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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterthe quarterly period ended June 30, 2020March 31, 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 1-35746


Bryn Mawr Bank Corporation
(Exact name of registrant as specified in its charter)

Pennsylvania23-2434506
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
801 Lancaster Avenue, Bryn Mawr, Pennsylvania19010
(Address of principal executive offices)(Zip Code)
(610) 525-1700
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolSymbol(s)Name of each exchange on which registered
Common Stock, $1 par valueBMTCThe NASDAQ Stock Market
 ________________________________________________________________________________
Indicate by checkmark 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      No   ☐
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 and post such files).    Yes      No   ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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      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. ☐
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Classes Outstanding at AugustMay 4, 20202021
Common Stock, par value $1 19,928,48119,878,993



Table of Contents
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
 
FORM 10-Q
 
QUARTER ENDED June 30, 2020March 31, 2021

Index 
 
PART I - 
   
ITEM 1. 
   
 
Page 3
   
 
Page 129
   
ITEM 2.
Page 5746
   
ITEM 3.
Page 8167
   
ITEM 4.
Page 8167
   
PART II -
Page 8268
   
ITEM 1.
Page 8268
   
ITEM 1A.
Page 8268
  
ITEM 2.
Page 8569
   
ITEM 3.
Page 8670
   
ITEM 4.
Page 8670
  
ITEM 5.
Page 8670
   
ITEM 6.
Page 8771



Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets - Unaudited
(dollars in thousands)(dollars in thousands)June 30,
2020
December 31,
2019
(dollars in thousands)March 31,
2021
December 31,
2020
AssetsAssetsAssets
Cash and due from banksCash and due from banks$16,408  $11,603  Cash and due from banks$10,311 $11,287 
Interest bearing deposits with banksInterest bearing deposits with banks448,113  42,328  Interest bearing deposits with banks37,089 85,026 
Cash and cash equivalentsCash and cash equivalents464,521  53,931  Cash and cash equivalents47,400 96,313 
Investment securities available for sale, at fair value (amortized cost of $517,041 and $1,001,034 as of June 30, 2020 and December 31, 2019, respectively)530,581  1,005,984  
Investment securities held to maturity, at amortized cost (fair value of $12,995 and $12,661 as of June 30, 2020 and December 31, 2019, respectively)12,592  12,577  
Investment securities available for sale, at fair value (amortized cost of $731,349 and $1,161,098 as of March 31, 2021 and December 31, 2020, respectively)Investment securities available for sale, at fair value (amortized cost of $731,349 and $1,161,098 as of March 31, 2021 and December 31, 2020, respectively)738,974 1,174,964 
Investment securities held to maturity, at amortized cost (fair value of $14,371 and $15,186 as of March 31, 2021 and December 31, 2020, respectively)Investment securities held to maturity, at amortized cost (fair value of $14,371 and $15,186 as of March 31, 2021 and December 31, 2020, respectively)14,126 14,759 
Investment securities, tradingInvestment securities, trading7,801  8,621  Investment securities, trading8,777 8,623 
Loans held for saleLoans held for sale4,116  4,249  Loans held for sale3,210 6,000 
Portfolio loans and leases, originatedPortfolio loans and leases, originated3,422,890  3,320,816  Portfolio loans and leases, originated3,405,128 3,380,727 
Portfolio loans and leases, acquiredPortfolio loans and leases, acquired299,275  368,497  Portfolio loans and leases, acquired228,107 247,684 
Total portfolio loans and leasesTotal portfolio loans and leases3,722,165  3,689,313  Total portfolio loans and leases3,633,235 3,628,411 
Less: Allowance for credit losses on originated loans and leasesLess: Allowance for credit losses on originated loans and leases(51,659) (22,526) Less: Allowance for credit losses on originated loans and leases(45,285)(50,783)
Less: Allowance for credit losses on acquired loans and leasesLess: Allowance for credit losses on acquired loans and leases(3,315) (76) Less: Allowance for credit losses on acquired loans and leases(2,277)(2,926)
Total allowance for credit losses on loans and leasesTotal allowance for credit losses on loans and leases(54,974) (22,602) Total allowance for credit losses on loans and leases(47,562)(53,709)
Net portfolio loans and leasesNet portfolio loans and leases3,667,191  3,666,711  Net portfolio loans and leases3,585,673 3,574,702 
Premises and equipment, netPremises and equipment, net61,778  64,965  Premises and equipment, net55,510 56,662 
Operating lease right-of-use assetsOperating lease right-of-use assets39,348  40,961  Operating lease right-of-use assets33,848 34,601 
Accrued interest receivableAccrued interest receivable15,577  12,482  Accrued interest receivable15,058 15,440 
Mortgage servicing rightsMortgage servicing rights3,440  4,450  Mortgage servicing rights2,493 2,626 
Bank owned life insuranceBank owned life insurance59,728  59,079  Bank owned life insurance60,721 60,393 
Federal Home Loan Bank stockFederal Home Loan Bank stock4,506  23,744  Federal Home Loan Bank stock5,986 12,666 
GoodwillGoodwill184,012  184,012  Goodwill184,012 184,012 
Intangible assetsIntangible assets17,303  19,131  Intangible assets14,726 15,564 
Other investmentsOther investments17,055  16,683  Other investments17,811 17,742 
Other assetsOther assets181,762  85,679  Other assets126,183 156,955 
Total assetsTotal assets$5,271,311  $5,263,259  Total assets$4,914,508 $5,432,022 
LiabilitiesLiabilitiesLiabilities
Deposits:Deposits:Deposits:
Noninterest-bearingNoninterest-bearing$1,217,496  $898,173  Noninterest-bearing$1,364,716 $1,401,843 
Interest-bearingInterest-bearing3,026,152  2,944,072  Interest-bearing2,537,534 2,974,411 
Total depositsTotal deposits4,243,648  3,842,245  Total deposits3,902,250 4,376,254 
Short-term borrowingsShort-term borrowings28,891  493,219  Short-term borrowings60,027 72,161 
Long-term FHLB advancesLong-term FHLB advances44,837  52,269  Long-term FHLB advances39,941 39,906 
Subordinated notesSubordinated notes98,794  98,705  Subordinated notes98,928 98,883 
Junior subordinated debenturesJunior subordinated debentures21,843  21,753  Junior subordinated debentures21,983 21,935 
Operating lease liabilitiesOperating lease liabilities43,693  45,258  Operating lease liabilities39,543 40,284 
Accrued interest payableAccrued interest payable7,907  6,248  Accrued interest payable6,358 6,277 
Other liabilitiesOther liabilities178,024  91,335  Other liabilities122,382 154,000 
Total liabilitiesTotal liabilities4,667,637  4,651,032  Total liabilities4,291,412 4,809,700 
Shareholders' equityShareholders' equityShareholders' equity
Common stock, par value $1; authorized 100,000,000 shares; issued 24,662,161 and 24,650,051 shares as of June 30, 2020 and December 31, 2019, respectively and outstanding of 19,927,893 and 20,126,296 as of June 30, 2020 and December 31, 2019, respectively24,662  24,650  
Common stock, par value $1; authorized 100,000,000 shares; issued 24,714,768 and 24,713,968 shares as of March 31, 2021 and December 31, 2020, respectively and outstanding of 19,878,993 and 19,960,294 as of March 31, 2021 and December 31, 2020, respectivelyCommon stock, par value $1; authorized 100,000,000 shares; issued 24,714,768 and 24,713,968 shares as of March 31, 2021 and December 31, 2020, respectively and outstanding of 19,878,993 and 19,960,294 as of March 31, 2021 and December 31, 2020, respectively24,715 24,714 
Paid-in capital in excess of par valuePaid-in capital in excess of par value380,167  378,606  Paid-in capital in excess of par value382,202 381,653 
Less: Common stock in treasury at cost - 4,734,268 and 4,523,755 shares as of June 30, 2020 and December 31, 2019, respectively(88,612) (81,174) 
Less: Common stock in treasury at cost - 4,835,775 and 4,753,674 shares as of March 31, 2021 and December 31, 2020, respectivelyLess: Common stock in treasury at cost - 4,835,775 and 4,753,674 shares as of March 31, 2021 and December 31, 2020, respectively(91,774)(89,164)
Accumulated other comprehensive income, net of taxAccumulated other comprehensive income, net of tax9,019  2,187  Accumulated other comprehensive income, net of tax154 8,948 
Retained earningsRetained earnings279,165  288,653  Retained earnings308,569 296,941 
Total Bryn Mawr Bank Corporation shareholders' equityTotal Bryn Mawr Bank Corporation shareholders' equity604,401  612,922  Total Bryn Mawr Bank Corporation shareholders' equity623,866 623,092 
Noncontrolling interestNoncontrolling interest(727) (695) Noncontrolling interest(770)(770)
Total shareholders' equityTotal shareholders' equity603,674  612,227  Total shareholders' equity623,096 622,322 
Total liabilities and shareholders' equityTotal liabilities and shareholders' equity$5,271,311  $5,263,259  Total liabilities and shareholders' equity$4,914,508 $5,432,022 

The accompanying notes are an integral part of the Unaudited Consolidated Financial Statements.
Page 3

Table of Contents
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income - Unaudited
Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
March 31,
(dollars in thousands, except share and per share data)(dollars in thousands, except share and per share data)2020201920202019(dollars in thousands, except share and per share data)20212020
Interest income:Interest income:Interest income:
Interest and fees on loans and leasesInterest and fees on loans and leases$40,690  $44,783  $83,485  $89,620  Interest and fees on loans and leases$34,578 $42,795 
Interest on cash and cash equivalentsInterest on cash and cash equivalents37  73  148  205  Interest on cash and cash equivalents22 111 
Interest on investment securities:Interest on investment securities:Interest on investment securities:
TaxableTaxable2,870  3,494  6,046  6,944  Taxable3,038 3,176 
Non-taxableNon-taxable22  37  46  84  Non-taxable11 24 
DividendsDividends    Dividends
Total interest incomeTotal interest income43,621  48,388  89,728  96,856  Total interest income37,650 46,107 
Interest expense:Interest expense:Interest expense:
Interest on depositsInterest on deposits4,476  9,655  12,113  17,752  Interest on deposits1,424 7,637 
Interest on short-term borrowingsInterest on short-term borrowings232  357  685  1,300  Interest on short-term borrowings10 453 
Interest on FHLB advances and other borrowingsInterest on FHLB advances and other borrowings155  269  399  547  Interest on FHLB advances and other borrowings203 244 
Interest on subordinated notesInterest on subordinated notes1,144  1,144  2,289  2,289  Interest on subordinated notes1,034 1,145 
Interest on junior subordinated debenturesInterest on junior subordinated debentures229  352  524  710  Interest on junior subordinated debentures198 295 
Total interest expenseTotal interest expense6,236  11,777  16,010  22,598  Total interest expense2,869 9,774 
Net interest incomeNet interest income37,385  36,611  73,718  74,258  Net interest income34,781 36,333 
Provision for credit losses on loans and leases4,302  1,627  36,637  5,363  
Net interest income after provision for credit losses on loans and leases33,083  34,984  37,081  68,895  
(Recovery of) provision for credit losses(Recovery of) provision for credit losses(5,246)35,350 
Net interest income after (recovery of) provision for credit lossesNet interest income after (recovery of) provision for credit losses40,027 983 
Noninterest income:Noninterest income:Noninterest income:
Fees for wealth management servicesFees for wealth management services9,069  11,510  20,237  21,902  Fees for wealth management services12,836 11,168 
Insurance commissionsInsurance commissions1,303  1,697  2,836  3,369  Insurance commissions1,464 1,533 
Capital markets revenueCapital markets revenue2,975  1,489  5,336  3,708  Capital markets revenue1,596 2,361 
Service charges on depositsService charges on deposits603  852  1,449  1,660  Service charges on deposits696 846 
Loan servicing and other feesLoan servicing and other fees452  553  913  1,162  Loan servicing and other fees304 461 
Net gain on sale of loansNet gain on sale of loans3,134  752  3,916  1,071  Net gain on sale of loans250 782 
Net gain (loss) on sale of other real estate owned ("OREO")—  —  148  (24) 
Net gain on sale of other real estate owned ("OREO")Net gain on sale of other real estate owned ("OREO")148 
Dividends on FHLB and FRB stockDividends on FHLB and FRB stock243  316  687  727  Dividends on FHLB and FRB stock222 444 
Other operating incomeOther operating income2,787  3,052  3,344  5,899  Other operating income2,473 557 
Total noninterest incomeTotal noninterest income20,566  20,221  38,866  39,474  Total noninterest income19,841 18,300 
Noninterest expenses:Noninterest expenses:Noninterest expenses:
Salaries and wagesSalaries and wages16,926  17,038  33,915  37,939  Salaries and wages16,830 16,989 
Employee benefitsEmployee benefits3,221  3,317  6,721  7,483  Employee benefits3,687 3,500 
Occupancy and bank premisesOccupancy and bank premises3,033  3,125  6,048  6,377  Occupancy and bank premises2,892 3,015 
Furniture, fixtures, and equipmentFurniture, fixtures, and equipment2,120  2,568  4,551  4,957  Furniture, fixtures, and equipment2,242 2,431 
AdvertisingAdvertising196  504  597  919  Advertising176 401 
Amortization of intangible assetsAmortization of intangible assets910  956  1,828  1,894  Amortization of intangible assets838 918 
Due diligence, merger-related and merger integration expensesDue diligence, merger-related and merger integration expenses1,646 
Professional feesProfessional fees1,575  1,316  2,943  2,636  Professional fees1,433 1,368 
Pennsylvania bank shares taxPennsylvania bank shares tax116  513  232  922  Pennsylvania bank shares tax749 116 
Data processingData processing1,479  1,303  2,873  2,623  Data processing1,404 1,394 
Other operating expensesOther operating expenses5,060  4,548  11,346  9,162  Other operating expenses5,806 3,271 
Total noninterest expensesTotal noninterest expenses34,636  35,188  71,054  74,912  Total noninterest expenses37,703 33,403 
Income before income taxes19,013  20,017  4,893  33,457  
Income tax expense4,010  4,239  1,053  7,003  
Net income15,003  15,778  3,840  26,454  
Income (loss) before income taxesIncome (loss) before income taxes22,165 (14,120)
Income tax expense (benefit)Income tax expense (benefit)5,082 (2,957)
Net income (loss)Net income (loss)17,083 (11,163)
Net loss attributable to noncontrolling interestNet loss attributable to noncontrolling interest(32) (7) (32) (8) Net loss attributable to noncontrolling interest
Net income attributable to Bryn Mawr Bank Corporation$15,035  $15,785  $3,872  $26,462  
Net income (loss) attributable to Bryn Mawr Bank CorporationNet income (loss) attributable to Bryn Mawr Bank Corporation$17,083 $(11,163)
Basic earnings per common shareBasic earnings per common share$0.75  $0.78  $0.19  $1.31  Basic earnings per common share$0.86 $(0.56)
Diluted earnings per common shareDiluted earnings per common share0.75  0.78  0.19  1.31  Diluted earnings per common share0.85 (0.56)
Dividends paid or accrued per common shareDividends paid or accrued per common share0.26  0.25  0.52  0.50  Dividends paid or accrued per common share0.27 0.26 
Weighted-average basic shares outstandingWeighted-average basic shares outstanding19,926,737  20,144,651  19,989,948  20,156,509  Weighted-average basic shares outstanding19,907,873 20,053,159 
Dilutive sharesDilutive shares81,482  99,758  87,211  99,960  Dilutive shares142,863 
Adjusted weighted-average diluted sharesAdjusted weighted-average diluted shares20,008,219  20,244,409  20,077,159  20,256,469  Adjusted weighted-average diluted shares20,050,736 20,053,159 

The accompanying notes are an integral part of the Unaudited Consolidated Financial Statements.
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Table of Contents
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income - Unaudited
 
Three Months Ended
June 30,
Six Months Ended
June 30,
(dollars in thousands)2020201920202019
Net income attributable to Bryn Mawr Bank Corporation$15,035  $15,785  $3,872  $26,462  
Other comprehensive income:
Net change in unrealized gains on investment securities available for sale:
Unrealized investment gains, net of tax expense of $34, $1,319, $1,804 and $2,441, respectively127  4,962  6,786  9,181  
Net change in unfunded pension liability:
Change in unfunded pension liability related to unrealized loss, prior service cost and transition obligation, net of tax expense of $6, $4, $12 and $8, respectively23  16  46  32  
Total other comprehensive income150  4,978  6,832  9,213  
Total comprehensive income$15,185  $20,763  $10,704  $35,675  
Three Months Ended
March 31,
(dollars in thousands)20212020
Net income (loss) attributable to Bryn Mawr Bank Corporation$17,083 $(11,163)
Other comprehensive income:
Net change in unrealized (losses) gains on investment securities available for sale:
Unrealized investment (losses) gains, net of tax (benefit) expense of $(1,311) and $1,770, respectively(4,930)6,659 
Net change in unrealized losses on interest rate swaps used in cash flow hedges:
Net unrealized losses arising during the period, net of tax benefit of $1,003 and $0, respectively(3,769)
Reclassification adjustment for gains included in net income, net of tax expense of $39 and $0, respectively(147)
Net unrealized losses on interest rate swaps used in cash flow hedges, net of tax benefit of $1,042 and $0, respectively(3,916)
Net change in unfunded pension liability:
Change in unfunded pension liability related to unrealized loss, prior service cost and transition obligation, net of tax expense of $14 and $6, respectively52 23 
Total other comprehensive (loss) income(8,794)6,682 
Total comprehensive income (loss)$8,289 $(4,481)
 
The accompanying notes are an integral part of the Unaudited Consolidated Financial Statements.

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BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows - Unaudited
Six Months Ended June 30,Three Months Ended March 31,
(dollars in thousands)
(dollars in thousands)
20202019
(dollars in thousands)
20212020
Operating activities:Operating activities:Operating activities:
Net income attributable to Bryn Mawr Bank Corporation$3,872  $26,462  
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses on loans and leases36,637  5,363  
Net income (loss) attributable to Bryn Mawr Bank CorporationNet income (loss) attributable to Bryn Mawr Bank Corporation$17,083 $(11,163)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:Adjustments to reconcile net income (loss) to net cash provided by operating activities:
(Recovery of) provision for credit losses(Recovery of) provision for credit losses(5,246)35,350 
Depreciation of fixed assetsDepreciation of fixed assets4,001  3,896  Depreciation of fixed assets1,601 2,008 
Amortization of operating lease right-of-use assets1,613  1,828  
Non-cash operating lease expenseNon-cash operating lease expense753 804 
Net amortization of investment premiums and discountsNet amortization of investment premiums and discounts1,891  1,316  Net amortization of investment premiums and discounts1,806 807 
Net gain on sale of loansNet gain on sale of loans(3,916) (1,071) Net gain on sale of loans(250)(782)
Stock based compensationStock based compensation1,513  1,987  Stock based compensation550 889 
Amortization and net impairment of mortgage servicing rightsAmortization and net impairment of mortgage servicing rights1,010  303  Amortization and net impairment of mortgage servicing rights133 335 
Net accretion of fair value adjustmentsNet accretion of fair value adjustments(1,989) (2,285) Net accretion of fair value adjustments(515)(949)
Amortization of intangible assetsAmortization of intangible assets1,828  1,894  Amortization of intangible assets838 918 
Net (gain) loss on sale of OREO(148) 24  
Net gain on sale of OREONet gain on sale of OREO(148)
Net increase in cash surrender value of bank owned life insurance ("BOLI")Net increase in cash surrender value of bank owned life insurance ("BOLI")(649) (593) Net increase in cash surrender value of bank owned life insurance ("BOLI")(328)(320)
Other, netOther, net1,216  (832) Other, net375 1,031 
Loans originated for saleLoans originated for sale(46,750) (35,781) Loans originated for sale(12,882)(13,435)
Proceeds from loans soldProceeds from loans sold48,211  35,187  Proceeds from loans sold15,922 17,112 
Provision for deferred income taxesProvision for deferred income taxes99  51  Provision for deferred income taxes42 
Change in income taxes payable/receivable, netChange in income taxes payable/receivable, net(4,963) 6,906  Change in income taxes payable/receivable, net4,776 (3,322)
Change in accrued interest receivableChange in accrued interest receivable(3,095) (727) Change in accrued interest receivable382 465 
Change in accrued interest payableChange in accrued interest payable1,659  1,592  Change in accrued interest payable81 982 
Change in operating lease liabilitiesChange in operating lease liabilities(1,565) (1,726) Change in operating lease liabilities(741)(776)
Change in other assetsChange in other assets(96,979) (68,444) Change in other assets32,528 (88,149)
Change in other liabilitiesChange in other liabilities90,831  30,744  Change in other liabilities(41,509)77,422 
Net cash provided by operating activitiesNet cash provided by operating activities34,327  6,094  Net cash provided by operating activities15,359 19,121 
Investing activities:Investing activities:Investing activities:
Purchases of investment securities available for salePurchases of investment securities available for sale(120,458) (121,976) Purchases of investment securities available for sale(127,795)(58,214)
Purchases of investment securities held to maturityPurchases of investment securities held to maturity(1,103) (1,827) Purchases of investment securities held to maturity(1,103)
Proceeds from maturity and paydowns of investment securities available for saleProceeds from maturity and paydowns of investment securities available for sale557,125  238,349  Proceeds from maturity and paydowns of investment securities available for sale538,338 526,881 
Proceeds from maturity and paydowns of investment securities held to maturityProceeds from maturity and paydowns of investment securities held to maturity1,023  273  Proceeds from maturity and paydowns of investment securities held to maturity599 284 
Net change in FHLB stockNet change in FHLB stock19,238  (147) Net change in FHLB stock6,680 11,816 
Proceeds from calls of investment securitiesProceeds from calls of investment securities45,500  43,285  Proceeds from calls of investment securities17,434 28,500 
Net change in other investmentsNet change in other investments(372)  Net change in other investments(69)(103)
Purchase of customer relationships—  (18) 
Net portfolio loan and lease originationsNet portfolio loan and lease originations(337,951) (112,046) Net portfolio loan and lease originations(4,927)(82,421)
Proceeds from sales of loans originally classified as portfolio loans and leases302,169  —  
Purchases of premises and equipmentPurchases of premises and equipment(814) (6,339) Purchases of premises and equipment(456)(187)
Proceeds from sale of OREOProceeds from sale of OREO534  309  Proceeds from sale of OREO534 
Net cash provided by investing activitiesNet cash provided by investing activities464,891  39,872  Net cash provided by investing activities429,804 425,987 
Financing activities:Financing activities:Financing activities:
Change in depositsChange in deposits401,624  33,719  Change in deposits(473,945)(63,219)
Change in short-term borrowingsChange in short-term borrowings(464,328) (44,539) Change in short-term borrowings(12,134)(331,174)
Dividends paidDividends paid(10,438) (10,086) Dividends paid(5,387)(5,243)
Change in long-term FHLB advances and other borrowingsChange in long-term FHLB advances and other borrowings(7,501) (7,500) Change in long-term FHLB advances and other borrowings(5,000)
Payment of contingent consideration for business combinations(507) (523) 
Cash payments to taxing authorities on employees' behalf from shares withheld from stock-based compensationCash payments to taxing authorities on employees' behalf from shares withheld from stock-based compensation(144) (45) Cash payments to taxing authorities on employees' behalf from shares withheld from stock-based compensation(12)(81)
Net purchase of treasury stock for deferred compensation plansNet purchase of treasury stock for deferred compensation plans(90) (82) Net purchase of treasury stock for deferred compensation plans(31)(36)
Net purchase of treasury stock through publicly announced plansNet purchase of treasury stock through publicly announced plans(7,249) (2,603) Net purchase of treasury stock through publicly announced plans(2,567)(7,249)
Proceeds from exercise of stock optionsProceeds from exercise of stock options 622  Proceeds from exercise of stock options
Net cash used in financing activitiesNet cash used in financing activities(88,628) (31,037) Net cash used in financing activities(494,076)(411,997)
Change in cash and cash equivalentsChange in cash and cash equivalents410,590  14,929  Change in cash and cash equivalents(48,913)33,111 
Cash and cash equivalents at beginning of periodCash and cash equivalents at beginning of period53,931  48,456  Cash and cash equivalents at beginning of period96,313 53,931 
Cash and cash equivalents at end of periodCash and cash equivalents at end of period$464,521  $63,385  Cash and cash equivalents at end of period$47,400 $87,042 
Supplemental cash flow information:Supplemental cash flow information:Supplemental cash flow information:
Cash paid during the year for:Cash paid during the year for:Cash paid during the year for:
Income taxesIncome taxes$5,922  $4,580  Income taxes$298 $323 
InterestInterest$14,351  $21,006  Interest$2,788 $8,792 
Non-cash information:Non-cash information:Non-cash information:
Change in other comprehensive incomeChange in other comprehensive income$6,832  $9,213  Change in other comprehensive income$(8,794)$6,682 
Change in deferred tax due to change in comprehensive incomeChange in deferred tax due to change in comprehensive income$1,816  $2,449  Change in deferred tax due to change in comprehensive income$(2,339)$1,776 
Transfer of loans to OREO and repossessed assetsTransfer of loans to OREO and repossessed assets$386  $72  Transfer of loans to OREO and repossessed assets$$386 
 
The accompanying notes are an integral part of the Unaudited Consolidated Financial Statements.

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BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes In Shareholders’ Equity - Unaudited

 For the Three Months Ended June 30, 2020
(dollars in thousands, except share and per share data)Shares of Common Stock IssuedCommon
Stock
Paid-in CapitalTreasury
Stock
Accumulated Other Comprehensive IncomeRetained
Earnings
Noncontrolling
Interest
Total Shareholders' Equity
Balance March 31, 202024,655,362  $24,655  $379,495  $(88,540) $8,869  $269,395  $(695) $593,179  
Net loss attributable to Bryn Mawr Bank Corporation—  —  —  —  —  15,035  —  15,035  
Net loss attributable to noncontrolling interest—  —  —  —  —  —  (32) (32) 
Dividends paid or accrued, $0.26 per share—  —  —  —  —  (5,265) —  (5,265) 
Other comprehensive income, net of tax expense of $40—  —  —  —  150  —  —  150  
Stock based compensation—  —  624  —  —  —  —  624  
Retirement of treasury stock(3,816) (4) (41) 45  —  —  —  —  
Net purchase of treasury stock from stock awards for statutory tax withholdings—  —  —  (63) —  —  —  (63) 
Net treasury stock activity for deferred compensation trusts—  —  —  (54) —  —  —  (54) 
Common stock issued:
Common stock issued through share-based awards and options exercises10,615  11  89  —  —  —  —  100  
Balance June 30, 202024,662,161  $24,662  $380,167  $(88,612) $9,019  $279,165  $(727) $603,674  
 For the Three Months Ended March 31, 2021
(dollars in thousands, except share and per share data)Shares of Common Stock IssuedCommon
Stock
Paid-in CapitalTreasury
Stock
Accumulated Other Comprehensive IncomeRetained
Earnings
Noncontrolling
Interest
Total Shareholders' Equity
Balance December 31, 202024,713,968 $24,714 $381,653 $(89,164)$8,948 $296,941 $(770)$622,322 
Net income attributable to Bryn Mawr Bank Corporation— — — — — 17,083 — 17,083 
Dividends paid or accrued, $0.27 per share— — — — — (5,455)— (5,455)
Other comprehensive loss, net of tax benefit of $2,339— — — — (8,794)— — (8,794)
Stock based compensation— — 550 — — — — 550 
Net purchase of treasury stock from stock awards for statutory tax withholdings— — — (12)— — — (12)
Net treasury stock activity for deferred compensation trusts— — — (31)— — — (31)
Purchase of treasury stock through publicly announced plans— — — (2,567)— — — (2,567)
Common stock issued:
Common stock issued through share-based awards and options exercises800 (1)— — — — 
Balance March 31, 202124,714,768 $24,715 $382,202 $(91,774)$154 $308,569 $(770)$623,096 


















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BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes In Shareholders’ Equity - Unaudited

 For the Three Months Ended June 30, 2019
 Shares of Common Stock IssuedCommon
Stock
Paid-in CapitalTreasury
Stock
Accumulated Other Comprehensive (Loss) IncomeRetained
Earnings
Noncontrolling
Interest
Total Shareholders' Equity
Balance March 31, 201924,577,248  $24,577  $375,655  $(76,974) $(3,278) $255,813  $(686) $575,107  
Net income attributable to Bryn Mawr Bank Corporation—  —  —  —  —  15,785  —  15,785  
Net loss attributable to noncontrolling interest—  —  —  —  —  —  (7) (7) 
Dividends paid or accrued, $0.25 per share—  —  —  —  —  (5,102) —  (5,102) 
Other comprehensive income, net of tax expense of $1,323—  —  —  —  4,978  —  —  4,978  
Stock based compensation—  —  850  —  —  —  —  850  
Retirement of treasury stock(2,704) (3) (27) 30  —  —  —  —  
Net purchase of treasury stock from stock awards for statutory tax withholdings—  —  —  (11) —  —  —  (11) 
Net treasury stock activity for deferred compensation trusts—  —  —  (82) —  —  —  (82) 
Purchase of treasury stock through publicly announced plans—  —  —  (1,546) —  —  —  (1,546) 
Common stock issued:
Common stock issued through share-based awards and options exercises8,013   174  —  —  —  —  183  
Balance June 30, 201924,582,557  $24,583  $376,652  $(78,583) $1,700  $266,496  $(693) $590,155  














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BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes In Shareholders’ Equity - Unaudited

 For the Six Months Ended June 30, 2020
(dollars in thousands, except share and per share data)Shares of Common Stock IssuedCommon
Stock
Paid-in CapitalTreasury
Stock
Accumulated Other Comprehensive IncomeRetained
Earnings
Noncontrolling
Interest
Total Shareholders' Equity
Balance December 31, 201924,650,051  $24,650  $378,606  $(81,174) $2,187  $288,653  $(695) $612,227  
Net income attributable to Bryn Mawr Bank Corporation—  —  —  —  —  3,872  —  3,872  
Net loss attributable to noncontrolling interest—  —  —  —  —  —  (32) (32) 
Cumulative-effect adjustment due to the adoption of ASU No. 2016-13—  —  —  —  —  (2,801) —  (2,801) 
Dividends paid or accrued, $0.52 per share—  —  —  —  —  (10,559) —  (10,559) 
Other comprehensive income, net of tax expense of $1,816—  —  —  —  6,832  —  —  6,832  
Stock based compensation—  —  1,513  —  —  —  —  1,513  
Retirement of treasury stock(3,816) (4) (41) 45  —  —  —  —  
Net purchase of treasury stock from stock awards for statutory tax withholdings—  —  —  (144) —  —  —  (144) 
Net treasury stock activity for deferred compensation trusts—  —  —  (90) —  —  —  (90) 
Purchase of treasury stock through publicly announced plans—  —  —  (7,249) —  —  —  (7,249) 
Common stock issued:
Common stock issued through share-based awards and options exercises15,926  16  89  —  —  —  —  105  
Balance June 30, 202024,662,161  $24,662  $380,167  $(88,612) $9,019  $279,165  $(727) $603,674  














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BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes In Shareholders’ Equity - Unaudited

 For the Six Months Ended June 30, 2019
 Shares of Common Stock IssuedCommon
Stock
Paid-in CapitalTreasury
Stock
Accumulated Other Comprehensive (Loss) IncomeRetained
Earnings
Noncontrolling
Interest
Total Shareholders' Equity
Balance December 31, 201824,545,348  $24,545  $374,010  $(75,883) $(7,513) $250,230  $(685) $564,704  
Net income attributable to Bryn Mawr Bank Corporation—  —  —  —  —  26,462  —  26,462  
Net loss attributable to noncontrolling interest—  —  —  —  —  —  (8) (8) 
Dividends paid or accrued, $0.50 per share—  —  —  —  —  (10,196) —  (10,196) 
Other comprehensive income, net of tax expense of $2,449—  —  —  —  9,213  —  —  9,213  
Stock based compensation—  —  1,987  —  —  —  —  1,987  
Retirement of treasury stock(2,704) (3) (27) 30  —  —  —  —  
Net purchase of treasury stock from stock awards for statutory tax withholdings—  —  —  (45) —  —  —  (45) 
Net treasury stock activity for deferred compensation trusts—  —  —  (82) —  —  —  (82) 
Purchase of treasury stock through publicly announced plans—  —  —  (2,603) —  —  —  (2,603) 
Common stock issued:
Common stock issued through share-based awards and options exercises39,913  41  682  —  —  —  —  723  
Balance June 30, 201924,582,557  $24,583  $376,652  $(78,583) $1,700  $266,496  $(693) $590,155  
 For the Three Months Ended March 31, 2020
 Shares of Common Stock IssuedCommon
Stock
Paid-in CapitalTreasury
Stock
Accumulated Other Comprehensive IncomeRetained
Earnings
Noncontrolling
Interest
Total Shareholders' Equity
Balance December 31, 201924,650,051 $24,650 $378,606 $(81,174)$2,187 $288,653 $(695)$612,227 
Net loss attributable to Bryn Mawr Bank Corporation— — — — — (11,163)— (11,163)
Cumulative-effect adjustment due to the adoption of ASU No. 2016-13— — — — — (2,801)— (2,801)
Dividends paid or accrued, $0.26 per share— — — — — (5,294)— (5,294)
Other comprehensive income, net of tax expense of $1,776— — — — 6,682 — — 6,682 
Stock based compensation— — 889 — — — — 889 
Net purchase of treasury stock from stock awards for statutory tax withholdings— — — (81)— — — (81)
Net treasury stock activity for deferred compensation trusts— — — (36)— — — (36)
Purchase of treasury stock through publicly announced plans— — — (7,249)— — — (7,249)
Common stock issued:
Common stock issued through share-based awards and options exercises5,311 — — — — — 
Balance March 31, 202024,655,362 $24,655 $379,495 $(88,540)$8,869 $269,395 $(695)$593,179 

The accompanying notes are an integral part of the Unaudited Consolidated Financial Statements.
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 BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
 
Note 1 – Basis of Presentation, Principles of Consolidation, and Significant Accounting Policies
 
The Unaudited Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).

The Unaudited Consolidated Financial Statements include the accounts of Bryn Mawr Bank Corporation (“BMBC,” and together with its subsidiaries, the “Corporation”) and its consolidated subsidiaries; BMBC's primary subsidiary is The Bryn Mawr Trust Company (the “Bank”). In connection with the merger of Royal Bancshares of Pennsylvania, Inc. (“RBPI”) with and into BMBC, and the merger of Royal Bank America with and into the Bank (collectively, the "RBPI Merger"), the Corporation acquired 2 Delaware trusts, Royal Bancshares Capital Trust I and Royal Bancshares Capital Trust II. These two entities are not consolidated per requirements under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, “Consolidation” (“ASC Topic 810”). All significant intercompany balances and transactions are eliminated in consolidation and certain prior-period amounts have been reclassified when necessary in order to conform to the current period presentation.

In the opinion of management, all adjustments, which are normal and recurring in nature, necessary for a fair presentation of the consolidated financial position and the results of operations for the interim periods presented have been included. The results of operations for the three and six months ended June 30, 2020March 31, 2021 are not necessarily indicative of the results to be expected for any other interim period or for the full year.

In preparing the Unaudited Consolidated Financial Statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the dates of the balance sheets, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
These Unaudited Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto in BMBC’s Annual Report on Form 10-K for the twelve months ended December 31, 20192020 (the “2019“2020 Annual Report”). Except as described below, the accounting policies applied in these Unaudited Consolidated Financial Statements are the same as those applied in the 20192020 Annual Report.
Updates to Significant Accounting Policies:

A.Allowance for Credit Losses (“ACL”) on Loans and Leases:

The ACL on loans and leases represents management’s estimate of all expected credit losses over the expected contractual life of our existing portfolio loans and leases. Determining the appropriateness of the ACL on loans and leases is complex and requires judgment by management about the effect of matters that are inherently uncertain. Subsequent evaluations of the then-existing loan portfolio, in light of the factors then prevailing, may result in significant changes in the ACL on loans and leases in those future periods.

The expense for credit loss recorded through earnings is the amount necessary to maintain the ACL on loans and leases at the amount of expected credit losses inherent within the loans and leases portfolio. The amount of expense and the corresponding level of ACL on loans and leases are based on management’s evaluation of the collectability of the loan and lease portfolio based on historical loss experience, reasonable and supportable forecasts, and other significant qualitative and quantitative factors. The ACL on loans and leases, as reported in our Consolidated Statements of Financial Condition, is adjusted by an expense for credit losses, which is recognized in earnings, and reduced by the charge-off of loan and lease amounts, net of recoveries. For further information on the ACL on loans and leases, see Note 4 - Loans and Leases in the accompanying Notes to Unaudited Consolidated Financial Statements.

Management employs a disciplined process and methodology to establish the ACL on loans and leases that has two basic components: first, an asset-specific component involving individual loans and leases that do not share risk characteristics with other loans and leases and the measurement of expected credit losses for such individual loans; and second, a collective (pooled) component for estimated expected credit losses for pools of loans and leases that share similar risk characteristics.

Based upon this methodology, management establishes an asset-specific ACL on loans and leases that do not share risk characteristics with other loans and leases based on the amount of expected credit losses calculated on those loans and leases and charges off amounts determined to be uncollectible. Factors we consider in measuring the extent of expected credit loss include payment status, collateral value, borrower financial condition, guarantor support and the probability of collecting scheduled principal and interest payments when due.
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When a loan or lease does not share risk characteristics with other loans or leases, management measures expected credit loss as the difference between the amortized cost basis in the loan and the present value of expected future cash flows discounted at the loan’s effective interest rate except that, for collateral dependent loans, credit loss is measured as the difference between the amortized cost basis in the loan and the fair value of the underlying collateral. The fair value of the collateral is adjusted for the estimated cost to sell if repayment or satisfaction of a loan is dependent on the sale (rather than only on the operation) of the collateral. If the calculated expected credit loss is determined to be permanent, fixed or nonrecoverable, the credit loss portion of the loan will be charged off against the ACL on loans and leases. Loans and leases designated as having significantly increased credit risk are generally placed on nonaccrual and remain in that status until all principal and interest payments are current and the prospects for future payments in accordance with the loan agreement are reasonably assured, at which point the loan is returned to accrual status.

In estimating the component of the ACL on loans and leases that share common risk characteristics, loans and leases are segregated into portfolio segments based on federal call report codes which classify loans and leases based on the primary collateral supporting the loan and lease. Methods utilized by management to estimate expected credit losses include a discounted cash flow (“DCF”) methodology that discounts instrument-level contractual cash flows, adjusted for prepayments and curtailments, incorporating loss expectations, and a weighted average remaining maturity (“WARM”) methodology which contemplates expected losses at a pool-level, utilizing historic loss information.

Under both methodologies, management estimates the ACL on loans and leases using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. After the end of the reasonable and supportable forecast period, the loss rates revert to the long-term mean loss rate, or in the case of an input-driven predictive method, the long-term mean of the input, using a reversion period where applicable. Historical credit loss experience, including examination of loss experience at representative peer institutions when the Corporation’s first-party loss history does not result in estimations that are meaningful to users of the Corporation’s Consolidated Financial Statements, provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are considered for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in unemployment rates, property values, or other relevant factors.

The DCF methodology uses inputs of current and forecasted macroeconomic indicators to predict future loss rates. The current macroeconomic indicator utilized by the bank is the Pennsylvania unemployment rate. In building the current expected credit loss (“CECL”) model utilized in the DCF methodology, a correlation between this indicator and historic loss levels was developed, enabling a prediction of future loss rates related to future Pennsylvania unemployment rates. The portfolio segments utilizing the DCF methodology as of June 30, 2020 included: CRE - owner-occupied and nonowner-occupied loans, home equity lines of credit, residential mortgages (first and junior liens), construction loans and consumer loans.

The WARM methodology uses combined historic loss rates for the Bank and peer institutions, if necessary, gathered from Call Report filings. The selected period for which historic loss rates are used is dependent on management's evaluation of current conditions and expectations of future loss conditions. The portfolio segments utilizing the WARM methodology as of June 30, 2020 included commercial and industrial loans and leases.

For those loans and leases where the ACL is measured on a collective (pool) basis, management has identified the following portfolio segments based on federal call report codes which classify loans and leases based on the primary collateral supporting the loan or lease:

Commercial Real Estate (“CRE”) Loans (owner-occupied and non-owner occupied): The Bank originates mortgage loans for multifamily properties (i.e. buildings which have five or more residential units) and other commercial real estate that is either owner-occupied or managed as an investment property (non-owner occupied) primarily within Pennsylvania, Delaware and Southern and Central New Jersey. Commercial real estate properties primarily include retail buildings/shopping centers, hotels, office/medical buildings and industrial/warehouse space. Multifamily loans are expected to be repaid from the cash flows of the underlying property so the collective amount of rents must be sufficient to cover all operating expenses, property management and maintenance, taxes and debt service. Increases in vacancy rates, interest rates or other changes in general economic conditions can have an impact on the borrower and its ability to repay the loan. Commercial real estate loans are generally considered to have a higher degree of credit risk than multifamily loans as they may be dependent on the ongoing success and operating viability of a fewer number of tenants who are occupying the property and who may have a greater degree of exposure to economic conditions.

Home equity lines of credit: The Bank originates the majority of its home equity lines of credit through its retail channel. The primary risk characteristics associated with home equity lines of credit typically involve major living or lifestyle changes to the borrower, including unemployment or other loss of income; unexpected significant expenses, such as major medical expenses,
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catastrophic events, divorce and death. Home equity lines of credit are typically originated with variable or floating interest rates, which could expose the borrower to higher payments in a rising interest rate environment. Real estate values could decrease and cause the value of the underlying property to fall below the loan amount, creating additional potential loss exposure for the Bank.

Residential Mortgages secured by first liens: The Bank originates one-to-four family residential mortgage loans primarily within Pennsylvania, Delaware and Southern and Central New Jersey. These loans are secured by first liens on a primary residence or investment property. The primary risk characteristics associated with residential mortgage loans typically involve major living or lifestyle changes to the borrower, including unemployment or other loss of income; unexpected significant expenses, such as major medical expenses, catastrophic events, divorce or death. Residential mortgage loans that have adjustable rates could expose the borrower to higher payments in a rising interest rate environment. Real estate values could decrease and cause the value of the underlying property to fall below the loan amount, creating additional potential loss exposure for the Bank.

Residential Mortgages secured by junior liens: The Bank originates loans secured by junior liens against one to four family properties primarily within Pennsylvania, Delaware and Southern and Central New Jersey. Loans secured by junior liens are primarily in the form of an amortizing home equity loan. These loans are subordinate to a first mortgage which may be from another lending institution. The primary risk characteristics associated with loans secured by junior liens typically involve major living or lifestyle changes to the borrower, including unemployment or other loss of income, unexpected significant expenses, such as for major medical expenses, catastrophic events, divorce or death. Real estate values could decrease and cause the value of the property to fall below the loan amount, creating additional potential loss exposure for the Bank.

Construction: The Bank originates construction loans to finance land development preparatory to erecting new structures or the on-site construction of industrial, commercial, or residential buildings. Construction loans include not only construction of new structures, but also additions or alterations to existing structures and the demolition of existing structures to make way for new structures. Construction loans are generally secured by real estate. The primary risk characteristics are specific to the uncertainty on whether the construction will be completed according to the specifications and schedules. Factors that may influence the completion of construction may be customer specific, such as the quality and depth of property management, or related to changes in general economic conditions.

Commercial & Industrial: The Bank originates lines of credit and term loans to operating companies for business purposes. The loans are generally secured by business assets such as accounts receivable, inventory, business vehicles and equipment as well as the stock of a company, if privately held. Commercial & Industrial loans are typically repaid first by the cash flows generated by the borrower’s business operations. The primary risk characteristics are specific to the underlying business and its ability to generate sustainable profitability and positive cash flow. Factors that may influence a borrower's ability to repay their loan include demand for the business’ products or services, the quality and depth of management, the degree of competition, regulatory changes, and general economic conditions. The ability of the Bank to foreclose and realize sufficient value from business assets securing these loans is often uncertain. To mitigate the risk characteristics of commercial and industrial loans, commercial real estate may be included as a secondary source of collateral. The Bank will often require more frequent reporting requirements from the borrower in order to better monitor its business performance.

Consumer: The Bank originates or lines of credit to individuals for household, family, and other personal expenditures as well as overdrawn customer deposit balances which are reported as loans. This also represents all other loans that cannot be categorized in any of the previous mentioned loan segments. Consumer loans generally have higher interest rates and shorter terms than residential loans but tend to have higher credit risk due to the type of collateral securing the loan or in some cases the absence of collateral.

Leases: The Bank’s wholly-owned subsidiary Bryn Mawr Equipment Financing, Inc. specializes in equipment leases for small- and mid-sized businesses nationally and across a broad range of industries. The Bank’s credit risk generally results from the potential default of borrowers or lessees, which may be driven by customer specific or broader industry related conditions.

Accrued interest receivable on loans and leases, which is reported in Accrued interest receivable on the Consolidated Balance Sheet, totaled $12.5 million as of June 30, 2020 and is excluded from the estimate of credit losses.

B.ACL on Off-Balance Sheet (“OBS”) Credit Exposures

Management estimates expected credit losses over the contractual period in which the Corporation is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Corporation. The ACL on OBS credit exposure, included within Other Liabilities on the Consolidated Balance Sheet, is adjusted as a provision for credit loss expense included within other operating expense on the Consolidated Statement of Income. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be
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funded over its estimated life. Management estimates the amount of expected losses by calculating a commitment usage factor over the contractual period for exposures that are not unconditionally cancellable by the bank and applying the loss factors used in the ACL on loans and leases methodology to the results of the usage calculation to estimate the liability for credit losses related to unfunded commitments for each loan type. No credit loss estimate is reported for OBS credit exposures that are unconditionally cancellable by the Bank.

The ACL on OBS credit exposure as of June 30, 2020 was $3.3 million. For the three months ended June 30, 2020 the Corporation recorded a $867 thousand release of reserves for credit losses on OBS credit exposures. For the six months ended June 30, 2020, the Corporation recorded a $2.1 million provision for credit losses on OBS credit exposures.

C.Troubled Debt Restructurings (“TDRs”)

The Corporation has implemented various consumer and commercial loan modification programs to provide its borrowers relief from the economic impacts of COVID-19. In accordance with the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), loans to borrowers experiencing financial difficulty related to the COVID-19 pandemic which were granted short-term modifications after March 1, 2020 and which were not more than 30 days past due as of December 31, 2019 are exempt from TDR classification. In addition, for loans modified in response to the COVID-19 pandemic that do not meet the above delinquency criteria (e.g., not more than 30 days past due as of December 31, 2019), the Corporation applies the guidance included in an interagency statement issued by the bank regulatory agencies. This guidance states that loan modifications performed in light of the COVID-19 pandemic, including loan payment deferrals that are up to six months in duration, that were granted to borrowers who were less than 30 days past due as of the implementation date of a loan modification program or modifications granted under government mandated modification programs, are also exempt from TDR classification. For loan modifications that include a payment deferral and are not TDRs, the borrower’s past due and nonaccrual status will not be impacted during the deferral period. Interest income will continue to be recognized over the contractual life of the loan. For more information on the Corporation's TDR accounting, see Note 1 – Summary of Significant Accounting Policies to the Consolidated Financial Statements of the Corporation’s 2019 Annual Report.

D.Purchased Credit Deteriorated (“PCD”) Loans and Leases

The Corporation has purchased loans and leases, some of which have experienced more than insignificant credit deterioration since origination. PCD loans are recorded at the amount paid. An ACL is determined using the same methodology as other portfolio loans and leases. The initial ACL determined on a collective basis is allocated to individual loans. The loan’s purchase price is grossed-up by adding the allocated ACL to arrive at its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan or lease is a noncredit discount or premium, which is amortized into interest income over the life of the loan or lease. Subsequent changes to the ACL associated with PCD loans or leases are recorded through provision expense.

E.ACL on Held to Maturity Securities

Management measures expected credit losses on held to maturity debt securities on a collective basis by major security type. The Corporation’s held to maturity debt securities consist of mortgage-backed securities issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. With respect to these securities, management considers the history of credit losses, current conditions and reasonable and supportable forecasts, which may indicate that the expectation that nonpayment of the amortized cost basis is or continues to be zero, even if the U.S. government were to default. Therefore, for those securities, the Corporation does not record expected credit losses. Accrued interest receivable on held to maturity debt securities, which is reported in Accrued interest receivable on the Consolidated Balance Sheet, totaled $36 thousand as of June 30, 2020 and is excluded from the estimate of credit losses.

F.ACL on Available for Sale Securities

For available for sale debt securities in an unrealized loss position, management first assesses whether it intends to sell, or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For available for sale debt securities that do not meet the aforementioned criteria, management evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any explicit or implicit guarantees by the U.S. government, any changes to the rating of the security by the rating agency, and adverse conditions specifically related to the security, among other factors.

If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit loss is recognized in other comprehensive income.

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Changes in the ACL on available for sale debt securities are recorded as provision for (or release of) credit loss expense. Losses are charged against the ACL on available for sale debt securities when management believes the uncollectibility of an available for sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Accrued interest receivable on available for sale debt securities, which is reported in Accrued interest receivable on the Consolidated Balance Sheet, totaled $1.9 million at June 30, 2020 and is excluded from the estimate of credit losses.

Note 2 – Recent Accounting Pronouncements
 
The following FASB Accounting Standards Updates (“ASUs”) are divided into pronouncements which have been adopted by the Corporation since January 1, 2020,2021, and those which are not yet effective and have been evaluated or are currently being evaluated by management as of June 30, 2020.March 31, 2021.
 
Adopted Pronouncements:

FASB ASU 2016-13 (Topic 326), “Measurement of Credit Losses on Financial Instruments”

On January 1, 2020, the Corporation adopted ASU 2016-13 (Topic 326), “Measurement of Credit Losses on Financial Instruments,” which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (or CECL) methodology. This standardeliminates the Provision for Loan and Lease Losses and Allowance for Loan and Lease Losses line items and establishes the Provision for Credit Losses (“PCL”) and Allowance for Credit Losses (“ACL”) line items.

The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to OBS credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with Topic 842 on leases. In addition, ASC 326 made changes to the accounting for available for sale debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities management does not intend to sell or believes that it is more likely than not they will be required to sell.

The Corporation adopted ASC 326 using the modified retrospective approach method for all financial assets measured at amortized cost and OBS credit exposures. Results for reporting periods beginning after January 1, 2020 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. In conjunction with the adoption of CECL, the Corporation has revised its segmentation to align with the methodology applied in determining the ACL for loans and leases under CECL, which is based on federal call report codes which classify loans based on the primary collateral supporting the loan. Segmentation prior to the adoption of CECL was based on product type or purpose. As such, certain reclassifications were made to conform prior-period amounts to current period presentation.

Upon adoption, the Corporation's total ACL increased by $4.0 million, or 17.5%, which included an increase in ACL on loans and leases of $3.2 million and an increase in the reserve for OBS exposures, which is included within Other Liabilities on the Consolidated Balance Sheet, of $821 thousand. The increase in the total ACL resulted in a $2.8 million decrease to retained earnings, net of deferred taxes. The overall change in total ACL upon adoption was primarily due to the move to a life of loan reserve estimate as well as methodology changes required under CECL.

The Corporation adopted CECL using the prospective transition approach for financial assets purchased with credit deterioration (“PCD”) that were previously classified as purchased credit impaired (“PCI”) and accounted for under ASC 310-30. In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. On January 1, 2020, the amortized cost basis of the PCD assets were adjusted to reflect the addition of $481 thousand of the allowance for credit losses. The remaining noncredit discount (based on the adjusted amortized cost basis) will be accreted into interest income at the effective interest rate as of January 1, 2020.









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The following table illustrates the adoption of CECL on January 1, 2020:

January 1, 2020
Pre-CECL
Adoption
Reclassification to CECL
Portfolio Segmentation
Pre-CECL
Adoption
Portfolio Segmentation
Post-CECL
Adoption
Portfolio Segmentation
Impact of
CECL
Adoption
Assets:
Loans and leases:
Commercial mortgage$1,913,430  $(1,913,430) $—  $—  $—  
CRE - nonowner-occupied—  1,337,167  1,337,167  1,337,464  297  
CRE - owner-occupied—  527,607  527,607  527,607  —  
Home equity lines of credit194,639  29,623  224,262  224,262  —  
Residential mortgage489,903  (489,903) —  —  —  
Residential mortgage - first liens—  706,690  706,690  706,843  153  
Residential mortgage - junior liens—  36,843  36,843  36,843  —  
Construction159,867  42,331  202,198  202,198  —  
Commercial & Industrial709,257  (277,030) 432,227  432,248  21  
Consumer57,139  102  57,241  57,241  —  
Leases165,078  —  165,078  165,088  10  
Total loans and leases$3,689,313  $—  $3,689,313  $3,689,794  $481  
ACL on loans and leases
Commercial mortgage$10,434  $(10,434) $—  $—  $—  
CRE - nonowner-occupied—  7,960  7,960  7,493  (467) 
CRE - owner-occupied—  2,825  2,825  2,841  16  
Home equity lines of credit890  224  1,114  1,068  (46) 
Residential mortgage1,538  (1,538) —  —  —  
Residential mortgage - first liens—  2,501  2,501  4,909  2,408  
Residential mortgage - junior liens—  338  338  417  79  
Construction997  233  1,230  871  (359) 
Commercial & Industrial6,029  (2,194) 3,835  3,676  (159) 
Consumer353  85  438  578  140  
Leases2,361  —  2,361  3,955  1,594  
Total ACL on loans and leases$22,602  $—  $22,602  $25,808  $3,206  
Liabilities:
ACL on OBS credit exposures$360  $—  $360  $1,181  $821  
Total ACL$22,962  $—  $22,962  $26,989  $4,027  
Retained earnings:
Total increase in ACL$4,027  
Balance sheet reclassification(481) 
Total pre-tax impact3,546  
Tax effect(745) 
Decrease to retained earnings$2,801  

FASB ASU 2017-04 (Topic 350), “Intangibles – Goodwill and Others”
Issued in January 2017, ASU 2017-04 simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. ASU 2017-04 became effective for the Corporation on January 1, 2020, and will follow such guidance in connection with our next annual impairment testing, or prior to that if any such change constitutes a triggering event outside of the quarter from when the annual goodwill impairment test is performed. Management does not expect the adoption of this ASU to have a material impact on our Consolidated Financial Statements and related disclosures.

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FASB ASU 2018-13, “Fair Value Measurement Disclosure Framework”

Issued in August 2018, ASU 2018-13 modifies, adds and removes certain disclosures aimed to improve the overall usefulness of the disclosure requirements for fair value measurements. The guidance became effective for the Corporation on January 1, 2020 and the adoption of this ASU did not have a material impact on our Consolidated Financial Statements and related disclosures.
Pronouncements Not Yet Effective:

FASB ASU 2018-14 (Topic 715), “Compensation-Retirement Benefits - Defined Benefit Plans-General”

Issued in August 2018, ASU 2018-14, modifies, adds and removes certain disclosures aimed to improve the overall usefulness of the disclosure requirements to financial statement users. The guidance isbecame effective for annual periods beginning after December 15, 2020. Early adoption is permitted. Use of the retrospective method is required. Management does not expectCorporation on January 1, 2021 and the adoption of this ASU todid not have a material impact on our Consolidated Financial Statements and related disclosures.

FASB ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”

Issued in December 2019, ASU 2019-12 adds new guidance to simplify accounting for income taxes, changes the accounting for certain income tax transactions and makes minor improvements to the codification. The guidance isbecame effective for annual periods beginning after December 15, 2020. Early adoption is permitted. Management does not expectthe Corporation on January 1, 2021 and the adoption of this ASU todid not have a material impact on our Consolidated Financial Statements and related disclosures.

Pronouncements Not Yet Effective:

FASB ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”

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Issued in March 2020, ASU No. 2020-04 provides optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. Specifically, the guidance permits an entity, when certain criteria are met, to consider amendments to contracts made to comply with reference rate reform to meet the definition of a modification under GAAP. It further allows hedge accounting to be maintained and a one-time transfer or sale of qualifying held-to-maturity securities. The expedients and exceptions provided by the amendments are permitted to be adopted any time through December 31, 2022 and do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for certain optional expedients elected for certain hedging relationships existing as of December 31, 2022. Management is currently evaluating the potential impact of ASU 2020-04 on our Consolidated Financial Statements and related disclosures.

Note 3 - Business Combinations

Pending Business Combination – WSFS Financial Corporation

On March 10, 2021, WSFS Financial Corporation (“WSFS”) and BMBC, jointly announced the signing of a definitive Agreement and Plan of Merger, dated as of March 9, 2021, between WSFS and BMBC whereby BMBC will merge with WSFS, in a 100% stock-consideration transaction with a fixed exchange ratio of 0.90 shares of WSFS common stock for each share of BMBC common stock outstanding. Simultaneously with the merger, the Bank will merge into WSFS Bank, a wholly-owned subsidiary of WSFS. Closing of the transaction is subject to customary approvals by regulators and stockholders of both companies.

The Corporation recorded $1.6 million of due diligence and merger-related expenses for the three months ended March 31, 2021 related to the pending merger with WSFS. These expenses primarily consisted of legal fees, investment banker fees and board of director fees.

Note 34 – Investment Securities
 
The amortized cost and fair value of investment securities available for sale as of June 30, 2020March 31, 2021 and December 31, 20192020 are as follows:
 
As of June 30, 2020March 31, 2021
(dollars in thousands)(dollars in thousands)Amortized CostGross Unrealized GainsGross Unrealized Losses
Fair
Value
(dollars in thousands)Amortized CostGross Unrealized GainsGross Unrealized Losses
Fair
Value
U.S. Treasury securitiesU.S. Treasury securities$100  $—  $—  $100  U.S. Treasury securities$100 $$$100 
Obligations of the U.S. government and agenciesObligations of the U.S. government and agencies113,046  1,120  (17) 114,149  Obligations of the U.S. government and agencies113,010 450 (3,047)110,413 
Obligations of state and political subdivisionsObligations of state and political subdivisions4,553  30  —  4,583  Obligations of state and political subdivisions2,152 16 2,168 
Mortgage-backed securitiesMortgage-backed securities365,521  12,056  (373) 377,204  Mortgage-backed securities488,371 11,478 (2,521)497,328 
Collateralized mortgage obligationsCollateralized mortgage obligations25,171  702  —  25,873  Collateralized mortgage obligations16,551 522 17,073 
Collateralized loan obligationsCollateralized loan obligations99,515 204 (53)99,666 
Corporate bondsCorporate bonds8,000  22  —  8,022  Corporate bonds11,000 576 11,576 
Other investment securitiesOther investment securities650  —  —  650  Other investment securities650 650 
TotalTotal$517,041  $13,930  $(390) $530,581  Total$731,349 $13,246 $(5,621)$738,974 














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As of December 31, 20192020
(dollars in thousands)(dollars in thousands)Amortized CostGross Unrealized GainsGross Unrealized Losses
Fair
Value
(dollars in thousands)Amortized CostGross Unrealized GainsGross Unrealized Losses
Fair
Value
U.S. Treasury securitiesU.S. Treasury securities$500,066  $35  $—  $500,101  U.S. Treasury securities$500,095 $$$500,100 
Obligations of the U.S. government and agenciesObligations of the U.S. government and agencies102,179  193  (352) 102,020  Obligations of the U.S. government and agencies92,449 868 (219)93,098 
Obligations of state and political subdivisionsObligations of state and political subdivisions5,366  13  —  5,379  Obligations of state and political subdivisions2,149 22 2,171 
Mortgage-backed securitiesMortgage-backed securities360,977  5,182  (157) 366,002  Mortgage-backed securities441,575 12,739 (457)453,857 
Collateralized mortgage obligationsCollateralized mortgage obligations31,796  195  (159) 31,832  Collateralized mortgage obligations18,680 583 19,263 
Collateralized loan obligationsCollateralized loan obligations94,500 (97)94,404 
Corporate bondsCorporate bonds11,000 421 11,421 
Other investment securitiesOther investment securities650  —  —  650  Other investment securities650 650 
TotalTotal$1,001,034  $5,618  $(668) $1,005,984  Total$1,161,098 $14,639 $(773)$1,174,964 

The following tables present the aggregate amount of gross unrealized losses as of June 30, 2020March 31, 2021 and December 31, 20192020 on available for sale investment securities classified according to the amount of time those securities have been in a continuous unrealized loss position:
 
As of June 30, 2020March 31, 2021
Less than 12
Months
12 Months
or Longer
Total Less than 12
Months
12 Months
or Longer
Total
(dollars in thousands)(dollars in thousands)Fair
Value
Unrealized LossesFair
Value
Unrealized LossesFair
Value
Unrealized Losses(dollars in thousands)Fair
Value
Unrealized LossesFair
Value
Unrealized LossesFair
Value
Unrealized Losses
Obligations of the U.S. government and agenciesObligations of the U.S. government and agencies$6,005  $(17) $—  $—  $6,005  $(17) Obligations of the U.S. government and agencies$86,926 $(3,047)$$$86,926 $(3,047)
Mortgage-backed securitiesMortgage-backed securities32,503  (373) —  —  32,503  (373) Mortgage-backed securities194,674 (2,521)194,674 (2,521)
Collateralized loan obligationsCollateralized loan obligations25,947 (53)25,947 (53)
TotalTotal$38,508  $(390) $—  $—  $38,508  $(390) Total$307,547 $(5,621)$$$307,547 $(5,621)
 
As of December 31, 20192020
Less than 12
Months
12 Months
or Longer
Total Less than 12
Months
12 Months
or Longer
Total
(dollars in thousands)(dollars in thousands)Fair
Value
Unrealized LossesFair
Value
Unrealized LossesFair
Value
Unrealized Losses(dollars in thousands)Fair
Value
Unrealized LossesFair
Value
Unrealized LossesFair
Value
Unrealized Losses
Obligations of the U.S. government and agenciesObligations of the U.S. government and agencies$48,497  $(315) $7,966  $(37) $56,463  $(352) Obligations of the U.S. government and agencies$19,777 $(219)$$$19,777 $(219)
Mortgage-backed securitiesMortgage-backed securities33,783  (119) 5,977  (38) 39,760  (157) Mortgage-backed securities79,990 (457)79,990 (457)
Collateralized mortgage obligations6,978  (67) 10,861  (92) 17,839  (159) 
Collateralized loan obligationsCollateralized loan obligations31,903 (97)31,903 (97)
TotalTotal$89,258  $(501) $24,804  $(167) $114,062  $(668) Total$131,670 $(773)$$$131,670 $(773)
 
As of June 30, 2020,March 31, 2021, the Corporation’s available for sale investment securities consisted of 392448 securities, 1486 of which were in an unrealized loss position.

As of June 30, 2020,March 31, 2021, management had not made a decision to sell any of the Corporation’s available for sale investment securities in an unrealized loss position, nor did management consider it more likely than not that it would be required to sell such securities before recovery of their amortized cost basis. Management has evaluated available for sale debt securities that are in an unrealized loss position and has determined that the decline in value is unrelated to credit loss and is related to the change in market interest rates since purchase. Factors considered in this evaluation included the extent to which fair value is less than amortized cost, any explicit or implicit guarantees by the U.S. government, any changes to the rating of the security by the rating agency, and adverse conditions specifically related to the security, among other factors. As of June 30, 2020,March 31, 2021, approximately 97.0%84.6% of the Corporation’s available for sale investment securities were U.S. Treasuries or mortgage-backed securities or collateral mortgage obligations which were issued or guaranteed by U.S. government-sponsored entities and agencies. In addition, none of the available for sale debt securities held by the Corporation are past due as of June 30, 2020.March 31, 2021. Accrued interest receivable on available for sale debt securities, which is reported in Accrued interest receivable on the Consolidated Balance Sheet, totaled $2.5 million at March 31, 2021 and is excluded from the estimate of credit losses.
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As of June 30, 2020March 31, 2021 and December 31, 2019,2020, there were no holdings of securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of shareholders’ equity.

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As of June 30, 2020March 31, 2021 and December 31, 2019,2020, securities having a fair value of $268.2$184.2 million and $156.4$282.3 million, respectively, were specifically pledged as collateral for public funds, trust deposits, the Federal Reserve Bank of Philadelphia (the “FRB”) discount window program, Federal Home Loan Bank (“FHLB”) borrowings, collateral requirements in derivative contracts, and other purposes. Advances by the FHLB are collateralized by a blanket lien on non-pledged, mortgage-related loans as part of the Corporation’s borrowing agreement with the FHLB as well as certain securities individually pledged by the Corporation.
 
The amortized cost and fair value of available for sale investment and mortgage-related securities available for sale as of June 30, 2020March 31, 2021 and December 31, 2019,2020, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
June 30,
2020
December 31,
2019
March 31,
2021
December 31,
2020
(dollars in thousands)(dollars in thousands)Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
(dollars in thousands)Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Investment securities:Investment securities:    Investment securities:    
Due in one year or lessDue in one year or less$2,511  $2,514  $504,851  $504,890  Due in one year or less$2,618 $2,631 $502,465 $502,489 
Due after one year through five yearsDue after one year through five years11,808  11,905  38,710  38,623  Due after one year through five years20,642 21,190 18,679 19,167 
Due after five years through ten yearsDue after five years through ten years102,829  103,479  53,598  53,457  Due after five years through ten years98,804 96,050 77,433 77,681 
Due after ten yearsDue after ten years9,201  9,606  11,102  11,180  Due after ten years104,363 104,702 102,266 102,507 
SubtotalSubtotal126,349  127,504  608,261  608,150  Subtotal226,427 224,573 700,843 701,844 
Mortgage-related securities(1)
Mortgage-related securities(1)
390,692  403,077  392,773  397,834  
Mortgage-related securities(1)
504,922 514,401 460,255 473,120 
TotalTotal$517,041  $530,581  $1,001,034  $1,005,984  Total$731,349 $738,974 $1,161,098 $1,174,964 
 
(1) Expected maturities of mortgage-related securities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
 
The amortized cost and fair value of investment securities held to maturity as of June 30, 2020March 31, 2021 and December 31, 20192020 are as follows:
 
As of June 30, 2020March 31, 2021
(dollars in thousands)(dollars in thousands)Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
 
Fair Value
(dollars in thousands)Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
 
Fair Value
Mortgage-backed securitiesMortgage-backed securities$12,592  $403  $—  $12,995  Mortgage-backed securities$14,126 $428 $(183)$14,371 
 
As of December 31, 20192020
(dollars in thousands)(dollars in thousands)Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
 
Fair Value
(dollars in thousands)Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
 
Fair Value
Mortgage-backed securitiesMortgage-backed securities$12,577  $104  $(20) $12,661  Mortgage-backed securities$14,759 $451 $(24)$15,186 
 
The Corporation had no held to maturity securities with gross unrealized losses as of June 30, 2020. The following table presents the aggregate amount of gross unrealized losses as of March 31, 2021 and December 31, 20192020 on held to maturity securities classified according to the amount of time those securities have been in a continuous unrealized loss position:








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As of March 31, 2021
 Less than 12
Months
12 Months
or Longer
Total
(dollars in thousands)Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Mortgage-backed securities$4,034 $(183)$$$4,034 $(183)

As of December 31, 20192020
Less than 12
Months
12 Months
or Longer
Total Less than 12
Months
12 Months
or Longer
Total
(dollars in thousands)(dollars in thousands)Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
(dollars in thousands)Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Mortgage-backed securitiesMortgage-backed securities$3,159  $(20) $—  $—  $3,159  $(20) Mortgage-backed securities$4,224 $(24)$$$4,224 $(24)

As of June 30, 2020,March 31, 2021, none of the Corporation’s held to maturity investment securities were in an unrealized loss position. The Corporation’s held to maturity debt securities consist of mortgage-backed securities issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. With respect to these securities, the bank considers the history of credit
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losses, current conditions and reasonable and supportable forecasts, which may indicate that the expectation that nonpayment of the amortized cost basis is or continues to be zero, even if the U.S. government were to default. The bank does not record expected credit losses for these securities. Accrued interest receivable on held to maturity debt securities totaled $36 thousand at June 30, 2020March 31, 2021 and is excluded from the estimate of credit losses.

The amortized cost and fair value of held to maturity investment securities as of June 30, 2020March 31, 2021 and December 31, 2019,2020, by contractual maturity, are shown below:
June 30,
2020
December 31,
2019
March 31,
2021
December 31,
2020
(dollars in thousands)(dollars in thousands)Amortized
Cost
Fair ValueAmortized
Cost
Fair Value(dollars in thousands)Amortized
Cost
Fair ValueAmortized
Cost
Fair Value
Mortgage-backed securities(1)
Mortgage-backed securities(1)
$12,592  $12,995  $12,577  $12,661  
Mortgage-backed securities(1)
$14,126 $14,371 $14,759 $15,186 
 
(1) Expected maturities of mortgage-related securities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


As of June 30, 2020March 31, 2021 and December 31, 2019,2020, the Corporation’s investment securities held in trading accounts totaled $7.8$8.8 million and $8.6 million, respectively, and primarily consist of deferred compensation trust accounts which are invested in listed mutual funds whose diversification is at the discretion of the deferred compensation plan participants and rabbi trust accounts established to fund certain unqualified pension obligations. Investment securities held in trading accounts are reported at fair value, with adjustments in fair value reported through income. Changes in the fair value of investments held in the deferred compensation trust accounts create corresponding changes in the liability to the deferred compensation plan participants.

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Note 45 Loans and Leases
 
The loan and lease portfolio consists of loans and leases originated by the Corporation, as well as loans acquired in prior acquisitions. Certain tables in this footnote are presented with a breakdown between originated and acquired loans and leases.
 
A. The following table details the amortized cost of loans and leases as of the dates indicated:
 
Loans and LeasesLoans and LeasesLoans and Leases
June 30, 2020December 31, 2019 March 31, 2021December 31, 2020
(dollars in thousands)(dollars in thousands)OriginatedAcquiredTotal Loans and LeasesOriginatedAcquiredTotal Loans and Leases(dollars in thousands)OriginatedAcquiredTotal Loans and LeasesOriginatedAcquiredTotal Loans and Leases
Loans held for saleLoans held for sale$4,116  $—  $4,116  $4,249  $—  $4,249  Loans held for sale$3,210 $$3,210 $6,000 $$6,000 
Real estate loans:Real estate loans:Real estate loans:
Commercial real estate (CRE) - nonowner-occupiedCommercial real estate (CRE) - nonowner-occupied1,252,173  123,731  1,375,904  1,161,815  175,352  1,337,167  Commercial real estate (CRE) - nonowner-occupied1,309,797 98,443 1,408,240 1,330,947 104,628 1,435,575 
Commercial real estate (CRE) - owner-occupiedCommercial real estate (CRE) - owner-occupied499,650  43,038  542,688  479,466  48,141  527,607  Commercial real estate (CRE) - owner-occupied550,451 28,296 578,747 544,782 33,727 578,509 
Home equity lines of creditHome equity lines of credit182,035  12,732  194,767  209,239  15,023  224,262  Home equity lines of credit146,287 11,131 157,418 157,385 11,952 169,337 
Residential mortgage - 1st liensResidential mortgage - 1st liens596,597  98,673  695,270  604,884  101,806  706,690  Residential mortgage - 1st liens527,948 74,636 602,584 540,307 81,062 621,369 
Residential mortgage - junior liensResidential mortgage - junior liens32,083  1,561  33,644  34,903  1,940  36,843  Residential mortgage - junior liens26,220 1,180 27,400 22,375 1,420 23,795 
ConstructionConstruction203,833  8,541  212,374  193,307  8,891  202,198  Construction178,411 9,061 187,472 153,131 8,177 161,308 
Total real estate loansTotal real estate loans2,766,371  288,276  3,054,647  2,683,614  351,153  3,034,767  Total real estate loans2,739,114 222,747 2,961,861 2,748,927 240,966 2,989,893 
Commercial & IndustrialCommercial & Industrial451,228  6,301  457,529  425,322  6,905  432,227  Commercial & Industrial483,265 3,559 486,824 442,283 4,155 446,438 
ConsumerConsumer43,672  90  43,762  54,913  2,328  57,241  Consumer39,195 31 39,226 39,603 80 39,683 
LeasesLeases161,619  4,608  166,227  156,967  8,111  165,078  Leases143,554 1,770 145,324 149,914 2,483 152,397 
Total portfolio loans and leasesTotal portfolio loans and leases3,422,890  299,275  3,722,165  3,320,816  368,497  3,689,313  Total portfolio loans and leases3,405,128 228,107 3,633,235 3,380,727 247,684 3,628,411 
Total loans and leasesTotal loans and leases$3,427,006  $299,275  $3,726,281  $3,325,065  $368,497  $3,693,562  Total loans and leases$3,408,338 $228,107 $3,636,445 $3,386,727 $247,684 $3,634,411 
Loans with fixed ratesLoans with fixed rates$1,298,849  $165,053  $1,463,902  $1,251,762  $216,269  $1,468,031  Loans with fixed rates$1,161,527 $123,199 $1,284,726 $1,198,908 $134,084 $1,332,992 
Loans with adjustable or floating ratesLoans with adjustable or floating rates2,128,157  134,222  2,262,379  2,073,303  152,228  2,225,531  Loans with adjustable or floating rates2,246,811 104,908 2,351,719 2,187,819 113,600 2,301,419 
Total loans and leasesTotal loans and leases$3,427,006  $299,275  $3,726,281  $3,325,065  $368,497  $3,693,562  Total loans and leases$3,408,338 $228,107 $3,636,445 $3,386,727 $247,684 $3,634,411 
Net deferred loan origination fees (costs) included in the above loan tableNet deferred loan origination fees (costs) included in the above loan table$210  $—  $210  $(193) $—  $(193) Net deferred loan origination fees (costs) included in the above loan table$836 $$836 $673 $$673 

B. The following table details the components of net investment in leases:
 
Components of Net Investment in LeasesComponents of Net Investment in LeasesComponents of Net Investment in Leases
June 30, 2020December 31, 2019 March 31, 2021December 31, 2020
(dollars in thousands)(dollars in thousands)OriginatedAcquiredTotal LeasesOriginatedAcquiredTotal Leases(dollars in thousands)OriginatedAcquiredTotal LeasesOriginatedAcquiredTotal Leases
Minimum lease payments receivableMinimum lease payments receivable$178,407  $4,874  $183,281  $174,385  $8,753  $183,138  Minimum lease payments receivable$157,245 $1,834 $159,079 $164,556 $2,583 $167,139 
Unearned lease incomeUnearned lease income(23,182) (346) (23,528) (23,641) (813) (24,454) Unearned lease income(19,664)(91)(19,755)(20,746)(138)(20,884)
Initial direct costs and deferred feesInitial direct costs and deferred fees6,394  80  6,474  6,223  171  6,394  Initial direct costs and deferred fees5,973 27 6,000 6,104 38 6,142 
Total LeasesTotal Leases$161,619  $4,608  $166,227  $156,967  $8,111  $165,078  Total Leases$143,554 $1,770 $145,324 $149,914 $2,483 $152,397 











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C. The following table details the amortized cost of nonperforming loans and leases as of the dates indicated:
   
Nonperforming Loans and LeasesNonperforming Loans and LeasesNonperforming Loans and Leases
June 30, 2020December 31, 2019 March 31, 2021December 31, 2020
(dollars in thousands)(dollars in thousands)OriginatedAcquiredTotal Loans and LeasesOriginatedAcquiredTotal Loans and Leases(dollars in thousands)OriginatedAcquiredTotal Loans and LeasesOriginatedAcquiredTotal Loans and Leases
CRE - nonowner-occupiedCRE - nonowner-occupied$245  $—  $245  $199  $—  $199  CRE - nonowner-occupied$56 $$56 $57 $$57 
CRE - owner-occupiedCRE - owner-occupied2,937  1,109  4,046  1,523  2,636  4,159  CRE - owner-occupied610 745 1,355 823 836 1,659 
Home equity lines of creditHome equity lines of credit741  174  915  636  —  636  Home equity lines of credit420 112 532 515 214 729 
Residential mortgage - 1st liensResidential mortgage - 1st liens899  13  912  630  1,817  2,447  Residential mortgage - 1st liens573 72 645 26 73 99 
Residential mortgage - junior liensResidential mortgage - junior liens72  —  72  83  —  83  Residential mortgage - junior liens151 33 184 50 35 85 
Commercial & IndustrialCommercial & Industrial1,642  331  1,973  1,799  381  2,180  Commercial & Industrial1,490 1,490 1,657 118 1,775 
ConsumerConsumer36  —  36  19  42  61  Consumer40 40 30 30 
LeasesLeases190  29  219  747  136  883  Leases777 118 895 791 81 872 
Total non-performing loans and leasesTotal non-performing loans and leases$6,762  $1,656  $8,418  $5,636  $5,012  $10,648  Total non-performing loans and leases$4,117 $1,080 $5,197 $3,949 $1,357 $5,306 


D. Age Analysis of Past Due Loans and Leases
 
The following tables present an aging of all portfolio loans and leases as of the dates indicated:

Payment Status of All Portfolio Loans and LeasesPayment Status of All Portfolio Loans and LeasesPayment Status of All Portfolio Loans and Leases
Accruing Loans and Leases Accruing Loans and Leases
As of June 30, 202030 – 59
Days
Past Due
60 – 89
Days
Past Due
Over 89
Days
Past Due
Total Past
Due
CurrentTotal Accruing
Loans and Leases
Nonaccrual
Loans and Leases
Total
Loans and Leases
As of March 31, 2021As of March 31, 202130 – 59
Days
Past Due
60 – 89
Days
Past Due
Over 89
Days
Past Due
Total Past
Due
CurrentTotal Accruing
Loans and Leases
Nonaccrual
Loans and Leases
Total
Loans and Leases
(dollars in thousands)(dollars in thousands)30 – 59
Days
Past Due
60 – 89
Days
Past Due
Over 89
Days
Past Due
Total Past
Due
CurrentTotal Accruing
Loans and Leases
Nonaccrual
Loans and Leases
Total
Loans and Leases
(dollars in thousands)CurrentTotal Accruing
Loans and Leases
Nonaccrual
Loans and Leases
Total
Loans and Leases
CRE - nonowner-occupiedCRE - nonowner-occupiedCRE - nonowner-occupied$653 $$$653 $1,407,531 $1,408,184 $56 $1,408,240 
CRE - owner-occupiedCRE - owner-occupied995  501  —  1,496  537,146  538,642  4,046  542,688  CRE - owner-occupied249 249 577,143 577,392 1,355 578,747 
Home equity lines of creditHome equity lines of credit214  22  —  236  193,616  193,852  915  194,767  Home equity lines of credit17 17 156,869 156,886 532 157,418 
Residential mortgage - 1st liensResidential mortgage - 1st liens4,826  153  —  4,979  689,379  694,358  912  695,270  Residential mortgage - 1st liens2,595 295 2,890 599,049 601,939 645 602,584 
Residential mortgage - junior liensResidential mortgage - junior liens—  —  —  —  33,572  33,572  72  33,644  Residential mortgage - junior liens163 163 27,053 27,216 184 27,400 
ConstructionConstruction—  —  —  —  212,374  212,374  —  212,374  Construction187,472 187,472 187,472 
Commercial & IndustrialCommercial & Industrial12  271  —  283  455,273  455,556  1,973  457,529  Commercial & Industrial157 165 485,169 485,334 1,490 486,824 
ConsumerConsumer 76  —  85  43,641  43,726  36  43,762  Consumer23 24 47 39,139 39,186 40 39,226 
LeasesLeases1,337  148  —  1,485  164,523  166,008  219  166,227  Leases863 348 1,211 143,218 144,429 895 145,324 
Total portfolio loans and leases Total portfolio loans and leases$7,931  $2,091  $—  $10,022  $3,703,725  $3,713,747  $8,418  $3,722,165   Total portfolio loans and leases$4,720 $675 $$5,395 $3,622,643 $3,628,038 $5,197 $3,633,235 
 



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Table of Contents
Payment Status of All Portfolio Loans and LeasesPayment Status of All Portfolio Loans and LeasesPayment Status of All Portfolio Loans and Leases
Accruing Loans and Leases Accruing Loans and Leases
As of December 31, 201930 – 59
Days
Past Due
60 – 89
Days
Past Due
Over 89
Days
Past Due
Total Past
Due
CurrentTotal Accruing
Loans and Leases
Nonaccrual
Loans and Leases
Total
Loans and Leases
As of December 31, 2020As of December 31, 202030 – 59
Days
Past Due
60 – 89
Days
Past Due
Over 89
Days
Past Due
Total Past
Due
CurrentTotal Accruing
Loans and Leases
Nonaccrual
Loans and Leases
Total
Loans and Leases
(dollars in thousands)(dollars in thousands)30 – 59
Days
Past Due
60 – 89
Days
Past Due
Over 89
Days
Past Due
Total Past
Due
CurrentTotal Accruing
Loans and Leases
Nonaccrual
Loans and Leases
Total
Loans and Leases
(dollars in thousands)CurrentTotal Accruing
Loans and Leases
Nonaccrual
Loans and Leases
Total
Loans and Leases
CRE - nonowner-occupiedCRE - nonowner-occupiedCRE - nonowner-occupied$$$$$1,435,518 $1,435,518 $57 $1,435,575 
CRE - owner-occupiedCRE - owner-occupied2,462  —  —  2,462  520,986  523,448  4,159  527,607  CRE - owner-occupied1,907 416 2,323 574,527 576,850 1,659 578,509 
Home equity lines of creditHome equity lines of credit354  365  —  719  222,907  223,626  636  224,262  Home equity lines of credit87 87 168,521 168,608 729 169,337 
Residential mortgage - 1st liensResidential mortgage - 1st liens1,639  388  —  2,027  702,216  704,243  2,447  706,690  Residential mortgage - 1st liens6,020 217 6,237 615,033 621,270 99 621,369 
Residential mortgage - junior liensResidential mortgage - junior liens116  —  —  116  36,644  36,760  83  36,843  Residential mortgage - junior liens88 58 146 23,564 23,710 85 23,795 
ConstructionConstruction—  —  —  —  202,198  202,198  —  202,198  Construction161,308 161,308 161,308 
Commercial & IndustrialCommercial & Industrial—  —  —  —  430,047  430,047  2,180  432,227  Commercial & Industrial444,663 444,663 1,775 446,438 
ConsumerConsumer98  140  —  238  56,942  57,180  61  57,241  Consumer32 16 48 39,605 39,653 30 39,683 
LeasesLeases857  594  —  1,451  162,744  164,195  883  165,078  Leases1,196 810 2,006 149,519 151,525 872 152,397 
Total portfolio loans and leases Total portfolio loans and leases$5,710  $1,487  $—  $7,197  $3,671,468  $3,678,665  $10,648  $3,689,313   Total portfolio loans and leases$9,330 $1,517 $$10,847 $3,612,258 $3,623,105 $5,306 $3,628,411 

The following tables present an aging of originated portfolio loans and leases as of the dates indicated:

Payment Status of Originated Portfolio Loans and LeasesPayment Status of Originated Portfolio Loans and LeasesPayment Status of Originated Portfolio Loans and Leases
Accruing Loans and Leases Accruing Loans and Leases
As of June 30, 202030 – 59
Days
Past Due
60 – 89
Days
Past Due
Over 89
Days
Past Due
Total Past
Due
CurrentTotal Accruing
Loans and Leases
Nonaccrual
Loans and Leases
Total
Loans and Leases
As of March 31, 2021As of March 31, 202130 – 59
Days
Past Due
60 – 89
Days
Past Due
Over 89
Days
Past Due
Total Past
Due
CurrentTotal Accruing
Loans and Leases
Nonaccrual
Loans and Leases
Total
Loans and Leases
(dollars in thousands)(dollars in thousands)30 – 59
Days
Past Due
60 – 89
Days
Past Due
Over 89
Days
Past Due
Total Past
Due
CurrentTotal Accruing
Loans and Leases
Nonaccrual
Loans and Leases
Total
Loans and Leases
(dollars in thousands)CurrentTotal Accruing
Loans and Leases
Nonaccrual
Loans and Leases
Total
Loans and Leases
CRE - nonowner-occupiedCRE - nonowner-occupiedCRE - nonowner-occupied$653 $$$653 $1,309,088 $1,309,741 $56 $1,309,797 
CRE - owner-occupiedCRE - owner-occupied995  383  —  1,378  495,335  496,713  2,937  499,650  CRE - owner-occupied249 249 549,592 549,841 610 550,451 
Home equity lines of creditHome equity lines of credit112  22  —  134  181,160  181,294  741  182,035  Home equity lines of credit17 17 145,850 145,867 420 146,287 
Residential mortgage - 1st liensResidential mortgage - 1st liens1,007  121  —  1,128  594,570  595,698  899  596,597  Residential mortgage - 1st liens1,317 244 1,561 525,814 527,375 573 527,948 
Residential mortgage - junior liensResidential mortgage - junior liens—  —  —  —  32,011  32,011  72  32,083  Residential mortgage - junior liens141 141 25,928 26,069 151 26,220 
ConstructionConstruction—  —  —  —  203,833  203,833  —  203,833  Construction178,411 178,411 178,411 
Commercial & IndustrialCommercial & Industrial12  271  —  283  449,303  449,586  1,642  451,228  Commercial & Industrial157 165 481,610 481,775 1,490 483,265 
ConsumerConsumer 76  —  85  43,551  43,636  36  43,672  Consumer22 24 46 39,109 39,155 40 39,195 
LeasesLeases1,256  147  —  1,403  160,026  161,429  190  161,619  Leases774 331 1,105 141,672 142,777 777 143,554 
Total portfolio loans and leasesTotal portfolio loans and leases$3,786  $1,020  $—  $4,806  $3,411,322  $3,416,128  $6,762  $3,422,890  Total portfolio loans and leases$3,330 $607 $$3,937 $3,397,074 $3,401,011 $4,117 $3,405,128 


Payment Status of Originated Portfolio Loans and LeasesPayment Status of Originated Portfolio Loans and LeasesPayment Status of Originated Portfolio Loans and Leases
Accruing Loans and Leases Accruing Loans and Leases
As of December 31, 201930 – 59
Days
Past Due
60 – 89
Days
Past Due
Over 89
Days
Past Due
Total Past
Due
CurrentTotal Accruing
Loans and Leases
Nonaccrual
Loans and Leases
Total
Loans and Leases
As of December 31, 2020As of December 31, 202030 – 59
Days
Past Due
60 – 89
Days
Past Due
Over 89
Days
Past Due
Total Past
Due
CurrentTotal Accruing
Loans and Leases
Nonaccrual
Loans and Leases
Total
Loans and Leases
(dollars in thousands)(dollars in thousands)30 – 59
Days
Past Due
60 – 89
Days
Past Due
Over 89
Days
Past Due
Total Past
Due
CurrentTotal Accruing
Loans and Leases
Nonaccrual
Loans and Leases
Total
Loans and Leases
(dollars in thousands)CurrentTotal Accruing
Loans and Leases
Nonaccrual
Loans and Leases
Total
Loans and Leases
CRE - nonowner-occupiedCRE - nonowner-occupiedCRE - nonowner-occupied$$$$$1,330,890 $1,330,890 $57 $1,330,947 
CRE - owner-occupiedCRE - owner-occupied2,462  —  —  2,462  475,481  477,943  1,523  479,466  CRE - owner-occupied1,907 416 2,323 541,636 543,959 823 544,782 
Home equity lines of creditHome equity lines of credit254  365  —  619  207,984  208,603  636  209,239  Home equity lines of credit87 87 156,783 156,870 515 157,385 
Residential mortgage - 1st liensResidential mortgage - 1st liens890  102  —  992  603,262  604,254  630  604,884  Residential mortgage - 1st liens4,109 217 4,326 535,955 540,281 26 540,307 
Residential mortgage - junior liensResidential mortgage - junior liens116  —  —  116  34,704  34,820  83  34,903  Residential mortgage - junior liens84 56 140 22,185 22,325 50 22,375 
ConstructionConstruction—  —  —  —  193,307  193,307  —  193,307  Construction153,131 153,131 153,131 
Commercial & IndustrialCommercial & Industrial—  —  —  —  423,523  423,523  1,799  425,322  Commercial & Industrial440,626 440,626 1,657 442,283 
ConsumerConsumer18  88  —  106  54,788  54,894  19  54,913  Consumer32 16 48 39,525 39,573 30 39,603 
LeasesLeases781  566  —  1,347  154,873  156,220  747  156,967  Leases1,196 735 1,931 147,192 149,123 791 149,914 
Total portfolio loans and leasesTotal portfolio loans and leases$4,705  $1,121  $—  $5,826  $3,309,354  $3,315,180  $5,636  $3,320,816  Total portfolio loans and leases$7,415 $1,440 $$8,855 $3,367,923 $3,376,778 $3,949 $3,380,727 
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Table of Contents

The following tables present an aging of acquired portfolio loans and leases as of the dates indicated:

Payment Status of Acquired Portfolio Loans and LeasesPayment Status of Acquired Portfolio Loans and LeasesPayment Status of Acquired Portfolio Loans and Leases
Accruing Loans and Leases Accruing Loans and Leases
As of June 30, 202030 – 59
Days
Past Due
60 – 89
Days
Past Due
Over 89
Days
Past Due
Total Past
Due
CurrentTotal Accruing
Loans and Leases
Nonaccrual
Loans and Leases
Total
Loans and Leases
As of March 31, 2021As of March 31, 202130 – 59
Days
Past Due
60 – 89
Days
Past Due
Over 89
Days
Past Due
Total Past
Due
CurrentTotal Accruing
Loans and Leases
Nonaccrual
Loans and Leases
Total
Loans and Leases
(dollars in thousands)(dollars in thousands)30 – 59
Days
Past Due
60 – 89
Days
Past Due
Over 89
Days
Past Due
Total Past
Due
CurrentTotal Accruing
Loans and Leases
Nonaccrual
Loans and Leases
Total
Loans and Leases
(dollars in thousands)CurrentTotal Accruing
Loans and Leases
Nonaccrual
Loans and Leases
Total
Loans and Leases
CRE - nonowner-occupiedCRE - nonowner-occupiedCRE - nonowner-occupied$$$$$98,443 $98,443 $$98,443 
CRE - owner-occupiedCRE - owner-occupied—  118  —  118  41,811  41,929  1,109  43,038  CRE - owner-occupied27,551 27,551 745 28,296 
Home equity lines of creditHome equity lines of credit102  —  —  102  12,456  12,558  174  12,732  Home equity lines of credit11,019 11,019 112 11,131 
Residential mortgage - 1st liensResidential mortgage - 1st liens3,819  32  —  3,851  94,809  98,660  13  98,673  Residential mortgage - 1st liens1,278 51 1,329 73,235 74,564 72 74,636 
Residential mortgage - junior liensResidential mortgage - junior liens—  —  —  —  1,561  1,561  —  1,561  Residential mortgage - junior liens22 22 1,125 1,147 33 1,180 
ConstructionConstruction—  —  —  —  8,541  8,541  —  8,541  Construction9,061 9,061 9,061 
Commercial & IndustrialCommercial & Industrial—  —  —  —  5,970  5,970  331  6,301  Commercial & Industrial3,559 3,559 3,559 
ConsumerConsumer—  —  —  —  90  90  —  90  Consumer30 31 31 
LeasesLeases81   —  82  4,497  4,579  29  4,608  Leases89 17 106 1,546 1,652 118 1,770 
Total portfolio loans and leasesTotal portfolio loans and leases$4,145  $1,071  $—  $5,216  $292,403  $297,619  $1,656  $299,275  Total portfolio loans and leases$1,390 $68 $$1,458 $225,569 $227,027 $1,080 $228,107 


Payment Status of Acquired Portfolio Loans and LeasesPayment Status of Acquired Portfolio Loans and LeasesPayment Status of Acquired Portfolio Loans and Leases
Accruing Loans and Leases Accruing Loans and Leases
As of December 31, 201930 – 59
Days
Past Due
60 – 89
Days
Past Due
Over 89
Days
Past Due
Total Past
Due
CurrentTotal Accruing
Loans and Leases
Nonaccrual
Loans and Leases
Total
Loans and Leases
As of December 31, 2020As of December 31, 202030 – 59
Days
Past Due
60 – 89
Days
Past Due
Over 89
Days
Past Due
Total Past
Due
CurrentTotal Accruing
Loans and Leases
Nonaccrual
Loans and Leases
Total
Loans and Leases
(dollars in thousands)(dollars in thousands)30 – 59
Days
Past Due
60 – 89
Days
Past Due
Over 89
Days
Past Due
Total Past
Due
CurrentTotal Accruing
Loans and Leases
Nonaccrual
Loans and Leases
Total
Loans and Leases
(dollars in thousands)CurrentTotal Accruing
Loans and Leases
Nonaccrual
Loans and Leases
Total
Loans and Leases
CRE - nonowner-occupiedCRE - nonowner-occupiedCRE - nonowner-occupied$$$$$104,628 $104,628 $$104,628 
CRE - owner-occupiedCRE - owner-occupied—  —  —  —  45,505  45,505  2,636  48,141  CRE - owner-occupied32,891 32,891 836 33,727 
Home equity lines of creditHome equity lines of credit100  —  —  100  14,923  15,023  —  15,023  Home equity lines of credit11,738 11,738 214 11,952 
Residential mortgage - 1st liensResidential mortgage - 1st liens749  286  —  1,035  98,954  99,989  1,817  101,806  Residential mortgage - 1st liens1,911 1,911 79,078 80,989 73 81,062 
Residential mortgage - junior liensResidential mortgage - junior liens—  —  —  —  1,940  1,940  —  1,940  Residential mortgage - junior liens1,379 1,385 35 1,420 
ConstructionConstruction—  —  —  —  8,891  8,891  —  8,891  Construction8,177 8,177 8,177 
Commercial & IndustrialCommercial & Industrial—  —  —  —  6,524  6,524  381  6,905  Commercial & Industrial4,037 4,037 118 4,155 
ConsumerConsumer80  52  —  132  2,154  2,286  42  2,328  Consumer80 80 80 
LeasesLeases76  28  —  104  7,871  7,975  136  8,111  Leases75 75 2,327 2,402 81 2,483 
Total portfolio loans and leasesTotal portfolio loans and leases$1,005  $366  $—  $1,371  $362,114  $363,485  $5,012  $368,497  Total portfolio loans and leases$1,915 $77 $$1,992 $244,335 $246,327 $1,357 $247,684 

E. Allowance for Credit Losses (“ACL”) on LoanLoans and Leases

The ACL on loans and leases represents management’s estimate of all expected credit losses over the expected contractual life of our existing portfolio loans and leases. Determining the appropriateness of the ACL on loans and leases is complex and requires judgment by management about the effect of matters that are inherently uncertain. Subsequent evaluations of the then-existing loan portfolio, in light of the factors then prevailing, may result in significant changes in the ACL on loans and leases in those future periods.

The expense for credit loss recorded through earnings is the amount necessary to maintain the ACL on loans and leases at the amount of expected credit losses inherent within the loans and leases portfolio. The amount of expense and the corresponding level of ACL on loans and leases are based on management’s evaluation of the collectability of the loan and lease portfolio based on historical loss experience, reasonable and supportable forecasts, and other significant qualitative and quantitative factors. The ACL on loans and leases, as reported in our Consolidated Statements of Financial Condition, is adjusted by an expense for credit losses, which is recognized in earnings, and reduced by the charge-off of loan and lease amounts, net of recoveries.

Management employs a disciplined process and methodology to establish the ACL on loans and leases that has two basic components: first, an asset-specific component involving individual loans and leases that do not share risk characteristics with other loans and leases
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and the measurement of expected credit losses for such individual loans; and second, a collective (pooled) component for estimated expected credit losses for pools of loans and leases that share similar risk characteristics.

Based upon this methodology, management establishes an asset-specific ACL on loans and leases that do not share risk characteristics with other loans and leases based on the amount of expected credit losses calculated on those loans and leases and charges off amounts determined to be uncollectible. Factors we consider in measuring the extent of expected credit loss include payment status, collateral value, borrower financial condition, guarantor support and the probability of collecting scheduled principal and interest payments when due.

When a loan or lease does not share risk characteristics with other loans or leases, management measures expected credit loss as the difference between the amortized cost basis in the loan and the present value of expected future cash flows discounted at the loan’s effective interest rate except that, for collateral dependent loans, credit loss is measured as the difference between the amortized cost basis in the loan and the fair value of the underlying collateral. The fair value of the collateral is adjusted for the estimated cost to sell if repayment or satisfaction of a loan is dependent on the sale (rather than only on the operation) of the collateral. If the calculated expected credit loss is determined to be permanent, fixed or nonrecoverable, the credit loss portion of the loan will be charged off against the ACL on loans and leases. Loans and leases designated as having significantly increased credit risk are generally placed on nonaccrual and remain in that status until all principal and interest payments are current and the prospects for future payments in accordance with the loan agreement are reasonably assured, at which point the loan is returned to accrual status.

In estimating the component of the ACL on loans and leases that share common risk characteristics, loans and leases are segregated into portfolio segments based on federal call report codes which classify loans and leases based on the primary collateral supporting the loan andor lease. Methods utilized by management to estimate expected credit losses include a DCF methodology that discounts instrument-level contractual cash flows, adjusted for prepayments and curtailments, incorporating loss expectations, and a WARM methodology which contemplates expected losses at a pool-level, utilizing historic loss information.

Under both methodologies, management estimates the ACL on loans and leases using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. After the end of the reasonable and supportable forecast period, the loss rates revert to the long-term mean loss rate, or in the case of an input-driven predictive method, the long-term mean of the input, using a reversion period where applicable. Historical credit loss experience, including examination of loss experience at representative peer institutions when the Corporation’s first-party loss history does not result in estimations that are meaningful to users of the Corporation’s Consolidated Financial Statements, provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are considered for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in unemployment rates, property values, or other relevant factors.

The DCF methodology uses inputs of current and forecasted macroeconomic indicators to predict future loss rates. The current macroeconomic indicator utilized by the bank is the Pennsylvania unemployment rate. In building the CECLCurrent Expected Credit Loss (“CECL”) model utilized in the DCF methodology, a correlation between this indicator and historic loss levels was developed, enabling a prediction of future loss rates related to future Pennsylvania unemployment rates. The portfolio segments utilizing the DCF methodology as of June 30, 2020March 31, 2021 included: CRE - owner-occupied and nonowner-occupied loans, home equity lines of credit, residential mortgages (first and junior liens), construction loans and consumer loans.

The WARM methodology uses combined historic loss rates for the Bank and peer institutions, if necessary, gathered from Call Report filings. The selected period for which historic loss rates are used is dependent on management's evaluation of current conditions and expectations of future loss conditions. The portfolio segments utilizing the WARM methodology as of June 30, 2020March 31, 2021 included commercial and industrial loans and leases.

For the three months ended June 30, 2020,March 31, 2021, there was a significantfavorable change in the economic outlook impacting the ACL on loans and leases. Our CECL model, which had included a sharp deterioration in the Pennsylvania unemployment rate to levels observed during the last recessionary period, projected to be sustained in the thirdfirst and fourthsecond quarters of 2020, withbegan forecasting a declining rate of Pennsylvania unemployment as of the third quarter of 2020 and as of March 31, 2021, is forecasting a continued decrease in the rate through the first quarter of 2022, followed by a reversion to athe long-term 15-year average.

In addition to these assumptions, management applied additional qualitative factors related to the loss mitigation expected to be provided by the various governmental aid programs, such as increased unemployment benefits, stimulus payments, and the SBA's Paycheck Protection Program, as well as the Bank's loan payment deferral programs being offered to borrowers which provide a three- or six-month payment deferral to borrowers affectedcontinued stress, brought on by the COVID-19 pandemic. These qualitative factors were applied to allpandemic, on certain segments of the portfolio except the construction segment andloan portfolio. In particular, the retail and hospitality sectors of the nonowner-occupied CRE segment due towere directly impacted by the significant expected impact on these specific segmentsmany shutdowns and sectors from the economic shutdown, such as government mandated stay at home orders and closurecurtailments of non-essential businesses.consumer activity during most of 2020.





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The following tables present the activity in the ACL on loans and leases, by portfolio segment, for the three and six months ended June 30, 2020March 31, 2021 and 2019:2020:

Roll-Forward of ACL on Loans and Leases
Roll-Forward of ACL on Loans and LeasesRoll-Forward of ACL on Loans and Leases
(dollars in thousands)(dollars in thousands)CRE - nonowner-occupiedCRE -
owner-occupied
Home equity lines of creditResidential mortgage - 1st liensResidential mortgage - junior liensConstructionCommercial & IndustrialConsumerLeasesTotal(dollars in thousands)CRE - nonowner-occupiedCRE -
owner-occupied
Home equity lines of creditResidential mortgage - 1st liensResidential mortgage - junior liensConstructionCommercial & IndustrialConsumerLeasesTotal
Balance, March 31, 2020$13,329  $4,192  $2,748  $8,316  $517  $6,984  $8,734  $341  $8,909  $54,070  
Balance, December 31, 2020Balance, December 31, 2020$19,382 $6,982 $1,406 $7,782 $382 $2,707 $8,087 $325 $6,656 $53,709 
Loans and leases charged-offLoans and leases charged-off—  (1,234) —  (556) —  —  (522) (296) (1,443) (4,051) Loans and leases charged-off(189)(1)(128)(122)(649)(1,089)
Recoveries collectedRecoveries collected —   136  —   22  57  428  652  Recoveries collected182 15 249 447 
PCL on loans and leasesPCL on loans and leases1,998  2,125  (1,125) 302   (924) (246) 338  1,831  4,303  PCL on loans and leases(3,605)(948)(126)(2,143)57 416 470 163 211 (5,505)
Balance, June 30, 2020$15,331  $5,083  $1,627  $8,198  $521  $6,061  $7,988  $440  $9,725  $54,974  
Balance, March 31, 2021Balance, March 31, 2021$15,777 $5,845 $1,280 $5,638 $439 $3,124 $8,611 $381 $6,467 $47,562 


Roll-Forward of ACL on Loans and Leases
(dollars in thousands)(dollars in thousands)CRE - nonowner-occupiedCRE -
owner-occupied
Home equity lines of creditResidential mortgage - 1st liensResidential mortgage - junior liensConstructionCommercial & IndustrialConsumerLeasesTotal(dollars in thousands)CRE - nonowner-occupiedCRE -
owner-occupied
Home equity lines of creditResidential mortgage - 1st liensResidential mortgage - junior liensConstructionCommercial & IndustrialConsumerLeasesTotal
Balance, December 31, 2019 Prior to Adoption of ASC 326Balance, December 31, 2019 Prior to Adoption of ASC 326$7,960  $2,825  $1,114  $2,501  $338  $1,230  $3,835  $438  $2,361  $22,602  Balance, December 31, 2019 Prior to Adoption of ASC 326$7,960 $2,825 $1,114 $2,501 $338 $1,230 $3,835 $438 $2,361 $22,602 
Impact of Adopting ASC 326Impact of Adopting ASC 326(467) 16  (46) 2,408  79  (359) (159) 140  1,594  3,206  Impact of Adopting ASC 326(467)16 (46)2,408 79 (359)(159)140 1,594 3,206 
Loans and leases charged-offLoans and leases charged-off—  (1,233) (114) (1,284) —  —  (1,149) (590) (4,069) (8,439) Loans and leases charged-off(114)(728)(627)(294)(2,626)(4,389)
Recoveries collectedRecoveries collected —   137  —   37  90  692  968  Recoveries collected15 33 264 316 
PCL on loans and leasesPCL on loans and leases7,832  3,475  669  4,436  104  5,188  5,424  362  9,147  36,637  PCL on loans and leases5,834 1,351 1,794 4,134 100 6,112 5,670 24 7,316 32,335 
Balance, June 30, 2020$15,331  $5,083  $1,627  $8,198  $521  $6,061  $7,988  $440  $9,725  $54,974  
Balance, March 31, 2020Balance, March 31, 2020$13,329 $4,192 $2,748 $8,316 $517 $6,984 $8,734 $341 $8,909 $54,070 


Roll-Forward of ACL on Loans and Leases
(dollars in thousands)CRE - nonowner-occupiedCRE -
owner-occupied
Home equity lines of creditResidential mortgage - 1st liensResidential mortgage - junior liensConstructionCommercial & IndustrialConsumerLeasesTotal
Balance, March 31, 2019$6,308  $2,740  $1,222  $2,634  $350  $1,372  $3,507  $439  $2,044  $20,616  
Loans and leases charged-off—  —  (211) (341) (56) —  (20) (127) (624) (1,379) 
Recoveries collected —  83     37   179  318  
PCL on loans and leases520  (80) 158  349  45  (93) 58  20  650  1,627  
Balance, June 30, 2019$6,833  $2,660  $1,252  $2,644  $343  $1,280  $3,582  $339  $2,249  $21,182  

Roll-Forward of ACL on Loans and Leases
(dollars in thousands)CRE - nonowner-occupiedCRE -
owner-occupied
Home equity lines of creditResidential mortgage - 1st liensResidential mortgage - junior liensConstructionCommercial & IndustrialConsumerLeasesTotal
Balance, December 31, 2018$5,856  $2,454  $1,140  $2,561  $364  $1,715  $3,166  $303  $1,867  $19,426  
Loans and leases charged-off(1,515) —  (313) (682) (56) —  (217) (247) (1,192) (4,222) 
Recoveries collected —  84  15    45  25  433  615  
PCL on loans and leases2,485  206  341  750  31  (437) 588  258  1,141  5,363  
Balance, June 30, 2019$6,833  $2,660  $1,252  $2,644  $343  $1,280  $3,582  $339  $2,249  $21,182  

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As part of the process of determining the ACL for the different segments of the loan and lease portfolio, management considers certain credit quality indicators. Periodic reviews of loans are conducted by both in-house staff as well as external loan reviewers. The result of these reviews is reflected in the risk grade assigned to each loan. These internally assigned grades are as follows:
 
Pass – Loans considered satisfactory with no indications of deterioration.

Pass-Watch – Loans that are performing, but which may have a potential deficiency which the borrower appears to be managing or a possible deficiency in the future.

Special mention – Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard – Loans classified as substandard are inadequately protected by the current net worth and payment capacity of the obligor or of the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.





































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The following table details the amortized cost of portfolio loans and leases, by year of origination (for term loans) and by risk grade within each portfolio segment as of June 30, 2020:March 31, 2021:

Term LoansRevolving LoansTerm LoansRevolving Loans
Amortized Cost Basis by Origination Year(1)
Amortized Cost Basis
Amortized Cost Basis by Origination Year(1)
Amortized Cost Basis
(dollars in thousands)(dollars in thousands)Risk Rating202020192018201720162015 and PriorRevolving Lines of CreditRevolving Lines of Credit Converted to Term LoansTotal(dollars in thousands)Risk Rating202120202019201820172016 and PriorRevolving Lines of CreditRevolving Lines of Credit Converted to Term LoansTotal
CRE - nonowner-occupiedCRE - nonowner-occupiedPass$171,485  $454,690  $192,252  $124,010  $120,715  $140,138  $32,668  $—  $1,235,958  CRE - nonowner-occupiedPass$28,765 $312,096 $400,014 $150,184 $104,760 $177,812 $42,377 $$1,216,008 
Pass-Watch332  676  2,963  —  1,686  2,455  —  —   CRE - nonowner-occupiedPass-Watch5,992 31,370 17,225 4,207 18,738 77,532 
Special Mention17,817  —  10,931  —  —  —  —  —   Special Mention8,889 4,971 26,044 39,904 
Substandard2,443  33,386  11,868  4,780  43,235  7,374  —  —   Substandard56 7,878 29,370 11,812 1,417 24,263 74,796 
Total$192,077  $488,752  $218,014  $128,790  $165,636  $149,967  $32,668  $—   Total$28,821 $325,966 $460,754 $188,110 $115,355 $246,857 $42,377 $$1,408,240 
CRE - owner-occupiedCRE - owner-occupiedPass$73,670  $111,679  $109,629  $87,028  $51,683  $50,568  $13,430  $—  $497,687  CRE - owner-occupiedPass$27,001 $124,814 $114,717 $103,666 $63,359 $73,387 $9,987 $$516,931 
Pass-Watch4,914  1,786  —  —  2,401  1,747  441  —   CRE - owner-occupiedPass-Watch10,169 2,335 4,746 7,122 4,529 28,901 
Special Mention3,367  434  3,698  —  —  879  50  —   Special Mention4,685 270 3,886 833 50 9,724 
Substandard3,153  6,746  7,597  860  5,907  858  163  —   Substandard3,702 6,190 6,601 666 5,933 99 23,191 
Total$85,104  $120,645  $120,924  $87,888  $59,991  $54,052  $14,084  $—   Total$27,001 $143,370 $123,512 $118,899 $71,147 $84,682 $10,136 $$578,747 
Home equity lines of creditHome equity lines of creditPass$98  $887  $332  $123  $276  $2,777  $184,201  $4,327  $193,021  Home equity lines of creditPass$897 $580 $844 $$73 $2,057 $151,143 $800 $156,394 
Special Mention—  —  —  —  —  —  —  —   Home equity lines of creditSpecial Mention491 491 
Substandard831  251  195  58  —  352  59  —   Substandard59 25 99 348 533 
Total$929  $1,138  $527  $181  $276  $3,129  $184,260  $4,327   Total$897 $580 $903 $25 $172 $2,405 $151,636 $800 $157,418 
Residential mortgage - 1st liensResidential mortgage - 1st liensPass$62,318  $135,324  $91,917  $87,672  $77,890  $228,862  $1,135  $—  $685,118  Residential mortgage - 1st liensPass$24,617 $113,345 $104,791 $61,416 $70,906 $208,048 $1,062 $$584,185 
Pass-Watch505  —  —  —  —  265  —  —   Residential mortgage - 1st liensPass-Watch12,714 2,117 627 15,458 
Special Mention—  —  —  —  —  7,505  —  —   Special Mention341 341 
Substandard—  86  689  26  977  99  —  —   Substandard877 338 69 249 1,067 2,600 
Total$62,823  $135,410  $92,606  $87,698  $78,867  $236,731  $1,135  $—   Total$24,617 $114,222 $117,843 $63,943 $71,155 $209,742 $1,062 $$602,584 
Residential mortgage - junior liensResidential mortgage - junior liensPass$1,825  $5,056  $9,251  $4,371  $3,412  $9,425  $177  $—  $33,517  Residential mortgage - junior liensPass$5,945 $2,804 $4,126 $3,152 $2,896 $8,078 $177 $$27,178 
Substandard55  —  —  —  36  36  —  —   Residential mortgage - junior liensSpecial Mention37 37 
Total$1,880  $5,056  $9,251  $4,371  $3,448  $9,461  $177  $—   Substandard103 82 185 
Residential mortgage - junior liensTotal$6,048 $2,804 $4,126 $3,189 $2,896 $8,160 $177 $$27,400 
ConstructionPass$85,546  $66,421  $25,739  $10,134  $—  $5,079  $13,033  $—  $205,952  ConstructionPass$31,459 $75,001 $44,426 $3,225 $824 $5,792 $12,916 $$173,643 
Pass-Watch—  —  —  —  —  —  —  —   ConstructionPass-Watch7,921 2,394 10,315 
Substandard6,422  —  —  —  —  —  —  —   Substandard1,000 2,182 332 3,514 
ConstructionTotal$91,968  $66,421  $25,739  $10,134  $—  $5,079  $13,033  $—   Total$32,459 $85,104 $44,758 $5,619 $824 $5,792 $12,916 $$187,472 
Commercial & IndustrialPass$87,861  $70,042  $70,867  $15,637  $30,559  $23,068  $104,645  $—  $402,679  Commercial & IndustrialPass$49,793 $111,966 $32,051 $59,606 $8,993 $33,876 $102,563 $$398,848 
Pass-Watch10,564  7,656  205  3,492  305  916  6,486  —   Commercial & IndustrialPass-Watch18,142 4,979 2,279 4,494 305 10,719 40,918 
Special Mention532  —  4,685  212  —  1,127  3,934  —   Special Mention1,147 11,380 7,561 206 4,296 24,590 
Commercial & IndustrialSubstandard1,774  1,962  3,298  1,531  1,307  3,119  1,745  —   Substandard449 2,611 5,570 8,075 1,355 1,505 2,903 22,468 
Total$100,731  $79,660  $79,055  $20,872  $32,171  $28,230  $116,810  $—   Total$51,389 $144,099 $50,161 $69,960 $15,048 $35,686 $120,481 $$486,824 
ConsumerPass$1,154  $4,817  $2,554  $379  $32  $235  $33,401  $—  $42,572  ConsumerPass$316 $1,137 $2,998 $1,305 $164 $151 $32,216 $$38,287 
Substandard1,154  18   12  —  —  —  —   ConsumerSubstandard903 21 15 939 
Total$2,308  $4,835  $2,560  $391  $32  $235  $33,401  $—   Total$316 $2,040 $3,019 $1,320 $164 $151 $32,216 $$39,226 
LeasesLeasesPass$34,974  $69,578  $45,476  $12,391  $3,163  $426  $—  $—  $166,008  LeasesPass$10,679 $47,412 $50,707 $29,030 $6,012 $589 $$$144,429 
Substandard—  69  66  68  16  —  —  —   LeasesSubstandard147 361 230 148 895 
Total$34,974  $69,647  $45,542  $12,459  $3,179  $426  $—  $—   Total$10,679 $47,559 $51,068 $29,260 $6,160 $598 $$$145,324 
Total portfolio loans and leases Total portfolio loans and leases$572,794  $971,564  $594,218  $352,784  $343,600  $487,310  $395,568  $4,327  $3,722,165   Total portfolio loans and leases$182,227 $865,744 $856,144 $480,325 $282,921 $594,073 $371,001 $800 $3,633,235 

(1) Year originated or renewed, whichever is more recent.

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The following tables present the amortized cost basis of loans and leases on nonaccrual status and loans and leases past due over 89 days still accruing as of the dates indicated:


As of June 30, 2020
As of March 31, 2021As of March 31, 2021
(dollars in thousands)(dollars in thousands)Nonaccrual with No ACLNonaccrual with ACLLoans Past Due Over 89 Days Still Accruing(dollars in thousands)Nonaccrual with No ACLNonaccrual with ACLLoans Past Due Over 89 Days Still Accruing
CRE - nonowner-occupiedCRE - nonowner-occupied$245  $—  $—  CRE - nonowner-occupied$56 $$
CRE - owner-occupiedCRE - owner-occupied4,046  —  —  CRE - owner-occupied1,335 
Home equity lines of creditHome equity lines of credit915  —  —  Home equity lines of credit532 
Residential mortgage - 1st liensResidential mortgage - 1st liens912  —  —  Residential mortgage - 1st liens645 
Residential mortgage - junior liensResidential mortgage - junior liens72  —  —  Residential mortgage - junior liens184 
ConstructionConstruction—  —  —  Construction
Commercial & IndustrialCommercial & Industrial1,973  —  —  Commercial & Industrial1,490 
ConsumerConsumer—  36  —  Consumer40 
LeasesLeases—  219  —  Leases895 
Total non-performing loans and leasesTotal non-performing loans and leases$8,163  $255  $—  Total non-performing loans and leases$4,242 $935 $


As of December 31, 2019
As of December 31, 2020As of December 31, 2020
(dollars in thousands)(dollars in thousands)Nonaccrual with No ACLNonaccrual with ACLLoans Past Due Over 89 Days Still Accruing(dollars in thousands)Nonaccrual with No ACLNonaccrual with ACLLoans Past Due Over 89 Days Still Accruing
CRE - nonowner-occupiedCRE - nonowner-occupied$199  $—  $—  CRE - nonowner-occupied$57 $$
CRE - owner-occupiedCRE - owner-occupied4,159  —  —  CRE - owner-occupied1,659 
Home equity lines of creditHome equity lines of credit636  —  —  Home equity lines of credit729 
Residential mortgage - 1st liensResidential mortgage - 1st liens2,447  —  —  Residential mortgage - 1st liens99 
Residential mortgage - junior liensResidential mortgage - junior liens83  —  —  Residential mortgage - junior liens85 
ConstructionConstruction—  —  —  Construction
Commercial & IndustrialCommercial & Industrial2,180  —  —  Commercial & Industrial1,775 
ConsumerConsumer42  19  —  Consumer30 
LeasesLeases—  883  —  Leases872 
Total non-performing loans and leasesTotal non-performing loans and leases$9,746  $902  $—  Total non-performing loans and leases$4,404 $902 $

For the three months ended June 30, 2020, $78 thousand ofMarch 31, 2021, 0 interest income was recognized on nonaccrual loans and leases.

Collateral-dependent loans and leases for which the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the sale of the collateral are, in general, individually evaluated for credit losses. Identified shortfalls between the amortized cost of the individually evaluated loan or lease and the value, less selling costs, of the underlying collateral are charged against the ACL. In certain cases, when the loan or lease is serviced by a third-party, and management is unable to process a timely charge-down of the loan or lease, it will assess a specific ACL to the individual loan or lease. This ACL represents the shortfall between the amortized cost and realizable value of the collateral.












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The following tables present the amortized cost basis of collateral-dependent loans and leases, indicating the type of collateral and the ACL determined through individual evaluation for credit loss, as of the dates indicated:


As of June 30, 2020
As of March 31, 2021As of March 31, 2021
(dollars in thousands)(dollars in thousands)Real Estate CollateralNon-Real Estate CollateralIndividually Evaluated ACL(dollars in thousands)Real Estate CollateralNon-Real Estate CollateralIndividually Evaluated ACL
CRE - nonowner-occupiedCRE - nonowner-occupied$245  $—  $—  CRE - nonowner-occupied$56 $$
CRE - owner-occupiedCRE - owner-occupied4,046  —  —  CRE - owner-occupied1,335 
Home equity lines of creditHome equity lines of credit915  —  —  Home equity lines of credit532 
Residential mortgage - 1st liensResidential mortgage - 1st liens912  —  —  Residential mortgage - 1st liens645 
Residential mortgage - junior liensResidential mortgage - junior liens72  —  —  Residential mortgage - junior liens184 
ConstructionConstruction—  —  —  Construction
Commercial & IndustrialCommercial & Industrial—  1,973  —  Commercial & Industrial1,490 
ConsumerConsumer—  36  36  Consumer40 40 
LeasesLeases—  219  165  Leases895 733 
Total collateral-dependent loans and leasesTotal collateral-dependent loans and leases$6,190  $2,228  $201  Total collateral-dependent loans and leases$2,752 $2,425 $773 


As of December 31, 2019
As of December 31, 2020As of December 31, 2020
(dollars in thousands)(dollars in thousands)Real Estate CollateralNon-Real Estate CollateralIndividually Evaluated ACL(dollars in thousands)Real Estate CollateralNon-Real Estate CollateralIndividually Evaluated ACL
CRE - nonowner-occupiedCRE - nonowner-occupied$199  $—  $—  CRE - nonowner-occupied$57 $$
CRE - owner-occupiedCRE - owner-occupied4,159  —  —  CRE - owner-occupied1,659 
Home equity lines of creditHome equity lines of credit636  —  —  Home equity lines of credit729 
Residential mortgage - 1st liensResidential mortgage - 1st liens2,447  —  —  Residential mortgage - 1st liens99 
Residential mortgage - junior liensResidential mortgage - junior liens83  —  —  Residential mortgage - junior liens85 
ConstructionConstruction—  —  —  Construction
Commercial & IndustrialCommercial & Industrial—  2,180  —  Commercial & Industrial1,775 
ConsumerConsumer—  61  19  Consumer30 30 
LeasesLeases—  883  60  Leases872 814 
Total collateral-dependent loans and leasesTotal collateral-dependent loans and leases$7,524  $3,124  $79  Total collateral-dependent loans and leases$2,629 $2,677 $844 

F. Troubled Debt Restructurings (“TDRs”)
 
The restructuring of a loan is considered a “troubled debt restructuring” if both of the following conditions are met: (i) the borrower is experiencing financial difficulties, and (ii) the creditor has granted a concession. The most common concessions granted include one or more modifications to the terms of the debt, such as (a) a reduction in the interest rate for the remaining life of the debt, (b) an extension of the maturity date at an interest rate lower than the current market rate for new debt with similar risk, (c) a temporary period of interest-only payments, (d) a reduction in the contractual payment amount for either a short period or remaining term of the loan, and (e) for leases, a reduced lease payment. A less common concession granted is the forgiveness of a portion of the principal.
 
The determination of whether a borrower is experiencing financial difficulties takes into account not only the current financial condition of the borrower, but also the potential financial condition of the borrower, were a concession not granted. Similarly, the determination of whether a concession has been granted is very subjective in nature. For example, simply extending the term of a loan at its original interest rate or even at a higher interest rate could be interpreted as a concession unless the borrower could readily obtain similar credit terms from a different lender.





The Corporation has implemented various consumer and commercial loan modification programs to provide its borrowers relief from the economic impacts of COVID-19. In accordance with the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), loans to borrowers experiencing financial difficulty related to the COVID-19 pandemic which were granted short-term modifications after March 1, 2020 and which were not more than 30 days past due as of December 31, 2019 are exempt from TDR classification. In addition, for loans modified in response to the COVID-19 pandemic that do not meet the above delinquency criteria (e.g., not more than 30 days past due as of December 31, 2019), the Corporation applies the guidance included in an interagency statement issued by the bank
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regulatory agencies. This guidance states that loan modifications performed in light of the COVID-19 pandemic, including loan payment deferrals that are up to six months in duration, that were granted to borrowers who were less than 30 days past due as of the implementation date of a loan modification program or modifications granted under government mandated modification programs, are also exempt from TDR classification. For loan modifications that include a payment deferral and are not TDRs, the borrower’s past due and nonaccrual status will not be impacted during the deferral period. Interest income will continue to be recognized over the contractual life of the loan. As of March 31, 2021, 31 consumer loans and leases in the amount of $4.5 million and 42 commercial loans in the amount of $61.5 million are within a deferral period under the Bank's modification programs, the total comprising 1.8% of the Bank’s portfolio loans and leases. As of December 31, 2020, 66 consumer loans and leases in the amount of $7.3 million and 37 commercial loans in the amount of $67.7 million are within a deferral period under the Bank's COVID-19 modification programs, the total comprising 2.1% of the Bank’s portfolio loans and leases.

The following table presents the balance of TDRs as of the indicated dates:

Troubled Debt Restructurings(1)
(dollars in thousands)June 30,
2020
December 31,
2019
TDRs included in nonperforming loans and leases$1,792  $3,018  
TDRs in compliance with modified terms10,013  5,071  
     Total TDRs$11,805  $8,089  

(1) The Corporation began entering into loan modifications with borrowers in response to the COVID-19 pandemic, which have not been  classified as TDRs, and therefore are not included in the above table. For more information on the criteria for classifying loans as TDRs, see Note 1 – Basis of Presentation, Principles of Consolidation, and Significant Accounting Policies to the Unaudited Consolidated Financial Statements.
Troubled Debt Restructurings
(dollars in thousands)March 31,
2021
December 31,
2020
TDRs included in nonperforming loans and leases$1,480 $1,737 
TDRs in compliance with modified terms6,967 7,046 
     Total TDRs$8,447 $8,783 

The following tables present information regarding loan and lease modifications categorized as TDRs for the three and six months ended June 30, 2020:March 31, 2021: 

Troubled Debt Restructurings(1)
Troubled Debt Restructurings(1)
Troubled Debt Restructurings(1)
For the Three Months Ended June 30, 2020 For the Three Months Ended March 31, 2021
(dollars in thousands)(dollars in thousands)Number of ContractsPre-Modification Outstanding
Recorded Investment
Post-Modification Outstanding
Recorded Investment
(dollars in thousands)Number of ContractsPre-Modification Outstanding
Recorded Investment
Post-Modification Outstanding
Recorded Investment
CRE - nonowner-occupied2$1,818  $1,818  
Residential mortgage - 1st liensResidential mortgage - 1st liens1200  200  Residential mortgage - 1st liens1103 103 
Construction43,419  3,419  
LeasesLeases6141  141  Leases7361 361 
Total Total13$5,578  $5,578   Total8$464 $464 

Troubled Debt Restructurings(1)
 For the Six Months Ended June 30, 2020
(dollars in thousands)Number of ContractsPre-Modification Outstanding
Recorded Investment
Post-Modification Outstanding
Recorded Investment
CRE - nonowner-occupied2$1,818  $1,818  
Residential mortgage - 1st liens1200  200  
Construction43,419  3,419  
Leases6141  141  
    Total13$5,578  $5,578  
(1) The Corporation began entering into loan modifications with borrowers in response to the COVID-19 pandemic, which have not been  classified as TDRs, and therefore are not included in the above table. For more information on the criteria for classifying loans as TDRs, see Note 1 – Basis of Presentation, Principles of Consolidation, and Significant Accounting Policies to the Unaudited Consolidated Financial Statements.











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The following table presents information regarding the types of loan and lease modifications made for the three and six months ended June 30, 2020:March 31, 2021:

Troubled Debt Restructurings(1)
 Number of Contracts for the Three Months Ended June 30, 2020
 Loan Term ExtensionInterest Rate Change and Term ExtensionInterest Rate Change and/or Interest-Only PeriodContractual
Payment Reduction
(Leases only)
Temporary Payment Deferral
CRE - nonowner-occupied2
Residential mortgage - 1st liens1
Construction4
Leases6
    Total166

Troubled Debt Restructurings(1)
 Number of Contracts for the Six Months Ended June 30, 2020
 Loan Term ExtensionInterest Rate Change and Term ExtensionInterest Rate Change and/or Interest-Only PeriodContractual
Payment Reduction
(Leases only)
Temporary Payment Deferral
CRE - nonowner-occupied2
Residential mortgage - 1st liens1
Construction4
Leases6
    Total166

(1) The Corporation began entering into loan modifications with borrowers in response to the COVID-19 pandemic, which have not been  classified as TDRs, and therefore are not included in the above table. For more information on the criteria for classifying loans as TDRs, see Note 1 – Basis of Presentation, Principles of Consolidation, and Significant Accounting Policies to the Unaudited Consolidated Financial Statements.
Troubled Debt Restructurings
 Number of Contracts for the Three Months Ended March 31, 2021
 Loan Term ExtensionInterest Rate Change and Term ExtensionInterest Rate Change and/or Interest-Only PeriodContractual
Payment Reduction
(Leases only)
Temporary Payment Deferral
Residential mortgage - 1st liens01000
Leases00070
    Total01070

For the sixthree months ended June 30, 2020, two residential mortgageMarch 31, 2021, 2 commercial & industrial loans, in the aggregate amount of $228$128 thousand, and one commercial and industrial loan1 lease in the amount of $477$27 thousand and 2 owner-occupied commercial real estate loans in the aggregate amount of $194 thousand, that were modified as a TDRTDRs during the past 12 months defaulted and were charged off.

G. ACL on Off-Balance Sheet ("OBS") Credit Exposures

Management estimates expected credit losses over the contractual period in which the Corporation is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Corporation. The ACL on OBS credit exposure, included within Other Liabilities on the Consolidated Balance Sheet, is adjusted as a provision for credit loss expense included within Provision for Credit Losses on the Consolidated Statement of Income. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. Management
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estimates the amount of expected losses by calculating a commitment usage factor over the contractual period for exposures that are not unconditionally cancellable by the bank and applying the loss factors used in the ACL on loans and leases methodology to the results of the usage calculation to estimate the liability for credit losses related to unfunded commitments for each loan type. No credit loss estimate is reported for OBS credit exposures that are unconditionally cancellable by the Bank.

The ACL on OBS credit exposure as of March 31, 2021 and December 31, 2020 was $3.2 million and $2.9 million, respectively. The Corporation recorded a provision for credit losses on OBS credit exposures of $259 thousand and $3.0 million for the three months ended March 31, 2021 and 2020 respectively.

H. ACL on Accrued Interest Receivable

Accrued interest receivable on loans and leases, which is reported in Accrued interest receivable on the Consolidated Balance Sheet, totaled $11.2 million and $12.1 million as of March 31, 2021 and December 31, 2020, respectively, and is excluded from the estimate of credit losses due to our charge-off policy to reverse accrued interest in a timely manner on loans and leases that are 90-days past due and deemed nonperforming. However, the Corporation continued to accrue interest on loans and leases for which payment deferrals have been extended to borrowers affected by the COVID-19 pandemic. Deferrals under the Corporation's modification program may be for durations which exceed the Corporation’s 90-day write-off policy for accrued interest. Therefore, these interest deferrals do not qualify for the Corporation’s election to not recognize a credit loss allowance for credit losses on accrued interest receivable. Accordingly, the Corporation has estimated credit losses for COVID-19 interest deferrals of $62 thousand and $64 thousand as of March 31, 2021 and December 31, 2020, respectively, which is included as a reduction to Accrued interest receivable on the Consolidated Balance Sheet.



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Note 56 – Mortgage Servicing Rights
 
The following table summarizes the Corporation’s activity related to mortgage servicing rights (“MSRs”) for the three and six months ended June 30, 2020March 31, 2021 and 2019:2020:
Three Months Ended
June 30,
Three Months Ended
March 31,
(dollars in thousands)(dollars in thousands)20202019(dollars in thousands)20212020
Balance, beginning of periodBalance, beginning of period$4,115  $4,910  Balance, beginning of period$2,626 $4,450 
AdditionsAdditions—  —  Additions
AmortizationAmortization(453) (156) Amortization(133)(104)
ImpairmentImpairment(222) (10) Impairment(231)
Balance, end of periodBalance, end of period$3,440  $4,744  Balance, end of period$2,493 $4,115 
Fair valueFair value$3,440  $5,175  Fair value$2,493 $4,115 
Residential mortgage loans serviced for othersResidential mortgage loans serviced for others$445,233  $545,743  Residential mortgage loans serviced for others$335,106 $482,911 
 
 Six Months Ended
June 30,
(dollars in thousands)20202019
Balance, beginning of period$4,450  $5,047  
Additions—  —  
Amortization(557) (276) 
Impairment(453) (27) 
Balance, end of period$3,440  $4,744  

As of June 30, 2020,March 31, 2021, and December 31, 2019,2020, key economic assumptions and the sensitivity of the current fair value of MSRs to immediate 10% and 20% adverse changes in those assumptions are as follows:

(dollars in thousands)(dollars in thousands)June 30,
2020
December 31,
2019
(dollars in thousands)March 31,
2021
December 31,
2020
Fair value amount of MSRsFair value amount of MSRs$3,440  $4,838  Fair value amount of MSRs$2,493 $2,632 
Weighted average life (in years)Weighted average life (in years)4.76.0Weighted average life (in years)4.64.9
Prepayment speeds (constant prepayment rate)(1)
Prepayment speeds (constant prepayment rate)(1)
14.4 %10.5 %
Prepayment speeds (constant prepayment rate)(1)
14.2 %13.1 %
Impact on fair value:Impact on fair value:Impact on fair value:
10% adverse change10% adverse change$(151) $(149) 10% adverse change$(130)$(141)
20% adverse change20% adverse change(292) (297) 20% adverse change(252)(273)
Discount rateDiscount rate9.56 %9.55 %Discount rate9.56 %9.56 %
Impact on fair value:Impact on fair value:Impact on fair value:
10% adverse change10% adverse change$(88) $(166) 10% adverse change$(74)$(81)
20% adverse change20% adverse change(172) (321) 20% adverse change(143)(156)
 
(1) Represents the weighted average prepayment rate for the life of the MSR asset.

At June 30, 2020March 31, 2021 and December 31, 2019,2020, the fair value of the MSRs was $3.4$2.5 million and $4.8$2.6 million, respectively. The fair value of the MSRs for these dates was determined using values obtained from a third party which utilizes a valuation model which calculates the present value of estimated future servicing income. The model incorporates assumptions that market participants use in estimating future net servicing income, including estimates of prepayment speeds and discount rates. Mortgage loan prepayment speed is the annual rate at which borrowers are forecasted to repay their mortgage loan principal and is based on historical experience. The discount rate is used to determine the present value of future net servicing income. Another key assumption in the model is the required rate of return the market would expect for an asset with similar risk. These assumptions can, and generally will, change quarterly valuations as market conditions and interest rates change. Management reviews, annually, the process utilized by its independent third-party valuation experts.
 
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These assumptions and sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on a 10% variation in assumptions generally cannot be extrapolated because the relationship of the change in assumptions to the change in fair value may not be linear. Also, the effect of a variation in a particular assumption on the fair value of the MSRs is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another, which could magnify or counteract the sensitivities.

Note 67 – Goodwill and Intangible Assets
 
The following table presents activity in the Corporation's goodwill by its reporting units and finite-lived and indefinite-lived intangible assets, other than MSRs, for the sixthree months ended June 30, 2020:March 31, 2021:
(dollars in thousands)Balance
December 31, 2019
AdditionsAmortizationBalance
June 30, 2020
Amortization
Period
Goodwill – Wealth$20,412  $—  $—  $20,412  Indefinite
Goodwill – Banking156,991  —  —  156,991  Indefinite
Goodwill – Insurance6,609  —  —  6,609  Indefinite
Total Goodwill184,012  —  —  184,012  
Core deposit intangible4,598  —  (584) 4,014  10 years
Customer relationships11,820  —  (906) 10,914  5 to 20 years
Non-compete agreements911  —  (94) 817  5 to 10 years
Trade name1,651  —  (244) 1,407  3 to 5 years
Domain name151  —  —  151  Indefinite
Total Intangible Assets19,131  —  (1,828) 17,303  
Total Goodwill and Intangible Assets$203,143  $—  $(1,828) $201,315  
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(dollars in thousands)Balance
December 31, 2020
AmortizationBalance
March 31, 2021
Amortization
Period
Goodwill – Wealth$20,412 $— $20,412 Indefinite
Goodwill – Banking156,991 — 156,991 Indefinite
Goodwill – Insurance6,609 — 6,609 Indefinite
Total Goodwill184,012 — 184,012 
Core deposit intangible3,488 (231)3,257 10 years
Customer relationships10,012 (451)9,561 5 to 20 years
Non-compete agreements722 (48)674 5 to 10 years
Trade name1,191 (108)1,083 3 to 5 years
Domain name151 — 151 Indefinite
Total Intangible Assets15,564 (838)14,726 
Total Goodwill and Intangible Assets$199,576 $(838)$198,738 

Management conducted its annual impairment tests for goodwill and indefinite-lived intangible assets as of October 31, 20192020 using generally accepted valuation methods. Management determined that 0 impairment of goodwill or indefinite-lived intangible assets was identified as a result of the annual impairment analyses. Future impairment testing will be conducted each October 31, unless a triggering event occurs in the interim that would suggest possible impairment, in which case it would be tested as of the date of the triggering event. For the five months ended June 30, 2020,March 31, 2021, management determined there were 0no events that would necessitate impairment testing of goodwill or indefinite-lived intangible assets. Management continues to monitor the economic environment as impacted by the COVID-19 pandemic in the markets we serve and resulting effect on the Corporation's long-term forecast.

Note 78 Deposits
 
The following table details the components of deposits:
(dollars in thousands)(dollars in thousands)June 30,
2020
December 31,
2019
(dollars in thousands)March 31,
2021
December 31,
2020
Interest-bearing demandInterest-bearing demand$910,441  $944,915  Interest-bearing demand$671,854 $885,802 
Money marketMoney market1,239,523  1,106,478  Money market1,201,115 1,163,620 
SavingsSavings249,636  220,450  Savings286,124 282,406 
Retail time depositsRetail time deposits400,186  405,123  Retail time deposits301,702 331,527 
Wholesale non-maturity depositsWholesale non-maturity deposits146,463  177,865  Wholesale non-maturity deposits70,605 275,011 
Wholesale time depositsWholesale time deposits79,903  89,241  Wholesale time deposits6,134 36,045 
Total interest-bearing depositsTotal interest-bearing deposits3,026,152  2,944,072  Total interest-bearing deposits2,537,534 2,974,411 
Noninterest-bearing depositsNoninterest-bearing deposits1,217,496  898,173  Noninterest-bearing deposits1,364,716 1,401,843 
Total depositsTotal deposits$4,243,648  $3,842,245  Total deposits$3,902,250 $4,376,254 






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Note 89 Short-Term Borrowings and Long-Term FHLB Advances
 
A. Short-term borrowings
 
The Corporation’s short-term borrowings (original maturity of one year or less), which consist of funds obtained from overnight repurchase agreements with commercial customers, FHLB advances with original maturities of one year or less and overnight fed funds, are detailed below.
 
A summary of short-term borrowings is as follows:
(dollars in thousands)(dollars in thousands)June 30,
2020
December 31,
2019
(dollars in thousands)March 31,
2021
December 31,
2020
Repurchase agreements(1) – commercial customers
Repurchase agreements(1) – commercial customers
$28,891  $10,819  
Repurchase agreements(1) – commercial customers
$18,027 $38,836 
Short-term FHLB advancesShort-term FHLB advances—  482,400  Short-term FHLB advances42,000 33,325 
Total short-term borrowingsTotal short-term borrowings$28,891  $493,219  Total short-term borrowings$60,027 $72,161 
(1) Overnight repurchase agreements with no expiration date
 
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The following table sets forth information concerning short-term borrowings:
Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
March 31,
(dollars in thousands)(dollars in thousands)2020201920202019(dollars in thousands)20212020
Balance at period-endBalance at period-end$28,891  $207,828  $28,891  $207,828  Balance at period-end$60,027 $162,045 
Maximum amount outstanding at any month endMaximum amount outstanding at any month end174,431  207,828  174,431  207,828  Maximum amount outstanding at any month end60,027 162,045 
Average balance outstanding during the periodAverage balance outstanding during the period136,816  68,529  138,700  112,844  Average balance outstanding during the period32,020 140,585 
Weighted-average interest rate:Weighted-average interest rate:Weighted-average interest rate:
As of the period-endAs of the period-end0.10 %2.33 %0.10 %2.33 %As of the period-end0.25 %0.86 %
Paid during the periodPaid during the period0.68 %2.09 %0.99 %2.32 %Paid during the period0.13 %1.30 %

Average balances outstanding during the year represent daily average balances and average interest rates represent interest expense divided by the related average balance.
 
B. Long-term FHLB Advances
 
As of June 30, 2020March 31, 2021 and December 31, 2019,2020, the Corporation had $44.8$39.9 million and $52.3$39.9 million, respectively, of long-term FHLB advances (original maturities exceeding one year).
 
The following table presents the remaining periods until maturity of long-term FHLB advances:
(dollars in thousands)(dollars in thousands)June 30,
2020
December 31,
2019
(dollars in thousands)March 31,
2021
December 31,
2020
Within one yearWithin one year$4,861  $12,363  Within one year$39,941 $39,906 
Over one year through five yearsOver one year through five years39,976  39,906  Over one year through five years
TotalTotal$44,837  $52,269  Total$39,941 $39,906 
 
The following table presents rate and maturity information on FHLB advances and other borrowings: 
Maturity Range(1)
Weighted Average Rate(1)
Coupon Rate(1)
Balance at
Maturity Range(1)
Weighted Average Rate(1)
Coupon Rate(1)
Balance at
DescriptionDescriptionFrom  ToFromToJune 30,
2020
December 31,
2019
DescriptionFromTo
Weighted Average Rate(1)
FromToMarch 31,
2021
December 31,
2020
Bullet maturity – fixed rateBullet maturity – fixed rate12/9/202011/12/20211.73 %1.40 %2.13 %$44,837  $52,269  Bullet maturity – fixed rate8/24/202111/12/20211.68 %1.40 %1.85 %$39,941 $39,906 
 
(1) Maturity range, weighted average rate and coupon rate range refers to June 30, 2020March 31, 2021 balances.



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C. Other Borrowings Information
 
In connection with its FHLB borrowings, the Corporation is required to hold the capital stock of the FHLB. The amount of capital stock held was $4.5$6.0 million at June 30, 2020,March 31, 2021, and $23.7$12.7 million at December 31, 2019.2020. The carrying amount of the FHLB stock approximates its redemption value.
 
The level of required investment in FHLB stock is based on the balance of outstanding borrowings the Corporation has from the FHLB. Although FHLB stock is a financial instrument that represents an equity interest in the FHLB, it does not have a readily determinable fair value. FHLB stock is generally viewed as a long-term investment. Accordingly, when evaluating FHLB stock for impairment, its value should be determined based on the ultimate recoverability of the par value rather than by recognizing temporary declines in value.

The Corporation had a maximum borrowing capacity with the FHLB of $1.83$1.78 billion as of June 30, 2020March 31, 2021 of which the unused capacity was $1.78$1.70 billion. In addition, there were $74.0 million in the overnight federal funds line available and $166.8$121.4 million of FRB discount window capacity.
 



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Note 910 – Subordinated Notes
 
On December 13, 2017, BMBC completed the issuance of $70.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes due 2027 (the “2027 Notes”) in an underwritten public offering. On August 6, 2015, BMBC completed the issuance of $30.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes due 2025 (the “2025 Notes”) in a private placement transaction to institutional accredited investors. The net proceeds of both offerings increasedsubordinated notes qualify as Tier II2 capital
for regulatory capital at BMBC.purposes, subject to applicable limitations.

The following tables detail the subordinated notes, including debt issuance costs, as of June 30, 2020,March 31, 2021, and December 31, 2019:2020:
June 30,
2020
December 31,
2019
March 31,
2021
December 31,
2020
(dollars in thousands)(dollars in thousands)Balance
Rate(1)(2)
Balance
Rate(1)(2)
(dollars in thousands)Balance
Rate(1)(2)
Balance
Rate(1)(2)
Subordinated notes – due 2027Subordinated notes – due 2027$69,071  4.25 %$69,009  4.25 %Subordinated notes – due 2027$69,164 4.25 %$69,133 4.25 %
Subordinated notes – due 2025Subordinated notes – due 202529,723  4.75  29,696  4.75  Subordinated notes – due 202529,764 3.27 29,750 3.29 
Total subordinated notesTotal subordinated notes$98,794  $98,705  Total subordinated notes$98,928 $98,883 
 
(1) The 2027 Notes bear interest at an annual fixed rate of 4.25% from the date of issuance until and including December 14, 2022, and will thereafter bear interest at a variable rate that will reset quarterly to a level equal to the then-current three-month LIBOR rate plus 2.050% until December 15, 2027, or any early redemption date.
 
(2) The 2025 Notes bearwere bearing interest at an annual fixed rate of 4.75% from the date of issuance until and including August 14, 2020, and will thereafter bear interest at a variable rate that will resetresets quarterly to a level equal to the then-current three-month LIBOR rate plus 3.068% until August 15, 2025, or any early redemption date.

Note 1011 – Junior Subordinated Debentures
 
In connection with the RBPI Merger, BMBCthe Corporation acquired Royal Bancshares Capital Trust I (“Trust I”) and Royal Bancshares Capital Trust II (“Trust II”) (collectively, the “Trusts”), which were utilized for the sole purpose of issuing and selling capital securities representing preferred beneficial interests. Although BMBC owns an aggregate of $774 thousand of the common securities of Trust I and Trust II, the Trusts are not consolidated into the Corporation’s Consolidated Financial Statements as the Corporation is not deemed to be the primary beneficiary of these entities. In connection with the issuance and sale of the capital securities, RBPI issued, and the CorporationBMBC assumed as a result of the RBPI Merger, junior subordinated debentures to the Trusts of $10.7 million each, totaling $21.4 million representing the Corporation’s maximum exposure to loss.million. The junior subordinated debentures incur interest at a coupon rate of 2.46%2.33% as of June 30, 2020.March 31, 2021. The rate resets quarterly based on 3-month LIBOR plus 2.15%.
 
Each of Trust I and Trust II issued an aggregate principal amount of $12.5 million of capital securities initially bearing fixed and/or fixed/floating interest rates corresponding to the debt securities held by each trust to an unaffiliated investment vehicle and an aggregate principal amount of $387 thousand of common securities bearing fixed and/or fixed/floating interest rates corresponding to the debt securities held by each trust to the Corporation.BMBC. As a result of the RBPI Merger, the CorporationBMBC has
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fully and unconditionally guaranteed all of the obligations of the Trusts, including any distributions and payments on liquidation or redemption of the capital securities.
 
The rights of holders of common securities of the Trusts are subordinate to the rights of the holders of capital securities only in the event of a default; otherwise, the common securities’ economic and voting rights are pari passu with the capital securities. The capital and common securities of the Trusts are subject to mandatory redemption upon the maturity or call of the junior subordinated debentures held by each. Unless earlier dissolved, the Trusts will dissolve on December 15, 2034. The junior subordinated debentures are the sole assets of Trusts, mature on December 15, 2034, currently and may be called at par by the Corporation.BMBC any time. The Corporation records its investments in the Trusts’ common securities of $387 thousand each as investments in unconsolidated entities and records dividend income upon declaration by Trust I and Trust II.

Note 1112 – Operating Leases

The Corporation’s operating leases consist of various retail branch locations and corporate offices. As of June 30, 2020,March 31, 2021, the Corporation’s leases have remaining lease terms ranging from three months to 2221 years including extension options that the Corporation is reasonably certain will be exercised.

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The Corporation’s leases include fixed rental payments, and certain of our leases also include variable rental payments where lease payments may increase at pre-determined dates based on the change in the consumer price index. The Corporation’s lease agreements include gross leases as well as leases in which we make separate payments to the lessor for items such as the property taxes assessed on the property or a portion of the common area maintenance associated with the property. We have elected the practical expedient not to separate lease and non-lease components for all of our building leases. The Corporation also elected to not recognize right-of-use assets (“ROU assets”) and lease liabilities for short-term leases, which consist of certain leases of the Corporation’s limited-hour retirement community offices.

As of June 30, 2020March 31, 2021, the Corporation’s ROU assets and related lease liabilities were $39.3$33.8 million and $43.7$39.5 million, respectively.

The components of lease expense were as follows:

Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
March 31,
2020201920202019 20212020
(dollars in thousands)(dollars in thousands)(dollars in thousands)
Operating lease expenseOperating lease expense$1,198  $1,333  $2,396  $2,663  Operating lease expense$1,103 $1,198 
Short term lease expenseShort term lease expense14  14  29  29  Short term lease expense15 15 
Variable lease expenseVariable lease expense308  392  665  810  Variable lease expense324 357 
Sublease incomeSublease income(8) (7) (17) (16) Sublease income(5)(9)
Total lease expenseTotal lease expense$1,512  $1,732  $3,073  $3,486  Total lease expense$1,437 $1,561 

Supplemental cash flow information related to leases was as follows:

Six Months Ended
June 30,
Three Months Ended
March 31,
20202019 20212020
(dollars in thousands)(dollars in thousands)(dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities:Cash paid for amounts included in the measurement of lease liabilities:Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases Operating cash flows from operating leases$2,348  $2,561   Operating cash flows from operating leases$1,091 $1,171 
ROU assets obtained in exchange for lease liabilitiesROU assets obtained in exchange for lease liabilities—  44,944  ROU assets obtained in exchange for lease liabilities





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Maturities of operating lease liabilities under FASB ASC 842 “Leases” as of June 30, 2020March 31, 2021 are as follows:

June 30,
2020
March 31,
2021
(dollars in thousands)(dollars in thousands)(dollars in thousands)
2020$2,357  
202120214,479  2021$3,085 
202220224,200  20223,924 
202320234,047  20233,771 
202420244,076  20243,793 
2025 and thereafter37,308  
202520253,859 
2026 and thereafter2026 and thereafter32,548 
Total lease paymentsTotal lease payments56,467  Total lease payments50,980 
Less: imputed interestLess: imputed interest12,774  Less: imputed interest11,437 
Present value of operating lease liabilitiesPresent value of operating lease liabilities$43,693  Present value of operating lease liabilities$39,543 

As of June 30, 2020,March 31, 2021, the weighted-average remaining lease term, including extension options that the Corporation is reasonably certain will be exercised, for all operating leases is 13.9413.79 years.

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Because we generally do not have access to the rate implicit in the lease, we utilize our incremental borrowing rate as the discount rate. The weighted average discount rate associated with operating leases as of June 30, 2020March 31, 2021 is 3.58%3.60%.

As of June 30, 2020,March 31, 2021, the Corporation had not entered into any material leases that have not yet commenced.

Note 1213 – Derivative Instruments and Hedging Activities
 
A.Derivatives not designated as hedging instruments

Derivative financial instruments involve, to varying degrees, interest rate, market and credit risk. Management manages these risks as part of its asset and liability management process and through credit policies and procedures. Management seeks to minimize counterparty credit risk by establishing credit limits and collateral agreements and utilizes certain derivative financial instruments to enhance its ability to manage interest rate risk that exists as part of its ongoing business operations. The Corporation enters into derivative transactions entered into by the Corporation areas an economic hedge of a derivative offerings to Bank customers. The Corporation does not use derivative financial instruments for trading purposes.
 
Customer Derivatives – Interest Rate Swaps. The Corporation enters into interest rate swaps with commercial loan customers and correspondent banks wishing to manage interest rate risk. The Corporation then enters into corresponding swap agreements with swap dealer counterparties to economically hedge the exposure arising from these contracts. The interest rate swaps with both the customers and third parties are not designated as hedges under FASB ASC 815 and are marked to market through earnings. As the interest rate swaps are structured to offset each other, changes to the underlying benchmark interest rates considered in the valuation of these instruments do not result in an impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by FASB ASC 820. As of June 30, 2020,March 31, 2021, there were no fair value adjustments related to credit quality.

Foreign Exchange Forward Contracts. The Corporation enters into foreign exchange forward contracts (“FX forwards”) with customers to exchange one currency for another on an agreed date in the future at an agreed exchange rate. The Corporation then enters into corresponding FX forwards with swap dealer counterparties to economically hedge its exposure on the exchange rate component of the customer agreements. The FX forwards with both the customers and third parties are not designated as hedges under FASB ASC 815 and are marked to market through earnings. Exposure to gains and losses on these contracts increase or decrease over their respective lives as currency exchange and interest rates fluctuate. As the FX forwards are structured to offset each other, changes to the underlying term structure of currency exchange rates considered in the valuation of these instruments do not result in an impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by FASB ASC 820. As of June 30, 2020,March 31, 2021, there were no fair value adjustments related to credit quality.

Risk Participation Agreements. The Corporation may enter into a risk participation agreement (“RPA”) with another institution as a means to assume a portion of the credit risk associated with a loan structure which includes a derivative instrument, in exchange for fee income commensurate with the risk assumed. This type of derivative is referred to as an “RPA sold.” In addition, in an effort to reduce the credit risk associated with an interest rate swap agreement with a borrower for whom the
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Corporation has provided a loan structured with a derivative, the Corporation may purchase an RPA from an institution participating in the facility in exchange for a fee commensurate with the risk shared. This type of derivative is referred to as an “RPA purchased.”

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The following table details the derivatives not designated as hedging instruments as of March 31, 2021 and December 31, 2020:

 Asset DerivativesLiability Derivatives
(dollars in thousands)Notional
Amount
Fair
Value(1)
Notional
Amount
Fair
Value(2)
Derivatives not designated as hedging instruments    
As of March 31, 2021:
Customer derivatives – interest rate swaps$1,150,756 $75,837 $1,150,756 $75,837 
FX forwards4,647 40 2,136 21 
RPAs sold44,284 16 
RPAs purchased59,280 154 
Total derivatives$1,214,683 $76,031 $1,197,176 $75,874 
As of December 31, 2020:
Customer derivatives – interest rate swaps$1,102,753 $113,848 $1,102,753 $113,848 
FX forwards9,146 52 9,856 70 
RPAs sold33,111 30 
RPAs purchased55,415 342 
Total derivatives$1,167,314 $114,242 $1,145,720 $113,948 
(1) Included within Other Assets on the Unaudited Consolidated Balance Sheet.
(2) Included within Other Liabilities on the Unaudited Consolidated Balance Sheet.
B.Derivatives designated as hedging instruments

Management's objectives in using interest rate derivative financial instruments are to add stability to interest income and expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Corporation has entered into interest rate swaps designated as cash flow hedges that involve the receipt of fixed rate amounts from a counterparty in exchange for the Corporation making variable rate payments. As of March 31, 2021, the Corporation had entered into 3 interest rate swaps with an aggregate notional value of $150.0 million. The Corporation will pay a floating rate component of interest equal to the one-month LIBOR rate for up to ten years while receiving a fixed rate of interest. The interest paid on the variable rate component is intended to offset the interest received on variable rate commercial mortgages within the Corporation's loan portfolio. The notional amount of the interest rate swap does not represent the amount exchanged by the parties. The exchange of cash flows is determined by reference to the notional amount and the other terms of the interest rate swap agreement.

The following tables detailtable summarizes information about the derivativeinterest rate swaps designated as cash flow hedges as of March 31, 2021:

(dollars in thousands)
Notional Amount$150,000 
Weighted average fixed-receive rate1.19 %
Weighted average pay-float rate0.11 %
Weighted average maturity in years9.24

The following table details the derivatives designated as hedging instruments as of June 30, 2020 andMarch 31, 2021. The Corporation did not have derivatives designated as hedging instruments as of December 31, 2019:2020:

 Asset DerivativesLiability Derivatives
(dollars in thousands)Notional
Amount
Fair
Value
Notional
Amount
Fair
Value
Derivatives not designated as hedging instruments    
As of June 30, 2020:
Customer derivatives – interest rate swaps$970,146  $143,339  $970,146  $143,339  
FX forwards3,528  36  4,116  107  
RPAs sold—  —  14,164  39  
RPAs purchased39,995  358  —  —  
Total derivatives$1,013,669  $143,733  $988,426  $143,485  
As of December 31, 2019:
Customer derivatives – interest rate swaps$790,209  $47,627  $790,209  $47,627  
RPAs sold—  —  4,232  16  
RPAs purchased20,249  90  —  —  
Total derivatives$810,458  $47,717  $794,441  $47,643  
 Asset DerivativesLiability Derivatives
(dollars in thousands)Notional
Amount
Fair
Value
Notional
Amount
Fair
Value(1)
Derivatives designated as hedging instruments    
As of March 31, 2021:
Interest rate swaps$$$150,000 $4,958 
(1) Included within Other Liabilities on the Unaudited Consolidated Balance Sheet.

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The following table presents the effect of cash flow hedge accounting on accumulated other comprehensive income for the three months ended March 31, 2021:

(dollars in thousands)Amount of Gain (Loss) Recognized in OCI on DerivativeLocation of Gain (Loss) Reclassified from OCI into IncomeAmount of Gain (Loss) Reclassified from OCI into Income
Interest rate swaps$(4,772)Interest Income$186 

During the next twelve months, the Corporation estimates that $1.1 million will be reclassified as an increase to interest income.

Gains and losses on interest rate swaps related to funding liabilities are recorded in interest income. To the extent these derivatives are effective in offsetting the variability of the hedged cash flows, changes in the derivatives’ fair value will not be included in current earnings but are reported as a component of OCI in the Unaudited Consolidated Statement of Changes in Shareholders’ Equity. These changes in fair value will be included in earnings of future periods when earnings are also affected by the changes in the hedged cash flows. To the extent these derivatives are not effective, changes in their fair values are immediately included in other income or expense.

C.Pledged Collateral

The Corporation has International Swaps and Derivatives Association agreements with third parties that requires a minimum dollar transfer amount upon a margin call. This requirement is dependent on certain specified credit measures. The amount of collateral posted with third parties at June 30, 2020March 31, 2021 and December 31, 20192020 was $157.5$63.8 million and $63.8$124.8 million, respectively, and is comprised of a combination of cash and investment securities. The amount of collateral posted with third parties is deemed to be sufficient to collateralize both the fair market value change as well as any additional amounts that may be required as a result of a change in the specified credit measures. The aggregate fair value of all derivative financial instruments in a liability position with credit measure contingencies and entered into with third parties was $143.3$57.7 million and $46.7$113.2 million as of June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively.

Note 1314 – Accounting for Uncertainty in Income Taxes

The Corporation recognizes the financial statement benefit of a tax position only after determining that the Corporation would be more likely than not to sustain the position following an examination. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon settlement with the relevant tax authority.

The Corporation is subject to income taxes in the United States federal jurisdiction and multiple state jurisdictions. The Corporation is no longer subject to U.S. federal income tax examination by taxing authorities for years before 2016.2017.

The Corporation’s policy is to record interest and penalties on uncertain tax positions as income tax expense. NaN interest or penalties were accrued for the sixthree months ended June 30, 2020March 31, 2021 or 2019.2020.

Note 1415 – Shareholders’ Equity
 
Dividend
 
On July 20, 2020,April 22, 2021, BMBC’s Board of Directors declared a regular quarterly dividend of $0.27 per share payable SeptemberJune 1, 20202021 to shareholders of record as of August 3, 2020.May 4, 2021. During the secondfirst quarter of 2020,2021, the Corporation paid or accrued, as applicable, a regular quarterly dividend of $0.26$0.27 per share. This dividend totaled $5.3$5.5 million, based on outstanding shares and restricted stock units as of April 30, 2020February 1, 2021 of 20,251,45920,207,124 shares.




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S-3 Shelf Registration Statement and Offerings Thereunder

In May 2018, BMBC filed a shelf registration statement on Form S-3, SEC File No. 333-224849 (the “Shelf Registration Statement”). The Shelf Registration Statement allows BMBC to raise additional capital from time to time through offers and sales of registered securities consisting of common stock, debt securities, warrants, purchase contracts, rights and units or units
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consisting of any combination of the foregoing securities. BMBC may sell these securities using the prospectus in the Shelf Registration Statement, together with applicable prospectus supplements, from time to time, in one or more offerings.

In addition, BMBC has in place a Dividend Reinvestment and Stock Purchase Plan (the “Plan”), which allows it to issue up to 1,500,000 shares of registered common stock. The Plan allows for the grant of a request for waiver (“RFW”) above the Plan’s maximum investment of $120 thousand per account per year. A RFW is granted based on a variety of factors, including BMBC’s current and projected capital needs, prevailing market prices of BMBC’s common stock and general economic and market conditions.

For the three and six months ended June 30, 2020,March 31, 2021, BMBC did not issue any shares under the Plan. The Plan administrator conducted dividend reinvestments for Plan participants through open market purchases. No RFWs were approved during the three and six months ended June 30, 2020.March 31, 2021. No other sales of equity securities were executed under the Shelf Registration Statement during the three and six months ended June 30, 2020.March 31, 2021.

Option Exercises and Vesting of Restricted Stock Units (“RSUs”) and Performance Stock Units (“PSUs”)

In addition to shares that may be issued through the Plan, the Corporation also issues shares through the exercise of stock options and the vesting of RSUs and PSUs. During the sixthree months ended June 30, 2020, 338March 31, 2021, no shares were issued pursuant to the exercise of stock options, increasing shareholders’ equity by $5 thousand. NaN shares were issued pursuant to the exercise of stock options during the three months ended June 30, 2020.options. The increase in shareholders’ equity related to the vesting of RSUs and PSUs, which is recognized over the vesting period through stock based compensation expense, was $624$551 thousand and $1.5 million for the three and six months ended June 30, 2020.March 31, 2021, respectively.
 
Stock Repurchases
 
On April 18, 2019, BMBC announced a new stock repurchase program (the “2019 Program”) pursuant to which the Corporation may repurchase up to 1,000,000 shares of BMBC's common stock. Under the 2019 Program, the Corporation may repurchase BMBC's common stock at any price, but the aggregate purchase price is not to exceed $45 million. The 2019 Program became effective in the second quarter of 2019. During the three months ended March 31, 2021, 80,788 shares were repurchased under the 2019 Program at an average price of $31.77. During the three months ended March 31, 2020, 207,201 shares were repurchased under the 2019 Program at an average price of $34.99. No shares were repurchased during the three months ended June 30, 2020. All share repurchases were accomplished in open market transactions. As of June 30, 2020,March 31, 2021, the maximum number of shares remaining authorized for repurchase under the 2019 Program was 710,032,629,244, at an aggregate purchase price not to exceed $34.8$32.2 million.

In addition to the 2019 Program, it is BMBC’s practice to retire shares to its treasury account upon the vesting of stock awards to certain officers in order to cover the statutory income tax withholdings related to such vestings.

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Note 1516 – Accumulated Other Comprehensive Income (Loss)

The following table details the components of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2020March 31, 2021 and 2019:2020:

(dollars in thousands)Net Change in
Unrealized Gains
on Available-for-
Sale Investment
Securities
Net Change in
Unfunded
Pension Liability
Accumulated Other Comprehensive Income (Loss)
Balance, March 31, 2020$10,569  $(1,700) $8,869  
Other comprehensive income127  23  150  
Balance, June 30, 2020$10,696  $(1,677) $9,019  
Balance, March 31, 2019$(2,010) $(1,268) $(3,278) 
Other comprehensive income4,962  16  4,978  
Balance, June 30, 2019$2,952  $(1,252) $1,700  


(dollars in thousands)(dollars in thousands)Net Change in
Unrealized Gains
on Available-for-
Sale Investment
Securities
Net Change in
Unfunded
Pension Liability
Accumulated Other Comprehensive Income (Loss)(dollars in thousands)Net Change in
Unrealized Gains
on Available-for-
Sale Investment
Securities
Net Change in Fair Value of Derivative Used for Cash Flow HedgeNet Change in
Unfunded
Pension Liability
Accumulated Other Comprehensive Income (Loss)
Balance, December 31, 2020Balance, December 31, 2020$10,954 $$(2,006)$8,948 
Other comprehensive incomeOther comprehensive income(4,930)(3,916)52 (8,794)
Balance, March 31, 2021Balance, March 31, 2021$6,024 $(3,916)$(1,954)$154 
Balance, December 31, 2019Balance, December 31, 2019$3,910  $(1,723) $2,187  Balance, December 31, 2019$3,910 $$(1,723)$2,187 
Other comprehensive incomeOther comprehensive income6,786  46  6,832  Other comprehensive income6,659 23 6,682 
Balance, June 30, 2020$10,696  $(1,677) $9,019  
Balance, December 31, 2018$(6,229) $(1,284) $(7,513) 
Other comprehensive income9,181  32  9,213  
Balance, June 30, 2019$2,952  $(1,252) $1,700  
Balance, March 31, 2020Balance, March 31, 2020$10,569 $$(1,700)$8,869 

The following table details the amounts reclassified from each component of accumulated other comprehensive income (loss) to each component’s applicable income statement line, for the three and six months ended June 30, 2020March 31, 2021 and 2019:

Amount Reclassified from Accumulated Other Comprehensive Income (Loss) 
Description of Accumulated Other
Comprehensive Income (Loss) Component
Three Months Ended
June 30,
Affected Income Statement Category
 20202019 
Unfunded pension liability:
Amortization of net loss included in net periodic pension costs(1)
$17  $13  Other operating expenses
Income tax effect(3) (3) Income tax expense
Net of income tax$14  $10  Net income

2020:
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Amount Reclassified from Accumulated Other Comprehensive Income (Loss) 
Description of Accumulated Other
Comprehensive Income (Loss) Component
Six Months Ended
June 30,
Affected Income Statement Category
 20202019 
Unfunded pension liability:
Amortization of net loss included in net periodic pension costs(1)
$35  $24  Other operating expenses
Income tax effect(7) (5) Income tax expense
Net of income tax$28  $19  Net income

Amount Reclassified from Accumulated Other Comprehensive Income (Loss) 
Description of Accumulated Other
Comprehensive Income (Loss) Component
Three Months Ended
March 31,
Affected Income Statement Category
 20212020 
Net unrealized losses on interest rate swaps used in cash flow hedges:
Reclassification adjustment for gains included in net income$(186)$Interest income
Income tax effect39 Income tax expense
Net of income tax$(147)$Net income
Unfunded pension liability:
Amortization of net loss included in net periodic pension costs(1)
$35 $18 Other operating expenses
Income tax effect(7)(4)Income tax expense
Net of income tax$28 $14 Net income

(1) Accumulated other comprehensive income (loss) components are included in the computation of net periodic pension cost.

Note 1617 – Earnings per Common Share
 
Basic earnings per common share excludes dilution and is computed by dividing income available to common shareholders by the weighted-average common shares outstanding during the period. Diluted earnings per common share takes into account the potential dilution that would occur if in-the-money stock options were exercised and converted into common shares and RSUs and PSUs were vested. Proceeds assumed to have been received on option exercises are assumed to be used to purchase shares of BMBC’s common stock at the average market price during the period, as required by the treasury stock method of accounting. The effects of stock options are excluded from the computation of diluted earnings per share in periods in which the effect would be antidilutive.
Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
March 31,
(dollars in thousands except share and per share data)(dollars in thousands except share and per share data)2020201920202019(dollars in thousands except share and per share data)20212020
Numerator:Numerator:Numerator:
Net income available to common shareholdersNet income available to common shareholders$15,035  $15,785  $3,872  $26,462  Net income available to common shareholders$17,083 $(11,163)
Denominator for basic earnings per share – weighted average shares outstanding
Denominator for basic earnings per share – weighted average shares outstanding
19,926,737  20,144,651  19,989,948  20,156,509  
Denominator for basic earnings per share – weighted average shares outstanding
19,907,873 20,053,159 
Effect of dilutive common sharesEffect of dilutive common shares81,482  99,758  87,211  99,960  Effect of dilutive common shares142,863 
Denominator for diluted earnings per share – adjusted weighted average shares outstanding
Denominator for diluted earnings per share – adjusted weighted average shares outstanding
20,008,219  20,244,409  20,077,159  20,256,469  
Denominator for diluted earnings per share – adjusted weighted average shares outstanding
20,050,736 20,053,159 
Basic earnings per shareBasic earnings per share$0.75  $0.78  $0.19  $1.31  Basic earnings per share$0.86 $(0.56)
Diluted earnings per shareDiluted earnings per share0.75  0.78  0.19  1.31  Diluted earnings per share0.85 (0.56)
Antidilutive shares excluded from computation of average dilutive earnings per shareAntidilutive shares excluded from computation of average dilutive earnings per share76,038  14,441  71,260  30,506  Antidilutive shares excluded from computation of average dilutive earnings per share25,117 
 
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Note 1718 Revenue from Contracts with Customers
 
All of the Corporation’s revenue from contracts with customers in the scope of ASC 606 is recognized within noninterest income. The following table presents the Corporation’s noninterest income by revenue stream and reportable segment for the three and six months ended June 30, 2020March 31, 2021 and 2019.2020. Items outside the scope of ASC 606 are noted as such.
 
 Three Months Ended
June 30, 2020
Three Months Ended
June 30, 2019
(dollars in thousands)BankingWealth
Management
ConsolidatedBankingWealth
Management
Consolidated
Fees for wealth management services$—  $9,069  $9,069  $—  $11,510  $11,510  
Insurance commissions—  1,303  1,303  —  1,697  1,697  
Capital markets revenue(1)
2,975  —  2,975  1,489  —  1,489  
Service charges on deposit accounts603  —  603  852  —  852  
Loan servicing and other fees(1)
452  —  452  553  —  553  
Net gain on sale of loans(1)
3,134  —  3,134  752  —  752  
Dividends on FHLB and FRB stock(1)
243  —  243  316  —  316  
Other operating income(2)
2,699  88  2,787  3,026  26  3,052  
Total noninterest income$10,106  $10,460  $20,566  $6,988  $13,233  $20,221  
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 Three Months Ended
March 31, 2021
Three Months Ended
March 31, 2020
(dollars in thousands)BankingWealth
Management
ConsolidatedBankingWealth
Management
Consolidated
Fees for wealth management services$$12,836 $12,836 $$11,168 $11,168 
Insurance commissions1,464 1,464 1,533 1,533 
Capital markets revenue(1)
1,596 1,596 2,361 2,361 
Service charges on deposit accounts696 696 846 846 
Loan servicing and other fees(1)
304 304 461 461 
Net gain on sale of loans(1)
250 250 782 782 
Dividends on FHLB and FRB stock(1)
222 222 444 444 
Other operating income(2)
2,461 12 2,473 544 13 557 
Total noninterest income$5,529 $14,312 $19,841 $5,586 $12,714 $18,300 
 
(1) Not within the scope of ASC 606.
 
(2) Other operating income includes Visa debit card income, safe deposit box rentals, and rent income totaling $733$721 thousand and $525$620 thousand for the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively, which are within the scope of ASC 606.

 Six Months Ended
June 30, 2020
Six Months Ended
June 30, 2019
(dollars in thousands)BankingWealth
Management
ConsolidatedBankingWealth
Management
Consolidated
Fees for wealth management services$—  $20,237  $20,237  $—  $21,902  $21,902  
Insurance commissions—  2,836  2,836  —  3,369  3,369  
Capital markets revenue(1)
5,336  —  5,336  3,708  —  3,708  
Service charges on deposit accounts1,449  —  1,449  1,660  —  1,660  
Loan servicing and other fees(1)
913  —  913  1,162  —  1,162  
Net gain on sale of loans(1)
3,916  —  3,916  1,071  —  1,071  
Net gain (loss) on sale of OREO148  —  148  (24) —  (24) 
Dividends on FHLB and FRB stock(1)
687  —  687  727  —  727  
Other operating income(2)
3,243  101  3,344  5,852  47  5,899  
Total noninterest income$15,692  $23,174  $38,866  $14,156  $25,318  $39,474  

(1) Not within the scope of ASC 606.
(2) Other operating income includes Visa debit card income, safe deposit box rentals, and rent income totaling $1.4 million and $1.0 million for the six months ended June 30, 2020 and 2019, respectively, which are within the scope of ASC 606.

A description of the Corporation’s primary revenue streams accounted for under ASC 606 follows:
 
Service Charges on Deposit Accounts: The Corporation earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Corporation fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Corporation satisfies the performance obligation.
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Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance.

Wealth Management Fees: The Corporation earns wealth management fee revenue from a variety of sources including fees from trust administration and other related fiduciary services, custody, investment management and advisory services, employee benefit account and IRA administration, estate settlement, tax service fees, shareholder service fees and brokerage.
 
Fees that are determined based on the market value of the assets held in their accounts are generally billed monthly or quarterly, in arrears, based on the market value of assets at the end of the previous billing period. Other related services that are based on a fixed fee schedule are recognized when the services are rendered. Fees that are transaction based, including trade execution services, are recognized at the point in time that the transaction is executed, i.e. the trade date.
 
Included in other assets on the balance sheet is a receivable for wealth management fees that have been earned but not yet collected.
 
Insurance Commissions: The Corporation earns commissions from the sale of insurance policies, which are generally calculated as a percentage of the policy premium, and contingent income, which is calculated based on the volume and performance of the policies held by each carrier. Obligations for the sale of insurance policies are generally satisfied at the point in time which the policy is executed and are recognized at the point in time in which the amounts are known and collection is reasonably assured. Performance metrics for contingent income are generally satisfied over time, not exceeding one year, and are recognized at the point in time in which the amounts are known and collection is reasonably assured.

Visa Debit Card Income: The Corporation earns income fees from debit cardholder transactions conducted through the Visa payment network. Fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder.
 
Gains/Losses on Sales of OREO: The Corporation records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed.
 

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Note 1819 Stock-Based Compensation
 
A. General Information

BMBC permits the issuance of stock options, dividend equivalents, performance stock awards, stock appreciation rights and restricted stock units or awards to employees and directors of the Corporation under several plans. The performance awards and restricted awards may be in the form of stock awards or stock units. Stock awards and stock units differ in that for a stock award, shares of restricted stock are issued in the name of the grantee, whereas a stock unit constitutes a promise to issue shares of stock upon vesting. The accounting for awards and units is identical. The terms and conditions of awards under the plans are determined by the Corporation’s Management Development and Compensation Committee.
 
Prior to April 25, 2007, all shares authorized for grant as stock-based compensation were limited to grants of stock options. On April 25, 2007, the shareholders approved BMBC’s “2007 Long-Term Incentive Plan” (the “2007 LTIP”) under which a total of 428,996 shares of BMBC’s common stock were made available for award grants. On April 28, 2010, the shareholders approved BMBC’s “2010 Long Term Incentive Plan” under which a total of 445,002 shares of BMBC’s common stock were made available for award grants, and on April 30, 2015, the shareholders approved an amendment and restatement of such plan (as amended and restated, the “2010 LTIP”) to, among other things, increase the number of shares available for award grants by 500,000 to 945,002.
 
In addition to the shareholder-approved plans mentioned in the preceding paragraph, BMBC periodically authorizes grants of stock-based compensation as inducement awards to new employees. This type of award does not require shareholder approval in accordance with Rule 5635(c)(4) of the NASDAQ listing rules.
 
The equity awards are authorized to be in the form of, among others, options to purchase BMBC’s common stock, RSUs and PSUs.
 
RSUs have a restriction based on the passage of time. The grant date fair value of the RSUs is based on the closing price on the date of the grant.
 
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PSUs have restrictions based on performance criteria and the passage of time. The performance criteria may be a market-based criteria measured by BMBC’s total shareholder return (“TSR”) relative to the performance of the community bank index for the respective period. The fair value of the PSUs based on BMBC’s TSR relative to the performance of a designated peer group or the NASDAQ Community Bank Index is calculated using the Monte Carlo Simulation method. The performance criteria may also be based on a non-market-based criteria such as return on average equity relative to that designated peer group. The grant date fair value of these PSUs is based on the closing price of BMBC’s stock on the date of the grant. PSU grants may have a vesting percent ranging from 0% to 150%.

B. Other Stock Option Information

No options were forfeited, expired, or exercised the three months ended March 31, 2021. The following table provides information about options outstanding for the three and six months ended June 30, 2020:as of March 31, 2021:
SharesWeighted
Average
Exercise
Price
Weighted
Average
Grant Date
Fair Value
Options outstanding, March 31, 2020563  $21.32  $19.09  
Forfeited—  —  —  
Expired—  —  —  
Exercised—  —  —  
Options outstanding, June 30, 2020563  21.32  19.09  


SharesWeighted
Average
Exercise
Price
Weighted
Average
Grant Date
Fair Value
Options outstanding, December 31, 2019901  $19.33  $16.78  
Forfeited—  —  —  
Expired—  —  —  
Exercised(338) 16.02  12.93  
Options outstanding, June 30, 2020563  21.32  19.09  
SharesWeighted
Average
Exercise
Price
Weighted
Average
Grant Date
Fair Value
Options outstanding, March 31, 2021225 18.33 12.93 

As of June 30, 2020March 31, 2021 there were 0 unvested options.

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Proceeds, related tax benefits realized from options exercised and intrinsic value of options exercised were as follows for the periods presented:
Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
March 31,
(dollars in thousands)(dollars in thousands)2020201920202019(dollars in thousands)20212020
Proceeds from exercise of stock optionsProceeds from exercise of stock options$—  $82  $ $622  Proceeds from exercise of stock options$$
Related tax benefit recognizedRelated tax benefit recognized—  18   155  Related tax benefit recognized
Net proceeds of options exercisedNet proceeds of options exercised$—  $100  $ $777  Net proceeds of options exercised$$
Intrinsic value of options exercisedIntrinsic value of options exercised$—  $86  $ $738  Intrinsic value of options exercised$$
 
The following table provides information about options outstanding and exercisable at June 30, 2020:March 31, 2021:

(dollars in thousands, except share data and exercise price)(dollars in thousands, except share data and exercise price)OutstandingExercisable(dollars in thousands, except share data and exercise price)OutstandingExercisable
Number of sharesNumber of shares563  563  Number of shares225 225 
Weighted average exercise priceWeighted average exercise price$21.32  $21.32  Weighted average exercise price$18.33 $18.33 
Aggregate intrinsic valueAggregate intrinsic value$ $ Aggregate intrinsic value$$
Weighted average remaining contractual term in yearsWeighted average remaining contractual term in years3.63.6Weighted average remaining contractual term in years2.82.8


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C. Restricted Stock Units and Performance Stock Units
 
The Corporation has granted RSUs and PSUs under the 2007 LTIP and 2010 LTIP and in accordance with Rule 5635(c)(4) of the NASDAQ listing standards.

RSUs
 
The compensation expense for the RSUs is measured based on the market price of the stock on the day prior to the grant date and is recognized on a straight-line basis over the vesting period.

For the three and six months ended June 30, 2020,March 31, 2021, the Corporation recognized $471$448 thousand and $0.9 million, respectively, of expense related to the Corporation’s RSUs. As of June 30, 2020,March 31, 2021, there was $2.8 million of unrecognized compensation cost related to RSUs. This cost will be recognized over a weighted average period of 21.9 years.
 
The following table details the RSUs for the three and six months ended June 30, 2020:March 31, 2021:

Three Months Ended
June 30, 2020
Six Months Ended
June 30, 2020
Three Months Ended
March 31, 2021
Number of SharesWeighted
Average
Grant Date
Fair Value
Number of SharesWeighted
Average
Grant Date
Fair Value
Number of SharesWeighted
Average
Grant Date
Fair Value
Beginning balanceBeginning balance136,725  $38.02  115,466  $38.57  Beginning balance114,846 $38.00 
GrantedGranted—  —  26,818  35.90  Granted36,791 35.09 
VestedVested(6,799) 39.82  (11,772) 39.73  Vested(800)43.95 
ForfeitedForfeited—  —  (586) 35.74  Forfeited
Ending balanceEnding balance129,926  37.92  129,926  37.92  Ending balance150,837 37.26 

PSUs

For the three and six months ended June 30, 2020,March 31, 2021, the Corporation recognized $153$103 thousand and $0.6 million, respectively, of expense related to the PSUs. As of June 30, 2020,March 31, 2021, there was $2.3$3.8 million of unrecognized compensation cost related to PSUs. This cost will be recognized over a weighted average period of 1.82.2 years.

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The following table details the PSUs for the three and six months ended June 30, 2020:March 31, 2021:

Three Months Ended
June 30, 2020
Six Months Ended
June 30, 2020
Three Months Ended
March 31, 2021
Number of SharesWeighted
Average
Grant Date
Fair Value
Number of SharesWeighted
Average
Grant Date
Fair Value
Number of SharesWeighted
Average
Grant Date
Fair Value
Beginning balanceBeginning balance189,808  $37.31  136,271  $37.87  Beginning balance149,911 $37.60 
GrantedGranted—  —  53,685  35.90  Granted56,144 34.99 
VestedVested—  —  —  —  Vested
ForfeitedForfeited—  —  (148) 40.35  Forfeited
Ending balanceEnding balance189,808  37.31  189,808  37.31  Ending balance206,055 36.89 
 

Note 1920 Fair Value Measurement
 
FASB ASC 820, “Fair Value Measurements and Disclosures,” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. FASB ASC 820 also 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).
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The three levels of the fair value hierarchy under FASB ASC Topic 820 are:

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 – Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active and model derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
 
A. Assets and liabilities measured on a recurring basis

A description of the valuation methodologies used for financial instruments measured at fair value on a recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. 

Investment Securities

The value of the Corporation’s available for sale investment securities, which include obligations of the U.S. government and its agencies, mortgage-backed securities issued by U.S. government- and U.S. government sponsored agencies, obligations of state and political subdivisions, corporate bonds and other debt securities are determined by the Corporation, taking into account the input of an independent third party valuation service provider. The third party’s evaluations are based on market data, utilizing pricing models that vary by asset and incorporate available trade, bid and other market information. For securities that do not trade on a daily basis, their pricing models apply available information such as benchmarking and matrix pricing. The market inputs normally sought in the evaluation of securities include benchmark yields, reported trades, broker/dealer quotes (only obtained from market makers or broker/dealers recognized as market participants), issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. For certain securities, additional inputs may be used or some market inputs may not be applicable. Inputs are prioritized differently on any given day based on market conditions. Management reviews, annually, the process utilized by its independent third-party valuation service provider. On a quarterly basis, management tests the validity of the prices provided by the third party by selecting a representative sample of the portfolio and obtaining actual trade results, or if actual trade results are not available, competitive broker pricing. On an annual basis, management evaluates, for appropriateness, the methodology utilized by the independent third-party valuation service provider.
 
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U.S. government agencies are evaluated and priced using multi-dimensional relational models and option adjusted spreads. State and municipal securities are evaluated on a series of matrices including reported trades and material event notices. Mortgage-backed securities are evaluated using matrix correlation to treasury or floating index benchmarks, prepayment speeds, monthly payment information and other benchmarks. Other available-for-sale investments are evaluated using a broker-quote based application, including quotes from issuers.
 
Interest Rate Swaps, FX Forwards, and Risk Participation Agreements 
 
The Corporation’s interest rate swaps, FX forwards, and RPAs are reported at fair value utilizing Level 2 inputs. Prices of these instruments are obtained through an independent pricing source utilizing pricing information which may include market observed quotations for swaps, LIBOR rates, forward rates and rate volatility. When entering into a derivative contract, the Corporation is exposed to fair value changes due to interest rate movements, and the potential non-performance of our contract counterparty. The Corporation has developed a methodology to value the non-performance risk based on internal credit risk metrics and the unique characteristics of derivative instruments, which include notional exposure rather than principle at risk and interest payment netting. The results of this methodology are used to adjust the base fair value of the instrument for the potential counterparty credit risk.






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The following tables present the Corporation’s assets measured at fair value on a recurring basis as of June 30, 2020March 31, 2021 and December 31, 2019:2020:

As of June 30, 2020    
As of March 31, 2021As of March 31, 2021    
(dollars in thousands)(dollars in thousands)TotalLevel 1Level 2Level 3(dollars in thousands)TotalLevel 1Level 2Level 3
Investment securities available for sale:Investment securities available for sale:    Investment securities available for sale:    
U.S. Treasury securitiesU.S. Treasury securities$100  $100  $—  $—  U.S. Treasury securities$100 $100 $$
Obligations of U.S. government & agenciesObligations of U.S. government & agencies114,149  —  114,149  —  Obligations of U.S. government & agencies110,413 110,413 
Obligations of state & political subdivisionsObligations of state & political subdivisions4,583  —  4,583  —  Obligations of state & political subdivisions2,168 2,168 
Mortgage-backed securitiesMortgage-backed securities377,204  —  377,204  —  Mortgage-backed securities497,328 497,328 
Collateralized mortgage obligationsCollateralized mortgage obligations25,873  —  25,873  —  Collateralized mortgage obligations17,073 17,073 
Collateralized loan obligationsCollateralized loan obligations99,666 99,666 
Corporate bondsCorporate bonds8,022  —  8,022  —  Corporate bonds11,576 11,576 
Other investment securitiesOther investment securities650  —  650  —  Other investment securities650 650 
Total investment securities available for saleTotal investment securities available for sale530,581  100  530,481  —  Total investment securities available for sale738,974 100 738,874 
Investment securities trading:Investment securities trading:Investment securities trading:
Mutual fundsMutual funds7,801  7,801  —  —  Mutual funds8,777 8,777 
Derivatives:Derivatives:Derivatives:
Interest rate swapsInterest rate swaps143,339  —  143,339  —  Interest rate swaps75,837 75,837 
RPAs purchasedRPAs purchased358  —  358  —  RPAs purchased154 154 
FX forwardsFX forwards36  —  36  —  FX forwards40 40 
Total derivativesTotal derivatives143,733  —  143,733  —  Total derivatives76,031 76,031 
Total recurring fair value measurements Total recurring fair value measurements$682,115  $7,901  $674,214  $—   Total recurring fair value measurements$823,782 $8,877 $814,905 $
 
As of December 31, 2019    
(dollars in thousands)TotalLevel 1Level 2Level 3
Investment securities available for sale:    
U.S. Treasury securities$500,101  $500,101  $—  $—  
Obligations of U.S. government & agencies102,020  —  102,020  —  
Obligations of state & political subdivisions5,379  —  5,379  —  
Mortgage-backed securities366,002  —  366,002  —  
Collateralized mortgage obligations31,832  —  31,832  —  
Other investment securities650  —  650  —  
Total investment securities available for sale1,005,984  500,101  505,883  —  
Investment securities trading:
Mutual funds8,621  8,621  —  —  
Derivatives:
Interest rate swaps47,627  —  47,627  —  
RPAs purchased90  —  90  —  
Total derivatives47,717  —  47,717  —  
     Total recurring fair value measurements$1,062,322  $508,722  $553,600  $—  
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As of December 31, 2020    
(dollars in thousands)TotalLevel 1Level 2Level 3
Investment securities available for sale:    
U.S. Treasury securities$500,100 $500,100 $$
Obligations of U.S. government & agencies93,098 93,098 
Obligations of state & political subdivisions2,171 2,171 
Mortgage-backed securities453,857 453,857 
Collateralized mortgage obligations19,263 19,263 
Collateralized loan obligations94,404 94,404 
Corporate bonds11,421 11,421 
Other investment securities650 650 
Total investment securities available for sale1,174,964 500,100 674,864 
Investment securities trading:
Mutual funds8,623 8,623 
Derivatives:
Interest rate swaps113,848 113,848 
RPAs purchased342 342 
FX forwards52 52 
Total derivatives114,242 114,242 
     Total recurring fair value measurements$1,297,829 $508,723 $789,106 $
 
There have been no transfers between levels during the three and six months ended June 30, 2020.March 31, 2021.


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B. Assets and liabilities measured on a non-recurring basis
 
Fair value is used on a nonrecurring basis to evaluate certain financial assets and financial liabilities in specific circumstances. Similarly, fair value is used on a nonrecurring basis for nonfinancial assets and nonfinancial liabilities such as foreclosed assets, OREO, intangible assets, nonfinancial assets and liabilities evaluated in a goodwill impairment analysis and other nonfinancial assets measured at fair value for purposes of assessing impairment. A description of the valuation methodologies used for financial and nonfinancial assets and liabilities measured at fair value, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy, is set forth below.
 
Collateral-dependent Loans and Leases Individually Evaluated for Credit Losses

Collateral-dependent loans and leases for which the repayment is expected to be provided substantially through the sale of the collateral and the borrower is experiencing financial difficulty are, in general, individually evaluated for credit losses. Management evaluates and values collateral-dependent loans and leases when management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, and the fair values of such loans and leases are estimated using Level 3 inputs in the fair value hierarchy. Each loan’s collateral has a unique appraisal and management’s discount of the value is based on the factors unique to each loan or lease. The significant unobservable input in determining the fair value is management’s subjective discount on appraisals of the collateral securing the loan, which range from 10% - 50%. Collateral may consist of real estate and/or business assets including equipment, inventory and/or accounts receivable and the value of these assets is determined based on the appraisals by qualified licensed appraisers hired by the Corporation. Appraised and reported values may be discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, estimated costs to sell, and/or management’s expertise and knowledge of the client and the client’s business. For loans and leases that are not collateral-dependent, management measures expected credit loss as the difference between the amortized cost basis of the loan and the present value of expected future cash flows discounted at the loan’s effective interest rate.
 
The Corporation has an appraisal policy in which an appraisal is obtained for a commercial loan at the point at which the loan either becomes nonperforming or is downgraded to a substandard or worse classification. For consumer loans, management obtains updated appraisals when a loan becomes 90 days past due or when it receives other information that may indicate possible impairment. Based on the appraisals obtained by the Corporation, a partial or full charge-off may be necessary. 

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Other Real Estate Owned (“OREO”)
 
OREO consists of properties acquired as a result of foreclosures and deeds in-lieu-of foreclosure. Properties classified as OREO are reported at the lower of cost or fair value less cost to sell, and are classified as Level 3 in the fair value hierarchy. The Corporation did not have any OREO at June 30, 2020March 31, 2021 or December 31, 2019.2020.
 
Mortgage Servicing Rights
 
The model to value MSRs estimates the present value of projected net servicing cash flows of the remaining servicing portfolio based on various assumptions, including changes in anticipated loan prepayment rates, the discount rate, reflective of a market participant's required return on an investment for similar assets, and other market-based economic factors. All of these assumptions are considered to be unobservable inputs. Accordingly, MSRs are classified within Level 3 of the fair value hierarchy.

The following tables present the Corporation’s assets measured at fair value on a non-recurring basis as of June 30, 2020March 31, 2021 and December 31, 2019:2020:

As of June 30, 2020
As of March 31, 2021As of March 31, 2021
(dollars in thousands)(dollars in thousands)TotalLevel 1Level 2Level 3(dollars in thousands)TotalLevel 1Level 2Level 3
MSRsMSRs$3,440  $—  $—  $3,440  MSRs$2,493 $$$2,493 
Collateral-dependent loans and leases8,217  —  —  8,217  
Loans and leases individually evaluated for credit lossesLoans and leases individually evaluated for credit losses11,323 11,323 
Total non-recurring fair value measurements Total non-recurring fair value measurements$11,657  $—  $—  $11,657   Total non-recurring fair value measurements$13,816 $$$13,816 

As of December 31, 2019
(dollars in thousands)TotalLevel 1Level 2Level 3
MSRs$4,838  $—  $—  $4,838  
Impaired loans and leases15,311  —  —  15,311  
   Total non-recurring fair value measurements$20,149  $—  $—  $20,149  
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As of December 31, 2020
(dollars in thousands)TotalLevel 1Level 2Level 3
MSRs$2,632 $$$2,632 
Loans and leases individually evaluated for credit losses11,142 11,142 
   Total non-recurring fair value measurements$13,774 $$$13,774 

During the three and six months ended June 30, 2020, a net decrease andMarch 31, 2021, a net increase of $110$139 thousand and $122 thousand werewas recorded in the ACL on loans and leases as a result of adjusting the carrying value and estimated fair value of the collateral-dependent loans and leases individually evaluated for credit losses in the above tables.

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Note 2021 – Fair Value of Financial Instruments
 
FASB ASC 825, “Disclosures about Fair Value of Financial Instruments” requires disclosure of the fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate such value. The methodologies for estimating the fair value of financial assets and financial liabilities measured at fair value on a recurring and non-recurring basis are discussed above. The estimated fair value amounts have been determined by management using available market information and appropriate valuation methodologies, are based on the exit price notion. In cases where quoted market prices are not available, fair values are based on estimates using present value or other market value techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. The aggregate fair value amounts presented below do not represent the underlying value of the Corporation.

The carrying amount and fair value of the Corporation’s financial instruments are as follows:

June 30,
2020
December 31,
2019
March 31,
2021
December 31,
2020
(dollars in thousands)(dollars in thousands)
Fair Value
Hierarchy
Level(1)
Carrying
Amount
Fair ValueCarrying
Amount
Fair Value(dollars in thousands)
Fair Value
Hierarchy
Level(1)
Carrying
Amount
Fair ValueCarrying
Amount
Fair Value
Financial assets:Financial assets:Financial assets:
Cash and cash equivalentsCash and cash equivalentsLevel 1$464,521  $464,521  $53,931  $53,931  Cash and cash equivalentsLevel 1$47,400 $47,400 $96,313 $96,313 
Investment securities - available for saleInvestment securities - available for saleSee Note 19530,581  530,581  1,005,984  1,005,984  Investment securities - available for saleSee Note 20738,974 738,974 1,174,964 1,174,964 
Investment securities - tradingInvestment securities - tradingSee Note 197,801  7,801  8,621  8,621  Investment securities - tradingSee Note 208,777 8,777 8,623 8,623 
Investment securities – held to maturityInvestment securities – held to maturityLevel 212,592  12,995  12,577  12,661  Investment securities – held to maturityLevel 214,126 14,371 14,759 15,186 
Loans held for saleLoans held for saleLevel 24,116  4,116  4,249  4,249  Loans held for saleLevel 23,210 3,210 6,000 6,000 
Net portfolio loans and leasesNet portfolio loans and leasesLevel 33,667,191  3,564,380  3,666,711  3,596,268  Net portfolio loans and leasesLevel 33,585,673 3,483,821 3,574,702 3,489,322 
MSRsMSRsLevel 33,440  3,440  4,450  4,838  MSRsLevel 32,493 2,493 2,626 2,632 
Interest rate swapsInterest rate swapsLevel 2143,339  143,339  47,627  47,627  Interest rate swapsLevel 275,837 75,837 113,848 113,848 
FX forwardsFX forwardsLevel 236  36  —  —  FX forwardsLevel 240 40 52 52 
RPAs purchasedRPAs purchasedLevel 2358  358  90  90  RPAs purchasedLevel 2154 154 342 342 
Other assetsOther assetsLevel 337,137  37,137  52,908  52,908  Other assetsLevel 338,855 38,855 45,847 45,847 
Total financial assets Total financial assets$4,871,112  $4,768,704  $4,857,148  $4,787,177   Total financial assets$4,515,539 $4,413,932 $5,038,076 $4,953,129 
Financial liabilities:Financial liabilities:Financial liabilities:
DepositsDepositsLevel 2$4,243,648  $4,248,488  $3,842,245  $3,842,014  DepositsLevel 2$3,902,250 $4,379,021 $4,376,254 $4,379,021 
Short-term borrowingsShort-term borrowingsLevel 228,891  28,891  493,219  493,219  Short-term borrowingsLevel 260,027 60,027 72,161 72,161 
Long-term FHLB advancesLong-term FHLB advancesLevel 244,837  45,664  52,269  52,380  Long-term FHLB advancesLevel 239,941 40,346 39,906 40,441 
Subordinated notesSubordinated notesLevel 298,794  91,748  98,705  97,199  Subordinated notesLevel 298,928 91,331 98,883 90,735 
Junior subordinated debenturesJunior subordinated debenturesLevel 221,843  26,097  21,753  25,652  Junior subordinated debenturesLevel 221,983 19,607 21,935 27,812 
Interest rate swapsInterest rate swapsLevel 2143,339  143,339  47,627  47,627  Interest rate swapsLevel 280,795 80,795 113,848 113,848 
FX forwardsFX forwardsLevel 2107  107  —  —  FX forwardsLevel 221 21 70 70 
RPAs soldRPAs soldLevel 239  39  16  16  RPAs soldLevel 216 16 30 30 
Other liabilitiesOther liabilitiesLevel 342,447  42,447  50,251  50,251  Other liabilitiesLevel 347,909 47,909 45,734 45,734 
Total financial liabilities Total financial liabilities$4,623,945  $4,626,820  $4,606,085  $4,608,358   Total financial liabilities$4,251,870 $4,719,073 $4,768,821 $4,769,852 
 
(1) See Note 1920 in the Notes to Unaudited Consolidated Financial Statements above for a description of hierarchy levels.
 
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Note 2122 – Financial Instruments with Off-Balance Sheet Risk, Contingencies and Concentration of Credit Risk

Off-Balance Sheet Arrangements

The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated statements of financial condition. The contractual amounts of those instruments reflect the extent of involvement the Corporation has in particular classes of financial instruments.

The Corporation’s exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument of commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Corporation uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet financial instruments.

Commitments to extend credit, which include unused lines of credit and unfunded commitments to originate loans, are agreements to lend to a customer as long as there is no violation of any condition established in the agreement. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Some of the commitments are expected to expire without being drawn upon, and the total commitment amounts do not necessarily represent future cash requirements. Total commitments to extend credit at June 30, 2020March 31, 2021 and December 31, 20192020 were $826.3$987.0 million and $828.9$924.5 million, respectively. Management evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Corporation upon extension of credit, is based on a credit evaluation of the counterparty. Collateral varies but may include accounts receivable, marketable securities, inventory, property, plant and equipment, residential real estate, and income-producing commercial properties.

Standby letters of credit are conditional commitments issued by the Bank to a customer for a third party. Such standby letters of credit are issued to support private borrowing arrangements. The credit risk involved in issuing standby letters of credit is similar to that involved in extending loan facilities to customers. The collateral varies, but may include accounts receivable, marketable securities, inventory, property, plant and equipment, and residential real estate for those commitments for which collateral is deemed necessary. The Corporation’s obligations under standby letters of credit as of June 30, 2020March 31, 2021 and December 31, 20192020 were $13.2$20.1 million and $20.7$21.1 million, respectively.

Contingencies

Legal Matters

In the ordinary course of its operations, BMBC and its subsidiaries are parties to various claims, litigation, investigations, and legal and administrative cases and proceedings. Such pending or threatened claims, litigation, investigations, legal and administrative cases and proceedings typically entail matters that are considered ordinary routine litigation incidental to our business. Claims for significant monetary damages may be asserted in many of these types of legal actions. Based on the information currently available, management believes it has meritorious defenses to the claims asserted against it in its currently outstanding legal proceedings and with respect to such legal proceedings, intends to continue to defend itself vigorously, litigating or settling cases according to management’s judgment as to what is in the best interests of the Corporation and its shareholders.

On a regular basis, liabilities and contingencies in connection with outstanding legal proceedings are assessed utilizing the latest information available. For those matters where it is probable that the Corporation will incur a loss and the amount of the loss can be reasonably estimated, a liability may be recorded in the Consolidated Financial Statements. These legal reserves may be increased or decreased to reflect any relevant developments on at least a quarterly basis. For other matters, where a loss is not probable or the amount or range of the loss is not estimable, legal reserves are not accrued. While the outcome of legal proceedings is inherently uncertain, based on information currently available, advice of counsel and available insurance coverage, management believes that the established legal reserves are adequate and the liabilities arising from legal proceedings will not have a material adverse effect on the consolidated financial position, consolidated results of operations or consolidated cash flows. However, in the event of unexpected future developments, it is possible that the ultimate resolution of these matters, if unfavorable, may be material to the consolidated financial position, consolidated results of operations or consolidated cash flows of the Corporation.



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Crusader Servicing Corporation (“Crusader”), which was an 80% owned subsidiary of Royal Bank America that was acquired by the Bank in the RBPI merger, along with the Bank as successor-in-interest to Royal Bank America, are defendants in the case captioned Snyder v. Crusader Servicing Corporation et al., Case No. 2007-01027, in the Court of Common Pleas of Montgomery County, Pennsylvania. The case involves claims brought by a former Crusader shareholder in 2007 against Crusader, its former directors and remaining shareholders related, among other things, to a purported failure to pay amounts allegedly due to Snyder for his shares of Crusader stock. Subsequent to the end of the first quarter of 2019, onOn May 1, 2019, the Court rendered a decision against Crusader.in favor of Snyder and ordered Crusader to pay Snyder the amount of $2,190,000 plus interest at the rate of 6% from December 1, 2006. The matter was appealed, and on March 18, 2020, the Superior Court of the Commonwealth of Pennsylvania returned an opinion reversing in part and affirming in part the trial court's judgment. The effect of this was to vacate the initial judgment awarded by the trial court, and instead to require an appraisal process in accordance with Crusader's Shareholders' Agreement to determine the value of Mr. Snyder's shares. The parties anticipate the appraisal to commence within the coming months. We do not believe that this ruling and anythe monetary award, if any, ultimately payable by Crusader will be material to the consolidated financial position, consolidated results of operations or consolidated cash flows of the Corporation.

Indemnifications

In general, the Corporation does not sell loans with recourse, except to the extent that it arises from standard loan-sale contract provisions. These provisions cover violations of representations and warranties and, under certain circumstances, first payment default by borrowers. These indemnifications may include the repurchase of loans by the Corporation, and are considered customary provisions in the secondary market for conforming mortgage loan sales. Repurchases and losses have been rare and no provision is made for losses at the time of sale. There were nowas one such repurchases forrepurchase of approximately $200 thousand during the three and six months ended June 30, 2020.March 31, 2021.

Concentrations of Credit Risk

The Corporation has a material portion of its loans in real estate-related loans. A predominant percentage of the Corporation’s real estate exposure, both commercial and residential, is in the Corporation’s primary trade area which includes portions of Delaware, Chester, Montgomery and Philadelphia counties in Southeastern Pennsylvania. Management is aware of this concentration and attempts to mitigate this risk to the extent possible in many ways, including the underwriting and assessment of borrower’s capacity to repay. See Note 4 – “Loans and Leases” for additional information.

Note 2223 – Segment Information
 
FASB Codification 280 – “Segment Reporting” identifies operating segments as components of an enterprise which are evaluated regularly by the Corporation’s chief operating decision maker, our Chief Executive Officer, in deciding how to allocate resources and assess performance. The Corporation has applied the aggregation criterion set forth in this codification to the results of its operations.
 
The Corporation’s Banking segment consists of commercial and retail banking. The Banking segment is evaluated as a single strategic unit which generates revenues from a variety of products and services. The Banking segment generates interest income from its lending (including leases) and investing activities and is dependent on the gathering of lower cost deposits from its branch network or borrowed funds from other sources for funding its loans, resulting in the generation of net interest income. The Banking segment also derives revenues from other sources including gains on the sale in available for sale investment securities, gains on the sale of residential mortgage loans, service charges on deposit accounts, cash sweep fees, overdraft fees, bank owned life insurance (“BOLI”) income and revenue associated with its Visa Check Card offering. Also included in the Banking segment are two subsidiaries of the Bank, KCMI Capital, Inc. and Bryn Mawr Equipment Financing, Inc., both of which provide specialized lending solutions to our customers.
 
The Wealth Management segment has responsibility for a number of activities within the Corporation, including trust administration, other related fiduciary services, custody, investment management and advisory services, employee benefits and IRA administration, estate settlement, tax services and brokerage. Bryn Mawr Trust of Delaware is included in the Wealth Management segment of the Corporation since it has similar economic characteristics, products and services to those of the Wealth Management Division of the Bank. Effective January 1, 2020, the business of Lau Associates LLC was transitioned into the Wealth Management Division of the Bank. BMT Investment Advisers, formed in May 2017, which servesserved as investment adviser to BMT Investment Funds, a Delaware statutory trust, isprior to its wind-down in the second quarter of 2020, was also reported under the Wealth Management segment. In addition, the Wealth Management Division oversees all insurance services of the Corporation, which are conducted through the Bank’s insurance subsidiary, BMT Insurance Advisors, Inc., and are reported in the Wealth Management segment.
 
The accounting policies of the Corporation are applied by segment in the following tables. The segments are presented on a pre-tax basis.
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The following tables detail the Corporation’s segments for the three and six months ended June 30, 2020March 31, 2021 and 2019:2020:

Three Months Ended
June 30, 2020
Three Months Ended
June 30, 2019
Three Months Ended
March 31, 2021
Three Months Ended
March 31, 2020
(dollars in thousands)(dollars in thousands)BankingWealth
Management
ConsolidatedBankingWealth
Management
Consolidated(dollars in thousands)BankingWealth
Management
ConsolidatedBankingWealth
Management
Consolidated
Net interest incomeNet interest income$37,384  $ $37,385  $36,610  $ $36,611  Net interest income$34,781 $$34,781 $36,332 $$36,333 
PCL on loans and leases4,302  —  4,302  1,627  —  1,627  
Net interest income after PCL on loans and leases33,082   33,083  34,983   34,984  
(Recovery of) provision for credit losses(Recovery of) provision for credit losses(5,246)(5,246)35,350 35,350 
Net interest income after PCLNet interest income after PCL40,027 40,027 982 983 
Noninterest income:Noninterest income:Noninterest income:
Fees for wealth management servicesFees for wealth management services—  9,069  9,069  —  11,510  11,510  Fees for wealth management services12,836 12,836 11,168 11,168 
Insurance commissionsInsurance commissions—  1,303  1,303  —  1,697  1,697  Insurance commissions1,464 1,464 1,533 1,533 
Capital markets revenueCapital markets revenue2,975  —  2,975  1,489  —  1,489  Capital markets revenue1,596 1,596 2,361 2,361 
Service charges on deposit accountsService charges on deposit accounts603  —  603  852  —  852  Service charges on deposit accounts696 696 846 846 
Loan servicing and other feesLoan servicing and other fees452  —  452  553  —  553  Loan servicing and other fees304 304 461 461 
Net gain on sale of loansNet gain on sale of loans3,134  —  3,134  752  —  752  Net gain on sale of loans250 250 782 782 
Net gain on sale of OREONet gain on sale of OREO148 148 
Other operating incomeOther operating income2,942  88  3,030  3,342  26  3,368  Other operating income2,683 12 2,695 988 13 1,001 
Total noninterest incomeTotal noninterest income10,106  10,460  20,566  6,988  13,233  20,221  Total noninterest income5,529 14,312 19,841 5,586 12,714 18,300 
Noninterest expenses:Noninterest expenses:Noninterest expenses:
Salaries & wagesSalaries & wages11,699  5,227  16,926  12,295  4,743  17,038  Salaries & wages11,428 5,402 16,830 11,859 5,130 16,989 
Employee benefitsEmployee benefits2,301  920  3,221  2,338  979  3,317  Employee benefits2,598 1,089 3,687 2,597 903 3,500 
Occupancy and bank premisesOccupancy and bank premises2,535  498  3,033  2,608  517  3,125  Occupancy and bank premises2,371 521 2,892 2,516 499 3,015 
Amortization of intangible assetsAmortization of intangible assets291  619  910  328  628  956  Amortization of intangible assets231 607 838 292 626 918 
Professional feesProfessional fees1,357  218  1,575  1,221  95  1,316  Professional fees1,252 181 1,433 1,097 271 1,368 
Other operating expensesOther operating expenses7,496  1,475  8,971  7,983  1,453  9,436  Other operating expenses10,748 1,275 12,023 6,221 1,392 7,613 
Total noninterest expensesTotal noninterest expenses25,679  8,957  34,636  26,773  8,415  35,188  Total noninterest expenses28,628 9,075 37,703 24,582 8,821 33,403 
Segment profit17,509  1,504  19,013  15,198  4,819  20,017  
Segment profit (loss)Segment profit (loss)16,928 5,237 22,165 (18,014)3,894 (14,120)
Intersegment (revenues) expenses(1)
Intersegment (revenues) expenses(1)
(177) 177  —  (125) 125  —  
Intersegment (revenues) expenses(1)
(160)160 (178)178 
Pre-tax segment profit after eliminationsPre-tax segment profit after eliminations$17,332  $1,681  $19,013  $15,073  $4,944  $20,017  Pre-tax segment profit after eliminations$16,768 $5,397 $22,165 $(18,192)$4,072 $(14,120)
% of segment pre-tax profit after eliminations% of segment pre-tax profit after eliminations91.2 %8.8 %100.0 %75.3 %24.7 %100.0 %% of segment pre-tax profit after eliminations75.7 %24.3 %100.0 %128.8 %(28.8)%100.0 %
Segment assets (dollars in millions)
Segment assets (dollars in millions)
$5,221.7  $49.6  $5,271.3  $4,682.0  $54.6  $4,736.6  
Segment assets (dollars in millions)
$4,867.1 $47.4 $4,914.5 $4,871.8 $51.2 $4,923.0 


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 Six Months Ended
June 30, 2020
Six Months Ended
June 30, 2019
(dollars in thousands)BankingWealth
Management
ConsolidatedBankingWealth
Management
Consolidated
Net interest income$73,716  $ $73,718  $74,255  $ $74,258  
PCL on loans and leases36,637  —  36,637  5,363  —  5,363  
Net interest income after PCL on loans and leases37,079   37,081  68,892   68,895  
Noninterest income:
Fees for wealth management services—  20,237  20,237  —  21,902  21,902  
Insurance commissions—  2,836  2,836  —  3,369  3,369  
Capital markets revenue5,336  —  5,336  3,708  —  3,708  
Service charges on deposit accounts1,449  —  1,449  1,660  —  1,660  
Loan servicing and other fees913  —  913  1,162  —  1,162  
Net gain on sale of loans3,916  —  3,916  1,071  —  1,071  
Net gain (loss) on sale of OREO148  —  148  (24) —  (24) 
Other operating income3,930  101  4,031  6,579  47  6,626  
Total noninterest income15,692  23,174  38,866  14,156  25,318  39,474  
Noninterest expenses:
Salaries & wages23,558  10,357  33,915  28,070  9,869  37,939  
Employee benefits4,898  1,823  6,721  5,510  1,973  7,483  
Occupancy and bank premises5,051  997  6,048  5,340  1,037  6,377  
Amortization of intangible assets583  1,245  1,828  655  1,239  1,894  
Professional fees2,454  489  2,943  2,384  252  2,636  
Other operating expenses16,732  2,867  19,599  15,252  3,331  18,583  
Total noninterest expenses53,276  17,778  71,054  57,211  17,701  74,912  
Segment (loss) profit(505) 5,398  4,893  25,837  7,620  33,457  
Intersegment (revenues) expenses(1)
(355) 355  —  (248) 248  —  
Pre-tax segment profit after eliminations$(860) $5,753  $4,893  $25,589  $7,868  $33,457  
% of segment pre-tax profit after eliminations(17.6)%117.6 %100.0 %76.5 %23.5 %100.0 %
Segment assets (dollars in millions)
$5,221.7  $49.6  $5,271.3  $4,682.0  $54.6  $4,736.6  

(1) Inter-segment revenues consist of rental payments, interest on deposits and management fees.

Wealth Management Segment Information
(dollars in millions)(dollars in millions)June 30,
2020
December 31,
2019
(dollars in millions)March 31,
2021
December 31,
2020
Assets under management, administration, supervision and brokerageAssets under management, administration, supervision and brokerage$17,012.9  $16,548.1  Assets under management, administration, supervision and brokerage$20,059.4 $18,976.5 

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ITEM 2. Management’s Discussion and Analysis of Results of Operation and Financial Condition
 
The following discussion describes the significant changes to the financial condition of the Corporation that have occurred during the first sixthree months of 20202021 compared to the financial condition as of December 31, 2019.2020. In addition, this discussion summarizes the significant factors affecting the results of operations, liquidity and cash flows of the Corporation for the three and six months ended June 30, 2020,March 31, 2021, compared to the same periods in 2019.2020. This discussion should be read in conjunction with the accompanying condensed consolidated financial statements included in this report and our Annual Report on Form 10-K for the year ended December 31, 20192020 (the “2019“2020 Annual Report”). Certain financial condition comparisons to the prior year and results of operations comparisons for the linked quarter are included for additional trend analysis.
 
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS
 
Certain of the statements contained in this Quarterly Report on Form 10-Q and the documents incorporated by reference herein may constitute forward-looking statements for the purposes of the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Such forward-looking statements may include financial and other projections as well as statements regarding the Corporation’s financial goals, future business plans, business prospects, credit quality, credit risk, reserve adequacy, liquidity, origination and sale of residential mortgage loans, mortgage servicing rights, the effect of changes in accounting standards, and market and pricing trends loss. The words “may,” “might,” “would,” “should,” “could,” “will,” “likely,” “possibly,” “expect,” “anticipate,” “intend,” “indicate,” “estimate,” “target,” “potentially,” “promising,” “probably,” “outlook,” “predict,” “contemplate,” “continue,” “plan,” “strategy,” “forecast,” “project,” “annualized,” “are optimistic,” “are looking,” “are looking forward,” and “believe” or other similar expressions may identify statements that constitute forward-looking statements. Persons reading this Quarterly Report on Form 10-Q are cautioned that such statements are only predictions and may involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements of the Corporation to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.

The COVID-19 pandemic is adversely affecting us, our clients, counterparties, employees, and third party service providers, and the ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects is uncertain. Continued deterioration in general business and economic conditions, including further increases in unemployment rates, or turbulence in domestic or global financial markets could adversely affect our revenues and the values of our assets and liabilities, reduce the availability of funding, lead to a tightening of credit, and further increase stock price volatility, which could result in impairment to our goodwill in future periods. Changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to the COVID-19 pandemic, could affect us in substantial and unpredictable ways, including the potential adverse impact of loan modifications and payment deferrals implemented consistent with recent regulatory guidance. In addition, the Corporation’s actual results may differ materially from the results anticipated by the forward-looking statements due to a variety of factors, including without limitation:

the possibility that the proposed merger with WSFS does not close when expected or at all because required regulatory, shareholder or other approvals and other conditions to closing are not received or satisfied on a timely basis or at all;
the delay in or failure to close the proposed merger for any other reason;
changes in WSFS’s share price before closing of the proposed merger;
the outcome of any legal proceedings that have, or may in the future, be instituted against WSFS or BMBC;
the occurrence of any event, change or other circumstance that could give rise to the right of one or both of WSFS and BMBC to terminate the merger agreement providing for the merger;
the risk that the businesses of WSFS and the Corporation will not be integrated successfully;
the possibility that the cost savings and any synergies or other anticipated benefits from the proposed merger may not be fully realized or may take longer to realize than expected;
disruption from the proposed merger making it more difficult to maintain relationships with employees, customers or other parties with whom WSFS or the Corporation have business relationships;
diversion of management time on merger-related issues;
risks relating to the potential dilutive effect of the shares of WSFS common stock to be issued in the proposed transaction;
the reaction to the proposed transaction of the companies’ customers, employees and counterparties;
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uncertainty as to the extent of the duration, scope, and impacts of the COVID-19 pandemic on WSFS, BMBC and the proposed merger;
local, regional, national and international economic conditions, their impact on us and our customers, and our ability to assess those impacts;
our need for capital;
reduced demand for our products and services, and lower revenues and earnings due to an economic recession;
lower earnings due to other-than-temporary impairment charges related to our investment securities portfolios or other assets;
changes in monetary or fiscal policy, or existing statutes, regulatory guidance, legislation or judicial decisions, including those concerning banking, securities. insurance or taxes, that adversely affect our business, the financial services industry as a whole, the Corporation, or our subsidiaries individually or collectively;
changes in the level of non-performing assets and charge-offs;
effectiveness of capital management strategies and activities;
the accuracy of assumptions underlying the establishment of provisions for loan and lease losses, estimates in the value of collateral, and various financial assets and liabilities;
the accuracy of assumptions underlying the establishment of provisions for loan and lease losses, estimates in the value of collateral, and various financial assets and liabilities;
uncertainty relating to the LIBOR calculation process and potential phasing out of LIBOR after 2021;
the effect of changes in accounting policies and practices or accounting standards, as may be adopted from time-to-time by bank regulatory agencies, the SEC, the Public Company Accounting Oversight Board, the FASB or other accounting standards setters, including ASU 2016-13 (Topic 326), “Measurement of Credit Losses on Financial Instruments,” commonly referenced as the Current Expected Credit Loss (“CECL”)CECL model, which has changed how we estimate credit losses and may result in further increases in the required level of our allowance for credit losses;

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inflation, securities market and monetary fluctuations, including changes in the market values of financial assets and the stability of particular securities markets;
changes in interest rates, spreads on interest-earning assets and interest-bearing liabilities, and interest rate sensitivity;
prepayment speeds, loan originations and credit losses;
changes in the value of our mortgage servicing rights;
sources of liquidity and financial resources in the amounts, at the times, and on the terms required to support our future business;
possible credit-related impairments of securities held by us;
results of examinations by the Board of Governors of the Federal Reserve System (the “Federal Reserve”) of the Corporation, including the possibility that such regulator may, among other things, require us to increase our allowance for loan losses or to write down assets, or restrict our ability to: engage in new products or services; engage in future mergers or acquisitions; open new branches; pay future dividends; or otherwise take action, or refrain from taking action, in order to correct activities or practices that the Federal Reserve believes may violate applicable law or constitute an unsafe or unsound banking practice;
variances in common stock outstanding and/or volatility in common stock price;
fair value of and number of stock-based compensation awards to be issued in future periods;
risks related to our past or future, if any, mergers and acquisitions, such as our pending transaction with WSFS, including, but not limited to: reputational risks; client and customer retention risks; diversion of management’s time for integration-related issues; risk that the transaction may be delayed, including as a result of regulatory action or failure for either party's shareholders to approve the transaction; integration may take longer than anticipated or cost more than expected; anticipated benefits of the merger or acquisition, including any anticipated cost savings or strategic gains, may take longer or be significantly harder to achieve, or may not be realized;
deposit attrition, operating costs, customer loss and business disruption following a merger or acquisition, including, without limitation, difficulties in maintaining relationships with employees, customers, and/or suppliers may be greater than expected; litigation risk;
the credit risks of lending activities and overall quality of the composition of acquired loan, lease and securities portfolio;
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our success in continuing to generate new business in our existing markets, as well as identifying and penetrating targeted markets and generating a profit in those markets in a reasonable time;
our ability to continue to generate investment results for customers or introduce competitive new products and services on a timely, cost-effective basis, including investment and banking products that meet customers’ needs;
changes in consumer and business spending, borrowing and savings habits and demand for financial services in the relevant market areas;
extent to which products or services previously offered (including but not limited to mortgages and asset back securities) require us to incur liabilities or absorb losses not contemplated at their initiation or origination;
rapid technological developments and changes;
technological systems failures, interruptions and security breaches, internally or through a third-party provider, could negatively impact our operations, customers and/or reputation;
competitive pressure and practices of other commercial banks, thrifts, mortgage companies, finance companies, credit unions, securities brokerage firms, insurance companies, money-market and mutual funds and other institutions operating in our market areas and elsewhere, including institutions operating locally, regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone, computer and the internet;
protection and validity of intellectual property rights;
reliance on large customers;
technological, implementation and cost/financial risks in contracts;
the outcome of pending and future litigation and governmental proceedings;
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any extraordinary events (such as natural disasters, global health risks or pandemics, acts of terrorism, wars or political conflicts), including the COVID-19 pandemic, and the effects of the economic and business environments in which we operate, including our credit quality and business operations, as well as the impact on general economic and financial market conditions;
ability to retain key employees and members of senior management;
changes in relationships with employees, customers, and/or suppliers;
the ability of key third-party providers to perform their obligations to us and our subsidiaries;
our need for capital, or our ability to control operating costs and expenses or manage loan and lease delinquency rates;
other material adverse changes in operations or earnings; and
our success in managing the risks involved in the foregoing.

All written or oral forward-looking statements attributed to the Corporation are expressly qualified in their entirety by the factors, risks, and uncertainties set forth in the foregoing cautionary statements, along with those set forth under the caption titled “Risk Factors” beginning on page 14 of the Corporation's 20192020 Annual Report.Report, as supplemented by those set forth under the caption titled “Risk Factors” beginning on page 68 of this Quarterly Report on Form 10-Q. All forward-looking statements included in this Quarterly Report and the documents incorporated by reference herein are based upon the Corporation’s beliefs and assumptions as of the date of this Quarterly Report. The Corporation assumes no obligation to update any forward-looking statement, whether the result of new information, future events, uncertainties or otherwise, as of any future date. In light of these risks, uncertainties and assumptions, you should not put undue reliance on any forward-looking statements discussed in this Quarterly Report or incorporated documents. For a complete discussion of the assumptions, risks and uncertainties related to our business, you are encouraged to review our filings with the SEC, including our 20192020 Annual Report, as updated by our quarterly or other reports subsequently filed with the SEC.
 
Brief History of the Corporation
 
The Bryn Mawr Trust Company (the “Bank”) received its Pennsylvania banking charter in 1889 and is a member of the Federal Reserve System. In 1986, Bryn Mawr Bank Corporation (“BMBC”, and together with its subsidiaries, the “Corporation”) was formed and the Bank became a wholly-owned subsidiary of BMBC. The Bank and BMBC are headquartered in Bryn Mawr, Pennsylvania, a western suburb of Philadelphia. The Corporation offers a full range of personal and business banking services,
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consumer and commercial loans, equipment leasing,finance, mortgages, insurance and wealth management services, including investment management, trust and estate administration, retirement planning, custody services, and tax planning and preparation from, 43as of March 31, 2021, 41 banking locations, fiveseven wealth management offices and two insurance and risk management locations in the following counties: Montgomery, Chester, Delaware, Philadelphia, and Dauphin Counties in Pennsylvania; New Castle County in Delaware; and Mercer and Camden Counties in New Jersey. The common stock of BMBC trades on the NASDAQ Stock Market (“NASDAQ”) under the symbol BMTC.
 
The Corporation operates in a highly competitive market area that includes local, national and regional banks as competitors along with savings banks, credit unions, insurance companies, trust companies, registered investment advisors and mutual fund families. BMBC and its subsidiaries are regulated by many agencies including the Securities and Exchange Commission (“SEC”), NASDAQ, Federal Deposit Insurance Corporation (“FDIC”), the Federal Reserve Bank of Philadelphia (the “FRB”) and the Pennsylvania Department of Banking and Securities. The goal of the Corporation is to become the preeminent community bank and wealth management organization in the Philadelphia area.

Critical Accounting Policies, Judgments and Estimates
 
The accounting and reporting policies of the Corporation conform to U.S. generally accepted accounting principles (“GAAP”). All significant intercompany balances and transactions are eliminated in consolidation and certain prior-period amounts have been reclassified when necessary in order to conform to current period presentation. In preparing the Consolidated Financial Statements, management is required to make estimates and assumptions that affect the reported amount of assets and liabilities as of the dates of the balance sheets and revenues and expenditures for the periods presented. Therefore, actual results could differ from these estimates. In preparing the Consolidated Financial Statements, the Corporation is required to make estimates and assumptions that affect the reported amount of assets and liabilities as of the dates of the balance sheets and revenues and expenditures for the periods presented. However, there are uncertainties inherent in making these estimates and actual results could differ from these estimates. The Corporation has identified certain areas that require estimates and assumptions, which include the allowance for credit losses (“ACL”) on loans and leases, the ACL on Off-Balance Sheet (“OBS”) Credit Exposures, the valuation of goodwill and intangible assets, the fair value of investment securities, the fair value of derivative financial instruments, and the valuation of mortgage servicing rights, deferred tax assets and liabilities, benefit plans and stock-based
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compensation. In addition, certain assets are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances.

On January 1, 2020, ASU 2016-13 (Topic 326 - Credit Losses), commonly referenced as the Current Expected Credit Loss (“CECL”) became effective for the Corporation. CECL has changed the way we estimate credit losses for loans and leases, including off-balance sheet (“OBS”) credit exposures for reporting periods beginning after January 1, 2020. For more information regarding the CECL standard, see Note 2, “Recent Accounting Pronouncements” in the accompanying Unaudited Notes to the Consolidated Financial Statements.

As a result, management has identified the accounting policies and estimates related to the ACL on loans and leases that, due to the inherent judgments and assumptions and the potential sensitivity of the financial statements to those judgments and assumptions, are critical to an understanding of our financial statements. We believe that the judgments, estimates and assumptions used in the preparation of the Company’s financial statements are appropriate. For a further description of our accounting policies, see Note 1, “Summary of Significant Accounting Policies,” in the Notes to the audited Consolidated Financial Statements in the 20192020 Annual Report, as well as Note 1, “Basis of Presentation, Principles of Consolidation, and Significant Accounting Policies,” in the accompanying Notes to Unaudited Consolidated Financial Statements.

Allowance for Credit Losses on Loans and Leases

The ACL on loans and leases represents management’s estimate of all expected credit losses over the expected contractual life of our existing portfolio loans and leases. Determining the appropriateness of the ACL on loans and leases is complex and requires judgment by management about the effect of matters that are inherently uncertain. Subsequent evaluations of the then-existing loan portfolio, in light of the factors then prevailing, may result in significant changes in the ACL on loans and leases in those future periods.

The expense for credit loss recorded through earnings is the amount necessary to maintain the ACL on loans and leases at the amount of expected credit losses inherent within the loans and leases portfolio. The amount of expense and the corresponding level of ACL on loans and leases are based on management’s evaluation of the collectability of the loan and lease portfolio based on historical loss experience, reasonable and supportable forecasts, and other significant qualitative and quantitative factors. The ACL on loans and leases, as reported in our Consolidated Statements of Financial Condition, is adjusted by an expense for credit losses, which is recognized in earnings, and reduced by the charge-off of loan and lease amounts, net of recoveries. For further information on the ACL on loans and leases, see Note 4 - Loans and Leases in the accompanying Notes to Unaudited Consolidated Financial Statements.

Management employs a disciplined process and methodology to establish the ACL on loans and leases that has two basic components: first, an asset-specific component involving individual loans and leases that do not share risk characteristics with other loans and leases and the measurement of expected credit losses for such individual loans; and second, a collective (pooled) component for estimated expected credit losses for pools of loans and leases that share similar risk characteristics.

Based upon this methodology, management establishes an asset-specific ACL on loans and leases that do not share risk characteristics with other loans and leases based on the amount of expected credit losses calculated on those loans and leases and charges off amounts determined to be uncollectible. Factors we consider in measuring the extent of expected credit loss include payment status, collateral value, borrower financial condition, guarantor support and the probability of collecting scheduled principal and interest payments when due.

When a loan or lease does not share risk characteristics with other loans or leases, management measures expected credit loss as the difference between the amortized cost basis in the loan and the present value of expected future cash flows discounted at the loan’s effective interest rate except that, for collateral dependent loans, credit loss is measured as the difference between the amortized cost basis in the loan and the fair value of the underlying collateral. The fair value of the collateral is adjusted for the estimated cost to sell if repayment or satisfaction of a loan is dependent on the sale (rather than only on the operation) of the collateral. If the calculated expected credit loss is determined to be permanent, fixed or nonrecoverable, the credit loss portion of the loan will be charged off against the ACL on loans and leases. Loans and leases designated as having significantly increased credit risk are generally placed on nonaccrual and remain in that status until all principal and interest payments are current and the prospects for future payments in accordance with the loan agreement are reasonably assured, at which point the loan is returned to accrual status.

In estimating the component of the ACL on loans and leases that share common risk characteristics, loans and leases are segregated into portfolio segments based on federal call report codes which classify loans and leases based on the primary collateral supporting the loan and lease. Methods utilized by management to estimate expected credit losses include a discounted cash flow (“DCF”) methodology that discounts instrument-level contractual cash flows, adjusted for prepayments
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and curtailments, incorporating loss expectations, and a weighted average remaining maturity (“WARM”) methodology which contemplates expected losses at a pool-level, utilizing historic loss information.

Under both methodologies, management estimates the ACL on loans and leases using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. After the end of the reasonable and supportable forecast period, the loss rates revert to the long-term mean loss rate, or in the case of an input-driven predictive method, the long-term mean of the input, using a reversion period where applicable. Historical credit loss experience, including examination of loss experience at representative peer institutions when the Corporation’s first-party loss history does not result in estimations that are meaningful to users of the Corporation’s Consolidated Financial Statements, provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are considered for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in unemployment rates, property values, or other relevant factors.

The DCF methodology uses inputs of current and forecasted macroeconomic indicators to predict future loss rates. The current macroeconomic indicator utilized by the bank is the Pennsylvania unemployment rate. In building the CECL model, a correlation between this indicator and historic loss levels was developed, enabling a prediction of future loss rates related to future Pennsylvania unemployment rates. The portfolio segments utilizing the DCF methodology as of June 30, 2020 included: CRE - owner-occupied and nonowner-occupied loans, home equity lines of credit, residential mortgages (first and junior liens), construction loans and consumer loans.

The WARM methodology uses combined historic loss rates for the Bank and peer institutions, if necessary, gathered from Call Report filings. The selected period for which historic loss rates are used is dependent on management's evaluation of current conditions and expectations of future loss conditions. The portfolio segments utilizing the WARM methodology as of June 30, 2020 included leases and commercial and industrial loans.
Impact of COVID-19

In the first quarter of 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. The COVID-19 pandemic has resulted in authorities implementing numerous measures attempting to contain the spread and impact of COVID-19. Our banking products and services are delivered primarily in Southeastern Pennsylvania, Southern and Central New Jersey, and Delaware, each of which had a stay at home orderstay-at-home orders in place and had closedmandated closure all non-essential businesses during a period of the second quarterperiods of 2020.

To address the economic impact in the U.S., in March and April 2020, the President Trump signed into law four economic stimulus packages to provide relief to businesses and individuals, including the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act). Among other measures, the CARES Act created funding for the Small Business Administration (SBA) Paycheck Protection Program (PPP), which providesprovided forgivable loans to small businesses to help them keep their employees on payroll and to make other eligible payments. The originalfirst round of PPP funding for theallocated $349 billion to small businesses. This first round was followed by two subsequent rounds of PPP was fully allocated by mid-Aprilfunding of $310 billion, expiring in August 2020 with additional funding made available on April 24, 2020 under the Paycheck Protection Program and Health Care Enhancement Act.$284 billion expiring March 31, 2021 or until funds are exhausted.

On April 9, 2020, the Federal Reserve took additional steps to bolster the economy by providing additional funding sources for small and mid-sized businesses as well as for state and local governments as they workworked through cash flow stresses caused by the COVID-19 pandemic. Additionally, the Federal Reserve has takentook other steps to provide fiscal and monetary stimuli, including reducing the federal funds rate and the interest rate on the Federal Reserve’s discount window, and implementingimplemented programs to promote liquidity in certain securities markets. The Federal Reserve, along with other U.S. banking regulators, has also issued interagency guidance to financial institutions that are working with borrowers affected by the COVID-19 pandemic.

We participated in the PPP and during the second quarter of 2020 originated 1,866 loans with a recorded investment of $307.9 million. Recognizing the significance of operational risk that this portfolio poses, and the continued complexity and uncertainty surrounding evolving regulatory pronouncements regarding various aspects of the PPP, management reviewed several options for continued servicing of the PPP loan portfolio through forgiveness and beyond. After thoughtful consideration, management decided that it is in the best interests of both the Bank and our PPP borrowers that the loans be serviced by an organization that has the servicing infrastructure in place to support the significant volume and short timeframe involved in the complex and evolving PPP forgiveness process. In that regard, in late June the Bank sold substantially all of its PPP loans to The Loan Source, Inc., which, together with its servicing partner, ACAP SME, LLC, have taken over the forgiveness and ongoing servicing process for the PPP loans. In connection with the sale, the Corporation recognized a $2.4 million gain on the sale of approximately $292.1 million of PPP loans in the second quarter of 2020. The remaining loans within the Bank's PPP portfolio were sold in the third quarter of 2020 and did not result in a material impact on our Consolidated Financial Statements. Also, the Corporation recognized $1.8 million of net deferred PPP loan origination fees during the second quarter of 2020, which is included within interest and fees on loans and leases on the Consolidated Statement of Income.
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To provide relief from the economic impacts of COVID-19, the Corporation has offered assistance to our commercial, consumer and small business clients by waiving fees for early CD redemptions, overdrafts, and minimum deposit balance requirements, as well as implemented consumer and commercial loan modification programs.

The Corporation’s modification program for consumer credit products includes a six-month deferral of principal and interest, with interest continuing to accrue on unpaid principal. Upon completion of the deferral period, resumed payments will be applied to the interest accrued during the deferral period, followed by principal and interest payments through the extended maturity date. As of June 30, 2020, 209March 31, 2021, 31 consumer loans in the amount of $48.3$4.5 million were within theira deferral periodsperiod under the program. Management is taking proactive measures and is working prudently with borrowers who may be unable to meet their obligations due to continuing financial challenges caused by COVID-19. As a result, an additional deferral period may be extended to a borrower who is continuing to experience financial difficulties associated with the Bank continues to receive and process applications, management expects additional modifications under the program.COVID-19 pandemic.

The Corporation’s modification programs for commercial loan and lease products include a three- or six-month deferral of principal and interest or a three- or six-month period of interest-only payments, with interest continuing to accrue on unpaid principal. Upon completion of the deferral period, resumed payments will be applied to the interest accrued during the deferral period, followed by principal and interest payments through the contractual maturity date. As of June 30, 2020 1,532March 31, 2021 42 commercial loans and leases in the amount of $721.9$61.5 million were within theira deferral periodsperiod under the program. Management is taking proactive measures and is working prudently with borrowers who may be unable to meet their obligations due to continuing financial challenges caused by COVID-19. As a result, the Bank continuesmay enter into an additional modification in an effort to receivemitigate losses for the Bank and process applications, management expects additional modifications under the program.borrower.

Based on the provisions of the CARES Act, short-term COVID-19 related modifications to consumer and commercial loans that were not more than 30 days past due as of December 31, 2019 are exempt from TDR classification under GAAP. In addition, the bank regulatory agencies issued interagency guidance stating that COVID-19 related short-term modifications (i.e., six months or less) granted to consumer or commercial loans that were less than 30 days past due as of the loan modification program implementation date are not considered TDRs. For more information, see Note 1 –Section F - Troubled Debt Restructurings Basis of Presentation, Principles of Consolidation, and Significant Accounting Policies and Note 4 –Loans5 – Loans and Leases,in the Notes to the Unaudited Consolidated Financial Statements.

As discussed in more detail below, we recorded an increase ina recovery of PCL and ACL on loans and leases bothduring the first quarter of which were 2021,driven by the current and forward-looking adverseeasing of the economic impacts of the COVID-19 pandemic.

Due to the high degree of uncertainty surrounding the COVID-19 pandemic, the full extent of COVID-19’s effects on our business, operations or the economy as a whole are not yet known. However, the COVID-19 pandemic is expected to have a complexknown and significant adverse impact on the economy, the banking industrymay adversely affect our business, results of operations and the Corporationfinancial condition in future fiscal periods. For more information on how the risks related to COVID-19, may adversely affectsee the section titled Risk Factors in Part I, Item 1A of our business, results of operations and financial condition, see Part II, Item 1A. Risk Factors.2020 Annual Report.


Executive Overview 

The following items highlight the Corporation’s results of operations for the three and six months ended June 30, 2020,March 31, 2021, as compared to the same period in 2019,2020, and the changes in its financial condition as of June 30, 2020March 31, 2021 as compared to December 31, 2019.2020. More detailed information related to these highlights can be found in the sections that follow.

Effective January 1, 2020, the Corporation adopted ASU 2016-13 (Topic 326), “Measurement of Credit Losses on Financial Instruments,” which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The Corporation adopted ASC 326 using the modified retrospective approach method for all financial assets measured at amortized cost and OBS credit exposures. Results for reporting periods beginning after January 1, 2020 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. In conjunction with the adoption of CECL, the Corporation has revised its segmentation to align with the methodology applied in determining the ACL for loans and leases under CECL, which is based on federal call report codes which classify loans based on the primary collateral supporting the loan. Segmentation prior to the adoption of CECL was based on product type or purpose. As such, certain reclassifications were made to conform prior-period amounts to current period presentation. For more information, see Note 1 – Basis of Presentation, Principles of Consolidation, and Significant Accounting Policies to the Unaudited Consolidated Financial Statements.

Three Month Results of Operations

Net income attributable to the Corporation was $15.0$17.1 million, or $0.75$0.85 diluted earnings per share, for the three months ended June 30, 2020March 31, 2021 as compared to $15.8a net loss of $(11.2) million, or $0.78$(0.56) diluted earnings per share for the same period in 2019.2020.

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Return on average equity (“ROAE”) and return on average assets (“ROAA”) for the three months ended June 30, 2020March 31, 2021 were 10.07%11.09% and 1.16%1.39%, respectively, as compared to ROAE and ROAA of 10.89%(7.30)% and 1.36%(0.93)%, respectively, for the same period in 2019.

Tax-equivalent net interest income increased $741 thousand, or 2.0%, to $37.5 million for the three months ended June 30, 2020, as compared to $36.7 million for the same period in 2019.

Provision for credit losses (“PCL”) on loans and leases of $4.3 million for the three months ended June 30, 2020 was an increase of $2.7 million from the $1.6 million PCL on loans and leases recorded for the same period in 2019.

Noninterest income of $20.6 million for the three months ended June 30, 2020 increased $345 thousand as compared to $20.2 million for the same period in 2019.

Capital markets revenue of $3.0 million for the three months ended June 30, 2020 increased $1.5 million as compared to the same period in 2019. Fees for wealth management services and insurance commissions of $9.1 million and $1.3 million, respectively, for the three months ended June 30, 2020 decreased $2.4 million and $394 thousand, respectively, as compared to the same period in 2019.

Noninterest expense of $34.6 million for the three months ended June 30, 2020 decreased $552 thousand, from $35.2 million for the same period in 2019.

Six Month Results of Operations

Net income attributable to the Corporation for the six months ended June 30, 2020 was $3.9 million, a decrease of $22.6 million as compared to $26.5 million for the same period in 2019. Diluted earnings per share was $0.19 for the six months ended June 30, 2020 as compared to $1.31 for the same period in 2019.

ROAE and ROAA for the six months ended June 30, 2020 were 1.28% and 0.15%, respectively, as compared to 9.25% and 1.16% respectively, for the same period in 2019.2020.

Tax-equivalent net interest income decreased $595 thousand,$1.5 million, or 0.8%4.3%, to $73.9$34.9 million for the sixthree months ended June 30, 2020,March 31, 2021, as compared to $74.5$36.4 million for the same period in 2019.2020.

PCLThe provision for credit losses (“PCL”), which includes the provision for credit losses on loans and leases, of $36.6 millionoff-balance sheet credit exposures, and accrued interest receivable on COVID-19 deferrals, for the sixthree months ended June 30, 2020March 31, 2021 was an increasea recovery of $31.2$5.2 million, a decrease of $40.6 million from the $5.4$35.4 million PCL on loans and leases recorded for the same period in 2019.2020.

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Noninterest income of $38.9$19.8 million for the sixthree months ended June 30, 2020 decreased $608 thousandMarch 31, 2021 increased $1.5 million as compared to $39.5$18.3 million for the same period in 2019.

Capital markets revenue of $5.3 million for the six months ended June 30, 2020 increased $1.6 million as compared to the same period in 2019.2020. Fees for wealth management services of $20.2$12.8 million for the sixthree months ended June 30, 2020 decreasedMarch 31, 2021 increased $1.7 million as compared to the same period in 2019. Insurance2020. Capital markets revenue and insurance commissions of $2.8$1.6 million and of $1.5 million, respectively, for the sixthree months ended June 30, 2020March 31, 2021 decreased $533$765 thousand and $69 thousand, respectively, as compared to the same period in 2019.2020.

Noninterest expense of $71.1$37.7 million for the sixthree months ended June 30, 2020 decreased $3.8March 31, 2021 increased $4.3 million, from $74.9$33.4 million for the same period in 2019.2020. Included in noninterest expense for the three months ended March 31, 2021 are $1.6 million of due diligence and merger-related expenses related to the pending merger with WSFS. These expenses primarily consisted of legal fees, investment banker fees and board of director fees.


Changes in Financial Condition

Total assets of $5.27$4.91 billion as of June 30, 2020 increased $8.1March 31, 2021 decreased $517.5 million from $5.26$5.43 billion as of December 31, 2019.2020.

Total shareholders’ equity of $603.7$623.1 million as of June 30, 2020 decreased $8.5 millionMarch 31, 2021 increased $774 thousand from $612.2$622.3 million as of December 31, 2019.2020.

Total portfolio loans and leases as of June 30, 2020March 31, 2021 were $3.72$3.63 billion, an increase of $32.9$4.8 million from $3.69$3.63 billion as of December 31, 2019.2020.

Total non-performing loans and leases of $8.4$5.2 million represented 0.23%0.14% of portfolio loans and leases as of June 30, 2020March 31, 2021 as compared to $10.6$5.3 million, or 0.29%0.15% of portfolio loans and leases as of December 31, 2019.2020.
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The $55.0$47.6 million ACL on loans and leases, as of June 30, 2020,March 31, 2021, represented 1.48%1.31% of portfolio loans and leases, as compared to $22.6$53.7 million or 0.61%1.48% of portfolio loans and leases as of December 31, 2019.2020.

Total deposits of $4.24$3.90 billion as of June 30, 2020 increased $401.4March 31, 2021 decreased $474.0 million from $3.84$4.38 billion as of December 31, 2019.2020.

Wealth assets under management, administration, supervision and brokerage as of June 30, 2020March 31, 2021 were $17.01$20.06 billion, an increase of $464.8 million$1.08 billion from $16.55$18.98 billion as of December 31, 2019.2020.

Key Performance Ratios
 
Key financial performance ratios for the three and six months ended June 30,March 31, 2021 and 2020 and 2019 are shown in the table below:
Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
March 31,
2020201920202019 20212020
Return on average equityReturn on average equity10.07 %10.89 %1.28 %9.25 %Return on average equity11.09 %(7.30)%
Return on average assetsReturn on average assets1.16  1.36  0.15  1.16  Return on average assets1.39 (0.93)
Tax-equivalent net interest marginTax-equivalent net interest margin3.22  3.55  3.30  3.65  Tax-equivalent net interest margin3.16 3.38 
Equity to assets ratioEquity to assets ratio11.49  12.50  12.07  12.54  Equity to assets ratio12.58 12.69 
Basic earnings per shareBasic earnings per share$0.75  $0.78  $0.19  $1.31  Basic earnings per share$0.86 $(0.56)
Diluted earnings per shareDiluted earnings per share0.75  0.78  0.19  1.31  Diluted earnings per share0.85 (0.56)
Dividends paid or accrued per shareDividends paid or accrued per share0.26  0.25  0.52  0.50  Dividends paid or accrued per share0.27 0.26 
Dividends paid or accrued per share to net income per basic common shareDividends paid or accrued per share to net income per basic common share34.7 %32.1 %273.7 %38.2 %Dividends paid or accrued per share to net income per basic common share31.4 %(46.4)%
 






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The following table presents certain key period-end balances and ratios as of June 30, 2020March 31, 2021 and December 31, 2019:2020:

(dollars in millions, except per share amounts)(dollars in millions, except per share amounts)June 30,
2020
December 31,
2019
(dollars in millions, except per share amounts)March 31,
2021
December 31,
2020
Book value per shareBook value per share$30.29  $30.42  Book value per share$31.34 $31.18 
ACL on loans and leases as a percentage of portfolio loans and leasesACL on loans and leases as a percentage of portfolio loans and leases1.48 %0.61 %ACL on loans and leases as a percentage of portfolio loans and leases1.31 %1.48 %
Tier I capital to risk weighted assetsTier I capital to risk weighted assets11.27  11.42  Tier I capital to risk weighted assets12.08 11.86 
Loan to deposit ratioLoan to deposit ratio87.7  96.0  Loan to deposit ratio93.1 82.9 
Wealth assets under management, administration, supervision and brokerageWealth assets under management, administration, supervision and brokerage$17,012.9  $16,548.1  Wealth assets under management, administration, supervision and brokerage$20,059.4 $18,976.5 
Portfolio loans and leasesPortfolio loans and leases3,722.2  3,689.3  Portfolio loans and leases3,633.2 3,628.4 
Total assetsTotal assets5,271.3  5,263.3  Total assets4,914.5 5,432.0 
Total shareholders’ equityTotal shareholders’ equity603.7  612.2  Total shareholders’ equity623.1 622.3 
 
The following sections discuss, in greater detail, the Corporation’s results of operations for the three and six months ended June 30, 2020,March 31, 2021, as compared to the same period in 2019,2020, and the changes in its financial condition as of June 30, 2020March 31, 2021 as compared to December 31, 2019.2020.

Other Matters

Crusader Servicing Corporation (“Crusader”), which was an 80% owned subsidiary of Royal Bank America that was acquired by the Bank in the RBPI merger,Merger, along with the Bank as successor-in-interest to Royal Bank America, are defendants in the case captioned Snyder v. Crusader Servicing Corporation et al., Case No. 2007-01027, in the Court of Common Pleas of Montgomery County, Pennsylvania. The case involves claims brought by a former Crusader shareholder in 2007 against Crusader, its former directors and remaining shareholders related, among other things, to a purported failure to pay amounts allegedly due to Snyder for his shares of Crusader stock. On May 1, 2019, the Court rendered a decision in favor of Snyder and ordered Crusader to pay Snyder the amount of $2,190,000 plus interest at the rate of 6% from December 1, 2006. The matter was appealed, and on March 18, 2020, the Superior Court of the Commonwealth of Pennsylvania returned an opinion reversing in part and affirming in part the trial court's judgment. The effect of this was to vacate the initial judgment of $2,190,000 plus interest,awarded by the trial court, and instead to require an appraisal process in accordance with Crusader's Shareholders' Agreement to determine the value of
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Mr. Snyder's shares. The parties anticipate the appraisal to commence within the coming months. We do not believe that this ruling and any monetary award ultimately payable by Crusader will be material to the consolidated financial position, consolidated results of operations or consolidated cash flows of the Corporation.

Components of Net Income
 
Net income is comprised of five major elements:

Net Interest Income, or the difference between the interest income earned on loans, leases and investments and the interest expense paid on deposits and borrowed funds;
Provision for Credit Losses on Loans and Leases, or the amount added tochanges in the ACL on loans and leases, to provide for estimated inherent losses on portfolio loansoff-balance sheet credit exposures, and leases;other financial assets measured at amortized cost;
Noninterest Income, which is made up primarily of wealth management revenue, capital markets revenue, gains and losses from the sale of residential mortgage loans, gains and losses from the sale of available for sale investment securities and other fees from loan and deposit services;
Noninterest Expense, which consists primarily of salaries and employee benefits, occupancy, intangible asset amortization, professional fees, due diligence, merger-related and merger integration expenses, and other operating expenses; and
Income Tax Expense, which includes state and federal jurisdictions.

TAX-EQUIVALENT NET INTEREST INCOME
 
Net interest income is the primary source of the Corporation’s revenue. The tables within "Management’s Discussion and Analysis of Results of Operation and Financial Condition – Analyses of Interest Rates and Interest Differential” beginning at page 54below table presentspresent a summary, for the three and six months ended June 30,March 31, 2021 and 2020, and 2019, of the Corporation’s average balances and tax-equivalent yields earned on its interest-earning assets and the rates paid on its interest-bearing liabilities. The tax-equivalent net interest margin is the tax-equivalent net interest income as a percentage of average interest-earning assets. The tax-equivalent net interest spread is the difference between the weighted average tax-equivalent yield on
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interest-earning assets and the weighted average cost of interest-bearing liabilities. The effect of noninterest-bearing liabilities represents the effect on the net interest margin of net funding provided by noninterest-earning assets, noninterest-bearing liabilities and shareholders’ equity.

Three Months Ended June 30, 2020March 31, 2021 Compared to the Same Period in 20192020

For the three months ended June 30, 2020,March 31, 2021, tax-equivalent net interest income increased $741 thousand,decreased $1.5 million, or 2.0%4.3%, to $37.5$34.9 million, as compared to $36.7$36.4 million for the same period in 2019.2020.

Items contributing to the increaseThe change in tax-equivalent net interest income adjusted for purchase accounting included a decrease of $5.2 million in interest paid on deposits, partially offset by decreases of $4.1$7.8 million, $6.3 million, $443 thousand, and $642$132 thousand in tax-equivalent interest and fees earned on loans and leases, interest paid on deposits, interest expense on short-term borrowings, and tax-equivalent interest income on available for sale investment securities, respectively, for the three months ended June 30, 2020March 31, 2021 as compared to the same period in 2019.

Interest expense on deposits for the three months ended June 30, 2020 decreased $5.2 million as compared to the same period in 2019. The decrease was primarily due to a 78 basis point decrease in the rate paid on average interest-bearing deposits for the three months ended June 30, 2020 as compared to the same period in 2019. The effect of the decrease in the tax-equivalent rate paid was partially offset by an increase of $174.3 million in average interest-bearing deposits for the three months ended June 30, 2020 as compared to the same period in 2019.2020.

Tax-equivalent interest and fees earned on loans and leases for the three months ended June 30, 2020March 31, 2021 decreased $4.1$8.2 million as compared to the same period in 2019.2020. The decrease was primarily due to a 95 basis point decrease in the tax-equivalent yield on average loans and leases for the three months ended June 30, 2020March 31, 2021 was 3.90%, a 72 basis point decrease as compared to the same period in 2019. The effect of the decrease in the tax-equivalent yield was partially offset by an increase of $415.8 million in average2020. Average loans and leases decreased $131.2 million for the three months ended June 30, 2020March 31, 2021 as compared to same period in 2019. Included in tax-equivalent interest and fees earned on loans and leases for the three months ended June 30, 2020 was the recognition of $1.8 million of net deferred PPP loan origination fees.2020.

Tax-equivalent interest income on available for sale investment securities for the three months ended June 30, 2020March 31, 2021 decreased $642$132 thousand as compared to the same period in 2019.2020. The decrease was primarily due to a 27 basis point decrease in the tax-equivalent yield on average available for sale investment securities for the three months ended June 30, 2020March 31, 2021 was 1.63%, a 76 basis point decrease as compared to the same period in 2019 coupled with a decrease of $47.1 million in average2020. Average available for sale investment securities increased $216.5 million for the three months ended June 30, 2020March 31, 2021 as compared to the same period in 2019.2020.


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Six Months Ended June 30, 2020 Compared toInterest expense on deposits for the Same Period in 2019

For the sixthree months ended June 30, 2020, tax-equivalent net interest income decreased $595 thousand, or 0.8%, to $73.9 million, as compared to $74.5 million for the same period in 2019.

Items contributing to the decrease in tax-equivalent net interest income included decreases of $6.2 million and $967 thousand in tax-equivalent interest and fees earned on loans and leases and tax-equivalent interest income on available for sale investment securities, respectively, for the six months ended June 30, 2020 as compared to the same period in 2019. The effect of these decreases on tax-equivalent net interest income were partially offset by decreases of $5.6 million and $615 thousand in interest paid on deposits and interest paid on and short-term borrowings, respectively, for the six months ended June 30, 2020 as compared to the same period in 2019.

Tax-equivalent interest and fees earned on loans and leases for the six months ended June 30, 2020March 31, 2021 decreased $6.2 million as compared to the same period in 2019.2020. The decreaserate paid on average interest-bearing deposits for the three months ended March 31, 2021 was primarily due to0.22%, an 8086 basis point decrease in the tax-equivalent yield on average loans and leases for the six months ended June 30, 2020 as compared to the same period in 2019. The effect of the decrease in the tax-equivalent yield was partially offset by an increase of $338.1 million in average loans and leases for the six months ended June 30, 2020 as compared to same period in 2019. Included in tax-equivalent interest and fees earned on loans and leases for the six months ended June 30, 2020 was the recognition of $1.8 million of net deferred PPP loan origination fees.

Tax-equivalent interest income on available for sale investment securities for the six months ended June 30, 2020 decreased $967 thousand as compared to the same period in 2019. The decrease was primarily due to a 20 basis point decrease in the tax-equivalent yield on average available for sale investment securities for the six months ended June 30, 2020 as compared to the same period in 2019 coupled with a decrease of $39.8 million in average available for sale investment securities for the six months ended June 30, 2020 as compared to the same period in 2019.

Interest expense on2020. Average interest-bearing deposits for the sixthree months ended June 30, 2020March 31, 2021 decreased $5.6$240.7 million as compared to the same period in 2019. The decrease was primarily due to a 47 basis point decrease in the rate paid on average interest-bearing deposits for the six months ended June 30, 2020 as compared to the same period in 2019. The effect of the decrease in the rate paid was partially offset by an increase of $176.6 million in average interest-bearing deposits for the six months ended June 30, 2020 as compared to the same period in 2019.2020.

Interest expense on short-term borrowings for the sixthree months ended June 30, 2020March 31, 2021 decreased $615$443 thousand as compared to the same period in 2019.2020. The decrease was primarily due to a 133$108.6 million decrease in average short-term borrowings for the three months ended March 31, 2021 as compared to the same period in 2020 coupled with a 117 basis point decrease in the rate paid on average short-term borrowings for the sixthree months ended June 30, 2020March 31, 2021 as compared to the same period in 2019. The effect of the decrease in the rate paid was partially offset by an increase of $25.9 million in average short-term borrowings for the six months ended June 30, 2020 as compared to the same period in 2019.2020.


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Analyses of Interest Rates and Interest Differential
 
The tables below present the major asset and liability categories on an average daily balance basis for the periods presented, along with interest income, interest expense and key rates and yields.
 
Three Months Ended June 30, Three Months Ended March 31,
20202019 20212020
(dollars in thousands)(dollars in thousands)Average
Balance
Interest
Income/
Expense
Average
Rates
Earned/
Paid
Average
Balance
Interest
Income/
Expense
Average
Rates
Earned/
Paid
(dollars in thousands)Average
Balance
Interest
Income/
Expense
Average
Rates
Earned/
Paid
Average
Balance
Interest
Income/
Expense
Average
Rates
Earned/
Paid
Assets:Assets:Assets:
Interest-bearing deposits with banksInterest-bearing deposits with banks$195,966  $37  0.08 %$37,843  $73  0.77 %Interest-bearing deposits with banks$110,972 $22 0.08 %$50,330 $111 0.89 %
Investment securities - available for sale:Investment securities - available for sale:Investment securities - available for sale:
TaxableTaxable516,823  2,775  2.16  560,999  3,400  2.43  Taxable735,508 2,947 1.62 516,244 3,065 2.39 
Tax-exempt(4)
Tax-exempt(4)
4,572  26  2.29  7,530  43  2.29  
Tax-exempt(4)
2,170 14 2.62 4,909 28 2.29 
Total investment securities – available for saleTotal investment securities – available for sale521,395  2,801  2.16  568,529  3,443  2.43  Total investment securities – available for sale737,678 2,961 1.63 521,153 3,093 2.39 
Investment securities – held to maturityInvestment securities – held to maturity13,126  73  2.24  10,417  71  2.73  Investment securities – held to maturity14,329 73 2.07 13,195 87 2.65 
Investment securities – tradingInvestment securities – trading7,800  24  1.24  8,572  24  1.12  Investment securities – trading8,618 19 0.89 8,528 25 1.18 
Loans and leases(1)(2)(3)(4)
Loans and leases(1)(2)(3)(4)
3,940,032  40,779  4.16  3,524,219  44,903  5.11  
Loans and leases(1)(2)(3)(4)
3,607,214 34,674 3.90 3,738,386 42,898 4.62 
Total interest-earning assetsTotal interest-earning assets4,678,319  43,714  3.76  4,149,580  48,514  4.69  Total interest-earning assets4,478,811 37,749 3.42 4,331,592 46,214 4.29 
Cash and due from banksCash and due from banks16,263  13,725  Cash and due from banks10,824 12,479 
ACL on loans and leasesACL on loans and leases(54,113) (20,844) ACL on loans and leases(53,582)(25,786)
Other assetsOther assets585,605  509,164  Other assets532,489 526,633 
Total assetsTotal assets$5,226,074  $4,651,625  Total assets$4,968,542 $4,844,918 
Liabilities:Liabilities:Liabilities:
Savings, NOW, and market rate accountsSavings, NOW, and market rate accounts$2,313,150  $2,341  0.41  $1,928,755  $5,040  1.05  Savings, NOW, and market rate accounts$2,178,730 $374 0.07 $2,197,279 $4,981 0.91 
Wholesale depositsWholesale deposits245,052  486  0.80  345,782  2,143  2.49  Wholesale deposits117,710 257 0.89 253,322 977 1.55 
Retail time depositsRetail time deposits410,911  1,649  1.61  520,317  2,472  1.91  Retail time deposits316,564 793 1.02 403,111 1,679 1.68 
Total interest-bearing depositsTotal interest-bearing deposits2,969,113  4,476  0.61  2,794,854  9,655  1.39  Total interest-bearing deposits2,613,004 1,424 0.22 2,853,712 7,637 1.08 
Short-term borrowingsShort-term borrowings136,816  232  0.68  68,529  357  2.09  Short-term borrowings32,020 10 0.13 140,585 453 1.30 
Long-term FHLB advancesLong-term FHLB advances46,161  155  1.35  52,397  269  2.06  Long-term FHLB advances39,921 203 2.06 47,335 244 2.07 
Subordinated notesSubordinated notes98,770  1,144  4.66  98,587  1,144  4.65  Subordinated notes98,904 1,034 4.24 98,725 1,145 4.66 
Junior subordinated debtJunior subordinated debt21,814  229  4.22  21,637  352  6.53  Junior subordinated debt21,955 198 3.66 21,768 295 5.45 
Total interest-bearing liabilitiesTotal interest-bearing liabilities3,272,674  6,236  0.77  3,036,004  11,777  1.56  Total interest-bearing liabilities2,805,804 2,869 0.41 3,162,125 9,774 1.24 
Noninterest-bearing depositsNoninterest-bearing deposits1,126,139  909,945  Noninterest-bearing deposits1,345,253 894,264 
Other liabilitiesOther liabilities226,698  124,211  Other liabilities192,495 173,519 
Total noninterest-bearing liabilitiesTotal noninterest-bearing liabilities1,352,837  1,034,156  Total noninterest-bearing liabilities1,537,748 1,067,783 
Total liabilitiesTotal liabilities4,625,511  4,070,160  Total liabilities4,343,552 4,229,908 
Shareholders’ equityShareholders’ equity600,563  581,465  Shareholders’ equity624,990 615,010 
Total liabilities and shareholders’ equityTotal liabilities and shareholders’ equity$5,226,074  $4,651,625  Total liabilities and shareholders’ equity$4,968,542 $4,844,918 
Net interest spreadNet interest spread2.99  3.13  Net interest spread3.01 3.05 
Effect of noninterest-bearing sourcesEffect of noninterest-bearing sources0.23  0.42  Effect of noninterest-bearing sources0.15 0.33 
Net interest income/margin on earning assets(4)
Net interest income/margin on earning assets(4)
$37,478  3.22  $36,737  3.55  
Net interest income/margin on earning assets(4)
$34,880 3.16 $36,440 3.38 
Tax-equivalent adjustment(4)
Tax-equivalent adjustment(4)
$93  0.01 %$126  0.01 %
Tax-equivalent adjustment(4)
$99 0.01 %$107 0.01 %
 
(1)Non-accrual loans have been included in average loan balances, but interest on non-accrual loans has not been included for purposes of determining interest income.
(2)Includes portfolio loans and leases and loans held for sale.
(3)Interest on loans and leases includes net accretion of deferred fees of $258$560 thousand and $634$362 thousand for the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively.
(4)Tax rate used for tax-equivalent calculations is 21% for 20202021 and 2019.2020.



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 Six Months Ended June 30,
 20202019
(dollars in thousands)Average
Balance
Interest
Income/
Expense
Average
Rates
Earned/
Paid
Average
Balance
Interest
Income/
Expense
Average
Rates
Earned/
Paid
Assets:
Interest-bearing deposits with banks$123,148  $148  0.24 %$35,306  $205  1.17 %
Investment securities - available for sale:
Taxable516,534  5,840  2.27  552,391  6,763  2.47  
Tax-exempt(4)
4,740  54  2.29  8,656  98  2.28  
Total investment securities – available for sale521,274  5,894  2.27  561,047  6,861  2.47  
Investment securities – held to maturity13,160  160  2.44  9,615  138  2.89  
Investment securities – trading8,164  49  1.21  8,103  46  1.14  
Loans and leases(1)(2)(3)(4)
3,839,208  83,677  4.38  3,501,107  89,861  5.18  
Total interest-earning assets4,504,954  89,928  4.01  4,115,178  97,111  4.76  
Cash and due from banks14,371  14,068  
Allowance for loan and lease losses(39,950) (20,368) 
Other assets556,120  489,794  
Total assets$5,035,495  $4,598,672  
Liabilities:
Savings, NOW, and market rate accounts$2,255,215  $7,322  0.65  $1,863,790  $8,804  0.95  
Wholesale deposits249,186  1,463  1.18  344,247  4,155  2.43  
Retail time deposits407,011  3,328  1.64  526,820  4,793  1.83  
Total interest-bearing deposits2,911,412  12,113  0.84  2,734,857  17,752  1.31  
Short-term borrowings138,700  685  0.99  112,844  1,300  2.32  
Long-term FHLB advances46,748  399  1.72  53,883  547  2.05  
Subordinated notes98,748  2,289  4.66  98,564  2,289  4.68  
Junior subordinated debt21,791  524  4.84  21,616  710  6.62  
Total interest-bearing liabilities3,217,399  16,010  1.00  3,021,764  22,598  1.51  
Noninterest-bearing deposits1,010,202  890,941  
Other liabilities200,107  109,165  
Total noninterest-bearing liabilities1,210,309  1,000,106  
Total liabilities4,427,708  4,021,870  
Shareholders’ equity607,787  576,802  
Total liabilities and shareholders’ equity$5,035,495  $4,598,672  
Net interest spread3.01  3.25  
Effect of noninterest-bearing sources0.29  0.40  
Net interest income/margin on earning assets(4)
$73,918  3.30  $74,513  3.65  
Tax-equivalent adjustment(4)
$200  0.01 %$255  0.01 %

(1)Non-accrual loans have been included in average loan balances, but interest on non-accrual loans has not been included for purposes of determining interest income.
(2)Includes portfolio loans and leases and loans held for sale.
(3)Interest on loans and leases includes deferred fees of $620 thousand and $919 thousand for the six months ended June 30, 2020 and 2019, respectively.
(4)Tax rate used for tax-equivalent calculations is 21% for 2020 and 2019.


Rate/Volume Analysis (tax-equivalent basis)(1)
 
The rate/volume analysis in the table below analyzes dollar changes in the components of interest income and interest expense as they relate to the change in balances (volume) and the change in interest rates (rate) of tax-equivalent net interest income for
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the three and six months ended June 30, 2020March 31, 2021 as compared to the same period in 2019,2020, allocated by rate and volume. The change in interest income and/or expense due to both volume and rate has been allocated to changes in volume.

2020 Compared to 2019 2021 Compared to 2020
(dollars in thousands)(dollars in thousands)Three Months Ended
June 30,
Six Months Ended
June 30,
(dollars in thousands)Three Months Ended
March 31,
increase/(decrease)increase/(decrease)VolumeRateTotalVolumeRateTotalincrease/(decrease)VolumeRateTotal
Interest Income:Interest Income:Interest Income:
Interest-bearing deposits with banksInterest-bearing deposits with banks$1,264  $(1,300) $(36) $1,056  $(1,113) $(57) Interest-bearing deposits with banks$641 $(730)$(89)
Investment securities - taxableInvestment securities - taxable(211) (412) (623) (337) (561) (898) Investment securities - taxable5,429 (5,567)(138)
Investment securities -nontaxableInvestment securities -nontaxable(17) —  (17) (45)  (44) Investment securities -nontaxable(25)11 (14)
Loans and leasesLoans and leases25,614  (29,738) (4,124) 20,061  (26,245) (6,184) Loans and leases(1,556)(6,668)(8,224)
Total interest incomeTotal interest income26,650  (31,450) (4,800) 20,735  (27,918) (7,183) Total interest income4,489 (12,954)(8,465)
Interest expense:Interest expense:Interest expense:
Savings, NOW and market rate accountsSavings, NOW and market rate accounts5,765  (8,464) (2,699) 4,274  (5,756) (1,482) Savings, NOW and market rate accounts(42)(4,565)(4,607)
Wholesale depositsWholesale deposits(625) (1,032) (1,657) (1,146) (1,546) (2,692) Wholesale deposits(526)(194)(720)
Retail time depositsRetail time deposits(518) (305) (823) (1,083) (382) (1,465) Retail time deposits(364)(522)(886)
Short-term borrowingsShort-term borrowings1,587  (1,712) (125) 754  (1,369) (615) Short-term borrowings(350)(93)(443)
Long-term FHLB advancesLong-term FHLB advances(32) (82) (114) (72) (76) (148) Long-term FHLB advances(40)(1)(41)
Subordinated notesSubordinated notes—  —  —  12  (12) —  Subordinated notes14 (125)(111)
Junior subordinated debtJunior subordinated debt20  (143) (123) 17  (203) (186) Junior subordinated debt17 (114)(97)
Total interest expenseTotal interest expense6,197  (11,738) (5,541) 2,756  (9,344) (6,588) Total interest expense(1,291)(5,614)(6,905)
Interest differentialInterest differential$20,453  $(19,712) $741  $17,979  $(18,574) $(595) Interest differential$5,780 $(7,340)$(1,560)

(1) The tax rate used in the calculation of the tax-equivalent income is 21% for 20202021 and 2019.2020.
 
Tax-Equivalent Net Interest Margin
 
The tax-equivalent net interest margin of 3.22%3.16% for the three months ended June 30, 2020March 31, 2021 was a 3322 basis point decrease from 3.55%3.38% for the same period in 2019.2020. The decrease in the tax-equivalent net interest margin was primarily due to the reduced interest rates during the three months ended June 30, 2020March 31, 2021 as compared to the same period in 2019 and driven by management's active balance sheet management in the current interest rate environment.2020.

The tax-equivalent net interest margin and related components for the past five consecutive quarters are shown in the table below:
QuarterQuarterInterest-
Earning
Asset Yield
Interest-
Bearing
Liability Cost
Net Interest
Spread
Effect of Noninterest Bearing SourcesNet Interest
Margin
QuarterInterest-
Earning
Asset Yield
Interest-
Bearing
Liability Cost
Net Interest
Spread
Effect of Noninterest Bearing SourcesNet Interest
Margin
1st Quarter 20211st Quarter 20213.42%0.41%3.01%0.15%3.16%
4th Quarter 20204th Quarter 20203.330.452.880.163.04
3rd Quarter 20203rd Quarter 20203.420.582.840.193.03
2nd Quarter 20202nd Quarter 20203.76%0.77%2.99%0.23%3.22%2nd Quarter 20203.760.772.990.233.22
1st Quarter 20201st Quarter 20204.291.243.050.333.381st Quarter 20204.291.243.050.333.38
4th Quarter 20194.391.412.980.383.36
3rd Quarter 20194.691.553.140.403.54
2nd Quarter 20194.691.563.130.423.55

Interest Rate Sensitivity

Management actively manages the Corporation’s interest rate sensitivity position. The objectives of interest rate risk management are to control exposure of net interest income changes associated with interest rate movements and to achieve sustainable growth in net interest income. The Corporation’s Asset Liability Committee (“ALCO”), using policies approved by
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the Corporation’s Board of Directors, is responsible for the management of the Corporation’s interest rate sensitivity position. The Corporation manages interest rate sensitivity by changing the mix, pricing and re-pricing characteristics of its assets and liabilities. This is accomplished through the management of the investment portfolio, the pricings of loans and deposit offerings and through wholesale funding. Wholesale funding is available from multiple sources including borrowings from the FHLB, the
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Federal Reserve Bank of Philadelphia’s discount window, federal funds from correspondent banks, certificates of deposit from institutional brokers, Certificate of Deposit Account Registry Service (“CDARS”), Insured Network Deposit (“IND”) Program, and Insured Cash Sweep (“ICS”).

Management utilizes several tools to measure the effect of interest rate risk on net interest income. These methods include gap analysis, market value of portfolio equity analysis, and net interest income simulations under various scenarios. TheManagement compares the results of these analyses are compared to limits established by the Corporation’s ALCO policies and makemakes adjustments as appropriate if the results are outside the established limits.

The below table demonstrates the annualized result of an interest rate simulation and the estimated effect that a parallel interest rate shift, or “shock”, in the yield curve and subjective adjustments in deposit pricing, might have on management’s projected net interest income over the next 12 months.

This simulation assumes that there is no growth in interest-earning assets or interest-bearing liabilities over the next twelve months. By definition, the simulation assumes static interest rates and does not incorporate forecasted changes in the yield curve. The changes to net interest income shown below are in compliance with the Corporation’s policy guidelines.

Summary of Interest Rate Simulation
Change in Net Interest Income Over the Twelve Months Beginning After June 30, 2020Change in Net Interest Income Over the Twelve Months Beginning After December 31, 2019Change in Net Interest Income Over the Twelve Months Beginning After March 31, 2021Change in Net Interest Income Over the Twelve Months Beginning After December 31, 2020
AmountPercentageAmountPercentageAmountPercentageAmountPercentage
+300 basis points+300 basis points$5,902  4.13 %$15,357  10.52 %+300 basis points$24,388 16.96 %$24,525 17.35 %
+200 basis points+200 basis points4,291  3.01  10,217  7.00  +200 basis points15,720 10.93 15,172 10.73 
+100 basis points+100 basis points2,534  1.78  5,079  3.48  +100 basis points7,411 5.15 6,298 4.46 
-100 basis points-100 basis points(894) 0.63  (6,817) (4.67) -100 basis points(2,033)1.41 (2,262)(1.60)
 
The above interest rate simulation suggests that the Corporation’s balance sheet is asset sensitive as of June 30, 2020March 31, 2021 in the +100 basis point scenario, demonstrating that a 100 basis point increase in interest rates would have a positive impact on net interest income over the next 12 months. The balance sheet is significantly lessslightly more asset sensitive in a rising-rate environmentthe +100 basis point scenario as of June 30, 2020March 31, 2021 than it was as of December 31, 2019. Rates declined significantly during the quarter2020. This is primarily due to economic conditions related to the COVID-19 pandemic. The Bank responded to these concerns by decreasing ratesaddition of interest-bearing assets at a higher yield combined with a decline in yields on deposit accounts to offset some of the decline that it would experience on the asset side. The reduction of loss of net interest income as rates decline 100 basis points is partially the result of floor rates being implemented on the asset side as well as the inability for rates to decline much further on the deposit side.interest-bearing liabilities.

The interest rate simulation is an estimate based on assumptions, which are derived from past behavior of customers, along with expectations of future behavior relative to interest rate changes. In today’s economic environment and emerging from an extended period of very low interest rates, the reliability of management’s assumptions in the interest rate simulation model is more uncertain than in prior years. Actual customer behavior, as it relates to deposit activity, may be significantly different than expected behavior, which could cause an unexpected outcome and may result in lower net interest income than that derived from the analysis referenced above.

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Gap Analysis
 
The interest sensitivity, or gap analysis, identifies interest rate risk by showing repricing gaps in the Corporation’s balance sheet. All assets and liabilities are reflected based on behavioral sensitivity, which is usually the earliest of: repricing, maturity, contractual amortization, prepayments or likely call dates. Non-maturity deposits, such as NOW, savings and money market accounts are spread over various time periods based on the expected sensitivity of these rates considering liquidity. Non-rate-sensitive assets and liabilities are spread over time periods to reflect management’s view of the maturity of these funds.
 
Non-maturity deposits (demand deposits in particular) are recognized by the industry to have different sensitivities to interest rate environments. Consequently, it is an accepted practice to spread non-maturity deposits over defined time periods to capture that sensitivity. Commercial demand deposits are often in the form of compensating balances, and fluctuate inversely to the level of interest rates; the maturity of these deposits is reported as having a shorter life than typical retail demand deposits. Additionally, the industry practice has suggested distribution limits for non-maturity deposits. However, management has taken a more conservative approach than these limits would suggest by forecasting these deposit types with a shorter maturity. These assumptions are also reflected in the above interest rate simulation.

The following table presents the Corporation’s gap analysis as of June 30, 2020:March 31, 2021:

(dollars in millions)(dollars in millions)0 to 90
Days
91 to 365
Days
1 - 5
Years
Over
5 Years
Non-Rate
Sensitive
Total(dollars in millions)0 to 90
Days
91 to 365
Days
1 - 5
Years
Over
5 Years
Non-Rate
Sensitive
Total
Assets:Assets:      Assets:      
Interest-bearing deposits with banksInterest-bearing deposits with banks$448.1  $—  $—  $—  $—  $448.1  Interest-bearing deposits with banks$37.1 $— $— $— $— $37.1 
Investment securities(1)
Investment securities(1)
89.2  123.1  231.0  107.7  —  551.0  
Investment securities(1)
117.6 118.8 359.8 165.6 — 761.8 
Loans and leases(2)
Loans and leases(2)
1,374.6  497.1  1,395.0  459.6  —  3,726.3  
Loans and leases(2)
1,853.3 332.3 1,121.9 329.0 — 3,636.5 
ACL on loans and leasesACL on loans and leases—  —  —  —  (55.0) (55.0) ACL on loans and leases— — — — (47.6)(47.6)
Cash and due from banksCash and due from banks—  —  —  —  16.4  16.4  Cash and due from banks— — — — 10.3 10.3 
Operating lease right-of-use assetsOperating lease right-of-use assets0.7  2.2  10.4  26.0  —  39.3  Operating lease right-of-use assets0.4 1.3 9.2 22.9 — 33.8 
Other assetsOther assets—  —  —  —  545.2  545.2  Other assets— — — — 482.6 482.6 
Total assetsTotal assets1,912.6  622.4  1,636.4  593.3  506.6  5,271.3  Total assets2,008.4 452.4 1,490.9 517.5 445.3 4,914.5 
Liabilities and shareholders’ equity:Liabilities and shareholders’ equity:Liabilities and shareholders’ equity:
Demand, noninterest-bearingDemand, noninterest-bearing34.5  103.5  355.9  723.6  —  1,217.5  Demand, noninterest-bearing38.7 116.2 402.0 807.8 — 1,364.7 
Savings, NOW and market rateSavings, NOW and market rate92.7  278.0  898.8  1,130.1  —  2,399.6  Savings, NOW and market rate107.9 323.8 937.4 790.0 — 2,159.1 
Time depositsTime deposits92.1  207.6  99.2  1.3  —  400.2  Time deposits55.9 204.3 40.5 1.0 — 301.7 
Wholesale non-maturity depositsWholesale non-maturity deposits146.5  —  —  —  —  146.5  Wholesale non-maturity deposits70.6 — — — — 70.6 
Wholesale time depositsWholesale time deposits0.5  43.4  36.0  —  —  79.9  Wholesale time deposits— 0.5 5.6 — — 6.1 
Short-term borrowingsShort-term borrowings28.9  —  —  —  —  28.9  Short-term borrowings60.0 — — — — 60.0 
Long-term FHLB advancesLong-term FHLB advances—  5.0  39.8  —  —  44.8  Long-term FHLB advances— 39.9 — — — 39.9 
Subordinated notesSubordinated notes30.0  —  68.8  —  —  98.8  Subordinated notes30.0 — 68.9 — — 98.9 
Junior subordinated debenturesJunior subordinated debentures21.8  —  —  —  —  21.8  Junior subordinated debentures22.0 — — — — 22.0 
Operating lease liabilitiesOperating lease liabilities0.8  2.4  11.6  28.9  —  43.7  Operating lease liabilities0.5 1.5 10.7 26.8 — 39.5 
Other liabilitiesOther liabilities—  —  —  —  185.9  185.9  Other liabilities— — — — 128.9 128.9 
Shareholders’ equityShareholders’ equity21.6  64.7  345.0  172.4  —  603.7  Shareholders’ equity22.3 66.8 356.1 177.9 — 623.1 
Total liabilities and shareholders’ equityTotal liabilities and shareholders’ equity469.4  704.6  1,855.1  2,056.3  185.9  5,271.3  Total liabilities and shareholders’ equity407.9 753.0 1,821.2 1,803.5 128.9 4,914.5 
Interest-earning assetsInterest-earning assets1,911.9  620.2  1,626.0  567.3  —  4,725.4  Interest-earning assets2,008.0 451.1 1,481.7 494.6 — 4,435.4 
Interest-bearing liabilitiesInterest-bearing liabilities412.5  534.0  1,142.6  1,131.4  —  3,220.5  Interest-bearing liabilities346.4 568.5 1,052.4 791.0 — 2,758.3 
Difference between interest-earning assets and interest-bearing liabilitiesDifference between interest-earning assets and interest-bearing liabilities1,499.4  86.2  483.4  (564.1) —  1,504.9  Difference between interest-earning assets and interest-bearing liabilities1,661.6 (117.4)429.3 (296.4)— 1,677.1 
Cumulative difference between interest earning assets and interest-bearing liabilitiesCumulative difference between interest earning assets and interest-bearing liabilities$1,499.4  $1,585.6  $2,069.0  $1,504.9  $—  $1,504.9  Cumulative difference between interest earning assets and interest-bearing liabilities$1,661.6 $1,544.2 $1,973.5 $1,677.1 $— $1,677.1 
Cumulative earning assets as a % of cumulative interest-bearing liabilitiesCumulative earning assets as a % of cumulative interest-bearing liabilities463 %268 %199 %147 %Cumulative earning assets as a % of cumulative interest-bearing liabilities580 %269 %200 %161 %

(1) Investment securities include available for sale, held to maturity and trading.
(2) Loans include portfolio loans and leases and loans held for sale. 
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The table above indicates that the Corporation is asset-sensitive in the immediate 90-day time frame and may experience an increase in net interest income during that time period if rates rise. Conversely, if rates decline, net interest income may decline. It should be noted that the gap analysis is only one tool used to measure interest rate sensitivity and should be used in conjunction with other measures such as the interest rate simulation discussed above. The gap analysis measures the timing of changes in rate, but not the true weighting of any specific component of the Corporation’s balance sheet. The asset-sensitive position reflected in this gap analysis is similar to the Corporation’s position at December 31, 2019.2020.

PROVISION FOR CREDIT LOSSES ON LOANS AND LEASES

For the three and six months ended June 30, 2020,March 31, 2021, the Corporation recorded a recovery of PCL on loans and leases of $4.3$5.2 million as compared to a PCL of $35.4 million for the same period in 2020. As of March 31, 2021 the ACL on loans and $36.6leases of $47.6 million respectively, bringing the June 30, 2020 ACL to $55.0 million, or 1.48%was 1.31% of portfolio loans and leases, as compared to an ACL of $21.2$53.7 million, or 0.60%1.48% of portfolio loans and leases, as of June 30, 2019.December 31, 2020. The difference in ACL at June 30, 2020 reflects management's current estimate of expected future credit losses consideringon loans and leases between the adverse economic indicators and other assumptions largelytwo periods was driven by the current and forward-looking economic impacts of the COVID-19 pandemic.pandemic, as well as projected prepayments, included in the estimation of expected credit losses on loans and leases as of March 31, 2021 as compared to December 31, 2020. Net charge-offs for the three months ended June 30, 2020March 31, 2021 were $3.4 million$642 thousand as compared to $1.1$4.1 million for the same period in 2019. Net charge-offs for the six months ended June 30, 2020 were $7.5 million as compared to $3.6 million for the same period in 2019.2020.

The following table details the allocation of the ACL as of the dates indicated:

Allocation of ACLAllocation of ACLAllocation of ACL
June 30, 2020December 31, 2019 March 31, 2021December 31, 2020
(dollars in thousands)(dollars in thousands)ACL% Loans and Leases to Total Loans and LeasesACL% Loans and Leases to Total Loans and Leases(dollars in thousands)ACL% Loans and Leases to Total Loans and LeasesACL% Loans and Leases to Total Loans and Leases
CRE - nonowner-occupiedCRE - nonowner-occupied$15,331  37.0 %$7,960  36.2 %CRE - nonowner-occupied$15,777 38.8 %$19,382 39.6 %
CRE - owner-occupiedCRE - owner-occupied5,083  14.6  2,825  14.3  CRE - owner-occupied5,845 15.9 6,982 15.9 
Home equity lines of creditHome equity lines of credit1,627  5.2  1,114  6.1  Home equity lines of credit1,280 4.3 1,406 4.7 
Residential mortgage - 1st liensResidential mortgage - 1st liens8,198  18.7  2,501  19.2  Residential mortgage - 1st liens5,638 16.6 7,782 17.1 
Residential mortgage - junior liensResidential mortgage - junior liens521  0.9  338  1.0  Residential mortgage - junior liens439 0.8 382 0.7 
ConstructionConstruction6,061  5.7  1,230  5.5  Construction3,124 5.2 2,707 4.4 
Commercial & IndustrialCommercial & Industrial7,988  12.3  3,835  11.7  Commercial & Industrial8,611 13.4 8,087 12.3 
ConsumerConsumer440  1.2  438  1.6  Consumer381 1.1 325 1.1 
LeasesLeases9,725  4.5  2,361  4.5  Leases6,467 4.0 6,656 4.2 
Total ACL on loans and leasesTotal ACL on loans and leases$54,974  100.0 %$22,602  100.0 %Total ACL on loans and leases$47,562 100.0 %$53,709 100.0 %


Asset Quality and Analysis of Credit Risk
 
As of June 30, 2020,March 31, 2021, total nonperforming loans and leases decreased by $2.2 million$109 thousand to $8.4$5.2 million, representing 0.23%0.14% of portfolio loans and leases, as compared to $10.6$5.3 million, or 0.29%0.15% of portfolio loans and leases, as of December 31, 2019.2020. The decrease in nonperforming loans and leases was related to pay-offs and pay-downs of $2.4 million,$798 thousand, charge-offs of $2.7 million, transfers to OREO of $380$349 thousand and the salereturn to accrual status of $1.7 million of$174 thousand. These decreases in nonperforming loans and leases classified as nonperforming as of December 31, 2019,was partially offset by the addition of $5.0$1.2 million of new nonperforming loans and leases during the sixthree months ended June 30, 2020.March 31, 2021. All nonperforming loans are evaluated for impairment and charged-off to net realizable value, when necessary.

As of June 30, 2020,March 31, 2021, the ACL on loans and leases of $55.0$47.6 million represented 1.48%1.31% of portfolio loans and leases, an increasea decrease of 8717 basis points from December 31, 2019.2020. The significant increasedecrease in coverage was driven by theimproving current and forward-looking adverseforecasted economic impactsconditions, which determine the level of the COVID-19 pandemic included in the estimation ofACL required to absorb expected credit losses on loans and leases as of June 30, 2020 as compared to our initial adoption of CECL effective January 1, 2020.losses.

As of June 30, 2020,March 31, 2021, the Corporation had $11.8$8.4 million of TDRs, of which $10.0$7.0 million were in compliance with modified terms and excluded from non-performing loans and leases. As of December 31, 2019,2020, the Corporation had $8.1$8.8 million of TDRs, of which $5.1$7.0 million were in compliance with modified terms, and were excluded from non-performing loans and leases. As of June 30, 2020, 1,690March 31, 2021, 73 loans and leases in the amount of $66.0 million, comprising 1.8% of the Bank's portfolio loans and leases, are within a deferral period under the Bank's consumer and commercial loan and lease modifications totaling $768.2modification programs, as compared to 102 loans and leases in the amount of $75.0 million, which were related to COVID-19comprising 2.1% of the Bank's portfolio loans and were not classifiedleases, as TDRs, had been completed.of December 31, 2020. For more information on our loan modification programs offered in response to the COVID-19 pandemic, which are not classified as TDRs, see COVID-19 Impact within ITEM 2. Management’s
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Discussion and Analysis pandemic, which are not classified as TDRs, see Section F - Troubled Debt Restructurings of Results of Operation and Financial Condition and Note 15Basis of Presentation, Principles of Consolidation,Loans and Significant Accounting PoliciesLeases, in the Notes to the Unaudited Consolidated Financial Statements.

Management continues to be diligent in its credit underwriting process and proactive with its loan review process, including the engagement of the services of an independent outside loan review firm, which helps identify developing credit issues. Proactive steps that are taken include the procurement of additional collateral (preferably outside the current loan structure) whenever possible and frequent contact with the borrower. Management believes that timely identification of credit issues and appropriate actions early in the process serve to mitigate overall risk of loss.

Nonperforming Assets and Related Ratios

Nonperforming assets and related ratios as of June 30, 2020March 31, 2021 and December 31, 20192020 were as follows:
(dollars in thousands)June 30,
2020
December 31,
2019
Nonperforming Assets:
Nonperforming loans and leases$8,418  $10,648  
Other real estate owned—  —  
Total nonperforming assets$8,418  $10,648  
Troubled Debt Restructurings(1):
TDRs included in non-performing loans$1,792  $3,018  
TDRs in compliance with modified terms10,013  5,071  
Total TDRs$11,805  $8,089  
Loan and Lease quality indicators:
Allowance for credit losses on loans and leases to nonperforming loans and leases653.1 %212.3 %
Nonperforming loans and leases to total portfolio loans and leases0.23  0.29  
Allowance for credit losses on loans and leases to total portfolio loans and leases1.48  0.61  
Nonperforming assets to total loans and leases and OREO0.23  0.29  
Nonperforming assets to total assets0.16  0.20  
Total portfolio loans and leases$3,722,165  $3,689,313  
Allowance for credit losses on loans and leases54,974  22,602  

(1) For more information on our loan modification programs offered in response to the COVID-19 pandemic, which are not TDRs, see COVID-19 Impact within ITEM 2. Management’s Discussion and Analysis of Results of Operation and Financial Condition and Note 1 – Basis of Presentation, Principles of Consolidation, and Significant Accounting Policies to the Unaudited Consolidated Financial Statements.
(dollars in thousands)March 31,
2021
December 31,
2020
Nonperforming Assets:
Nonperforming loans and leases$5,197 $5,306 
Other real estate owned— — 
Total nonperforming assets$5,197 $5,306 
Troubled Debt Restructurings:
TDRs included in non-performing loans$1,480 $1,737 
TDRs in compliance with modified terms6,967 7,046 
Total TDRs$8,447 $8,783 
Loan and Lease quality indicators:
Allowance for credit losses on loans and leases to nonperforming loans and leases915.2 %1,012.2 %
Nonperforming loans and leases to total portfolio loans and leases0.14 0.15 
Allowance for credit losses on loans and leases to total portfolio loans and leases1.31 1.48 
Nonperforming assets to total loans and leases and OREO0.14 0.15 
Nonperforming assets to total assets0.11 0.10 
Total portfolio loans and leases$3,633,235 $3,628,411 
Allowance for credit losses on loans and leases47,562 53,709 

NONINTEREST INCOME
 
Three Months Ended June 30, 2020March 31, 2021 Compared to the Same Period in 20192020
 
Noninterest income of $20.6$19.8 million for the three months ended June 30, 2020March 31, 2021 increased $345 thousand$1.5 million as compared to $20.2$18.3 million for the same period in 2019.2020. The increase was primarily due todriven by increases of $2.4$1.9 million and $1.5$1.7 million in other operating income and fees for wealth management services, respectively, partially offset by decreases of $765 thousand and $532 thousand in capital markets revenue and net gain on sale of loans, and capital markets revenue, respectively, partially offset by decreases of $2.4respectively. The $1.9 million $394 thousand, $265 thousand, and $249 thousandincrease in fees for wealth management services, insurance commissions, other operating income and service charges on deposits, respectively. The increase in net gain on sale of loans was driven by a $2.4 million gain on the sale of approximately $292.1 million of PPP loans in the second quarter of 2020. The increase in capital markets revenue was primarily due to increased volumea $978 thousand loss on trading securities recorded in the first quarter of 2020 due to market fluctuations affecting the Corporation's executive and size of interest rate swap transactions with commercial loan customers for the three months ended June 30, 2020director supplemental retirement plan assets, as compared to the same period in 2019. The decrease in fees for wealth management services was primarily driven by $2.2 million of costs incurreda $137 thousand gain on trading securities recorded in the secondfirst quarter of 2020 associated with the wind-down of BMT Investment Advisers.2021.

Six Months Ended June 30, 2020 Compared to the Same Period in 2019

Noninterest income of $38.9 million for the six months ended June 30, 2020 decreased $608 thousand as compared to $39.5 million for the same period in 2019. The decrease was primarily due to decreases of $2.6 million, $1.7 million, and $533 thousand in other operating income, fees for wealth management services, and insurance commissions, respectively, partially offset by increases of $2.8 million and $1.6 million in net gain on sale of loans and capital markets revenue, respectively. The









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increase in net gain on sale of loans was driven by a $2.4 million gain on the sale of approximately $292.1 million of PPP loans in the second quarter of 2020. The increase in capital markets revenue was primarily due to increased volume and size of interest rate swap transactions with commercial loan customers for the six months ended June 30, 2020 as compared to the same period in 2019. The decrease in fees for wealth management services was primarily driven by $2.2 million of costs incurred in the second quarter of 2020 associated with the wind-down of BMT Investment Advisers.

The following table provides details of other operating income for the three and six months ended June 30, 2020March 31, 2021 and 2019:2020:

Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
March 31,
(dollars in thousands)(dollars in thousands)2020201920202019(dollars in thousands)20212020
Visa debit card incomeVisa debit card income$643  $431  $1,174  $850  Visa debit card income$643 $531 
BOLI incomeBOLI income330  303  650  597  BOLI income328 320 
Commissions and feesCommissions and fees264  344  568  699  Commissions and fees355 304 
Safe deposit box rentalsSafe deposit box rentals82  87  162  171  Safe deposit box rentals73 80 
Other investment incomeOther investment income20  411  39  447  Other investment income230 19 
Rental incomeRental income  17  16  Rental income
Gain on trading investments1,017  214  39  946  
Recovery of purchase accounting fair value loan mark—  36  —  48  
Gain (loss) on trading investmentsGain (loss) on trading investments137 (978)
Miscellaneous other incomeMiscellaneous other income423  1,219  695  2,125  Miscellaneous other income702 272 
Other operating incomeOther operating income$2,787  $3,052  $3,344  $5,899  Other operating income$2,473 $557 

 
The following table provides supplemental information regarding mortgage loan originations and sales:

As of or for the
Three Months Ended
June 30,
As of or for the
Six Months Ended
June 30,
As of or for the
Three Months Ended
March 31,
(dollars in thousands)(dollars in thousands)2020201920202019(dollars in thousands)20212020
Mortgage originationsMortgage originations$38,771  $49,614  $68,134  $84,058  Mortgage originations$34,880 $29,363 
Mortgage loans sold:Mortgage loans sold:Mortgage loans sold:
Servicing retainedServicing retained—  —  —  —  Servicing retained— — 
Servicing releasedServicing released31,984  21,979  46,883  31,197  Servicing released15,672 14,899 
Total mortgage loans soldTotal mortgage loans sold$31,984  $21,979  $46,883  $31,197  Total mortgage loans sold$15,672 $14,899 
Percentage of originated mortgage loans soldPercentage of originated mortgage loans sold82.5 %44.3 %68.8 %37.1 %Percentage of originated mortgage loans sold44.9 %50.7 %
Servicing retained %Servicing retained %—  —  —  —  Servicing retained %— — 
Servicing released %Servicing released %100.0  100.0  100.0  100.0  Servicing released %100.0 100.0 
Residential mortgage loans serviced for othersResidential mortgage loans serviced for others$445,233  $545,743  $445,233  $545,743  Residential mortgage loans serviced for others$335,106 $482,911 
Mortgage servicing rightsMortgage servicing rights3,440  4,744  3,440  4,744  Mortgage servicing rights2,493 4,115 
Gain on sale of mortgage loansGain on sale of mortgage loans615  622  1,213  883  Gain on sale of mortgage loans250 598 
Loan servicing and other feesLoan servicing and other fees452  553  913  1,162  Loan servicing and other fees304 461 
Amortization of MSRsAmortization of MSRs453  156  557  276  Amortization of MSRs133 104 
Impairment of MSRs(222) (10) (453) (27) 
(Impairment) recovery of MSRs(Impairment) recovery of MSRs— (231)

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Wealth Assets Under Management, Administration, Supervision and Brokerage (“Wealth Assets”)
 
Wealth Asset accounts are categorized into two groups. The first account group consists predominantly of clients whose fees are determined based on the market value of the assets held in their accounts (“Market Value” basis). The second account group consists predominantly of clients whose fees are set at fixed amounts (“Fixed Fee” basis), and, as such, are not affected by market value changes.
 
The following tables detail the composition of Wealth Assets as it relates to the calculation of fees for wealth management services:
(dollars in thousands)(dollars in thousands)Wealth Assets as of:(dollars in thousands)Wealth Assets as of:
Fee BasisFee BasisJune 30,
2020
March 31,
2020
December 31,
2019
September 30,
2019
June 30,
2019
Fee BasisMarch 31,
2021
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
Market valueMarket value$6,661,996  $6,001,999  $6,977,009  $6,396,399  $6,346,861  Market value$7,258,019 $7,121,474 $6,557,898 $6,661,996 $6,001,999 
Fixed feeFixed fee10,350,908  9,591,733  9,571,051  9,213,387  8,468,437  Fixed fee12,801,352 11,855,070 10,686,409 10,350,908 9,591,733 
TotalTotal$17,012,904  $15,593,732  $16,548,060  $15,609,786  $14,815,298  Total$20,059,371 $18,976,544 $17,244,307 $17,012,904 $15,593,732 
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Percentage of Wealth Assets as of: Percentage of Wealth Assets as of:
Fee BasisFee BasisJune 30,
2020
March 31,
2020
December 31,
2019
September 30,
2019
June 30,
2019
Fee BasisMarch 31,
2021
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
Market valueMarket value39.2 %38.5 %42.2 %41.0 %42.8 %Market value36.2 %37.5 %38.0 %39.2 %38.5 %
Fixed feeFixed fee60.8 %61.5 %57.8 %59.0 %57.2 %Fixed fee63.8 %62.5 %62.0 %60.8 %61.5 %
TotalTotal100.0 %100.0 %100.0 %100.0 %100.0 %Total100.0 %100.0 %100.0 %100.0 %100.0 %
 
The following tables detail the composition of fees for wealth management services for the periods indicated:
(dollars in thousands)(dollars in thousands)For the Three Months Ended:(dollars in thousands)For the Three Months Ended:
Fee BasisFee BasisJune 30,
2020
March 31,
2020
December 31,
2019
September 30,
2019
June 30,
2019
Fee BasisMarch 31,
2021
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
Market valueMarket value$5,525  $8,131  $8,126  $7,924  $7,802  Market value$9,232 $8,572 $8,344 $5,525 $8,131 
Fixed feeFixed fee3,544  3,037  3,546  2,902  3,708  Fixed fee3,604 4,016 3,363 3,544 3,037 
TotalTotal$9,069  $11,168  $11,672  $10,826  $11,510  Total$12,836 $12,588 $11,707 $9,069 $11,168 

Percentage of Fees for Wealth Management for the Three Months Ended: Percentage of Fees for Wealth Management for the Three Months Ended:
Fee BasisFee BasisJune 30,
2020
March 31,
2020
December 31,
2019
September 30,
2019
June 30,
2019
Fee BasisMarch 31,
2021
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
Market valueMarket value60.9 %72.8 %69.6 %73.2 %67.8 %Market value71.9 %68.1 %71.3 %60.9 %72.8 %
Fixed feeFixed fee39.1 %27.2 %30.4 %26.8 %32.2 %Fixed fee28.1 %31.9 %28.7 %39.1 %27.2 %
TotalTotal100.0 %100.0 %100.0 %100.0 %100.0 %Total100.0 %100.0 %100.0 %100.0 %100.0 %

Customer Derivatives
 
To accommodate the risk management needs of qualified commercial customers, the Bank enters into financial derivative transactions consisting of interest rate swaps, options, risk participation agreements and foreign exchange contracts. Derivative financial instruments involve, to varying degrees, interest rate, market and credit risk. Market risk exposure from customer derivative positions is managed by simultaneously entering into matching transactions with institutional dealer counterparties that offset customer contracts in notional amount and term. Derivative contracts create counterparty credit risk with both the Bank’s customers and with institutional dealer counterparties. The Corporation manages customer counterparty credit risk through its credit policy, approval processes, monitoring procedures and by obtaining adequate collateral, when appropriate. The Bank seeks to minimize dealer counterparty credit risk by establishing credit limits and collateral agreements through industry standard agreements published by the International Swaps and Derivatives Association (ISDA) and associated credit support annex (CSA) agreements. None of the Bank’s outstanding derivative contracts associated with the customer derivative program is designated as a hedge and none is entered into for speculative purposes. DerivativeThe interest rate swaps with both the customers and third parties are not designated as hedges under FASB ASC 815 and are marked to market through earnings. As the interest rate swaps are structured to offset each other, changes to the underlying benchmark interest rates considered in the valuation of these instruments are recorded atdo not result in an impact to earnings; however, there may be fair value with changes in fair values recognized inadjustments related to credit quality variations between counterparties, which may impact earnings as componentsrequired by FASB ASC 820. As of noninterest income and noninterest expense on the consolidated statements of income.
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March 31, 2021, there were no fair value adjustments related to credit quality.

NONINTEREST EXPENSE

Three Months Ended June 30, 2020March 31, 2021 Compared to the Same Period in 20192020
 
Noninterest expense of $34.6$37.7 million for the three months ended June 30, 2020 decreased $552 thousandMarch 31, 2021 increased $4.3 million as compared to $35.2$33.4 million for the same period in 2019. The decrease was primarily due to decreases2020. Increases of $448 thousand, $397 thousand,$2.5 million, $1.6 million, and $308 thousand in furniture, fixtures and equipment expenses, Pennsylvania bank shares tax, and advertising expenses, respectively, partially offset by increases of $512 thousand and $259$633 thousand in other operating expenses, and professional fees, respectively.

Six Months Ended June 30, 2020 Compared to the Same Period in 2019
Noninterest expense for the six months ended June 30, 2020 decreased $3.8 million, to $71.1 million, as compared to $74.9 million for the same period in 2019. The decrease was primarily due to decreases of $4.0 million, $762 thousand, and $690 thousand in salaries and wages, employee benefits,merger related expenses, and Pennsylvania bank shares tax expense, respectively, were partially offset by an increasedecreases of $1.8 million$225 thousand, $189 thousand, $159 thousand, and $123 thousand in other operating expenses. The decrease inadvertising expense, furniture, fixtures and equipment expense, salaries and wages, and employee benefits was largely driven by a pre-tax, non-recurring, charge of $4.5occupancy and bank premises expense, respectively. The $2.5 million in the first quarter of 2019 related to Corporation’s voluntary Years of Service Incentive Program (the “Incentive Program”), which offered certain benefits to eligible employees who met the Incentive Program requirements and voluntarily exited from service with the Corporation, the Bank or one of their subsidiaries. The increase in other operating expenses was primarily driven by a $2.3$1.9 million increase in provision for credit losses on off-balance sheet credit exposures primarily driven bydeferred compensation expense as market fluctuations resulted in a $1.1 million reduction in expense in the adverse economic impactsfirst quarter of 2020 as compared to $801 thousand of expense in the COVID-19 pandemic as well as the Corporation’s adoptionfirst quarter of CECL effective January 1, 2020.2021.

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The following table provides details of other operating expenses for the three and six months ended June 30, 2020March 31, 2021 and 2019:2020:

Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
March 31,
(dollars in thousands)(dollars in thousands)2020201920202019(dollars in thousands)20212020
Amortization expense of capitalized costs for cloud computing arrangementsAmortization expense of capitalized costs for cloud computing arrangements$413 $90 
ContributionsContributions$521  $410  $968  $754  Contributions122 447 
Deferred compensation expenseDeferred compensation expense654  178  (441) 721  Deferred compensation expense807 (1,095)
Director feesDirector fees151  141  304  286  Director fees151 153 
Dues and subscriptionsDues and subscriptions523  524  884  819  Dues and subscriptions418 361 
FDIC insuranceFDIC insurance673  509  823  910  FDIC insurance429 150 
InsuranceInsurance302  217  541  431  Insurance305 239 
Loan processingLoan processing139  199  282  451  Loan processing196 143 
Miscellaneous other expensesMiscellaneous other expenses1,331  761  2,651  1,751  Miscellaneous other expenses1,837 1,230 
MSR amortization and impairmentMSR amortization and impairment675  166  1,010  303  MSR amortization and impairment133 335 
Other taxesOther taxes 33  24  123  Other taxes22 
Outsourced servicesOutsourced services63  65  125  130  Outsourced services46 62 
Wealth custodian feesWealth custodian fees116  98  229  216  Wealth custodian fees117 113 
PostagePostage158  188  314  390  Postage124 156 
(Release of reserve) / provision for credit losses on off-balance sheet credit exposures(867) (17) 2,148  (138) 
Stationary and suppliesStationary and supplies79  120  224  256  Stationary and supplies70 145 
Telephone and data linesTelephone and data lines438  446  866  870  Telephone and data lines409 428 
Temporary help and recruitingTemporary help and recruiting67  174  134  380  Temporary help and recruiting198 67 
Travel and entertainmentTravel and entertainment35  336  260  509  Travel and entertainment26 225 
Other operating expensesOther operating expenses$5,060  $4,548  $11,346  $9,162  Other operating expenses$5,806 $3,271 






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INCOME TAXES

Income tax expense for the three months ended June 30, 2020March 31, 2021 was $4.0$5.1 million a decrease of $229 thousand as compared to $4.2an income tax benefit of $3.0 million for the same period in 2019.2020. The difference was primarily due to the $14.1 million pre-tax loss for the three months ended March 31, 2020. The effective tax rate for the three months ended June 30, 2020 was 21.1%, relatively unchangedfirst quarter of 2021 increased to 22.93% as compared to 21.2%20.94% for the same period in 2019.

Income tax expense for the six months ended June 30, 2020 was $1.1 million, a decreasefirst quarter of $5.9 million as compared to $7.0 million for the same period in 2019. Income before income taxes decreased $28.6 million for the six months ended June 30, 2020 as compared for the same period in 2019. The effective tax rate for the six months ended June 30, 2020 increased to 21.5% from 20.9% for the same period in 2019.2020. The increase in the effective tax rate was primarily due to a $144$323 thousand decrease in net discrete tax benefits foritem related to non-deductible merger-related expenses recognized in the six months ended June 30, 2020 as compared to the same period in 2019.first quarter of 2021.

BALANCE SHEET ANALYSIS
 
Total assets of $5.27$4.91 billion as of June 30, 2020 increased $8.1March 31, 2021 decreased $517.5 million from $5.26$5.43 billion as of December 31, 2019.2020. The following sections detail the balance sheet changes:

Loans and Leases
The table below compares the portfolio loans and leases outstanding at June 30, 2020 to December 31, 2019:

 June 30,
2020
December 31,
2019
Change
(dollars in thousands)BalancePercent of
Portfolio
BalancePercent of
Portfolio
AmountPercent
CRE - nonowner-occupied$1,375,904  37.0 %$1,337,167  36.2 %$38,737  2.9 %
CRE - owner-occupied542,688  14.6  527,607  14.3  15,081  2.9  
Home equity lines of credit194,767  5.2  224,262  6.1  (29,495) (13.2) 
Residential mortgage - 1st liens695,270  18.7  706,690  19.2  (11,420) (1.6) 
Residential mortgage - jr. liens33,644  0.9  36,843  1.0  (3,199) (8.7) 
Construction212,374  5.7  202,198  5.5  10,176  5.0  
Commercial & Industrial457,529  12.3  432,227  11.7  25,302  5.9  
Consumer43,762  1.2  57,241  1.6  (13,479) (23.5) 
Leases166,227  4.5  165,078  4.5  1,149  0.7  
Total portfolio loans and leases3,722,165  100.0 %3,689,313  100.0 %32,852  0.9  
Loans held for sale4,116  4,249  (133) (3.1) 
Total loans and leases$3,726,281  $3,693,562  $32,719  0.9 %

Investment Securities

Investment securities available for sale as of June 30, 2020 totaled $530.6 million, as compared to $1.01 billion as of December 31, 2019. The decrease was primarily related to the maturing of $500.0 million of short-term U.S. Treasury securities in the first quarter of 2020, partially offset by increases of $12.1 million, $11.2 million, and $8.0 million of U.S. government and agency securities, mortgage-backed securities, and corporate bonds, respectively.















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Loans and Leases
The table below compares the portfolio loans and leases outstanding at March 31, 2021 to December 31, 2020:

 March 31,
2021
December 31,
2020
Change
(dollars in thousands)BalancePercent of
Portfolio
BalancePercent of
Portfolio
AmountPercent
CRE - nonowner-occupied$1,408,240 38.8 %$1,435,575 39.6 %$(27,335)(1.9)%
CRE - owner-occupied578,747 15.9 578,509 15.9 238 — 
Home equity lines of credit157,418 4.3 169,337 4.7 (11,919)(7.0)
Residential mortgage - 1st liens602,584 16.6 621,369 17.1 (18,785)(3.0)
Residential mortgage - jr. liens27,400 0.8 23,795 0.7 3,605 15.2 
Construction187,472 5.2 161,308 4.4 26,164 16.2 
Commercial & Industrial486,824 13.4 446,438 12.3 40,386 9.0 
Consumer39,226 1.1 39,683 1.1 (457)(1.2)
Leases145,324 4.0 152,397 4.2 (7,073)(4.6)
Total portfolio loans and leases3,633,235 100.0 %3,628,411 100.0 %4,824 0.1 
Loans held for sale3,210 6,000 (2,790)(46.5)
Total loans and leases$3,636,445 $3,634,411 $2,034 0.1 %

Investment Securities

Investment securities available for sale as of March 31, 2021 totaled $739.0 million, a decrease of $436.0 million as compared to $1.17 billion as of December 31, 2020. The decrease was primarily related to the maturing of $500.0 million of short-term U.S. Treasury securities in the first quarter of 2021, partially offset by increases of $43.5 million and $17.3 million of mortgage-backed securities and U.S. Government and agency securities, respectively.

Deposits

Deposits of $3.90 billion as of March 31, 2021 decreased $474.0 million from December 31, 2020. The decrease was primarily driven by decreases of $213.9 million, $204.4 million, and $37.1 million in interest-bearing demand accounts, wholesale non-maturity deposits, and noninterest bearing deposits, respectively, partially offset by an increase of $37.5 million in money market accounts. The decrease in wholesale non-maturity deposits was primarily due to a decrease of approximately $200.0 million of wholesale deposits in the first quarter of 2021, which was used to partially fund the purchase of $500.0 million of short-term U.S. Treasury securities included on the balance sheet as of December 31, 2020. The decrease in interest-bearing demand deposits was primarily driven by management's active management of excess liquidity in this current interest rate environment.
 
Deposits as of June 30, 2020March 31, 2021 and December 31, 20192020 were as follows:

June 30,
2020
December 31,
2019
Change March 31,
2021
December 31,
2020
Change
(dollars in thousands)(dollars in thousands)BalancePercent of
Deposits
BalancePercent of
Deposits
AmountPercent(dollars in thousands)BalancePercent of
Deposits
BalancePercent of
Deposits
AmountPercent
Interest-bearing demandInterest-bearing demand$910,441  21.5 %$944,915  24.6 %$(34,474) (3.6)%Interest-bearing demand$671,854 17.2 %$885,802 20.2 %$(213,948)(24.2)%
Money marketMoney market1,239,523  29.2  1,106,478  28.8  133,045  12.0  Money market1,201,115 30.8 1,163,620 26.6 37,495 3.2 
SavingsSavings249,636  5.9  220,450  5.7  29,186  13.2  Savings286,124 7.3 282,406 6.5 3,718 1.3 
Retail time depositsRetail time deposits400,186  9.4  405,123  10.5  (4,937) (1.2) Retail time deposits301,702 7.7 331,527 7.6 (29,825)(9.0)
Wholesale non-maturity depositsWholesale non-maturity deposits146,463  3.5  177,865  4.6  (31,402) (17.7) Wholesale non-maturity deposits70,605 1.8 275,011 6.3 (204,406)(74.3)
Wholesale time depositsWholesale time deposits79,903  1.9  89,241  2.3  (9,338) (10.5) Wholesale time deposits6,134 0.2 36,045 0.8 (29,911)(83.0)
Interest-bearing depositsInterest-bearing deposits3,026,152  71.3  2,944,072  76.6  82,080  2.8  Interest-bearing deposits2,537,534 65.0 2,974,411 68.0 (436,877)(14.7)
Noninterest-bearing depositsNoninterest-bearing deposits1,217,496  28.7  898,173  23.4  319,323  35.6  Noninterest-bearing deposits1,364,716 35.0 1,401,843 32.0 (37,127)(2.6)
Total depositsTotal deposits$4,243,648  100.0 %$3,842,245  100.0 %$401,403  10.4 %Total deposits$3,902,250 100.0 %$4,376,254 100.0 %$(474,004)(10.8)%
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Borrowings
 
Borrowings as of June 30, 2020March 31, 2021 and December 31, 20192020 were as follows:

June 30,
2020
December 31,
2019
Change March 31,
2021
December 31,
2020
Change
(dollars in thousands)(dollars in thousands)BalancePercent of
Borrowings
BalancePercent of
Borrowings
AmountPercent(dollars in thousands)BalancePercent of
Borrowings
BalancePercent of
Borrowings
AmountPercent
Short-term borrowingsShort-term borrowings$28,891  14.9 %$493,219  74.1 %$(464,328) (94.1)%Short-term borrowings$60,027 27.1 %$72,161 31.0 %$(12,134)(16.8)%
Long-term FHLB advancesLong-term FHLB advances44,837  23.1  52,269  7.8  (7,432) (14.2) Long-term FHLB advances39,941 18.1 39,906 17.1 35 0.1 
Subordinated notesSubordinated notes98,794  50.8  98,705  14.8  89  0.1  Subordinated notes98,928 44.8 98,883 42.5 45 — 
Junior subordinated debenturesJunior subordinated debentures21,843  11.2  21,753  3.3  90  0.4  Junior subordinated debentures21,983 10.0 21,935 9.4 48 0.2 
Total borrowed fundsTotal borrowed funds$194,365  100.0 %$665,946  100.0 %$(471,581) (70.8)%Total borrowed funds$220,879 100.0 %$232,885 100.0 %$(12,006)(5.2)%

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Capital
 
Consolidated shareholders' equity of the Corporation was $603.7$623.1 million, or 12.7% of total assets, as of March 31, 2021, as compared to $622.3 million, or 11.5% of total assets, as of June 30, 2020, as compared to $612.2 million, or 11.6% of total assets, as of December 31, 2019.2020. The following table presents BMBC’s and Bank’s regulatory capital ratios and the minimum capital requirements for the Bank to be considered “Well Capitalized” by regulators as of June 30, 2020March 31, 2021 and December 31, 2019:2020:
ActualMinimum to be Well
Capitalized
ActualMinimum to be Well
Capitalized
(dollars in thousands)(dollars in thousands)AmountRatioAmountRatio(dollars in thousands)AmountRatioAmountRatio
June 30, 2020    
March 31, 2021March 31, 2021    
Total capital to risk weighted assets:Total capital to risk weighted assets:    Total capital to risk weighted assets:    
BMBCBMBC$569,428  15.14 %$375,986  10.00 %BMBC$588,099 15.65 %$375,834 10.00 %
BankBank485,780  12.93  375,633  10.00  Bank492,129 13.11 375,513 10.00 
Tier I capital to risk weighted assets:Tier I capital to risk weighted assets:Tier I capital to risk weighted assets:
BMBCBMBC423,762  11.27  300,789  8.00  BMBC454,052 12.08 300,667 8.00 
BankBank438,908  11.68  300,506  8.00  Bank451,010 12.01 300,411 8.00 
Common equity Tier I risk weighted assets:Common equity Tier I risk weighted assets:Common equity Tier I risk weighted assets:
BMBCBMBC402,646  10.71  244,391  6.50  BMBC432,839 11.52 244,292 6.50 
BankBank438,908  11.68  244,161  6.50  Bank451,010 12.01 244,084 6.50 
Tier I leverage ratio (Tier I capital to total quarterly average assets):Tier I leverage ratio (Tier I capital to total quarterly average assets):Tier I leverage ratio (Tier I capital to total quarterly average assets):
BMBCBMBC423,762  8.44  250,950  5.00  BMBC454,052 9.53 238,233 5.00 
BankBank438,908  8.75  250,775  5.00  Bank451,010 9.47 238,097 5.00 
December 31, 2019    
December 31, 2020December 31, 2020    
Total capital to risk weighted assets:Total capital to risk weighted assets:    Total capital to risk weighted assets:    
BMBCBMBC547,440  14.69  372,690  10.00  BMBC583,057 15.55 375,045 10.00 
BankBank450,212  12.09  372,435  10.00  Bank477,792 12.75 374,758 10.00 
Tier I capital to risk weighted assets:Tier I capital to risk weighted assets:Tier I capital to risk weighted assets:
BMBCBMBC425,773  11.42  298,152  8.00  BMBC444,640 11.86 300,036 8.00 
BankBank427,250  11.47  297,948  8.00  Bank432,258 11.53 299,807 8.00 
Common equity Tier I risk weighted assets:Common equity Tier I risk weighted assets:Common equity Tier I risk weighted assets:
BMBCBMBC404,715  10.86  242,249  6.50  BMBC423,475 11.29 243,779 6.50 
BankBank427,250  11.47  242,083  6.50  Bank432,258 11.53 243,593 6.50 
Tier I leverage ratio (Tier I capital to total quarterly average assets):Tier I leverage ratio (Tier I capital to total quarterly average assets):Tier I leverage ratio (Tier I capital to total quarterly average assets):
BMBCBMBC425,773  9.33  228,216  5.00  BMBC444,640 9.04 246,002 5.00 
BankBank427,250  9.37  227,997  5.00  Bank432,258 8.79 245,837 5.00 
 
In MarchSeptember 2020, the U.S. banking agencies issued an interima final rule that provides banking organizations with an alternative option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period. This final rule is consistent with the interim final rule issued by the U.S. banking agencies in March 2020. The June 30,March 31, 2021 and December 31, 2020 ratios reflect the Corporation's election of the five-year transition provision.

Liquidity
 
BMBC’s liquidity position is managed on a daily basis as part of the daily settlement function and continuously as part of the formal asset liability management process. The Bank’s liquidity is maintained by managing its core deposits as the primary source, purchasing federal funds, selling loans in the secondary market, borrowing from the FHLB and the FRB, maintaining a highly liquid investment portfolio, and purchasing and issuing wholesale certificates of deposit as its secondary sources.





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Unused availability is detailed on the following table:

(dollars in millions)(dollars in millions)Available
Funds as of
June 30,
2020
Percent of
Total
Borrowing
Capacity
Available
Funds as of
December 31, 2019
Percent of Total
Borrowing
Capacity
Dollar
Change
Percent
Change
(dollars in millions)Available
Funds as of
March 31,
2021
Percent of
Total
Borrowing
Capacity
Available
Funds as of
December 31, 2020
Percent of Total
Borrowing
Capacity
Dollar
Change
Percent
Change
FHLB of PittsburghFHLB of Pittsburgh$1,783.7  97.5 %$1,110.6  67.5 %$673.1  60.6 %FHLB of Pittsburgh$1,700.1 95.4 %$1,696.9 95.9 %$3.2 0.2 %
FRB of PhiladelphiaFRB of Philadelphia166.8  100.0  174.3  100.0  (7.5) (4.3) FRB of Philadelphia121.4 100.0 127.7 100.0 (6.3)(4.9)
Fed Funds Lines (six banks)Fed Funds Lines (six banks)74.0  100.0  79.0  100.0  (5.0) (6.3) Fed Funds Lines (six banks)74.0 100.0 74.0 100.0 — — 
TotalTotal$2,024.5  97.8  $1,363.9  71.8  $660.6  48.4  Total$1,895.5 95.9 $1,898.6 96.3 $(3.1)(0.2)

Quarterly, the ALCO reviews the Corporation’s liquidity position and reports its findings to BMBC’s Board of Directors.

The Corporation has an agreement with Insured Network Deposits to provide up to $175 million, excluding accrued interest, of money market and NOW funds at an agreed upon interest rate equal to the current Fed Funds rate plus 20 basis points. The Corporation had $146.5$70.6 million in balances as of June 30, 2020March 31, 2021 under this program.

Management continually evaluates its borrowing capacity and sources of liquidity. Management currently believes that it has sufficient capacity to fund expected short- and long-term earning asset growth with wholesale sources, along with deposit growth from its internal branch and wealth products.

Discussion of Segments

The Corporation has two principal segments as defined by FASB ASC 280, “Segment Reporting.” The segments are Banking and Wealth Management (see Note 22 in the accompanying Notes to Unaudited Consolidated Financial Statements).

The Wealth Management segment recorded a pre-tax segment profit (“PTSP”) of $1.7 million and $5.8$5.4 million for the three and six months ended June 30, 2020,March 31, 2021, as compared to a PTSP of $4.9 million and $7.9$4.1 million for the same periodsperiod in 2019.2020. Fees for wealth management services decreased $2.4 million andincreased $1.7 million respectively, for the three and six months ended June 30, 2020March 31, 2021 as compared to the same period in 2020. Insurance commissions decreased $69 thousand for the three months ended March 31, 2021 as compared to the same periods in 2019. The decrease in PTSP and fees for wealth management services for the three and six months ended June 30, 2020 as compared to the same periods in 2019 was primarily driven by $2.2 million of costs incurred in the second quarter of 2020 associated with the wind-down of BMT Investment Advisers. Also contributing to the decrease in PTSP were decreases in insurance commissions of $394 thousand and $533 thousand for the three and six months ended June 30, 2020 as compared to the same periods in 2019. Effective January 1, 2020, the business of Lau Associates LLC was transitioned into the Wealth Management Division of the Bank, also reported in the Wealth Management segment.2020.

The Banking segment recorded a PTSP of $17.3$16.8 million andfor the three months ended March 31, 2021, as compared to a pre-tax segment loss of $860 thousand for the three and six months ended June 30, 2020, as compared to a PTSP of $15.1 million and $25.6$18.2 million for the same periodsperiod in 2019. The decrease in PTSP2020. Net interest income for the sixthree months ended June 30, 2020March 31, 2021 was $34.8 million, a decrease of $1.6 million as compared to the same period in 20192020. A recovery of PCL of $5.2 million was primarilyrecorded for the three months ended March 31, 2021 as compared to a PCL of $35.4 million for the three months ended March 31, 2020, a difference of $40.6 million. The difference in PCL between the two periods was driven by the first quarter 2020 provision forcurrent and forward-looking economic impacts of the COVID-19 pandemic included in the estimation of expected credit losses on loans and leases as calculated underof March 31, 2021 as compared to March 31, 2020. Total noninterest income for the CECL framework, driven byBanking segment decreased $57 thousand and total noninterest expense for the COVID-19 pandemic.Banking segment increased $4.0 million for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.

Off Balance Sheet Arrangements

The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the loan agreement. Total commitments to extend credit at June 30, 2020March 31, 2021 were $826.3$987.0 million, as compared to $828.9$924.5 million at December 31, 2019.2020.

Standby letters of credit are conditional commitments issued by the Bank to a customer for a third party. Such standby letters of credit are issued to support private borrowing arrangements. The credit risk involved in issuing standby letters of credit is similar to that involved in granting loan facilities to customers. The Bank’s obligation under standby letters of credit at June 30, 2020March 31, 2021 amounted to $13.2$20.1 million, as compared to $20.7$21.1 million at December 31, 2019.2020.

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Estimated fair values of the Corporation’s off-balance sheet arrangements are based on fees and rates currently charged to enter into similar loan agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. Since fees and rates charged for off-balance sheet items are at market levels when set, there is no material difference between the stated amount and the estimated fair value of off-balance sheet arrangements.


Contractual Cash Obligations of the Corporation as of June 30, 2020March 31, 2021:
(dollars in thousands)(dollars in thousands)TotalLess Than
1 Year
1 - 3
Years
3 - 5
Years
More Than
5 Years
(dollars in thousands)TotalLess Than
1 Year
1 - 3
Years
3 - 5
Years
More Than
5 Years
Deposits without a stated maturityDeposits without a stated maturity$3,763,559  $3,763,559  $—  $—  $—  Deposits without a stated maturity$3,594,414 $3,594,414 $— $— $— 
Wholesale and retail time depositWholesale and retail time deposit480,089  343,479  122,473  13,255  882  Wholesale and retail time deposit307,836 260,705 34,287 11,860 984 
Short-term borrowingsShort-term borrowings28,891  28,891  —  —  —  Short-term borrowings60,027 60,027 — — — 
Long-term FHLB AdvancesLong-term FHLB Advances44,837  4,861  39,976  —  —  Long-term FHLB Advances39,941 39,941 — — — 
Subordinated NotesSubordinated Notes100,000  —  —  —  100,000  Subordinated Notes100,000 — — 30,000 70,000 
Junior subordinated debenturesJunior subordinated debentures25,800  —  —  —  25,800  Junior subordinated debentures25,800 — — — 25,800 
Operating lease liabilitiesOperating lease liabilities56,467  4,680  8,395  8,145  35,247  Operating lease liabilities50,980 3,085 7,695 7,652 32,548 
Purchase obligationsPurchase obligations22,785  6,560  9,161  3,904  3,160  Purchase obligations18,369 4,904 6,231 3,521 3,713 
TotalTotal$4,522,428  $4,152,030  $180,005  $25,304  $165,089  Total$4,197,367 $3,963,076 $48,213 $53,033 $133,045 

Other Information

Effects of Inflation
 
Inflation has some impact on the Corporation’s operating costs. Unlike many industrial companies, however, substantially all of the Corporation’s assets and liabilities are monetary in nature. As a result, interest rates have a more significant impact on the Corporation’s performance than the general level of inflation. Over short periods of time, interest rates may not necessarily move in the same direction or in the same magnitude as prices of goods and services.
 
Effects of Government Monetary Policies
 
The earnings of the Corporation are and will be affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. An important function of the Federal Reserve Board is to regulate the money supply and interest rates. Among the instruments used to implement those objectives are open market operations in United States government securities and changes in reserve requirements against member bank deposits. These instruments are used in varying combinations to influence overall growth and distribution of bank loans, investments, and deposits, and their use may also affect rates charged on loans or paid for deposits. 
 
The Corporation is a member of the Federal Reserve System and, therefore, the policies and regulations of the Federal Reserve Board have a significant effect on its deposits, loans and investment growth, as well as the rate of interest earned and paid, and are expected to affect the Corporation’s operations in the future. The effect of such policies and regulations upon the future business and earnings of the Corporation cannot be predicted.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risks

See the discussion of quantitative and qualitative disclosures about market risks in the Corporation’s 20192020 Annual Report, as updated by the disclosure in “Management’s Discussion and Analysis of Results of Operations – Impact of COVID-19,” “–Interest Rate Sensitivity,” “– Summary of Interest Rate Simulation,” “Customer Derivatives” and “– Gap Analysis” in this Quarterly Report on Form 10-Q.

ITEM 4. Controls and Procedures
 
As of the end of the period covered by this report, the Corporation carried out an evaluation, under the supervision and with the participation of the Corporation’s management, including the Corporation’s Chief Executive Officer, Francis J. Leto, and Chief Financial Officer, Michael W. Harrington, of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon the evaluation, the Chief
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Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures were effective as of June 30, 2020.March 31, 2021.
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The adoption of ASU 2016-13 (Topic 326 - Credit Losses) required the implementation of new accounting policies and procedures which changed the Corporation's internal controls over financial reporting for the analysis of the allowance for credit losses and related disclosures. Other than the changes related to the adoption of ASU 2016-13 (Topic 326 - Credit Losses), thereThere were no changes during the period covered by this Quarterly Report on Form 10-Q in the Corporation’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, those controls.

PART II OTHER INFORMATION.
 
ITEM 1. Legal Proceedings.
 
The information required by this Item is set forth in the “Legal Matters” discussion in Note 2122 “Contingencies” in the Notes to Unaudited Consolidated Financial Statements in Part I Item I of this Form 10-Q, which is incorporated herein by reference in response to this Item.

On April 21, 2021, a purported BMBC shareholder filed a lawsuit against BMBC, the members of the BMBC board of directors, and WSFS in the United States District Court for the District of Delaware, captioned Stein v. Bryn Mawr Corp., et al. (Case No. 1:99-mc-09999-UNA) (the “Stein Action”). The plaintiff generally alleges that the defendants violated Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder by disclosing materially incomplete and misleading information concerning the merger and related matters to BMBC shareholders. The plaintiff seeks injunctive relief, rescissory and compensatory damages and an award of attorneys’ fees and expenses.

On April 27, 2021, another purported BMBC shareholder filed a lawsuit against BMBC, the members of the BMBC board of directors, and WSFS in the United States District Court for the District of Delaware, captioned Artis v. Bryn Mawr Corp., et al. (Case No. 1:21-cv-00588-UNA) (the “Artis Action”). The plaintiff generally alleges that the defendants violated Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder by disclosing materially incomplete and misleading information concerning the merger and related matters to BMBC shareholders. The plaintiff seeks injunctive relief, declaratory relief, rescissory damages and an award of attorneys’ and experts’ fees and expenses.

Management believes that the lawsuits described above are without merit and that neither lawsuit, individually or in the aggregate, will have a material adverse impact on the results of operations or financial condition of the Corporation.
 
ITEM 1A. Risk Factors

The section titled Risk FactorsIn addition to the other information set forth below and elsewhere in Part I, Item 1A of our 2019 Annualthis Quarterly Report, includes a discussion of the many risks and uncertainties we face, any one or more of which could have a material adverse effect on our business, results of operations, financial condition (including capital and liquidity), or prospects or the value of or return on an investment in the Corporation. The information presented below provides an update to, andyou should be read in conjunction with,carefully consider the risk factors and other informationcautionary statements described under the heading “Item 1A. Risk Factors” included in our 2020 Annual Report and the risk factors and other cautionary statements contained in our 2019 Annual Report.other SEC filings, including our joint proxy statement/prospectus that was filed on May 6, 2021 pursuant to Rule 424(b)(3), which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

The recent global coronavirus (COVID-19) pandemic has led to periodsoutcomes of significant volatilitylawsuits filed by shareholders of BMBC against BMBC, its board of directors and WSFS in financial, commodities and other marketsApril 2021 are uncertain and could harm our business and resultsresult in significant costs, management distraction, and/or a delay of operations.or injunction against the Merger.

In December 2019, a novel strain of coronavirus (COVID-19) was first reported in Wuhan, Hubei Province, China. Since then, COVID-19 infections have spread to additional countries including the United States. In March 2020, the World Health Organization declared COVID-19 to be a pandemic. Given the ongoing and dynamic natureThe outcomes of the circumstances, it is difficultStein Action and the Artis Action, as well as other similar litigation that has been brought against WSFS and its directors by purported WSFS shareholders, are uncertain and could result in significant costs to predictBMBC and/or WSFS, including costs associated with the impactindemnification of BMBC’s directors and officers. Other plaintiffs may also file lawsuits against BMBC, WSFS and/or their directors and officers in connection with the coronavirus pandemic on our business, and there is no guarantee that our effortsmerger. The defense or settlement of any lawsuits or claims relating to address or mitigate the adverse impacts of the coronavirus will be effective. The impact to date has included periods of significant volatility in financial, commodities and other markets. This volatility, if it continues, couldmerger may have an adverse impacteffect on our customers and on ourthe business, financial condition and results of operations as well as our growth strategy.of WSFS, BMBC and/or the combined company.

Our businessIf the actions remain unresolved, they could prevent or delay the completion of the mergers. One of the conditions to the consummation of the mergers is dependent upon the willingness and abilityabsence of our customers to conduct banking andany law or order (whether temporary, preliminary or permanent) by any court or regulatory authority of competent jurisdiction prohibiting, restricting or making illegal the consummation of the transactions contemplated by the merger agreement (including the mergers). Consequently, if a settlement or other financial transactions. The spread of COVID-19 has caused and could continue to cause severe disruptionsresolution is not reached in the U.S. economy at large, and has resulted and may continue to result in disruptions to our customers’ businesses,any lawsuit that is filed or any regulatory proceeding and a decrease in consumer confidence and business generally. In addition, recent actions by US federal, state and local governments to addressclaimant secures injunctive or other relief or a regulatory authority issues an order or other directive prohibiting, restricting or making illegal the pandemic, including travel bans, stay-at-home orders and school, business and entertainment venue closures, may have a significant adverse effect on our customers and the markets in which we conduct our business. The extent of impacts resulting from the coronavirus pandemic and other events beyond our control will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severityconsummation of the coronavirus pandemic and actions taken to containtransactions contemplated by the coronavirusmerger agreement (including the mergers), then such injunctive or its impact, among others.

Disruptions to our customers could resultother relief may prevent the mergers from becoming effective in increased risk of delinquencies, defaults, foreclosures and losses on our loans. The escalation of the pandemic may also negatively impact regional economic conditions for a period of time, resulting in declines in local loan demand, liquidity of loan guarantors, loan collateral (particularly in real estate), loan originations and deposit availability.

For a description of the impact the COVID-19 pandemic has had on our business and results of operations during the period covered by this Quarterly Report on Form 10-Q, see “Management’s Discussion and Analysis of Results of Operation and Financial Condition – Impact of COVID-19” beginningtimely manner or at page 61. If the global response to contain COVID-19 escalates or is unsuccessful, we could experience additional effects, including a material adverse effect, on our business, financial condition, results of operations and cash flows.



all.

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The spread of the COVID-19 outbreak and the governmental responses may disrupt banking and other financial activity in the areas in which we operate and could potentially create widespread business continuity issues for us.

The outbreak of COVID-19 and the U.S. federal, state and local governmental responses may result in a disruption in the services we provide. We rely on our third-party vendors to conduct business and to process, record, and monitor transactions. If any of these vendors are unable to continue to provide us with these services or experience interruptions in their ability to provide us with these services, it could negatively impact our ability to serve our customers. Furthermore, the coronavirus pandemic could negatively impact the ability of our employees and customers to engage in banking and other financial transactions in the geographic areas in which we operate and could create widespread business continuity issues for us. We also could be adversely affected if key personnel or a significant number of employees were to become unavailable due to infection, quarantine or other effects and restrictions of a COVID-19 outbreak in our market areas. Although we have business continuity plans and other safeguards in place, there is no assurance that such plans and safeguards will be effective. If we are unable to promptly recover from such business disruptions, our business and financial conditions and results of operations would be adversely affected. We also may incur additional costs to remedy damages caused by such disruptions, which could adversely affect our financial condition and results of operations.

Our past participation in the SBA PPP loan program exposes us to risks related to noncompliance with the PPP, as well as litigation risk related to our administration of the PPP loan program, which could have a material adverse impact on our business, financial condition and results of operations.

We participated as a lender in the PPP, a loan program administered through the SBA, that was created to help eligible businesses, organizations and self-employed persons fund their operational costs during the COVID-19 pandemic. Under this program, the SBA guarantees 100% of the amounts loaned under the PPP. The PPP opened on April 3, 2020; however, because of the short window between the passing of the CARES Act and the opening of the PPP, there is some ambiguity in the laws, rules and guidance regarding the operation of the PPP, which exposes us to risks relating to noncompliance with the PPP. For instance, other financial institutions have experienced litigation related to their process and procedures used in processing applications for the PPP. Any financial liability, litigation costs or reputational damage caused by PPP related litigation could have a material adverse impact on our business, financial condition and results of operations. As previously announced, we have sold our PPP loan portfolio, however, we may be required to repurchase, and as a result be exposed to credit risk, on sold PPP loans in certain circumstances if a determination is made by the SBA that there was a deficiency by the Bank with respect to the manner in which the loan was originated, funded, or serviced.

Interest rate volatility stemming from the COVID-19 pandemic could negatively affect our net interest income, lending activities, deposits and profitability.

Our net interest income, lending activities, deposits and profitability could be negatively affected by volatility in interest rates caused by uncertainties stemming from COVID-19.In March 2020, the Federal Reserve lowered the target range for the federal funds rate to a range from 0 to 0.25 percent, citing concerns about the impact of COVID-19 on markets and stress in the energy sector. A prolonged period of extremely volatile and unstable market conditions would likely increase our funding costs and negatively affect market risk mitigation strategies. Higher income volatility from changes in interest rates and spreads to benchmark indices could cause a loss of future net interest income and a decrease in current fair market values of our assets. Fluctuations in interest rates will impact both the level of income and expense recorded on most of our assets and liabilities and the market value of all interest-earning assets and interest-bearing liabilities, which in turn could have a material adverse effect on our net income, operating results, or financial condition.

We are subject to increasing credit risk as a result of the COVID-19 pandemic, which could adversely impact our profitability.

Our business depends on our ability to successfully measure and manage credit risk. As a commercial lender, we are exposed to the risk that the principal of, or interest on, a loan will not be paid timely or at all or that the value of any collateral supporting a loan will be insufficient to cover our outstanding exposure. In addition, we are exposed to risks with respect to the risks resulting from changes in economic and industry conditions and risks inherent in dealing with individual loans and borrowers. As the overall economic climate in the U.S., generally, and in our market areas specifically, experiences material disruption due to the COVID-19 pandemic, our borrowers may experience difficulties in repaying their loans and governmental actions may provide payment relief to borrowers affected by COVID-19 and preclude our ability to initiate foreclosure proceedings in certain circumstances and, as a result, the collateral we hold may decrease in value or become illiquid, and the level of our nonperforming loans, charge-offs and delinquencies could rise and require significant additional provisions for credit losses. Additional factors related to the credit quality of certain commercial real estate and multifamily residential loans include the duration of state and local moratoriums on evictions for non-payment of rent or other fees. The payment on these loans that are secured by income producing properties are typically dependent on the successful operation of the related real estate property and may subject us to risks from adverse conditions in the real estate market or the general economy.

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We are actively working to support our borrowers to mitigate the impact of the COVID-19 pandemic on them and on our loan portfolio, including through loan modifications that defer payments for those who experienced a hardship as a result of the COVID-19 pandemic. Although recent regulatory guidance provides that such loan modifications are exempt from the calculation and reporting of TDRs and loan delinquencies, we cannot predict whether such loan modifications may ultimately have an adverse impact on our profitability in future periods. Our inability to successfully manage the increased credit risk caused by the COVID-19 pandemic could have a material adverse effect on our business, financial condition and results of operations.

Unpredictable future developments related to or resulting from the COVID-19 pandemic could materially and adversely affect our business and results of operations.

Because there have been no comparable recent global pandemics that resulted in a similar global impact, we do not yet know the full extent of the COVID-19 pandemic’seffects on our business, operations, or the global economy as a whole. Any future development will be highly uncertain and cannot be predicted, including the scope and duration of the pandemic, the effectiveness of our work from home arrangements, third party providers’ ability to support our operation, and any actions taken by governmental authorities and other third parties in response to the pandemic.We are continuing to monitor the COVID-19 pandemic and related risks, although the rapid development and fluidity of the situation precludes any specific prediction as to its ultimate impact on us. However, if the pandemic continues to spread or otherwise results in a continuation or worsening of the current economic and commercial environments, our business, financial condition, results of operations and cash flows as well as our regulatory capital and liquidity ratios could be materially adversely affected and many of the risks described in our 2019 Annual Report will be heightened.

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ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
 
Share Repurchase
 
The following table presents the shares repurchased by the Corporation during the secondfirst quarter of 2020:2021:
Period
Total Number of Shares Purchased(1)(2)
Average Price Paid Per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(3)
Maximum
Number of
Shares that
May Yet Be
Purchased
Under the Plan
or Programs
April 1, 2020 – April 30, 2020414  $25.56  —  710,032  
May 1, 2020 – May 31, 2020953  $27.98  ���  710,032  
June 1, 2020 – June 30, 20202,879  $27.78  —  710,032  
Total4,246  $27.61  —  
Period
Total Number of Shares Purchased(1)(2)
Average Price Paid Per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(3)
Maximum
Number of
Shares that
May Yet Be
Purchased
Under the Plan
or Programs
January 1, 2021 – January 31, 202118,676 $31.45 18,676 691,356 
February 1, 2021 – February 28, 202162,496 $31.88 62,112 629,244 
March 1, 2021 – March 31, 2021929 $33.35 — 629,244 
Total82,101 $31.80 80,788 

(1)On June 30, 2020, 2,017929 shares were purchased by the Corporation’s deferred compensation plans through open market transactions.
(2)Includes shares purchased to cover statutory tax withholding requirements on vested stock awards for certain officers of BMBC or the Bank as follows: 414384 shares on April 4, 2020, 953 shares on May 6, 2020, and 862 shares on June 5, 2020.February 7, 2021.
(3)On April 18, 2019, BMBC announced a new stock repurchase program (the “2019 Program”) pursuant to which the Corporation may repurchase up to 1,000,000 shares of BMBC's common stock. Under the 2019 Program, the Corporation may repurchase BMBC's common stock at any price, but the aggregate purchase price is not to exceed $45 million. No shares were repurchasedAll share repurchases during the three months ended June 30, 2020.period presented under the 2019 Program were accomplished in open market transactions. As of June 30, 2020,March 31, 2021, the maximum number of shares remaining authorized for repurchase under the 2019 Program was 710,032,629,244, at an aggregate purchase price not to exceed $34.8$32.2 million.

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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 No.Description and References
  
2.1
3.1
3.2
10.1
10.2
10.3
10.4
31.1
31.2
*32.1
*32.2
  
101.INS Inline XBRLInstance Document - the Instance Document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL Document
  
101.SCH Inline XBRLTaxonomy Extension Schema Document, filed herewith
  
101.CAL Inline XBRLTaxonomy Extension Calculation Linkbase Document, filed herewith
  
101.DEF Inline XBRLTaxonomy Extension Definition Linkbase Document, filed herewith
  
101.LAB Inline XBRLTaxonomy Extension Label Linkbase Document, filed herewith
  
101.PRE Inline XBRLTaxonomy Extension Presentation Linkbase Document, filed herewith
104The cover page of Bryn Mawr Bank Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2020,March 31, 2021, formatted in Inline XBRL (contained in Exhibit 101)
*Furnished herewith. Notwithstanding any incorporation of this Quarterly Statement on Form 10-Q in any other filing by
the Registrant, Exhibits furnished herewith and designated with one (*) shall not be deemed incorporated by reference to
any other filing unless specifically otherwise set forth herein or therein.
**Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule will be furnished supplementally to the SEC upon request; provided, however, that the parties may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any document so furnished.

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Signatures
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
  BRYN MAWR BANK CORPORATION
    
Date: August 10, 2020May 7, 2021 By:/s/ Francis J. Leto
    Francis J. Leto
    Chief Executive Officer
   (Principal Executive Officer)
    
   
Date: August 10, 2020May 7, 2021 By:/s/ Michael W. Harrington
    Michael W. Harrington
    Chief Financial Officer
    (Principal Financial Officer)
 


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