] | No Hedge Designation [Member] | Rate-Lock Mortgage Loan Commitments [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Asset Derivatives	2,051	687
Other Assets [Member] | No Hedge Designation [Member] | Mandatory Commitments to Sell Mortgage Loans [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Asset Derivatives	0	0
Other Assets [Member] | No Hedge Designation [Member] | Purchased Options [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Asset Derivatives	125	116
Other Assets [Member] | No Hedge Designation [Member] | Written Options [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Asset Derivatives	0	0
Other Assets [Member] | Fixed Income Interest Rate [Member] | Designated as Hedging Instrument [Member] | Interest Rate Swap [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Asset Derivatives	0	280
Other Assets [Member] | Fixed Income Interest Rate [Member] | No Hedge Designation [Member] | Interest Rate Swap [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Asset Derivatives	23	1,116
Other Assets [Member] | Variable Income Interest Rate [Member] | No Hedge Designation [Member] | Interest Rate Swap [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Asset Derivatives	4,872	711
Other Liabilities [Member] | Designated as Hedging Instrument [Member] | Interest-Rate Cap Agreements [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Liability Derivatives	0	0
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	27	383
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	124	116
Other Liabilities [Member] | Fixed Income Interest Rate [Member] | Designated as Hedging Instrument [Member] | Interest Rate Swap [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Liability Derivatives	611	0
Other Liabilities [Member] | Fixed Income Interest Rate [Member] | No Hedge Designation [Member] | Interest Rate Swap [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Liability Derivatives	4,872	711
Other Liabilities [Member] | Variable Income Interest Rate [Member] | No Hedge Designation [Member] | Interest Rate Swap [Member]
Fair value of derivative instruments, balance sheet location [Abstract]
Liability Derivatives	$ 23	$ 1,116

XML

Share Based Compensation, Outstanding Stock Option Grants and Related Transactions (Details) - Stock Options [Member] $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($) $ / shares shares
Number of Shares [Roll Forward]
Outstanding, beginning balance (in shares)	211,421
Granted (in shares)	0
Exercised (in shares)	(70,299)
Forfeited (in shares)	0
Expired (in shares)	(1,116)
Outstanding, ending balance (in shares)	140,006
Vested and expected to vest, period end (in shares)	140,006
Exercisable, period end (in shares)	140,006
Average Exercise Price [Roll Forward]
Outstanding, beginning balance (in dollars per share) | $ / shares	$ 6.48
Exercised (in dollars per share) | $ / shares	9.98
Expired (in dollars per share) | $ / shares	22.35
Outstanding, ending balance (in dollars per share) | $ / shares	4.60
Vested and expected to vest, period end (in dollars per share) | $ / shares	4.60
Exercisable, period end (in dollars per share) | $ / shares	$ 4.60
Weighted-Average Remaining Contractual Term (Years) [Abstract]
Outstanding, weighted average remaining contractual term	3 years 2 months 12 days
Vested and expected to vest, weighted-average remaining contractual term	3 years 2 months 12 days
Exercisable, weighted average remaining contractual term	3 years 2 months 12 days
Aggregate Intrinsic Value [Abstract]
Outstanding, aggregate intrinsic value | $	$ 2,340
Vested and expected to vest, aggregate intrinsic value | $	2,340
Exercisable, aggregate intrinsic value | $	$ 2,340

XML

Regulatory Matters (Details) - USD ($) $ in Thousands		9 Months Ended	12 Months Ended
		Sep. 30, 2019	Dec. 31, 2018	Jun. 30, 2019	Sep. 30, 2018	Jun. 30, 2018	Dec. 31, 2017
Regulatory Matters [Abstract]
Undivided profits		$ 38,300
Tier 1 capital to average assets [Abstract]
Capital conservation buffer		2.50%	1.875%
Components of regulatory capital [Abstract]
Total shareholders' equity		$ 340,245	$ 338,994	$ 330,846	$ 345,204	$ 337,083	$ 264,933
Add (deduct) [Abstract]
Accumulated other comprehensive (income) loss for regulatory purposes		(3,373)	(10,108)
Consolidated [Member]
Total capital to risk-weighted assets [Abstract]
Total risk-based capital	[1]	$ 369,923	$ 371,603
Actual, Ratio	[1]	13.39%	14.25%
Minimum for Adequately Capitalized Institutions, Amount	[1]	$ 221,065	$ 208,572
Minimum for Adequately Capitalized Institutions, Ratio	[1]	8.00%	8.00%
Tier 1 capital to risk-weighted assets [Abstract]
Actual, Amount	[1]	$ 342,138	$ 345,419
Actual, Ratio	[1]	12.38%	13.25%
Minimum for Adequately Capitalized Institutions, Amount	[1]	$ 165,799	$ 156,429
Minimum for Adequately Capitalized Institutions, Ratio	[1]	6.00%	6.00%
Common equity tier 1 capital to risk-weighted assets [Abstract]
Actual, Amount	[1]	$ 303,923	$ 307,255
Actual, Ratio	[1]	11.00%	11.79%
Minimum for Adequately Capitalized Institutions, Amount	[1]	$ 124,349	$ 117,322
Minimum for Adequately Capitalized Institutions, Ratio	[1]	4.50%	4.50%
Tier 1 capital to average assets [Abstract]
Tier 1 capital	[1]	$ 342,138	$ 345,419
Actual, Ratio	[1]	9.93%	10.47%
Minimum for Adequately Capitalized Institutions, Amount	[1]	$ 137,762	$ 131,930
Minimum for Adequately Capitalized Institutions, Ratio	[1]	4.00%	4.00%
Components of regulatory capital [Abstract]
Total shareholders' equity		$ 340,245	$ 338,994
Add (deduct) [Abstract]
Accumulated other comprehensive (income) loss for regulatory purposes		(2,424)	4,311
Goodwill and other intangibles		(33,898)	(34,715)
Disallowed deferred tax assets		0	(1,335)
Common equity tier 1 capital	[1]	303,923	307,255
Qualifying trust preferred securities		38,215	38,164
Tier 1 capital	[1]	342,138	345,419
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets		27,785	26,184
Total risk-based capital	[1]	369,923	371,603
Independent Bank [Member]
Total capital to risk-weighted assets [Abstract]
Total risk-based capital	[1]	$ 352,432	$ 337,227
Actual, Ratio	[1]	12.76%	12.94%
Minimum for Adequately Capitalized Institutions, Amount	[1]	$ 220,984	$ 208,456
Minimum for Adequately Capitalized Institutions, Ratio	[1]	8.00%	8.00%
Minimum for Well Capitalized Institutions, Amount	[1]	$ 276,230	$ 260,569
Minimum for Well-Capitalized Institutions, Ratio	[1]	10.00%	10.00%
Tier 1 capital to risk-weighted assets [Abstract]
Actual, Amount	[1]	$ 324,647	$ 311,043
Actual, Ratio	[1]	11.75%	11.94%
Minimum for Adequately Capitalized Institutions, Amount	[1]	$ 165,738	$ 156,342
Minimum for Adequately Capitalized Institutions, Ratio	[1]	6.00%	6.00%
Minimum for Well-Capitalized Institutions, Amount	[1]	$ 220,984	$ 208,456
Minimum for Well Capitalized Institutions, Ratio	[1]	8.00%	8.00%
Common equity tier 1 capital to risk-weighted assets [Abstract]
Actual, Amount	[1]	$ 324,647	$ 311,043
Actual, Ratio	[1]	11.75%	11.94%
Minimum for Adequately Capitalized Institutions, Amount	[1]	$ 124,304	$ 117,256
Minimum for Adequately Capitalized Institutions, Ratio	[1]	4.50%	4.50%
Minimum for Well-Capitalized Institutions, Amount	[1]	$ 179,550	$ 169,370
Minimum for Well Capitalized Institutions, Ratio	[1]	6.50%	6.50%
Tier 1 capital to average assets [Abstract]
Tier 1 capital	[1]	$ 324,647	$ 311,043
Actual, Ratio	[1]	9.43%	9.44%
Minimum for Adequately Capitalized Institutions, Amount	[1]	$ 137,736	$ 131,778
Minimum for Adequately Capitalized Institutions, Ratio	[1]	4.00%	4.00%
Minimum for Well-Capitalized Institutions, Amount	[1]	$ 172,170	$ 164,723
Minimum for Well-Capitalized Institutions, Ratio	[1]	5.00%	5.00%
Components of regulatory capital [Abstract]
Total shareholders' equity		$ 360,969	$ 341,496
Add (deduct) [Abstract]
Accumulated other comprehensive (income) loss for regulatory purposes		(2,424)	4,311
Goodwill and other intangibles		(33,898)	(34,715)
Disallowed deferred tax assets		0	(49)
Common equity tier 1 capital	[1]	324,647	311,043
Qualifying trust preferred securities		0	0
Tier 1 capital	[1]	324,647	311,043
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets		27,785	26,184
Total risk-based capital	[1]	$ 352,432	$ 337,227

[1] These ratios do not reflect a capital conservation buffer of 2.50% and 1.875% at September 30, 2019 and December 31, 2018, respectively.