UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________________________________________________

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2020~~2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to


Commission File Number:			1-9047

Independent Bank Corp.

(Exact name of registrant as specified in its charter)

___________________________________________________


MA			04-2870273
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

Office Address:

2036 Washington Street,

Hanover,

02339

Mailing Address:

288 Union Street,

Rockland,

02370

(Address of principal executive offices, including zip code)

(781) 878-6100

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
Title of each Class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 par value per share	INDB	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 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 x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes x No o

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	x	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. o

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

Yes

☐

☒

As of November ~~4, 2020,~~3, 2021, there were ~~32,965,121~~33,049,880 shares of the issuer’s common stock outstanding, par value $0.01 per share.

~~Table of Contents~~


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			PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets - September 30, ~~2020~~2021 and December 31, ~~2019~~2020			54
Consolidated Statements of Income - Three and Ni ne Nine months ended September 30, ~~2020~~2021 and ~~2019~~2020			76
Consolidated Statements of Comprehensive Income -Three and Ni n e Nine months ended ~~Septemb~~er September 30, ~~2020~~2021 and ~~2019~~2020			87
Consolidated Statements of Stockholders’ Equity - Three and N i n e Nine months ended September 30, ~~2020~~2021 and ~~2019~~2020			98
Consolidated Statements of Cash Flows - Ni ne Nine months ended September 30, ~~2020~~2021 and ~~2019~~2020			1110

Condensed Notes to Consolidated Financial Statements - September 30, ~~2020~~2021
Note 1 - Basis of Presentation			1312
Note 2 - Recent Accounting Standards Updates			1312
Note 3 - Securities			1413
Note 4 - Loans, Allowance for Credit Losses, and Credit Quality			1917
Note 5 - ~~Loans and Allowance for Loan Losses~~Stock Based Compensation			3028
Note 6 - ~~Goodwill~~Derivative and ~~Other Intangible Assets~~Hedging Activities			3329
Note 7 - ~~Earnings Per Share~~			33
~~Note 8 - Stock Based Compensation~~			34
~~Note 9 - Derivative and Hedging Activities~~Fair Value Measurements			35
Note 108 - ~~Income Taxes~~Revenue Recognition			42
Note ~~11 - Fair Value Measurements~~			42
~~Note 12 - Revenue Recognition~~			51
~~Note 13~~9 - Comprehensive Income (Loss)			5445
Note 1410 - Commitments and Contingencies			5546
Note 1511 - Low Income Housing Project Investments			5748
Note 12 - Subsequent Event			48
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			5748
Table 1 - Closed Residential Real Estate Loans			7162
Table 2 - Residential Mortgage Loan Sales			7162
Table 3 - Mortgage Servicing Asset			7263
Table 4 - Nonperforming Assets			7768
Table 5 - Activity in Nonperforming Assets			7868
Table 6 - Troubled Debt Restructurings			7969

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~~Table of Contents~~


Item 3. Quantitative and Qualitative Disclosures About Market Risk			~~104~~93
Item 4. Controls and Procedures			~~105~~93

PART II. OTHER INFORMATION			~~105~~93
Item 1. Legal Proceedings			~~105~~93
Item 1A. Risk Factors			~~105~~94
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			~~108~~95
Item 3. Defaults Upon Senior Securities			~~108~~95
Item 4. Mine Safety Disclosures			~~108~~95
Item 5. Other Information			~~108~~95
Item 6. Exhibits			~~109~~95
Signatures			~~110~~97

~~Exhibit 31.1 – Certification 302~~
~~Exhibit 31.2 – Certification 302~~
~~Exhibit 32.1 – Certification 906~~
~~Exhibit 32.2 – Certification 906~~

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PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

INDEPENDENT BANK CORP.

CONSOLIDATED BALANCE SHEETS

(Unaudited—Dollars in thousands)


		September 30 2020		December 31 2019			September 30 2021		December 31 2020
Assets	Assets					Assets
Cash and due from banks	Cash and due from banks	$	125,103	$	114,686	Cash and due from banks	$	138,148	$	169,460
Interest-earning deposits with banks	Interest-earning deposits with banks	1,142,934		36,288		Interest-earning deposits with banks	1,869,683		1,127,176
Securities	Securities					Securities
Trading	Trading	2,612		2,179		Trading	3,504		2,838
Equity	Equity	21,119		21,261		Equity	22,794		22,107
Available for sale (amortized cost $404,159 and $420,703)		423,478		426,424
Held to maturity (fair value $690,467 and $753,263)		659,573		740,806
Available for sale (amortized cost $1,425,392 and $395,453)						Available for sale (amortized cost $1,425,392 and $395,453)	1,427,210		412,860
Held to maturity (fair value $875,306 and $752,177)						Held to maturity (fair value $875,306 and $752,177)	865,249		724,512
Total securities	Total securities	1,106,782		1,190,670		Total securities	2,318,757		1,162,317
Loans held for sale (at fair value)	Loans held for sale (at fair value)	54,713		33,307		Loans held for sale (at fair value)	33,553		58,104
Loans	Loans					Loans
Commercial and industrial	Commercial and industrial	2,062,345		1,395,036		Commercial and industrial	1,640,709		2,103,152
Commercial real estate	Commercial real estate	4,125,464		4,002,359		Commercial real estate	4,221,259		4,173,927
Commercial construction	Commercial construction	573,334		547,293		Commercial construction	515,415		553,929
Small business	Small business	167,632		174,497		Small business	184,138		175,023
Residential real estate	Residential real estate	1,352,305		1,590,569		Residential real estate	1,222,849		1,296,183
Home equity - first position	Home equity - first position	643,187		649,255		Home equity - first position	592,564		633,142
Home equity - subordinate positions	Home equity - subordinate positions	457,867		484,543		Home equity - subordinate positions	407,904		435,648
Other consumer	Other consumer	23,059		30,087		Other consumer	23,175		21,862
Total loans	Total loans	9,405,193		8,873,639		Total loans	8,808,013		9,392,866
Less: allowance for credit losses	Less: allowance for credit losses	(115,625)		(67,740)		Less: allowance for credit losses	(92,246)		(113,392)
Net loans	Net loans	9,289,568		8,805,899		Net loans	8,715,767		9,279,474
Federal Home Loan Bank stock	Federal Home Loan Bank stock	15,090		14,424		Federal Home Loan Bank stock	8,666		10,250
Bank premises and equipment, net	Bank premises and equipment, net	121,816		123,674		Bank premises and equipment, net	123,528		116,393
Goodwill	Goodwill	506,206		506,206		Goodwill	506,206		506,206
Other intangible assets	Other intangible assets	24,543		29,286		Other intangible assets	19,055		23,107
Cash surrender value of life insurance policies	Cash surrender value of life insurance policies	199,453		197,372		Cash surrender value of life insurance policies	244,573		200,525

Other assets	Other assets	587,457		343,353		Other assets	555,375		551,289
Total assets	Total assets	$	13,173,665	$	11,395,165	Total assets	$	14,533,311	$	13,204,301
Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity					Liabilities and Stockholders' Equity
Deposits	Deposits					Deposits
Noninterest-bearing demand deposits	Noninterest-bearing demand deposits	$	3,715,528	$	2,662,591	Noninterest-bearing demand deposits	$	4,590,492	$	3,762,306
Savings and interest checking accounts	Savings and interest checking accounts	3,912,703		3,232,909		Savings and interest checking accounts	4,484,208		4,047,332
Money market	Money market	2,164,436		1,856,552		Money market	2,399,878		2,232,903
Time certificates of deposit of $100,000 and over	Time certificates of deposit of $100,000 and over	570,068		663,645		Time certificates of deposit of $100,000 and over	412,129		525,424
Other time certificates of deposits	Other time certificates of deposits	488,573		731,670		Other time certificates of deposits	373,433		425,205
Total deposits	Total deposits	10,851,308		9,147,367		Total deposits	12,260,140		10,993,170
Borrowings	Borrowings					Borrowings
Federal Home Loan Bank borrowings	Federal Home Loan Bank borrowings	145,765		115,748		Federal Home Loan Bank borrowings	25,675		35,740

Long-term borrowings (less unamortized debt issuance costs of $53 and $94)		37,447		74,906
Long-term borrowings (less unamortized debt issuance costs of $0 and $40)						Long-term borrowings (less unamortized debt issuance costs of $0 and $40)	18,750		32,773

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Junior subordinated debentures (less unamortized debt issuance costs of $38and $40)		62,850		62,848
Subordinated debentures (less unamortized debt issuance costs of $328 and $399)		49,672		49,601
Junior subordinated debentures (less unamortized debt issuance costs of $35 and $37)						Junior subordinated debentures (less unamortized debt issuance costs of $35 and $37)	62,853		62,851
Subordinated debentures (less unamortized debt issuance costs of $233 and $304)						Subordinated debentures (less unamortized debt issuance costs of $233 and $304)	49,767		49,696
Total borrowings	Total borrowings	295,734		303,103		Total borrowings	157,045		181,060
Other liabilities	Other liabilities	336,899		236,552		Other liabilities	360,172		327,386
Total liabilities	Total liabilities	11,483,941		9,687,022		Total liabilities	12,777,357		11,501,616
Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies	—		—
Stockholders' equity	Stockholders' equity					Stockholders' equity
Preferred stock, $0.01 par value, authorized: 1,000,000 shares, outstanding: NaN		0		0
Common stock, $0.01 par value, authorized: 75,000,000 shares, issued and outstanding: 32,955,547 shares at September 30, 2020 and 34,377,388 shares at December 31, 2019 (includes 137,457 and 147,184 shares of unvested participating restricted stock awards, respectively)		328		342
Value of shares held in rabbi trust at cost: 135,111 shares at September 30, 2020 and 143,820 shares at December 31, 2019		(4,712)		(4,735)
Preferred stock, $0.01 par value, authorized: 1,000,000 shares, outstanding: none						Preferred stock, $0.01 par value, authorized: 1,000,000 shares, outstanding: none	—		—
Common stock, $0.01 par value, authorized: 75,000,000 shares, issued and outstanding: 33,043,812 shares at September 30, 2021 and 32,965,692 shares at December 31, 2020 (includes 135,485 and 135,205 shares of unvested participating restricted stock awards, respectively)						Common stock, $0.01 par value, authorized: 75,000,000 shares, issued and outstanding: 33,043,812 shares at September 30, 2021 and 32,965,692 shares at December 31, 2020 (includes 135,485 and 135,205 shares of unvested participating restricted stock awards, respectively)	329		328
Value of shares held in rabbi trust at cost: 84,207 shares at September 30, 2021 and 84,126 shares at December 31, 2020						Value of shares held in rabbi trust at cost: 84,207 shares at September 30, 2021 and 84,126 shares at December 31, 2020	(3,157)		(3,066)
Deferred compensation and other retirement benefit obligations	Deferred compensation and other retirement benefit obligations	4,712		4,735		Deferred compensation and other retirement benefit obligations	3,157		3,066
Additional paid in capital	Additional paid in capital	944,218		1,035,450		Additional paid in capital	949,316		945,638
Retained earnings	Retained earnings	696,546		654,182		Retained earnings	787,742		716,024
Accumulated other comprehensive income, net of tax	Accumulated other comprehensive income, net of tax	48,632		18,169		Accumulated other comprehensive income, net of tax	18,567		40,695
Total stockholders’ equity	Total stockholders’ equity	1,689,724		1,708,143		Total stockholders’ equity	1,755,954		1,702,685
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	13,173,665	$	11,395,165	Total liabilities and stockholders' equity	$	14,533,311	$	13,204,301

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

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INDEPENDENT BANK CORP.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited—Dollars in thousands, except per share data)


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30				September 30					September 30				September 30
		2020		2019		2020		2019			2021		2020		2021		2020
Interest income	Interest income									Interest income
Interest and fees on loans	Interest and fees on loans	$	90,112	$	110,205	$	280,768	$	306,736	Interest and fees on loans	$	84,212	$	90,112	$	265,409	$	280,768
Taxable interest and dividends on securities	Taxable interest and dividends on securities	7,218		8,269		23,006		24,255		Taxable interest and dividends on securities	7,792		7,218		21,603		23,006
Nontaxable interest and dividends on securities	Nontaxable interest and dividends on securities	9		14		27		40		Nontaxable interest and dividends on securities	4		9		14		27
Interest on loans held for sale	Interest on loans held for sale	326		456		917		527		Interest on loans held for sale	193		326		675		917
Interest on federal funds sold and short-term investments	Interest on federal funds sold and short-term investments	254		680		546		1,753		Interest on federal funds sold and short-term investments	815		254		1,654		546
Total interest and dividend income	Total interest and dividend income	97,919		119,624		305,264		333,311		Total interest and dividend income	93,016		97,919		289,355		305,264
Interest expense	Interest expense									Interest expense
Interest on deposits	Interest on deposits	5,432		11,846		23,351		30,052		Interest on deposits	1,633		5,432		6,361		23,351
Interest on borrowings	Interest on borrowings	1,604		3,180		5,628		10,117		Interest on borrowings	1,292		1,604		3,965		5,628
Total interest expense	Total interest expense	7,036		15,026		28,979		40,169		Total interest expense	2,925		7,036		10,326		28,979
Net interest income	Net interest income	90,883		104,598		276,285		293,142		Net interest income	90,091		90,883		279,029		276,285
Provision for credit losses	Provision for credit losses	7,500		0		52,500		2,000		Provision for credit losses	(10,000)		7,500		(17,500)		52,500
Net interest income after provision for credit losses	Net interest income after provision for credit losses	83,383		104,598		223,785		291,142		Net interest income after provision for credit losses	100,091		83,383		296,529		223,785
Noninterest income	Noninterest income									Noninterest income
Deposit account fees	Deposit account fees	3,428		5,299		11,227		14,785		Deposit account fees	4,298		3,428		11,704		11,227
Interchange and ATM fees	Interchange and ATM fees	3,044		6,137		13,154		16,447		Interchange and ATM fees	3,441		3,044		9,229		13,154
Investment management	Investment management	7,571		7,188		21,696		21,089		Investment management	9,174		7,571		26,350		21,696
Mortgage banking income	Mortgage banking income	7,704		3,968		13,570		8,184		Mortgage banking income	2,825		7,704		11,270		13,570
Increase in cash surrender value of life insurance policies	Increase in cash surrender value of life insurance policies	1,314		1,304		3,902		3,572		Increase in cash surrender value of life insurance policies	1,596		1,314		4,508		3,902
Gain on life insurance benefits	Gain on life insurance benefits	0		434		692		434		Gain on life insurance benefits	—		—		258		692
Loan level derivative income	Loan level derivative income	2,457		2,739		8,918		4,312		Loan level derivative income	586		2,457		875		8,918

Unrealized gain on equity securities										Unrealized gain on equity securities	—		308		723		1,694

Other noninterest income	Other noninterest income	3,829		4,747		10,813		13,174		Other noninterest income	4,537		3,521		11,753		9,119
Total noninterest income	Total noninterest income	29,347		31,816		83,972		81,997		Total noninterest income	26,457		29,347		76,670		83,972
Noninterest expenses	Noninterest expenses									Noninterest expenses
Salaries and employee benefits	Salaries and employee benefits	38,409		39,432		113,027		111,401		Salaries and employee benefits	42,235		38,409		124,759		113,027
Occupancy and equipment expenses	Occupancy and equipment expenses	9,273		8,555		27,863		24,109		Occupancy and equipment expenses	8,564		9,273		26,543		27,863
Data processing and facilities management	Data processing and facilities management	1,567		1,515		4,684		4,883		Data processing and facilities management	1,673		1,567		5,024		4,684
FDIC assessment	FDIC assessment	1,034		0		1,537		1,394		FDIC assessment	980		1,034		2,805		1,537
Advertising expense		1,215		1,417		3,107		3,912
Advertising										Advertising	884		1,215		2,949		3,107
Consulting expense	Consulting expense	1,305		1,338		4,244		3,486		Consulting expense	1,560		1,305		5,443		4,244
Core deposit amortization		1,428		1,567		4,392		3,996
Amortization of intangible assets										Amortization of intangible assets	1,310		1,449		4,037		4,704
Debit card expense										Debit card expense	1,347		1,105		3,693		3,312

Loss on sale of securities		0		0		0		1,462
Loss on termination of derivatives	Loss on termination of derivatives	684		0		684		0		Loss on termination of derivatives	—		684		—		684
Merger and acquisition expense	Merger and acquisition expense	0		705		0		26,433		Merger and acquisition expense	1,943		—		3,674		—

Software maintenance	Software maintenance	1,753		1,385		5,218		3,913		Software maintenance	2,018		1,753		5,903		5,218

Other noninterest expenses	Other noninterest expenses	9,990		11,619		35,349		31,887		Other noninterest expenses	9,905		8,864		30,573		31,725
Total noninterest expenses	Total noninterest expenses	66,658		67,533		200,105		216,876		Total noninterest expenses	72,419		66,658		215,403		200,105
Income before income taxes	Income before income taxes	46,072		68,881		107,652		156,263		Income before income taxes	54,129		46,072		157,796		107,652
Provision for income taxes	Provision for income taxes	11,199		17,036		21,126		38,565		Provision for income taxes	14,122		11,199		38,506		21,126
Net income	Net income	$	34,873	$	51,845	$	86,526	$	117,698	Net income	$	40,007	$	34,873	$	119,290	$	86,526
Basic earnings per share	Basic earnings per share	$	1.06	$	1.51	$	2.59	$	3.65	Basic earnings per share	$	1.21	$	1.06	$	3.61	$	2.59
Diluted earnings per share	Diluted earnings per share	$	1.06	$	1.51	$	2.59	$	3.64	Diluted earnings per share	$	1.21	$	1.06	$	3.61	$	2.59
Weighted average common shares (basic)	Weighted average common shares (basic)	32,951,918		34,361,176		33,358,879		32,283,196		Weighted average common shares (basic)	33,043,716		32,951,918		33,024,386		33,358,879
Common share equivalents	Common share equivalents	24,758		39,390		27,871		45,416		Common share equivalents	15,554		24,758		18,238		27,871
Weighted average common shares (diluted)	Weighted average common shares (diluted)	32,976,676		34,400,566		33,386,750		32,328,612		Weighted average common shares (diluted)	33,059,270		32,976,676		33,042,624		33,386,750
Cash dividends declared per common share	Cash dividends declared per common share	$	0.46	$	0.44	$	1.38	$	1.32	Cash dividends declared per common share	$	0.48	$	0.46	$	1.44	$	1.38

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

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INDEPENDENT BANK CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited—Dollars in thousands)


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30				September 30					September 30				September 30
		2020		2019		2020		2019			2021		2020		2021		2020
Net income	Net income	$	34,873	$	51,845	$	86,526	$	117,698	Net income	$	40,007	$	34,873	$	119,290	$	86,526
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax									Other comprehensive income (loss), net of tax
Net change in fair value of securities available for sale	Net change in fair value of securities available for sale	(709)		2,175		10,333		12,349		Net change in fair value of securities available for sale	(7,897)		(709)		(11,878)		10,333
Net change in fair value of cash flow hedges	Net change in fair value of cash flow hedges	(2,729)		3,030		20,452		14,905		Net change in fair value of cash flow hedges	(3,383)		(2,729)		(11,559)		20,452
Net change in other comprehensive income for defined benefit postretirement plans	Net change in other comprehensive income for defined benefit postretirement plans	225		41		(322)		121		Net change in other comprehensive income for defined benefit postretirement plans	280		225		1,309		(322)
Total other comprehensive income (loss)	Total other comprehensive income (loss)	(3,213)		5,246		30,463		27,375		Total other comprehensive income (loss)	(11,000)		(3,213)		(22,128)		30,463
Total comprehensive income	Total comprehensive income	$	31,660	$	57,091	$	116,989	$	145,073	Total comprehensive income	$	29,007	$	31,660	$	97,162	$	116,989

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

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INDEPENDENT BANK CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Three Months Ended September 30, ~~2020~~2021 and ~~2019~~2020

(Unaudited—Dollars in thousands, except per share data)

Common Stock Outstanding Common Stock Value of Shares Held in Rabbi Trust at Cost Deferred Compensation Obligation Additional Paid in Capital Retained Earnings Accumulated Other
Comprehensive Income (Loss) Total
Balance June 30, 2020 32,942,110 $ 328 $ (4,649) $ 4,649 $ 942,685 $ 676,834 $ 51,845 $ 1,671,692
Net income — — — — — 34,873 — 34,873
Other comprehensive loss — — — — — — (3,213) (3,213)
Common dividend declared ($0.46 per share) — — — — — (15,161) — (15,161)
Proceeds from exercise of stock options, net of cash paid 5,000 0 — — 140 — — 140
Stock based compensation — — — — 868 — — 868
Restricted stock awards issued, net of awards surrendered (43) 0 — — (3) — — (3)
Shares issued under direct stock purchase plan 8,480 — — — 528 — — 528
Deferred compensation and other retirement benefit obligations — — (63) 63 — — — 0
Balance September 30, 2020 32,955,547 $ 328 $ (4,712) $ 4,712 $ 944,218 $ 696,546 $ 48,632 $ 1,689,724
Balance June 30, 2019 34,321,061 $ 342 $ (4,648) $ 4,648 $ 1,029,594 $ 585,111 $ 20,956 $ 1,636,003
Net income — — — — — 51,845 — 51,845
Other comprehensive income — — — — — — 5,246 5,246
Common dividend declared ($0.44 per share) — — — — — (15,125) — (15,125)
Common stock issued for acquisition 0 0 — — 0 — — 0
Proceeds from exercise of stock options, net of cash paid 0 0 — — 0 — — 0
Stock based compensation — — — — 981 — — 981
Restricted stock awards issued, net of awards surrendered (43) (1) — — (3) — — (4)
Shares issued under direct stock purchase plan 45,763 1 — — 3,377 — — 3,378
Deferred compensation and other retirement benefit obligations — — (65) 65 — — — 0
Balance September 30, 2019 34,366,781 $ 342 $ (4,713) $ 4,713 $ 1,033,949 $ 621,831 $ 26,202 $ 1,682,324


	Common Stock Outstanding	Common Stock		Value of Shares Held in Rabbi Trust at Cost		Deferred Compensation Obligation		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total
Balance June 30, 2021	33,037,859	$	329	$	(3,116)	$	3,116	$	948,130	$	763,596	$	29,567	$	1,741,622
Net income	—	—		—		—		—		40,007		—		40,007
Other comprehensive loss	—	—		—		—		—		—		(11,000)		(11,000)
Common dividend declared ($0.48 per share)	—	—		—		—		—		(15,861)		—		(15,861)


Stock based compensation	—	—		—		—		707		—		—		707
Restricted stock awards issued, net of awards surrendered	(763)	—		—		—		(3)		—		—		(3)
Shares issued under direct stock purchase plan	6,716	—		—		—		482		—		—		482

Deferred compensation and other retirement benefit obligations	—	—		(41)		41		—		—		—		—
Balance September 30, 2021	33,043,812	$	329	$	(3,157)	$	3,157	$	949,316	$	787,742	$	18,567	$	1,755,954

Balance June 30, 2020	32,942,110	$	328	$	(4,649)	$	4,649	$	942,685	$	676,834	$	51,845	$	1,671,692
Net income	—	—		—		—		—		34,873		—		34,873
Other comprehensive income	—	—		—		—		—		—		(3,213)		(3,213)
Common dividend declared ($0.46 per share)	—	—		—		—		—		(15,161)		—		(15,161)

Proceeds from exercise of stock options, net of cash paid	5,000	—		—		—		140		—		—		140
Stock based compensation	—	—		—		—		868		—		—		868
Restricted stock awards issued, net of awards surrendered	(43)	—		—		—		(3)		—		—		(3)
Shares issued under direct stock purchase plan	8,480	—		—		—		528		—		—		528

Deferred compensation and other retirement benefit obligations	—	—		(63)		63		—		—		—		—
Balance September 30, 2020	32,955,547	$	328	$	(4,712)	$	4,712	$	944,218	$	696,546	$	48,632	$	1,689,724

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INDEPENDENT BANK CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Nine Months Ended September 30, ~~2020~~2021 and ~~2019~~2020

(Unaudited—Dollars in thousands, except per share data)

Common Stock Outstanding Common Stock Value of Shares Held in Rabbi Trust at Cost Deferred Compensation Obligation Additional Paid in Capital Retained Earnings Accumulated Other
Comprehensive Income (Loss) Total
Balance December 31, 2019 34,377,388 $ 342 $ (4,735) $ 4,735 $ 1,035,450 $ 654,182 $ 18,169 $ 1,708,143
Cumulative effect accounting adjustment (1) — — — — — 1,553 — 1,553
Net income — — — — — 86,526 — 86,526
Other comprehensive income — — — — — — 30,463 30,463
Common dividend declared ($1.38 per share) — — — — — (45,715) — (45,715)
Proceeds from exercise of stock options, net of cash paid 5,873 — — — 114 — — 114
Stock based compensation — — — — 3,297 — — 3,297
Restricted stock awards issued, net of awards surrendered 49,249 1 — — (1,187) — — (1,186)
Shares issued under direct stock purchase plan 23,037 — — — 1,620 — — 1,620
Shares repurchased under share repurchase program (1,500,000) (15) — — (95,076) — — (95,091)
Deferred compensation and other retirement benefit obligations — — 23 (23) — — — 0
Balance September 30, 2020 32,955,547 $ 328 $ (4,712) $ 4,712 $ 944,218 $ 696,546 $ 48,632 $ 1,689,724
Balance December 31, 2018 28,080,408 $ 279 $ (4,718) $ 4,718 $ 527,648 $ 546,736 $ (1,173) $ 1,073,490
Net income — — — — — 117,698 — 117,698
Other comprehensive income — — — — — — 27,375 27,375
Common dividend declared ($1.32 per share) — — — — — (42,603) — (42,603)
Common stock issued for acquisition 6,166,010 61 — — 499,632 — — 499,693
Proceeds from exercise of stock options, net of cash paid 11,000 0 — — 281 — — 281
Stock based compensation — — — — 3,413 — — 3,413
Restricted stock awards issued, net of awards surrendered 50,431 1 — — (1,436) — — (1,435)
Shares issued under direct stock purchase plan 58,932 1 — — 4,411 — — 4,412
Deferred compensation and other retirement benefit obligations — — 5 (5) — — — 0
Balance September 30, 2019 34,366,781 $ 342 $ (4,713) $ 4,713 $ 1,033,949 $ 621,831 $ 26,202 $ 1,682,324


	Common Stock Outstanding	Common Stock		Value of Shares Held in Rabbi Trust at Cost		Deferred Compensation Obligation		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
Balance December 31, 2020	32,965,692	$	328	$	(3,066)	$	3,066	$	945,638	$	716,024	$	40,695	$	1,702,685

Net income	—	—		—		—		—		119,290		—		119,290
Other comprehensive loss	—	—		—		—		—		—		(22,128)		(22,128)
Common dividend declared ($1.44 per share)	—	—		—		—		—		(47,572)		—		(47,572)

Proceeds from exercise of stock options, net of cash paid	4,744	—		—		—		(57)		—		—		(57)
Stock based compensation	—	—		—		—		3,467		—		—		3,467
Restricted stock awards issued, net of awards surrendered	53,795	1		—		—		(1,247)		—		—		(1,246)
Shares issued under direct stock purchase plan	19,581	—		—		—		1,515		—		—		1,515

Deferred compensation and other retirement benefit obligations	—	—		(91)		91		—		—		—		—
Balance September 30, 2021	33,043,812	$	329	$	(3,157)	$	3,157	$	949,316	$	787,742	$	18,567	$	1,755,954

Balance December 31, 2019	34,377,388	$	342	$	(4,735)	$	4,735	$	1,035,450	$	654,182	$	18,169	$	1,708,143
Cumulative effect accounting adjustment (1)	—	—		—		—		—		1,553		—		1,553

Net income	—	—		—		—		—		86,526		—		86,526
Other comprehensive income	—	—		—		—		—		—		30,463		30,463
Common dividend declared ($1.38 per share)	—	—		—		—		—		(45,715)		—		(45,715)

Proceeds from exercise of stock options, net of cash paid	5,873	—		—		—		114		—		—		114
Stock based compensation	—	—		—		—		3,297		—		—		3,297
Restricted stock awards issued, net of awards surrendered	49,249	1		—		—		(1,187)		—		—		(1,186)
Shares issued under direct stock purchase plan	23,037	—		—		—		1,620		—		—		1,620
Shares repurchased under share repurchase program	(1,500,000)	(15)		—		—		(95,076)		—		—		(95,091)
Deferred compensation and other retirement benefit obligations	—	—		23		(23)		—		—		—		—
Balance September 30, 2020	32,955,547	$	328	$	(4,712)	$	4,712	$	944,218	$	696,546	$	48,632	$	1,689,724

(1) Represents adjustment needed to reflect the cumulative impact on retained earnings pursuant to the Company's adoption of Accounting Standards Update 2016-13. The adjustment presented includes $1.1 million ($817,000, net of tax) attributable to the change in accounting methodology for estimating the allowance for credit losses and $1.0 million ($736,000, net of tax) related to the reserve for unfunded commitments resulting from the Company's adoption of the standard. Amount shown in the table above is presented net of tax.

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

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INDEPENDENT BANK CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited—Dollars in thousands)


		Nine Months Ended					Nine Months Ended
		September 30					September 30
		2020		2019			2021		2020
Cash flow from operating activities	Cash flow from operating activities					Cash flow from operating activities
Net income	Net income	$	86,526	$	117,698	Net income	$	119,290	$	86,526
Adjustments to reconcile net income to net cash provided by operating activities
Adjustments to reconcile net income to net cash provided by (used in) operating activities						Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation and amortization	Depreciation and amortization	21,071		13,919		Depreciation and amortization	24,586		21,071
Change in unamortized net loan costs and premiums	Change in unamortized net loan costs and premiums	(9,406)		(7,262)		Change in unamortized net loan costs and premiums	(22,566)		(9,406)

Provision for credit losses	Provision for credit losses	52,500		2,000		Provision for credit losses	(17,500)		52,500
Deferred income tax expense	Deferred income tax expense	2,802		171		Deferred income tax expense	271		2,802
Net (gain) loss on equity securities	Net (gain) loss on equity securities	107		(1,562)		Net (gain) loss on equity securities	(695)		107
Net loss on sale of securities		—		1,462

Net loss on bank premises and equipment	Net loss on bank premises and equipment	363		180		Net loss on bank premises and equipment	32		363

Loss on termination of derivatives	Loss on termination of derivatives	684		0		Loss on termination of derivatives	—		684
Net loss on other real estate owned and foreclosed assets		0		389

Realized gain on sale leaseback transaction	Realized gain on sale leaseback transaction	(433)		(433)		Realized gain on sale leaseback transaction	(433)		(433)
Stock based compensation	Stock based compensation	3,297		3,413		Stock based compensation	3,467		3,297

Increase in cash surrender value of life insurance policies	Increase in cash surrender value of life insurance policies	(3,902)		(3,572)		Increase in cash surrender value of life insurance policies	(4,508)		(3,902)
Gain on life insurance benefits	Gain on life insurance benefits	(692)		(434)		Gain on life insurance benefits	(258)		(692)
Operating lease payments	Operating lease payments	(8,899)		(7,798)		Operating lease payments	(8,993)		(8,899)
Operating lease termination payments						Operating lease termination payments	(4,750)		—
Change in fair value on loans held for sale	Change in fair value on loans held for sale	(1,252)		(1,192)		Change in fair value on loans held for sale	1,534		(1,252)
Net change in:	Net change in:					Net change in:
Trading assets	Trading assets	(433)		(459)		Trading assets	(666)		(433)

Loans held for sale	Loans held for sale	(20,154)		37,672		Loans held for sale	23,017		(20,154)
Other assets	Other assets	(200,520)		(57,624)		Other assets	16,700		(200,520)
Other liabilities	Other liabilities	89,164		40,668		Other liabilities	28,267		89,164
Total adjustments	Total adjustments	(75,703)		19,538		Total adjustments	37,505		(75,703)
Net cash provided by operating activities	Net cash provided by operating activities	10,823		137,236		Net cash provided by operating activities	156,795		10,823
Cash flows used in investing activities	Cash flows used in investing activities					Cash flows used in investing activities
Proceeds from sales of equity securities	Proceeds from sales of equity securities	0		1,461		Proceeds from sales of equity securities	1,164		—

Purchases of equity securities	Purchases of equity securities	(331)		(356)		Purchases of equity securities	(1,522)		(331)
Proceeds from sales of securities available for sale		—		45,863

Proceeds from maturities and principal repayments of securities available for sale	Proceeds from maturities and principal repayments of securities available for sale	74,898		35,770		Proceeds from maturities and principal repayments of securities available for sale	75,442		74,898
Purchases of securities available for sale	Purchases of securities available for sale	(58,704)		(16,230)		Purchases of securities available for sale	(1,106,079)		(58,704)
Proceeds from maturities and principal repayments of securities held to maturity	Proceeds from maturities and principal repayments of securities held to maturity	176,841		87,313		Proceeds from maturities and principal repayments of securities held to maturity	199,304		176,841
Purchases of securities held to maturity	Purchases of securities held to maturity	(95,017)		(56,937)		Purchases of securities held to maturity	(340,713)		(95,017)
Net redemption (purchases) of Federal Home Loan Bank stock	Net redemption (purchases) of Federal Home Loan Bank stock	(666)		18,344		Net redemption (purchases) of Federal Home Loan Bank stock	1,584		(666)
Investments in low income housing projects	Investments in low income housing projects	(15,586)		(3,549)		Investments in low income housing projects	(19,236)		(15,586)
Purchases of life insurance policies	Purchases of life insurance policies	(116)		(115)		Purchases of life insurance policies	(40,116)		(116)
Proceeds from life insurance policies	Proceeds from life insurance policies	2,629		3,162		Proceeds from life insurance policies	576		2,629
Net increase in loans		(525,626)		(11,668)
Net cash paid in business combinations		0		(105,264)
Net decrease (increase) in loans						Net decrease (increase) in loans	603,773		(525,626)

Purchases of bank premises and equipment	Purchases of bank premises and equipment	(8,283)		(11,753)		Purchases of bank premises and equipment	(16,114)		(8,283)
Proceeds from the sale of bank premises and equipment	Proceeds from the sale of bank premises and equipment	283		17		Proceeds from the sale of bank premises and equipment	78		283
Payments on early termination of hedging relationship						Payments on early termination of hedging relationship	—		(684)

Net cash used in investing activities						Net cash used in investing activities	(641,859)		(450,362)
Cash flows provided by financing activities						Cash flows provided by financing activities

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Payments on early termination of hedging relationship (684) 0
Net cash used in investing activities (450,362) (13,942)
Cash flows provided by (used in) financing activities
Net increase (decrease) in time deposits (336,289) 28,113
Net increase (decrease) in other deposits 2,040,615 (56,714)
Net advances (repayments) of short-term Federal Home Loan Bank borrowings 55,000 (177,046)
Repayments of long-term Federal Home Loan Bank borrowings (25,000) (25,000)
Proceeds from line of credit, net of issuance costs 0 49,980
Repayment of line of credit, net of issuance costs 0 (49,980)
Proceeds from (repayments of) long-term debt, net of issuance costs (37,500) 74,867
Repayments of junior subordinated debentures, net of issuance costs 0 (13,329)
Proceeds from subordinated debentures, net of issuance costs 0 49,526
Net proceeds from exercise of stock options 114 281
Restricted stock awards issued, net of awards surrendered (1,186) (1,435)
Proceeds from shares issued under direct stock purchase plan 1,620 4,412
Payments for shares repurchased under share repurchase program (95,091) 0
Common dividends paid (45,681) (38,152)
Net cash provided by (used in) financing activities 1,556,602 (154,477)
Net increase (decrease) in cash and cash equivalents 1,117,063 (31,183)
Cash and cash equivalents at beginning of year 150,974 250,455
Cash and cash equivalents at end of period $ 1,268,037 $ 219,272
Supplemental schedule of noncash activities
Net increase in capital commitments relating to low income housing project investments $ 28,027 $ 15,740
Initial recognition of operating leases upon adoption of Accounting Standards Update 2016-02 (1) $ — $ 32,777
Right-of-use assets obtained in exchange for new lease obligations $ 7,693 $ 7,593
In conjunction with the Company's acquisitions, assets were acquired and liabilities were assumed as follows:
Common stock issued for acquisition $ 0 $ 499,693
Fair value of assets acquired, net of cash acquired $ 0 $ 2,711,067
Fair value of liabilities assumed $ 0 $ 2,106,110

~~(1)~~Represents adjustment needed to reflect the opening balance of the Company's Right of Use ("ROU") assets and lease liabilities pursuant to the adoption of Accounting Standards Update 2016-02 effective January 1, 2019. Upon adoption, the Company recognized on its balance sheet ROU assets of approximately $32.8 million, with a corresponding operating lease liability of approximately $34.1 million, with an adjustment to remove the Company's existing deferred rent liability of approximately $1.3 million.


Net decrease in time deposits	(165,052)		(336,289)
Net increase in other deposits	1,432,037		2,040,615

Net advances of short-term Federal Home Loan Bank borrowings	—		55,000

Repayments of long-term Federal Home Loan Bank borrowings	(10,000)		(25,000)





Repayments of long-term debt, net of issuance costs	(14,063)		(37,500)


Net payments for exercise of stock options	(57)		114
Restricted stock awards issued, net of awards surrendered	(1,246)		(1,186)
Proceeds from shares issued under direct stock purchase plan	1,515		1,620
Payments for shares repurchased under share repurchase program	—		(95,091)
Common dividends paid	(46,875)		(45,681)
Net cash provided by financing activities	1,196,259		1,556,602
Net increase in cash and cash equivalents	711,195		1,117,063
Cash and cash equivalents at beginning of year	1,296,636		150,974
Cash and cash equivalents at end of period	$	2,007,831	$	1,268,037
Supplemental schedule of noncash activities


Net increase in capital commitments relating to low income housing project investments	$	34,127	$	28,027

Right-of-use assets obtained in exchange for new lease obligations	$	5,888	$	7,693

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

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CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION

Independent Bank Corp. (the “Company”) is a state chartered, federally registered bank holding company, incorporated in 1985. The Company is the sole stockholder of Rockland Trust Company (“Rockland Trust” or the “Bank”), a Massachusetts trust company chartered in 1907.

As announced on April 22, 2021, the Company has signed a definitive merger agreement under which the Company will acquire Meridian Bancorp, Inc. (“Meridian”), with the Company as the surviving entity, and East Boston Savings Bank will merge with and into Rockland trust. The Company anticipates the merger to close during the fourth quarter of 2021.

All material intercompany balances and transactions have been eliminated in consolidation. Certain previously reported amounts have been reclassified to conform to the current year’s presentation.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial statements, primarily consisting of normal recurring adjustments, have been included. Results for the ~~three and~~ nine months ended September 30, ~~2020~~2021 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2020~~2021 or any other interim period.

For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, filed with the Securities and Exchange ~~Commission.~~Commission (the "2020 Form 10-K").

NOTE 2 - RECENT ACCOUNTING STANDARDS UPDATES

Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") ~~Topic 326 "Financial Instruments - Credit Losses" Update No. 2016-13.~~The standard was issued in June 2016 and has been amended three times by the FASB (collectively, the "updates"). The purpose of the updates is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, these updates replace the incurred loss impairment methodology in current GAAP with a methodology, referred to as the current expected credit losses ("CECL") methodology, which reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The updates affect loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The Company adopted the CECL standard effective January 1, 2020.

The Company adopted the standard using the modified retrospective method for all financial assets measured at amortized cost, net investment in leases and off-balance sheet credit exposures. Results for reporting periods beginning after January 1, 2020 are presented under the CECL standard, while prior period results are presented under standards previously applicable under GAAP. The cumulative effect of the Company's adoption resulted in an immaterial increase to retained earnings as of the January 1, 2020 adoption date. This transition adjustment was a result of the change in allowance methodology, including the impact to the reserve on unfunded commitments resulting from the application of new guidance under CECL, as well as the day one gross-up of purchased credit deteriorated ("PCD") assets. The standard was adopted using the prospective transition approach for PCD assets that were previously classified as purchased credit impaired ("PCI") assets. As prescribed by the standard, management did not reassess whether PCI assets met the criteria of PCD assets at the date of adoption. On January 1, 2020, the amortized cost basis of the PCD assets were adjusted to reflect estimated credit losses, with the remaining non-credit related discount, calculated based on the adjusted amortized cost, and will be accreted into interest income on a straight line basis over the remaining contractual term of the asset. See ~~Note 3 - "Securities"~~ ~~and~~ ~~Note 4 - "Loans, Allowance for Credit Losses and Credit Quality"~~ ~~for further details surrounding the Company's adoption of CECL, related accounting policy updates and full disclosures required under the standard.~~

~~FASB ASC~~ Topic 848 "Reference Rate Reform" Update No. 2020-04. Update No. 2020-04 was issued in March 2020 to provide optional expedients and exceptions for applying GAAP to certain contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform. The amendments will not apply to contract modifications made and hedging ~~relationship~~relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022 for which an entity has elected certain optional expedients that are retained through the end of the hedging relationship. The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022 and do not apply to contract modifications made after December 31, 2022. FASB ASC Topic 848 "Reference Rate Reform" Update No. 2021-01 was subsequently issued in January 2021 and expanded application of the optional expedients to derivative transactions affected by the discounting transition. The Company has not yet adopted the amendments in these updates, but has established a working group to guide the Company’s transition from LIBOR and has begun efforts to transition off the LIBOR index consistent with industry timelines. The working group has identified its products that utilize LIBOR and has implemented fallback language to facilitate the transition to alternative rates. The Company is also evaluating existing platforms and systems as well as alternative indices in its preparation to offer new products tied to the alternative indices.

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~~amendments in this update and is currently in the process of reviewing its contracts and existing processes in order to assess the risks and potential impact of the transition away from LIBOR.~~

NOTE 3 - SECURITIES

Investment securities are classified at the time of purchase as available for sale, held to maturity, trading, or equity. Classification is constantly re-evaluated for consistency with corporate goals and objectives. Trading and equity securities are recorded at fair value with subsequent changes in fair value recorded in earnings. Debt securities that management has the positive intent and ability to hold to maturity are classified as held to maturity and recorded at amortized cost. Securities not classified as held to maturity or trading are classified as available for sale and recorded at fair value, with changes in fair value excluded from earnings and reported in other comprehensive income, net of related tax. Purchase premiums and discounts are recognized in interest income, using the interest method, to arrive at periodic interest income at a constant effective yield, thereby reflecting the securities market yield. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

Accrued interest receivable balances are excluded from the amortized cost of held to maturity securities and the fair value of available for sale securities and are included within other assets on the consolidated balance sheet. Management has elected not to measure an allowance for credit losses on these balances as the Company employs a timely write-off policy. It is the Company's policy that a security is placed on nonaccrual status at the time any principal or interest payments become 90 days delinquent, and interest earned but not collected for a security placed on non-accrual is reversed against interest income.

~~Allowance for Credit Losses - Available for Sale Securities~~

The Company's available for sale securities are carried at fair value. For available for sale securities in an unrealized loss position, management will first evaluate whether there is intent to sell, or if it is more likely than not that the Company will be required to sell a security prior to anticipated recovery of its amortized cost basis. If either of these criteria are met, the Company will record a write-down of the security's amortized cost basis to fair value through income. For those available for sale securities which do not meet the intent or requirement to sell criteria, management will evaluate whether the decline in fair value is a result of credit related matters or other factors. In performing this assessment, management considers the creditworthiness of the issuer including whether the security is guaranteed by the U.S. Federal Government or other government agency, the extent to which fair value is less than amortized cost, and changes in credit rating during the period, among other factors. If this assessment indicates the existence of credit losses, the security will be written down to fair value, as determined by a discounted cash flow analysis. To the extent the estimated cash flows do not support the amortized cost, the deficiency is considered to be due to credit loss and is recognized in earnings.

Changes in the allowance for credit losses are recorded as a provision for (or reversal of) credit loss expense. Losses are charged against the allowance when the uncollectibility of a security is confirmed, or when either of the aforementioned criteria surrounding intent or requirement to sell have been met.

~~Allowance for Credit Losses - Held to Maturity Securities~~

The Company measures expected credit losses on held to maturity securities on a collective basis by major security type. Management classifies the held to maturity portfolio into the following major security types: U.S. Government Agency, U.S. Treasury, Agency Mortgage-Backed Securities, Agency Collateralized Mortgage Obligations, Small Business Administration Pooled Securities, and Single Issuer Trust Preferred Securities. Securities in the Company's held to maturity portfolio are primarily guaranteed by either the U.S. Federal Government or other government sponsored agencies with a long history of no credit losses. As a result, management has determined these securities to have a zero loss expectation and therefore does not estimate an allowance for credit losses on these securities.

Trading Securities

The Company had trading securities of ~~$2.6~~$3.5 million and ~~$2.2~~$2.8 million as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. These securities are held in a rabbi trust and will be used for future payments associated with the Company’s ~~nonqualified~~non-qualified 401(k) Restoration Plan and ~~Nonqualified~~Non-qualified Deferred Compensation Plan.

Equity Securities

The Company had equity securities of ~~$21.1~~$22.8 million and ~~$21.3~~$22.1 million as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. These securities consist primarily of mutual funds held in a rabbi trust and will be used for future payments associated with the Company’s supplemental executive retirement plans.

~~Table of Contents~~

The following table represents a summary of the gains and losses recognized within non-interest income and non-interest expense within the consolidated statements of income that relate to equity securities for the periods indicated:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30				September 30					September 30				September 30
		2020		2019		2020		2019			2021		2020		2021		2020
		Dollars in thousands									Dollars in thousands
Net gains (losses) recognized during the period on equity securities	Net gains (losses) recognized during the period on equity securities	$	308	$	211	(107)		1,562		Net gains (losses) recognized during the period on equity securities	$	(169)	$	308	695		(107)
Less: net gains recognized during the period on equity securities sold during the period	Less: net gains recognized during the period on equity securities sold during the period	0		0		6		6		Less: net gains recognized during the period on equity securities sold during the period	50		—		191		6
Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date	Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date	$	308	$	211	$	(113)	$	1,556	Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date	$	(219)	$	308	$	504	$	(113)

Available for Sale Securities

The following table summarizes the amortized cost, allowance for credit losses, and fair value of available for sale securities and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) as of the dates indicated:


		September 30, 2020										December 31, 2019						September 30, 2021												December 31, 2020
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for credit losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for credit losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for credit losses		Fair Value
		(Dollars in thousands)																(Dollars in thousands)

Available for sale securities																					Available for sale securities
U.S. government agency securities	U.S. government agency securities	$	22,475	$	1,798	$	0	$	0	$	24,273	$	32,473	$	642	$	0		$	33,115	U.S. government agency securities	$	217,613	$	1,511	$	(1,779)	$	—	$	217,345	$	22,476	$	1,640	$	—	$	—	$	24,116
U.S. treasury securities																					U.S. treasury securities	774,492		—		(4,490)		—		770,002		—		—		—		—		—
Agency mortgage-backed securities	Agency mortgage-backed securities	220,150		10,471		(1)		0		230,620		243,548		3,456		(4)			247,000		Agency mortgage-backed securities	294,387		6,120		(3,288)		—		297,219		224,293		9,337		(1)		—		233,629
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	98,657		3,539		(119)		0		102,077		87,305		1,225		(19)			88,511		Agency collateralized mortgage obligations	85,076		1,933		(522)		—		86,487		88,687		3,083		(87)		—		91,683

State, county, and municipal securities	State, county, and municipal securities	1,125		20		0		0		1,145		1,377		19		0			1,396		State, county, and municipal securities	276		12		—		—		288		790		17		—		—		807
Single issuer trust preferred securities issued by banks	Single issuer trust preferred securities issued by banks	489		—		(20)		0		469		488		5		0			493		Single issuer trust preferred securities issued by banks	489		2		—		—		491		489		—		(1)		—		488
Pooled trust preferred securities issued by banks and insurers	Pooled trust preferred securities issued by banks and insurers	1,433		0		(412)		0		1,021		1,488		0		(374)			1,114		Pooled trust preferred securities issued by banks and insurers	1,341		—		(331)		—		1,010		1,429		—		(373)		—		1,056
Small business administration pooled securities	Small business administration pooled securities	59,830		4,043		0		0		63,873		54,024		771		—			54,795		Small business administration pooled securities	51,718		2,650		—		—		54,368		57,289		3,792		—		—		61,081
Total available for sale securities	Total available for sale securities	$	404,159	$	19,871	$	(552)	$	—	$	423,478	$	420,703	$	6,118	$	(397)		$	426,424	Total available for sale securities	$	1,425,392	$	12,228	$	(10,410)	$	—	$	1,427,210	$	395,453	$	17,869	$	(462)	$	—	$	412,860

The Company did not record ~~an allowance~~a provision for estimated credit losses on any available for sale securities during the three and nine months ended September 30, 2021 and 2020. Excluded from the table above is accrued interest on available for sale securities of ~~$1.4~~$3.3 million and $1.2 million as of September 30, 2021 and December 31, 2020, respectively, which is included within other assets on the consolidated balance ~~sheet.~~sheets. Additionally, the Company did not record any write-offs of accrued interest income on available for sale securities during the three and nine months ended September 30, 2021 and 2020. No

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Furthermore, no securities held by the Company were delinquent on contractual payments ~~as of September 30, 2020,~~ nor were any securities placed on non-accrual status ~~during the three or nine months then ended.~~as of September 30, 2021 and December 31, 2020.

When securities are sold, the adjusted cost of the specific security sold is used to compute the gain or loss on the sale. The Company had no sales of securities available for sale during the three or nine months ended September 30, 2021 and 2020, and therefore no gains or losses were realized during the periods presented. The Company had no sales of securities available for sale during the three months ended September 30, 2019 and recorded realized losses of $1.5 million on sales of securities available for sale during the nine months ended September 30, 2019.

~~Table of Contents~~

The following ~~table shows~~tables show the gross unrealized losses and fair value of the Company’s available for sale securities ~~which are~~ in an unrealized loss position, and for which the Company has not recorded ~~an allowance~~a provision for credit losses, as of ~~September 30, 2020.~~the dated indicated. These available for sale securities are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position:


																September 30, 2021
																	Less than 12 months				12 months or longer				Total
																# of holdings	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
																(Dollars in thousands)
U.S. government agency securities															U.S. government agency securities	5	$	138,262	$	(1,779)	$	—	$	—	$	138,262	$	(1,779)
U.S. treasury securities															U.S. treasury securities	16	770,002		(4,490)		—		—		770,002		(4,490)
Agency mortgage-backed securities															Agency mortgage-backed securities	9	131,548		(3,287)		304		(1)		131,852		(3,288)
Agency collateralized mortgage obligations															Agency collateralized mortgage obligations	1	22,994		(522)		—		—		22,994		(522)

Pooled trust preferred securities issued by banks and insurers															Pooled trust preferred securities issued by banks and insurers	1	—		—		1,010		(331)		1,010		(331)

Total impaired available for sale securities															Total impaired available for sale securities	32	$	1,062,806	$	(10,078)	$	1,314	$	(332)	$	1,064,120	$	(10,410)

		September 30, 2020														December 31, 2020
			Less than 12 months				12 months or longer				Total						Less than 12 months				12 months or longer				Total
		# of holdings	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			# of holdings	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
		(Dollars in thousands)														(Dollars in thousands)

Agency mortgage-backed securities	Agency mortgage-backed securities	2	399		(1)		—		0		399		(1)		Agency mortgage-backed securities	3	$	437	$	(1)	$	—	$	—	$	437	$	(1)
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	2	27,269		(119)		—		0		27,269		(119)		Agency collateralized mortgage obligations	2	23,323		(87)		—		—		23,323		(87)

Single issuer trust preferred securities issued by banks and insurers	Single issuer trust preferred securities issued by banks and insurers	1	469		(20)		0		0		469		(20)		Single issuer trust preferred securities issued by banks and insurers	1	488		(1)		—		—		488		(1)
Pooled trust preferred securities issued by banks and insurers	Pooled trust preferred securities issued by banks and insurers	1	0		0		1,021		(412)		1,021		(412)		Pooled trust preferred securities issued by banks and insurers	1	—		—		1,056		(373)		1,056		(373)

Total impaired available for sale securities	Total impaired available for sale securities	6	$	28,137	$	(140)	$	1,021	$	(412)	$	29,158	$	(552)	Total impaired available for sale securities	7	$	24,248	$	(89)	$	1,056	$	(373)	$	25,304	$	(462)

The Company does not intend to sell these investments and has determined, based upon available evidence, that it is more likely than not that the Company will not be required to sell each security before the recovery of its amortized cost basis. In addition, management does not believe that any of the securities are impaired due to reasons of credit quality. As a result, the Company did not recognize ~~an allowance~~a provision for credit losses on these investments during the three orand nine months ended September 30, 2021 and 2020. The Company made this determination by reviewing various qualitative and quantitative factors regarding each investment category, such as current market conditions, extent and nature of changes in fair value, issuer rating changes and trends, volatility of earnings, and current analysts’ evaluations.

As a result of the Company’s review of these qualitative and quantitative factors, the causes of the impairments listed in the table above by category were as follows at September 30, ~~2020:~~2021:

•U.S. Government Agency Securities, U.S. Treasury Securities, Agency Mortgage-Backed Securities and Agency Collateralized Mortgage Obligations: These portfolios have contractual terms that generally do not permit the issuer to settle the securities at a price less than the current par value of the investment. The decline in market value of these securities is attributable to changes in interest rates and not credit quality. Additionally, these securities are implicitly guaranteed by the U.S. Government or one of its agencies.

•~~Single Issuer Trust Preferred Securities:~~ ~~This portfolio consists~~Table of one security, which is investment grade. The unrealized loss on this security is attributable to the illiquid nature of the trust preferred market in the current economic environment. Management evaluates various financial metrics for the issuer, including regulatory capital ratios of the issuer.Contents

•Pooled Trust Preferred Securities: This portfolio consists of one below investment grade security which is performing. The unrealized loss on this security is attributable to the illiquid nature of the trust preferred market in the current economic and regulatory environment. Management evaluates collateral credit and instrument structure, including current and expected deferral and default rates and timing. In addition, discount rates are determined by evaluating comparable spreads observed currently in the market for similar instruments.

~~Table of Contents~~

Held to Maturity Securities

The following table summarizes the amortized cost, fair value and allowance for credit losses of held to maturity securities and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) as of the dates indicated:


		September 30, 2020										December 31, 2019						September 30, 2021												December 31, 2020
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for credit losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for credit losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for credit losses		Fair Value
		(Dollars in thousands)																(Dollars in thousands)
U.S. government agency securities	U.S. government agency securities	$	0	$	—	$	0	$	0	$	0	$	12,874	$	123	$	0		$	12,997	U.S. government agency securities	$	33,422	$	—	$	(127)	$	—	$	33,295	$	—	$	—	$	—	$	—	$	—
U.S. Treasury securities		4,021		79		0		0		4,100		4,032		21		0			4,053
U.S. treasury securities																					U.S. treasury securities	3,007		17		—		—		3,024		4,017		60		—		—		4,077
Agency mortgage-backed securities	Agency mortgage-backed securities	388,106		19,687		0		0		407,793		397,414		8,445		(57)			405,802		Agency mortgage-backed securities	352,483		10,911		(2,781)		—		360,613		356,085		18,036		—		—		374,121
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	237,380		9,557		0		0		246,937		293,662		4,501		(849)			297,314		Agency collateralized mortgage obligations	451,151		5,089		(4,202)		—		452,038		335,993		8,466		(340)		—		344,119

Single issuer trust preferred securities issued by banks	Single issuer trust preferred securities issued by banks	1,500		0		(2)		0		1,498		1,500		0		(10)			1,490		Single issuer trust preferred securities issued by banks	1,500		8		—		—		1,508		1,500		—		(2)		—		1,498
Small business administration pooled securities	Small business administration pooled securities	28,566		1,573		0		0		30,139		31,324		338		(55)			31,607		Small business administration pooled securities	23,686		1,142		—		—		24,828		26,917		1,445		—		—		28,362

Total held to maturity securities	Total held to maturity securities	$	659,573	$	30,896	$	(2)	$	0	$	690,467	$	740,806	$	13,428	$	(971)		$	753,263	Total held to maturity securities	$	865,249	$	17,167	$	(7,110)	$	—	$	875,306	$	724,512	$	28,007	$	(342)	$	—	$	752,177

The Company did not record ~~an allowance~~a provision for estimated credit losses on any held to maturity securities during the three and nine months ended September 30, 2021 and 2020. Excluded from the table above is accrued interest on held to maturity securities of ~~$1.7~~$2.2 million and $1.5 million as of September 30, 2021 and December 31, 2020, respectively, which is included within other assets on the consolidated balance ~~sheet.~~sheets. Additionally, the Company did not record any write-offs of accrued interest income on held to maturity securities during the three and nine months ended September 30, 2021 and 2020. NoFurthermore, no securities held by the Company were delinquent on contractual payments ~~as of September 30, 2020,~~ nor were any securities placed on non-accrual status ~~during the three~~as of September 30, 2021 and ~~nine months then ended.~~December 31, 2020.

When securities are sold, the adjusted cost of the specific security sold is used to compute the gain or loss on the sale. The Company had no sales of held to maturity securities during the three and nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, and therefore no gains or losses were realized during the periods presented.

The Company monitors the credit quality of held to maturity securities through the use of credit ratings. Credit ratings are monitored by the Company on at least a quarterly basis. As of September 30, ~~2020,~~2021, all held to maturity securities held by the Company were rated investment grade or higher.

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The actual maturities of certain available for sale or held to maturity securities may differ from the contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. A schedule of the contractual maturities of available for sale and held to maturity securities as of September 30, ~~2020~~2021 is presented below:


		Due in one year or less				Due after one year to five years				Due after five to ten years				Due after ten years				Total					Due in one year or less				Due after one year to five years				Due after five to ten years				Due after ten years				Total
		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value			Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
		(Dollars in thousands)																					(Dollars in thousands)
Available for sale securities	Available for sale securities																					Available for sale securities
U.S. government agency securities	U.S. government agency securities	$	0	$	0	$	10,001	$	10,288	$	12,474	$	13,985	$	0	$	0	$	22,475	$	24,273	U.S. government agency securities	$	10,000	$	10,066	$	31,422	$	31,275	$	176,191	$	176,004	$	—	$	—	$	217,613	$	217,345
U.S. treasury securities																						U.S. treasury securities	—		—		541,282		538,755		233,210		231,247		—		—		774,492		770,002
Agency mortgage-backed securities	Agency mortgage-backed securities	0		0		71,624		73,773		38,956		41,956		109,570		114,891		220,150		230,620		Agency mortgage-backed securities	2,273		2,292		81,194		83,434		88,655		87,152		122,265		124,341		294,387		297,219
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	0		0		0		0		0		0		98,657		102,077		98,657		102,077		Agency collateralized mortgage obligations	—		—		—		—		—		—		85,076		86,487		85,076		86,487

State, county, and municipal securities	State, county, and municipal securities	515		516		420		422		190		207		0		0		1,125		1,145		State, county, and municipal securities	85		85		—		—		191		203		—		—		276		288
Single issuer trust preferred securities issued by banks	Single issuer trust preferred securities issued by banks	0		0		0		0		0		0		489		469		489		469		Single issuer trust preferred securities issued by banks	—		—		—		—		—		—		489		491		489		491
Pooled trust preferred securities issued by banks and insurers	Pooled trust preferred securities issued by banks and insurers	0		0		0		0		0		0		1,433		1,021		1,433		1,021		Pooled trust preferred securities issued by banks and insurers	—		—		—		—		—		—		1,341		1,010		1,341		1,010
Small business administration pooled securities	Small business administration pooled securities	0		0		0		0		0		0		59,830		63,873		59,830		63,873		Small business administration pooled securities	—		—		—		—		—		—		51,718		54,368		51,718		54,368
Total available for sale securities	Total available for sale securities	$	515	$	516	$	82,045	$	84,483	$	51,620	$	56,148	$	269,979	$	282,331	$	404,159	$	423,478	Total available for sale securities	$	12,358	$	12,443	$	653,898	$	653,464	$	498,247	$	494,606	$	260,889	$	266,697	$	1,425,392	$	1,427,210
Held to maturity securities	Held to maturity securities																					Held to maturity securities

U.S. Treasury securities		$	1,001	$	1,019	$	3,020	$	3,081	$	0	$	0	$	0	$	0	$	4,021	$	4,100
U.S. government agency securities																						U.S. government agency securities	$	—	$	—	$	33,422	$	33,295	$	—	$	—	$	—	$	—	$	33,422	$	33,295
U.S. treasury securities																						U.S. treasury securities	3,007		3,024		—		—		—		—		—		—		3,007		3,024
Agency mortgage-backed securities	Agency mortgage-backed securities	8,510		8,574		1,458		1,509		53,530		56,289		324,608		341,421		388,106		407,793		Agency mortgage-backed securities	—		—		3,482		3,677		125,204		125,407		223,797		231,529		352,483		360,613
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	0		0		0		0		0		0		237,380		246,937		237,380		246,937		Agency collateralized mortgage obligations	—		—		—		—		—		—		451,151		452,038		451,151		452,038

Single issuer trust preferred securities issued by banks	Single issuer trust preferred securities issued by banks	0		0		0		0		1,500		1,498		0		0		1,500		1,498		Single issuer trust preferred securities issued by banks	—		—		—		—		1,500		1,508		—		—		1,500		1,508
Small business administration pooled securities	Small business administration pooled securities	0		0		0		0		0		0		28,566		30,139		28,566		30,139		Small business administration pooled securities	—		—		—		—		—		—		23,686		24,828		23,686		24,828

Total held to maturity securities	Total held to maturity securities	$	9,511	$	9,593	$	4,478	$	4,590	$	55,030	$	57,787	$	590,554	$	618,497	$	659,573	$	690,467	Total held to maturity securities	$	3,007	$	3,024	$	36,904	$	36,972	$	126,704	$	126,915	$	698,634	$	708,395	$	865,249	$	875,306
Total	Total	$	10,026	$	10,109	$	86,523	$	89,073	$	106,650	$	113,935	$	860,533	$	900,828	$	1,063,732	$	1,113,945	Total	$	15,365	$	15,467	$	690,802	$	690,436	$	624,951	$	621,521	$	959,523	$	975,092	$	2,290,641	$	2,302,516

Included in the table above are ~~$3.9~~$3.2 million of callable securities at September 30, ~~2020.~~2021.

The carrying value of securities pledged to secure public funds, trust deposits, and for other purposes, as required or permitted by law, was ~~$417.1~~$678.4 million and ~~$375.5~~$419.6 million at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

At September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had 0no investments in obligations of individual states, counties, or municipalities which exceeded 10% of consolidated stockholders’ equity.

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Under previous accounting guidance, the Company reviewed both available for sale and held to maturity securities for other-than-temporary-impairment ("OTTI"). However, in accordance with the newly adopted CECL standard, the Company now utilizes separate impairment models for held to maturity and available for sale securities for purposes of estimating credit losses. The following table shows the gross unrealized losses and fair value of the Company’s investments in an unrealized loss position, which the Company had not deemed to be OTTI, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2019:

December 31, 2019
Less than 12 months 12 months or longer Total
# of
holdings Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses
(Dollars in thousands)
Agency mortgage-backed securities 12 34,009 (59) 243 (2) 34,252 (61)
Agency collateralized mortgage obligations 17 48,476 (215) 37,382 (653) 85,858 (868)
Single issuer trust preferred securities issued by banks and insurers 1 0 0 1,490 (10) 1,490 (10)
Pooled trust preferred securities issued by banks and insurers 1 0 0 1,114 (374) 1,114 (374)
Small business administration pooled securities 1 7,349 (55) 0 0 7,349 (55)
Total temporarily impaired securities 32 $ 89,834 $ (329) $ 40,229 $ (1,039) $ 130,063 $ (1,368)

The Company did not intend to sell these investments and therefore determined, based upon available evidence, that it was more likely than not that the Company would not be required to sell each security before the recovery of its amortized cost basis. As a result, the Company did not consider these investments to be OTTI and accordingly, there was 0 OTTI recorded and 0 cumulative credit related component of OTTI for the year ended December 31, 2019.

NOTE 4 - LOANS, ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY

~~Loans Held for Sale~~

The Bank primarily classifies new residential real estate mortgage loans as held for sale based on intent, which is determined when loans are underwritten. Residential real estate mortgage loans not designated as held for sale are retained based upon available liquidity, for interest rate risk management and other business purposes.

The Company has elected the fair value option to account for originated closed loans intended for sale. Accordingly, changes in fair value relating to loans intended for sale are recorded in earnings and are offset by changes in fair value relating to interest rate lock commitments and forward sales commitments. Gains and losses on residential loan sales (sales proceeds minus carrying amount) are recorded in mortgage banking income. Upfront costs and fees related to items for which the fair value option is elected are recognized in earnings as incurred and are not deferred.

~~Loans~~

Loans that the Company has the intent and ability to hold until maturity or payoff are carried at amortized cost (net of the allowance for credit losses). Amortized cost is the principal amount outstanding, adjusted by partial charge-offs and net of deferred loan costs or fees. For originated loans, loan fees and certain direct origination costs are deferred and amortized into interest income over the expected term of the loan using the level-yield method. When a loan is paid off, the unamortized portion is recognized in interest income. Interest income on loans is accrued based upon the daily principal amount outstanding except for loans on nonaccrual status.

As a general rule, loans 90 days or more past due with respect to principal or interest are classified as nonaccrual loans, or sooner if management considers such action to be prudent. However, loans that are 90 days or more past due may be kept on an accruing status if the loan is well secured and in the process of collection. The Company may also put a junior lien mortgage on nonaccrual status as a result of delinquency with respect to the first position, which is held by the Bank or by another financial institution, while the junior lien is currently performing. Income accruals are suspended on all nonaccrual loans in a timely manner and all previously accrued and uncollected interest is reversed against current income. A loan remains on nonaccrual status until it becomes current with respect to principal and interest (and in certain instances remains current for up to six months), the loan is liquidated, or when the loan is determined to be uncollectible and is charged-off against the allowance for credit losses. When doubt exists as to the collectability of a loan, any payments received are applied to reduce

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the amortized cost of the loan to the extent necessary to eliminate such doubt. For all loan portfolios, a charge-off occurs when the Company determines that a specific loan, or portion thereof, is uncollectible. This determination is made based on management's review of specific facts and circumstances of the individual loan, including assessing the viability of the customer’s business or project as a going concern, the expected cash flows to repay the loan, the value of the collateral and the ability and willingness of any guarantors to perform.

~~Allowance for Credit Losses - Loans Held for Investment~~

The allowance for credit losses is established based upon the Company's current estimate of expected lifetime credit losses on loans measured at amortized cost. Loan losses are charged against the allowance when management's assessments confirm that the Company will not collect the full amortized cost basis of a loan. Subsequent recoveries, if any, are credited to the allowance.

Under the CECL methodology, the Company estimates credit losses for financial assets on a collective basis for loans sharing similar risk characteristics using a quantitative model combined with an assessment of certain qualitative factors designed to address forecast risk and model risk inherent in the quantitative model output. The quantitative model utilizes a factor based approach to estimate expected credit losses using Probability of Default ("PD"), Loss Given Default ("LGD") and Exposure at Default ("EAD"), which are derived from internal historical default and loss experience. The model estimates expected credit losses using loan level data over the estimated life of the exposure, considering the effect of prepayments. Economic forecasts are incorporated into the estimate over a reasonable and supportable forecast period, beyond which is a reversion to the Company's historical long-run average. Management has determined a reasonable and supportable period of 12 months, and a straight line reversion period of 6 months, to be appropriate for purposes of estimating expected credit losses. The qualitative risk factors impacting the expected risk of loss within the portfolio include the following:

•~~Lending policies and procedures~~

•~~Economic and business conditions~~

•~~Nature and volume of loans~~

•~~Changes in management~~

•~~Changes in credit quality~~

•~~Changes in loan review system~~

•~~Changes to underlying collateral values~~

•~~Concentrations of credit risk~~

•~~Other external factors~~

Loans that do not share similar risk characteristics with any pools of assets are subject to individual assessment and are removed from the collectively assessed pools to avoid double counting. For the loans that are individually assessed, the Company uses either a discounted cash flow (“DCF”) approach or a fair value of collateral approach. The latter approach is used for loans deemed to be collateral dependent or when foreclosure is probable.

Accrued interest receivable amounts are excluded from balances of loans held at amortized cost and are included within other assets on the consolidated balance sheet. Management has elected not to measure an allowance for credit losses on these amounts as the Company employs a timely write-off policy. Consistent with the Company's policy for nonaccrual loans, accrued interest receivable is typically written off when loans reach 90 days past due and are placed on nonaccrual status.

In the ordinary course of business, the Company enters into commitments to extend credit, commercial letters of credit, and standby letters of credit. Such financial instruments are recorded in the financial statements when they become payable. The credit risk associated with these commitments is evaluated in a manner similar to the allowance for credit losses. The reserve for unfunded lending commitments is included in other liabilities on the consolidated balance sheet.

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~~Acquired Loans~~

Prior to its adoption of CECL, and under legacy GAAP, the Company maintained a portfolio of acquired loans, which, at acquisition, were recorded at fair value with no carryover of the allowance for loan losses. Acquired loans were also reviewed to determine if the loan had evidence of deterioration in credit quality and also if it was probable, at acquisition, that all contractually required payments would not be collected. Loans meeting such criteria were deemed to be purchased credit impaired ("PCI") loans. Under the accounting model for PCI loans, the excess of cash flows expected to be collected over the carrying amount of the loans, referred to as the "accretable yield", was accreted into interest income over the life of the loans using the effective yield method. Accordingly, PCI loans were not subject to classification as nonaccrual in the same manner as originated loans. Rather, acquired PCI loans were generally considered to be accruing loans because their interest income related to the accretable yield recognized and not to contractual interest payments at the loan level. The difference between contractually required principal and interest payments and the cash flows expected to be collected, referred to as the "nonaccretable difference", included estimates of both the impact of prepayments and future credit losses expected to be incurred over the life of the loans.

Under the CECL standard, the concept of PCI assets was effectively replaced with purchased credit deteriorated ("PCD") assets, the balances of which should be treated in a manner consistent with loans held for investment for purposes of estimating an allowance for credit losses. As a result, upon the Company's adoption of CECL on January 1, 2020, loan balances previously classified as PCI assets were re-classified as PCD assets and have been prospectively accounted for in accordance with the standard. See Note 2 - Recent Accounting Standards Updates for further discussion surrounding the day one impact associated with adoption of CECL as it relates to PCI assets.

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Loans Held for Investment and Allowance for Credit Losses

The following table summarizes the change in allowance for credit losses by loan category, and bifurcates the amount of loans allocated to each loan category for the period indicated:

Three Months Ended September 30, 2020
(Dollars in thousands)
Commercial and
Industrial Commercial
Real Estate Commercial
Construction Small
Business Residential
Real Estate
Home Equity Other Consumer Total
Allowance for credit losses
Beginning balance $ 25,662 $ 36,956 $ 4,501 $ 4,561 $ 15,046 $ 24,860 $ 590 $ 112,176
Charge-offs (185) (3,885) 0 (49) 0 0 (185) (4,304)
Recoveries 1 9 0 2 1 21 219 253
Provision for credit loss expense 2,741 6,306 709 79 (884) (1,309) (142) 7,500
Ending balance (1) $ 28,219 $ 39,386 $ 5,210 $ 4,593 $ 14,163 $ 23,572 $ 482 $ 115,625
Nine Months Ended September 30, 2020
(Dollars in thousands)
Commercial and
Industrial Commercial
Real Estate Commercial
Construction Small
Business Residential
Real Estate
Home Equity Other Consumer Total
Allowance for credit losses
Beginning balance, pre adoption of Topic 326 $ 17,594 $ 32,935 $ 6,053 $ 1,746 $ 3,440 $ 5,576 $ 396 $ 67,740
Cumulative effect accounting adjustment (2) (1,984) (13,048) (3,652) 495 9,828 7,012 212 (1,137)
Cumulative effect accounting adjustment (3) 49 337 0 0 423 319 29 1,157
Charge-offs (185) (3,885) 0 (194) 0 (142) (1,342) (5,748)
Recoveries 47 9 0 8 2 174 873 1,113
Provision for credit loss expense 12,698 23,038 2,809 2,538 470 10,633 314 52,500
Ending balance (1) $ 28,219 $ 39,386 $ 5,210 $ 4,593 $ 14,163 $ 23,572 $ 482 $ 115,625

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	Three Months Ended September 30, 2021
	(Dollars in thousands)
	Commercial and Industrial		Commercial Real Estate		Commercial Construction		Small Business		Residential Real Estate		Home Equity		Other Consumer		Total
Allowance for credit losses
Beginning balance	$	17,032	$	44,325	$	4,865	$	3,612	$	12,014	$	20,087	$	422	$	102,357


Charge-offs	(1)		—		—		(83)		—		—		(248)		(332)
Recoveries	1		—		—		50		—		49		121		221
Provision for credit loss expense	(1,018)		(6,527)		(397)		88		(967)		(1,268)		89		(10,000)
Ending balance (1)	$	16,014	$	37,798	$	4,468	$	3,667	$	11,047	$	18,868	$	384	$	92,246

	Three Months Ended September 30, 2020
	(Dollars in thousands)
	Commercial and Industrial		Commercial Real Estate		Commercial Construction		Small Business		Residential Real Estate		Home Equity		Other Consumer		Total
Allowance for credit losses
Beginning balance	$	25,662	$	36,956	$	4,501	$	4,561	$	15,046	$	24,860	$	590	$	112,176
Charge-offs	(185)		(3,885)		—		(49)		—		—		(185)		(4,304)
Recoveries	1		9		—		2		1		21		219		253
Provision for credit loss expense	2,741		6,306		709		79		(884)		(1,309)		(142)		7,500
Ending balance (1)	$	28,219	$	39,386	$	5,210	$	4,593	$	14,163	$	23,572	$	482	$	115,625

	Nine Months Ended September 30, 2021
	(Dollars in thousands)
	Commercial and Industrial		Commercial Real Estate		Commercial Construction		Small Business		Residential Real Estate		Home Equity		Other Consumer		Total
Allowance for credit losses
Beginning balance	$	21,086	$	45,009	$	5,397	$	5,095	$	14,275	$	22,060	$	470	$	113,392
Charge-offs	(3,474)		—		—		(184)		—		(69)		(772)		(4,499)
Recoveries	100		57		—		65		1		107		523		853
Provision for credit loss expense	(1,698)		(7,268)		(929)		(1,309)		(3,229)		(3,230)		163		(17,500)
Ending balance (1)	$	16,014	$	37,798	$	4,468	$	3,667	$	11,047	$	18,868	$	384	$	92,246

	Nine Months Ended September 30, 2020
	(Dollars in thousands)
	Commercial and Industrial		Commercial Real Estate		Commercial Construction		Small Business		Residential Real Estate		Home Equity		Other Consumer		Total
Allowance for credit losses
Beginning balance, pre adoption of ASU 2016-13	$	17,594	$	32,935	$	6,053	$	1,746	$	3,440	$	5,576	$	396	$	67,740
Cumulative effect accounting adjustment (2)	(1,984)		(13,048)		(3,652)		495		9,828		7,012		212		(1,137)
Cumulative effect accounting adjustment (3)	49		337		—		—		423		319		29		1,157
Charge-offs	(185)		(3,885)		—		(194)		—		(142)		(1,342)		(5,748)
Recoveries	47		9		—		8		2		174		873		1,113
Provision for credit loss expense	12,698		23,038		2,809		2,538		470		10,633		314		52,500
Ending balance (1)	$	28,219	$	39,386	$	5,210	$	4,593	$	14,163	$	23,572	$	482	$	115,625

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(1)Balances of accrued interest receivable excluded from amortized cost and the calculation of allowance for credit losses amounted to $29.1 million and $36.7 million as of September 30, ~~2020.~~2021 and September 30, 2020, respectively.

(2)Represents adjustment needed to reflect the cumulative day one impact pursuant to the Company's adoption of Accounting Standards Update 2016-13. The adjustment represents a $1.1 million decrease to the allowance attributable to the change in accounting methodology for estimating the allowance for credit losses resulting from the Company's adoption of the standard.

(3)Represents adjustment needed to reflect the day one reclassification of the Company's PCI loan balances to PCD and the associated gross-up, pursuant to the Company's adoption of Accounting Standards Update 2016-13. The adjustment represents a $1.2 million increase to the allowance resulting from the day one reclassification.

The balance of allowance for credit losses of ~~$115.6~~$92.2 million as of September 30, ~~2020~~2021 represents ~~an increase~~a decrease of ~~$47.9~~$10.1 million, or ~~70.6%~~9.9%, ~~in comparison to the implementation balances at January 1, 2020, and an increase of $3.4 million, or 3.1%~~ compared to June 30, ~~2020. These increases~~2021. The decrease in the allowance ~~were~~was primarily driven by ~~anticipated credit deterioration caused by~~a release of the COVID-19 pandemic. During the third quarter, conditions surrounding the credit environment and expectations for future loss estimates did not change significantly in comparison to the previous quarter. As a result, the third quarter provision for credit losses of ~~$7.5 million reflects a decrease from the $25.0 million and $20.0~~$10.0 million recorded during the ~~first~~quarter, reflecting improvements in expected overall macro-economic forecast assumptions and ~~second quarters, respectively.~~ continued strong asset quality metrics, along with lower loan levels. While management is unable to know with certainty the direct, indirect, and future impacts of the COVID-19 pandemic, it is expected that the pandemic ~~will~~could have a ~~material~~significant adverse impact on future losses across a broad range of loan segments. As such, the ~~provision~~allowance for credit ~~loss recognized in 2020 reflects~~losses at September 30, 2021 continues to reflect increased reserve allocations to loan segments that are considered to have elevated loss exposure associated with the COVID-19 ~~pandemic.~~pandemic, in addition to other economic uncertainties, including labor and supply shortages, as well as inflationary factors. These loan segments primarily include commercial relationships within industries that ~~are~~have been subject to mandated closures and capacity limits that ~~will~~have impeded and could potentially impede the borrowers’ ability to make loan payments, including loans in the following industry sections: Accommodations, Food Services, Retail Trade, ~~Recreation and Entertainment, and~~ Other Services (excluding Public Administration)., and Arts, Entertainment and Recreation. In addition to these industry exposures, additional risk of loss was attributable to non-owner occupied real estate borrowers with significant retail tenant exposure, as well as home equity loans within a junior lien position. Leveraging

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actual historical loss given default (LGD) rates combined with stressing of assumptions over probability of default rates over these higher risk segments, qualitative adjustments were made to the initially model-driven calculated loss reserves. Additionally, the forecast used by the model was adjusted to use a more severe outlook at each quarter end throughout 2020, as compared to the baseline forecast that was used to calculate opening balances on January 1, 2020 as a result of the uncertainty in the outlook due to the ongoing pandemic.

For the purpose of estimating the allowance for credit losses, management segregated the loan portfolio into the portfolio segments detailed in the above tables. Each of these loan categories possesses unique risk characteristics that are considered when determining the appropriate level of allowance for each segment. Some of the characteristics unique to each loan category include:

Commercial Portfolio

•Commercial and Industrial: Loans in this category consist of revolving and term loan obligations extended to business and corporate enterprises for the purpose of financing working capital and/or capital investment. Collateral generally consists of pledges of business assets including, but not limited to: accounts receivable, inventory, plant and equipment, or real estate, if applicable. Repayment sources consist of primarily, operating cash flow, and secondarily, liquidation of assets.

•Commercial Real Estate: Loans in this category consist of mortgage loans to finance investment in real property such as multi-family residential, commercial/retail, office, industrial, hotels, educational and healthcare facilities and other specific use properties. Loans are typically written with amortizing payment structures. Collateral values are determined based upon third party appraisals and evaluations. Loan to value ratios at origination are governed by established policy and regulatory guidelines. Repayment sources consist of, primarily, cash flow from operating leases and rents and, secondarily, liquidation of assets.

•Commercial Construction: Loans in this category consist of short-term construction loans, revolving and nonrevolving credit lines and construction/permanent loans to finance the acquisition, development and construction or rehabilitation of real property. Project types include residential land development, 1-4 family, condominium, and multi-family home construction, commercial/retail, office, industrial, hotels, educational and healthcare facilities and other specific use properties. Loans may be written with nonamortizing or hybrid payment structures depending upon the type of project. Collateral values are determined based upon third party appraisals and evaluations. Loan to value ratios at origination are governed by established policy and regulatory guidelines. Repayment sources vary depending upon the type of project and may consist of sale or lease of units, operating cash flows or liquidation of other assets.

•Small Business: Loans in this category consist of revolving, term loan and mortgage obligations extended to sole proprietors and small businesses for purposes of financing working capital and/or capital investment. Collateral generally consists of pledges of business assets including, but not limited to, accounts receivable, inventory, plant and equipment, or real estate if applicable. Repayment sources consist primarily of operating cash flows and, secondarily, liquidation of assets.

For the commercial portfolio it is the Company’s policy to obtain personal guarantees for payment from individuals holding material ownership interests in the borrowing entities.

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Consumer Portfolio

•Residential Real Estate: Residential mortgage loans held in the Company’s portfolio are made to borrowers who demonstrate the ability to make scheduled payments with full consideration to underwriting factors such as current and expected income, employment status, current assets, other financial resources, credit history and the value of the collateral. Collateral consists of mortgage liens on 1-4 family residential properties. Residential mortgage loans also include loans to construct owner-occupied 1-4 family residential properties.

•Home Equity: Home equity loans and credit lines are made to qualified individuals and are primarily secured by senior or junior mortgage liens on owner-occupied 1-4 family homes, condominiums or vacation homes. Each home equity loan has a fixed rate and is billed in equal payments comprised of principal and interest. The majority of home equity lines of credit have a variable rate and are billed in interest-only payments during the draw period. At the end of the draw period, the home equity line of credit is billed as a percentage of the then outstanding principal balance plus all accrued interest over a predetermined repayment period, as set forth in the note. Additionally, the Company has the option of renewing each line of credit for additional draw periods. Borrower qualifications include favorable credit history combined with supportive income requirements and combined loan to value ratios within established policy guidelines.

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•Other Consumer: Other consumer loan products include personal lines of credit and amortizing loans made to qualified individuals for various purposes such as education, debt consolidation, personal expenses or overdraft protection. Borrower qualifications include favorable credit history combined with supportive income and collateral requirements within established policy guidelines. These loans may be secured or unsecured.

Credit Quality

The Company continually monitors the asset quality of the loan portfolio using all available information. Based on this information, loans demonstrating certain payment issues or other weaknesses may be categorized as adversely risk-rated, delinquent, nonperforming and/or put on nonaccrual status. Additionally, in the course of resolving such loans, the Company may choose to restructure the contractual terms of certain loans to match the borrower’s ability to repay the loan based on their current financial condition.

The Company reviews numerous credit quality indicators when assessing the risk in its loan portfolio. For the commercial portfolio, the Company utilizes a 10-point credit risk-rating system, which assigns a risk-grade to each loan obligation based on a number of quantitative and qualitative factors associated with a commercial or small business loan transaction. Factors considered include industry and market conditions, position within the industry, earnings trends, operating cash flow, asset/liability values, debt capacity, guarantor strength, management and controls, financial reporting, collateral, and other considerations. The risk-rating categories for the commercial portfolio are defined as follows:

•Pass: Risk-rating “1” through “6” comprises of loans ranging from ‘Substantially Risk Free’ which indicates borrowers are of unquestioned credit standing and the pinnacle of credit quality, well established companies with a very strong financial condition, and loans fully secured by cash collateral, through ‘Acceptable Risk’, which indicates borrowers may exhibit declining earnings, strained cash flow, increasing or above average leverage and/or weakening market fundamentals that indicate below average asset quality, margins and market share. Collateral coverage is protective.

•Potential Weakness: Borrowers exhibit potential credit weaknesses or downward trends deserving management’s close attention. If not checked or corrected, these trends will weaken the Company’s asset and position. While potentially weak, currently these borrowers are marginally acceptable; no loss of principal or interest is envisioned.

•Definite Weakness Loss Unlikely: Borrowers exhibit well defined weaknesses that jeopardize the orderly liquidation of debt. Loans may be inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any. Normal repayment from the borrower is in jeopardy, although no loss of principal is envisioned. However, there is a distinct possibility that a partial loss of interest and/or principal will occur if the deficiencies are not corrected. Collateral coverage may be inadequate to cover the principal obligation.

•Partial Loss Probable: Borrowers exhibit well defined weaknesses that jeopardize the orderly liquidation of debt with the added provision that the weaknesses make collection of the debt in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Serious problems exist to the point where partial loss of principal is likely.

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•Definite Loss: Borrowers deemed incapable of repayment. Loans to such borrowers are considered uncollectible and of such little value that continuation as active assets of the Company is not warranted.

The Company utilizes a comprehensive, continuous strategy for evaluating and monitoring commercial credit quality. Initially, credit quality is determined at loan origination and is re-evaluated when subsequent actions, such as renewals, modifications or reviews, occur. Actively managed commercial borrowers are required to provide updated financial information at least annually which is carefully evaluated for any changes in credit quality. Larger loan relationships are subject to a full annual credit review by experienced credit professionals, while continuous portfolio monitoring techniques are employed to evaluate changes in credit quality for smaller loan relationships. Any changes in credit quality are reflected in risk-rating changes. Additionally, the Company retains an independent loan review firm to evaluate the credit quality of the commercial loan portfolio. The independent loan review process achieves significant penetration into the commercial loan portfolio and reports the results of these reviews to the Audit Committee of the Board of Directors on a quarterly basis. Commercial loan modifications granted by the Company allowing payment deferrals for qualifying borrowers in accordance with the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") ~~have been~~were assessed for potential downgrades of risk ratings.

For the Company’s consumer portfolio, the quality of the loan is best indicated by the repayment performance of an individual borrower. As a result, for this portfolio the Company utilizes a pass/default risk-rating system, based on an age

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analysis (i.e., days past due) associated with each consumer loan. Under this structure, consumer loans less than 90 days past due are assigned a "pass" rating, while any consumer loans 90 days or more past due are assigned a "default" rating. Consumer loan modifications granted by the Company allowing payment deferrals for qualifying borrowers in accordance with the CARES Act ~~have~~were not ~~been reflected~~categorized as delinquent loans.

The following table details the amortized cost balances of the Company's loan portfolios, presented by credit quality indicator and origination year as of the ~~date~~dates indicated below:

September 30, 2020
2020 2019 2018 2017 2016 Prior Revolving Loans Revolving converted to Term Total
(Dollars in thousands)
Commercial and
industrial
Pass $ 1,012,974 (1) $ 153,137 $ 107,318 $ 34,826 $ 23,065 $ 22,334 $ 601,937 $ 2,577 $ 1,958,168
Potential weakness 2,560 2,302 7,833 4,573 1,219 318 15,248 50 34,103
Definite weakness - loss unlikely 2,732 1,553 22,748 5,500 2,483 1,419 33,496 0 69,931
Partial loss probable 0 0 0 0 0 143 0 0 143
Definite loss 0 0 0 0 0 0 0 0 —
Total commercial and industrial $ 1,018,266 $ 156,992 $ 137,899 $ 44,899 $ 26,767 $ 24,214 $ 650,681 $ 2,627 $ 2,062,345
Commercial real estate
Pass $ 753,415 $ 859,548 $ 512,371 $ 587,345 $ 399,442 $ 751,629 $ 39,998 $ 16,341 $ 3,920,089
Potential weakness 20,639 15,957 20,313 7,941 27,253 47,875 0 0 139,978
Definite weakness - loss unlikely 4,261 2,265 10,092 21,081 2,170 6,605 0 0 46,474
Partial loss probable 0 0 18,923 0 0 0 0 0 18,923
Definite loss 0 0 0 0 0 0 0 0 0
Total commercial real estate $ 778,315 $ 877,770 $ 561,699 $ 616,367 $ 428,865 $ 806,109 $ 39,998 $ 16,341 $ 4,125,464
Commercial construction
Pass $ 182,291 $ 196,420 $ 73,298 $ 66,406 $ 0 $ 6,750 $ 31,372 $ 1,077 $ 557,614
Potential weakness 0 9,352 5,037 — 0 0 328 0 14,717
Definite weakness - loss unlikely 0 0 1,003 0 0 0 — 0 1,003
Partial loss probable 0 0 0 0 0 0 0 0 0
Definite loss 0 0 0 0 0 0 0 0 0
Total commercial construction $ 182,291 $ 205,772 $ 79,338 $ 66,406 $ 0 $ 6,750 $ 31,700 $ 1,077 $ 573,334
Small business
Pass $ 27,457 $ 28,766 $ 20,806 $ 14,627 $ 14,528 $ 22,644 $ 34,569 $ 0 $ 163,397
Potential weakness 0 10 16 10 755 232 736 0 1,759
Definite weakness - loss unlikely 184 408 78 170 98 723 786 0 2,447
Partial loss probable 0 0 0 0 0 0 29 0 29
Definite loss 0 0 0 0 0 0 0 0 0
Total small business $ 27,641 $ 29,184 $ 20,900 $ 14,807 $ 15,381 $ 23,599 $ 36,120 $ 0 $ 167,632
Residential real estate
Pass $ 131,691 $ 167,901 $ 187,194 $ 168,048 $ 241,638 $ 449,219 $ 0 $ 0 $ 1,345,691
Default 728 0 760 235 167 4,724 0 0 6,614
Total residential real estate $ 132,419 $ 167,901 $ 187,954 $ 168,283 $ 241,805 $ 453,943 $ 0 $ 0 $ 1,352,305
Home equity
Pass $ 60,274 $ 66,238 $ 59,534 $ 59,387 $ 44,817 $ 122,397 $ 681,784 $ 4,057 $ 1,098,488

2521

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																					September 30, 2021
																					2021		2020		2019		2018		2017		Prior		Revolving Loans		Revolving converted to Term		Total (1)
																					(Dollars in thousands)
Commercial and industrial																				Commercial and industrial
Pass (2)																				Pass (2)	$	590,532	$	185,706	$	97,095	$	74,381	$	15,175	$	16,731	$	605,718	$	66	$	1,585,404
Potential weakness																				Potential weakness	1,338		9,035		3,286		1,672		980		1,632		10,262		—		28,205
Definite weakness - loss unlikely																				Definite weakness - loss unlikely	16,597		332		793		1,034		2,678		214		5,452		—		27,100
Partial loss probable																				Partial loss probable	—		—		—		—		—		—		—		—		—
Definite loss																				Definite loss	—		—		—		—		—		—		—		—		—
Total commercial and industrial																				Total commercial and industrial	$	608,467	$	195,073	$	101,174	$	77,087	$	18,833	$	18,577	$	621,432	$	66	$	1,640,709

Commercial real estate																				Commercial real estate
Pass																				Pass	$	699,565	$	1,019,453	$	606,645	$	347,874	$	442,306	$	794,263	$	17,068	$	—	$	3,927,174
Potential weakness																				Potential weakness	22,106		29,091		51,976		14,628		21,350		82,655		13,615		—		235,421
Definite weakness - loss unlikely																				Definite weakness - loss unlikely	9,331		16,336		3,399		13,657		9,762		6,179		—		—		58,664
Partial loss probable																				Partial loss probable	—		—		—		—		—		—		—		—		—
Definite loss																				Definite loss	—		—		—		—		—		—		—		—		—
Total commercial real estate																				Total commercial real estate	$	731,002	$	1,064,880	$	662,020	$	376,159	$	473,418	$	883,097	$	30,683	$	—	$	4,221,259

Commercial construction																				Commercial construction
Pass																				Pass	$	127,945	$	216,573	$	82,559	$	22,851	$	22,873	$	6,505	$	16,424	$	2,134	$	497,864
Potential weakness																				Potential weakness	—		12,991		—		—		—		—		—		—		12,991
Definite weakness - loss unlikely																				Definite weakness - loss unlikely	—		4,560		—		—		—		—		—		—		4,560
Partial loss probable																				Partial loss probable	—		—		—		—		—		—		—		—		—
Definite loss																				Definite loss	—		—		—		—		—		—		—		—		—
Total commercial construction																				Total commercial construction	$	127,945	$	234,124	$	82,559	$	22,851	$	22,873	$	6,505	$	16,424	$	2,134	$	515,415

Small business																				Small business
Pass																				Pass	$	40,736	$	38,804	$	22,075	$	14,241	$	10,675	$	21,809	$	32,679	$	—	$	181,019
Potential weakness																				Potential weakness	14		—		383		200		5		174		627		—		1,403
Definite weakness - loss unlikely																				Definite weakness - loss unlikely	138		637		41		26		10		284		580		—		1,716
Partial loss probable																				Partial loss probable	—		—		—		—		—		—		—		—		—
Definite loss																				Definite loss	—		—		—		—		—		—		—		—		—
Total small business																				Total small business	$	40,888	$	39,441	$	22,499	$	14,467	$	10,690	$	22,267	$	33,886	$	—	$	184,138

Residential real estate																				Residential real estate
Pass																				Pass	$	277,949	$	184,974	$	92,723	$	97,915	$	102,581	$	463,397	$	—	$	—	$	1,219,539
Default																				Default	—		123		—		1,024		—		2,163		—		—		3,310

Total residential real estate																				Total residential real estate	$	277,949	$	185,097	$	92,723	$	98,939	$	102,581	$	465,560	$	—	$	—	$	1,222,849

Home equity																				Home equity
Pass																				Pass	$	58,897	$	68,629	$	42,083	$	37,644	$	41,792	$	117,488	$	628,575	$	3,575	$	998,683
Default	Default	0		0		0		—		0		455		2,044		67		2,566		Default	—		—		—		—		—		33		1,717		35		1,785

Total home equity	Total home equity	$	60,274	$	66,238	$	59,534	$	59,387	$	44,817	$	122,852	$	683,828	$	4,124	$	1,101,054	Total home equity	$	58,897	$	68,629	$	42,083	$	37,644	$	41,792	$	117,521	$	630,292	$	3,610	$	1,000,468

Other consumer	Other consumer																			Other consumer
Pass	Pass	$	679	$	450	$	209	$	739	$	696	$	7,737	$	12,493	$	0	$	23,003	Pass	$	307	$	347	$	244	$	78	$	500	$	5,338	$	16,359	$	—	$	23,173
Default	Default	0		0		0		20		0		34		2		0		56		Default	—		—		—		—		—		—		2		—		2

Total other consumer	Total other consumer	$	679	$	450	$	209	$	759	$	696	$	7,771	$	12,495	$	0	$	23,059	Total other consumer	$	307	$	347	$	244	$	78	$	500	$	5,338	$	16,361	$	—	$	23,175

Total	Total	$	2,199,885	$	1,504,307	$	1,047,533	$	970,908	$	758,331	$	1,445,238	$	1,454,822	$	24,169	$	9,405,193	Total	$	1,845,455	$	1,787,591	$	1,003,302	$	627,225	$	670,687	$	1,518,865	$	1,349,078	$	5,810	$	8,808,013

Table of Contents


	September 30, 2020
	2020		2019		2018		2017		2016		Prior		Revolving Loans		Revolving converted to Term		Total (1)
	(Dollars in thousands)
Commercial and industrial
Pass (2)	$	1,012,974	$	153,137	$	107,318	$	34,826	$	23,065	$	22,334	$	601,937	$	2,577	$	1,958,168
Potential weakness	2,560		2,302		7,833		4,573		1,219		318		15,248		50		34,103
Definite weakness - loss unlikely	2,732		1,553		22,748		5,500		2,483		1,419		33,496		—		69,931
Partial loss probable	—		—		—		—		—		143		—		—		143
Definite loss	—		—		—		—		—		—		—		—		—
Total commercial and industrial	$	1,018,266	$	156,992	$	137,899	$	44,899	$	26,767	$	24,214	$	650,681	$	2,627	$	2,062,345

Commercial real estate
Pass	$	753,415	$	859,548	$	512,371	$	587,345	$	399,442	$	751,629	$	39,998	$	16,341	$	3,920,089
Potential weakness	20,639		15,957		20,313		7,941		27,253		47,875		—		—		139,978
Definite weakness - loss unlikely	4,261		2,265		10,092		21,081		2,170		6,605		—		—		46,474
Partial loss probable	—		—		18,923		—		—		—		—		—		18,923
Definite loss	—		—		—		—		—		—		—		—		—
Total commercial real estate	$	778,315	$	877,770	$	561,699	$	616,367	$	428,865	$	806,109	$	39,998	$	16,341	$	4,125,464

Commercial construction
Pass	$	182,291	$	196,420	$	73,298	$	66,406	$	—	$	6,750	$	31,372	$	1,077	$	557,614
Potential weakness	—		9,352		5,037		—		—		—		328		—		14,717
Definite weakness - loss unlikely	—		—		1,003		—		—		—		—		—		1,003
Partial loss probable	—		—		—		—		—		—		—		—		—
Definite loss	—		—		—		—		—		—		—		—		—
Total commercial construction	$	182,291	$	205,772	$	79,338	$	66,406	$	—	$	6,750	$	31,700	$	1,077	$	573,334

Small business
Pass	$	27,457	$	28,766	$	20,806	$	14,627	$	14,528	$	22,644	$	34,569	$	—	$	163,397
Potential weakness	—		10		16		10		755		232		736		—		1,759
Definite weakness - loss unlikely	184		408		78		170		98		723		786		—		2,447
Partial loss probable	—		—		—		—		—		—		29		—		29
Definite loss	—		—		—		—		—		—		—		—		—
Total small business	$	27,641	$	29,184	$	20,900	$	14,807	$	15,381	$	23,599	$	36,120	$	—	$	167,632

Residential real estate
Pass	$	131,691	$	167,901	$	187,194	$	168,048	$	241,638	$	449,219	$	—	$	—	$	1,345,691
Default	728		—		760		235		167		4,724		—		—		6,614

Total residential real estate	$	132,419	$	167,901	$	187,954	$	168,283	$	241,805	$	453,943	$	—	$	—	$	1,352,305

Home equity
Pass	$	60,274	$	66,238	$	59,534	$	59,387	$	44,817	$	122,397	$	681,784	$	4,057	$	1,098,488
Default	—		—		—		—		—		455		2,044		67		2,566

Total home equity	$	60,274	$	66,238	$	59,534	$	59,387	$	44,817	$	122,852	$	683,828	$	4,124	$	1,101,054

Other consumer
Pass	$	679	$	450	$	209	$	739	$	696	$	7,737	$	12,493	$	—	$	23,003
Default	—		—		—		20		—		34		2		—		56

Total other consumer	$	679	$	450	$	209	$	759	$	696	$	7,771	$	12,495	$	—	$	23,059

Table of Contents



Total	$	2,199,885	$	1,504,307	$	1,047,533	$	970,908	$	758,331	$	1,445,238	$	1,454,822	$	24,169	$	9,405,193

(1)Loan origination dates in the tables above reflect the original origination date, or the date of a material modification of a previously originated loan.

(2)Loans originated as part of the Paycheck Protection Program ("PPP") ~~program~~ established by the CARES Act are included within commercial and industrial under the 2021 and 2020 vintage year and "pass" category as these loans are 100% guaranteed by the U.S. Government. ~~Funded~~Outstanding PPP loans totaled ~~$811.7~~$383.6 million as of September 30, ~~2020.~~2021, including $16.3 million and $367.3 million originated in 2020 and 2021, respectively, while outstanding PPP loans as of September 30, 2020 totaled $811.7 million.

For the Company’s consumer portfolio, the quality of the loan is best indicated by the repayment performance of an individual borrower. However, the Company does supplement performance data with current Fair Isaac Corporation (“FICO”) scores and Loan to Value (“LTV”) estimates. Current FICO data is purchased and appended to all consumer loans on a regular basis. In addition, automated valuation services and broker opinions of value are used to supplement original value data for the residential real estate and home equity portfolios, periodically. The following table shows the weighted average FICO scores and the weighted average combined LTV ratios at the dates indicated below:


		September 30 2020		December 31 2019			September 30 2021		December 31 2020
Residential portfolio
Residential real estate portfolio						Residential real estate portfolio
FICO score (re-scored)(1)	FICO score (re-scored)(1)	749		749		FICO score (re-scored)(1)	750		749
LTV (re-valued)(2)	LTV (re-valued)(2)	57.7	%	59.0	%	LTV (re-valued)(2)	55.4	%	57.4	%
Home equity portfolio	Home equity portfolio					Home equity portfolio
FICO score (re-scored)(1)	FICO score (re-scored)(1)	770		767		FICO score (re-scored)(1)	773		771
LTV (re-valued)(2)(3)	LTV (re-valued)(2)(3)	46.6	%	46.6	%	LTV (re-valued)(2)(3)	43.3	%	46.0	%

(1)The average FICO scores at September 30, ~~2020~~2021 are based upon rescores from September 2021, as available ~~from August 2020 and~~for previously originated loans, or origination score data for loans booked in September ~~2020.~~2021. The average FICO scores at December 31, ~~2019~~2020 were based upon rescores available from ~~November 2019 and~~December 2020, as available for previously originated loans, or origination score data for loans booked in December ~~2019.~~2020.

(2)The combined LTV ratios for September 30, ~~2020~~2021 are based upon updated automated valuations as of August ~~2020,~~2021, when available, and/or the most current valuation data available. The combined LTV ratios for December 31, ~~2019~~2020 were based upon updated automated valuations as of November ~~2019,~~2020, when available, and/or the most current valuation data available as of such date. The updated automated valuations provide new information on loans that may be available since the previous valuation was obtained. If no new information is available, the valuation will default to the previously obtained data or most recent appraisal.

(3)For home equity loans and lines in a subordinate lien, the LTV data represents a combined LTV, taking into account the senior lien data for loans and lines.

Unfunded Commitments

Management evaluates the need for a reserve on unfunded lending commitments in a manner consistent with loans held for investment. At September 30, 2021 and December 31, 2020, the Company's estimated reserve for unfunded commitments amounted to ~~$1.0 million.~~$1.3 million and $1.2 million, respectively.

Asset Quality

The Company’s philosophy toward managing its loan portfolios is predicated upon careful monitoring, which stresses early detection and response to delinquent and default situations. Delinquent loans are managed by a team of collection specialists and the Company seeks to make arrangements to resolve any delinquent or default situation over the shortest possible time frame. As a general rule, loans 90 days or more past due with respect to principal or interest are classified as nonaccrual loans. The Company also may use discretion regarding other loans 90 days or more delinquent if the loan is well secured and/or in process of collection.

~~Table of Contents~~

In response to the COVID-19 pandemic, the Company has granted loan modifications to allow deferral of payments for borrowers negatively impacted by the pandemic. The ~~amount~~balance of loans with active deferrals as of September 30, 2021 and December 31, 2020 was ~~$583.8 million.~~$222.9 million and $173.6 million, respectively. The majority of these loans with active deferrals as of September 30, 2021 continue to be characterized as current loans. In accordance with regulatory guidance, these modifications are not considered to be troubled debt restructures ("TDRs") if they were performing ~~prior to~~as of December 31, 2019. Additionally, a majority of these modified loans are characterized as current and therefore are not impacting nonaccrual or delinquency totals as of September 30, 2021 and December 31, 2020. The Company does, however, consider all active deferrals when estimating loss reserves. As loans reach their deferral maturity date, consideration of TDR and delinquency status will resume in accordance with the Company's accounting policy.

Table of Contents

The following table shows information regarding nonaccrual loans as of the dates indicated:


		Nonaccrual Balances									Nonaccrual Balances
		September 30, 2020						December 31, 2019			September 30, 2021						December 31, 2020
		With Allowance for Credit Losses		Without Allowance for Credit Losses		Total		Total			With Allowance for Credit Losses		Without Allowance for Credit Losses		Total		With Allowance for Credit Losses		Without Allowance for Credit Losses		Total
		(Dollars in thousands)									(Dollars in thousands)
Commercial and industrial	Commercial and industrial	$	17,816	$	19,035	$	36,851	$	22,574	Commercial and industrial	$	3,468	$	15,807	$	19,275	$	3,804	$	30,925	$	34,729
Commercial real estate	Commercial real estate	17,501		20,663		38,164		3,016		Commercial real estate	8,541		3,247		11,788		10,195		—		10,195

Small business	Small business	542		—		542		311		Small business	46		—		46		815		10		825
Residential real estate	Residential real estate	13,379		2,850		16,229		13,360		Residential real estate	6,486		4,386		10,872		10,935		4,593		15,528
Home equity	Home equity	6,052		107		6,159		6,570		Home equity	3,746		—		3,746		5,427		—		5,427
Other consumer	Other consumer	79		—		79		61		Other consumer	83		—		83		156		—		156
Total nonaccrual loans (1)	Total nonaccrual loans (1)	$	55,369	$	42,655	$	98,024	$	45,892	Total nonaccrual loans (1)	$	22,370	$	23,440	$	45,810	$	31,332	$	35,528	$	66,860

(1)Included in these amounts were ~~$23.8~~$21.1 million and ~~$24.8~~$22.2 million of nonaccruing TDRs at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

It is the Company's policy to reverse any accrued interest when a loan is put on nonaccrual status, and, as such, the Company did not record any interest income on nonaccrual loans during the ~~three and~~ nine months ended September 30, 2021 and September 30, 2020.

In accordance with government moratorium orders established in response to the COVID-19 pandemic, new foreclosures pursued by the Company were on hold through August 31, 2021, at which point such orders were lifted. The following table shows information regarding foreclosed residential real estate property at the dates indicated:


		September 30, 2020		December 31, 2019			September 30, 2021		December 31, 2020
		(Dollars in thousands)					(Dollars in thousands)
Foreclosed residential real estate property held by the creditor	Foreclosed residential real estate property held by the creditor	$	0	$	0	Foreclosed residential real estate property held by the creditor	$	—	$	—
Recorded investment in mortgage loans collateralized by residential real estate property that are in the process of foreclosure	Recorded investment in mortgage loans collateralized by residential real estate property that are in the process of foreclosure	$	2,113	$	3,294	Recorded investment in mortgage loans collateralized by residential real estate property that are in the process of foreclosure	$	1,215	$	1,750

The following tables show the age analysis of past due financing receivables as of the dates indicated:


		September 30, 2020																								September 30, 2021
		30-59 days			60-89 days			90 days or more			Total Past Due					Total Financing Receivables				Amortized Cost >90 Days and Accruing						30-59 days							60-89 days						90 days or more						Total Past Due										Total Financing Receivables				Amortized Cost >90 Days and Accruing
		Number of Loans	Principal Balance		Number of Loans	Principal Balance		Number of Loans	Principal Balance		Number of Loans	Principal Balance		Current										Number of Loans				Principal Balance			Number of Loans			Principal Balance			Number of Loans			Principal Balance			Number of Loans			Principal Balance			Current
		(Dollars in thousands)																								(Dollars in thousands)
Loan Portfolio	Loan Portfolio																						Loan Portfolio
Commercial and industrial	Commercial and industrial	1	$	52	6	$	3,608	5	$	930	12	$	4,590	$	2,057,755			$	2,062,345			$	0				Commercial and industrial	2			$	343		1			$	87		—			$	—		3			$	430			$	1,640,279			$	1,640,709			$	—
Commercial real estate	Commercial real estate	1	99		2	8,269		5	1,355		8	9,723		4,115,741		4,125,464				0					Commercial real estate	6			5,142				1		487				5		3,674				12		9,303				4,211,956				4,221,259				—
Commercial construction	Commercial construction	0	0		0	0		0	0		0	0		573,334		573,334				0					Commercial construction	—			—				—		—				—		—				—		—				515,415				515,415				—
Small business	Small business	6	514		4	455		12	124		22	1,093		166,539		167,632				0					Small business	8			243				2		35				5		27				15		305				183,833				184,138				—
Residential real estate	Residential real estate	11	1,792		7	1,631		37	5,870		55	9,293		1,343,012		1,352,305				0					Residential real estate	13			2,037				2		848				22		2,822				37		5,707				1,217,142				1,222,849				—
Home equity	Home equity	18	1,581		8	468		36	2,566		62	4,615		1,096,439		1,101,054				0					Home equity	9			479				5		218				24		1,784				38		2,481				997,987				1,000,468				—
Other consumer (1)	Other consumer (1)	237	217		3	1		12	57		252	275		22,784		23,059				1					Other consumer (1)	230			109				12		32				3		2				245		143				23,032				23,175				—
Total	Total	274	$	4,255	30	$	14,432	107	$	10,902	411	$	29,589	$	9,375,604	$	9,405,193			$	1				Total	268			$	8,353			23		$	1,707			59		$	8,309			350		$	18,369			$	8,789,644			$	8,808,013			$	—

2725

Table of Contents


		December 31, 2019																								December 31, 2020
		30-59 days			60-89 days			90 days or more			Total Past Due					Total Financing Receivables				Recorded Investment >90 Days and Accruing						30-59 days							60-89 days						90 days or more						Total Past Due										Total Financing Receivables				Recorded Investment >90 Days and Accruing
		Number of Loans	Principal Balance		Number of Loans	Principal Balance		Number of Loans	Principal Balance		Number of Loans	Principal Balance		Current										Number of Loans				Principal Balance			Number of Loans			Principal Balance			Number of Loans			Principal Balance			Number of Loans			Principal Balance			Current
		(Dollars in thousands)																								(Dollars in thousands)
Loan Portfolio	Loan Portfolio																						Loan Portfolio
Commercial and industrial	Commercial and industrial	1	$	253	2	$	323	5	$	760	8	$	1,336	$	1,393,700			$	1,395,036			$	0				Commercial and industrial	2			$	318		1			$	672		8			$	785		11			$	1,775			$	2,101,377			$	2,103,152			$	—
Commercial real estate	Commercial real estate	7	1,690		1	194		8	2,038		16	3,922		3,998,437		4,002,359				218		(2)			Commercial real estate	3			409				—		—				4		515				7		924				4,173,003				4,173,927				—
Commercial construction	Commercial construction	1	560		0	0		0	0		1	560		546,733		547,293				0					Commercial construction	—			—				2		2,794				—		—				2		2,794				551,135				553,929				—
Small business	Small business	11	837		3	15		6	115		20	967		173,530		174,497				0					Small business	14			421				6		273				4		59				24		753				174,270				175,023				—
Residential real estate	Residential real estate	17	2,237		17	3,055		38	7,020		72	12,312		1,578,257		1,590,569				1,652		(2)			Residential real estate	12			2,150				8		5,507				27		3,648				47		11,305				1,284,878				1,296,183				—
Home equity	Home equity	23	1,689		8	524		40	3,854		71	6,067		1,127,731		1,133,798				265		(2)			Home equity	10			733				5		203				33		2,633				48		3,569				1,065,221				1,068,790				—
Other consumer (1)	Other consumer (1)	387	245		12	44		16	32		415	321		29,766		30,087				22					Other consumer (1)	260			137				3		1				6		138				269		276				21,586				21,862				1
Total	Total	447	$	7,511	43	$	4,155	113	$	13,819	603	$	25,485	$	8,848,154	$	8,873,639			$	2,157				Total	301			$	4,168			25		$	9,450			82		$	7,778			408		$	21,396			$	9,371,470			$	9,392,866			$	1

(1)Other consumer portfolio is inclusive of deposit account overdrafts recorded as loan balances.

~~(2)Represents purchased credit impaired ("PCI") loans that were accruing interest due to expectations of future cash collections.~~

Troubled Debt Restructurings

In the course of resolving nonperforming loans, the Bank may choose to restructure the contractual terms of certain loans. The Bank attempts to work out an alternative payment schedule with the borrower in order to avoid foreclosure actions. Any loans that are modified are reviewed by the Bank to identify if a TDR has occurred, which is when, for economic or legal reasons related to a borrower’s financial difficulties, the Bank grants a concession to the borrower that it would not otherwise consider. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status and the restructuring of the loan may include the transfer of assets from the borrower to satisfy the debt, a modification of loan terms, or a combination of the two.

The following table shows the Company’s total TDRs and other pertinent information as of the dates indicated:


			September 30, 2020		December 31, 2019				September 30, 2021		December 31, 2020
		(Dollars in thousands)						(Dollars in thousands)
TDRs on accrual status	TDRs on accrual status		$	17,521	$	19,599	TDRs on accrual status		$	15,950	$	16,983
TDRs on nonaccrual	TDRs on nonaccrual		23,810		24,766		TDRs on nonaccrual		21,104		22,209
Total TDRs	Total TDRs		$	41,331	$	44,365	Total TDRs		$	37,054	$	39,192
Amount of specific reserves associated with TDRs			n/a		$	855
Additional commitments to lend to a borrower who has been a party to a TDR	Additional commitments to lend to a borrower who has been a party to a TDR		$	158	$	63	Additional commitments to lend to a borrower who has been a party to a TDR		$	352	$	263

The Company’s policy is to have any restructured loan which is on nonaccrual status prior to being modified remain on nonaccrual status for six months subsequent to being modified before management considers its return to accrual status. If the restructured loan is on accrual status prior to being modified, it is reviewed to determine if the modified loan should remain on accrual status. Additionally, loans classified as TDRs are adjusted to reflect the changes in value of the recorded investment in the loan, if any, resulting from the granting of a concession. For all residential real estate loan modifications, the borrower must perform during a 90 day trial period before the modification is finalized.

Table of Contents

The following table shows the ~~troubled debt restructurings~~TDRs which occurred during the periods indicated and the change in the recorded investment subsequent to the modifications occurring:


		Three Months Ended					Nine Months Ended						Three Months Ended					Nine Months Ended
		September 30, 2020					September 30, 2020						September 30, 2021					September 30, 2021
		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment			Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
		(Dollars in thousands)											(Dollars in thousands)
Troubled debt restructurings	Troubled debt restructurings											Troubled debt restructurings
Commercial and industrial	Commercial and industrial	2	$	83	$	83	5	$	391	$	391	Commercial and industrial	—	$	—	$	—	1	$	14,148	$	14,148
Commercial real estate	Commercial real estate	3	744		744		8	2,518		2,518		Commercial real estate	—	—		—		5	3,964		3,964
Small business	Small business	0	—		—		2	112		88		Small business	—	—		—		2	189		189
Residential real estate		0	—		—		2	559		642

Total(1)	Total(1)	5	$	827	$	827	17	$	3,580	$	3,639	Total(1)	—	$	—	$	—	8	$	18,301	$	18,301


		Three Months Ended					Nine Months Ended						Three Months Ended					Nine Months Ended
		September 30, 2019					September 30, 2019						September 30, 2020					September 30, 2020
		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment			Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
		(Dollars in thousands)											(Dollars in thousands)
Troubled debt restructurings	Troubled debt restructurings											Troubled debt restructurings
Commercial and industrial	Commercial and industrial	1	$	87	$	87	2	$	184	$	184	Commercial and industrial	2	$	83	$	83	5	$	391	$	391
Commercial real estate	Commercial real estate	1	133		133		2	283		283		Commercial real estate	3	744		744		8	2,518		2,518
Small business	Small business	1	19		19		2	33		33		Small business	—	—		—		2	112		88
Residential real estate	Residential real estate	1	163		168		1	163		168		Residential real estate	—	—		—		2	559		642
Home equity		1	46		46		2	121		121

Total(1)	Total(1)	5	$	448	$	453	9	$	784	$	789	Total(1)	5	$	827	$	827	17	$	3,580	$	3,639

(1)The pre-modification and post-modification balances represent the legal principal balance of the loan. Activity presented in the tables above includes no modifications on existing TDRs during the three months ended September 30, 2021, $14.3 million of modifications on existing TDRs during the nine months ended September 30, 2021, and $83,000 and $1.5 million of modifications on existing TDRs during the three and nine months ended September 30, 2020, respectively.

The following table shows the Company’s post-modification balance of TDRs listed by type of modification for the periods indicated:


		Three Months Ended		Nine Months Ended					Three Months Ended		Nine Months Ended
		September 30		September 30					September 30		September 30
		2020	2019	2020		2019			2021	2020	2021		2020
		(Dollars in thousands)							(Dollars in thousands)
Adjusted interest rate	Adjusted interest rate	218	0	$	822	$	150	Adjusted interest rate	—	218	$	—	$	822

Combination rate and maturity								Combination rate and maturity	—	—	14,148		—
Court ordered concession	Court ordered concession	0	0	25		75		Court ordered concession	—	—	—		25
Extended maturity	Extended maturity	609	453	2,792		606		Extended maturity	—	609	4,153		2,792
Total	Total	827	453	$	3,639	$	831	Total	—	827	$	18,301	$	3,639

Table of Contents

The Company considers a loan to have defaulted when it reaches 90 days past due. ~~During~~There was 1 commercial real estate loan modified during the ~~three and~~preceding twelve months with a recorded investment of $3.2 million, which subsequently defaulted during the nine ~~months~~month period ended September 30, ~~2020 and September 30, 2019 there~~2021. There were 0no defaults on such loans modified during the prior twelve months ~~that subsequently defaulted.~~

~~Table of Contents~~

~~NOTE 5 - LOANS AND ALLOWANCE FOR LOAN LOSSES~~

~~As disclosed in~~ ~~Note 2 - "Recent Accounting Standards Updates~~"for the three and ~~Note 4 - "Loans, Allowance for Credit Losses and Credit Quality," the~~nine month periods ended September 30, 2020, respectively. The Company adopted the CECL standard, effective January 1, 2020. As required by disclosure guidance, the Company has included relevant disclosures from the prior year and prior to the adoption of CECL within this footnote, as it relates to loans and allowance for loan losses.

~~The following table bifurcates~~determines the amount of ~~loans and~~allowance on TDRs in accordance with CECL methodology using a discounted cash flow approach, or a fair value of collateral approach if the ~~allowance allocated to each~~ loan ~~category based on the type of impairment analysis as of December 31, 2019:~~

December 31, 2019
Commercial
and
Industrial Commercial
Real Estate Commercial
Construction Small
Business Residential
Real
Estate Home
Equity Other Consumer Total
(Dollars in thousands)
Financing receivables ending balance:
Collectively evaluated for impairment $ 1,370,580 $ 3,987,848 $ 547,293 $ 173,960 $ 1,571,848 $ 1,127,963 $ 29,663 $ 8,809,155
Individually evaluated for impairment 24,456 8,337 0 537 11,228 4,948 122 49,628
Purchased credit impaired loans 0 6,174 0 0 7,493 887 302 14,856
Total loans by group $ 1,395,036 $ 4,002,359 $ 547,293 $ 174,497 $ 1,590,569 $ 1,133,798 $ 30,087 $ 8,873,639 (1)

~~(1)The amount of net deferred costs on originated loans included in the ending balance was $7.1 million at December 31, 2019. Net unamortized discounts on acquired loans not deemed~~is determined to be ~~purchased credit impaired ("PCI") included in the ending balance was $21.6 million at December 31, 2019.~~

~~At December 31, 2019, the reserve for unfunded loan commitments was $2.1 million.~~

~~The following table summarizes changes in allowance for loan losses by loan category for the periods indicated:~~

Three Months Ended September 30, 2019
(Dollars in thousands)
Commercial and
Industrial Commercial
Real Estate Commercial
Construction Small
Business Residential
Real Estate
Home Equity Other Consumer Total
Allowance for loan losses
Beginning balance $ 16,857 $ 32,660 $ 5,593 $ 1,768 $ 3,296 $ 5,547 $ 239 $ 65,960
Charge-offs 0 (82) 0 (125) 0 (28) (472) (707)
Recoveries 1,003 106 0 61 140 194 185 1,689
Provision (benefit) (528) (33) 240 48 (88) 36 325 0
Ending balance $ 17,332 $ 32,651 $ 5,833 $ 1,752 $ 3,348 $ 5,749 $ 277 $ 66,942
Nine Months Ended September 30, 2019
(Dollars in thousands)
Commercial and
Industrial Commercial
Real Estate Commercial
Construction Small
Business Residential
Real Estate
Home Equity Other Consumer Total
Allowance for loan losses
Beginning balance $ 15,760 $ 32,370 $ 5,158 $ 1,756 $ 3,219 $ 5,608 $ 422 $ 64,293
Charge-offs 0 (82) 0 (319) 0 (212) (1,125) (1,738)
Recoveries 1,127 152 0 108 141 278 581 2,387
Provision (benefit) 445 211 675 207 (12) 75 399 2,000
Ending balance $ 17,332 $ 32,651 $ 5,833 $ 1,752 $ 3,348 $ 5,749 $ 277 $ 66,942
Ending balance: collectively evaluated for impairment $ 17,326 $ 32,610 $ 5,833 $ 1,741 $ 2,729 $ 5,594 $ 272 $ 66,105
Ending balance: individually evaluated for impairment $ 6 $ 41 $ 0 $ 11 $ 619 $ 155 $ 5 $ 837

~~Table of Contents~~

The Company's historical approach to loan portfolio segmentation by risk characteristics and monitoring of credit quality for commercial loans under previous accounting guidance was consistent with that applied under the newly adopted CECL standard. See ~~Note 4 - "Loans, Allowance for Credit Losses and Credit Quality"~~ ~~further discussion surrounding the Company's policies for loan segmentation and credit quality monitoring.~~

~~The following tables detail the amount of outstanding principal balances relative to each of the risk-rating categories for the Company’s loan portfolio as of December 31, 2019:~~

December 31, 2019
Category Risk
Rating Commercial and
Industrial Commercial
Real Estate Commercial
Construction Small Business Total
(Dollars in thousands)
Pass 1 - 6 $ 1,274,155 $ 3,860,555 $ 542,608 $ 171,213 $ 5,848,531
Potential weakness 7 63,485 97,268 2,247 1,416 164,416
Definite weakness-loss unlikely 8 57,396 44,536 2,438 1,868 106,238
Partial loss probable 9 0 0 0 0 0
Definite loss 10 0 0 0 0 0
Total $ 1,395,036 $ 4,002,359 $ 547,293 $ 174,497 $ 6,119,185

~~Impaired Loans~~

Under previous accounting guidance, a loan was considered impaired when, based on current information and events, it was probable that the Company would be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment included payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experienced insignificant payment delays and payment shortfalls generally were not classified as impaired. Management determined the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

~~The table below sets forth information regarding the Company’s impaired loans by loan portfolio at the date indicated:~~

December 31, 2019
Recorded
Investment Unpaid
Principal
Balance Related
Allowance
(Dollars in thousands)
With no related allowance recorded
Commercial and industrial $ 23,786 $ 34,970 $ 0
Commercial real estate 6,213 12,101 0
Small business 469 484 0
Residential real estate 4,976 5,123 0
Home equity 3,764 3,893 0
Other consumer 34 34 0
Subtotal 39,242 56,605 0
With an allowance recorded
Commercial and industrial $ 670 $ 670 $ 126
Commercial real estate 2,124 2,124 48
Small business 68 105 8
Residential real estate 6,252 7,163 637
Home equity 1,184 1,382 156
Other consumer 88 91 5
Subtotal 10,386 11,535 980
Total $ 49,628 $ 68,140 $ 980

~~Table of Contents~~

~~The following table sets forth information regarding interest income recognized on impaired loans, by portfolio, for the periods indicated:~~

Three Months Ended Nine Months Ended
September 30, 2019 September 30, 2019
Average
Recorded
Investment Interest
Income
Recognized Average
Recorded
Investment Interest
Income
Recognized
(Dollars in thousands)
With no related allowance recorded
Commercial and industrial $ 25,694 $ 35 $ 27,937 $ 108
Commercial real estate 12,987 149 13,261 478
Small business 235 3 266 10
Residential real estate 5,031 57 5,061 175
Home equity 4,417 50 4,479 151
Other consumer 39 1 43 2
Subtotal 48,403 295 51,047 924
With an allowance recorded
Commercial and industrial $ 353 $ 4 $ 360 $ 13
Commercial real estate 1,402 20 1,415 60
Small business 92 0 95 2
Residential real estate 6,047 61 6,115 179
Home equity 959 11 972 33
Other consumer 107 1 116 3
Subtotal 8,960 97 9,073 290
Total $ 57,363 $ 392 $ 60,120 $ 1,214
individually evaluated.

~~Purchased Credit Impaired Loans~~

Under previous accounting guidance, certain loans acquired by the Company may have shown evidence of deterioration of credit quality since origination at purchase date, and it was therefore deemed unlikely that the Company would be able to collect all contractually required payments. As such, these loans were deemed to be PCI loans and the carrying value and prospective income recognition were predicated upon future cash flows expected to be collected. The following table displays certain information pertaining to PCI loans at the date indicated:


	~~December 31, 2019~~
	~~(Dollars in thousands)~~
~~Outstanding balance~~	$	~~18,358~~
~~Carrying amount~~	$	~~14,856~~

~~The following table summarizes activity in the accretable yield for the PCI loan portfolio for the periods indicated:~~

Three Months Ended September 30 Nine Months Ended September 30
2019 2019
(Dollars in thousands)
Beginning balance $ 2,238 $ 1,191
Acquisition 0 1,464
Accretion (412) (1,215)
Other change in expected cash flows (1) 237 623
Reclassification from nonaccretable difference for loans which have paid off 227 227
Ending balance $ 2,290 $ 2,290

~~Table of Contents~~

~~(1) Represents changes in cash flows expected to be collected and resulting in increased interest income as a prospective yield adjustment over the remaining life of the loan(s).~~

~~NOTE 6 - GOODWILL AND OTHER INTANGIBLE ASSETS~~

~~The following table sets forth the carrying value of goodwill and other intangible assets, net of accumulated amortization, at the dates indicated below:~~

September 30, 2020 December 31, 2019
(Dollars in thousands)
Balances not subject to amortization
Goodwill $ 506,206 $ 506,206
Balances subject to amortization
Core deposit intangibles 23,625 28,016
Other intangible assets 918 1,270
Total other intangible assets 24,543 29,286
Total goodwill and other intangible assets $ 530,749 $ 535,492

The Company typically performs its goodwill impairment test during the third quarter of the year, unless certain indicators suggest earlier testing to be warranted. The COVID-19 pandemic has resulted in significant levels of ongoing volatility in the capital markets and presents heightened uncertainty surrounding the future impact to operations of the Company and its customers. Given these conditions, the Company identified this impact from the pandemic as a triggering event warranting interim tests for impairment as of March 31, June 30, and again as of September 30, 2020. Accordingly, the Company performed impairment tests and determined that there was no impairment of its goodwill, as the fair value of the Company's single reporting unit remained in excess of its carrying value. Although the Company utilizes quoted market prices when estimating fair value of the reporting unit for purposes of the quantitative impairment test, it also considers certain qualitative factors, including the concept of a control premium, which increases the fair value as compared to market capitalization. Other intangible assets are also reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company also considered the impact of the COVID-19 pandemic as it pertains to other intangible assets, and determined that there was no indication of impairment related to other intangible assets as of September 30, 2020.

NOTE ~~7 -EARNINGS PER SHARE~~

~~Earnings per share consisted of the following components for the periods indicated:~~

Three Months Ended Nine Months Ended
September 30 September 30
2020 2019 2020 2019
(Dollars in thousands, except per share data)
Net income $ 34,873 $ 51,845 $ 86,526 $ 117,698
Weighted Average Shares
Basic shares 32,951,918 34,361,176 33,358,879 32,283,196
Effect of dilutive securities 24,758 39,390 27,871 45,416
Diluted shares 32,976,676 34,400,566 33,386,750 32,328,612
Net income per share
Basic EPS $ 1.06 $ 1.51 $ 2.59 $ 3.65
Effect of dilutive securities 0 0 0 (0.01)
Diluted EPS $ 1.06 $ 1.51 $ 2.59 $ 3.64

~~Table of Contents~~

The diluted earnings per share computations do not assume the conversion, exercise, or contingent issuance of the following shares for the following periods because the result would have been anti-dilutive for the periods indicated. As a result of the anti-dilution, the potential common shares excluded from the calculation of diluted earnings per share are as follows:

Three Months Ended Nine Months Ended
September 30 September 30
2020 2019 2020 2019
Stock options 10,000 5,000 10,000 0
Performance-based restricted stock 0 0 11,080 0

~~NOTE 8~~5 - STOCK BASED COMPENSATION

~~Time Vested Restricted Stock Awards~~

During the nine months ended September 30, ~~2020,~~2021, the Company had the following activity related to stock based compensation:

Time Vested Restricted Stock Awards

The Company made the following awards of time vested restricted stock:

Date Shares Granted Plan Grant Date Fair Value Per Share Vesting Period
2/27/2020 46,550 2005 Employee Stock Plan $ 70.24 Ratably over 5 years from grant date
4/15/2020 880 2005 Employee Stock Plan $ 68.14 Ratably over 5 years from grant date
5/27/2020 9,438 2018 Non-Employee Director Stock Plan $ 72.86 Shares vested immediately

Date

Shares Granted

Plan

Grant Date Fair Value Per Share

Vesting Period

2/18/2021

49,550

2005 Employee Stock Plan

81.84

Ratably over 5 years from grant date

5/25/2021

7,680

2018 Non-Employee Director Stock Plan

78.18

Shares vested immediately

9/1/2021

640

2018 Non-Employee Director Stock Plan

76.78

Shares vested immediately

The fair value of the restricted stock awards is based upon the average of the high and low price at which the Company’s common stock traded on the date of grant. The holders of restricted stock awards are entitled to receive dividends and to vote from and as of the date of grant.

Performance-Based Restricted Stock Awards

On February ~~27, 2020,~~18, 2021, the Company granted ~~17,100~~18,900 performance-based restricted stock awards to certain executive level employees. These performance-based restricted stock awards were issued from the 2005 Employee Stock Plan and were determined to have a grant date fair value per share of ~~$70.24, determined by the average of the high and low price at which the Company's common stock traded on the date of grant.~~$81.84. The number of shares to be vested isare contingent upon the Company's attainment of certain performance ~~measures outlined in the award agreement and will~~criteria to be measured ~~as of~~at the end of ~~the~~a three year performance period, ~~January 1, 2020 through~~ending December 31, ~~2022.~~2023. The awards will vest upon the earlier of the date on which it is determined if the performance goal is achieved subsequent to the performance period or March 31, 2023. These awards are accounted for as equity awards due to the nature of these awards and the fact that these shares will not be settled in cash. The holders of these awards are not entitled to receive dividends or vote until the shares are vested.2024.

On March ~~3, 2020,~~12, 2021, the performance-based restricted stock awards that were awarded on February ~~16, 2017~~15, 2018 vested at ~~100%~~85% of the maximum target shares awarded, or ~~14,400~~13,005 shares.

~~Stock Options~~

~~The Company did not grant any awards of options to purchase shares of common stock during the nine months ended September 30, 2020.~~

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Table of Contents

NOTE 96 - DERIVATIVE AND HEDGING ACTIVITIES

The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally to manage the Company’s interest rate risk. Additionally, the Company enters into interest rate derivatives, foreign exchange contracts and risk participation agreements to accommodate the business requirements of its customers (“customer related positions”). The Company minimizes the market and liquidity risks of customer related positions by entering into similar offsetting positions with broker-dealers. Derivative instruments are carried at fair value in the Company's financial statements. The accounting for changes in the fair value of a derivative instrument is dependent upon whether or not it qualifies as a hedge for accounting purposes, and further, by the type of hedging relationship.

The Company does not enter into proprietary trading positions for any derivatives.

The Company is subject to over-the-counter derivative clearing requirements which require certain derivatives to be cleared through central clearing houses. Accordingly, the Company clears certain derivative transactions through the Chicago Mercantile Exchange Clearing House ("CME"). This clearing house requires the Company to post initial and variation margin to mitigate the risk of non-payment, the latter of which is received or paid daily based on the net asset or liability position of the contracts.

Interest Rate Positions

The Company may utilize various interest rate derivatives as hedging instruments against interest rate risk associated with the Company’s borrowings and loan portfolios. An interest rate derivative is an agreement whereby one party agrees to pay a floating rate of interest on a notional principal amount in exchange for receiving a fixed rate of interest on the same notional amount, for a predetermined period of time, from a second party. The amounts relating to the notional principal amount are not actually exchanged.

3529

Table of Contents

The following tables reflect the Company's derivative positions as of the dates indicated below for interest rate derivatives which qualify as cash flow hedges for accounting purposes:


September 30, 2020
September 30, 2021											September 30, 2021
					Weighted Average Rate										Weighted Average Rate
		Notional Amount		Average Maturity	Current Rate Received		Pay Fixed Swap Rate		Fair Value (1)			Notional Amount		Average Maturity	Current Rate Received		Pay Fixed Swap Rate		Fair Value
		(in thousands)		(in years)					(in thousands)			(in thousands)		(in years)					(in thousands)
Interest rate swaps on borrowings	Interest rate swaps on borrowings	$	75,000	1.43	0.26	%	1.53	%	$	(1,561)	Interest rate swaps on borrowings	$	75,000	0.43	0.12	%	1.53	%	$	(593)

					Current Rate Paid		Receive Fixed Swap Rate								Current Rate Paid		Receive Fixed Swap Rate
Interest rate swaps on loans	Interest rate swaps on loans	450,000		2.91	0.15	%	2.37	%	29,878		Interest rate swaps on loans	550,000		2.83	0.08	%	2.16	%	18,016

					Current Rate Paid		Receive Fixed Swap Rate Cap - Floor								Current Rate Paid		Receive Fixed Swap Rate Cap - Floor
Interest rate collars on loans	Interest rate collars on loans	400,000		2.91	0.15	%	2.73% - 2.20%		24,169		Interest rate collars on loans	400,000		1.91	0.08	%	2.73% - 2.20%		13,971

Total	Total	$	925,000						$	52,486	Total	$	1,025,000						$	31,394

December 31, 2019
December 31, 2020											December 31, 2020
					Weighted Average Rate										Weighted Average Rate
		Notional Amount		Average Maturity	Current Rate Received		Pay Fixed Swap Rate		Fair Value (1)			Notional Amount		Average Maturity	Current Rate Received		Pay Fixed Swap Rate		Fair Value
		(in thousands)		(in years)					(in thousands)			(in thousands)		(in years)					(in thousands)
Interest rate swaps on borrowings	Interest rate swaps on borrowings	$	75,000	2.18	1.90	%	1.53	%	$	140	Interest rate swaps on borrowings	$	75,000	1.18	0.22	%	1.53	%	$	(1,341)

					Current Rate Paid		Receive Fixed Swap Rate								Current Rate Paid		Receive Fixed Swap Rate
Interest rate swaps on loans	Interest rate swaps on loans	450,000		3.66	1.76	%	2.37	%	12,907		Interest rate swaps on loans	450,000		2.66	0.15	%	2.37	%	27,021

					Current Rate Paid		Receive Fixed Swap Rate Cap - Floor								Current Rate Paid		Receive Fixed Swap Rate Cap - Floor
Interest rate collars on loans	Interest rate collars on loans	400,000		3.66	1.76	%	2.73% - 2.20%		9,896		Interest rate collars on loans	400,000		2.66	0.15	%	2.73% - 2.20%		21,764

Total	Total	$	925,000						$	22,943	Total	$	925,000						$	47,444

~~(1)Beginning in 2020, the Company made an election to include accrued interest within fair value balances.~~

The maximum length of time over which the Company is currently hedging its exposure to the variability in future cash flows for forecasted transactions related to the payment of variable interest on existing financial instruments is ~~4.1~~7.5 years.

For derivative instruments that are designated and qualify as cash flow hedging instruments, the effective portion of the gains or losses is reported as a component of other comprehensive income ("OCI"), and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The Company expects approximately ~~$18.5~~$19.0 million (pre-tax) to be reclassified as an increase to interest income and ~~$999,000~~$509,000 (pre-tax) to be reclassified as an increase to interest expense, from OCI related to the Company’s cash flow hedges in the next twelve months. This reclassification is due to anticipated payments that will be made and/or received on the swaps based upon the forward curve as of September 30, ~~2020.~~

~~Table of Contents~~

During the quarter ended September 30, 2020, the Company accelerated the reclassification of a loss of approximately $684,000 from OCI to earnings as a result of the termination of one of its cash flow hedges. The Company subsequently exited the associated borrowing early in the fourth quarter.2021.

The Company had 0no fair value hedges as of September 30, ~~2020~~2021 or December 31, ~~2019.~~2020.

Table of Contents

Customer Related Positions

Loan level derivatives, primarily interest rate swaps, offered to commercial borrowers through the Company’s loan level derivative program do not qualify as hedges for accounting purposes. The Company believes that its exposure to commercial customer derivatives is limited because these contracts are simultaneously matched at inception with an offsetting dealer transaction. Derivatives with dealer counterparties are then either cleared through a clearinghouse or settled directly with a single counterparty. The commercial customer derivative program allows the Company to retain variable-rate commercial loans while allowing the customer to synthetically fix the loan rate by entering into a variable-to-fixed interest rate swap. The amounts relating to the notional principal amount are not actually exchanged.

Foreign exchange contracts offered to commercial borrowers through the Company’s derivative program do not qualify as hedges for accounting purposes. The Company acts as a seller and buyer of foreign exchange contracts to accommodate its customers. To mitigate the market and liquidity risk associated with these derivatives, the Company enters into similar offsetting positions. The amounts relating to the notional principal amount are exchanged.

The Company has entered into risk participation agreements with other dealer banks in commercial loan agreements. Participating banks guarantee the performance on borrower-related interest rate swap contracts. These derivatives are not designated as hedges and, therefore, changes in fair value are recognized in earnings. Under a risk participation-out agreement, a derivative asset, the Company participates out a portion of the credit risk associated with the interest rate swap position executed with the commercial borrower for a fee paid to the participating bank. Under a risk participation-in agreement, a derivative liability, the Company assumes, or participates in, a portion of the credit risk associated with the interest rate swap position with the commercial borrower for a fee received from the other bank.

3731

Table of Contents

The following table reflects the Company’s customer related derivative positions as of the dates indicated below for those derivatives not designated as hedging:


			Notional Amount Maturing																Notional Amount Maturing
		Number of Positions (1)	Less than 1 year		Less than 2 years		Less than 3 years		Less than 4 years		Thereafter		Total		Fair Value (2)			Number of Positions (1)	Less than 1 year		Less than 2 years		Less than 3 years		Less than 4 years		Thereafter		Total		Fair Value
		September 30, 2020																September 30, 2021
		(Dollars in thousands)																(Dollars in thousands)
Loan level swaps	Loan level swaps																Loan level swaps
Receive fixed, pay variable	Receive fixed, pay variable	331	$	135,993	$	34,017	$	158,477	$	138,314	$	1,260,159	$	1,726,960	$	145,517	Receive fixed, pay variable	293	$	30,047	$	148,874	$	129,939	$	288,580	$	980,166	$	1,577,606	$	67,126
Pay fixed, receive variable	Pay fixed, receive variable	322	$	135,993	$	34,017	$	158,477	$	138,314	$	1,260,159	$	1,726,960	$	(145,501)	Pay fixed, receive variable	293	30,047		148,874		129,939		288,580		980,166		1,577,606		(67,122)
Foreign exchange contracts	Foreign exchange contracts																Foreign exchange contracts
Buys foreign currency, sells U.S. currency	Buys foreign currency, sells U.S. currency	33	$	81,207	$	—	$	—	$	—	$	—	$	81,207	$	(3,125)	Buys foreign currency, sells U.S. currency	45	148,253		6,087		—		—		—		154,340		(5,529)
Buys U.S. currency, sells foreign currency	Buys U.S. currency, sells foreign currency	33	$	81,207	$	—	$	—	$	—	$	—	$	81,207	$	3,151	Buys U.S. currency, sells foreign currency	45	148,253		6,087		—		—		—		154,340		5,530
Risk participation agreements	Risk participation agreements																Risk participation agreements
Participation out	Participation out	13	$	6,800	$	—	$	7,282	$	—	$	112,487	$	126,569	$	745	Participation out	11	—		2,645		—		31,719		67,767		102,131		236
Participation in	Participation in	10	$	—	$	18,978	$	23,925	$	36,836	$	18,295	$	98,034	$	(269)	Participation in	7	18,450		23,375		16,768		—		8,372		66,965		(64)

			Notional Amount Maturing																Notional Amount Maturing
		Number of Positions (1)	Less than 1 year		Less than 2 years		Less than 3 years		Less than 4 years		Thereafter		Total		Fair Value (2)			Number of Positions (1)	Less than 1 year		Less than 2 years		Less than 3 years		Less than 4 years		Thereafter		Total		Fair Value
		December 31, 2019																December 31, 2020
		(Dollars in thousands)																(Dollars in thousands)
Loan level swaps	Loan level swaps																Loan level swaps
Receive fixed, pay variable	Receive fixed, pay variable	299	$	156,690	$	125,203	$	85,603	$	165,599	$	1,044,315	$	1,577,410	$	48,596	Receive fixed, pay variable	322	$	102,999	$	76,487	$	149,265	$	147,422	$	1,222,557	$	1,698,730	$	127,226
Pay fixed, receive variable	Pay fixed, receive variable	290	$	156,690	$	125,203	$	85,603	$	165,599	$	1,044,315	$	1,577,410	$	(48,591)	Pay fixed, receive variable	313	102,999		76,487		149,265		147,422		1,222,557		1,698,730		(127,216)
Foreign exchange contracts	Foreign exchange contracts																Foreign exchange contracts
Buys foreign currency, sells U.S. currency	Buys foreign currency, sells U.S. currency	40	$	91,434	$	—	$	—	$	—	$	—	$	91,434	$	(81)	Buys foreign currency, sells U.S. currency	33	87,557		5,300		—		—		—		92,857		(4,214)
Buys U.S. currency, sells foreign currency	Buys U.S. currency, sells foreign currency	40	$	91,434	$	—	$	—	$	—	$	—	$	91,434	$	123	Buys U.S. currency, sells foreign currency	33	87,557		5,300		—		—		—		92,857		4,224
Risk participation agreements																	Risk participation agreements
Participation out																	Participation out	12	6,721		—		2,675		7,307		93,378		110,081		512
Participation in																	Participation in	8	—		30,649		29,072		—		15,844		75,565		(118)

(1)The Company may enter into one dealer swap agreement which offsets multiple commercial borrower swap agreements.

~~(2)Beginning in 2020, the Company made an election to include accrued interest within fair value balances.~~

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Mortgage Derivatives

The Company enters into commitments to fund residential mortgage loans at specified rates and times in the future, with the intention that loans ~~will likely~~may be sold subsequently in the secondary market. Mortgage loan commitments are referred to as derivative loan commitments if the loan that will result from exercise of the commitment will be held for sale upon funding. These commitments are recognized at fair value on the consolidated balance sheet in other assets and other liabilities with changes in their fair values recorded within mortgage banking income. In addition, the Company has elected the fair value option to carry loans held for sale at fair value. The change in fair value of loans held for sale is recorded in current period earnings as a component of mortgage banking income in accordance with the Company's fair value election. The fair value of loans held for sale decreased by $75,000 and increased by $413,000 ~~and $272,000~~ for the three month periods ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The fair value of loans held for sale decreased by $1.5 million and increased by $1.3 ~~million and $1.2~~ million for the nine month periods ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. These amounts were offset in earnings by the change in the fair value of mortgage derivatives.

Outstanding loan commitments expose the Company to the risk that the price of the loans arising from exercise of the loan commitment might change from inception of the rate lock to funding of the loan due to changes in mortgage interest rates. If interest rates increase, the value of these loan commitments decreases. Conversely, if interest rates decrease, the value of these loan commitments increases. To protect against the price risk inherent in derivative loan commitments, the Company utilizes both "mandatory delivery" and "best efforts" forward loan sale commitments to mitigate the risk of potential decreases in the values of loans that would result from the exercise of the derivative loan commitments. Mandatory delivery contracts are accounted for as derivative instruments. Included in the mandatory delivery forward commitments are To Be Announced securities ("TBAs"). Certain assumptions, including pull through rates and rate lock periods, are used in managing the existing and future hedges. The accuracy of underlying assumptions will impact the ultimate effectiveness of any hedging strategies.

With mandatory delivery contracts, the Company commits to deliver a certain principal amount of mortgage loans to an investor at a specified price on or before a specified date. If the Company fails to deliver the amount of mortgages necessary to fulfill the commitment by the specified date, it is obligated to pay a "pair-off" fee, based on then-current market prices, to the investor/counterparty to compensate the investor for the shortfall. Generally, the Company makes this type of commitment once mortgage loans have been funded and are held for sale, in order to minimize the risk of failure to deliver the requisite volume of loans to the investor and paying pair-off fees as a result. The Company also sells TBA securities to offset potential changes in the fair value of derivative loan commitments. Generally, the Company sells TBA securities by entering into derivative loan commitments for settlement in 30 to 90 days. The Company expects that mandatory delivery contracts, including TBA securities, will experience changes in fair value opposite to the changes in the fair value of derivative loan commitments.

With best effort contracts, the Company commits to deliver an individual mortgage loan of a specified principal amount and quality to an investor if the loan to the underlying borrower closes. Generally, best efforts cash contracts have no pair off risk regardless of market movement. The price the investor will pay the seller for an individual loan is specified prior to the loan being funded (e.g., on the same day the lender commits to lend funds to a potential borrower). The Company expects that these best efforts forward loan sale commitments will experience a net neutral shift in fair value with related derivative loan commitments.

The aggregate amount of net realized gains or losses on sales of such loans included within mortgage banking income was ~~$10.0~~$4.9 million and ~~$5.5~~$10.0 million for the three ~~months~~month periods ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$20.7~~$17.2 million and ~~$9.5~~$20.7 million for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

Balance Sheet Offsetting

The Company does not offset fair value amounts recognized for derivative instruments. The Company does net the amount recognized for the right to reclaim cash collateral against the obligation to return cash collateral arising from derivative instruments executed with the same counterparty under a master netting arrangement. Collateral legally required to be maintained at dealer banks by the Company is monitored and adjusted as necessary.

A daily settlement occurs through the CME for changes in the fair value of centrally cleared derivatives. Not all of the derivatives are required to be cleared through the daily clearing agent. As a result, the total fair values of loan level derivative assets and liabilities recognized on the Company's financial statements are not equal and offsetting.

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The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the balance sheet and the potential effect of netting arrangements on its financial position, at the dates indicated:


		Asset Derivatives (1)						Liability Derivatives (2)								Asset Derivatives (1)						Liability Derivatives (2)
		Fair Value at			Fair Value at			Fair Value at			Fair Value at					Fair Value at			Fair Value at			Fair Value at			Fair Value at
		September 30 2020			December 31 2019			September 30 2020			December 31 2019					September 30 2021			December 31 2020			September 30 2021			December 31 2020
		(Dollars in thousands)													(Dollars in thousands)
Derivatives designated as hedges	Derivatives designated as hedges													Derivatives designated as hedges
Interest rate derivatives	Interest rate derivatives	$	54,047	(3)	$	23,140	(3)	$	1,561	(4)	$	197	(4)	Interest rate derivatives		$	32,380	(3)	$	48,786	(3)	$	986	(4)	$	1,342	(4)
Derivatives not designated as hedges	Derivatives not designated as hedges													Derivatives not designated as hedges
Customer Related Positions	Customer Related Positions													Customer Related Positions
Loan level derivatives	Loan level derivatives	145,517		(3)	52,374		(3)	145,501		(4)	52,369		(4)	Loan level derivatives		76,552		(3)	127,228		(3)	76,548		(4)	127,218		(4)
Foreign exchange contracts	Foreign exchange contracts	3,785			1,191			3,759			1,149			Foreign exchange contracts		5,531			4,359			5,530			4,349
Risk participation agreements	Risk participation agreements	745			0			269			0			Risk participation agreements		236			513			64			119
Mortgage Derivatives	Mortgage Derivatives													Mortgage Derivatives
Interest rate lock commitments	Interest rate lock commitments	6,587			1,680			0			0			Interest rate lock commitments		1,202			6,513			—			—
Forward sale loan commitments	Forward sale loan commitments	61			0			0			12			Forward sale loan commitments		—			—			22			1
Forward sale hedge commitments	Forward sale hedge commitments	0			0			523			196			Forward sale hedge commitments		457			—			—			1,035
Total derivatives not designated as hedges	Total derivatives not designated as hedges	156,695			55,245			150,052			53,726			Total derivatives not designated as hedges		83,978			138,613			82,164			132,722
Total	Total	210,742			78,385			151,613			53,923			Total		116,358			187,399			83,150			134,064

Netting Adjustments (5)	Netting Adjustments (5)	12			0			18,988			0			Netting Adjustments (5)		(4,808)			23			6,454			16,105
Net Derivatives on the Balance Sheet	Net Derivatives on the Balance Sheet	210,754			78,385			132,625			53,923			Net Derivatives on the Balance Sheet		111,550			187,422			76,696			117,959

Financial instruments (6)	Financial instruments (6)	54,047			24,882			54,047			24,882			Financial instruments (6)		36,914			48,786			36,914			48,786
Cash collateral pledged (received)	Cash collateral pledged (received)	0			0			73,094			25,493			Cash collateral pledged (received)		—			—			33,249			62,460
Net Derivative Amounts	Net Derivative Amounts	$	156,707		$	53,503		$	5,484		$	3,548		Net Derivative Amounts		$	74,636		$	138,636		$	6,533		$	6,713

(1)All asset derivatives are located in other assets on the balance sheet.

(2)All liability derivatives are located in other liabilities on the balance sheet.

(3)Approximately $1.2 million and ~~$1.9~~$1.6 million of accrued interest receivable is included in the fair value of the interest rate and loan level asset derivatives, respectively, as of September 30, ~~2020.~~2021. Accrued interest receivable of approximately $1.2 million and ~~$350,000 and $569,000 was excluded from~~$2.0 million is included in the fair value of the interest rate and loan level asset derivatives, respectively, as of December 31, ~~2019.~~2020.

(4)Approximately ~~$75,000~~$60,000 and ~~$1.9~~$1.6 million of accrued interest payable is included in the fair value of the interest rate and loan level liability derivatives, respectively, as of September 30, ~~2020.~~2021. Accrued interest payable of approximately ~~$4,000~~$81,000 and ~~$569,000 was excluded from~~$2.0 million is included in the fair value of the interest rate and loan level derivative liabilities, respectively, as of December 31, ~~2019.~~2020.

(5)Netting adjustments represent the amounts recorded to convert derivative assets and liabilities cleared through CME from a gross basis to a net basis, inclusive of the variation margin payments, in accordance with applicable accounting guidance. As displayed in the table above, derivatives that cleared through the CME were either in a net asset position or a net liability position as of September 30, ~~2020.~~2021.

(6)Reflects offsetting derivative positions with the same counterparty that are not netted on the balance sheet.

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The table below presents the effect of the Company’s derivative financial instruments included in OCI and current earnings for the periods indicated:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30				September 30					September 30				September 30
		2020		2019		2020		2019			2021		2020		2021		2020
		(Dollars in thousands)									(Dollars in thousands)
Derivatives designated as hedges	Derivatives designated as hedges									Derivatives designated as hedges
Gain (loss) in OCI on derivatives (effective portion), net of tax	Gain (loss) in OCI on derivatives (effective portion), net of tax	$	(2,729)	$	3,030	$	20,452	$	14,905	Gain (loss) in OCI on derivatives (effective portion), net of tax	$	(3,383)	$	(2,729)	$	(11,559)	$	20,452
Gain reclassified from OCI into interest income or interest expense (effective portion)	Gain reclassified from OCI into interest income or interest expense (effective portion)	$	4,339	$	352	$	9,901	$	1,170	Gain reclassified from OCI into interest income or interest expense (effective portion)	$	4,791	$	4,339	$	13,869	$	9,901
Loss reclassified from OCI into noninterest expense (loss on termination)	Loss reclassified from OCI into noninterest expense (loss on termination)	$	(684)	$	0	$	(684)	$	0	Loss reclassified from OCI into noninterest expense (loss on termination)	$	—	$	(684)	$	—	$	(684)
Interest expense	Interest expense	$	0	$	0	$	—	$	—	Interest expense	$	—	$	—	$	—	$	—
Other expense	Other expense	0		0		—		—		Other expense	—		—		—		—
Total	Total	$	0	$	0	$	—	$	—	Total	$	—	$	—	$	—	$	—
Derivatives not designated as hedges	Derivatives not designated as hedges									Derivatives not designated as hedges
Changes in fair value of customer related positions	Changes in fair value of customer related positions									Changes in fair value of customer related positions
Other income	Other income	$	21	$	10	$	46	$	37	Other income	$	54	$	21	$	137	$	46
Other expense	Other expense	(28)		(2)		(52)		(13)		Other expense	(80)		(28)		(374)		(52)
Changes in fair value of mortgage derivatives	Changes in fair value of mortgage derivatives									Changes in fair value of mortgage derivatives
Mortgage banking income	Mortgage banking income	2,027		366		4,653		1,913		Mortgage banking income	(213)		2,027		(3,840)		4,653
Total	Total	$	2,020	$	374	$	4,647	$	1,937	Total	$	(239)	$	2,020	$	(4,077)	$	4,647

The Company's derivative agreements with institutional counterparties contain various credit-risk related contingent provisions, such as requiring the Company to maintain a well-capitalized capital position. If the Company fails to meet these conditions, the counterparties could request the Company make immediate payment or demand that the Company provide immediate and ongoing full collateralization on derivative positions in net liability positions. The aggregate fair value of all derivative instruments with credit-risk related contingent features that were in a net liability position was ~~$93.0~~$35.9 million and ~~$26.0~~$79.8 million at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Although none of the contingency provisions have applied as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company has posted collateral to offset the net liability exposure with institutional counterparties.

By using derivatives, the Company is exposed to credit risk to the extent that counterparties to the derivative contracts do not perform as required. Should a counterparty fail to perform under the terms of a derivative contract, the Company's credit exposure on interest rate swaps is limited to the net positive fair value and accrued interest of all swaps with each counterparty. The Company seeks to minimize counterparty credit risk through credit approvals, limits, monitoring procedures, and obtaining collateral, where appropriate. Institutional counterparties must have an investment grade credit rating and be approved by the Company's Board of Directors. As such, management believes the risk of incurring credit losses on derivative contracts with institutional counterparties is remote. The Company's exposure relating to institutional counterparties was ~~$54.0~~$37.1 million and ~~$25.4~~$48.8 million at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The Company’s exposure relating to customer counterparties was approximately ~~$145.5~~$71.8 million and ~~$51.0~~$127.2 million at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Credit exposure may be reduced by the value of collateral pledged by the counterparty.

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~~NOTE 10 - INCOME TAXES~~

~~The following table sets forth information regarding the Company’s tax provision and applicable tax rates for the periods indicated:~~

Three Months Ended Nine Months Ended
September 30 September 30
2020 2019 2020 2019
(Dollars in thousands)
Combined federal and state income tax provision $ 11,199 $ 17,036 $ 21,126 $ 38,565
Effective income tax rate 24.31 % 24.73 % 19.62 % 24.68 %

The Company's provision for income taxes was $11.2 million and $17.0 million for the three months ended September 30, 2020 and 2019, respectively, and $21.1 million and $38.6 million for the nine months ended September 30, 2020 and 2019, respectively. The lower tax provisions in the current year periods are due to lower net income as well as the nine month period being impacted by a discrete tax benefit recognized in the first quarter of 2020. This discrete benefit was associated with revised net operating loss (NOL) carryback provisions included in the CARES Act, signed into law on March 27, 2020.

NOTE 117 - FAIR VALUE MEASUREMENTS

Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the assumptions applied by the Company when determining fair value reflect those that the Company determines market participants would use to price the asset or liability at the measurement date. If there has been a significant decrease in the volume and level of activity for the asset or liability, regardless of the valuation technique(s) used, the objective of a fair value measurement remains the same. Fair value is the price that would be received if the asset were to be sold or that would be or paid if the liability were to be transferred in an orderly market transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. When determining fair value, the Company considers pricing information and other inputs that are current as of the measurement date. In periods of market dislocation, the observability of prices and other inputs

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may be reduced for certain instruments, or not available at all. The unavailability or reduced availability of pricing or other input information could cause an instrument to be reclassified from one level to another.

The Fair Value Measurements and Disclosures Topic of the FASB ASC defines fair value and establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under the Fair Value Measurements and Disclosures Topic of the FASB ASC are described below:

Level 1 – Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 – Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Valuation Techniques

There have been no changes in the valuation techniques used during the ~~three and~~ nine months ended September 30, ~~2020.~~

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2021.

Securities

Trading and Equity Securities

These equity securities are valued based on market quoted prices. These securities are categorized in Level 1 as they are actively traded and no valuation adjustments have been applied.

U.S. Government Agency and U.S. Treasury Securities

Fair value is estimated using either multi-dimensional spread tables or benchmarks. The inputs used include benchmark yields, reported trades, and broker/dealer quotes. These securities are classified as Level 2.

Agency Mortgage-Backed Securities

Fair value is estimated using either a matrix or benchmarks. The inputs used include benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. These securities are categorized as Level 2.

Agency Collateralized Mortgage Obligations and Small Business Administration Pooled Securities

The valuation model for these securities is volatility-driven and ratings based, and uses multi-dimensional spread tables. The inputs used include benchmark yields, reported trades, new issue data, broker dealer quotes, and collateral performance. If there is at least one significant model assumption or input that is not observable, these securities are categorized as Level 3 within the fair value hierarchy; otherwise, they are classified as Level 2.

State, County, and Municipal Securities

The fair value is estimated using a valuation matrix with inputs including bond interest rate tables, recent transactions, and yield relationships. These securities are categorized as Level 2.

Single and Pooled Issuer Trust Preferred Securities

The fair value of trust preferred securities, including pooled and single issuer preferred securities, is estimated using external pricing models, discounted cash flow methodologies or similar techniques. The inputs used in these valuations include benchmark yields, reported trades, new issue data, broker dealer quotes, and collateral performance. If there is at least one significant model assumption or input that is not observable, these securities are classified as Level 3 within the fair value hierarchy; otherwise, they are classified as Level 2.

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Loans Held for Sale

The Company has elected the fair value option to account for originated closed loans intended for sale. The fair value is measured on an individual loan basis using quoted market prices and when not available, comparable market value or discounted cash flow analysis may be utilized. These assets are typically classified as Level 2.

Derivative Instruments

Derivatives

The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied ~~volatilities.~~volatilizes. The Company incorporates credit valuation adjustments to appropriately reflect nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings. Additionally, in conjunction with fair value measurement guidance, the Company has made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio. Although the Company has determined that the majority of the inputs used to value its interest rate derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its interest rate derivatives and risk participation agreements may also utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. However, as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are properly classified as Level 2.

Mortgage Derivatives

The fair value of mortgage derivatives is determined based on current market prices for similar assets in the secondary market and, therefore, classified as Level 2 within the fair value hierarchy.

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Individually Assessed Collateral Dependent Loans

In accordance with the CECL standard, expected credit losses on individually assessed loans deemed to be collateral dependent are valued based upon the lower of amortized cost or fair value of the underlying collateral less costs to sell. The inputs used in the appraisals of the collateral are not always observable, and in such cases the loans may be classified as Level 3 within the fair value hierarchy; otherwise, they are classified as Level 2.

Other Real Estate Owned and Other Foreclosed Assets

Other Real Estate Owned ("OREO") and Other Foreclosed Assets are valued at the lower of cost or fair value of the property, less estimated costs to sell. The fair values are generally estimated based upon recent appraisal values of the property less costs to sell the property. Certain inputs used in appraisals are not always observable, and therefore OREO and Other Foreclosed Assets may be classified as Level 3 within the fair value hierarchy.

Goodwill and Other Intangible Assets

Goodwill and other intangible assets are subject to impairment testing. The Company conducts an annual impairment test of goodwill in the third quarter of each year, or more frequently if necessary. Other intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. To estimate the fair value of goodwill and, if necessary, other intangible assets, the Company utilizes both a comparable analysis of relevant price multiples in recent market transactions and a discounted cash flow analysis. Both valuation models require a significant degree of management judgment. In the event the fair value as determined by the valuation model is less than the carrying value, the intangibles may be impaired. If the impairment testing resulted in impairment, the Company would classify the impaired goodwill and other intangible assets subjected to nonrecurring fair value adjustments as Level 3.

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Assets and liabilities measured at fair value on a recurring and nonrecurring basis were as follows as of the dates indicated:


				Fair Value Measurements at Reporting Date Using									Fair Value Measurements at Reporting Date Using
		Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
		September 30, 2020									September 30, 2021
		(Dollars in thousands)									(Dollars in thousands)
Recurring fair value measurements	Recurring fair value measurements									Recurring fair value measurements
Assets	Assets									Assets
Trading securities	Trading securities	$	2,612	$	2,612	$	—	$	—	Trading securities	$	3,504	$	3,504	$	—	$	—
Equity securities	Equity securities	21,119		21,119		0		0		Equity securities	22,794		22,794		—		—
Securities available for sale	Securities available for sale									Securities available for sale
U.S. government agency securities	U.S. government agency securities	24,273		—		24,273		—		U.S. government agency securities	217,345		—		217,345		—
U.S. treasury securities										U.S. treasury securities	770,002		—		770,002		—
Agency mortgage-backed securities	Agency mortgage-backed securities	230,620		—		230,620		—		Agency mortgage-backed securities	297,219		—		297,219		—
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	102,077		—		102,077		—		Agency collateralized mortgage obligations	86,487		—		86,487		—

State, county, and municipal securities	State, county, and municipal securities	1,145		—		1,145		—		State, county, and municipal securities	288		—		288		—
Single issuer trust preferred securities issued by banks and insurers	Single issuer trust preferred securities issued by banks and insurers	469		—		469		—		Single issuer trust preferred securities issued by banks and insurers	491		—		491		—
Pooled trust preferred securities issued by banks and insurers	Pooled trust preferred securities issued by banks and insurers	1,021		—		—		1,021		Pooled trust preferred securities issued by banks and insurers	1,010		—		1,010		—
Small business administration pooled securities	Small business administration pooled securities	63,873		0		63,873		0		Small business administration pooled securities	54,368		—		54,368		—
Loans held for sale	Loans held for sale	54,713		—		54,713		—		Loans held for sale	33,553		—		33,553		—
Derivative instruments	Derivative instruments	210,742		—		210,742		—		Derivative instruments	116,358		—		116,358		—
Liabilities	Liabilities									Liabilities
Derivative instruments	Derivative instruments	151,613		—		151,613		—		Derivative instruments	83,150		—		83,150		—
Total recurring fair value measurements	Total recurring fair value measurements	$	561,051	$	23,731	$	536,299	$	1,021	Total recurring fair value measurements	$	1,520,269	$	26,298	$	1,493,971	$	—

Nonrecurring fair value measurements	Nonrecurring fair value measurements									Nonrecurring fair value measurements
Assets	Assets									Assets
Individually assessed collateral dependent loans		$	56,660	$	—	$	—	$	56,660
Individually assessed collateral dependent loans (1)										Individually assessed collateral dependent loans (1)	$	34,799	$	—	$	—	$	34,799

Total nonrecurring fair value measurements	Total nonrecurring fair value measurements	$	56,660	$	0	$	0	$	56,660	Total nonrecurring fair value measurements	$	34,799	$	—	$	—	$	34,799

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Fair Value Measurements at Reporting Date Using
Balance Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
December 31, 2019
(Dollars in thousands)
Recurring fair value measurements
Assets
Trading securities $ 2,179 $ 2,179 $ — $ —
Equity securities 21,261 21,261 0 0
Securities available for sale
U.S. government agency securities 33,115 — 33,115 —
Agency mortgage-backed securities 247,000 — 247,000 —
Agency collateralized mortgage obligations 88,511 — 88,511 —
State, county, and municipal securities 1,396 0 1,396 0
Single issuer trust preferred securities issued by banks and insurers 493 — 493 —
Pooled trust preferred securities issued by banks and insurers 1,114 — — 1,114
Small business administration pooled securities 54,795 0 54,795 0
Loans held for sale 33,307 — 33,307 —
Derivative instruments 78,385 — 78,385 —
Liabilities
Derivative instruments 53,923 — 53,923 —
Total recurring fair value measurements $ 507,633 $ 23,440 $ 483,079 $ 1,114
Nonrecurring fair value measurements:
Assets
Collateral dependent impaired loans $ 25,515 $ — $ — $ 25,515
Total nonrecurring fair value measurements $ 25,515 $ 0 $ 0 $ 25,515

~~Table of Contents~~

The table below presents a reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3), which were valued using pricing models and discounted cash flow methodologies, for the periods indicated:

Three Months Ended
September 30
2020 2019
(Dollars in thousands)
Pooled Trust Preferred Securities
Beginning balance $ 986 $ 1,281
Gain and (losses) (realized/unrealized)
Included in other comprehensive income 41 (14)
Settlements (6) (161)
Ending balance $ 1,021 $ 1,106
Nine Months Ended
September 30
2020 2019
(Dollars in thousands)
Pooled Trust Preferred Securities
Beginning balance $ 1,114 $ 1,329
Losses (realized/unrealized)
Included in other comprehensive income (38) (38)
Settlements (55) (185)
Ending balance $ 1,021 $ 1,106


			Fair Value Measurements at Reporting Date Using
	Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	December 31, 2020
	(Dollars in thousands)
Recurring fair value measurements
Assets
Trading securities	$	2,838	$	2,838	$	—	$	—
Equity securities	22,107		22,107		—		—
Securities available for sale
U.S. government agency securities	24,116		—		24,116		—
Agency mortgage-backed securities	233,629		—		233,629		—
Agency collateralized mortgage obligations	91,683		—		91,683		—

State, county, and municipal securities	807		—		807		—
Single issuer trust preferred securities issued by banks and insurers	488		—		488		—
Pooled trust preferred securities issued by banks and insurers	1,056		—		1,056		—
Small business administration pooled securities	61,081		—		61,081		—
Loans held for sale	58,104		—		58,104		—
Derivative instruments	187,399		—		187,399		—
Liabilities
Derivative instruments	134,064		—		134,064		—
Total recurring fair value measurements	$	549,244	$	24,945	$	524,299	$	—

Nonrecurring fair value measurements:
Assets
Individually assessed collateral dependent loans (1)	$	31,510	$	—	$	—	$	31,510

Total nonrecurring fair value measurements	$	31,510	$	—	$	—	$	31,510

~~Table~~(1) The fair value of ~~Contents~~

~~The following table sets forth certain unobservable inputs regarding the Company’s financial instruments that are classified as Level 3 as of the dates indicated:~~

September 30
2020 December 31
2019 September 30
2020 December 31
2019 September 30
2020 December 31
2019
Valuation Technique Fair Value Unobservable Inputs Range Weighted Average
(Dollars in thousands)
Discounted cash flow methodology
Pooled trust preferred securities $ 1,021 $ 1,114 Cumulative prepayment 0% - 56% 0% - 57% 2.6% 2.6%
Cumulative default 4% - 100% 2% - 100% 11.9% 13.5%
Loss given default 85% - 100% 85% - 100% 94.0% 93.6%
Cure given default 0% - 75% 0% - 75% 60.9% 60.9%
Appraisals of collateral(1)
Individually assessed collateral dependent loans $ 56,660 n/a
Collateral dependent impaired loans n/a $ 25,515

~~(1)Fair value~~individually assessed collateral dependent loans is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable. Appraisals may be adjusted by management for qualitative factors such as economic factors and estimated liquidation expenses. The range of these possible adjustments may vary.

The significant unobservable inputs used in the fair value measurement of the Company’s pooled trust preferred securities are cumulative prepayment rates, cumulative default rates, loss given default rates and cure given default rates. Significant increases (decreases) in deferrals or defaults, in isolation, would result in a significantly lower (higher) fair value measurement. Alternatively, significant increases (decreases) in cure rates, in isolation, would result in a significantly higher (lower) fair value measurement.

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The estimated fair values and related carrying amounts for assets and liabilities for which fair value is only disclosed are shown below as of the dates indicated:

Fair Value Measurements at Reporting Date Using
Carrying
Value Fair
Value Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)

September 30, 2020
(Dollars in thousands)
Financial assets
Securities held to maturity(a)
U.S. Treasury securities $ 4,021 $ 4,100 $ — $ 4,100 $ —
Agency mortgage-backed securities 388,106 407,793 — 407,793 —
Agency collateralized mortgage obligations 237,380 246,937 — 246,937 —
Single issuer trust preferred securities issued by banks 1,500 1,498 — 1,498 —
Small business administration pooled securities 28,566 30,139 0 30,139 0
Loans, net of allowance for credit losses(b) 9,232,908 9,185,023 — — 9,185,023
Federal Home Loan Bank stock(c) 15,090 15,090 0 15,090 0
Cash surrender value of life insurance policies(d) 199,453 199,453 0 199,453 0
Financial liabilities
Deposit liabilities, other than time deposits(e) $ 9,792,667 $ 9,792,667 $ — $ 9,792,667 $ —
Time certificates of deposits(f) 1,058,641 1,065,818 — 1,065,818 —
Federal Home Loan Bank borrowings(f) 145,765 145,975 — 145,975 —
Long-term borrowings(f) 37,447 36,448 0 36,448 0
Junior subordinated debentures(g) 62,850 67,883 — 67,883 —
Subordinated debentures(f) 49,672 47,173 — — 47,173


					Fair Value Measurements at Reporting Date Using
	Carrying Value		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	September 30, 2021
	(Dollars in thousands)
Financial assets
Securities held to maturity (a)
U.S. government agency securities	$	33,422	$	33,295	$	—	$	33,295	$	—
U.S. treasury securities	$	3,007	$	3,024	$	—	$	3,024	$	—
Agency mortgage-backed securities	352,483		360,613		—		360,613		—
Agency collateralized mortgage obligations	451,151		452,038		—		452,038		—

Single issuer trust preferred securities issued by banks	1,500		1,508		—		1,508		��
Small business administration pooled securities	23,686		24,828		—		24,828		—

Loans, net of allowance for credit losses (b)	8,680,968		8,663,615		—		—		8,663,615
Federal Home Loan Bank stock (c)	8,666		8,666		—		8,666		—
Cash surrender value of life insurance policies (d)	244,573		244,573		—		244,573		—
Financial liabilities
Deposit liabilities, other than time deposits (e)	$	11,474,578	$	11,474,578	$	—	$	11,474,578	$	—
Time certificates of deposits (f)	785,562		786,514		—		786,514		—
Federal Home Loan Bank borrowings (f)	25,675		25,679		—		25,679		—



Long-term borrowings (f)	18,750		18,571		—		18,571		—
Junior subordinated debentures (g)	62,853		68,098		—		68,098		—
Subordinated debentures (f)	49,767		46,403		—		—		46,403

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Fair Value Measurements at Reporting Date Using
Carrying
Value Fair
Value Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)

December 31, 2019
(Dollars in thousands)
Financial assets
Securities held to maturity(a)
U.S. government agency securities $ 12,874 $ 12,997 $ — $ 12,997 $ —
U.S. Treasury securities 4,032 4,053 $ — 4,053 —
Agency mortgage-backed securities 397,414 405,802 — 405,802 —
Agency collateralized mortgage obligations 293,662 297,314 — 297,314 —
Single issuer trust preferred securities issued by banks 1,500 1,490 — 1,490 —
Small business administration pooled securities 31,324 31,607 0 31,607 0
Loans, net of allowance for credit losses(b) 8,780,384 8,613,635 — — 8,613,635
Federal Home Loan Bank stock(c) 14,424 14,424 0 14,424 0
Cash surrender value of life insurance policies(d) 197,372 197,372 0 197,372 0
Financial liabilities
Deposit liabilities, other than time deposits(e) $ 7,752,052 $ 7,752,052 $ — $ 7,752,052 $ —
Time certificates of deposits(f) 1,395,315 1,396,760 — 1,396,760 —
Federal Home Loan Bank borrowings(f) 115,748 115,881 — 115,881 —
Long-term borrowings (f) 74,906 72,219 0 72,219 0
Junior subordinated debentures(g) 62,848 65,603 — 65,603 —
Subordinated debentures(f) 49,601 52,870 — — 52,870


					Fair Value Measurements at Reporting Date Using
	Carrying Value		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	December 31, 2020
	(Dollars in thousands)
Financial assets
Securities held to maturity (a)

U.S. treasury securities	$	4,017	$	4,077	$	—	$	4,077	$	—
Agency mortgage-backed securities	356,085		374,121		—		374,121		—
Agency collateralized mortgage obligations	335,993		344,119		—		344,119		—

Single issuer trust preferred securities issued by banks	1,500		1,498		—		1,498		—
Small business administration pooled securities	26,917		28,362		—		28,362		—

Loans, net of allowance for credit losses (b)	9,247,964		9,253,381		—		—		9,253,381
Federal Home Loan Bank stock (c)	10,250		10,250		—		10,250		—
Cash surrender value of life insurance policies (d)	200,525		200,525		—		200,525		—
Financial liabilities
Deposit liabilities, other than time deposits (e)	$	10,042,541	$	10,042,541	$	—	$	10,042,541	$	—
Time certificates of deposits (f)	950,629		955,598		—		955,598		—
Federal Home Loan Bank borrowings (f)	35,740		35,885		—		35,885		—
Long-term borrowings (f)	32,773		32,033		—		32,033		—


Junior subordinated debentures (g)	62,851		70,238		—		70,238		—
Subordinated debentures (f)	49,696		46,486		—		—		46,486

(a)The fair values presented are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments and/or discounted cash flow analysis.

(b)Fair value of loans is measured using the exit price valuation method, determined primarily by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities or cash flows, while incorporating liquidity and credit assumptions. Additionally, this amount excludes individually assessed collateral dependent loans, which are deemed to be marked to fair value on a nonrecurring basis.

(c)Federal Home Loan Bank stock has no quoted market value and is carried at cost; therefore the carrying amount approximates fair value.

(d)Cash surrender value of life insurance policies is recorded at its cash surrender value (or the amount that can be realized upon surrender of the policy), therefore, carrying amount approximates fair value.

(e)Fair value of demand deposits, savings and interest checking accounts and money market deposits is the amount payable on demand at the reporting date.

(f)Fair value was determined by discounting anticipated future cash payments using rates currently available for instruments with similar remaining maturities.

(g)Fair value was determined based upon market prices of securities with similar terms and maturities.

This summary excludes certain financial assets and liabilities for which the carrying value approximates fair value. For financial assets, these may include cash and due from banks, federal funds sold and short-term investments. For financial liabilities, these may include federal funds purchased. These instruments would all be considered to be classified as Level 1 within the fair value hierarchy. Also excluded from the summary are financial instruments measured at fair value on a recurring and nonrecurring basis, as previously described.

The Company considers its current use of financial instruments to be the highest and best use of the instruments.

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NOTE 128 - REVENUE RECOGNITION

A portion of the Company's noninterest income is derived from contracts with customers, and as such, the revenue recognized depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company considers the terms of the contract and all relevant facts and circumstances when applying this guidance. To ensure its alignment with this core principle, the Company measures revenue and the timing of recognition by applying the following five steps:

1.Identify the contract(s) with customers

2.Identify the performance obligations

3.Determine the transaction price

4.Allocate the transaction price to the performance obligations

5.Recognize revenue when (or as) the entity satisfies a performance obligation

The Company has disaggregated its revenue from contracts with customers into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. The following table presents the revenue streams that the Company has disaggregated as of the periods indicated:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30 2020		September 30 2019		September 30 2020		September 30 2019			September 30 2021		September 30 2020		September 30 2021		September 30 2020
		(Dollars in thousands)									(Dollars in thousands)
Deposit account fees (inclusive of cash management fees)	Deposit account fees (inclusive of cash management fees)	$	3,428	$	5,299	$	11,227	$	14,785	Deposit account fees (inclusive of cash management fees)	$	4,298	$	3,428	$	11,704	$	11,227
Interchange fees	Interchange fees	2,025		4,913		10,665		13,473		Interchange fees	2,223		2,025		6,267		10,665
ATM fees	ATM fees	708		939		1,872		2,461		ATM fees	817		708		2,177		1,872
Investment management - wealth management and advisory services	Investment management - wealth management and advisory services	6,997		6,635		20,113		19,127		Investment management - wealth management and advisory services	8,147		6,997		23,576		20,113
Investment management - retail investments and insurance revenue	Investment management - retail investments and insurance revenue	574		553		1,583		1,962		Investment management - retail investments and insurance revenue	1,027		574		2,774		1,583
Merchant processing income	Merchant processing income	330		230		1,000		834		Merchant processing income	365		330		1,024		1,000
Credit card income	Credit card income	216		0		550		0		Credit card income	334		216		883		550
Other noninterest income	Other noninterest income	905		1,487		2,651		4,068		Other noninterest income	1,362		905		3,732		2,651
Total noninterest income in-scope of ASC 606	Total noninterest income in-scope of ASC 606	15,183		20,056		49,661		56,710		Total noninterest income in-scope of ASC 606	18,573		15,183		52,137		49,661
Total noninterest income out-of-scope of ASC 606	Total noninterest income out-of-scope of ASC 606	14,164		11,760		34,311		25,287		Total noninterest income out-of-scope of ASC 606	7,884		14,164		24,533		34,311
Total noninterest income	Total noninterest income	$	29,347	$	31,816	$	83,972	$	81,997	Total noninterest income	$	26,457	$	29,347	$	76,670	$	83,972

In each of the revenue streams identified above, there were no significant judgments made in determining or allocating the transaction price, as the consideration and service requirements are generally explicitly identified in the associated contracts. Additional information related to each of the revenue streams is further noted below.

Deposit Account Fees

The Company offers various deposit account products to its customers governed by specific deposit agreements applicable to either personal customers or business customers. These agreements identify the general conditions and obligations of both parties, and include standard information regarding deposit account related fees.

Deposit account services include providing access to deposit accounts as well as access to the various deposit transactional services of the Company. These transactional services are primarily those that are identified in the standard fee schedule, and include, but are not limited to, services such as overdraft protection, wire transfer, and check collection. Revenue is recognized in conjunction with the various services being provided. For example, the Company may assess monthly fixed service fees associated with the customer having access to a deposit account, which can vary depending on the account type and daily account balance. In addition, the Company may also assess separate fixed fees associated with and at the time specific transactions are entered into by the customer. As such, the Company considers its performance obligations to be met concurrently with providing the account access or completing the requested deposit transaction.

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Cash Management

Cash management services are a subset of the deposit account fees revenue stream. These services primarily include ACH transaction processing, positive pay and remote deposit services. These services are also governed by separate agreements entered into with the customer. The fee arrangement for these services is structured to assess fees under one of two scenarios, either a per transaction fee arrangement or an earnings credit analysis arrangement. Under the per transaction fee arrangement, fixed fees are assessed concurrently with customers executing the transactions, and as such, the Company considers its performance obligations to be met concurrently with completing the requested transaction. Under the earnings credit analysis arrangement, the Company provides a monthly earnings credit to the customer that is negotiated and determined based on various factors. The credit is then available to absorb the per transaction fees that are assessed on the customer's deposit account activity for the month. Any amount of the transactional fees in excess of the earnings credit is recognized as revenue in that month.

Interchange Fees

The Company earns interchange revenue from its issuance of credit and debit cards granted through its membership in various card payment networks. The Company provides credit cards and debit cards to its customers which are authorized and settled through these payment networks, and in exchange, the Company earns revenue as determined by each payment network's interchange program. The revenue is recognized concurrently with the settlement of card transactions within each network.

ATM Fees

The Company deploys automated teller machines (ATMs) as part of its overall branch network. Certain transactions performed at the ATMs require customers to acknowledge and pay a fee for the requested service. Certain ATM fees are disclosed in the deposit account agreement fee schedules, whereas those assessed to non-Rockland Trust deposit holders are solely determined during the transaction at the machine.

The ATM fee is a fixed dollar per transaction amount, and as such, is recognized concurrently with the overall daily processing and settlement of the ATM activity.

Investment Management - Wealth Management and Advisory Services

The Company offers investment management and trust services to individuals, institutions, small businesses and charitable institutions. Each investment management product is governed by its own contract along with a separate identifiable fee schedule unique to that product. The Company also offers additional services, such as estate settlement, financial planning, tax services and other special services quoted at the client's request.

The asset management and/or custody fees are based upon a percentage of the monthly valuation of the principal assets in the customer's account, whereas fees for additional or special services are fixed in nature and are charged as services are rendered. As the fees are dependent on assets under management, which are susceptible to market factors outside of the Company's control, this variable consideration is constrained and therefore no revenue is estimated at contract initiation. As such, all revenue is recognized in correlation to the monthly management fee determinations or as transactional services are provided. Due to the fact that payments are primarily made subsequent to the valuation period, the Company records a receivable for revenue earned but not received. The following table provides the amount of investment management revenue earned but not received as of the dates indicated:

September 30, 2020 December 31, 2019
(Dollars in thousands)
Receivables, included in other assets $ 4,383 $ 2,341


	September 30, 2021		December 31, 2020
	(Dollars in thousands)
Receivables, included in other assets	$	5,292	$	4,636

Investment Management - Retail Investments and Insurance Revenue

The Company offers the sale of mutual fund shares, unit investment trust shares, general securities, fixed and variable annuities and life insurance products through registered representatives who are both employed by the Company and licensed and contracted with various broker general agents to offer these products to the Company’s customer base. As such, the Company performs these services as an agent and earns a fixed commission on the sales of these products and services. To a lesser degree, production bonus commissions can also be earned based upon the Company meeting certain volume thresholds.

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In general, the Company recognizes commission revenue at the point of sale, and for certain insurance products, may also earn and recognize annual residual commissions commensurate with annual premiums being paid.

Merchant Processing Income

The Company refers customers to third party merchant processing partners in exchange for commission and fee income. The income earned is comprised of multiple components, including a fixed referral fee per each referred customer, a rebate amount determined primarily as a percentage of net revenue earned by the third party from services provided to each referred customer, and overall production bonus commissions if certain new account production thresholds are met. Merchant processing income is recognized in conjunction with either completing the referral to earn the fixed fee amount or as the merchant activity is processed to derive the Company's rebate and/or production bonus amounts.

Credit Card Income

The Company provides consumer and business credit card solutions to its customers by soliciting new accounts on behalf of a third party credit card provider in exchange for a fee. The income earned is comprised of new account incentive payments as well as a percentage of interchange income earned by the third party provider offering the consumer and business purpose revolving credit accounts. The credit card income is recognized in conjunction with the establishment of each new credit card member or as the interchange is earned by the third party in connection with net purchase transactions made by the credit card member.

Other Noninterest Income

The Company earns various types of other noninterest income that fall within the scope of the new revenue recognition rules, and have been aggregated into one general revenue stream in the table noted above. This amount includes, but is not limited to, the following types of revenue with customers:

Safe Deposit Rent

The Company rents out the use of safe deposit boxes to its customers, which can be accessed when the bank is open for business. The safe deposit box rental fee is paid upfront and is recognized as revenue ratably over the annual term of the contract.

1031 Exchange Fee Revenue

The Company provides like-kind exchange services pursuant to Section 1031 of the Internal Revenue Code. Fee income is recognized in conjunction with completing the exchange transactions.

Foreign Currency

The Company earns fee income associated with various transactions related to foreign currency product offerings, including foreign currency bank notes and drafts and foreign currency wires. The majority of this income is derived from commissions earned related to customers executing the above mentioned foreign currency transactions through arrangements with third party correspondents.

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NOTE 139 - OTHER COMPREHENSIVE INCOME (LOSS)

The following tables present a reconciliation of the changes in the components of other comprehensive income (loss) for the periods indicated, including the amount of income tax (expense) benefit allocated to each component of other comprehensive income (loss):


		Three Months Ended September 30, 2020						Nine Months Ended September 30, 2020							Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021
		Pre Tax Amount		Tax (Expense) Benefit		After Tax Amount		Pre Tax Amount		Tax (Expense) Benefit		After Tax Amount			Pre Tax Amount		Tax (Expense) Benefit		After Tax Amount		Pre Tax Amount		Tax (Expense) Benefit		After Tax Amount
		(Dollars in thousands)													(Dollars in thousands)
Change in fair value of securities available for sale	Change in fair value of securities available for sale	$	(857)	$	148	$	(709)	$	13,598	$	(3,265)	$	10,333	Change in fair value of securities available for sale	$	(10,337)	$	2,440	$	(7,897)	$	(15,589)	$	3,711	$	(11,878)
Less: net security losses reclassified into other noninterest expense	Less: net security losses reclassified into other noninterest expense	0		0		0		0		0		0		Less: net security losses reclassified into other noninterest expense	—		—		—		—		—		—
Net change in fair value of securities available for sale	Net change in fair value of securities available for sale	(857)		148		(709)		13,598		(3,265)		10,333		Net change in fair value of securities available for sale	(10,337)		2,440		(7,897)		(15,589)		3,711		(11,878)

Change in fair value of cash flow hedges	Change in fair value of cash flow hedges	(143)		41		(102)		37,674		(10,597)		27,077		Change in fair value of cash flow hedges	84		(23)		61		(2,214)		624		(1,590)
Less: net cash flow hedge gains reclassified into interest income or interest expense	Less: net cash flow hedge gains reclassified into interest income or interest expense	4,339		(1,220)		3,119		9,901		(2,784)		7,117		Less: net cash flow hedge gains reclassified into interest income or interest expense	4,791		(1,347)		3,444		13,869		(3,900)		9,969
Less: Loss on termination of hedge reclassified into noninterest expense		(684)		192		(492)		(684)		192		(492)

Net change in fair value of cash flow hedges	Net change in fair value of cash flow hedges	(3,798)		1,069		(2,729)		28,457		(8,005)		20,452		Net change in fair value of cash flow hedges	(4,707)		1,324		(3,383)		(16,083)		4,524		(11,559)

Net unamortized loss related to defined benefit pension and other postretirement adjustments arising during the period		(2)		1		(1)		(1,392)		392		(1,000)
Net unamortized gain related to defined benefit pension and other postretirement adjustments arising during the period														Net unamortized gain related to defined benefit pension and other postretirement adjustments arising during the period	—		—		—		653		(184)		469

Amortization of net actuarial losses	Amortization of net actuarial losses	245		(69)		176		736		(207)		529		Amortization of net actuarial losses	346		(97)		249		1,037		(291)		746
Amortization of net prior service costs	Amortization of net prior service costs	69		(19)		50		207		(58)		149		Amortization of net prior service costs	44		(13)		31		131		(37)		94

Net change in other comprehensive income for defined benefit postretirement plans (1)	Net change in other comprehensive income for defined benefit postretirement plans (1)	312		(87)		225		(449)		127		(322)		Net change in other comprehensive income for defined benefit postretirement plans (1)	390		(110)		280		1,821		(512)		1,309
Total other comprehensive income (loss)		$	(4,343)	$	1,130	$	(3,213)	$	41,606	$	(11,143)	$	30,463
Total other comprehensive loss														Total other comprehensive loss	$	(14,654)	$	3,654	$	(11,000)	$	(29,851)	$	7,723	$	(22,128)

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		Three Months Ended September 30, 2019						Nine Months Ended September 30, 2019							Three Months Ended September 30, 2020						Nine Months Ended September 30, 2020
		Pre Tax Amount		Tax (Expense) Benefit		After Tax Amount		Pre Tax Amount		Tax (Expense) Benefit		After Tax Amount			Pre Tax Amount		Tax (Expense) Benefit		After Tax Amount		Pre Tax Amount		Tax (Expense) Benefit		After Tax Amount
		(Dollars in thousands)													(Dollars in thousands)
Change in fair value of securities available for sale	Change in fair value of securities available for sale	$	2,858	$	(683)	$	2,175	$	14,699	$	(3,401)	$	11,298	Change in fair value of securities available for sale	$	(857)	$	148	$	(709)	$	13,598	$	(3,265)	$	10,333
Less: net security losses reclassified into other noninterest expense	Less: net security losses reclassified into other noninterest expense	0		0		0		(1,462)		411		(1,051)		Less: net security losses reclassified into other noninterest expense	—		—		—		—		—		—
Net change in fair value of securities available for sale	Net change in fair value of securities available for sale	2,858		(683)		2,175		16,161		(3,812)		12,349		Net change in fair value of securities available for sale	(857)		148		(709)		13,598		(3,265)		10,333

Change in fair value of cash flow hedges	Change in fair value of cash flow hedges	4,568		(1,285)		3,283		21,913		(6,167)		15,746		Change in fair value of cash flow hedges	(143)		41		(102)		37,674		(10,597)		27,077
Less: net cash flow hedge gains reclassified into interest income or interest expense	Less: net cash flow hedge gains reclassified into interest income or interest expense	352		(99)		253		1,170		(329)		841		Less: net cash flow hedge gains reclassified into interest income or interest expense	4,339		(1,220)		3,119		9,901		(2,784)		7,117

Less: loss on termination of hedge reclassified into noninterest expense														Less: loss on termination of hedge reclassified into noninterest expense	(684)		192		(492)		(684)		192		(492)
Net change in fair value of cash flow hedges	Net change in fair value of cash flow hedges	4,216		(1,186)		3,030		20,743		(5,838)		14,905		Net change in fair value of cash flow hedges	(3,798)		1,069		(2,729)		28,457		(8,005)		20,452

Net unamortized loss related to defined benefit pension and other postretirement adjustments arising during the period	Net unamortized loss related to defined benefit pension and other postretirement adjustments arising during the period	(11)		3		(8)		(33)		9		(24)		Net unamortized loss related to defined benefit pension and other postretirement adjustments arising during the period	(2)		1		(1)		(1,392)		392		(1,000)

Amortization of net actuarial gains		(2)		1		(1)		(6)		2		(4)
Amortization of net actuarial losses														Amortization of net actuarial losses	245		(69)		176		736		(207)		529
Amortization of net prior service costs	Amortization of net prior service costs	69		(19)		50		207		(58)		149		Amortization of net prior service costs	69		(19)		50		207		(58)		149

Net change in other comprehensive income for defined benefit postretirement plans (1)	Net change in other comprehensive income for defined benefit postretirement plans (1)	56		(15)		41		168		(47)		121		Net change in other comprehensive income for defined benefit postretirement plans (1)	312		(87)		225		(449)		127		(322)
Total other comprehensive income		$	7,130	$	(1,884)	$	5,246	$	37,072	$	(9,697)	$	27,375
Total other comprehensive income (loss)														Total other comprehensive income (loss)	$	(4,343)	$	1,130	$	(3,213)	$	41,606	$	(11,143)	$	30,463

(1)The amortization of prior service costs is included in the computation of net periodic pension cost as disclosed in Note 15 "Employee Benefit Plans" within the ~~Employee Benefit Plans footnote~~Notes to the Consolidated Financial Statements included in Item 8 of the Company's ~~Annual Report on~~2020 Form ~~10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission.~~10-K.

Information on the Company’s accumulated other comprehensive income (loss), net of tax, is comprised of the following components as of the dates indicated:


		Unrealized Gain (Loss) on Securities		Unrealized Gain on Cash Flow Hedge		Defined Benefit Postretirement Plans			Accumulated Other Comprehensive Income (Loss)			Unrealized Gain (Loss) on Securities		Unrealized Gain (Loss) on Cash Flow Hedge		Defined Benefit Postretirement Plans		Accumulated Other Comprehensive Income (Loss)
		(Dollars in thousands)						(Dollars in thousands)
		2020						2021
Beginning balance: January 1, 2021											Beginning balance: January 1, 2021	$	13,255	$	33,276	$	(5,836)	$	40,695
Net change in other comprehensive income (loss)											Net change in other comprehensive income (loss)	(11,878)		(11,559)		1,309		(22,128)
Ending balance: September 30, 2021											Ending balance: September 30, 2021	$	1,377	$	21,717	$	(4,527)	$	18,567
												2020
Beginning balance: January 1, 2020	Beginning balance: January 1, 2020	$	4,398	$	16,479	$	(2,708)		$	18,169	Beginning balance: January 1, 2020	$	4,398	$	16,479	$	(2,708)	$	18,169
Net change in other comprehensive income (loss)		10,333		20,452		(322)			30,463
Ending balance: September 30, 2020		$	14,731	$	36,931	$	(3,030)		$	48,632
		2019
Beginning balance: January 1, 2019		$	(5,947)	$	6,148	$	(1,374)		$	(1,173)

Net change in other comprehensive income (loss)	Net change in other comprehensive income (loss)	12,349		14,905		121			27,375		Net change in other comprehensive income (loss)	10,333		20,452		(322)		30,463
Ending balance: September 30, 2019		$	6,402	$	21,053	$	(1,253)		$	26,202
Ending balance: September 30, 2020											Ending balance: September 30, 2020	$	14,731	$	36,931	$	(3,030)	$	48,632

NOTE 1410 - COMMITMENTS AND CONTINGENCIES

Financial Instruments with Off-Balance Sheet Risk

In the normal course of business, the Company enters into various transactions to meet the financing needs of its customers, which, in accordance with GAAP, are not included in its consolidated balance sheets. These transactions include commitments to extend credit and standby letters of credit, and loan exposures with recourse, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in the consolidated balance sheets. The Company minimizes its exposure to loss under these commitments by subjecting them to credit approval and monitoring procedures.

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The Company enters into contractual commitments to extend credit, normally with fixed expiration dates or termination clauses, at specified rates and for specific purposes. Substantially all of these commitments to extend credit are contingent upon customers maintaining specific credit standards at the time of loan funding.

The Company has certain loan exposures for which there is recourse. These loan relationships could require the Company to repurchase or cover certain losses per agreements for certain loans that are either sold or referred to third parties.

Standby letters of credit are written conditional commitments issued to guarantee the performance of a customer to a third party. In the event the customer does not perform in accordance with the terms of the agreement with the third party, the Company would be required to fund the commitment. The maximum potential amount of future payments the Company could be required to make is represented by the contractual amount of the commitment. If the commitment were funded, the Company would be entitled to seek recovery from the customer. The Company’s policies generally require that standby letter of credit arrangements contain security and debt covenants similar to those contained in loan agreements.

The fees collected in connection with the issuance of standby letters of credit are representative of the fair value of the Company's obligation undertaken in issuing the guarantee. In accordance with applicable accounting standards related to guarantees, fees collected in connection with the issuance of standby letters of credit are deferred. The fees are then recognized in income proportionately over the life of the standby letter of credit agreement. The deferred standby letter of credit fees represent the fair value of the Company's potential obligations under the standby letter of credit guarantees.

The following table summarizes the above financial instruments at the dates indicated:


		September 30, 2020		December 31, 2019			September 30, 2021		December 31, 2020
		(Dollars in thousands)					(Dollars in thousands)
Commitments to extend credit	Commitments to extend credit	$	3,258,341	$	3,337,930	Commitments to extend credit	$	3,591,456	$	3,301,692
Standby letters of credit	Standby letters of credit	20,902		21,565		Standby letters of credit	20,081		20,686
Deferred standby letter of credit fees	Deferred standby letter of credit fees	191		158		Deferred standby letter of credit fees	146		164
Loan exposures with recourse	Loan exposures with recourse	343,314		404,532		Loan exposures with recourse	208,833		303,265

Lease Commitments

The Company leases office space, space for ATM locations, and certain branch locations under ~~noncancelable~~noncancellable operating leases. ~~Several~~Several of these leases contain renewal options to extend lease terms for a period of 13 to 10 years. During the fourth quarter of 2020, the Company recognized $4.8 million in lease termination costs associated with two branch closure decisions. These termination fees were paid by the Company during the second quarter of 2021.

There has been no significant change in the future minimum lease payments payable by the Company since December 31, ~~2019.~~2020. See the Company's ~~Annual Report on~~2020 Form 10-K ~~for the fiscal year ended December 31, 2019~~ for information regarding leases and other commitments.

Other Contingencies

At September 30, ~~2020,~~2021, the Bank was involved in pending lawsuits that arose in the ordinary course of business. Management has reviewed these pending lawsuits with legal counsel and has taken into consideration the view of counsel as to their outcome. In the opinion of management, the final disposition of pending lawsuits is not expected to have a material adverse effect on the Company’s financial position or results of operations.

Historically, the Bank was required to maintain certain reserve requirements of vault cash and/or deposits with the Federal Reserve Bank of Boston, however the reserve requirement was reduced to zero by the Federal Reserve during the first quarter of 2020 in response to the COVID-19 pandemic, and as such, there was 0no reserve requirement at September 30, ~~2020. There was also 0 reserve requirement balance necessary~~2021 or at December 31, ~~2019 due to cash balances held at the Federal Reserve that were in excess of reserve requirements.~~2020.

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NOTE 1511 - LOW INCOME HOUSING PROJECT INVESTMENTS

The Company has invested in low income housing projects that generate Low Income Housing Tax Credits (“LIHTC”) which provide the Company with tax credits and operating loss tax benefits over a period of approximately 15 years. None of the original investment is expected to be repaid.

The following table presents certain information related to the Company's investments in low income housing projects as of the dates indicated:


		September 30 2020			December 31 2019			September 30 2021			December 31 2020
		(Dollars in thousands)						(Dollars in thousands)
Original investment value	Original investment value	$	124,302		$	96,275	Original investment value	$	162,879		$	128,752
Current recorded investment	Current recorded investment	94,097			72,510		Current recorded investment	121,992			97,435
Unfunded liability obligation	Unfunded liability obligation	47,408			34,967		Unfunded liability obligation	74,157			49,586
Tax credits and benefits	Tax credits and benefits	10,671		(1)	7,342		Tax credits and benefits	14,251		(1)	9,404
Discrete tax adjustment							Discrete tax adjustment	1,572		(2)	n/a
Adjusted tax credits and benefits							Adjusted tax credits and benefits	15,823			9,404
Amortization of investments	Amortization of investments	8,676		(2)	5,645		Amortization of investments	12,437		(1)	7,552
Net income tax benefit	Net income tax benefit	1,995		(3)	1,696		Net income tax benefit	3,386		(1)	1,852

(1) ~~This amount reflects anticipated tax credits and tax benefits~~Amounts shown represent the estimated full year impact for the ~~full~~ year ended December 31, ~~2020.~~2021.

(2) ~~The amortization amount reduces the tax credits and~~Discrete adjustment recognized for difference in actual benefits ~~anticipated~~as reported on Schedule K-1 versus estimated benefits for the ~~full~~ year ended December 31, 2020.

~~(3) This amount represents~~

NOTE 12 - SUBSEQUENT EVENTS

On October 29, 2021, the ~~net tax benefit expected~~Company sold one large commercial and industrial loan relationship, the aggregate balance of which totaled $15.8 million as of September 30, 2021 and was included within non-performing assets. The Company expects to ~~be realized for~~recognize a gain of approximately $2.5 million based on proceeds from the ~~full year ended December 31, 2020 in determining the Company's effective tax rate.~~sale.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements, notes and tables included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019,~~2020, filed with the Securities and Exchange Commission (the ~~"2019~~"2020 Form 10-K")...

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (this "Report"), in Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about management’s confidence and strategies and management’s expectations about new and existing programs and products, acquisitions, relationships, opportunities, taxation, technology, market conditions and economic expectations. These statements may be identified by forward-looking terminology such as “should,” “could,” “will,” “may,” “expect,” “believe,” “forecast,” “view,” “opportunity,” “allow,” “continues,” “reflects,” “typically,” “usually,” “anticipate,” “intend,” or similar statements or variations of such terms. Such forward-looking statements involve certain risks and uncertainties and our actual results may differ materially from such forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements, in addition to those risk factors listed under the “Risk Factors” section of the ~~2019~~2020 Form 10-K and the Quarterly Reports on Form 10-Q for the periods ended March 31, 2021 and June 30, 2021 include, but are not limited to:

•further weakening in the United States economy in general and the regional and local economies within the New England region and the Company’s market area, including future weakening caused by the COVID-19 ~~pandemic;~~pandemic and variables such as global supply chain disruptions, labor shortages and inflation;

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•the length and extent of economic contraction as a result of the COVID-19 ~~pandemic;~~pandemic and variables such as global supply chain disruptions, labor shortages and stoppages and inflation (which could adversely impact us or our customers or suppliers);

•unanticipated loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by severe weather, pandemics or other external events;

•adverse changes or volatility in the local real estate market;

•adverse changes in asset quality and any unanticipated credit deterioration in our loan portfolio including those related to one or more large commercial relationships;

•failure to consummate or a delay in consummating the acquisition of Meridian Bancorp, Inc. ("Meridian"), which is subject to standard closing conditions, including the receipt of regulatory approvals;

•acquisitions, including the acquisition of Meridian, may not produce results at levels or within time frames originally anticipated and may result in unforeseen integration issues or impairment of goodwill and/or other intangibles;

•additional regulatory oversight and related compliance costs, including the additional costs associated with the Company's increase in assets to over $10 billion;

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•changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System;

•higher than expected tax expense, resulting from failure to comply with general tax laws and changes in tax ~~laws, or failure to comply with requirements of the federal New Markets Tax Credit program;~~laws;

•changes in market interest rates for interest earning assets and/or interest bearing liabilities and changes related to the phase-out of LIBOR;

•increased competition in the Company’s market areas;

•adverse weather, changes in climate, natural disasters, the emergence of widespread health emergencies or pandemics, including the magnitude and duration of the COVID-19 pandemic, other public health crises or man-made events could negatively affect our local economies or disrupt our operations, which would have an adverse effect on our business or results of operations;

•a deterioration in the conditions of the securities markets;

•a deterioration of the credit rating for U.S. long-term sovereign debt;

•inability to adapt to changes in information technology, including changes to industry accepted delivery models driven by a migration to the internet as a means of service delivery;

•electronic fraudulent activity within the financial services industry, especially in the commercial banking sector;

•adverse changes in consumer spending and savings habits;

•the inability to retain customers and employees, including those of previous and pending mergers;

•the effect of laws and regulations regarding the financial services industry;

•changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) generally applicable to the Company’s business;

•the Company's potential judgments, claims, damages, penalties, fines and reputational damage resulting from pending or future litigation and regulatory and government actions, including as a result of our participation in and execution of government programs related to the COVID-19 pandemic;

•changes in accounting policies, practices and standards, as may be adopted by the regulatory agencies as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, and other accounting standard setters including, but not limited to, , changes to how the Company accounts for credit losses;

•cyber security attacks or intrusions that could adversely impact our businesses; and

•other unexpected material adverse changes in our operations or earnings.

Further, the foregoing factors may be exacerbated by the ultimate impact of the COVID-19 pandemic, which is unknown at this ~~time.~~time, particularly given the threats posed by the rise and spread of variants of the virus that causes COVID-19. Statements about the COVID-19 pandemic and its potential impact on our business, financial condition, liquidity and results of operations may constitute forward-looking statements and are subject to the risk that actual results may differ, possibly materially, from what is reflected in such statements due to factors and future developments that are uncertain, unpredictable and, in many cases, beyond our control, including the scope, duration and extent of the pandemic and any resurgences, vaccination rates, actions taken by governmental authorities in response to the pandemic and the direct and indirect impact on the Company’s employees, customers, business and third-parties with which the Company conducts business.

Except as required by law, the Company disclaims any intent or obligation to update publicly any such forward-looking statements, whether in response to new information, future events or otherwise. Any public statements or disclosures by the Company following this Report which modify or impact any of the forward-looking statements contained in this Report will be deemed to modify or supersede such statements in this Report.

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Selected Quarterly Financial Data

The selected consolidated financial and other data of the Company set forth below does not purport to be complete and should be read in conjunction with, and is qualified in its entirety by, the more detailed information, including the Consolidated Financial Statements and related notes, appearing elsewhere in this Report.


					Three Months Ended																Three Months Ended
		September 30 2020			June 30 2020			March 31 2020			December 31 2019			September 30 2019				September 30 2021			June 30 2021			March 31 2021			December 31 2020			September 30 2020
		(Dollars in thousands, except per share data)																(Dollars in thousands, except per share data)
Financial condition data	Financial condition data																Financial condition data
Securities	Securities	$	1,106,782		$	1,174,894		$	1,236,780		$	1,190,670		$	1,192,229		Securities	$	2,318,757		$	1,682,751		$	1,431,430		$	1,162,317		$	1,106,782
Loans	Loans	9,405,193			9,359,648			8,916,430			8,873,639			8,913,501			Loans	8,808,013			8,938,988			9,246,691			9,392,866			9,405,193
Allowance for credit losses	Allowance for credit losses	(115,625)			(112,176)			(92,376)			(67,740)			(66,942)			Allowance for credit losses	(92,246)			(102,357)			(107,549)			(113,392)			(115,625)
Goodwill and other intangible assets	Goodwill and other intangible assets	530,749			532,202			533,672			535,492			535,869			Goodwill and other intangible assets	525,261			526,576			527,894			529,313			530,749
Total assets	Total assets	13,173,665			13,022,500			11,980,240			11,395,165			11,538,639			Total assets	14,533,311			14,194,207			13,773,914			13,204,301			13,173,665
Total deposits	Total deposits	10,851,308			10,716,821			9,416,198			9,147,367			9,326,091			Total deposits	12,260,140			11,986,971			11,593,524			10,993,170			10,851,308
Total borrowings	Total borrowings	295,734			295,701			545,985			303,103			292,791			Total borrowings	157,045			171,713			176,387			181,060			295,734
Stockholders’ equity	Stockholders’ equity	1,689,724			1,671,692			1,679,656			1,708,143			1,682,324			Stockholders’ equity	1,755,954			1,741,622			1,715,371			1,702,685			1,689,724
Nonperforming loans	Nonperforming loans	98,025			48,814			48,040			48,049			45,702			Nonperforming loans	45,810			47,818			59,201			66,861			98,025
Nonperforming assets	Nonperforming assets	98,025			48,814			48,040			48,049			48,202			Nonperforming assets	45,810			47,818			59,201			66,861			98,025
Income statement	Income statement																Income statement
Interest income	Interest income	$	97,919		$	99,965		$	107,380		$	113,703		$	119,624		Interest income	$	93,016		$	96,702		$	99,637		$	96,805		$	97,919
Interest expense	Interest expense	7,036			8,867			13,076			13,710			15,026			Interest expense	2,925			3,348			4,053			5,362			7,036
Net interest income	Net interest income	90,883			91,098			94,304			99,993			104,598			Net interest income	90,091			93,354			95,584			91,443			90,883
Provision for loan losses		7,500			20,000			25,000			4,000			—
Provision for credit losses																	Provision for credit losses	(10,000)			(5,000)			(2,500)			—			7,500
Noninterest income	Noninterest income	29,347			28,190			26,435			33,297			31,816			Noninterest income	26,457			24,967			25,246			27,468			29,347
Noninterest expenses	Noninterest expenses	66,658			66,607			66,840			67,445			67,533			Noninterest expenses	72,419			73,302			69,682			73,727			66,658
Net income	Net income	34,873			24,902			26,751			47,477			51,845			Net income	40,007			37,572			41,711			34,641			34,873
Per share data	Per share data																Per share data
Net income—basic	Net income—basic	$	1.06		$	0.76		$	0.78		$	1.38		$	1.51		Net income—basic	$	1.21		$	1.14		$	1.26		$	1.05		$	1.06
Net income—diluted	Net income—diluted	1.06			0.76			0.78			1.38			1.51			Net income—diluted	1.21			1.14			1.26			1.05			1.06
Cash dividends declared	Cash dividends declared	0.46			0.46			0.46			0.44			0.44			Cash dividends declared	0.48			0.48			0.48			0.46			0.46
Book value per share	Book value per share	51.27			50.75			50.50			49.69			48.95			Book value per share	53.14			52.72			51.94			51.65			51.27
Tangible book value per share (1)	Tangible book value per share (1)	35.17			34.59			34.46			34.11			33.36			Tangible book value per share (1)	37.24			36.78			35.96			35.59			35.17
Performance ratios	Performance ratios																Performance ratios
Return on average assets	Return on average assets	1.07		%	0.79		%	0.94		%	1.64		%	1.78		%	Return on average assets	1.11		%	1.08		%	1.26		%	1.04		%	1.07		%
Return on average common equity	Return on average common equity	8.21		%	5.97		%	6.22		%	11.06		%	12.33		%	Return on average common equity	9.04		%	8.70		%	9.87		%	8.10		%	8.21		%
Net interest margin (on a fully tax equivalent basis)	Net interest margin (on a fully tax equivalent basis)	3.13		%	3.25		%	3.74		%	3.90		%	4.03		%	Net interest margin (on a fully tax equivalent basis)	2.78		%	2.99		%	3.25		%	3.10		%	3.13		%
Equity to assets		12.83		%	12.84		%	14.02		%	14.99		%	14.58		%
Dividend payout ratio	Dividend payout ratio	43.45		%	61.85		%	56.54		%	31.85		%	29.13		%	Dividend payout ratio	39.64		%	42.19		%	36.35		%	43.76		%	43.45		%
Asset Quality Ratios	Asset Quality Ratios																Asset Quality Ratios
Nonperforming loans as a percent of gross loans	Nonperforming loans as a percent of gross loans	1.04		%	0.52		%	0.54		%	0.54		%	0.51		%	Nonperforming loans as a percent of gross loans	0.52		%	0.53		%	0.64		%	0.71		%	1.04		%
Nonperforming assets as a percent of total assets	Nonperforming assets as a percent of total assets	0.74		%	0.37		%	0.40		%	0.42		%	0.42		%	Nonperforming assets as a percent of total assets	0.32		%	0.34		%	0.43		%	0.51		%	0.74		%
Allowance for credit losses as a percent of total loans	Allowance for credit losses as a percent of total loans	1.23		%	1.20		%	1.04		%	0.76		%	0.75		%	Allowance for credit losses as a percent of total loans	1.05		%	1.15		%	1.16		%	1.21		%	1.23		%
Allowance for credit losses as a percent of nonperforming loans	Allowance for credit losses as a percent of nonperforming loans	117.95		%	229.80		%	192.29		%	140.98		%	146.47		%	Allowance for credit losses as a percent of nonperforming loans	201.37		%	214.06		%	181.67		%	169.59		%	117.95		%
Capital ratios																	Capital ratios

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Capital ratios
Equity to assets												Equity to assets	12.08	%	12.27	%	12.45	%	12.89	%	12.83	%
Tangible equity to tangible assets (1)												Tangible equity to tangible assets (1)	8.79	%	8.89	%	8.96	%	9.26	%	9.17	%
Tier 1 leverage capital ratio	Tier 1 leverage capital ratio	9.52	%	9.57	%	10.74	%	11.28	%	10.83	%	Tier 1 leverage capital ratio	9.36	%	9.41	%	9.63	%	9.56	%	9.52	%
Common equity tier 1 capital ratio	Common equity tier 1 capital ratio	12.41	%	12.26	%	11.95	%	12.86	%	12.52	%	Common equity tier 1 capital ratio	13.53	%	13.31	%	13.16	%	12.67	%	12.41	%
Tier 1 risk-based capital ratio	Tier 1 risk-based capital ratio	13.08	%	12.94	%	12.60	%	13.53	%	13.19	%	Tier 1 risk-based capital ratio	14.21	%	13.98	%	13.85	%	13.34	%	13.08	%
Total risk-based capital ratio	Total risk-based capital ratio	14.87	%	14.73	%	14.13	%	14.83	%	14.88	%	Total risk-based capital ratio	15.78	%	15.67	%	15.61	%	15.13	%	14.87	%

(1) Represents a non-GAAP measure. For reconciliation to GAAP book value per share, see Item 2 "~~Management's~~"Management's Discussion and Analysis of Financial Condition and Results of Operations - Executive Level Overview - Non-GAAP ~~Measures~~"Measures" below.

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Executive Level Overview

Management evaluates the Company's operating results and financial condition using measures that include net income, earnings per share, return on assets and equity, return on tangible common equity, net interest margin, tangible book value per share, asset quality indicators, and many others. These metrics are used by management to make key decisions regarding the Company's balance sheet, liquidity, interest rate sensitivity, and capital resources and assist with identifying opportunities for improving the Company's financial position or operating results. ~~Results~~The Company is focused on organic growth, but will also consider acquisition opportunities that can provide a satisfactory financial return.

On April 22, 2021 the Company announced the signing of a definitive merger agreement under which the Company will acquire Meridian, with the Company as the surviving entity, and East Boston Savings Bank will merge with and into Rockland Trust (the “Merger Agreement”). Under the Merger Agreement, each share of Meridian common stock will be exchanged for 0.2750 shares of the Company’s common stock. The transaction is intended to qualify as a tax-free reorganization for federal income tax purposes and to provide Meridian stockholders with a tax-free exchange for the ~~nine months ended September 30, 2020 were significantly impacted by $52.5~~Company common stock consideration they will receive in the merger. The Company anticipates issuing approximately 14.2 million shares of ~~loan provision expense. Assumptions regarding~~its common stock in the ~~potential impact~~merger. Based upon the closing price of $79.57 per share of the ~~COVID-19 pandemic were~~Company’s common stock on April 21, 2021, the ~~primary driver~~transaction is valued at approximately $1.15 billion. The closing of the ~~elevated provision levels. The full macroeconomic impacts~~Meridian acquisition, which is expected to occur during the fourth quarter of 2021, was approved by the ~~pandemic remain unknown~~Company's shareholders and ~~are continuing~~by Meridian's stockholders on August 5, 2021, and remains subject to ~~unfold; however,~~required regulatory approvals and satisfaction of other customary closing conditions set forth in the social distancing restrictions that have been put in place for public safety have led to a decline in consumer spending and historically high levels of unemployment as workplaces have been forced to shut down or severely limit operations. The duration of these restrictions has varied, and restrictions have been and may continue to be tightened or re-instituted in light of resurgences of COVID-19 in particular areas. As a result, the Company is not able to provide any assurances that the Company’s earnings, asset quality, regulatory capital ratios and economic condition will not be materially adversely impacted on a short term or long term basis.Merger Agreement.

~~The~~During the ongoing COVID-19 pandemic, the Company has been and ~~continues to remain~~remains committed to supporting and working with its customers as they navigate these unprecedented times. The Company has abided by ~~a state issued mandate~~government mandates requiring a temporary moratorium on foreclosures and has offered a variety of relief measures to its customers consistent with prudent banking principles and regulatory guidance. These relief measures have ~~included:~~included temporary deferrals of loan payments, waiving certain fees and permitting customers easier access to their deposits. The Company’s charitable foundations have engaged and will continue to engage in outreach to local communities during this difficult time and have committed funds to be made available to key nonprofits with urgent needs, such as local food banks. The Company ~~has been an active participant~~concluded its participation in the government-sponsored Paycheck Protection Program ("PPP"), designed to help deploy stimulus funds in the form of loans to businesses within the community, ~~funding over 6,100 loans for a total~~after the second round PPP closed to new applicants. During the first half of ~~$811.7~~2021, the Company funded an additional $370.0 million ~~through the third quarter~~ of ~~2020. The Company received fee revenue of $27.1 million for the origination of these~~ PPP loans ~~which is deferred and amortized over~~in the ~~life~~second round of the ~~loan. As~~program.

While the full macroeconomic impacts of ~~September 30, 2020, $5.4 million in fee revenue has been amortized into income, with~~ the ~~remaining amount~~COVID-19 pandemic have yet to be ~~amortized over~~fully determined, overall conditions have begun to improve as a result of vaccine availability, leading to the ~~remaining loan maturity.~~re-opening of businesses and loosening of certain travel restrictions and social distancing measures. Despite the observed improvements, the future outlook of the COVID-19 pandemic remains highly dependent on the speed of vaccine administration, the efficacy of the vaccines and the possibility for resurgences of COVID-19 or other variants of the virus, including the Delta variant. As a result, the Company is not able to provide any assurances that the Company’s earnings, asset quality, regulatory capital ratios and economic condition will not be materially adversely impacted on a short term or long term basis.

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Interest-Earning Assets

~~Management’s asset strategy typically emphasizes loan growth, primarily in the commercial and home equity portfolios.~~ The results depicted in the following table reflect the trend of the Company's interest-earning assets over the past five quarters. ~~For~~Management’s asset strategy typically emphasizes loan growth, however, the mix of interest earning assets has experienced volatility over the last five quarters due to the unique operating environment. With significant growth in deposits over this time period, along with over $400 million of PPP loans being forgiven and repaid during the first three quarters of 2021, securities and interest earning cash balances have increased significantly, while loan growth has been challenging due to elevated payoffs and lower line utilization. However, during the third quarter of ~~2020,~~2021, the ~~increase in interest-earning assets was driven primarily by an increase in commercial loan balances, reflecting the PPP's loan funding activity, as well as growth in~~Company continued to execute its strategy to deploy excess cash balances ~~attributable to elevated deposits~~into investment securities, resulting in net growth of the securities portfolio of $636.0 million, or 37.8%, from ~~PPP fundings and government stimulus payments, partially offset by decreases in residential and home equity portfolios.~~the prior quarter.

~~Table of Contents~~

Management strives to be disciplined about loan pricing and considers interest rate sensitivity when generating loan assets. In addition, management takes a disciplined approach to credit underwriting, seeking to avoid undue credit risk and loan losses.

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Funding and Net Interest Margin

The Company's overall sources of funding reflect strong business and retail deposit growth with a management emphasis on core deposit growth to fund loans. During the third quarter of ~~2020,~~2021, the Company realized growth in deposits, which increased ~~$134.5~~$273.2 million, or ~~1.3%~~2.3%, from June 30, 2021 to ~~$10.9~~$12.3 billion ~~which was attributable~~at September 30, 2021, reflecting continued robust new account activity in both consumer and business products, as well as increases on existing balances. Core deposits remained at 92.0% of total deposits at September 30, 2021, as higher-cost time deposits continued to ~~a combination of PPP loan fundings, government stimulus programs and an overall customer focus on retaining liquidity.~~run-off. The following chart shows the sources of funding and the percentage of core deposits to total deposits for the trailing five quarters:

The ~~cost of deposits~~2021 third quarter net interest margin continued to be heavily impacted by the increased excess liquidity position, decreasing by 21 basis points from the prior quarter to 2.78%. Net interest income for the third quarter ~~of 2020 was 0.20%, an 8 basis point decrease when~~decreased to $90.1 million compared to $93.4 million for the prior quarter, driven by a $5.0 million reduction in PPP fee income as compared to the ~~second~~prior quarter, along with increases in balances of 2020 due primarily to deposit rate reductions across all products. The Company's net interest margin was 3.13% for the third quarter of 2020 reflecting a 12 basis point decrease from the second quarter of 2020. The table below illustrates the factors that contributed to this decline in the net interest margin for the third quarter:lower yielding, short term assets.


~~Net Interest margin as of June 30, 2020~~	~~3.25~~	%
~~Decreased loan yields~~	~~(0.08)~~	%
~~Nonaccrual interest reversal~~	~~(0.05)~~	%
~~Excess liquidity (cash) levels~~	~~(0.07)~~	%
~~PPP loan activity at 1% interest rate~~	~~(0.04)~~	%
~~PPP loan fee amortization~~	~~0.03~~	%
~~Loan purchase accounting (fair value mark amortization/accretion)~~	~~0.03~~	%
~~Decreased cost of funds~~	~~0.08~~	%
~~Other~~	~~(0.02)~~	%
~~Net interest margin as of September 30, 2020~~	~~3.13~~	%

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The following table shows the net interest margin and cost of deposits trends for the trailing five ~~quarters, noting a continued decline through the third quarter of 2020.~~quarters:

Noninterest Income

Noninterest income is primarily comprised of deposit account fees, interchange and ATM fees, investment management fees and mortgage banking income. The increases in deposit fees, interchange and ATM fees for the three months ended September 30, 2021 were primarily volume driven and reflected a rise in customer spending. Investment management income also increased for the third quarter, primarily attributable to increased insurance commissions. The following chart shows the components of noninterest income over the past five quarters:

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Expense Control

Management seeks to take a balanced approach to noninterest expense control by monitoring ongoing operating expenses while making needed capital expenditures and prudently investing in growth initiatives. The Company’s primary expenses arise from Rockland Trust’s employee salaries and benefits, as well as expenses associated with buildings and equipment. Noninterest expense decreased slightly during the third quarter of 2021, however when combined with lower total revenues, the efficiency ratio remained elevated for the three months ended September 30, 2021. The following chart depicts the Company's efficiency ratio on a GAAP basis (calculated by dividing noninterest expense by the sum of noninterest income and net interest income), as well as the Company's efficiency ratio on a non-GAAP operating basis, if applicable (calculated by dividing noninterest expense, excluding certain noncore items, by the sum of noninterest income, excluding certain noncore items, and net interest income), over the past five quarters:

*See "Non-GAAP Measures" below for a reconciliation to GAAP financial measures.

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Capital

The Company's approach with respect to revenue and expense is designed to promote long-term earnings growth, which in turn contributes to capital growth. ~~During the first half of 2020, the Company completed its previously announced stock repurchase program, repurchasing all 1.5 million shares available under the program at a total cost of $95.1 million~~Strong earnings retention has contributed to capital growth, both on an absolute level and ~~an average cost~~ per share ~~of $63.39.~~basis. The following chart shows the Company's book value and tangible book value per share over the past five quarters (see "Non-GAAP Measures" below for a reconciliation ~~of non-GAAP~~to GAAP financial measures):

*See "Non-GAAP Measures" below for a reconciliation to GAAP financial measures.

The Company declared quarterly cash dividends of ~~$0.46~~$0.48 per share for each of the first three quarters ~~in 2020,~~of 2021, representing an increase of ~~4.5%~~4.3% from the ~~2019~~2020 quarterly dividend rate of ~~$0.44~~$0.46 per share.

Third Quarter ~~2020~~2021 Results

Net income for the third quarter of ~~2020~~2021 was ~~$34.9~~$40.0 million, or ~~$1.06~~$1.21 on a diluted earnings per share basis, and ~~decreased 32.7%~~increased 14.7% and ~~29.8%~~14.2%, respectively, as compared to ~~$51.8~~$34.9 million, or ~~$1.51~~$1.06 on a diluted earnings per share basis, for the prior year third quarter. ~~Results for the third~~Third quarter ~~of 2020 reflected elevated levels~~2021 results were positively impacted by a release of provision for credit losses ~~due~~of $10.0 million, in contrast to the prior year period results, which included a provision for credit losses of $7.5 million reflecting management's assumptions and expectations ~~surrounding the potential future impact of~~related to the COVID-19 pandemic ~~as well as a lower net interest margin as a result~~at that time. The third quarter of 2021 included merger and acquisition costs, while the ~~lower interest rate environment. The~~ third quarter of 2020 included a loss on the termination of a derivative contract, ~~and the third quarter of 2019 included merger and acquisition costs~~ which the Company deems to be noncore. Excluding these noncore items, third quarter ~~2020~~2021 and ~~2019~~2020 operating net income was ~~$35.4~~$41.4 million and ~~$51.7~~$35.4 million, respectively. See "Non-GAAP Measures" below for a reconciliation of non-GAAP measures.

~~2020~~2021 Outlook

Due to the impacts and uncertainties associated with the COVID-19 pandemic, the Company has not provided an updated 2020 Outlook as of September 30, 2020. The Company's prior Outlooks for 2020 as set forth under the heading "2020 Outlook" inDuring the Company's ~~2019 year-end~~third quarter 2021 earnings ~~release issued on January 16, 2020, its Form 10-K and its 2020 Quarterly Reports on Form 10-Q~~call, the Company's Chief Financial Officer provided the following key expectations regarding business activity to serve as near term guidance for ~~both~~ the ~~first and second quarter~~remainder of ~~2020, have been withdrawn and should not be relied upon.~~2021:

•Loan growth is expected to mirror third quarter results, such that continued payoffs will mitigate strong anticipated closing activity, resulting in relatively flat balances. However, any increase in line utilization rates could also serve as a catalyst to stronger loan growth;

•Deposit growth is expected to be in the low single digits;

•Near term deployment of excess liquidity is expected to continue to be in the form of increased securities balances;

•Assuming an anticipated trend of improving general economic factors and no significant unexpected changes in overall asset quality, the provision for credit losses is expected to continue to track at levels below net charge-offs;

•Non-interest income is expected to decrease slightly primarily due to anticipated seasonal declines in deposit fees, reduced mortgage banking income attributable to compressed gain on sale margins and an anticipated increase in loan production retained in the portfolio, as well as reduced equity investment gains which positively impacted both second and third quarter results in 2021;

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•Non-interest expense is expected to increase slightly.

Non-GAAP Measures

When management assesses the Company’s financial performance for purposes of making day-to-day and strategic decisions, it does so based upon the performance of its core banking business, which is primarily derived from the combination of net interest income and noninterest or fee income, reduced by operating expenses, the provision for credit losses, and the impact of income taxes and other noncore items shown in the tables that follow. There are items that impact the Company's results that management believes are unrelated to its core banking business such as merger and acquisition expenses and other items. Management, therefore, computes certain non-GAAP measures including operating net ~~operating earnings~~income and operating EPS, noninterest income on an operating basis, noninterest expense on an operating basis, operating return on average assets, operating return on average equity, and efficiency ratio on an operating basis, which exclude items management considers to be noncore. Management believes excluding these items facilitates greater visibility into the Company’s core banking business and underlying trends that may, to some extent, be obscured by inclusion of such items.

Management also supplements its evaluation of financial performance with analyses of tangible book value per share (which is computed by dividing stockholders' equity less goodwill and identifiable intangible assets, or "tangible common equity", by common shares outstanding) and the tangible common equity to tangible assets ratio (which is computed by dividing tangible common equity by "tangible assets", defined as total assets less goodwill and other intangibles). The Company has included information on tangible book value per share and the tangible common equity to tangible assets ratio because management believes that investors may find it useful to have access to the same analytical tools used by management. As a result of merger and acquisition activity, the Company has recognized goodwill and other intangible assets in conjunction with business combination accounting principles. Excluding the impact of goodwill and other intangibles in measuring asset and capital values for the ratios provided, along with other bank standard capital ratios, provides a framework to compare the capital adequacy of the Company to other companies in the financial services industry.

These non-GAAP measures should not be viewed as a substitute for operating results and other financial measures determined in accordance with GAAP. An item which management deems to be noncore and excludes when computing these non-GAAP measures can be of substantial importance to the Company’s results for any particular quarter or year. The Company’s non-GAAP performance measures including ~~operating earnings, operating EPS, operating return on average assets, operating return on average equity, tangible book value per share and the tangible common equity ratio,~~those non-GAAP measures referenced above, are not necessarily comparable to non-GAAP performance measures which may be presented by other companies.

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The following tables summarize adjustments for noncore items for the periods indicated below and reconcile non-GAAP measures:


		Three Months Ended September 30									Three Months Ended September 30
		Net Income				Diluted Earnings Per Share					Net Income				Diluted Earnings Per Share
		2020		2019		2020		2019			2021		2020		2021		2020
		(Dollars in thousands, except per share data)									(Dollars in thousands, except per share data)
Net income available to common shareholders (GAAP)	Net income available to common shareholders (GAAP)	$	34,873	$	51,845	$	1.06	$	1.51	Net income available to common shareholders (GAAP)	$	40,007	$	34,873	$	1.21	$	1.06
Non-GAAP adjustments	Non-GAAP adjustments									Non-GAAP adjustments
Noninterest income components
Less: gain on sale of loans		—		951		—		0.03

Noninterest expense components	Noninterest expense components									Noninterest expense components

Add: loss on termination of derivatives	Add: loss on termination of derivatives	684		—		0.02		—		Add: loss on termination of derivatives	—		684		—		0.02
Add: merger and acquisition expenses	Add: merger and acquisition expenses	—		705		—		0.02		Add: merger and acquisition expenses	1,943		—		0.06		—

Noncore increases (decreases) to income before taxes		684		(246)		0.02		(0.01)
Net tax (benefit) expense associated with noncore items (1)		(192)		72		(0.01)		—
Noncore increases to income before taxes										Noncore increases to income before taxes	1,943		684		0.06		0.02
Net tax benefit associated with noncore items (1)										Net tax benefit associated with noncore items (1)	(546)		(192)		(0.02)		(0.01)

Total tax impact	Total tax impact	(192)		72		(0.01)		—		Total tax impact	(546)		(192)		(0.02)		(0.01)
Noncore increases (decreases) to net income		492		(174)		0.01		(0.01)
Noncore increases to net income										Noncore increases to net income	1,397		492		0.04		0.01
Operating net income (Non-GAAP)	Operating net income (Non-GAAP)	$	35,365	$	51,671	$	1.07	$	1.50	Operating net income (Non-GAAP)	$	41,404	$	35,365	$	1.25	$	1.07

		Nine Months Ended September 30									Nine Months Ended September 30
		Net Income				Diluted Earnings Per Share					Net Income				Diluted Earnings Per Share
		2020		2019		2020		2019			2021		2020		2021		2020
		(Dollars in thousands, except per share data)									(Dollars in thousands, except per share data)
Net income available to common shareholders (GAAP)	Net income available to common shareholders (GAAP)	$	86,526	$	117,698	$	2.59	$	3.64	Net income available to common shareholders (GAAP)	$	119,290	$	86,526	$	3.61	$	2.59
Non-GAAP adjustments	Non-GAAP adjustments									Non-GAAP adjustments
Noninterest income components
Less: gain on sale of loans		—		951		—		0.03

Noninterest expense components	Noninterest expense components									Noninterest expense components

Add: loss on termination of derivatives	Add: loss on termination of derivatives	684		—		0.02		—		Add: loss on termination of derivatives	—		684		—		0.02
Add: merger and acquisition expenses	Add: merger and acquisition expenses	—		26,433		—		0.82		Add: merger and acquisition expenses	3,674		—		0.11		—
Noncore increases to income before taxes	Noncore increases to income before taxes	684		25,482		0.02		0.79		Noncore increases to income before taxes	3,674		684		0.11		0.02
Net tax benefit associated with noncore items (1)	Net tax benefit associated with noncore items (1)	(192)		(6,686)		(0.01)		(0.21)		Net tax benefit associated with noncore items (1)	(1,033)		(192)		(0.03)		(0.01)
Add: adjustment for tax effect of previously incurred merger and acquisition expenses		—		650		—		0.02

Noncore increases to net income	Noncore increases to net income	492		19,446		0.01		0.60		Noncore increases to net income	2,641		492		0.08		0.01
Operating net income (Non-GAAP)	Operating net income (Non-GAAP)	$	87,018	$	137,144	$	2.61	$	4.24	Operating net income (Non-GAAP)	$	121,931	$	87,018	$	3.69	$	2.61

(1)The net tax benefit associated with noncore items is determined by assessing whether each noncore item is included or excluded from net taxable income and applying the Company's combined marginal tax rate to only those items included in net taxable income.

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Three Months Ended
September 30
2020 June 30
2020 March 31
2020 December 31
2019 September 30
2019
(Dollars in thousands)
Net interest income (GAAP) $ 90,883 $ 91,098 $ 94,304 $ 99,993 $ 104,598 (a)
Noninterest income (GAAP) $ 29,347 $ 28,190 $ 26,435 $ 33,297 $ 31,816 (b)
Less:
Gain on sale of loans — — — — 951
Noninterest income on an operating basis (Non-GAAP) $ 29,347 $ 28,190 $ 26,435 $ 33,297 $ 30,865 (c)
Noninterest expense (GAAP) $ 66,658 $ 66,607 $ 66,840 $ 67,445 $ 67,533 (d)
Less:
Merger and acquisition expense — — — — 705
Loss on termination of derivative 684 — — — —
Noninterest expense on an operating basis (Non-GAAP) $ 65,974 $ 66,607 $ 66,840 $ 67,445 $ 66,828 (e)
Total revenue (GAAP) $ 120,230 $ 119,288 $ 120,739 $ 133,290 $ 136,414 (a+b)
Total operating revenue (Non-GAAP)* $ 120,230 $ 119,288 $ 120,739 $ 133,290 $ 135,463 (a+c)
Ratios
Noninterest income as a % of revenue (GAAP based) 24.41 % 23.63 % 21.89 % 24.98 % 23.32 % (b/(a+b))
Noninterest income as a % of revenue on an operating basis (Non-GAAP)* 24.41 % 23.63 % 21.89 % 24.98 % 22.78 % (c/(a+c))
Efficiency ratio (GAAP based) 55.44 % 55.84 % 55.36 % 50.60 % 49.51 % (d/(a+b))
Efficiency ratio on an operating basis (Non-GAAP) 54.87 % 55.84 % 55.36 % 50.60 % 49.33 % (e/(a+c))


	Three Months Ended
	September 30 2021			June 30 2021			March 31 2021			December 31 2020			September 30 2020
	(Dollars in thousands)
Net interest income (GAAP)	$	90,091		$	93,354		$	95,584		$	91,443		$	90,883		(a)

Noninterest income (GAAP)	$	26,457		$	24,967		$	25,246		$	27,468		$	29,347		(b)






Noninterest expense (GAAP)	$	72,419		$	73,302		$	69,682		$	73,727		$	66,658		(c)
Less:

Merger and acquisition expense	1,943			1,731			—			—			—


Loss on termination of derivatives	—			—			—			—			684
Noninterest expense on an operating basis (Non-GAAP)	$	70,476		$	71,571		$	69,682		$	73,727		$	65,974		(d)

Total revenue (GAAP)	$	116,548		$	118,321		$	120,830		$	118,911		$	120,230		(a+b)


Ratios
Noninterest income as a % of revenue (GAAP based)	22.70		%	21.10		%	20.89		%	23.10		%	24.41		%	(b/(a+b))

Efficiency ratio (GAAP based)	62.14		%	61.95		%	57.67		%	62.00		%	55.44		%	(c/(a+b))
Efficiency ratio on an operating basis (Non-GAAP)	60.47		%	60.49		%	57.67		%	62.00		%	54.87		%	(d/(a+b))

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The following table summarizes the calculation of the Company's tangible common equity to tangible assets ratio, ~~and~~ tangible book value per share, and loan and allowance metrics, exclusive of PPP loan balances as of the dates indicated:


		September 30 2020			June 30 2020			March 31 2020			December 31 2019			September 30 2019					September 30 2021			June 30 2021			March 31 2021			December 31 2020			September 30 2020
		(Dollars in thousands, except per share data)																	(Dollars in thousands, except per share data)
Tangible common equity	Tangible common equity																	Tangible common equity
Stockholders' equity (GAAP)	Stockholders' equity (GAAP)	$	1,689,724		$	1,671,692		$	1,679,656		$	1,708,143		$	1,682,324		(a)	Stockholders' equity (GAAP)	$	1,755,954		$	1,741,622		$	1,715,371		$	1,702,685		$	1,689,724		(a)
Less: Goodwill and other intangibles	Less: Goodwill and other intangibles	530,749			532,202			533,672			535,492			535,869				Less: Goodwill and other intangibles	525,261			526,576			527,895			529,313			530,749
Tangible common equity (Non-GAAP)	Tangible common equity (Non-GAAP)	1,158,975			1,139,490			1,145,984			1,172,651			1,146,455			(b)	Tangible common equity (Non-GAAP)	1,230,693			1,215,046			1,187,476			1,173,372			1,158,975			(b)
Tangible assets	Tangible assets																	Tangible assets
Assets (GAAP)	Assets (GAAP)	13,173,665			13,022,500			11,980,240			11,395,165			11,538,639			(c)	Assets (GAAP)	14,533,311			14,194,207			13,773,914			13,204,301			13,173,665			(c)
Less: Goodwill and other intangibles	Less: Goodwill and other intangibles	530,749			532,202			533,672			535,492			535,869				Less: Goodwill and other intangibles	525,261			526,576			527,895			529,313			530,749
Tangible assets (Non-GAAP)	Tangible assets (Non-GAAP)	$	12,642,916		$	12,490,298		$	11,446,568		$	10,859,673		$	11,002,770		(d)	Tangible assets (Non-GAAP)	$	14,008,050		$	13,667,631		$	13,246,019		$	12,674,988		$	12,642,916		(d)
Common shares	Common shares	32,955,547			32,942,110			33,260,005			34,377,388			34,366,781			(e)	Common shares	33,043,812			33,037,859			33,024,882			32,965,692			32,955,547			(e)

Common equity to assets ratio (GAAP)	Common equity to assets ratio (GAAP)	12.83		%	12.84		%	14.02		%	14.99		%	14.58		%	(a/c)	Common equity to assets ratio (GAAP)	12.08		%	12.27		%	12.45		%	12.89		%	12.83		%	(a/c)
Tangible common equity to tangible assets ratio (Non-GAAP)	Tangible common equity to tangible assets ratio (Non-GAAP)	9.17		%	9.12		%	10.01		%	10.80		%	10.42		%	(b/d)	Tangible common equity to tangible assets ratio (Non-GAAP)	8.79		%	8.89		%	8.96		%	9.26		%	9.17		%	(b/d)
Book value per share (GAAP)	Book value per share (GAAP)	$	51.27		$	50.75		$	50.50		$	49.69		$	48.95		(a/e)	Book value per share (GAAP)	$	53.14		$	52.72		$	51.94		$	51.65		$	51.27		(a/e)
Tangible book value per share (Non-GAAP)	Tangible book value per share (Non-GAAP)	$	35.17		$	34.59		$	34.46		$	34.11		$	33.36		(b/e)	Tangible book value per share (Non-GAAP)	$	37.24		$	36.78		$	35.96		$	35.59		$	35.17		(b/e)

Total loans (GAAP)																		Total loans (GAAP)	$	8,808,013		$	8,938,988		$	9,246,691		$	9,392,866		$	9,405,193
Total loans, excluding PPP (Non-GAAP)																		Total loans, excluding PPP (Non-GAAP)	$	8,424,442		$	8,456,338		$	8,400,390		$	8,600,956		$	8,593,470

Allowance as a % of total loans (GAAP)																		Allowance as a % of total loans (GAAP)	1.05		%	1.15		%	1.16		%	1.21		%	1.23		%
Allowance as a % of total loans, excluding PPP (Non-GAAP)																		Allowance as a % of total loans, excluding PPP (Non-GAAP)	1.09		%	1.21		%	1.28		%	1.32		%	1.35		%

Critical Accounting Policies

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. The Company believes that the most critical accounting policies are those which the Company’s financial condition depends upon, and which involve the most complex or subjective decisions or assessments.

There have been no material changes in critical accounting policies during the first nine months of ~~2020 aside from the adoption of the CECL accounting standard effective January 1, 2020. The Company's critical accounting policy for the Allowance for Credit Losses is as follows:~~

~~Allowance for Credit Losses~~ The Company’s allowance for credit losses provides for probable losses based upon current expected credit losses within the loan and securities portfolios. Arriving at an appropriate amount of allowance for credit losses involves a high degree of judgment.

For loans, the Company estimates credit losses on a collective basis for loans sharing similar risk characteristics using a quantitative model combined with an assessment of certain qualitative factors designed to address forecast risk and model risk inherent in the quantitative model output. The quantitative model utilizes a factor based approach to estimate expected credit losses using a Probability of Default ("PD"), Loss Given Default ("LGD") and Exposure at Default ("EAD"), which are derived from internal historical default and loss experience. Management’s judgment is based upon its assessment of PD, LGD, and EAD. Changes in these estimates could be due to a number of circumstances which may have a direct impact on the provision for credit losses and may result in changes to the amount of allowance. The allowance is determined based upon the application of the Company’s methodology for assessing the adequacy of the allowance for credit losses, which considers historical and expected loss factors, loan portfolio composition and other relevant indicators. Economic forecasts are incorporated into the estimate over a reasonable and supportable forecast period, beyond which is a reversion2021. Refer to the Company's historical long-run average. This methodology involves management’s judgment regarding the application and use of such factors, including the effects of changes to the prevailing economic environment in its estimate of the required amounts of allowance. Additionally, the model estimates expected credit losses using loan level data over the contractual life of the exposure, considering the effect of prepayments, which is subject to management's judgment based on analysis to determine the appropriate level of assumed prepayments.

Loans that no longer share similar risk characteristics with any pools of assets are subject to individual assessment and are removed from the collectively assessed pools to avoid double counting. For the loans that are individually assessed, the

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Company uses either a discounted cash flow (“DCF”) approach or a fair value of collateral approach. The latter approach is used for loans deemed to be collateral dependent or when foreclosure is probable. The allowance is increased by provisions for credit losses and by recoveries of loans previously charged-off and is reduced by loans charged-off. For additional discussion of the Company’s methodology of assessing the adequacy of the allowance for credit losses, see ~~Note 4, "Loans, Allowance for Credit Losses and Credit Quality"~~ ~~to the Consolidated Financial Statements included in Part I. Item 1 of this Report.~~

For held to maturity securities, the Company measures expected credit losses on a collective basis by major security type. Management classifies the held-to-maturity portfolio into the following major security types: U.S. Government Agency, U.S. Treasury, Agency Mortgage-Backed Securities, Agency Collateralized Mortgage Obligations, Small Business Administration Pooled Securities, and Single Issuer Trust Preferred Securities. Securities in the Company's held to maturity portfolio are guaranteed by either the U.S. Federal Government or other government sponsored agencies with a long history of no credit losses. As a result, management has determined these securities to have a zero loss expectation and therefore does not estimate an allowance for credit losses on these securities.

For available for sale securities, the Company reviews any holdings in an unrealized loss position, management will first evaluate whether there is intent to sell, or if it is more likely than not that the Company will be required to sell a security prior to anticipated recovery of its amortized cost basis. If either of these criteria are met, the Company will record a write-down of the security's amortized cost basis to fair value through income. For those available for sale securities which do not meet the intent or requirement to sell criteria, management will evaluate whether the decline in fair value is a result of credit related matters or other factors. In performing this assessment, Management considers the creditworthiness of the issuer including whether the security is guaranteed by the U.S. Federal Government or other government agency, the extent to which fair value is less than amortized cost, and changes in credit rating during the period, among other factors. If this assessment indicates the existence of credit losses, the security will be written down to fair value, as determined by a discounted cash flow analysis. To the extent the estimated cash flows do not support the amortized cost, the deficiency is considered to be due to credit loss and is recognized in earnings.

~~For additional discussion of the Company’s methodology of assessing the adequacy of the allowance for credit losses for its security portfolios, see~~ ~~Note 3, "Securities"~~ ~~to the Consolidated Financial Statements included in Part I. Item 1 of this Report.~~

~~Refer to the 2019~~2020 Form 10-K for a complete listing of critical accounting policies.

FINANCIAL POSITION

Securities Portfolio The Company’s securities portfolio consists of trading securities, equity securities, securities available for sale, and securities which management intends to hold until maturity. Securities ~~decreased~~increased by ~~$83.9 million,~~$1.2 billion, or ~~7.0%~~99.5%, at September 30, ~~2020~~2021 as compared to December 31, ~~2019,~~2020, reflecting $1.4 billionofpurchases offset by paydowns, called securities, and ~~maturities offset by $153.7 million~~maturities. Purchases made during 2021 reflect the Company's continued direct strategy to deploy a portion of ~~purchases.~~excess cash balances into investment securities. The ratio of securities to total assets was ~~8.40%~~16.0% and ~~10.45%~~8.8% at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The Company estimates expected credit losses for its available for sale and held to maturity securities in accordance with the current expected credit loss ("CECL") methodology. Further details regarding the Company's ~~analysis~~measurement of expected credit losses on securities can be found in Note 3 “Securities” within the Notes to ~~the~~ Consolidated Financial Statements included in Part I. Item 1 of this Report.

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Residential Mortgage Loan Sales The Company’s primary loan sale activity arises from the sale of government sponsored enterprise eligible residential mortgage loans. The Company originates residential loans with the intention of selling them in the secondary market or ~~to hold~~holding them in the Company's residential real estate portfolio. When a loan is sold, the Company enters into agreements that contain representations and warranties about the characteristics of the loans sold and their origination. The Company may be required to either repurchase mortgage loans or to indemnify the purchaser from losses if representations and warranties are breached. The Company incurred no material losses related to residential mortgage repurchases during the three and nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

The Company experienced strong closing volumes within the residential real estate portfolio during the three and nine months ended September 30, 2021, with a larger portion of residential real estate closings being retained in the portfolio rather than sold into the secondary market as compared to prior year periods. The following table shows the total residential real estate loans that were closed and whether the amounts were held in the portfolio or sold/held for sale in the secondary market during the periods indicated:

Table 1 - Closed Residential Real Estate Loans


		Three Months Ended September 30				Nine Months Ended September 30					Three Months Ended September 30				Nine Months Ended September 30
		2020		2019		2020		2019			2021		2020		2021		2020
		(Dollars in thousands)									(Dollars in thousands)
Held in portfolio	Held in portfolio	$	54,826	$	43,098	$	125,392	$	133,111	Held in portfolio	$	65,832	$	54,826	$	279,176	$	125,392
Sold or held for sale in the secondary market	Sold or held for sale in the secondary market	262,323		232,129		654,772		450,203		Sold or held for sale in the secondary market	183,794		262,323		611,795		654,772
Total closed loans	Total closed loans	$	317,149	$	275,227	$	780,164	$	583,314	Total closed loans	$	249,626	$	317,149	$	890,971	$	780,164

The table below reflects additional information related to the loans which were sold during the periods indicated:

Table 2 - Residential Mortgage Loan Sales


		Three Months Ended September 30				Nine Months Ended September 30					Three Months Ended September 30				Nine Months Ended September 30
		2020		2019		2020		2019			2021		2020		2021		2020
		(Dollars in thousands)									(Dollars in thousands)
Sold with servicing rights released	Sold with servicing rights released	$	252,907	$	169,532	$	581,206	$	334,426	Sold with servicing rights released	$	171,256	$	252,907	$	618,171	$	581,206
Sold with servicing rights retained (1)	Sold with servicing rights retained (1)	—		45,829		45,394		69,465		Sold with servicing rights retained (1)	3,029		—		11,116		45,394
Total loans sold	Total loans sold	$	252,907	$	215,361	$	626,600	$	403,891	Total loans sold	$	174,285	$	252,907	$	629,287	$	626,600

(1)~~The Company had recourse on all~~ All loans sold with servicing rights retained ~~as of~~during the nine months ended September 30, ~~2020 and 2019, respectively.~~2021 were sold without recourse.

When a loan is sold, the Company may decide to also sell the servicing of sold loans for a servicing release premium, ~~simultaneous~~simultaneously with the sale of the loan, or the Company may opt to sell the loan and retain the servicing. In the event of a sale with servicing rights retained, a mortgage servicing asset is established, which represents the then current estimated fair value based on market prices for comparable mortgage servicing contracts, when available, or alternatively is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. Servicing rights are recorded in other assets in the consolidated balance sheets, are amortized in proportion to and over the period of estimated net servicing income, and are assessed for impairment based on fair value at each reporting date. Impairment is determined by stratifying the rights based on predominant characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance, to the extent that fair value is less than the capitalized amount. If the Company later determines that all or a portion of the impairment no longer exists, a reduction of the allowance may be recorded as an increase to income. The principal balance of loans serviced by the Bank on behalf of investors was ~~$508.7~~$342.3 million, ~~$656.4~~$453.7 million and ~~$649.4~~$508.7 million at September 30, ~~2020,~~2021, December 31, ~~2019,~~2020, and September 30, ~~2019,~~2020, respectively.

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The following table shows the adjusted cost of the servicing rights associated with these loans and the changes for the periods indicated:

Table 3 - Mortgage Servicing Asset


		Three Months Ended September 30				Nine Months Ended September 30					Three Months Ended September 30				Nine Months Ended September 30
		2020		2019		2020		2019			2021		2020		2021		2020
		(Dollars in thousands)									(Dollars in thousands)
Balance at beginning of period	Balance at beginning of period	$	3,321	$	4,587	$	5,116	$	1,445	Balance at beginning of period	$	2,295	$	3,321	$	2,365	$	5,116
Additions	Additions	—		419		424		632		Additions	30		—		95		424
Acquired portfolio		—		—		—		3,198

Amortization	Amortization	(316)		(215)		(927)		(483)		Amortization	(244)		(316)		(769)		(927)
Change in valuation allowance	Change in valuation allowance	(250)		(34)		(1,858)		(35)		Change in valuation allowance	122		(250)		512		(1,858)
Balance at end of period	Balance at end of period	$	2,755	$	4,757	$	2,755	$	4,757	Balance at end of period	$	2,203	$	2,755	$	2,203	$	2,755

See Note 9,6, “Derivative and Hedging Activities” within the Notes to ~~the~~ Consolidated Financial Statements included in Part I. Item 1 of this Report for more information on mortgage activity and mortgage related derivatives.

Loan Portfolio ~~The Company’s loan portfolio increased~~Total loans at September 30, 2021 decreased by $531.6 million during the first nine months of 2020. The overall increase is primarily attributable to the Company's participation in the PPP, which resulted in aggregate program specific loan fundings of $811.7 million during the second and third quarters of 2020. When excluding PPP activity, loans declined by $280.2$584.9 million, or ~~3.16%~~6.23%, when compared to December 31, ~~2019. The majority~~2020, which was primarily attributable to a net reduction in PPP loan balances of ~~this decline occurred~~$408.3 million, or 51.6%. Despite strong origination volumes and loan pipelines across all products, overall portfolio growth continued to be constrained by ongoing paydowns and re-financing activity. Excluding PPP loans of $383.6 million and $791.9 million outstanding at September 30, 2021 and December 31, 2020, respectively, total loans declined by $176.5 million or 2.05%, for the nine months ended September 30, 2021. Exclusive of PPP loans, commercial loan balances decreased by $36.2 million, or 0.6%, from December 31, 2020 to September 30, 2021, as strong pipelines and closing activity continued to be counterbalanced by elevated payoffs and lower line utilization levels. Consumer loan balances also declined with increased prepayments and refinancing activity, as well as lower home equity line utilization, which resulted in reductions of 5.7% and 6.4% within the residential mortgage and home equity portfolios, respectively, for the nine months ended September 30, 2021. (See "Non-GAAP Measures" in the ~~commercial and industrial and residential portfolios, as commercial and industrial balances reflect reduced line utilization across multiple products, while residential declines continue~~"Executive Level Overview" above for a reconciliation to ~~reflect~~ the ~~lower rate environment driving~~GAAP financial measure, including the ~~majority~~measure of ~~production to be sold into the secondary market.~~total loans, excluding PPP).

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The Company's commercial loan portfolio is comprised primarily of commercial and industrial loans, ~~as well as~~ commercial real estate loans. Management considers the Company’s commercial and industrial portfolio to be well-diversified with loans to various types of industries. ~~As previously stated, the~~The Company's participation in the PPP resulted in significant loan fundings within the commercial and industrial ~~portfolio~~category throughout 2020 and ~~totaled $811.7~~first half of 2021, with outstanding balances totaling $383.6 million at September 30, ~~2020,~~2021, comprising ~~39.4%~~23.4% of the total ~~portfolio.~~commercial and industrial category. Accordingly, the composition of the portfolio by sector is skewed as compared to periods prior to the commencement of the PPP in the second quarter of 2020, as the PPP loans are reflected within the various sectors below. In connection with PPP loan originations during the first half of 2021, the Company recognized fee revenue of $18.3 million, which is deferred and amortized over the life of the loan. During the three and nine months ended September 30, 2021, the Company amortized into income $2.2 million and $18.9 million, respectively, in PPP fee revenue related to loans forgiven under the program. The following pie chart shows the diversification of the commercial and industrial portfolio as of September 30, ~~2020:~~ 2021:


	(Dollars in thousands)
Average loan size (excluding floor plan tranches)	$	~~203~~218
Largest individual commercial and industrial loan outstanding	$	~~22,801~~24,962
Commercial and industrial nonperforming loans/commercial and industrial loans	~~1.79~~1.17		%

The Company’s commercial real estate loan portfolio, inclusive of commercial construction, is the Company’s largest loan type concentration. The Company believes that this portfolio is also well-diversified with loans secured by a variety of property types, such as owner-occupied and nonowner-occupied commercial, retail, office, industrial, warehouse, and other special purpose properties, such as hotels, motels, nursing homes, restaurants, churches, recreational facilities, marinas, and golf courses. Commercial real estate also includes loans secured by certain residential-related property types, including multi-family apartment buildings, residential development tracts and condominiums. The following pie chart shows the diversification of the commercial real estate loan portfolio as of September 30, ~~2020:~~2021:

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	(Dollars in thousands)
Average loan size	$	~~1,115~~1,117
Largest individual commercial real estate mortgage outstanding	$	~~32,000~~33,354
Commercial real estate nonperforming loans/commercial real estate loans	~~0.81~~0.25		%
Owner occupied commercial real estate loans/commercial real estate loans	~~14.3~~15.1		%

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The Company's consumer portfolio primarily consists of both fixed-rate and adjustable-rate residential real estate loans as well as residential construction lending related to single-home residential development within the Company's market area. The Company also provides home equity loans and lines of credit that may be made as a ~~fixed rate~~fixed-rate term loan or under a variable rate revolving line of credit secured by a first or junior mortgage on the borrower's residence or second home. Additionally, the Company makes loans for a wide variety of other personal needs. Other consumer loans primarily consist of installment loans and overdraft protections. The residential real estate, home equity and other consumer portfolios totaled ~~$2.5~~$2.2 billion at September 30, ~~2020,~~2021, as noted below:

Asset Quality The Company continually monitors the asset quality of the loan portfolio using all available information. Based on this assessment, loans demonstrating certain payment issues or other weaknesses may be categorized as delinquent, nonperforming and/or put on nonaccrual status. In the course of resolving such loans, the Company may choose to restructure the contractual terms of certain loans to match the borrower’s ability to repay the loan based on their current financial condition. If a restructured loan meets certain criteria, it may be categorized as a troubled debt restructuring ("TDR"). In addition, the Company has ~~been offering needs based~~offered need-based payment relief options for commercial and small business loans, residential mortgages, and home equity loans and lines of credit in response to the COVID-19 pandemic. ~~These~~In accordance with the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"), these modifications ~~will~~are not be accounted for as TDRs or reflected as delinquent or non-accrual loans if the borrower was in compliance with the loan terms ~~of their loans~~ as of December 31, 2019.

Delinquency The Company’s philosophy toward managing its loan portfolios is predicated upon careful monitoring, which stresses early detection and response to delinquent and default situations. The Company seeks to make arrangements to resolve any delinquent or default situation over the shortest possible time frame. Generally, the Company requires that a delinquency notice be mailed to a borrower upon expiration of a grace period (typically no longer than 15 days beyond the due date). Reminder notices may be sent and telephone calls may be made prior to the expiration of the grace period. If the delinquent status is not resolved within a reasonable time frame following the mailing of a delinquency notice, the Bank’s personnel charged with managing its loan portfolios contacts the borrower to ascertain the reasons for delinquency and the prospects for payment. Any subsequent actions taken to resolve the delinquency will depend upon the nature of the loan and the length of time that the loan has been delinquent. The borrower’s needs are considered as much as reasonably possible without jeopardizing the Bank’s position. A late charge is usually assessed on loans upon expiration of the grace period.

Nonaccrual Loans As a general rule, loans 90 days or more past due with respect to principal or interest are classified as nonaccrual loans. However, certain loans that are 90 days or more past due may be kept on an accruing status if the loans are well secured and in the process of collection. The Company may also put a junior lien mortgage on nonaccrual status as a result of delinquency with respect to the first position, which is held by another financial institution, while the junior lien is currently

~~performing.~~ Income accruals are suspended on all nonaccrual loans and all previously accrued

and uncollected interest is reversed against current income. A loan remains on nonaccrual status until it becomes current with respect to principal and interest (and in certain instances remains current for up to six months), the loan is liquidated, or when the loan is determined to be uncollectible and is charged-off against the allowance for credit losses.

Troubled Debt Restructurings In the course of resolving problem loans, the Company may choose to restructure the contractual terms of certain loans. The Company attempts to work out an alternative payment schedule with the borrower in order to avoid or cure a default. Loans that are modified are reviewed by the Company to identify if a TDR has occurred, which is when, for economic or legal reasons related to a borrower’s financial difficulties, the Bank grants a concession to the borrower that it would not otherwise consider. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status and the restructuring of the loan may include adjustments to interest rates, extensions of maturity, consumer loans where the borrower's obligations have been effectively discharged through Chapter 7 Bankruptcy and the borrower has not reaffirmed the debt to the Bank, and other actions intended to minimize economic loss and avoid foreclosure or repossession of collateral. If such efforts by the Bank do not result in satisfactory performance, the loan is referred to legal counsel, at which time foreclosure proceedings are initiated. At any time prior to a sale of the property at foreclosure, the Bank may terminate foreclosure proceedings if the borrower is able to work out a satisfactory payment plan.

It is the Company’s policy to have any restructured loans which are on nonaccrual status prior to being modified remain on nonaccrual status for six months, subsequent to being modified, before management considers their return to accrual status. If the restructured loan is on accrual status prior to being modified, it is reviewed to determine if the modified loan should remain on accrual status. Loans that are considered TDRs are classified as performing, unless they are on nonaccrual status or ~~greater than~~are delinquent for 90 days ~~delinquent.~~or more. Loans classified as TDRs remain classified as such for the life of the loan, except in limited circumstances, when it may be determined that the borrower is performing under modified terms and the restructuring agreement specified an interest rate greater than or equal to an acceptable market rate for a comparable new loan at the time of the restructuring.

Purchased Credit Deteriorated Loans Purchased Credit Deteriorated ("PCD") loans are acquired loans which have shown a more-than-insignificant deterioration in credit quality since origination. PCD loans are recorded at amortized cost with an allowance for credit losses recorded upon purchase, as appropriate. ~~PCD loans are not subject to the same classification as nonaccrual as originated loans.~~

Nonperforming Assets Nonperforming assets are typically comprised of nonperforming loans and other real estate owned. Nonperforming loans consist of nonaccrual loans and loans that are ~~more than~~ 90 days or more past due but still accruing interest.

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The following table sets forth information regarding nonperforming assets held by the Company at the dates indicated:

Table 4 - Nonperforming Assets


		September 30 2020			December 31 2019			September 30 2019				September 30 2021			December 31 2020			September 30 2020
		(Dollars in thousands)										(Dollars in thousands)
Loans accounted for on a nonaccrual basis	Loans accounted for on a nonaccrual basis										Loans accounted for on a nonaccrual basis
Commercial and industrial	Commercial and industrial	$	36,851		$	22,574		$	23,507		Commercial and industrial	$	19,275		$	34,729		$	36,851
Commercial real estate	Commercial real estate	38,164			3,016			1,666			Commercial real estate	11,788			10,195			38,164
Small business	Small business	542			311			112			Small business	46			825			542
Residential real estate	Residential real estate	16,229			13,360			11,281			Residential real estate	10,872			15,528			16,229
Home equity	Home equity	6,159			6,570			6,720			Home equity	3,746			5,427			6,159
Other consumer	Other consumer	79			61			74			Other consumer	83			156			79
Total (1)	Total (1)	$	98,024		$	45,892		$	43,360		Total (1)	$	45,810		$	66,860		$	98,024
Loans past due 90 days or more but still accruing	Loans past due 90 days or more but still accruing										Loans past due 90 days or more but still accruing
Commercial real estate (2)		—			218			—
Residential real estate (2)		—			1,652			1,807
Home equity (2)		—			265			511

Other consumer	Other consumer	1			22			24			Other consumer	—			1			1
Total	Total	$	1		$	2,157		$	2,342		Total	$	—		$	1		$	1
Total nonperforming loans	Total nonperforming loans	$	98,025		$	48,049		$	45,702		Total nonperforming loans	$	45,810		$	66,861		$	98,025

Other real estate owned	Other real estate owned	—			—			2,500			Other real estate owned	—			—			—

Total nonperforming assets	Total nonperforming assets	$	98,025		$	48,049		$	48,202		Total nonperforming assets	$	45,810		$	66,861		$	98,025
Nonperforming loans as a percent of gross loans	Nonperforming loans as a percent of gross loans	1.04		%	0.54		%	0.51		%	Nonperforming loans as a percent of gross loans	0.52		%	0.71		%	1.04		%
Nonperforming assets as a percent of total assets	Nonperforming assets as a percent of total assets	0.74		%	0.42		%	0.42		%	Nonperforming assets as a percent of total assets	0.32		%	0.51		%	0.74		%

(1)Inclusive of TDRs on nonaccrual status of ~~$23.8~~$21.1 million, ~~$24.8~~$22.2 million, and ~~$26.2~~$23.8 million at September 30, ~~2020,~~2021, December 31, ~~2019,~~2020, and September 30, ~~2019,~~2020, respectively.

~~(2)~~Represents purchased credit impaired ("PCI") loans that were accruing interest due to expectation of future cash collections. Under CECL guidance, the concept of PCI loans was eliminated and therefore not applicable for periods subsequent to the Company's adoption on January 1, 2020.

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The following table summarizes the changes in nonperforming assets for the periods indicated:

Table 5 - Activity in Nonperforming Assets


				Three Months Ended
				March 31
							2021						2020
		Three Months Ended						Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30 2020			September 30 2019			September 30 2020		September 30 2019			September 30 2021		September 30 2020		September 30 2021		September 30 2020
		(Dollars in thousands)											(Dollars in thousands)
Nonperforming assets beginning balance	Nonperforming assets beginning balance	$	48,814		$	48,183		$	48,049	$	45,418	Nonperforming assets beginning balance	$	47,818	$	48,814	$	66,861	$	48,049
New to nonperforming (1)	New to nonperforming (1)	60,850			4,946			75,580		11,604		New to nonperforming (1)	4,613		60,850		9,205		75,580
Acquired nonperforming loans		—			—			—		2,317

Loans charged-off	Loans charged-off	(4,304)			(707)			(5,748)		(1,738)		Loans charged-off	(332)		(4,304)		(4,499)		(5,748)
Loans paid-off	Loans paid-off	(5,050)			(3,041)			(12,339)		(9,501)		Loans paid-off	(3,488)		(5,050)		(17,877)		(12,339)

Loans restored to performing status	Loans restored to performing status	(2,229)			(714)			(7,319)		(2,212)		Loans restored to performing status	(2,813)		(2,229)		(8,143)		(7,319)

Acquired other real estate owned		—			—			—		2,818
Valuation write down		—			(389)			—		(389)

Other	Other	(56)			(76)			(198)		(115)		Other	12		(56)		263		(198)
Nonperforming assets ending balance	Nonperforming assets ending balance	$	98,025		$	48,202		$	98,025	$	48,202	Nonperforming assets ending balance	$	45,810	$	98,025	$	45,810	$	98,025

(1)The ~~increase in~~higher balance for the periods ended September 30, 2020 ~~balance reflects the migration of~~primarily reflect three large commercial relationships that were newly nonperforming, all related to industries previously identified as being highly impacted by the COVID-19 pandemic.

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The following table sets forth information regarding troubled debt restructured loans as of the dates indicated:

Table 6 - Troubled Debt Restructurings


		September 30 2020			December 31 2019			September 30 2019				September 30 2021			December 31 2020			September 30 2020
		(Dollars in thousands)										(Dollars in thousands)
Performing troubled debt restructurings	Performing troubled debt restructurings	$	17,521		$	19,599		$	20,182		Performing troubled debt restructurings	$	15,950		$	16,983		$	17,521
Nonaccrual troubled debt restructurings	Nonaccrual troubled debt restructurings	23,810			24,766			26,232			Nonaccrual troubled debt restructurings	21,104			22,209			23,810
Total	Total	$	41,331		$	44,365		$	46,414		Total	$	37,054		$	39,192		$	41,331
Performing troubled debt restructurings as a % of total loans	Performing troubled debt restructurings as a % of total loans	0.19		%	0.22		%	0.23		%	Performing troubled debt restructurings as a % of total loans	0.18		%	0.18		%	0.19		%
Nonaccrual troubled debt restructurings as a % of total loans	Nonaccrual troubled debt restructurings as a % of total loans	0.25		%	0.28		%	0.29		%	Nonaccrual troubled debt restructurings as a % of total loans	0.24		%	0.24		%	0.25		%
Total troubled debt restructurings as a % of total loans	Total troubled debt restructurings as a % of total loans	0.44		%	0.50		%	0.52		%	Total troubled debt restructurings as a % of total loans	0.42		%	0.42		%	0.44		%

The following table summarizes changes in TDRs for the periods indicated:

Table 7 - Activity in Troubled Debt Restructurings

Three Months Ended Nine Months Ended
September 30
2020 September 30
2019 September 30
2020 September 30
2019
(Dollars in thousands)
TDRs beginning balance $ 41,839 $ 50,264 $ 44,365 $ 53,197
New to TDR status 625 290 1,874 622
Paydowns (1,133) (4,131) (4,930) (7,396)
Charge-offs — (9) 22 (9)
TDRs ending balance $ 41,331 $ 46,414 $ 41,331 $ 46,414

As previously noted, the Company has been offering needs based payment relief options for its customers in response to the COVID-19 pandemic. These modifications will not be accounted for as TDRs if the borrower was in compliance with their loan terms as of December 31, 2019. The following table summarizes active deferrals by modification type as of September 30, 2020:

~~Table 8 - Deferrals by Modification Type~~

Deferral of Principal and Interest Deferral of Principal Only Deferral of Interest Only Total Deferrals Total Portfolio % Deferral
(Dollars in thousands)
Commercial and industrial $ 5,658 $ 33,032 $ 582 $ 39,272 $ 2,062,345 1.9 %
Commercial real estate (1) 230,873 228,521 26,561 485,955 4,698,798 10.3 %
Business Banking 1,047 4,339 236 5,622 167,632 3.4 %
Residential real estate 37,173 2,515 — 39,688 1,352,305 2.9 %
Home equity 6,667 — 6,482 13,149 1,101,054 1.2 %
Consumer 94 — — 94 23,059 0.4 %
Total active deferrals as of September 30, 2020 $ 281,512 $ 268,407 $ 33,861 $ 583,780 $ 9,405,193 6.2 %

~~(1) Balances include commercial construction deferrals.~~


	Three Months Ended				Nine Months Ended
	September 30 2021		September 30 2020		September 30 2021		September 30 2020
	(Dollars in thousands)
TDRs beginning balance	$	39,707	$	41,839	$	39,192	$	44,365
New to TDR status	—		625		3,918		1,874

Paydowns	(2,637)		(1,133)		(6,040)		(4,886)
Charge-offs	(16)		—		(16)		(22)
TDRs ending balance	$	37,054	$	41,331	$	37,054	$	41,331

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Income accruals are suspended on all nonaccrual loans and all previously accrued and uncollected interest is reversed against current income. The table below shows interest income that was recognized or collected on all nonaccrual loans and TDRs for the periods indicated:

Table 98 - Interest Income - Nonaccrual Loans and Troubled Debt Restructurings


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30 2020		September 30 2019		September 30 2020		September 30 2019			September 30 2021		September 30 2020		September 30 2021		September 30 2020
		(Dollars in thousands)									(Dollars in thousands)
The amount of incremental gross interest income that would have been recorded if nonaccrual loans had been current in accordance with their original terms	The amount of incremental gross interest income that would have been recorded if nonaccrual loans had been current in accordance with their original terms	$	744	$	705	$	1,909	$	1,997	The amount of incremental gross interest income that would have been recorded if nonaccrual loans had been current in accordance with their original terms	$	678	$	744	$	2,289	$	1,909
The amount of interest income on nonaccrual loans and performing TDRs that was included in net income	The amount of interest income on nonaccrual loans and performing TDRs that was included in net income	$	861	$	1,047	$	2,258	$	3,155	The amount of interest income on nonaccrual loans and performing TDRs that was included in net income	$	257	$	345	$	673	$	804

Potential problem loans are any loans which are not included in nonaccrual or nonperforming loans, where known information about possible credit problems of the borrowers causes management to have concerns as to the ability of such borrowers to comply with present loan repayment terms. At September 30, ~~2020,~~2021, there were 9979 relationships, with an aggregate balance of ~~$176.0~~$135.7 million, deemed to be potential problem loans. These potential problem loans continued to perform with respect to payments. Management actively monitors these loans and strives to minimize any possible adverse impact to the Company. A portion of the potential problem loans identified by management were granted a deferral in accordance with the relief options offered in response to the COVID-19 pandemic. If applicable, these potential problem loans with an active deferral as of September 30, 2021 have been included in the table below.

As previously noted, the Company has offered need-based payment relief options to its customers in response to the COVID-19 pandemic, primarily in the form of payment deferrals, all of which were granted prior to December 31, 2020. Loans that were modified are not accounted for as TDRs or reflected as delinquent or nonaccrual loans if the borrower was in compliance with their loan terms as of December 31, 2019. The following table summarizes active deferrals by modification type as of September 30, 2021:

Table 9 - Deferrals by Modification Type


	Deferral of Principal and Interest		Deferral of Principal Only		Deferral of Interest Only		Total Deferrals		Total Portfolio		% Deferral
	(Dollars in thousands)
Commercial and industrial	$	2,300	$	560	$	1,165	$	4,025	$	1,640,709	0.2	%
Commercial real estate (1)	7,950		210,335		—		218,285		4,736,674		4.6	%
Business banking	—		588		—		588		184,138		0.3	%
Residential real estate	—		—		—		—		1,222,849		—	%
Home equity	—		—		—		—		1,000,468		—	%
Consumer	—		—		—		—		23,175		—	%
Total active deferrals as of September 30, 2021	$	10,250	$	211,483	$	1,165	$	222,898	$	8,808,013	2.5	%

(1) Balances include commercial construction deferrals.

~~In addition and as~~

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As a result of the COVID-19 pandemic, management has also enhanced monitoring of loan portfolios in certain industries that have been ~~or could be potentially~~ highly impacted. While management is unable to predict the full impact ofon all industries affected by the COVID-19 pandemic, there are assumptions as to which industries ~~will~~have been, and may continue to be, more greatly impacted ~~due to~~by social distancing and other restrictive measures, ~~put in place,~~ as well as the duration or re-imposition of ~~these~~any such restrictions. Management has identified approximately $1.3 billion of loans within highly impacted industries, ~~such as~~including Accommodations, Food Services, Retail Trade, Other Services (except Public Administration), and Arts, Entertainment &and Recreation. Loss exposure within these industries is mitigated by a number of factors such as collateral values, loan-to-value ratios, and other key indicators, however, some degree of credit loss is expected and has been incorporated into the allowance for credit loss recognition under the CECL model.

The table below provides total outstanding balances of commercial loans as of the ~~dates~~date indicated within industries that management has deemed to be highly impacted by the COVID-19 pandemic:

Table 10 - Industries Highly Impacted By COVID-19 ~~Industries~~ - Details


	September 30, ~~2020~~2021
	(Dollars in thousands)
Accommodations
Balance	$	~~420,099~~388,083
Average borrower loan size	$	~~4,194~~4,283
% secured by real estate	~~99.7~~99.8		%
Weighted average loan to value	~~52.2~~54.0		%
Other information:
–The accommodation portfolio consists of 7165 properties representing a combination of flagged (61%) and non-flagged (39%) hotels, motels and inns.
–~~Properties~~Loans secured by hotel properties deemed to be located in areas of leisure comprise ~~$169.8~~$146.6 million, or ~~41%~~38% of the ~~total accommodation~~hotel portfolio.
–Approximately ~~90%~~89% of the balances outstanding are secured by properties located within the six New England states with the largest concentration in Massachusetts (60%).

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Food Services
Balance	$	~~154,846~~142,059
Average borrower loan size	$	~~417~~384
% secured by real estate	~~61.5~~67.7		%
Weighted average loan to value	~~50.3~~50.5		%
Other information:
–The food services portfolio includes full-service restaurants ~~(65%~~(55%), limited service restaurants and fast food ~~(33%~~(43%), and other types of food service (caterers, bars, and mobile food service 2%).

Retail Trade
Balance	$	~~493,270~~527,957
Average borrower loan size	$	~~485~~499
% secured by real estate	~~43.8~~43.3		%
Weighted average loan to value	~~55.4~~57.4		%
Other information:
–The retail trade portfolio consists broadly of food and beverage stores ~~(42%~~(47%), motor vehicle and parts dealers ~~(26%~~(24%), and gasoline stations (14%)~~, and all~~. All other retailers account for ~~(18%).~~15% of the current outstanding balance.
–Collateral for these loans varies and may consist of real estate, motor vehicles inventories, other types of inventories and general business assets.

Other Services (except Public Administration)
Balance	$	~~147,984~~139,679

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Average borrower loan size	$	~~258~~250
% secured by real estate	~~51.2~~51.6		%
Weighted average loan to value	~~48.4~~48.8		%
Other information:
–The other services portfolio consists of various for-profit and not-for-profit services diversified across religious, civic and social service organizations ~~(42%~~(43%), repair and maintenance business ~~(30%~~(31%) and other personal services, including ~~car washes,~~ beauty salons, laundry services, ~~funeral homes,~~ pet care and other types of services ~~(28%~~(26%).



Arts, Entertainment, and Recreation
Balance	$	~~97,962~~99,699
Average borrower loan size	$	~~769~~793
% secured by real estate	~~83.8~~85.5		%
Weighted average loan to value	~~50.8~~52.3		%
Other information:
–Amusement, gambling and recreational industries make up a majority of this category (95%) and include amusement/theme parks, bowling centers, fitness centers, golf courses, marinas, and other recreational industries. Other industries including museums, performing arts, and spectator sports account for the remaining outstanding balances (5%).

Allowance for Credit Losses The allowance for credit losses is maintained at a level that management considers appropriate to provide for the Company's current estimate of expected lifetime credit losses on loans measured at amortized cost. The allowance is increased by providing for credit losses through a charge to expense and by credits for recoveries of loans previously charged-off and is reduced by loans being charged-off.

In accordance with the CECL methodology, ~~adopted January 1, 2020,~~ the Company estimates credit losses for financial assets on a collective basis for loans sharing similar risk characteristics using a quantitative model combined with an assessment of certain qualitative factors designed to address forecast risk and model risk inherent in the quantitative model output. The model estimates expected credit losses using loan level data over the contractual life of the exposure, considering the effect of prepayments. Economic forecasts are incorporated into the estimate over a reasonable and supportable forecast period of one

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year, beyond which is a reversion to the Company's historical long-run average for a period of 6 months. The Company's qualitative assessment is structured based upon nine environmental factors impacting the expected risk of loss within the loan portfolio. Loans that do not share similar risk characteristics with any pools of assets are subject to individual assessment and are removed from the collectively assessed pools to avoid double counting. For the loans that will be individually assessed, the Company uses either a discounted cash flow (“DCF”) approach or a fair value of collateral approach. The latter approach is used for loans deemed to be collateral dependent or when foreclosure is probable. ~~The Company's adoption of CECL had a minimal impact to the allowance as compared to the previous incurred loss methodology.~~

The ~~balance of~~ allowance for credit losses of ~~$115.6~~$92.2 million ~~as of~~at September 30, ~~2020~~2021 represents ~~an increase~~a decrease of ~~$47.9~~$21.1 million, or ~~70.6%, in comparison to the implementation balances at January 1, 2020, and an increase of $3.4 million, or 3.1%~~18.6% compared to ~~June 30,~~December 31, 2020. ~~This increase in the allowance during the first three quarters~~The Company recorded a release of ~~2020 was primarily driven by anticipated credit deterioration due to the ongoing COVID-19 pandemic, which resulted in the Company recording a $52.5 million~~ provision for credit losses for the nine months ended September 30, 2020. During the third quarter, conditions surrounding the credit environment and expectations for future loss estimates did not change significantly in comparison to the previous quarter, and as a result the Company recorded a $7.5of $17.5 million ~~credit loss provision, reflecting a decrease from the $25 million and $20 million recorded during the first and second quarters of 2020, respectively.~~

The Company utilizes forecasted data to run its quantitative model and continued to use a more severe outlook at September 30, 2020 as compared to the baseline forecast that was used to calculate opening balances on January 1, 2020. In determining the Company's allowance for credit losses as of September 30, 2020, the economic outlook included certain assumptions related to the COVID-19 pandemic as it has had a meaningful impact to the economy. The underlying assumptions related to the Company's economic forecast included items such as, unemployment increasing through mid-2022, federal funds rates holding steady near 0% until 2022 and an expectation that no sustained economic recovery will occur until 2022.

~~The provision for credit losses was qualitatively adjusted upward~~ during the nine months ended September 30, ~~2020~~2021, reflecting improvements in ~~order~~expected overall macro-economic forecast assumptions and continued strong asset quality metrics, along with lower loan levels. As a result, the allowance for credit losses at September 30, 2021 includes a release of qualitative reserves that reflects a general reduction in potential risk previously assessed on portions of the portfolio related to ~~ensure coverage for highly impacted relationships~~industries expected to be at heightened risk due to the COVID-19 pandemic, while reserves related to loans with non-owner occupied real estate and junior lien home equity collateral positions were also reduced as ~~management performed detailed analysis consisting~~performance trends within these portfolio segments remained relatively strong during the third quarter of ~~a review~~2021. Quantitative reserves also decreased as of ~~maximum levels of historic loss given default ("LGD") and stressed~~September 30, 2021, attributable to continued improvements in credit quality, including decreases in the weighted average probability of default ~~("PD") scenarios~~across most portfolios, as well as increased stability in economic variables.

While management is unable to know with certainty the direct, indirect, and future impacts of the COVID-19 pandemic, it is expected that the pandemic could potentially have a significant impact on future losses across a broad range of loan segments. As such, the allowance for ~~loans~~credit losses at September 30, 2021 continues to reflect elevated reserve allocations to those loan segments that ~~were deemed~~management considers to ~~be more at risk within the industries that are highly impacted by~~have heightened loss exposure associated with the COVID-19 pandemic. ~~As a result~~The reasonable and supportable forecast modeled in the allowance for credit losses incorporates an economic scenario which reflects management's assumption that some uncertainty remains as the economy recovers, such as that the federal funds rates

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will remain near 0% through 2023, and ~~analysis,~~that recent federal stimulus activity will be less effective as consumers are reluctant to spend the ~~qualitative overlay was adjusted upward slightly during~~funds, some concerns about the ~~three months ended September 30, 2020, but to a lesser extent than~~speed of widespread vaccine administration, and the ~~previous two quarters, as conditions related to~~efficacy of the vaccines and the possibility for resurgences of COVID-19 ~~environment did not change significantly during~~or other variants of the ~~quarter. Refer to~~ virus.

~~Note 4, "Loans, Allowance for Credit Losses and Credit Quality"~~
to the Consolidated Financial Statements included in Part I. Item 1 of this Report for further details surrounding the Company's adoption of CECL, related accounting policy updates and full disclosures under the new standard.

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The following table summarizes changes in the allowance for credit losses and other selected statistics for the periods presented:

Table 11 - Summary of Changes in the Allowance for Credit Losses


		Three Months Ended																Three Months Ended
		September 30 2020			June 30 2020			March 31 2020			December 31 2019			September 30 2019				September 30 2021			June 30 2021			March 31 2021			December 31 2020			September 30 2020
		(Dollars in thousands)																(Dollars in thousands)
Average total loans	Average total loans	$	9,375,522		$	9,311,877		$	8,871,346		$	8,877,072		$	8,897,794		Average total loans	$	8,827,249		$	9,107,446		$	9,343,769		$	9,396,192		$	9,375,522
Allowance for credit losses, beginning of period	Allowance for credit losses, beginning of period	$	112,176		$	92,376		$	67,740		$	66,942		$	65,960		Allowance for credit losses, beginning of period	$	102,357		$	107,549		$	113,392		$	115,625		$	112,176
Cumulative effect accounting adjustment (1)		—			—			(1,137)			—			—
Cumulative effect accounting adjustment (2)		—			—			1,157			—			—

Charged-off loans	Charged-off loans																Charged-off loans
Commercial and industrial	Commercial and industrial	185			—			—			244			—			Commercial and industrial	1			142			3,331			2,124			185
Commercial real estate	Commercial real estate	3,885			—			—			2,532			82			Commercial real estate	—			—			—			—			3,885

Commercial construction																	Commercial construction	—			—			—			—			—
Small business	Small business	49			36			109			190			125			Small business	83			35			66			186			49

Residential real estate																	Residential real estate	—			—			—			105			—
Home equity	Home equity	—			4			138			28			28			Home equity	—			69			—			—			—
Other consumer	Other consumer	185			670			487			473			472			Other consumer	248			235			289			283			185
Total charged-off loans	Total charged-off loans	4,304			710			734			3,467			707			Total charged-off loans	332			481			3,686			2,698			4,304
Recoveries on loans previously charged-off	Recoveries on loans previously charged-off																Recoveries on loans previously charged-off
Commercial and industrial	Commercial and industrial	1			4			42			4			1,003			Commercial and industrial	1			35			64			242			1
Commercial real estate	Commercial real estate	9			—			—			—			106			Commercial real estate	—			—			57			—			9

Commercial construction																	Commercial construction	—			—			—			—			—
Small business	Small business	2			3			3			14			61			Small business	50			4			11			25			2
Residential real estate	Residential real estate	1			—			1			1			140			Residential real estate	—			—			1			—			1
Home equity	Home equity	21			95			58			40			194			Home equity	49			45			13			36			21
Other consumer	Other consumer	219			408			246			206			185			Other consumer	121			205			197			162			219
Total recoveries	Total recoveries	253			510			350			265			1,689			Total recoveries	221			289			343			465			253
Net loans charged-off (recovered)	Net loans charged-off (recovered)																Net loans charged-off (recovered)
Commercial and industrial	Commercial and industrial	184			(4)			(42)			240			(1,003)			Commercial and industrial	—			107			3,267			1,882			184
Commercial real estate	Commercial real estate	3,876			—			—			2,532			(24)			Commercial real estate	—			—			(57)			—			3,876

Commercial construction																	Commercial construction	—			—			—			—			—
Small business	Small business	47			33			106			176			64			Small business	33			31			55			161			47
Residential real estate	Residential real estate	(1)			—			(1)			(1)			(140)			Residential real estate	—			—			(1)			105			(1)
Home equity	Home equity	(21)			(91)			80			(12)			(166)			Home equity	(49)			24			(13)			(36)			(21)
Other consumer	Other consumer	(34)			262			241			267			287			Other consumer	127			30			92			121			(34)
Total net loans charged-off (recovered)		4,051			200			384			3,202			(982)
Total net loans charged-off																	Total net loans charged-off	111			192			3,343			2,233			4,051
Provision for credit losses	Provision for credit losses	7,500			20,000			25,000			4,000			—			Provision for credit losses	(10,000)			(5,000)			(2,500)			—			7,500
Total allowance for credit losses, end of period	Total allowance for credit losses, end of period	$	115,625		$	112,176		$	92,376		$	67,740		$	66,942		Total allowance for credit losses, end of period	$	92,246		$	102,357		$	107,549		$	113,392		$	115,625
Net loans charged-off/(recovered) as a percent of average total loans (annualized)		0.17		%	0.01		%	0.02		%	0.14		%	(0.04)		%
Net loans charged-off as a percent of average total loans (annualized)																	Net loans charged-off as a percent of average total loans (annualized)	0.00		%	0.01		%	0.15		%	0.09		%	0.17		%
Allowance for credit losses as a percent of total loans	Allowance for credit losses as a percent of total loans	1.23		%	1.20		%	1.04		%	0.76		%	0.75		%	Allowance for credit losses as a percent of total loans	1.05		%	1.15		%	1.16		%	1.21		%	1.23		%
Allowance for credit losses as a percent of nonperforming loans	Allowance for credit losses as a percent of nonperforming loans	117.95		%	229.80		%	192.29		%	140.98		%	146.47		%	Allowance for credit losses as a percent of nonperforming loans	201.37		%	214.06		%	181.67		%	169.59		%	117.95		%

~~(1)~~Represents adjustment needed to reflect the cumulative day one impact pursuant to the Company's adoption of Accounting Standards Update 2016-13. The adjustment represents a $1.1 million decrease to the allowance attributable to the change in accounting methodology for estimating the allowance for credit losses resulting from the Company's adoption of the standard.

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~~(2)~~Represents adjustment needed to reflect the day one reclassification of the Company's PCI loan balances to PCD and the associated gross-up, pursuant to the adoption of Accounting Standards Update 2016-13. The adjustment represents a $1.2 million increase to the allowance resulting from the day one reclassification.

For purposes of the allowance for credit losses, management segregates the loan portfolio into the portfolio segments detailed in the table below. The allocation of the allowance for credit losses is made to each loan category using the analytical techniques and estimation methods described ~~herein.~~in this Report. While these amounts represent management’s best estimate of credit losses at the evaluation dates, they are not necessarily indicative of either the categories in which actual losses may occur or the extent of such actual losses that may be recognized within each category. Each of these loan categories possess unique risk characteristics that are considered when determining the appropriate level of allowance for each segment. The Company began estimating its allowance for credit losses in accordance with the CECL methodology as of January 1, 2020, while prior period amounts were estimated using the incurred loss methodology prescribed by previously applicable accounting guidance. The total allowance is available to absorb losses from any segment of the loan portfolio.

The following table sets forth the allocation of the allowance for credit losses by loan category at the dates indicated:

Table 12 - Summary of Allocation of Allowance for Credit Losses


		September 30 2020				January 1 2020				December 31 2019					September 30 2021				December 31 2020
		Allowance Amount		Percent of Loans In Category To Total Loans		Allowance Amount		Percent of Loans In Category To Total Loans		Allowance Amount		Percent of Loans In Category To Total Loans			Allowance Amount		Percent of Loans In Category To Total Loans		Allowance Amount		Percent of Loans In Category To Total Loans
		(Dollars in thousands)													(Dollars in thousands)
Commercial and industrial (1)	Commercial and industrial (1)	$	28,219	21.9	%	$	15,659	15.7	%	$	17,594	15.7	%	Commercial and industrial (1)	$	16,014	18.5	%	$	21,086	22.4	%
Commercial real estate	Commercial real estate	39,386		43.9	%	20,224		45.1	%	32,935		45.1	%	Commercial real estate	37,798		47.9	%	45,009		44.4	%
Commercial construction	Commercial construction	5,210		6.1	%	2,401		6.2	%	6,053		6.2	%	Commercial construction	4,468		5.9	%	5,397		5.9	%
Small business	Small business	4,593		1.8	%	2,241		2.0	%	1,746		2.0	%	Small business	3,667		2.1	%	5,095		1.9	%
Residential real estate	Residential real estate	14,163		14.4	%	13,691		17.9	%	3,440		17.9	%	Residential real estate	11,047		13.9	%	14,275		13.8	%
Home equity	Home equity	23,572		11.7	%	12,907		12.8	%	5,576		12.8	%	Home equity	18,868		11.4	%	22,060		11.4	%
Other consumer	Other consumer	482		0.2	%	637		0.3	%	396		0.3	%	Other consumer	384		0.3	%	470		0.2	%
Total allowance for credit losses	Total allowance for credit losses	$	115,625	100.0	%	$	67,760	100.0	%	$	67,740	100.0	%	Total allowance for credit losses	$	92,246	100.0	%	$	113,392	100.0	%

(1)~~Loans~~This loan category includes loans originated as part of the PPP established by the CARES Act, ~~and included within the commercial and industrial category~~which have been excluded from the credit loss calculations asbecause these loans are 100% guaranteed by the U.S. Government.

As a result of the initial adoption of CECL on January 1, 2020, the total allowance amount did not change materially, although allocation of these amounts by category did change. These changes are due to the new model that incorporates estimates of loss for the life of the loan, which requires higher reserves for loans with longer anticipated lives. The increase from adoption to September 30, 2020 is largely driven by the downturn of the economy in response to the impact of the COVID-19 pandemic and the resulting changes to the model inputs, as well as additional qualitative adjustments required for relationships in industries that are highly impacted by social distancing business closures and other mandated government requirements in response to the COVID-19 pandemic.

To determine if a loan should be charged-off, all possible sources of repayment are analyzed. Possible sources of repayment include the potential for future cash flows, the value of the Bank’s collateral, and the strength of co-makers or guarantors. When available information confirms that specific loans or portions thereof are uncollectible, these amounts are promptly charged-off against the allowance for credit losses and any recoveries of such previously charged-off amounts are credited to the allowance.

Regardless of whether a loan is unsecured or collateralized, the Company charges off the amount of any confirmed loan loss in the period when the loans, or portions of loans, are deemed uncollectible. For troubled, collateral-dependent loans, loss-confirming events may include an appraisal or other valuation that reflects a shortfall between the value of the collateral and the carrying value of the loan or receivable, or a deficiency balance following the sale of the collateral.

~~Table of Contents~~

For additional information regarding the Company’s allowance for credit losses, see Note 4 "Loans, Allowance for Credit Losses and Credit Quality" ~~and~~ ~~Note 5, “Loans and Allowance for Loan Losses”~~within the Notes to ~~the~~ Consolidated Financial Statements included in Part ~~I.Item~~I. Item 1 of this Report.

Federal Home Loan Bank Stock The Bank held ~~an investment~~investments in FHLB of Boston stock of ~~$15.1~~$8.7 million and ~~$14.4~~$10.3 million at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The FHLB is a cooperative that provides services to its member banking institutions. The primary reason for the FHLB of Boston membership is to gain access to a reliable source of wholesale funding as a tool to manage liquidity and interest rate risk. The purchase of stock in the FHLB is a requirement for a member to gain access to funding. The Company either purchases additional FHLB stock or is subject to redemption of FHLB stock proportional to the volume of funding received. The Company views the holdings as a necessary long-term investment for the purpose of balance sheet liquidity and not for investment return.

Goodwill and Other Intangible Assets Goodwill and other intangible assets were ~~$530.7~~$525.3 million and ~~$535.5~~$529.3 million at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The decrease was primarily due to amortization of definite-lived intangibles.

The Company typically performs its annual goodwill impairment testing during the third quarter of the year, unless certain indicators suggest earlier testing to be warranted. ~~The COVID-19 pandemic has resulted in significant levels of volatility in the capital markets and presents heightened uncertainty surrounding the future impact to operations of~~Accordingly, the Company last performed its annual goodwill

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impairment testing during the third quarter of 2021 and ~~its customers. Given these conditions,~~determined that the ~~Company identified this impact from the pandemic as a triggering event warranting interim tests for impairment as of March 31, June 30, and again~~Company's goodwill was not impaired as of September 30, 2020. Accordingly, the Company performed impairment tests as of each date and determined that there was no impairment of its goodwill. Although the Company utilizes quoted market prices when estimating fair value of the reporting unit for purposes of the quantitative impairment test, it also considers certain qualitative factors, including the concept of a control premium, which increases the fair value as compared to market capitalization.2021. Other intangible assets are also reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. ~~The Company also considered~~There were no events or changes during the ~~impact~~third quarter of ~~the COVID-19 pandemic as it pertains to these intangible assets,~~2021 that indicated impairment of goodwill and ~~determined that there was no indication of impairment related to~~ other intangible ~~assets as of September 30, 2020.~~assets.

Cash Surrender Value of Life Insurance Policies The Bank holds life insurance policies for the purpose of offsetting its future obligations to its employees under its retirement and benefits plans. The cash surrender value of life insurance policies was ~~$199.5 million and $197.4~~$244.6 million at September 30, ~~2020 and~~2021 compared to $200.5 million at December 31, ~~2019, respectively.~~2020, representing an increase of $44.0 million, or 22.0%, primarily due to new policy purchases. The Company recorded tax exempt income from life insurance policies of $1.6 million and $1.3 million for ~~each of~~ the three ~~month periods~~months ended September 30, 2021 and 2020, respectively, and ~~2019, respectively,~~$4.5 million and $3.9 million ~~and $3.6 million~~ for ~~the nine month periods ended September 30, 2020 and 2019, respectively. Also during~~ the nine months ended September 30, 2021 and 2020, respectively. There were no gains on life insurance benefits recorded for the three months ended September 30, 2021 and September 30, 2020. The Company recorded gains on life insurance benefits of $258,000, and $692,000 ~~all of which were recorded during~~for the ~~first half of 2020, as compared to $434,000 of gains on life insurance benefits recorded during the three and~~ nine months ended September 30, ~~2019.~~2021 and 2020, respectively.

Deposits As of September 30, ~~2020,~~2021, total deposits were ~~$10.9~~$12.3 billion, representing a ~~$1.7~~$1.3 billion, or ~~18.6%~~11.5%, increase from December 31, ~~2019, primarily due to a combination of PPP loan fundings,~~2020, as robust new account opening activity and the ongoing impact of government stimulus ~~programs and a customer focus on retaining liquidity, which~~payments continued to fuel ~~strong growth during the nine months ended September 30, 2020.~~significant growth. The total cost of deposits was ~~0.20%~~0.05% and ~~0.50%~~0.20% for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively and ~~0.31%~~0.07% and ~~0.46%~~0.31% for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Core deposits ~~represented 88.01%~~increased from 91.6% of total deposits as of June 30, 2021 to 92.0% of total deposits as of September 30, ~~2020.~~2021, while noncore time deposits continued to runoff.

The Company also participates in the ~~Promontory Interfinancial~~IntraFi Network, allowing the Bank to provide easy access to multi-million dollar Federal Deposit Insurance Corporation ("FDIC") deposit insurance protection on certificate of deposit and money market investments for consumers, businesses and public entities. This channel allows the Company to seek additional funding in potentially large quantities by attracting deposits from outside the Bank’s core market, and amounted to ~~$232.4~~$244.6 million and ~~$211.2~~$237.9 million at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. In addition, the Company may occasionally raise funds through the use of brokered deposits outside of the ~~Promontory Interfinancial~~IntraFi Network, which amounted to ~~$58.1~~$6.0 million and ~~$281.6~~$8.5 million at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

~~Table of Contents~~

Borrowings The Company’s borrowings consist of both short-term and long-term borrowings and provide the Bank with one of its primary sources of funding. Maintaining available borrowing capacity provides the Bank with a contingent source of liquidity. Borrowings decreased by $7.4 million, or 2.4%, at September 30, 2020, as compared to December 31, 2019. During the first quarter of 2020, the Company entered into $300.0 million in short-term advances from the Federal Home Loan Bank ("FHLB"). Subsequently, during the second quarter the Company madea $200.0 million prepayment on these FHLB borrowings, resulting in a prepayment penalty of $389,000. Also, during the second quarter, the Company paid down $37.5 million of its long-term line of credit. In relation to its funding strategy, in light of the steady buildup of its liquidity position, the Company decided to exit its $100.0 million hedge against the FHLB borrowings during the third quarter and subsequently exited the remaining $100.0 million FHLB borrowing early in the fourth quarter.

The following table presents the components of borrowings as of the dates indicated:

Table 13 - Borrowings


		September 30 2020		December 31 2019			September 30 2021		December 31 2020
							(Dollars in thousands)
Federal Home Loan Bank borrowings	Federal Home Loan Bank borrowings	$	145,765	$	115,748	Federal Home Loan Bank borrowings	$	25,675	$	35,740

Long-term borrowings	Long-term borrowings	37,447		74,906		Long-term borrowings	18,750		32,773
Junior subordinated debentures	Junior subordinated debentures	62,850		62,848		Junior subordinated debentures	62,853		62,851
Subordinated debentures	Subordinated debentures	49,672		49,601		Subordinated debentures	49,767		49,696
Total borrowings	Total borrowings	$	295,734	$	303,103	Total borrowings	$	157,045	$	181,060

Additionally, the Bank had ~~$4.1~~$3.6 billion and ~~$4.0~~$4.1 billion of assets pledged as collateral against borrowings at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. These assets are primarily pledged to the FHLB of Boston and the Federal Reserve Bank of Boston.

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Capital Resources On September ~~17, 2020,~~16, 2021, the Company’s Board of Directors declared a cash dividend of ~~$0.46~~$0.48 per share to ~~stockholders~~shareholders of record as of the close of business on September ~~28, 2020.~~27, 2021. This dividend was paid on October ~~9, 2020.~~8, 2021.

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table below) of Total, Tier 1 Capital and Common Equity Tier 1 Capital (as defined for regulatory purposes) to risk weighted assets (as defined for regulatory purposes) and Tier 1 Capital to average assets (as defined for regulatory purposes). At September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company and the Bank exceeded the minimum requirements for all applicable ratios that were in effect during the respective periods. The Company’s and the Bank’s capital amounts and ratios are presented in the following table, along with the applicable minimum requirements as of each date indicated:

Table 14 - Company and Bank's Capital Amounts and Ratios


		Actual				For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions						Actual				For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
		Amount		Ratio		Amount			Ratio		Amount			Ratio			Amount		Ratio		Amount			Ratio		Amount			Ratio
		September 30, 2020															September 30, 2021
		(Dollars in thousands)															(Dollars in thousands)
Company (consolidated)	Company (consolidated)															Company (consolidated)
Total capital (to risk weighted assets)	Total capital (to risk weighted assets)	$	1,352,497	14.87	%	$	727,486	≥	8.0	%	N/A			N/A		Total capital (to risk weighted assets)	$	1,432,353	15.78	%	$	726,292	≥	8.0	%	N/A			N/A
Common equity tier 1 capital (to risk weighted assets)	Common equity tier 1 capital (to risk weighted assets)	1,128,182		12.41	%	409,211		≥	4.5	%	N/A			N/A		Common equity tier 1 capital (to risk weighted assets)	1,228,670		13.53	%	408,539		≥	4.5	%	N/A			N/A
Tier 1 capital (to risk weighted assets)	Tier 1 capital (to risk weighted assets)	1,189,182		13.08	%	545,614		≥	6.0	%	N/A			N/A		Tier 1 capital (to risk weighted assets)	1,289,672		14.21	%	544,719		≥	6.0	%	N/A			N/A
Tier 1 capital (to average assets)	Tier 1 capital (to average assets)	1,189,182		9.52	%	499,613		≥	4.0	%	N/A			N/A		Tier 1 capital (to average assets)	1,289,672		9.36	%	571,437		≥	4.0	%	N/A			N/A
Bank	Bank															Bank
Total capital (to risk weighted assets)	Total capital (to risk weighted assets)	$	1,278,819	14.09	%	$	725,884	≥	8.0	%	$	907,355	≥	10.0	%	Total capital (to risk weighted assets)	$	1,389,105	15.30	%	$	726,448	≥	8.0	%	$	908,060	≥	10.0	%
Common equity tier 1 capital (to risk weighted assets)	Common equity tier 1 capital (to risk weighted assets)	1,165,370		12.84	%	408,310		≥	4.5	%	589,781		≥	6.5	%	Common equity tier 1 capital (to risk weighted assets)	1,296,191		14.27	%	408,627		≥	4.5	%	590,239		≥	6.5	%
Tier 1 capital (to risk weighted assets)	Tier 1 capital (to risk weighted assets)	1,165,370		12.84	%	544,413		≥	6.0	%	725,884		≥	8.0	%	Tier 1 capital (to risk weighted assets)	1,296,191		14.27	%	544,836		≥	6.0	%	726,448		≥	8.0	%
Tier 1 capital (to average assets)	Tier 1 capital (to average assets)	1,165,370		9.34	%	498,917		≥	4.0	%	623,646		≥	5.0	%	Tier 1 capital (to average assets)	1,296,191		9.40	%	571,492		≥	4.0	%	714,365		≥	5.0	%
		December 31, 2019															December 31, 2020
		(Dollars in thousands)															(Dollars in thousands)
Company (consolidated)	Company (consolidated)															Company (consolidated)
Total capital (to risk weighted assets)	Total capital (to risk weighted assets)	$	1,352,341	14.83	%	$	729,291	≥	8.0	%	N/A			N/A		Total capital (to risk weighted assets)	$	1,374,349	15.13	%	$	726,482	≥	8.0	%	N/A			N/A
Common equity tier 1 capital (to risk weighted assets)	Common equity tier 1 capital (to risk weighted assets)	1,171,963		12.86	%	410,226		≥	4.5	%	N/A			N/A		Common equity tier 1 capital (to risk weighted assets)	1,150,177		12.67	%	408,646		≥	4.5	%	N/A			N/A
Tier 1 capital (to risk weighted assets)	Tier 1 capital (to risk weighted assets)	1,232,963		13.53	%	546,969		≥	6.0	%	N/A			N/A		Tier 1 capital (to risk weighted assets)	1,211,177		13.34	%	544,861		≥	6.0	%	N/A			N/A
Tier 1 capital (to average assets)	Tier 1 capital (to average assets)	1,232,963		11.28	%	437,271		≥	4.0	%	N/A			N/A		Tier 1 capital (to average assets)	1,211,177		9.56	%	506,805		≥	4.0	%	N/A			N/A
Bank	Bank															Bank
Total capital (to risk weighted assets)	Total capital (to risk weighted assets)	$	1,275,611	14.00	%	$	728,868	≥	8.0	%	$	911,085	≥	10.0	%	Total capital (to risk weighted assets)	$	1,320,056	14.54	%	$	726,313	≥	8.0	%	$	907,892	≥	10.0	%
Common equity tier 1 capital (to risk weighted assets)	Common equity tier 1 capital (to risk weighted assets)	1,205,740		13.23	%	409,988		≥	4.5	%	592,205		≥	6.5	%	Common equity tier 1 capital (to risk weighted assets)	1,206,566		13.29	%	408,551		≥	4.5	%	590,130		≥	6.5	%
Tier 1 capital (to risk weighted assets)	Tier 1 capital (to risk weighted assets)	1,205,740		13.23	%	546,651		≥	6.0	%	728,868		≥	8.0	%	Tier 1 capital (to risk weighted assets)	1,206,566		13.29	%	544,735		≥	6.0	%	726,313		��	8.0	%
Tier 1 capital (to average assets)	Tier 1 capital (to average assets)	1,205,740		11.06	%	435,886		≥	4.0	%	544,857		≥	5.0	%	Tier 1 capital (to average assets)	1,206,566		9.54	%	505,747		≥	4.0	%	632,184		≥	5.0	%

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In addition to the minimum risk-based capital requirements outlined in the table above, the Company is required to maintain a minimum capital conservation buffer, in the form of common equity, in order to avoid restrictions on capital distributions and discretionary bonuses. The required amount of the capital conservation buffer is 2.5%. At September 30, ~~2020,~~2021, the Company's capital levels exceeded the buffer.

Dividend Restrictions InThe Company is subject to capital and dividend requirements administered by federal and state bank regulators, and the Company will not declare a cash dividend that would cause the Company to violate regulatory requirements. The Company is, in the ordinary course of business, ~~the Company is~~ dependent upon the receipt of cash dividends from the Bank to ~~provide funds for the payment of~~pay cash dividends to shareholders and ~~to provide for~~satisfy the Company’s other cash ~~requirements. Banking regulations~~needs. Federal and state law impose limits on capital distributions by the Bank. Massachusetts-chartered banks, such as the Bank, may ~~limit the amount of~~declare from net profits cash dividends ~~that~~not more frequently than quarterly and non-cash dividends at any time. No dividends may be ~~paid. Approval by regulatory authorities~~declared, credited, or paid if the Bank’s capital stock would be impaired. Massachusetts Bank Commissioner approval is required if the ~~effect~~total of all dividends declared ~~would cause the regulatory capital of~~by the Bank ~~to fall below specified minimum levels. Approval is also required if dividends declared~~in any calendar year would exceed the total of its net profits for that year combined with ~~the~~its retained net profits ~~for~~of the preceding two ~~years. Under~~years, less any required transfer to surplus or a fund for the ~~foregoing dividend restrictions~~retirement of any preferred stock. Dividends of $33.9 million and ~~while maintaining its "well capitalized" status, dividends~~$16.2 million were paid by the Bank to the Company ~~totaled $16.2 million and $32.6 million~~ for the three months ended September 30, ~~2020~~2021 and ~~2019,~~September 30, 2020, respectively, and ~~totaled~~dividends of $38.9 million and $139.8 million ~~and $90.3 million~~were paid by the Bank to the Company for the nine months ended September 30, ~~2020~~2021 and ~~2019, respectively. The total dividends paid for the nine months ended~~ September 30, ~~2019 included $16.5 million that was used for funding the April 1, 2019 Blue Hills Bancorp. Inc. ("BHB") acquisition.~~2020, respectively.

Trust Preferred Securities In accordance with the applicable accounting standard related to variable interest entities, the common stock of trusts which have issued trust preferred securities has not been included in the consolidated financial statements of the Company. At ~~both~~each of September 30, ~~2020~~2021 and December 31, ~~2019~~2020 there ~~was~~were $61.0 million in trust preferred securities ~~which have been~~ included in the Tier 1 capital of the Company for regulatory reporting purposes pursuant to the Federal Reserve's capital adequacy guidelines.

~~Common Stock Repurchase Program~~ On October 17, 2019, the Company put into place a share repurchase program with the ability to repurchase up to 1.5 million shares of the Company's common stock. The program allowed for repurchases to be made from time to time on the open market and in privately negotiated transactions, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act. During the first half of 2020, the full 1.5 million shares were repurchased at a total cost of $95.1 million, or an average cost per share of $63.39.

Investment Management As of September 30, ~~2020,~~2021, the Rockland Trust Investment Management Group had assets under administration of ~~$4.5~~$5.4 billion, representing ~~6,140~~6,368 trust, fiduciary, and agency accounts. At December 31, ~~2019,~~2020, assets under administration were ~~$4.6~~$4.9 billion, representing approximately ~~6,108~~6,175 trust, fiduciary, and agency accounts. The decline in value reflects the overall market decline driven primarily by investor response to the COVID-19 pandemic during the year, including a sharp decline in the U.S. stock market during the first quarter, followed by a period of market recovery during the second and third quarters, along with an outflow of custody accounts which also contributed to the decrease in value. Included in these amounts as of September 30, ~~2020~~2021 and December 31, ~~2019 are~~2020 were assets under administration of ~~$339.1~~$405.9 million and ~~$342.2~~$369.6 million, respectively, relating to the Company’s registered investment advisor, Bright Rock Capital Management, LLC, which provides institutional quality investment management services to institutional and high net worth clients. Revenue from the Investment Management Group was ~~$7.0~~$8.1 million and ~~$6.6~~$7.0 million for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$20.1~~$23.6 million and ~~$19.1~~$20.1 million for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

Retail investments and insurance revenue ~~were~~was $1.0 million and $573,000 ~~and $554,000~~ for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$1.6~~$2.8 million and ~~$2.0~~$1.6 million for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

Retail investments and insurance revenue include commission revenue from LPL Financial (“LPL”) and its affiliates and their insurance subsidiary, LPL Insurance Associates, Inc., which offers the sale of mutual fund shares, unit investment trust shares, general securities, fixed and variable annuities and life insurance. Registered representatives who are both employed by the Bank and licensed and contracted with LPL are onsite to offer these products to the Bank’s customer base. These same agents are also approved and appointed with various other broker general agents for the purpose of processing insurance solutions for clients.

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RESULTS OF OPERATIONS

The following table provides a summary of results of operations for the three and nine months ended September 30, ~~2020~~2021 and ~~2019:~~2020:

Table 15 - Summary of Results of Operations


		Three Months Ended September 30						Nine Months Ended September 30							Three Months Ended September 30						Nine Months Ended September 30
		2020			2019			2020			2019				2021			2020			2021			2020
		(Dollars in thousands, except per share data)													(Dollars in thousands, except per share data)
Net income	Net income	$	34,873		$	51,845		$	86,526		$	117,698		Net income	$	40,007		$	34,873		$	119,290		$	86,526
Diluted earnings per share	Diluted earnings per share	$	1.06		$	1.51		$	2.59		$	3.64		Diluted earnings per share	$	1.21		$	1.06		$	3.61		$	2.59
Return on average assets	Return on average assets	1.07		%	1.78		%	0.93		%	1.47		%	Return on average assets	1.11		%	1.07		%	1.15		%	0.93		%
Return on average equity	Return on average equity	8.21		%	12.33		%	6.80		%	10.77		%	Return on average equity	9.04		%	8.21		%	9.20		%	6.80		%
Net interest margin	Net interest margin	3.13		%	4.03		%	3.36		%	4.08		%	Net interest margin	2.78		%	3.13		%	3.00		%	3.36		%

The Company's results of operations ~~were impacted by a compressed net interest margin, along with elevated provision~~ for ~~credit losses recognized during~~ the nine months ended September 30, ~~2020. The~~2021 were positively impacted by a release of provision for credit losses in the amount of ~~$52.5~~$17.5 million, ~~recorded during~~as well as elevated interest income from forgiven PPP loans. In comparison, results for the same nine ~~months~~ ended September 30, 2020 ~~was primarily~~reflected an increased provision for credit loss of $52.5 million, driven by ~~assumptions regarding future~~anticipated credit losses ~~that contemplate the impact of~~related to the COVID-19 pandemic.

Net Interest Income The amount of net interest income is affected by changes in interest rates and by the volume, mix, and interest rate sensitivity of interest-earning assets and interest-bearing liabilities.

On a fully tax equivalent basis ("FTE"), net interest income for the third quarter of ~~2020~~2021 was ~~$91.1~~$90.3 million, representing a decrease of ~~$13.7 million,~~$801,000, or ~~13.1%~~0.9%, when compared to the third quarter of ~~2019, primarily due to the negative impact of a lower interest rate environment and mix of interest earnings assets.~~2020. For the nine months ended September 30, ~~2020,~~2021, the net interest income on a FTE basis was ~~$277.0~~$279.7 million, representing ~~a decrease~~an increase of ~~$16.8~~$2.7 million, or ~~5.7%~~1.0%, when compared to the nine months ended September 30, 2019, primarily due to the negative impact of a lower interest rate environment and mix of interest earning assets, partially offset by the year-to-date impact of the BHB acquisition, which closed in the second quarter of 2019.year ago period.

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The following tables present the Company’s average balances, net interest income, interest rate spread, and net interest margin for the three and nine months ~~ending~~ended September 30, ~~2020~~2021 and ~~2019.~~2020. Nontaxable income from loans and securities is presented on a FTE basis by adjusting tax-exempt income upward by an amount equivalent to the prevailing income ~~taxes~~tax rate that would have been paid if the income had been fully taxable.

Table 16 - Average Balance, Interest Earned/Paid & Average Yields Quarter-to-Date


		Three Months Ended September 30													Three Months Ended September 30
		2020						2019							2021						2020
		Average Balance		Interest Earned/ Paid		Yield/Rate		Average Balance		Interest Earned/ Paid		Yield/Rate			Average Balance		Interest Earned/ Paid		Yield/Rate		Average Balance		Interest Earned/ Paid		Yield/Rate
		(Dollars in thousands)													(Dollars in thousands)
Interest-earning assets	Interest-earning assets													Interest-earning assets
Interest-earning deposits with banks, federal funds sold, and short term investments	Interest-earning deposits with banks, federal funds sold, and short term investments	$	997,921	$	254	0.10	%	$	115,255	$	680	2.34	%	Interest-earning deposits with banks, federal funds sold, and short term investments	$	2,135,031	$	815	0.15	%	$	997,921	$	254	0.10	%
Securities	Securities													Securities
Securities - trading	Securities - trading	2,607		—		—	%	1,947		—		—	%	Securities - trading	3,498		—		—	%	2,607		—		—	%
Securities - taxable investments	Securities - taxable investments	1,139,843		7,218		2.52	%	1,204,314		8,269		2.72	%	Securities - taxable investments	1,880,863		7,792		1.64	%	1,139,843		7,218		2.52	%
Securities - nontaxable investments (1)	Securities - nontaxable investments (1)	1,146		11		3.82	%	1,739		18		4.11	%	Securities - nontaxable investments (1)	468		5		4.24	%	1,146		11		3.82	%
Total securities	Total securities	$	1,143,596	$	7,229	2.51	%	$	1,208,000	$	8,287	2.72	%	Total securities	$	1,884,829	$	7,797	1.64	%	$	1,143,596	$	7,229	2.51	%
Loans held for sale	Loans held for sale	50,709		326		2.56	%	102,065		456		1.77	%	Loans held for sale	30,143		193		2.54	%	50,709		326		2.56	%
Loans (2)	Loans (2)													Loans (2)
Commercial and industrial (1)	Commercial and industrial (1)	2,033,385		17,724		3.47	%	1,380,007		20,274		5.83	%	Commercial and industrial (1)	1,640,422		15,309		3.70	%	2,033,385		17,724		3.47	%
Commercial real estate (1)	Commercial real estate (1)	4,086,594		41,578		4.05	%	4,017,670		49,139		4.85	%	Commercial real estate (1)	4,232,575		41,469		3.89	%	4,086,594		41,578		4.05	%
Commercial construction	Commercial construction	568,007		5,126		3.59	%	510,277		7,155		5.56	%	Commercial construction	507,393		4,916		3.84	%	568,007		5,126		3.59	%
Small business	Small business	168,662		2,303		5.43	%	172,942		2,626		6.02	%	Small business	181,953		2,341		5.10	%	168,662		2,303		5.43	%
Total commercial	Total commercial	6,856,648		66,731		3.87	%	6,080,896		79,194		5.17	%	Total commercial	6,562,343		64,035		3.87	%	6,856,648		66,731		3.87	%
Residential real estate	Residential real estate	1,387,055		13,436		3.85	%	1,644,467		17,329		4.18	%	Residential real estate	1,231,606		10,955		3.53	%	1,387,055		13,436		3.85	%
Home equity	Home equity	1,107,685		9,658		3.47	%	1,142,137		13,309		4.62	%	Home equity	1,007,371		9,043		3.56	%	1,107,685		9,658		3.47	%
Total consumer real estate	Total consumer real estate	2,494,740		23,094		3.68	%	2,786,604		30,638		4.36	%	Total consumer real estate	2,238,977		19,998		3.54	%	2,494,740		23,094		3.68	%
Other consumer	Other consumer	24,134		515		8.49	%	30,294		627		8.21	%	Other consumer	25,929		398		6.09	%	24,134		515		8.49	%
Total loans	Total loans	$	9,375,522	$	90,340	3.83	%	$	8,897,794	$	110,459	4.93	%	Total loans	$	8,827,249	$	84,431	3.79	%	$	9,375,522	$	90,340	3.83	%
Total interest-earning assets	Total interest-earning assets	$	11,567,748	$	98,149	3.38	%	$	10,323,114	$	119,882	4.61	%	Total interest-earning assets	$	12,877,252	$	93,236	2.87	%	$	11,567,748	$	98,149	3.38	%
Cash and due from banks	Cash and due from banks	124,482						121,515						Cash and due from banks	144,556						124,482
Federal Home Loan Bank stock	Federal Home Loan Bank stock	15,090						15,781						Federal Home Loan Bank stock	8,904						15,090
Other assets	Other assets	1,313,194						1,119,388						Other assets	1,268,199						1,313,194
Total assets	Total assets	$	13,020,514					$	11,579,798					Total assets	$	14,298,911					$	13,020,514
Interest-bearing liabilities	Interest-bearing liabilities													Interest-bearing liabilities
Deposits	Deposits													Deposits
Savings and interest checking accounts	Savings and interest checking accounts	$	3,836,488	$	838	0.09	%	$	3,157,870	$	2,120	0.27	%	Savings and interest checking accounts	$	4,426,106	$	338	0.03	%	$	3,836,488	$	838	0.09	%
Money market	Money market	2,087,822		945		0.18	%	1,942,932		4,220		0.86	%	Money market	2,375,492		443		0.07	%	2,087,822		945		0.18	%
Time deposits	Time deposits	1,076,546		3,649		1.35	%	1,471,749		5,506		1.48	%	Time deposits	795,943		852		0.42	%	1,076,546		3,649		1.35	%
Total interest-bearing deposits	Total interest-bearing deposits	$	7,000,856	$	5,432	0.31	%	$	6,572,551	$	11,846	0.72	%	Total interest-bearing deposits	$	7,597,541	$	1,633	0.09	%	$	7,000,856	$	5,432	0.31	%
Borrowings	Borrowings													Borrowings
Federal Home Loan Bank borrowings	Federal Home Loan Bank borrowings	$	145,766	$	408	1.11	%	$	156,054	$	945	2.40	%	Federal Home Loan Bank borrowings	$	31,118	$	165	2.10	%	$	145,766	$	408	1.11	%

Long-term borrowings	Long-term borrowings	37,439		141		1.50	%	74,885		684		3.62	%	Long-term borrowings	18,742		77		1.63	%	37,439		141		1.50	%
Junior subordinated debentures	Junior subordinated debentures	62,850		438		2.77	%	62,848		506		3.19	%	Junior subordinated debentures	62,852		432		2.73	%	62,850		438		2.77	%
Subordinated debentures	Subordinated debentures	49,659		617		4.94	%	84,319		1,045		4.92	%	Subordinated debentures	49,753		617		4.92	%	49,659		617		4.94	%
Total borrowings		$	295,714	$	1,604	2.16	%	$	378,106	$	3,180	3.34	%

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Total borrowings														Total borrowings	$	162,465	$	1,291	3.15	%	$	295,714	$	1,604	2.16	%
Total interest-bearing liabilities	Total interest-bearing liabilities	$	7,296,570	$	7,036	0.38	%	$	6,950,657	$	15,026	0.86	%	Total interest-bearing liabilities	$	7,760,006	$	2,924	0.15	%	$	7,296,570	$	7,036	0.38	%
Noninterest bearing demand deposits	Noninterest bearing demand deposits	3,700,902						2,753,596						Noninterest bearing demand deposits	4,502,045						3,700,902
Other liabilities	Other liabilities	332,937						207,924						Other liabilities	280,754						332,937
Total liabilities	Total liabilities	$	11,330,409					$	9,912,177					Total liabilities	$	12,542,805					$	11,330,409
Stockholders' equity	Stockholders' equity	1,690,105						1,667,621						Stockholders' equity	1,756,106						1,690,105
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	13,020,514					$	11,579,798					Total liabilities and stockholders' equity	$	14,298,911					$	13,020,514
Net interest income (1)	Net interest income (1)			$	91,113					$	104,856			Net interest income (1)			$	90,312					$	91,113
Interest rate spread (3)	Interest rate spread (3)					3.00	%					3.75	%	Interest rate spread (3)					2.72	%					3.00	%
Net interest margin (4)	Net interest margin (4)					3.13	%					4.03	%	Net interest margin (4)					2.78	%					3.13	%
Supplemental information	Supplemental information													Supplemental information
Total deposits, including demand deposits	Total deposits, including demand deposits	$	10,701,758	$	5,432			$	9,326,147	$	11,846			Total deposits, including demand deposits	$	12,099,586	$	1,633			$	10,701,758	$	5,432
Cost of total deposits	Cost of total deposits					0.20	%					0.50	%	Cost of total deposits					0.05	%					0.20	%
Total funding liabilities, including demand deposits	Total funding liabilities, including demand deposits	$	10,997,472	$	7,036			$	9,704,253	$	15,026			Total funding liabilities, including demand deposits	$	12,262,051	$	2,924			$	10,997,472	$	7,036
Cost of total funding liabilities	Cost of total funding liabilities					0.25	%					0.61	%	Cost of total funding liabilities					0.09	%					0.25	%

(1)The total amount of adjustment to ~~present~~ interest income and yield on a FTE basis was ~~$230,000~~$220,000 and ~~$258,000~~$230,000 for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The FTE adjustment relates to tax exempt income relating to securities with average balances of ~~$1.1 million~~$468,000 and ~~$1.7~~$1.1 million and tax exempt income relating to loans with average balances of ~~$81.6~~$61.2 million and ~~$84.5~~$81.6 million, for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

(2)Includes average nonaccruing loans.

(3)Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.

(4)Net interest margin represents annualized net interest income as a percentage of average interest-earning assets.

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Table 17 - Average Balance, Interest Earned/Paid & Average Yields Year-to-Date


		Nine Months Ended September 30													Nine Months Ended September 30
		2020						2019							2021						2020
		Average Balance		Interest Earned/ Paid		Yield/ Rate		Average Balance		Interest Earned/ Paid		Yield/ Rate			Average Balance		Interest Earned/ Paid		Yield/ Rate		Average Balance		Interest Earned/ Paid		Yield/ Rate
		(Dollars in thousands)													(Dollars in thousands)
Interest-earning assets	Interest-earning assets													Interest-earning assets
Interest-earning deposits with banks, federal funds sold, and short-term investments	Interest-earning deposits with banks, federal funds sold, and short-term investments	$	599,827	$	546	0.12	%	$	96,305	$	1,753	2.43	%	Interest-earning deposits with banks, federal funds sold, and short-term investments	$	1,782,463	$	1,654	0.12	%	$	599,827	$	546	0.12	%
Securities	Securities													Securities
Securities - trading	Securities - trading	2,421		—		—	%	1,820		—		—	%	Securities - trading	3,267		—		—	%	2,421		—		—	%

Securities - taxable investments	Securities - taxable investments	1,178,671		23,006		2.61	%	1,176,961		24,255		2.76	%	Securities - taxable investments	1,550,859		21,603		1.86	%	1,178,671		23,006		2.61	%
Securities - nontaxable investments (1)	Securities - nontaxable investments (1)	1,176		34		3.86	%	1,739		52		4.00	%	Securities - nontaxable investments (1)	555		17		4.10	%	1,176		34		3.86	%
Total securities	Total securities	$	1,182,268	$	23,040	2.60	%	$	1,180,520	$	24,307	2.75	%	Total securities	$	1,554,681	$	21,620	1.86	%	$	1,182,268	$	23,040	2.60	%
Loans held for sale	Loans held for sale	43,150		917		2.84	%	40,768		527		1.73	%	Loans held for sale	35,953		675		2.51	%	43,150		917		2.84	%
Loans (2)	Loans (2)													Loans (2)
Commercial and industrial (1)	Commercial and industrial (1)	1,784,715		52,027		3.89	%	1,300,815		55,674		5.72	%	Commercial and industrial (1)	1,898,100		58,706		4.14	%	1,784,715		52,027		3.89	%
Commercial real estate (1)	Commercial real estate (1)	4,050,154		129,800		4.28	%	3,785,964		139,229		4.92	%	Commercial real estate (1)	4,195,200		123,377		3.93	%	4,050,154		129,800		4.28	%
Commercial construction	Commercial construction	554,222		17,341		4.18	%	453,097		20,037		5.91	%	Commercial construction	525,652		14,976		3.81	%	554,222		17,341		4.18	%
Small business	Small business	172,575		7,253		5.61	%	168,280		7,720		6.13	%	Small business	178,294		6,924		5.19	%	172,575		7,253		5.61	%
Total commercial	Total commercial	6,561,666		206,421		4.20	%	5,708,156		222,660		5.22	%	Total commercial	6,797,246		203,983		4.01	%	6,561,666		206,421		4.20	%
Residential real estate	Residential real estate	1,473,812		41,856		3.79	%	1,442,007		44,351		4.11	%	Residential real estate	1,242,991		34,449		3.71	%	1,473,812		41,856		3.79	%
Home equity	Home equity	1,125,817		31,617		3.75	%	1,125,144		38,797		4.61	%	Home equity	1,027,311		26,391		3.43	%	1,125,817		31,617		3.75	%
Total consumer real estate	Total consumer real estate	2,599,629		73,473		3.78	%	2,567,151		83,148		4.33	%	Total consumer real estate	2,270,302		60,840		3.58	%	2,599,629		73,473		3.78	%
Other consumer	Other consumer	25,643		1,587		8.27	%	25,317		1,623		8.57	%	Other consumer	23,382		1,241		7.10	%	25,643		1,587		8.27	%
Total loans	Total loans	$	9,186,938	$	281,481	4.09	%	$	8,300,624	$	307,431	4.95	%	Total loans	$	9,090,930	$	266,064	3.91	%	$	9,186,938	$	281,481	4.09	%
Total interest-earning assets	Total interest-earning assets	$	11,012,183	$	305,984	3.71	%	$	9,618,217	$	334,018	4.64	%	Total interest-earning assets	$	12,464,027	$	290,013	3.11	%	$	11,012,183	$	305,984	3.71	%
Cash and due from banks	Cash and due from banks	122,302						117,465						Cash and due from banks	147,269						122,302
Federal Home Loan Bank stock	Federal Home Loan Bank stock	17,645						16,561						Federal Home Loan Bank stock	9,516						17,645
Other assets	Other assets	1,256,074						927,837						Other assets	1,256,066						1,256,074
Total assets	Total assets	$	12,408,204					$	10,680,080					Total assets	$	13,876,878					$	12,408,204
Interest-bearing liabilities	Interest-bearing liabilities													Interest-bearing liabilities
Deposits	Deposits													Deposits
Savings and interest checking accounts	Savings and interest checking accounts	$	3,592,069	$	3,873	0.14	%	$	3,085,974	$	6,249	0.27	%	Savings and interest checking accounts	$	4,292,992	$	1,145	0.04	%	$	3,592,069	$	3,873	0.14	%
Money market	Money market	1,978,006		5,495		0.37	%	1,796,081		11,379		0.85	%	Money market	2,337,445		1,393		0.08	%	1,978,006		5,495		0.37	%
Time deposits	Time deposits	1,202,746		13,983		1.55	%	1,190,950		12,424		1.39	%	Time deposits	848,143		3,823		0.60	%	1,202,746		13,983		1.55	%
Total interest-bearing deposits	Total interest-bearing deposits	$	6,772,821	$	23,351	0.46	%	$	6,073,005	$	30,052	0.66	%	Total interest-bearing deposits	$	7,478,580	$	6,361	0.11	%	$	6,772,821	$	23,351	0.46	%
Borrowings	Borrowings													Borrowings
Federal Home Loan Bank borrowings	Federal Home Loan Bank borrowings	$	205,244	$	1,369	0.89	%	$	213,896	$	4,028	2.52	%	Federal Home Loan Bank borrowings	$	34,185	$	544	2.13	%	$	205,244	$	1,369	0.89	%

Line of credit		—		—		—	%	3,595		104		3.87	%

Long-term borrowings	Long-term borrowings	61,240		1,045		2.28	%	51,327		1,461		3.81	%	Long-term borrowings	23,434		282		1.61	%	61,240		1,045		2.28	%
Junior subordinated debentures	Junior subordinated debentures	62,849		1,362		2.89	%	69,176		1,891		3.65	%	Junior subordinated debentures	62,852		1,287		2.74	%	62,849		1,362		2.89	%
Subordinated debentures	Subordinated debentures	49,635		1,852		4.98	%	71,242		2,633		4.94	%	Subordinated debentures	49,729		1,852		4.98	%	49,635		1,852		4.98	%
Total borrowings	Total borrowings	$	378,968	$	5,628	1.98	%	$	409,236	$	10,117	3.31	%	Total borrowings	$	170,200	$	3,965	3.11	%	$	378,968	$	5,628	1.98	%
Total interest-bearing liabilities	Total interest-bearing liabilities	$	7,151,789	$	28,979	0.54	%	$	6,482,241	$	40,169	0.83	%	Total interest-bearing liabilities	$	7,648,780	$	10,326	0.18	%	$	7,151,789	$	28,979	0.54	%
Noninterest bearing demand deposits	Noninterest bearing demand deposits	3,257,058						2,572,357						Noninterest bearing demand deposits	4,213,764						3,257,058
Other liabilities	Other liabilities	300,248						164,783						Other liabilities	280,002						300,248

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Total liabilities	Total liabilities	$	10,709,095					$	9,219,381					Total liabilities	$	12,142,546					$	10,709,095
Stockholders' equity	Stockholders' equity	1,699,109						1,460,699						Stockholders' equity	1,734,332						1,699,109
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	12,408,204					$	10,680,080					Total liabilities and stockholders' equity	$	13,876,878					$	12,408,204
Net interest income (1)	Net interest income (1)			$	277,005					$	293,849			Net interest income (1)			$	279,687					$	277,005
Interest rate spread (3)	Interest rate spread (3)					3.17	%					3.81	%	Interest rate spread (3)					2.93	%					3.17	%
Net interest margin (4)	Net interest margin (4)					3.36	%					4.08	%	Net interest margin (4)					3.00	%					3.36	%
Supplemental information	Supplemental information													Supplemental information
Total deposit, including demand deposits	Total deposit, including demand deposits	$	10,029,879	$	23,351			$	8,645,362	$	30,052			Total deposit, including demand deposits	$	11,692,344	$	6,361			$	10,029,879	$	23,351
Cost of total deposits	Cost of total deposits					0.31	%					0.46	%	Cost of total deposits					0.07	%					0.31	%
Total funding liabilities, including demand deposits	Total funding liabilities, including demand deposits	$	10,408,847	$	28,979			$	9,054,598	$	40,169			Total funding liabilities, including demand deposits	$	11,862,544	$	10,326			$	10,408,847	$	28,979
Cost of total funding liabilities	Cost of total funding liabilities					0.37	%					0.59	%	Cost of total funding liabilities					0.12	%					0.37	%

(1)The total amount of adjustment to present interest income and yield on a FTE basis was ~~$720,000~~$658,000 and ~~$707,000~~$720,000 for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The FTE adjustment relates to nontaxable investment securities with average balances of ~~$1.2 million~~$555,000 and ~~$1.7~~$1.2 million and tax exempt income relating to loans with average balances of ~~$83.0~~$63.9 million and ~~$78.4~~$83.0 million for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

(2)Includes average nonaccruing loans.

(3)Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.

(4)Net interest margin represents annualized net interest income as a percentage of average interest-earning assets.

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The following table presents certain information on a FTE basis regarding changes in the Company’s interest income and interest expense for the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes attributable to: (1) changes in rate (change in rate multiplied by prior period volume), (2) changes in volume (change in volume multiplied by old rate), and (3) changes in volume/rate (change in volume multiplied by change in rate) which is allocated to the change due to rate column:

~~Table of Contents~~

Table 18 - Volume Rate Analysis


		Three Months Ended September 30						Nine Months Ended September 30							Three Months Ended September 30						Nine Months Ended September 30
		2020 Compared To 2019						2020 Compared To 2019							2021 Compared To 2020						2021 Compared To 2020
		Change Due to Rate		Change Due to Volume		Total Change		Change Due to Rate		Change Due to Volume		Total Change			Change Due to Rate		Change Due to Volume		Total Change		Change Due to Rate		Change Due to Volume		Total Change
		(Dollars in thousands)													(Dollars in thousands)
Income on interest-earning assets	Income on interest-earning assets													Income on interest-earning assets
Interest earning deposits, federal funds sold and short term investments	Interest earning deposits, federal funds sold and short term investments	$	(5,634)	$	5,208	$	(426)	$	(10,372)	$	9,165	$	(1,207)	Interest earning deposits, federal funds sold and short term investments	$	272	$	289	$	561	$	31	$	1,077	$	1,108
Securities	Securities													Securities

Securities - taxable investments	Securities - taxable investments	(608)		(443)		(1,051)		(1,284)		35		(1,249)		Securities - taxable investments	(4,118)		4,692		574		(8,668)		7,265		(1,403)
Securities - nontaxable investments (1)	Securities - nontaxable investments (1)	(1)		(6)		(7)		(1)		(17)		(18)		Securities - nontaxable investments (1)	1		(7)		(6)		1		(18)		(17)
Total securities	Total securities					(1,058)						(1,267)		Total securities					568						(1,420)
Loans held for sale	Loans held for sale	99		(229)		(130)		359		31		390		Loans held for sale	(1)		(132)		(133)		(89)		(153)		(242)
Loans	Loans													Loans
Commercial and industrial (1)	Commercial and industrial (1)	(12,149)		9,599		(2,550)		(24,358)		20,711		(3,647)		Commercial and industrial (1)	1,010		(3,425)		(2,415)		3,374		3,305		6,679
Commercial real estate (1)	Commercial real estate (1)	(8,404)		843		(7,561)		(19,145)		9,716		(9,429)		Commercial real estate (1)	(1,594)		1,485		(109)		(11,071)		4,648		(6,423)
Commercial construction	Commercial construction	(2,838)		809		(2,029)		(7,168)		4,472		(2,696)		Commercial construction	337		(547)		(210)		(1,471)		(894)		(2,365)
Small business	Small business	(258)		(65)		(323)		(664)		197		(467)		Small business	(143)		181		38		(569)		240		(329)
Total commercial	Total commercial					(12,463)						(16,239)		Total commercial					(2,696)						(2,438)
Residential real estate	Residential real estate	(1,180)		(2,713)		(3,893)		(3,473)		978		(2,495)		Residential real estate	(975)		(1,506)		(2,481)		(852)		(6,555)		(7,407)
Home equity	Home equity	(3,250)		(401)		(3,651)		(7,203)		23		(7,180)		Home equity	260		(875)		(615)		(2,460)		(2,766)		(5,226)
Total consumer real estate	Total consumer real estate					(7,544)						(9,675)		Total consumer real estate					(3,096)						(12,633)
Other consumer	Other consumer	15		(127)		(112)		(57)		21		(36)		Other consumer	(155)		38		(117)		(206)		(140)		(346)
Total loans (1)(2)	Total loans (1)(2)					(20,119)						(25,950)		Total loans (1)(2)					(5,909)						(15,417)
Total income of interest-earning assets	Total income of interest-earning assets					$	(21,733)					$	(28,034)	Total income of interest-earning assets					$	(4,913)					$	(15,971)
Expense of interest-bearing liabilities	Expense of interest-bearing liabilities													Expense of interest-bearing liabilities
Deposits	Deposits													Deposits
Savings and interest checking accounts	Savings and interest checking accounts	$	(1,738)	$	456	$	(1,282)	$	(3,401)	$	1,025	$	(2,376)	Savings and interest checking accounts	$	(629)	$	129	$	(500)	$	(3,484)	$	756	$	(2,728)
Money market	Money market	(3,590)		315		(3,275)		(7,037)		1,153		(5,884)		Money market	(632)		130		(502)		(5,101)		999		(4,102)
Time certificates of deposits	Time certificates of deposits	(378)		(1,479)		(1,857)		1,436		123		1,559		Time certificates of deposits	(1,846)		(951)		(2,797)		(6,037)		(4,123)		(10,160)
Total interest bearing deposits	Total interest bearing deposits					(6,414)						(6,701)		Total interest bearing deposits					(3,799)						(16,990)
Borrowings	Borrowings													Borrowings
Federal Home Loan Bank borrowings	Federal Home Loan Bank borrowings	(475)		(62)		(537)		(2,496)		(163)		(2,659)		Federal Home Loan Bank borrowings	78		(321)		(243)		316		(1,141)		(825)

Line of Credit	Line of Credit	—		—		—		—		(104)		(104)		Line of Credit	—		—		—						—
Long-term borrowings	Long-term borrowings	(201)		(342)		(543)		(698)		282		(416)		Long-term borrowings	6		(70)		(64)		(118)		(645)		(763)
Junior subordinated debentures	Junior subordinated debentures	(68)		—		(68)		(356)		(173)		(529)		Junior subordinated debentures	(6)		—		(6)		(75)		—		(75)
Subordinated debentures	Subordinated debentures	2		(430)		(428)		18		(799)		(781)		Subordinated debentures	(1)		1		—		(4)		4		—
Total borrowings	Total borrowings					(1,576)						(4,489)		Total borrowings					(313)						(1,663)
Total expense of interest-bearing liabilities	Total expense of interest-bearing liabilities					(7,990)						(11,190)		Total expense of interest-bearing liabilities					(4,112)						(18,653)
Change in net interest income	Change in net interest income					$	(13,743)					$	(16,844)	Change in net interest income					$	(801)					$	2,682

(1)~~The table above reflects~~Reflects income determined on a FTE basis. See footnote (1) to tables 16 and 17 in this Report for the related adjustments.

(2)Loans include portfolio loans and nonaccrual loans; however, unpaid interest on nonaccrual loans has not been included for purposes of determining interest income.

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Provision For Credit Losses The provision for credit losses represents the charge to expense that is required to maintain an ~~appropriate~~adequate level of allowance for credit losses. The Company recorded a release of provision for credit losses ~~was~~of $10.0 million and $17.5 million for the three and nine months ended September 30, 2021, primarily due to improvements in expected overall macro-economic forecast assumptions and continued strong asset quality metrics, as well as lower loan balances during 2021. In comparison, the Company recorded a provision expense of $7.5 million and $52.5 million for the three and nine months ended September 30, 2020, respectively, as compared to no provision for the third quarter of 2019 and $2.0 million for the nine months ended September 30, 2019. The elevated provision for credit losses for the three and nine months ended September 30, 2020which was ~~calculated under the newly adopted CECL methodology, which became effective as of January 1, 2020, and was~~primarily driven ~~primarily~~ by anticipated loan losses related to the COVID-19 pandemic. The Company’s allowance for credit losses, as a percentage of total loans, was 1.05% at September 30, 2021, 1.21% at December 31, 2020, and 1.23% at September 30, ~~2020, 0.76% at December 31, 2019, and 0.75% at September 30, 2019.~~2020. The Company recorded net charge-offs of $111,000 and $3.6 million for the three and nine months ended September 30, 2021, respectively, as compared to $4.1 million and $4.6 million for the three and nine months ended September 30, 2020, ~~respectively, as compared to net recoveries of $982,000 and $649,000 for the three and nine months ended September 30, 2019,~~ respectively. The increase in net charge-offs during the third quarter of 2020 was due primarily to a $3.8 million charge-off recorded on a commercial relationship within one of the industries deemed by management to be highly impacted by the COVID-19 pandemic. Refer to Note 4, "Loans, Allowance for Credit Losses and Credit Quality" within the Notes to ~~the~~ Consolidated Financial Statements included in Part I. Item 1 of this Report, for further details surrounding the ~~Company's accounting policies under the CECL standard and~~ primary drivers of the provision for credit losses for the ~~periods.~~period.

Noninterest IncomeThe following table sets forth information regarding noninterest income for the periods shown:

Table 19 - Noninterest Income


		Three Months Ended									Three Months Ended
		September 30				Change					September 30				Change
		2020		2019		Amount		%			2021		2020		Amount		%
		(Dollars in thousands)									(Dollars in thousands)
Deposit account fees	Deposit account fees	$	3,428	$	5,299	$	(1,871)	(35.31)	%	Deposit account fees	$	4,298	$	3,428	$	870	25.38	%
Interchange and ATM fees	Interchange and ATM fees	3,044		6,137		(3,093)		(50.40)	%	Interchange and ATM fees	3,441		3,044		397		13.04	%
Investment management	Investment management	7,571		7,188		383		5.33	%	Investment management	9,174		7,571		1,603		21.17	%
Mortgage banking income	Mortgage banking income	7,704		3,968		3,736		94.15	%	Mortgage banking income	2,825		7,704		(4,879)		(63.33)	%
Gain on life insurance benefits		—		434		(434)		(100.00)	%

Increase in cash surrender value of life insurance policies	Increase in cash surrender value of life insurance policies	1,314		1,304		10		0.77	%	Increase in cash surrender value of life insurance policies	1,596		1,314		282		21.46	%

Loan level derivative income	Loan level derivative income	2,457		2,739		(282)		(10.30)	%	Loan level derivative income	586		2,457		(1,871)		(76.15)	%
Unrealized gain on equity securities										Unrealized gain on equity securities	—		308		(308)		(100.00)	%
Other noninterest income	Other noninterest income	3,829		4,747		(918)		(19.34)	%	Other noninterest income	4,537		3,521		1,016		28.86	%
Total	Total	$	29,347	$	31,816	$	(2,469)	(7.76)	%	Total	$	26,457	$	29,347	$	(2,890)	(9.85)	%

		Nine Months Ended									Nine Months Ended
		September 30				Change					September 30				Change
		2020		2019		Amount		%			2021		2020		Amount		%
		(Dollars in thousands)									(Dollars in thousands)
Deposit account fees	Deposit account fees	$	11,227	$	14,785	$	(3,558)	(24.06)	%	Deposit account fees	$	11,704	$	11,227	$	477	4.25	%
Interchange and ATM fees	Interchange and ATM fees	13,154		16,447		(3,293)		(20.02)	%	Interchange and ATM fees	9,229		13,154		(3,925)		(29.84)	%
Investment management	Investment management	21,696		21,089		607		2.88	%	Investment management	26,350		21,696		4,654		21.45	%
Mortgage banking income	Mortgage banking income	13,570		8,184		5,386		65.81	%	Mortgage banking income	11,270		13,570		(2,300)		(16.95)	%
Gain on life insurance benefits	Gain on life insurance benefits	692		434		258		59.45	%	Gain on life insurance benefits	258		692		(434)		(62.72)	%
Increase in cash surrender value of life insurance policies	Increase in cash surrender value of life insurance policies	3,902		3,572		330		9.24	%	Increase in cash surrender value of life insurance policies	4,508		3,902		606		15.53	%

Loan level derivative income	Loan level derivative income	8,918		4,312		4,606		106.82	%	Loan level derivative income	875		8,918		(8,043)		(90.19)	%
Unrealized gain on equity securities										Unrealized gain on equity securities	723		1,694		(971)		(57.32)	%
Other noninterest income	Other noninterest income	10,813		13,174		(2,361)		(17.92)	%	Other noninterest income	11,753		9,119		2,634		28.88	%
Total	Total	$	83,972	$	81,997	$	1,975	2.41	%	Total	$	76,670	$	83,972	$	(7,302)	(8.70)	%

The primary reasons for the variances in the noninterest income categories for the three and nine months ended September 30, 2021 as compared to the respective prior year periods shown in the preceding table include:

•Deposit fee income was impacted by the timing and extent of government mandated shutdowns and social distancing measures, as well as the timing of economic stimulus payments received by customers.

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•~~Deposit account~~Interchange and ATM fees increased for the three months ended September 30, 2021 due to increased volume and rise in customer spending in comparison to the prior year period. Such fees decreased for the ~~three and~~ nine months ended September 30, ~~2020~~2021 in comparison to the year ago ~~periods, driven by reductions in overdraft fees, as customers benefited from government stimulus payments during the first half of 2020.~~

•~~Interchange and ATM fees have decreased for the three and nine months ended September 30, 2020 in comparison to the year ago periods,~~period, reflecting ~~an overall decrease in consumer spending as customers focus on retaining liquidity during the COVID-19 pandemic. In addition, interchange income for the third quarter of 2020 reflects~~ the negative impact of the Durbin Amendment, which the Company became subject to effective July 1, 2020 as a result of crossing the $10 billion asset ~~threshold.~~threshold, coupled with an overall decrease in consumer spending as customers focused on retaining liquidity following the onset of COVID-19 pandemic late in the first quarter of 2020.

•Investment management income increased for the three and nine months ended September 30, ~~2020~~2021 in comparison to the year ago periods, primarily driven by more favorable market conditions during 2021, along with overall growth in assets under administration which increased 19.7% to $5.4 billion at September 30, 2021 from $4.5 billion at September 30, 2020.

•Mortgage banking income decreased during the three and nine months ended September 30, 2021 in comparison to the year ago periods. ~~Assets under administration were $4.5 billion at both September 30, 2020 and 2019, respectively, however current year asset values were subject to significant general stock~~The changes are driven primarily by demand within the respective prevailing interest rate environments in those periods, as well as percentage of closings sold in the secondary market ~~volatility associated with~~versus retained in the ~~COVID-19 pandemic.~~portfolio.

•~~Mortgage banking~~Loan level derivative income decreased for the three and nine months ended September 30, 2021, primarily as a result of lower customer demand in comparison to the year ago periods.

•Unrealized gain on equity securities decreased for the three and nine months ended September 30, 2021, due primarily to significant market volatility during the first half of 2020 caused by the onset of the COVID-19 pandemic, the result of which was a sell-off late in the first quarter of 2020, followed by a period of elevated growth during the second and third quarters of 2020.

•Other noninterest income increased for the three and nine months ended September 30, ~~2020 in comparison~~2021 compared to the prior year ~~ago~~ periods, primarily ~~due~~attributable to ~~increased volume~~income recognized from other investments, income from like-kind exchanges and ~~continued strong demand largely driven by the low rate environment.~~

•The Company received proceeds on life insurance policies during the first half of 2020 resulting in gains of $692,000 for the nine months ended September 30, 2020. There were $434,000 of such gains during the three and nine months ended September 30, 2019.

•The increase in cash surrender value of life insurance policies for the nine months ended September 30, 2020 and September 30, 2019 was primarily due to policies obtained from the BHB acquisition, which closed in the second quarter of 2019.

•Loan level derivative income increased during the nine months ended September 30, 2020 primarily as a result of higher customer demand. Although remaining at an elevated level, loan level derivative income during the three months ended September 30, 2020 decreased slightly in comparison to the year ago comparable period.

•Other noninterest income decreased during the three months ended September 30, 2020, mainly due to a decrease from a gain recognized on the sale of loans in 2019, along with reductions in foreign currency exchange fees, checkbook fees and FHLB dividend income. The decline in noninterest income during the nine months ended September 30, 2020 is also due to the decrease from a gain on sale of loans in 2019, decreases in FHLB dividend income and service fee income partially offset by increases in income on called securities and 1031 exchangebusiness credit card income.

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Noninterest Expense The following table sets forth information regarding non-interest expense for the periods shown:

Table 20 - Noninterest Expense


		Three Months Ended									Three Months Ended
		September 30				Change					September 30				Change
		2020		2019		Amount		%			2021		2020		Amount		%
		(Dollars in thousands)									(Dollars in thousands)
Salaries and employee benefits	Salaries and employee benefits	$	38,409	$	39,432	$	(1,023)	(2.59)	%	Salaries and employee benefits	$	42,235	$	38,409	$	3,826	9.96	%
Occupancy and equipment expenses	Occupancy and equipment expenses	9,273		8,555		718		8.39	%	Occupancy and equipment expenses	8,564		9,273		(709)		(7.65)	%
Data processing & facilities management	Data processing & facilities management	1,567		1,515		52		3.43	%	Data processing & facilities management	1,673		1,567		106		6.76	%
FDIC assessment	FDIC assessment	1,034		—		1,034		100.00%		FDIC assessment	980		1,034		(54)		(5.22)	%
Advertising expense	Advertising expense	1,215		1,417		(202)		(14.26)	%	Advertising expense	884		1,215		(331)		(27.24)	%
Consulting expense	Consulting expense	1,305		1,338		(33)		(2.47)	%	Consulting expense	1,560		1,305		255		19.54	%
Core deposit amortization		1,428		1,567		(139)		(8.87)	%

Amortization of intangible assets										Amortization of intangible assets	1,310		1,449		(139)		(9.59)	%
Debit card expense										Debit card expense	1,347		1,105		242		21.90	%

Loss on termination of derivatives	Loss on termination of derivatives	684		—		684		100.00%		Loss on termination of derivatives	—		684		(684)		(100.00)	%
Merger and acquisition expenses	Merger and acquisition expenses	—		705		(705)		(100.00)	%	Merger and acquisition expenses	1,943		—		1,943		100.00%

Software maintenance	Software maintenance	1,753		1,385		368		26.57	%	Software maintenance	2,018		1,753		265		15.12	%

Other noninterest expenses	Other noninterest expenses	9,990		11,619		(1,629)		(14.02)	%	Other noninterest expenses	9,905		8,864		1,041		11.74	%
Total	Total	$	66,658	$	67,533	$	(875)	(1.30)	%	Total	$	72,419	$	66,658	$	5,761	8.64	%

		Nine Months Ended									Nine Months Ended
		September 30				Change					September 30				Change
		2020		2019		Amount		%			2021		2020		Amount		%
		(Dollars in thousands)									(Dollars in thousands)
Salaries and employee benefits	Salaries and employee benefits	$	113,027	$	111,401	$	1,626	1.46	%	Salaries and employee benefits	$	124,759	$	113,027	$	11,732	10.38	%
Occupancy and equipment expenses	Occupancy and equipment expenses	27,863		24,109		3,754		15.57	%	Occupancy and equipment expenses	26,543		27,863		(1,320)		(4.74)	%
Data processing & facilities management	Data processing & facilities management	4,684		4,883		(199)		(4.08)	%	Data processing & facilities management	5,024		4,684		340		7.26	%
FDIC assessment	FDIC assessment	1,537		1,394		143		10.26	%	FDIC assessment	2,805		1,537		1,268		82.50	%
Advertising expense	Advertising expense	3,107		3,912		(805)		(20.58)	%	Advertising expense	2,949		3,107		(158)		(5.09)	%
Consulting expense	Consulting expense	4,244		3,486		758		21.74	%	Consulting expense	5,443		4,244		1,199		28.25	%
Core deposit amortization		4,392		3,996		396		9.91	%

Amortization of intangible assets										Amortization of intangible assets	4,037		4,704		(667)		(14.18)	%
Debit card expense										Debit card expense	3,693		3,312		381		11.50	%
Loss on termination of derivatives	Loss on termination of derivatives	684		—		684		100.00%		Loss on termination of derivatives	—		684		(684)		(100.00)	%

Loss on sale of securities		—		1,462		(1,462)		(100.00)	%

Merger and acquisition expenses	Merger and acquisition expenses	—		26,433		(26,433)		(100.00)	%	Merger and acquisition expenses	3,674		—		3,674		100.00%

Software maintenance	Software maintenance	5,218		3,913		1,305		33.35	%	Software maintenance	5,903		5,218		685		13.13	%
Other noninterest expenses	Other noninterest expenses	35,349		31,887		3,462		10.86	%	Other noninterest expenses	30,573		31,725		(1,152)		(3.63)	%
Total	Total	$	200,105	$	216,876	$	(16,771)	(7.73)	%	Total	$	215,403	$	200,105	$	15,298	7.64	%

The primary reasons for the variances in the noninterest expense categories for the three and nine months ended September 30, 2021 as compared to the respective prior year periods shown in the preceding table include:

•The ~~decrease~~increase in salaries and employee benefits for the three ~~months ended September 30, 2020 is due primarily to reductions in incentive compensation programs costs, partially offset by increases in general salary costs~~ and ~~payroll taxes. The increase for the~~ nine months ended September 30, ~~2020 reflects overall increases in~~2021 as compared to the ~~employee base,~~prior year periods is primarily due to ~~the BHB acquisition which occurred on April 1, 2019, along with~~ increases in incentive programs, commissions, payroll taxes, general salary increases, and retirement ~~benefit costs~~costs.

•Occupancy and ~~medical insurance costs offset somewhat by~~equipment decreased during both the three and nine months ended September 30, 2021 as compared to the prior year periods. These decreases were primarily due to reductions in ~~incentive compensation.~~depreciation expense

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from disposals of equipment, as well as decreased computer hardware and software costs which were elevated in the prior year to facilitate remote work for employees after onset of the COVID-19 pandemic. Partially offsetting the decrease for the nine months ended September 30, 2021 were increases in cleaning costs and snow removal expenses in comparison to the prior year period.

•~~Occupancy~~Data processing and ~~equipment~~facilities management expenses increased for both the three and nine months ended September 30, ~~2020 primarily due~~2021 as compared to the ~~full nine month impact of the acquired BHB branch network and costs attributable to the Company's infrastructure expenses in response to the COVID-19 pandemic.~~

•~~Data processing and facilities management costs increased slightly for the three months ended September 30, 2020 and decreased for the nine months ended September 30, 2020 in comparison to~~ prior year periods, primarily due to timing of certain initiatives and system upgrades.

•~~Advertising expense decreased during the three and nine months ended~~ ~~September 30, 2020, as compared to the prior year periods, due primarily to the timing and scope of various marketing campaigns.~~

•FDIC assessment increased for ~~both~~the nine months ended September 30, 2021, in comparison to year ago period as the Company previously benefited from a small bank assessment credit, which resulted in no expense during the first quarter of 2020 and reduced expense during the second quarter of 2020. Assessment fees for the three months ended September 30, 2021 were slightly lower than the year ago period, due to normal fluctuations in the company's assessment base.

•Consulting expense increased for the three and nine months ended September 30, 2020, in comparison to the same periods in 2019. The Company has previously benefited from small bank assessment credit, which resulted in reduced expenses during 2019 and throughout the first quarter of 2020. In addition, the Company's assessment base increased resulting in an increase in over assessment fee.

•~~Consulting expense increased during the nine months ended September 30, 2020 in conjunction with the~~ ~~Company's overall growth, implementation of strategic initiatives and COVID-19 related projects. These costs decreased during the three months ended~~ ~~September 30, 2020~~2021, in comparison to the prior year ~~period~~periods, primarily due to ~~mainly to~~ the ~~timing~~Company's overall growth and implementation of ~~certain~~ strategic initiatives.

•The ~~core deposit amortization increased~~Company recorded merger and acquisitions expenses of $1.9 million and $3.7 million during the three and nine months ended September 30, ~~2020~~ ~~primarily due to additional core deposit intangibles associated with the BHB acquisition.~~

•~~Merger and acquisition expense in 2019 is attributable~~2021, respectively, relating to the ~~BHB~~Meridian acquisition. ~~The majority of these~~No such costs ~~include legal, professional fees, and integration costs. There~~ were ~~no merger and acquisition costs~~incurred during ~~the first three quarters of~~either period in 2020.

•Software maintenance increased ~~during 2020~~for the three and nine months ended September 30, 2021, as compared to the prior year periods, primarily due to the Company's continued investment in its technology infrastructure.

•~~The decrease in other~~Other noninterest expense for the three months ended September 30, ~~2020 is primarily due~~2021 increased when compared to ~~a decrease~~the prior year period, with increases in ~~loan workout costs,~~recruitment expense, sponsorships, ~~contributions, recruitment,~~unrealized loss on equity securities, and legal ~~fees and card issuance costs. For~~fees. Other noninterest expense decreased for the nine months ended September 30, ~~2020, other noninterest expense increased~~2021 as compared to the prior year period, mainly due to ~~software maintenance, retail branch traffic control, recruitment expenses,~~decreases in unrealized loss on equity securities, prepayment fees on borrowings, ~~investment management systems,~~ loss on the sale of fixed assets, ~~COVID-19 related~~office supplies, ~~appraisals, directors fees~~retail branch traffic control, and miscellaneous other ~~miscellaneous~~ expenses.

Income Taxes The tax effect of all income and expense transactions is recognized by the Company in each year’s consolidated statements of income, regardless of the year in which the transactions are reported for income tax purposes. The following table sets forth information regarding the Company’s tax provision and applicable tax rates for the periods indicated:

Table 21 - Tax Provision and Applicable Tax Rates


		Three Months Ended						Nine Months Ended							Three Months Ended						Nine Months Ended
		September 30						September 30							September 30						September 30
		2020			2019			2020			2019				2021			2020			2021			2020
		(Dollars in thousands)													(Dollars in thousands)
Combined federal and state income tax provision	Combined federal and state income tax provision	$	11,199		$	17,036		$	21,126		$	38,565		Combined federal and state income tax provision	$	14,122		$	11,199		$	38,506		$	21,126
Effective income tax rate	Effective income tax rate	24.31		%	24.73		%	19.62		%	24.68		%	Effective income tax rate	26.09		%	24.31		%	24.40		%	19.62		%
Blended statutory tax rate	Blended statutory tax rate	27.89		%	28.24		%	27.89		%	28.24		%	Blended statutory tax rate	27.92		%	27.89		%	27.92		%	27.89		%

The Company’s effective tax rate in ~~2020~~2021 thus far is ~~lower~~higher as compared to the year ago period primarily due to ~~lower net~~higher pre-tax income, as well as the impact of discrete items, ~~which are subject~~including tax benefits related to ~~fluctuation year over year.~~low income housing tax credits and equity compensation. The discrete tax amounts for the nine months ended September 30, 2020 ~~include~~also reflect a benefit of $4.7 million associated with the net operating loss (NOL) carryback provision of the CARES Act. The NOL was generated in relation to the ~~BHB acquisition. Additionally, the Company fully realized tax credit benefits from the New Market Tax Credit program as~~acquisition of ~~December 31,~~Blue Hills Bancorp, Inc. in 2019. ~~Therefore, the effective tax rate for the nine months ended September 30, 2020 reflects no benefit from these particular credits.~~ The effective tax rates in the table above are lower than the blended statutory tax rates due to the aforementioned discrete items as well as

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certain tax preference assets such as life insurance policies, tax exempt bonds, and federal tax credits. The Company’s blended statutory tax rate for the three and nine months ended September 30, ~~2020 is~~2021 are comparable to the year ago ~~period.~~

periods.

The Company invests in various low income housing projects, which are real estate limited partnerships that acquire, develop, own and operate low and moderate-income housing developments. As a limited partner in these operating partnerships, the Company will receive tax credits and tax deductions for losses incurred by the underlying properties. The investments are accounted for using the proportional amortization method and will be amortized over various periods through ~~2037,~~2039, which represents the period that the tax credits and other tax benefits will be utilized. The total committed investment in

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these partnerships is ~~$124.3~~$162.9 million, of which ~~$76.9~~$88.7 million ~~has~~had been funded as of September 30, ~~2020.~~2021. It is expected that the limited partnership investments will generate a net tax benefit of approximately ~~$2.0~~$3.4 million for the ~~full calendar~~fiscal year ~~of 2020~~2021 and a total of ~~$15.8~~$22.4 million over the remaining life of the investments from the combination of the tax credits and operating losses.

Risk Management

The Board of Directors and management have identified significant risks which affect the Company, including credit risk, market risk, liquidity risk, price risk, operations risk, cybersecurity risk, consumer compliance risk, reputation risk, and strategic risk. The Board of Directors has approved an Enterprise Risk Management Policy to state the Company’s goals and ~~management has adopted a Risk Appetite Statement that addresses each risk category.~~objectives in identifying, measuring, and managing the risks associated with the Company’s current and near future anticipated size and complexity. Management ~~reviews key risks and their mitigation on an ongoing basis and provides regular~~is responsible for comprehensive enterprise risk management, and continually strives to adopt and implement practices that strike an appropriate balance between risk and reward and permit the achievement of strategic goals in a controlled environment.

The Company has implemented the “three lines of defense” enterprise risk management model. The first line of defense are the executives in charge of business units, operational areas, and corporate functions who, sometimes assisted by management committees, teams, and working groups, own and manage risks. The second line of defense is the Chief Risk Officer and the risk department, who monitor and provide advice with respect to first line risk management. The third line of defense is independent assurance performed by the Chief Internal Auditor, who reports to the Audit Committee of the Company's Board of ~~Directors.~~ Directors, and by the Company's internal audit department.

The Board of Directors, with the assistance of ~~the Board’s~~its Risk Committee, oversees management’s enterprise risk management practices. As risks must be taken to create value, the Board of Directors has approved a Risk Appetite Statement that defines the acceptable residual risk tolerances for the Company and the seven major risk types identified as having the potential to create significant adverse impacts on the Company, such as financial losses, reputational damage, legal or regulatory actions, non‐achievement of strategic objectives, diminished customer experience, and/or cultural erosion. The seven major risk types identified by the Company and addressed in the Risk Appetite Statement are strategic risk, culture risk, credit risk, liquidity risk, market risk, operational risk, and reputation risk, each of which is discussed below.

Strategic Risk Strategic risk is the risk arising from adverse strategic or business decisions, misalignment of strategic direction with the Company’s mission and values, failure to execute strategies or tactics, or an inadequate adaptation or lack of responsiveness to industry and/or operating environment changes. Management seeks to mitigate strategic risk through strategic planning, frequent executive review of strategic plan progress, monitoring of competitors and technology, assessment of new products, new branches, and ~~management.~~new business initiatives, customer advocacy, and crisis management planning.

Culture Risk Culture risk is the risk arising from failed leadership and/or ineffective colleague engagement and workplace management that causes the Company to lose sight of core values and, through acts or omissions, damage the relationship-based culture which has been one of the foundations of the Company’s consistent success. Management mitigates culture risk through effective employee relations, leadership that encourages continuous improvement, cultural development and reinforcement of core values, communication of clear ethical and behavioral standards, consistent enforcement of policies and programs, discipline of misbehavior, alignment of incentives and compensation, and by promoting diversity, equity, and inclusion.

Credit Risk Credit risk is the ~~possibility that customers~~risk arising from the failure of a borrower or ~~other counterparties may not repay loans or other contractual obligations according~~a counterparty to ~~their terms.~~a contract to make payments as agreed, and includes the risks arising from inadequate collateral and mismanagement of loan concentrations. While the collateral securing loans may be sufficient in some cases to recover the amount due, in other cases the Company may experience significant credit losses which could have an adverse effect on its operating results. The Company makes assumptions and judgments about the collectability of its loan portfolio, including the creditworthiness of its borrowers and counterparties and the value of collateral for the repayment of loans. For further discussion regarding the credit risk and the credit quality of the Company’s loan portfolio, see Note 4, “Loans, Allowance for Credit Losses and Credit Quality” within the Notes to ~~the~~ Consolidated Financial Statements included in Part I. Item 1 of this Report.

~~Operations~~Liquidity Risk ~~Operations~~Liquidity risk is the risk ~~of loss~~arising from the ~~Company’s operations due~~Company being unable to ~~human behavior, inadequate~~meet obligations when due. Liquidity risk includes the inability to access funding sources or ~~failed internal systems and controls, and external influences such as market conditions, fraudulent activities, natural disasters, and security risks. Potential operational~~manage fluctuations in available funding levels. Liquidity risk exposure exists throughout the Company. The continued effectiveness of colleagues, technical systems, operational infrastructure, and relationships with key third party service providers are integral to mitigating operations risk, and any shortcomings subject the Company to risks that vary in size, scale and scope. Operations risks include, but are not limited to, operational or technical failures, unlawful tampering with technical systems, cyber security, terrorist activities, ineffectiveness or exposure due to interruption in third party support, as well as the loss of key individuals or failure on the part of the key individuals to perform properly. Management maintains an Operations Risk Committee to assess and mitigate operations risk which contributes to periodic enterprise risk management reporting to the Board of Directors.

~~Compliance Risk~~ ~~Compliance risk is the risk of regulatory sanctions or financial loss resulting~~also results from ~~the~~a failure to ~~comply~~recognize or address market condition changes that affect the ability to liquidate assets quickly with ~~rules~~minimal value loss.

The Company’s primary sources of funds are deposits, borrowings, and ~~regulations issued~~the amortization, prepayment, and maturities of loans and securities. The Bank utilizes its extensive branch network to access retail customers who provide a base of in-market core deposits. These funds are principally comprised of demand deposits, interest checking accounts, savings accounts, and money market accounts. Deposit levels are greatly influenced by ~~the various banking agencies, the U.S. Securities~~interest rates, economic conditions, and Exchange Commission, the NASDAQ Stock Market, and good banking practices. Activities which may expose the Company to compliance risk include money laundering, privacy and data protection, adherence to laws and regulations, community reinvestment initiatives, and employment and tax matters. Compliance risk is mitigated through the use of written policies and procedures, staff training, and continuous monitoring of activities for adherence to policies and procedures. Management maintains a Compliance Committee to assess and mitigate compliance risk that contributes to periodic enterprise risk management reporting to the Board of Directors.

~~Strategic and Reputation Risk~~ Strategic and reputation risk is the risk of loss due to impairment of reputation, failure to fully develop and execute business plans, and failure to assess current and new opportunities and threats in business, markets, and products. Management seeks to mitigate strategic and reputational risk through annual strategic planning, frequent executive review of strategic plan progress, ongoing competitive and technological observation, assessment processes of new products, new branches, and new business initiatives, adherence to ethical standards, a philosophy of customer advocacy, a structured process of customer complaint resolution, and ongoing reputational monitoring, crisis management planning, and management tools.

factors.

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The Company’s primary measure of short-term liquidity is the Total Basic Surplus/Deficit as a percentage of assets. This ratio, which is an analysis of the relationship between liquid assets plus available Federal Home Loan Bank funding, less short-term liabilities relative to total assets, was within policy limits at September 30, 2021. The Total Basic Surplus/Deficit measure is affected primarily by changes in deposits, securities and short-term investments, loans, and borrowings. An increase in deposits, without a corresponding increase in nonliquid assets, will improve the Total Basic Surplus/Deficit measure, whereas, an increase in loans, with no increase in deposits, will decrease the measure. Other factors affecting the Total Basic Surplus/Deficit include Federal Home Loan Bank collateral requirements, securities portfolio changes, and the mix of deposits.

The Company seeks to increase deposits without adversely impacting its weighted average funding cost. As a result of PPP loan funding, government stimulus programs, and a customer focus on retaining liquidity, the Company has experienced significant deposit growth and a buildup of liquidity throughout the first three quarters of 2021.

The Company also maintains a variety of liquidity sources, including Federal Home Loan Bank advances, Federal Reserve borrowing capacity, and repurchase agreement lines. These funding sources serve as a contingent source of liquidity and, when profitable lending and investment opportunities exist, the Company may access them to provide the liquidity needed to grow the balance sheet. The amount and type of assets that the Company has available to pledge impacts the Company's Federal Home Loan Bank and Federal Reserve borrowing capacity. For example, a prime one-to-four family residential loan may provide 75 cents of borrowing capacity for every $1.00 pledged, whereas a pledged commercial loan may increase borrowing capacity in a lower amount. The Company’s lending decisions, therefore, can also affect its liquidity position.

The Company can also raise additional funds through the issuance of equity or unsecured debt privately or publicly and has done so in the past. Additionally, the Company is able to enter into repurchase agreements or acquire brokered deposits at its discretion. The availability and cost of equity or debt on an unsecured basis is dependent on many factors, including the Company’s financial position, the market environment, and the Company’s credit rating. The Company monitors the factors that could impact its ability to raise liquidity through these channels.

The following table depicts current and unused liquidity capacity from various sources as of the dates indicated:

Table 22 - Liquidity Sources


	September 30, 2021				December 31, 2020
	Outstanding		Additional Borrowing Capacity		Outstanding		Additional Borrowing Capacity
	(Dollars in thousands)
Federal Home Loan Bank of Boston (1)	$	25,675	$	1,354,115	$	35,740	$	1,372,671
Federal Reserve Bank of Boston (2)	—		1,067,818		—		1,355,809
Unpledged Securities	—		1,613,818		—		716,961
Line of Credit	—		50,000		—		50,000
Long-term borrowing (3)	18,750		—		32,773		—

Junior subordinated debentures (3)	62,853		—		62,851		—
Subordinated debt (3)	49,767		—		49,696		—
Reciprocal deposits (3)	244,586		—		237,902		—
Brokered deposits (3)	6,000		—		8,538		—
	$	407,631	$	4,085,751	$	427,500	$	3,495,441

(1)Loans with a carrying value of $2.0 billion and $2.1 billion at September 30, 2021 and December 31, 2020, respectively, were pledged to the Federal Home Loan Bank of Boston resulting in this additional unused borrowing capacity.

(2)Loans with a carrying value of $1.6 billion and $1.9 billion at September 30, 2021 and December 31, 2020, respectively, were pledged to the Federal Reserve Bank of Boston resulting in this additional unused borrowing capacity.

(3)The additional borrowing capacity has not been assessed for these categories.

In addition to customary operational liquidity practices, the Board of Directors and management recognize the need to establish reasonable guidelines to manage a heightened liquidity risk environment. Catalysts for elevated liquidity risk can be Company-specific issues and/or systemic industry-wide events. It is therefore the responsibility of management to institute systems and controls designed to provide advanced detection of potentially significant funding shortages, establish methods for assessing and monitoring risk levels, and institute responses that may alleviate or circumvent a potential liquidity crisis. Management has established a Liquidity Contingency Plan to provide a framework to detect potential liquidity problems and

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appropriately address them in a timely manner. In a period of perceived heightened liquidity risk, the Liquidity Contingency Plan provides for the establishment of a Liquidity Crisis Task Force to monitor the potential for a liquidity crisis and establish and execute an appropriate response.

Market Risk Market risk is the ~~sensitivity of income to~~risk arising from changes in interest rates ~~equity prices, foreign exchange rates, commodity prices,~~ and the value of investments due to market conditions or other ~~market-driven rates~~external factors or ~~prices.~~events. The Company’s ~~most significant~~primary market risk exposure is interest rate risk.

Interest rate risk is the sensitivity of income ~~due~~ to changes in interest rates. Interest rate changes, as well as fluctuations in the level and duration of assets and liabilities, affect net interest income, the Company’s primary source of revenue. Interest rate risk arises directly from the Company’s core banking activities. In addition to directly impacting net interest income, changes in the level of interest rates can also affect the amount of loans originated, the timing of cash flows on loans and securities, and the fair value of securities and derivatives, and have other effects.

Management ~~maintains an Asset Liability Committee to manage interest rate risk, which~~ strives to control interest rate risk within limits approved by the Board of Directors that reflect the Company’s tolerance for interest rate risk over short-term and long-term horizons. The Company attempts to manage interest rate risk by identifying, quantifying, and, where appropriate, hedging exposure. If assets and liabilities do not re-price simultaneously and in equal volume, the potential for interest rate exposure exists. It is the Company's objective to maintain stability in the growth of net interest income through the maintenance of an appropriate mix of interest-earning assets and interest-bearing liabilities and, when necessary within limits management ~~determines to be~~deems prudent, through the use of off-balance sheet hedging instruments such as interest rate swaps, floors, and caps.

The Company quantifies its interest rate exposures using net interest income simulation models, as well as simpler gap analysis, and an Economic Value of Equity analysis. Key assumptions in these ~~simulation~~ analyses relate to behavior of interest rates and behavior of the Company’s deposit and loan customers. The most material assumptions relate to the prepayment of mortgage assets (including mortgage loans and mortgage-backed securities) and the life and sensitivity of non-maturity deposits (e.g., demand deposit, negotiable order of withdrawal, savings, and money market accounts). In the case of prepayment of mortgage assets, assumptions are derived from published dealer median prepayment estimates for comparable mortgage loans. The risk of prepayment tends to increase when interest rates fall. Since future prepayment behavior of loan customers is uncertain, interest rate sensitivity of loans cannot be determined ~~exactly~~with precision and actual behavior may differ from ~~assumption.~~assumptions to a significant degree.

Based upon the net interest income simulation models, the Company currently forecasts that ~~the Bank’s~~ assets are anticipated to re-price faster than ~~the~~ liabilities. As a result, ~~the~~ net interest income ~~of the Bank~~ will ~~benefit~~be positively impacted as market rates increase and ~~contract~~negatively impacted if market rates decrease. The Company runs several scenarios to quantify and effectively assist in managing ~~this position. These scenarios include~~interest rate risk, including instantaneous parallel shifts in market rates as well as gradual (12-24 months) shifts in market rates, and may also include other alternative scenarios as management deems necessary given the interest rate environment.

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The results of all scenarios and the impact to net interest income are outlined in the table below:

Table 2223 - Interest Rate Sensitivity


		September 30										September 30
		2020					2019					2021				2020
		Year 1		(1)	Year 2		Year 1		Year 2			Year 1		Year 2		Year 1		Year 2
Parallel rate shocks (basis points)	Parallel rate shocks (basis points)										Parallel rate shocks (basis points)

-100	-100	(0.8)	%		(9.9)	%	(3.2)	%	(7.3)	%	-100	(3.4)	%	(9.8)	%	(0.8)	%	(9.9)	%
+100	+100	6.0	%		1.6	%	3.2	%	4.1	%	+100	8.4	%	9.6	%	6.0	%	1.6	%
+200	+200	12.5	%		11.0	%	5.9	%	8.8	%	+200	18.0	%	22.8	%	12.5	%	11.0	%
+300	+300	19.4	%		20.5	%	8.4	%	13.3	%	+300	27.9	%	36.4	%	19.4	%	20.5	%
+400	+400	25.9	%		29.5	%	10.9	%	17.6	%	+400	37.5	%	49.5	%	25.9	%	29.5	%

Gradual rate shifts (basis points)	Gradual rate shifts (basis points)										Gradual rate shifts (basis points)

-100 over 12 months	-100 over 12 months	0.1	%		(9.3)	%	(1.2)	%	(6.3)	%	-100 over 12 months	(1.4)	%	(8.0)	%	0.1	%	(9.3)	%
+200 over 12 months	+200 over 12 months	5.8	%		8.5	%	2.7	%	7.3	%	+200 over 12 months	8.6	%	20.3	%	5.8	%	8.5	%
+400 over 24 months	+400 over 24 months	5.8	%		15.4	%	2.7	%	9.5	%	+400 over 24 months	8.6	%	31.6	%	5.8	%	15.4	%

Alternative scenarios	Alternative scenarios										Alternative scenarios
Yield Curve Twist(1)	Yield Curve Twist(1)	1.6	%		2.9	%	1.0	%	4.7	%	Yield Curve Twist(1)	n/a		n/a		1.6	%	2.9	%

Flat up 200 basis points scenario											Flat up 200 basis points scenario	8.0	%	17.8		n/a		n/a

(1)~~Baseline scenarios assume approximately 50%~~In the yield curve twist scenario, rates increase 200 basis points over a two year horizon. The parallel shift occurs faster on the long end of ~~PPP loans will be completely amortized or paid off~~the curve than it does on the short end, creating a temporary increase in the steepness of the curve during ~~year 1.~~

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~~Table~~the interim period of ~~Contents~~the twist.

The results depicted in the table above are dependent on material assumptions. For instance, asymmetrical rate behavior can have a material impact on the simulation results. If competition for deposits prompts the Company to raise rates on those liabilities more quickly than is assumed in the simulation analysis without a corresponding increase in asset yields, net interest income would be negatively impacted. Alternatively, if the Company is able to lag increases in deposit rates as loans re-price upward, net interest income would be positively impacted.

The most significant market factors affecting ~~market risk exposure of~~ the Company’s net interest income during the nine months ended September 30, ~~2020~~2021 were the shape of the U.S. Government securities and interest rate swap yield curve, the U.S. prime interest rate and LIBOR rates, and the interest rates being offered on long-term fixed rate loans. ~~Additionally, the~~The full economic impact of the COVID-19 pandemic on these factors remains uncertain.

The Company manages the interest rate risk inherent in both its loan and borrowing portfolios by using interest rate swap agreements and interest rate caps and floors. An interest rate swap is an agreement ~~whereby~~in which one party agrees to pay a floating rate of interest on a notional principal amount in exchange for receiving a fixed rate of interest on the same notional amount for a predetermined period of time from the other party. Interest rate caps and floors are agreements where one party agrees to pay a floating rate of interest on a notional principal amount for a predetermined period of time to a second party if certain market interest rate thresholds are realized. ~~The amounts relating to~~While interest is paid or received in swap, cap, and floors agreements, the notional principal amount ~~are~~is not actually exchanged. ~~Additionally, the~~The Company may also manage the interest rate risk inherent in its mortgage banking operations by entering into forward sales ~~contracts. In an effort to mitigate that risk, forward delivery sales commitments are executed,~~contracts under which the Company agrees to deliver whole mortgage loans to various investors. See Note 6,9 “~~, “Derivative~~Derivative and Hedging ~~Activities”~~Activities” within the Notes to ~~the~~ Consolidated Financial Statements included in Part I. Item 1 of this Report for additional information regarding the Company’s ~~Derivative Financial Instruments.~~derivative financial instruments.

The Company’s earnings are not directly or materially impacted by movements in foreign currency rates or commodity prices. Movements in equity prices may have a modest impact on earnings by affecting the volume of activity or the amount of fees from investment-related business lines. See Note 3, “Securities” within the Notes to ~~the~~ Consolidated Financial Statements included in Part I. Item 1.1 of this Report.

~~Liquidity Risk~~ ~~Liquidity risk is~~There were no material changes in off-balance sheet financial instruments during the risk that the Company will not have the ability to generate adequate amounts of cash in the most economical way to meet its ongoing obligations to pay deposit withdrawals, repay borrowings, and fund loans. The Company’s primary sources of funds are deposits, borrowings, and the amortization, prepayment, and maturities of loans and securities. The Bank utilizes its extensive branch network to access retail customers who provide a base of in-market core deposits. These funds are principally comprised of demand deposits, interest checking accounts, savings accounts, and money market accounts. Deposit levels are greatly influenced by interest rates, economic conditions, and competitive factors.

Management maintains an Asset Liability Committee to manage liquidity risk. The Company’s primary measure of short-term liquidity is the Total Basic Surplus/Deficit as a percentage of assets. This ratio, which is an analysis of the relationship between liquid assets plus available funding at the FHLB, less short-term liabilities relative to total assets, was within policy limits atthree months ended September 30, ~~2020. The Total Basic Surplus/Deficit measure is affected primarily by changes in deposits, securities~~2021. See Note 6, “Derivative and ~~short-term investments, loans,~~ Hedging Activities” and ~~borrowings. An increase in deposits, without a corresponding increase in nonliquid assets, will improve~~Note 10, "Commitments and Contingencies"within the Total Basic Surplus/Deficit measure, whereas, an increase in loans, with no increase in deposits, will decrease the measure. Other factors affecting the Total Basic Surplus/Deficit measure include collateral requirements at the FHLB, changes in the securities portfolio, and the mix of deposits.

~~The Bank seeks~~Notes to increase deposits without adversely impacting the weighted average cost of those funds. As part of a prudent liquidity risk management practice, the Company maintains various liquidity sources, some of which are only accessed on a contingency basis. Accordingly, Management has implemented funding strategies that include FHLB advances, Federal Reserve Bank borrowing capacity, and repurchase agreement lines. These funding sources are a contingent source of liquidity and, when profitable lending and investment opportunities exist, access to them provides a means to grow the balance sheet.

Borrowing capacity at the FHLB and the Federal Reserve is impacted by the amount and type of assets available to be pledged. For example, a prime, one-to-four family, residential loan, may provide 75 cents of borrowing capacity for every $1.00 pledged, whereas, a commercial loan may provide a lower amount. As a result, the Company’s lending decisions can also affect its liquidity position.

The Company can raise additional funds through the issuance of equity or unsecured debt privately or publicly and has done so in the past. Additionally, the Company is able to enter into repurchase agreements or acquire brokered deposits at its discretion. The availability and cost of equity or debt on an unsecured basis is dependent on many factors. Some factors that

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~~will impact~~Consolidated Financial Statements included in Part I. of Item 1 of this ~~source~~Report for more information relating to the Company's other off-balance sheet financial instruments.

Operational Risk Operational risk is the risk arising from human error or misconduct, transaction errors or delays, inadequate or failed internal systems or processes, data unavailability, loss, or poor quality, or adverse external events. Operational risk includes business resiliency risk, consumer compliance risk, data governance risk, fraud risk, information security risk, information technology risk, legal risk, model risk, regulatory compliance risk, and third party vendor risk. Potential operational risk exposure exists throughout the Company. The continued effectiveness of ~~liquidity~~colleagues, technical systems, operational infrastructure, and relationships with key third party service providers are integral to mitigating operational risk, and any shortcomings subject the ~~Company’s financial position,~~Company to risks that vary in size, scale and scope. Operational risks include operational or technical failures, unlawful tampering with technical systems, cyber security, terrorist activities, ineffectiveness or exposure due to interruption in third party support, as well as the ~~market environment,~~loss of key individuals or a failure of key individuals to perform properly.

Reputation Risk Reputational risk is the risk arising from negative public opinion of the Company and the ~~Company’s credit rating. The Company monitors the factors~~Bank. Management seeks to mitigate reputation risk through actions that ~~could impact its ability to raise liquidity through these channels.~~

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include a structured process of customer complaint resolution and ongoing reputational monitoring.

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~~As a result of PPP loan funding, government stimulus programs~~Contractual Obligations, Commitments, Contingencies, and a customer focus on retaining liquidity, the Company experienced significant growth in deposits and a buildup of liquidity through these sources. In addition to this excess liquidity as of September 30, 2020, the Company also maintains sufficient alternative sources of funding from which it may draw, if necessary. The table below shows current and unused liquidity capacity from various sources as of the dates indicated:

~~Table 23 - Sources of Liquidity~~

September 30, 2020 December 31, 2019
Outstanding Additional
Borrowing
Capacity Outstanding Additional
Borrowing Capacity
(Dollars in thousands)
Federal Home Loan Bank of Boston (1) $ 145,765 $ 1,302,139 $ 115,748 $ 1,557,559
Federal Reserve Bank of Boston (2) — 1,371,686 — 954,748
Unpledged Securities — 664,799 — 790,304
Line of Credit — 50,000 — 50,000
Long-term borrowing (3) 37,447 — 74,906 —
Junior subordinated debentures (3) 62,850 — 62,848 —
Subordinated debt (3) 49,672 — 49,601 —
Reciprocal deposits (3) 232,443 — 211,213 —
Brokered deposits (3) 58,104 — 281,773 —
$ 586,281 $ 3,388,624 $ 796,089 $ 3,352,611

~~(1)~~Loans with a carrying value of $2.2 billion and $2.5 billion at September 30, 2020 and December 31, 2019, respectively, have been pledged to the Federal Home Loan Bank of Boston resulting in this additional unused borrowing capacity.

~~(2)~~Loans with a carrying value of $2.0 billion and $1.5 billion at September 30, 2020 and December 31, 2019, respectively, have been pledged to the Federal Reserve Bank of Boston resulting in this additional unused borrowing capacity.

~~(3)The additional borrowing capacity has not been assessed for these categories.~~

In addition to policies used for managing operational liquidity, the Board of Directors and management recognize the need to establish reasonable guidelines for managing through an environment of heightened liquidity risk. Catalysts for elevated liquidity risk can be Bank-specific issues and/or systemic industry-wide events. It is therefore the responsibility of management to institute systems and controls to provide advanced detection of potentially significant funding shortages, establish methods for assessing and monitoring risk levels, and institute prompt responses that may alleviate or circumvent a potential liquidity crisis. Management has established a Liquidity Contingency Plan to provide a framework for the Bank to help detect liquidity problems promptly and appropriately address potential liquidity problems in a timely manner. In a period of perceived heightened liquidity risk, the Liquidity Contingency Plan provides for the establishment of a Liquidity Crisis Task Force. The Liquidity Crisis Task Force is responsible for monitoring the potential for a liquidity crisis and for establishing and executing an appropriate response.

Off-Balance Sheet Financial Information

Off-Balance Sheet Arrangements There were no material changes in off-balance sheet financial instruments during the three months ended September 30, ~~2020.~~2021.

See Note 9,6, "Derivative and Hedging Activities" and Note ~~14,~~10, "Commitments and Contingencies" within the Notes to ~~the~~ Consolidated Financial Statements included in Part I. Item 1 of this Report for more information relating to the Company's other off-balance sheet financial instruments.

Contractual Obligations, Commitments, and Contingencies There were no material changes in contractual obligations, commitments, or contingencies during the three months ended September 30, ~~2020.~~2021.

Refer to the ~~2019~~2020 Form 10-K for a complete table of contractual obligations, commitments and contingencies.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Information required by this Item 3 is included in the "Risk Management" section of Part I,I. Item 2 ~~Management's~~"Management's Discussion and Analysis of Financial Condition and Results of ~~Operations~~Operations" of this Report and is incorporated herein by reference.

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Item 4. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures. The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer along with the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as such term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, the Company’s Chief Executive Officer along with the Company’s Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.

Changes in Internal Control over Financial Reporting. There were no changes in the Company's internal control over financial reporting that occurred during the third quarter of ~~2020~~2021 that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting. The Company has not experienced any material impact to the Company’s internal control over financial reporting due to the fact that most of the Company’s employees responsible for financial reporting are working remotely during the COVID-19 pandemic. The Company is continually monitoring and assessing the impact of the COVID-19 pandemic on the Company’s internal control over financial reporting to minimize any impact on the design and operating effectiveness.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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At September 30, ~~2020,~~2021, the Bank was involved in pending lawsuits that arose in the ordinary course of business. Management has reviewed these pending lawsuits with legal counsel, including those lawsuits filed in connection with the Meridian acquisition as described in the Company's Form 8-K filed in July 27, 2021, and has taken into consideration the view of counsel as to their outcome. In the opinion of management, the final disposition of pending lawsuits is not expected to have a material adverse effect on the Company’s financial position or results of operations.

Item 1A. Risk Factors

The section titled Risk Factors in Part I, Item 1A of the ~~2019~~2020 Form 10-K includes a discussion of the ~~many~~material risks and uncertainties the Company faces, any one or more of which could have a material adverse effect on the Company's business, results of operations, or financial condition (including capital and liquidity). The information presented below provides an update to, and should be read in conjunction with, the risk factors and other information contained in the ~~2019~~2020 Form 10-K as well as any updated to our risk factors included in subsequent Quarterly Reports on Form 10-Q.

Except as presented below, there have been no material changes to the risk factors described in the ~~2019~~2020 Form 10-K.

Failure to complete the acquisition of Meridian Bancorp, Inc. for any reason could negatively impact future business and financial results of the Company.

On April 22, 2021, the Company announced the entry into a definitive agreement (the “Merger Agreement”) under which the Company will acquire Meridian Bancorp, Inc. (“Meridian”) and Rockland Trust Company will acquire East Boston Savings Bank (the “Merger”). Completion of the Merger is subject to customary closing conditions, including, among others, (i) authorization for listing on the Nasdaq Stock Market of the shares of the Company’s common stock to be issued in the Merger, subject to official notice of issuance, (ii) the receipt of all required regulatory approvals, including the approval of the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Massachusetts Commissioner of Banks, the Massachusetts Housing Partnership Fund and the Depositors Insurance Fund, without the imposition of a burdensome condition, (iv) the effectiveness of the registration statement on Form S-4 to be filed with the Securities and Exchange Commission by the Company in connection with the transactions contemplated by the Merger Agreement and (v) the absence of any order, injunction, decree or other legal restraint preventing the completion of the transactions contemplated by the Merger Agreement or making them illegal. Each party’s obligation to complete the Merger is also subject to additional customary conditions, including, subject to certain exceptions, the accuracy of the representations and warranties of the other party and the performance in all material respects by each party of its obligations under the Merger Agreement.

The ~~COVID-19 pandemic is adversely affecting~~Merger Agreement provides certain termination rights for both the Company and ~~its customers, counterparties, employees, and third-party service providers, and~~Meridian.

If the ~~full extent~~Merger is not completed for any reason, the business of the ~~adverse impacts on~~Company may be adversely affected and, without realizing any of the ~~Company's business, financial position, results~~benefits of ~~operations, and prospects~~having completed the Merger, the Company could be ~~significant.~~

The spread of COVID-19 has created a global public-health crisis that has resulted in widespread volatility and deteriorations in business, economic, and market conditions and household incomes, including in the Commonwealth of Massachusetts where the Company conducts nearly all of its business. The extent of the impact of the COVID-19 pandemic on the Company's capital and liquidity, and on its business, results of operations, financial position and prospects generally will depend onsubject to a number of ~~evolving factors, including:~~

~~The duration, extent,~~risks. In this regard, the Company faces risks and ~~severity~~uncertainties due both to the pendency of the ~~pandemic and any resurgences.~~ ~~COVID-19 has not yet been contained and could affect significantly more households and businesses. The duration and severity of the pandemic, including recent resurgences~~Merger and the potential ~~for seasonal~~failure to consummate the merger, including:

•the occurrence of any event, change or other ~~resurgences after~~circumstances that could give rise to the termination of the Merger Agreement;

•the risk that the necessary regulatory approvals may not be obtained or may be obtained subject to conditions that are not anticipated;

•delays in closing the Merger or other risks that any ~~containment, as well as~~of the ~~timing~~closing conditions to the Merger may not be satisfied in a timely manner;

•the diversion of ~~any vaccine continue~~management’s time and resources from ongoing business operations due to issues relating to the Merger;

•material adverse changes in the Company’s or Meridian’s operations or earnings; and

•the outcome of litigation in connection with the Merger.

In addition, the Company has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the Merger Agreement. If the Merger is not consummated, the Company could have to recognize these and other expenses without realized the expected benefits of the Merger.

The acquisition of Meridian may be ~~impossible to predict. Following any containment, there is also substantial uncertainty surrounding the pace of economic recovery~~more difficult, costly or time consuming than expected, and the ~~return of business and consumer confidence.~~

~~The response of governmental and nongovernmental authorities.~~ ~~Many~~expected benefits of the actions intended to contain the spread of COVID-19 have been directed toward curtailing household and business activity while simultaneously deploying fiscal- and monetary-policy measures to partially mitigate the adverse effects on individual households and businesses. These actions aremerger may not ~~always coordinated or consistent across jurisdictions and, in general, have changed rapidly in scope and intensity, contributing to substantial market volatility.~~be realized.

~~The effect on the Company's customers, counterparties, employees, and third-party service providers.~~ ~~COVID-19 and its associated consequences and uncertainties, including increased unemployment rates, are affecting individuals, households,~~

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Cost or difficulties relating to integration matters might be greater than expected and ~~businesses differently~~the Company may be unable to realize expected cost savings and ~~unevenly. Many, however, have changed their behavior~~synergies from the Merger in ~~response to governmental mandates~~the amounts and ~~advisories to sharply restrain commercial and social interactions and discretionary spending. As a~~in the timeframe anticipated. For example, it is possible that the integration process could result in the ~~near term,~~loss of key employees, the ~~Company's credit, operational,~~disruption of the Company’s ongoing business or inconsistencies in standards, controls, procedures and ~~other risks have generally increased~~policies that adversely affect the combined bank’s ability to maintain relationships with customers and ~~for~~employees or to achieve the ~~foreseeable future, are expected to remain elevated or increase further.~~

anticipated benefits and cost savings of the Merger. The ~~effect on economies and markets.~~ ~~Whether the actions~~loss of governmental and nongovernmental authorities will be successful in mitigating the adverse effects of COVID-19 is unclear. National, regional, and local economies (including the local economies in the markets areas which the Company serves) and markets could suffer disruptions that are lasting. Governmental actions are meaningfully influencing the interest-rate environment and financial-market activity, whichkey employees could adversely affect the ~~Company's results of operations and financial condition.~~

~~During the first nine months of 2020, the most notable impact~~Company’s ability to the Company's results of operations was a higher provision expense for credit losses. The Company's provision expense was $52.5 million for the nine months ended September 30, 2020, compared to $2.0 millionsuccessfully conduct its business in the ~~comparable year ago period. With~~markets in which Meridian now operates, which could have an adverse effect on the ~~continued spread~~Company’s financial results and the value of ~~COVID-19 in the United States, the Company's forecast of macroeconomic conditions~~its common stock. The Company’s belief that cost savings and revenue enhancements are achievable is a forward-looking statement that is inherently uncertain. The combined company’s actual cost savings and revenue enhancements, if any, cannot be quantified at this time. Any actual cost savings or revenue enhancements will depend on future expense levels and operating results, ~~including expected lifetime credit losses on~~ the ~~Company's loan portfolio, is subject to meaningful uncertainty.~~

~~Governments have taken unprecedented steps to partially mitigate the adverse effects~~timing of ~~their containment measures. For example, on March 27, 2020, the CARES Act was enacted to inject more than $2 trillion~~certain events and general industry, regulatory and business conditions. Many of ~~financial assistance into the U.S. economy. The FRB has taken decisive and sweeping actions as well. Since March 15, 2020,~~ these have included a reduction in the target range for the federal funds rate to 0 to 25 basis points, a program to purchase an indeterminate amount of Treasury securities and agency mortgage-backed securities, and numerous facilities to support the flow of credit to households and businesses.

The degree to which the Company's actions and those of governments and others will directly or indirectly assist the Company's customers, counterparties, and third-party service providers and advance the Company's business and the economy generally is not yet clear. For example, while the Company's loan-deferral programs may better position customers to resume their regular payments to the Company in the future and enhance the Company's brand and customer loyalty, these programs may negatively impact the Company's revenue and other results of operations at least in the near term, may produce a higher degree of enrollment and other requests for extensions and rewrites than the Company anticipated, and the Company may not be as successful as expected in managing credit risk. In addition, while the FRB’s accommodative monetary policy may benefit the Company to some degree by supporting economic activity among its customers, this policy and sudden shifts in it may inhibit the Company's ability to grow or sustain net interest income and effectively manage interest-rate risk.

The Company is unable to estimate the near-term and ultimate impacts of COVID-19 on the Company's business and operations at this time. The pandemic could cause the Company to experience higher credit losses in its lending portfolio, additional increases in the allowance for credit losses, impairment of goodwill and other financial assets, diminished access to capital markets and other funding sources, further reduced demand for the Company's products and services, and other negative impacts on the Company's financial position, results of operations, and prospects. In addition, while the Company continues to anticipate that its capital and liquidity positionsevents will be ~~sufficient, sustained adverse effects may impair these positions, prevent~~beyond the ~~Company from satisfying its minimum regulatory capital ratios and other supervisory requirements, and result in downgrades in its credit ratings.~~

~~The COVID-19 pandemic and related governmental mandates and advisories also have necessitated changes in~~control of the way the Company and its third party service providers continue operations, and the length of time that it may be required to operate under these circumstances, as well as the potential for conditions to worsen or for significant disruptions to occur, remains unpredictable. All of these risks and uncertainties can be expected to persist at least until the pandemic is demonstrably and sustainably contained, authorities cease curbing household and business activity, and consumer and business confidence recover. COVID-19 and the volatile economic conditions stemming from it could also precipitate or contribute to the other risk factors identified in the 2019 Form 10-K, ~~which in turn could materially adversely affect the Company's~~ ~~business, financial position, results of operations, prospects~~, and its stock price, and may also affect the Company's business in a manner that is not presently known to it or that the Company currently does not consider to present significant risks to its business, financial position, results of operations or prospects.

As a participating lender in the SBA Paycheck Protection Program (“PPP”), the Company is subject to additional risks of litigation from its customers or other parties regarding the processing of loans for the PPP and risks that the U.S. Small Business Administration (“SBA”) may not fund some or all PPP loan guaranties, which could have a significant adverse impact on the Company's business, financial position, results of operations, and prospects.combined company.

The CARES Act included a $349 billion loan program administered through the SBA referred to as the PPP. Under the PPP, small businesses and other entities and individuals can apply for loans from existing SBA lenders and other approved

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regulated lenders that enroll in the program, subject to numerous limitations and eligibility criteria. On April 16, 2020, the SBA notified lenders that the original $349.0 billion of funding under the PPP was exhausted, and on April 24, 2020, Congress allocated an additional $310.0 billion to the program. The Company participated as a lender in both rounds of the PPP. Through the third quarter of 2020, the Company has made over 6,100 PPP loans for a total of $811.7 million. In part because of the short timeframe between the passing of the CARES Act and the opening of the PPP, there was and continues to be some ambiguity in the laws, rules and guidance regarding the operation of the PPP, which exposes the Company to risks relating to noncompliance with the PPP. Since the opening of the PPP, several other larger banks have been subject to litigation regarding the process and procedures that such banks used in processing applications for the PPP. The Company may be exposed to the risk of litigation, from both clients and non-clients that approached us regarding PPP loans, regarding its process and procedures used in processing applications for the PPP. If any such litigation is filed against the Company and is not resolved in a manner favorable to the Company, it may result in significant financial liability or adversely affect the Company's reputation. In addition, litigation can be costly, regardless of outcome. Any financial liability, litigation costs or reputational damage caused by PPP-related litigation could have a material adverse impact on the Company's business, financial position, results of operations and prospects.

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

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

(a) Not applicable.

(b) Not applicable.

(c) The following table sets forth information regarding the Company’s repurchases of its common stock during the three months ended September 30, ~~2020:~~2021:

Issuer Purchases of Equity Securities
Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of
Shares Purchased as
Part of Publicly
Announced Plan or
Program (2) Maximum Number of Shares That May Yet Be Purchased Under the Plan or Program (2)
Period
July 1 to July 31, 2020 — $ — — —
August 1 to August 31, 2020 — $ — — —
September 1 to September 30, 2020 43 $ 54.28 — —
Total 43 $ 54.28 —


	Issuer Purchases of Equity Securities
	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan or Program	Maximum Number of Shares That May Yet Be Purchased Under the Plan or Program
Period
July 1 to July 31, 2021	—	$	—	—	—
August 1 to August 31, 2021	—	$	—	—	—
September 1 to September 30, 2021	43	$	70.81	—	—
Total	43	$	70.81	—

(1)Reflects shares withheld in connection with the exercise and/or vesting of equity compensation grants to satisfy related tax withholding obligations.

~~(2)~~On October 17, 2019, the Company announced that its Board of Directors authorized a share repurchase program of up to 1.5 million shares of the Company's common stock. All 1.5 million shares were repurchased under the program between January and April of 2020. Accordingly, the October 2019 share repurchase program is no longer in effect.

Item 3. Defaults Upon Senior Securities - None.

Item 4. Mine Safety Disclosures - Not Applicable.

Item 5. Other Information - None.

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Item 6. Exhibits

Exhibit Index


No.			Exhibit


31.1			Section 302 Certification of Sarbanes-Oxley Act of 2002 is attached hereto.*
31.2			Section 302 Certification of Sarbanes-Oxley Act of 2002 is attached hereto.*
32.1			Section 906 Certification of Sarbanes-Oxley Act of 2002 is attached hereto.+
32.2			Section 906 Certification of Sarbanes-Oxley Act of 2002 is attached hereto.+
99.1			Notice to Shareholders of Dismissal of Derivative Action
101			The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.*
104			Cover page interactive data file (formatted as inline XBRL and contained in Exhibit 101).*


*			Filed herewith


+			Furnished herewith

Table of Contents

~~109~~96

Table of Contents

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.

INDEPENDENT BANK CORP.

(registrant)


November ~~5, 2020~~4, 2021						/s/ Christopher Oddleifson
						Christopher Oddleifson President and Chief Executive Officer (Principal Executive Officer)


November ~~5, 2020~~4, 2021						/s/ Mark J. Ruggiero
						Mark J. Ruggiero Chief Financial Officer (Principal Financial Officer)

~~110~~97


Table 17 - Average Balance, Interest Earned/Paid & Average Yields Year-to-Date			9282
~~Table of Contents~~
Table 18 - Volume Rate Analysis			9484
Table 19 - Noninterest Income ~~- Three and~~ ~~Nine~~ ~~Months Ended~~			9685
Table 20 - Noninterest Expense ~~- Three and~~ Ni n e ~~Months Ended~~			9887
Table 21 - Tax Provision and Applicable Tax Rates			9988
Table 22 - ~~Interest Rate Sensitivity~~Sources of Liquidity			~~101~~90
Table 23 - ~~Sources of Liquidity~~Interest Rate Sensitivity			~~104~~92


Table 7 - Activity in Troubled Debt Restructurings			7969
Table 8 ~~- Deferral by Modification Type~~			79
~~Table 9~~ - Interest Income - Nonaccrual Loans and Troubled Debt Restructurings			8070
Table 9 - Deferral by Modification Type			70
Table 10 - ~~Potentially~~Industries Highly Impacted By COVID-19 ~~Industries~~- Details			8071
Table 11 - Summary of Changes in the Allowance for Credit Losses			8374
Table 12 - Summary of Allocation of the Allowance for Credit Losses			8475
Table 13 - Borrowings			8676
Table 14 - Company and Bank’s Capital Amounts and Ratios			8777
Table 15 - Summary of Results of Operations			8979
Table 16 - Average Balance, Interest Earned/Paid & Average Yields Quarter-to-Date			9080


	December 31, 2019
	Commercial and Industrial		Commercial Real Estate		Commercial Construction		Small Business		Residential Real Estate		Home Equity		Other Consumer		Total
	(Dollars in thousands)
Financing receivables ending balance:
Collectively evaluated for impairment	$	1,370,580	$	3,987,848	$	547,293	$	173,960	$	1,571,848	$	1,127,963	$	29,663	$	8,809,155
Individually evaluated for impairment	24,456		8,337		0		537		11,228		4,948		122		49,628
Purchased credit impaired loans	0		6,174		0		0		7,493		887		302		14,856
Total loans by group	$	1,395,036	$	4,002,359	$	547,293	$	174,497	$	1,590,569	$	1,133,798	$	30,087	$	8,873,639	(1)


	Three Months Ended September 30, 2019
	(Dollars in thousands)
	Commercial and Industrial		Commercial Real Estate		Commercial Construction		Small Business		Residential Real Estate		Home Equity		Other Consumer		Total
Allowance for loan losses
Beginning balance	$	16,857	$	32,660	$	5,593	$	1,768	$	3,296	$	5,547	$	239	$	65,960
Charge-offs	0		(82)		0		(125)		0		(28)		(472)		(707)
Recoveries	1,003		106		0		61		140		194		185		1,689
Provision (benefit)	(528)		(33)		240		48		(88)		36		325		0
Ending balance	$	17,332	$	32,651	$	5,833	$	1,752	$	3,348	$	5,749	$	277	$	66,942

	Nine Months Ended September 30, 2019
	(Dollars in thousands)
	Commercial and Industrial		Commercial Real Estate		Commercial Construction		Small Business		Residential Real Estate		Home Equity		Other Consumer		Total
Allowance for loan losses
Beginning balance	$	15,760	$	32,370	$	5,158	$	1,756	$	3,219	$	5,608	$	422	$	64,293
Charge-offs	0		(82)		0		(319)		0		(212)		(1,125)		(1,738)
Recoveries	1,127		152		0		108		141		278		581		2,387
Provision (benefit)	445		211		675		207		(12)		75		399		2,000
Ending balance	$	17,332	$	32,651	$	5,833	$	1,752	$	3,348	$	5,749	$	277	$	66,942
Ending balance: collectively evaluated for impairment	$	17,326	$	32,610	$	5,833	$	1,741	$	2,729	$	5,594	$	272	$	66,105
Ending balance: individually evaluated for impairment	$	6	$	41	$	0	$	11	$	619	$	155	$	5	$	837


		December 31, 2019
Category	Risk Rating	Commercial and Industrial		Commercial Real Estate		Commercial Construction		Small Business		Total
		(Dollars in thousands)
Pass	1 - 6	$	1,274,155	$	3,860,555	$	542,608	$	171,213	$	5,848,531
Potential weakness	7	63,485		97,268		2,247		1,416		164,416
Definite weakness-loss unlikely	8	57,396		44,536		2,438		1,868		106,238
Partial loss probable	9	0		0		0		0		0
Definite loss	10	0		0		0		0		0
Total		$	1,395,036	$	4,002,359	$	547,293	$	174,497	$	6,119,185


	December 31, 2019
	Recorded Investment		Unpaid Principal Balance		Related Allowance
	(Dollars in thousands)
With no related allowance recorded
Commercial and industrial	$	23,786	$	34,970	$	0
Commercial real estate	6,213		12,101		0

Small business	469		484		0
Residential real estate	4,976		5,123		0
Home equity	3,764		3,893		0
Other consumer	34		34		0
Subtotal	39,242		56,605		0
With an allowance recorded
Commercial and industrial	$	670	$	670	$	126
Commercial real estate	2,124		2,124		48

Small business	68		105		8
Residential real estate	6,252		7,163		637
Home equity	1,184		1,382		156
Other consumer	88		91		5
Subtotal	10,386		11,535		980
Total	$	49,628	$	68,140	$	980