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EX-32.2 - EXHIBIT 32.2 SECTION 906 CFO CERTIFICATION - INDEPENDENT BANK CORPindb0630201710-qexx322.htm
EX-32.1 - EXHIBIT 32.1 - SECTION 906 CERTIFICATION CEO - INDEPENDENT BANK CORPindb0630201710-qexx321.htm
EX-31.2 - EXHIBIT 31.2 SECTION 302 CFO CERTIFICATION - INDEPENDENT BANK CORPindb0630201710-qexx312.htm
EX-31.1 - EXHIBIT 31.1 - SECTION 302 CERTIFICATION CEO - INDEPENDENT BANK CORPindb0630201710-qexx311.htm

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________________________ 
FORM 10-Q
___________________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2017
Commission File Number: 1-9047
___________________________________________________
Independent Bank Corp.
(Exact name of registrant as specified in its charter)
 ___________________________________________________
Massachusetts
04-2870273
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
Office Address: 2036 Washington Street, Hanover Massachusetts 02339
Mailing Address: 288 Union Street, Rockland, Massachusetts 02370
(Address of principal executive offices, including zip code)
(781) 878-6100
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large Accelerated Filer
x
Accelerated Filer
o
 
 
 
 
Non-accelerated Filer
o
Smaller Reporting Company
o
 
 
 
 
 
 
Emerging Growth Company
o
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 Acts. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x
As of August 1, 2017, there were 27,437,090 shares of the issuer’s common stock outstanding, par value $0.01 per share.
 






 
Table of Contents
 
PAGE
 
 
 
 
Condensed Notes to Consolidated Financial Statements - June 30, 2017
 
 
 
 
 




3


PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
INDEPENDENT BANK CORP.
CONSOLIDATED BALANCE SHEETS
(Unaudited—Dollars in thousands)
 
 
June 30,
2017
 
December 31
2016
Assets
Cash and due from banks
$
110,249

 
$
97,196

Interest-earning deposits with banks
126,073

 
191,899

Securities
 
 
 
Securities - trading
1,293

 
804

Securities - available for sale
415,943

 
363,644

Securities - held to maturity (fair value $499,059 and $485,650)
498,392

 
487,076

Total securities
915,628

 
851,524

Loans held for sale (at fair value)
9,381

 
6,139

Loans
 
 
 
Commercial and industrial
910,936

 
902,053

Commercial real estate
3,083,020

 
3,010,798

Commercial construction
340,757

 
320,391

Small business
131,663

 
122,726

Residential real estate
749,392

 
644,426

Home equity - first position
612,428

 
577,006

Home equity - subordinate positions
431,031

 
411,141

Other consumer
10,469

 
11,064

   Total loans
6,269,696

 
5,999,605

Less: allowance for loan losses
(59,479
)
 
(61,566
)
Net loans
6,210,217

 
5,938,039

Federal Home Loan Bank stock
14,421

 
11,497

Bank premises and equipment, net
92,664

 
78,480

Goodwill
231,806

 
221,526

Other intangible assets
11,199

 
9,848

Cash surrender value of life insurance policies
149,319

 
144,503

Other real estate owned and other foreclosed assets
3,029

 
4,173

Other assets
143,307

 
154,551

Total assets
$
8,017,293

 
$
7,709,375

Liabilities and Stockholders' Equity
Deposits
 
 
 
Demand deposits
$
2,118,506

 
$
2,057,086

Savings and interest checking accounts
2,676,389

 
2,469,237

Money market
1,292,311

 
1,236,778

Time certificates of deposit of $100,000 and over
238,439

 
266,190

Other time certificates of deposits
369,735

 
382,962

Total deposits
6,695,380

 
6,412,253

Borrowings
 
 
 
Federal Home Loan Bank borrowings
53,279

 
50,819


4


Customer repurchase agreements
159,371

 
176,913

Junior subordinated debentures (less unamortized debt issuance costs of $128 and $136)
73,069

 
73,107

Subordinated debentures (less unamortized debt issuance costs of $341 and $365)
34,659

 
34,635

Total borrowings
320,378

 
335,474

Other liabilities
86,951

 
96,958

Total liabilities
7,102,709

 
6,844,685

Commitments and contingencies

 

Stockholders' equity
 
 
 
Preferred stock, $.01 par value, authorized: 1,000,000 shares, outstanding: none

 

Common stock, $.01 par value, authorized: 75,000,000 shares,
issued and outstanding: 27,431,171 shares at June 30, 2017 and 27,005,813 shares at December 31, 2016 (includes 185,006 and 212,698 shares of unvested participating restricted stock awards, respectively)
272

 
268

Value of shares held in rabbi trust at cost: 162,559 shares at June 30, 2017 and 170,036 shares at December 31, 2016
(4,414
)
 
(4,277
)
Deferred compensation and other retirement benefit obligations
4,414

 
4,277

Additional paid in capital
476,684

 
451,664

Retained earnings
437,587

 
414,095

Accumulated other comprehensive income (loss), net of tax
41

 
(1,337
)
Total stockholders’ equity
914,584

 
864,690

Total liabilities and stockholders' equity
$
8,017,293

 
$
7,709,375

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


5


INDEPENDENT BANK CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited—Dollars in thousands, except per share data)
 
Three Months Ended
 
Six Months Ended
 
June 30
 
June 30
 
2017
 
2016
 
2017
 
2016
Interest income
 
 
 
 
 
 
 
Interest and fees on loans
$
62,287

 
$
55,636

 
$
121,080

 
$
109,905

Taxable interest and dividends on securities
5,609

 
5,269

 
10,976

 
10,466

Nontaxable interest and dividends on securities
26

 
29

 
52

 
61

Interest on loans held for sale
21

 
57

 
35

 
89

Interest on federal funds sold and short-term investments
190

 
169

 
397

 
380

Total interest and dividend income
68,133

 
61,160

 
132,540

 
120,901

Interest expense
 
 
 
 
 
 
 
Interest on deposits
2,912

 
2,738

 
5,679

 
5,606

Interest on borrowings
1,466

 
1,889

 
2,906

 
3,871

Total interest expense
4,378

 
4,627

 
8,585

 
9,477

Net interest income
63,755

 
56,533

 
123,955

 
111,424

Provision for loan losses
1,050

 
600

 
1,650

 
1,125

Net interest income after provision for loan losses
62,705

 
55,933

 
122,305

 
110,299

Noninterest income
 
 
 
 
 
 
 
Deposit account fees
4,392

 
4,618

 
8,936

 
9,213

Interchange and ATM fees
4,434

 
4,136

 
8,356

 
7,860

Investment management
5,995

 
5,734

 
11,609

 
10,737

Mortgage banking income
1,314

 
1,363

 
2,271

 
2,495

Gain on sale of equity securities
3

 
5

 
7

 
5

Increase in cash surrender value of life insurance policies
1,017

 
982

 
1,981

 
1,996

Loan level derivative income
1,337

 
2,095

 
1,943

 
3,817

Other noninterest income
2,906

 
2,162

 
5,207

 
4,127

Total noninterest income
21,398

 
21,095

 
40,310

 
40,250

Noninterest expenses
 
 
 
 
 
 
 
Salaries and employee benefits
28,654

 
26,977

 
56,978

 
54,166

Occupancy and equipment expenses
6,059

 
5,667

 
12,217

 
11,494

Data processing and facilities management
1,188

 
1,225

 
2,460

 
2,431

FDIC assessment
778

 
920

 
1,561

 
1,930

Advertising expense
1,365

 
1,223

 
2,659

 
2,480

Consulting expense
1,262

 
864

 
1,816

 
1,465

Debit card expense
852

 
744

 
1,624

 
1,432

Loss on extinguishment of debt

 

 

 
437

Loss on sale of equity securities
2

 
3

 
5

 
32

Merger and acquisition expense
2,909

 
206

 
3,393

 
540

Software maintenance
896

 
735

 
1,826

 
1,489

Other noninterest expenses
8,844

 
8,582

 
17,043

 
15,732

Total noninterest expenses
52,809

 
47,146

 
101,582

 
93,628

Income before income taxes
31,294

 
29,882

 
61,033

 
56,921

Provision for income taxes
10,731

 
9,508

 
19,745

 
17,936

Net income
$
20,563

 
$
20,374

 
$
41,288

 
$
38,985

Basic earnings per share
$
0.75

 
$
0.77

 
$
1.52

 
$
1.48

Diluted earnings per share
$
0.75

 
$
0.77

 
$
1.52

 
$
1.48

Weighted average common shares (basic)
27,257,799

 
26,304,129

 
27,144,350

 
26,289,726

Common share equivalents
74,497

 
47,885

 
78,757

 
45,679

Weighted average common shares (diluted)
27,332,296

 
26,352,014

 
27,223,107

 
26,335,405

Cash dividends declared per common share
$
0.32

 
$
0.29

 
$
0.64

 
$
0.58

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


6


INDEPENDENT BANK CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited—Dollars in thousands)
 
 
Three Months Ended
 
Six Months Ended
 
June 30
 
June 30
 
2017
 
2016
 
2017
 
2016
Net income
$
20,563

 
$
20,374

 
$
41,288

 
$
38,985

Other comprehensive income, net of tax
 
 
 
 
 
 
 
Net change in fair value of securities available for sale
792

 
1,854

 
1,323

 
5,935

Net change in fair value of cash flow hedges
(190
)
 
(144
)
 
(101
)
 
(21
)
Net change in other comprehensive income for defined benefit postretirement plans
78

 
61

 
156

 
121

Total other comprehensive income
680

 
1,771

 
1,378

 
6,035

Total comprehensive income
$
21,243

 
$
22,145

 
$
42,666

 
$
45,020

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


7



INDEPENDENT BANK CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited—Dollars in thousands, except per share data)

 
Common Stock Outstanding
 
Common Stock
 
Value of Shares Held in Rabbi Trust at Cost
 
Deferred Compensation and Other Retirement Benefit Obligations
 
Additional Paid in Capital
 
Retained Earnings
 
Accumulated Other
Comprehensive Income (Loss)
 
Total
Balance December 31, 2016
27,005,813

 
$
268

 
$
(4,277
)
 
$
4,277

 
$
451,664

 
$
414,095

 
$
(1,337
)
 
$
864,690

Cumulative effect accounting adjustment (1)

 

 

 

 
542

 
(365
)
 

 
177

Net income

 

 

 

 

 
41,288

 

 
41,288

Other comprehensive income

 

 

 

 

 

 
1,378

 
1,378

Common dividend declared ($0.64 per share)

 

 

 

 

 
(17,431
)
 

 
(17,431
)
Common stock issued for acquisition
369,286

 
4

 

 

 
23,464

 

 

 
23,468

Proceeds from exercise of stock options, net of cash paid
11,174

 

 

 

 
8

 

 

 
8

Stock based compensation

 

 

 

 
1,560

 

 

 
1,560

Restricted stock awards issued, net of awards surrendered
32,524

 

 

 

 
(1,361
)
 

 

 
(1,361
)
Shares issued under direct stock purchase plan
12,374

 

 

 

 
807

 

 

 
807

Deferred compensation and other retirement benefit obligations

 

 
(137
)
 
137

 

 

 

 

Balance June 30, 2017
27,431,171

 
$
272

 
$
(4,414
)
 
$
4,414

 
$
476,684

 
$
437,587

 
$
41

 
$
914,584

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance December 31, 2015
26,236,352

 
$
260

 
$
(3,958
)
 
$
3,958

 
$
405,486

 
$
368,169

 
$
(2,452
)
 
$
771,463

Net income

 

 

 

 

 
38,985

 

 
38,985

Other comprehensive income

 

 

 

 

 

 
6,035

 
6,035

Common dividend declared ($0.58 per share)

 

 

 

 

 
(15,256
)
 

 
(15,256
)
Proceeds from exercise of stock options, net of cash paid
6,652

 

 

 

 
144

 

 

 
144

Tax benefit related to equity award activity

 

 

 

 
327

 

 

 
327

Stock based compensation

 

 

 

 
1,633

 

 

 
1,633

Restricted stock awards issued, net of awards surrendered
42,967

 
1

 

 

 
(674
)
 

 

 
(673
)
Shares issued under direct stock purchase plan
23,916

 

 

 

 
1,060

 

 

 
1,060

Deferred compensation and other retirement benefit obligations

 

 
(155
)
 
155

 

 

 

 

Tax benefit related to deferred compensation distributions

 

 

 

 
179

 

 

 
179

Balance June 30, 2016
26,309,887

 
$
261

 
$
(4,113
)
 
$
4,113

 
$
408,155

 
$
391,898

 
$
3,583

 
$
803,897

(1)
Represents adjustment needed to reflect the cumulative impact on retained earnings for previously recognized stock based compensation, which included an adjustment for estimated forfeitures. Pursuant to the Company's adoption of Accounting Standards Update 2016-09, the Company has elected to recognize stock based compensation without inclusion of a forfeiture estimate, and as such has recognized this adjustment to present retained earnings consistent with this election.
The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

8


INDEPENDENT BANK CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited—Dollars in thousands)
 
 
Six Months Ended
 
June 30
 
2017
 
2016
Cash flow from operating activities
 
 
 
Net income
$
41,288

 
$
38,985

Adjustments to reconcile net income to net cash provided by operating activities
 
 
 
Depreciation and amortization
7,454

 
7,242

Provision for loan losses
1,650

 
1,125

Deferred income tax expense
642

 
415

Net (gain) loss on sale of securities
(2
)
 
27

Net (gain) loss on bank premises and equipment
(92
)
 
13

Loss on extinguishment of debt

 
437

Net loss on other real estate owned and foreclosed assets
70

 
41

Realized gain on sale leaseback transaction
(517
)
 
(517
)
Stock based compensation
1,560

 
1,633

Excess tax benefit related to equity award activity

 
(327
)
Increase in cash surrender value of life insurance policies
(1,981
)
 
(1,996
)
Change in fair value on loans held for sale
(6
)
 
(13
)
Net change in:
 
 
 
Trading assets
(489
)
 
(443
)
Loans held for sale
(3,236
)
 
(6,924
)
Other assets
8,973

 
(45,265
)
Other liabilities
(6,104
)
 
19,615

Total adjustments
7,922

 
(24,937
)
Net cash provided by operating activities
49,210

 
14,048

Cash flows used in investing activities
 
 
 
Proceeds from sales of securities available for sale
35

 
285

Proceeds from maturities and principal repayments of securities available for sale
24,406

 
32,625

Purchases of securities available for sale
(74,956
)
 
(46,358
)
Proceeds from maturities and principal repayments of securities held to maturity
38,634

 
39,028

Purchases of securities held to maturity
(49,802
)
 

Redemption (purchases) of Federal Home Loan Bank stock
(2,438
)
 
3,127

Investments in low income housing projects
(3,871
)
 
(4,431
)
Purchases of life insurance policies
(101
)
 
(101
)
Net increase in loans
(118,579
)
 
(126,406
)
Cash acquired in business combinations, net of cash paid
6,289

 

Purchases of bank premises and equipment
(14,182
)
 
(4,003
)
Proceeds from the sale of bank premises and equipment
1,918

 
14

Proceeds from the sale of other real estate owned and foreclosed assets
1,531

 
795

Net payments relating to other real estate owned and foreclosed assets

 
(145
)
Net cash used in investing activities
(191,116
)
 
(105,570
)
Cash flows provided by financing activities
 
 
 
Net decrease in time deposits
(55,787
)
 
(40,755
)

9


Net increase in other deposits
179,495

 
247,944

Repayments of long-term Federal Home Loan Bank borrowings

 
(51,641
)
Net increase (decrease) in customer repurchase agreements
(17,542
)
 
5,758

Net proceeds from exercise of stock options
8

 
144

Restricted stock awards issued, net of awards surrendered
(1,361
)
 
(673
)
Excess tax benefit from stock based compensation

 
327

Tax benefit from deferred compensation distribution

 
179

Proceeds from shares issued under direct stock purchase plan
807

 
1,060

Common dividends paid
(16,487
)
 
(14,449
)
Net cash provided by financing activities
89,133

 
147,894

Net increase (decrease) in cash and cash equivalents
(52,773
)
 
56,372

Cash and cash equivalents at beginning of year
289,095

 
275,765

Cash and cash equivalents at end of period
$
236,322

 
$
332,137

Supplemental schedule of noncash investing and financing activities
 
 
 
Transfer of loans to other real estate owned & foreclosed assets
$
457

 
$
377

Net increase (decrease) in capital commitments relating to low income housing project investments
$
46

 
$
(180
)
In conjunction with the Company's acquisitions, assets were acquired and liabilities were assumed as follows
 
 
 
Common stock issued for acquisition
$
23,468

 
$

Fair value of assets acquired, net of cash acquired
$
179,252

 
$

Fair value of liabilities assumed
$
162,073

 
$

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

10


CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION
Independent Bank Corp. (the “Company”) is a state chartered, federally registered bank holding company, incorporated in 1985. The Company is the sole stockholder of Rockland Trust Company (“Rockland Trust” or the “Bank”), a Massachusetts trust company chartered in 1907.
All material intercompany balances and transactions have been eliminated in consolidation. Certain previously reported amounts have been reclassified to conform to the current year’s presentation.
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial statements, primarily consisting of normal recurring adjustments, have been included. Results for the quarter ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017 or any other interim period.
For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, filed with the Securities and Exchange Commission.

NOTE 2 - RECENT ACCOUNTING STANDARDS UPDATES

Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 718 "Compensation - Stock Compensation" Update No. 2016-09. Update No. 2016-09 was issued in March 2016 and affects all entities that issue share-based awards to their employees. This update was issued as part of the FASB’s simplification initiative. The areas for simplification in this update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in this update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company adopted this standard effective January 1, 2017. Upon adoption, the Company elected to no longer estimate forfeitures on stock compensation and instead recognize forfeitures when they occur. The election required a cumulative effect adjustment to retained earnings which did not materially impact the Company's consolidated financial position. Additionally, the disclosure requirements of this standard will be applied on a prospective basis.
FASB ASC Topic 718 "Compensation - Stock Compensation" Update No. 2017-09. Update No. 2017-09 was issued in May 2017 to provide clarity and reduce diversity in practice when applying guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity should account for the effects of a modification unless all the following are met: (1) The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification. (2) The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified. (3) The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification accounting under the amendments in this update. The amendments in this update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for public business entities for reporting periods for which financial statements have not yet been issued and all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this update should be applied prospectively to an award modified on or after the adoption date. The adoption of this standard is not expected to have a material impact on the Company's consolidated financial position.
FASB ASC Topic 310-20 "Receivables - Nonrefundable fees and Other Costs" Update No. 2017-08. Update No. 2017-08 was issued in March 2017 to shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. The Company early adopted this standard effective January 1, 2017 and the impact on the Company's consolidated financial position was immaterial.

11


FASB ASC Topic 715 "Compensation - Retirement Benefits" Update No. 2017-07. Update No. 2017-07 was issued in March 2017 to improve the presentation of net periodic pension cost and net periodic postretirement benefit costs. This update requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. The amendments in this update also allow only the service cost component to be eligible for capitalization when applicable. The amendments in this update are effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. Early adoption is permitted as of the beginning of an annual period for which the financial statements (interim or annual) have not been issued or made available for issuance. That is, early adoption should be within the first interim period if an employer issues interim financial statements. Disclosures of the nature of and reason for the change in accounting principle are required in the first interim and annual periods of adoption. The adoption of this standard is not expected to have a material impact on the Company's consolidated financial position.
FASB ASC Subtopic 610-20 "Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets" Update No. 2017-05. Update No. 2017-05 was issued in February 2017 to clarify that a financial asset is within the scope of Subtopic 610-20 if it meets the definition of an in substance nonfinancial asset. The amendments define the term in substance nonfinancial asset, in part, as a financial asset promised to a counterparty in a contract if substantially all of the fair value of the assets (recognized and unrecognized) that are promised to the counterparty in the contract is concentrated in nonfinancial assets. The amendments in this update also clarify that nonfinancial assets within the scope of Subtopic 610-20 may include nonfinancial assets transferred within a legal entity to a counterparty. A contract that includes the transfer of ownership interests in one or more consolidated subsidiaries is within the scope of Subtopic 610-20 if substantially all of the fair value of the assets that are promised to the counterparty in a contract is concentrated in nonfinancial assets. For purposes of that evaluation, the amendments require an entity to evaluate the underlying assets in consolidated subsidiaries to determine whether those assets are within the scope of Subtopic 610-20. The amendments are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The guidance may be applied earlier but only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods in that reporting period. The adoption of this standard is not expected to have a material impact on the Company's consolidated financial position.
FASB ASC Topic 350 "Intangibles - Goodwill and Other " Update No. 2017-04. Update No. 2017-04 was issued in January 2017 to simplify the subsequent measurement of goodwill, by eliminating Step 2 for the goodwill impairment test. The amendments in this update modify the concept of impairment from the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An entity is no longer required to determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit has been acquired in a business combination. An entity should apply the amendments in this update on a prospective basis. An entity is required to disclose the nature of and reason for the change in accounting principle upon transition. That disclosure should be provided in the first annual period and in the interim period within the first annual period when the entity initially adopts the amendments in this update. A public business entity that is a U.S. Securities and Exchange Commission (SEC)filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of this standard is not expected to have a material impact on the Company's consolidated financial position.
FASB ASC Topic 606 "Revenue from Contracts with Customers" Update No. 2014-09. Update No. 2014-09 was issued in May 2014 to address the previous revenue recognition requirements in GAAP that differ from those in International Financial Reporting Standards (IFRS).  Accordingly, the FASB and the International Accounting Standards Board (IASB) initiated a joint project to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and IFRS. The largely converged revenue recognition standards will supersede virtually all revenue recognition guidance in GAAP and IFRS. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Since the issuance of Update 2014-09, the FASB has finalized various amendments to the standard as summarized below:
FASB ASC Topic 606 "Revenue from Contracts with Customers" Update No. 2016-20
FASB ASC Topic 606 "Revenue from Contracts with Customers" Update No. 2016-12
FASB ASC Topic 606 "Revenue from Contracts with Customers" Update No. 2016-10
FASB ASC Topic 606 "Revenue from Contracts with Customers" Update No. 2016-08.

12


FASB ASC Topic 606 "Revenue from Contracts with Customers" Update No. 2015-14.

The amendments in Update 2016-20 make minor corrections or minor improvements to the codification that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities.

Through Updates 2016-12, 2016-10 and 2016-08, the FASB amended its new revenue guidance on licenses of intellectual property, identification of performance obligations, collectability, noncash consideration and the presentation of sales and other similar taxes. The FASB also clarified the definition of a completed contract at transition and added a practical expedient to ease transition for contracts that were modified prior to adoption. The FASB also amended the new revenue recognition guidance on determining whether an entity is a principal or an agent in an arrangement which affects whether revenue should be reported gross or net.
Following the issuance of Update 2015-14, Update 2014-09, as amended, is effective for the Company for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. A full or modified retrospective transition method is required. The Company's revenue is comprised of net interest income on financial assets and liabilities, and noninterest income.  Interest income, mortgage banking income, gain on sale of equity securities, increase in cash surrender value of life insurance policies and loan level derivative income are accounted for under other U.S. GAAP standards, and are therefore anticipated to be out of scope of the ASC 606 revenue standard. Deposit account fees, interchange and ATM fees, investment management and certain categories of other noninterest income are anticipated to be within the scope of the ASC 606 revenue standard. As such, the Company is currently reviewing contracts related to these revenue streams and at this point does not anticipate any material changes to revenue recognition upon adoption, however, the Company’s review is still ongoing. The Company plans to adopt the revenue recognition standard as of January 1, 2018 and anticipates using the modified retrospective transition method upon adoption.


13


NOTE 3 - ACQUISITIONS

Island Bancorp, Inc.

On May 12, 2017, the Company completed its acquisition of Island Bancorp, Inc., the parent of The Edgartown National Bank ("Island Bancorp"). The transaction qualified as a tax-free reorganization for federal income tax purposes and Island Bancorp shareholders received, for each share of Island Bancorp common stock, the right to receive either $500 in cash per share or 9.525 shares of the Company's stock (valued at $605.31 per share, based upon the highest trading value of the Company's stock on May 12, 2017 of $63.55). The total deal consideration was $28.3 million and was comprised of 20% cash and 80% stock consideration. The cash consideration was $4.8 million in the aggregate, inclusive of cash paid in lieu of fractional shares. The total stock consideration was $23.5 million resulting in an increase to the Company's outstanding shares of 369,286 shares.

The Company accounted for the acquisition using the acquisition method pursuant to the Business Combinations Topic of the FASB ASC. Accordingly, the Company recorded merger and acquisition expenses of $2.9 million and $3.2 million during the three and six months ended June 30, 2017. Additionally, the acquisition method requires the acquirer to recognize the assets acquired and the liabilities assumed at their fair values as of the acquisition date. The following table summarizes the estimated fair value of the assets acquired and liabilities assumed as of the date of the acquisition:
 
Net Assets Acquired at Fair Value
 
(Dollars in thousands)
Assets
 
Cash
$
11,137

Loans
155,551

Premises and equipment
5,828

Goodwill
10,280

Core deposit and other intangibles
2,964

Other assets
4,629

Total assets acquired
190,389

Liabilities
 
Deposits
159,580

Borrowings
2,475

Other liabilities
18

Total liabilities assumed
162,073

     Purchase price
$
28,316

    
Fair value adjustments to assets acquired and liabilities assumed are generally amortized using either an effective yield or straight-line basis over periods consistent with the average life, useful life and/or contractual term of the related assets and liabilities.
Fair values of the major categories of assets acquired and liabilities assumed were determined as follows:
Cash and Cash Equivalents
The fair values of cash and cash equivalents approximate the respective carrying amounts because the instruments are payable on demand or have short-term maturities.

14



Loans

The loans acquired were recorded at fair value without a carryover of the allowance for loan losses. Fair value of the loans is determined using market participant assumptions in estimating the amount and timing of both principal and interest cash flows expected to be collected, as adjusted for an estimate of future credit losses and prepayments, and then applying a market-based discount rate to those cash flows. The overall discount on the loans acquired in this transaction was due to anticipated credit loss, as well as considerations for liquidity and market interest rates. In addition, the acquired loans were reviewed to determine if the loan had evidence of deterioration of credit quality at the purchase date and also reviewed to determine if it was probable that all contractually required payments will not be collected. Based on the review of the loan portfolio at the time of the acquisition it was deemed that there was no evidence to show that any of the acquired loans were purchased credit impaired.

Premises and Equipment
The fair value of the premises, including land, buildings and improvements, was determined based upon appraisals by licensed real estate appraisers. The appraisals were based upon the best and highest use of the property with final values determined based upon an analysis of the cost, sales comparison and income capitalization approaches for each property appraised.
Core Deposit Intangible
The fair value of the core deposit intangible is derived by comparing the interest rate and servicing costs that the financial institution pays on the core deposit liability versus the current market rate for alternative sources of financing, while factoring in estimates over the remaining life and attrition rate of the deposit accounts. The intangible asset represents the stable and relatively low cost source of funds that the deposits and accompanying relationships provide the Company, when compared to alternative funding sources.
Deposits
The fair value of acquired savings and transaction deposit accounts was assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. The fair value of time deposits were determined based on the present value of the contractual cash flows over the remaining period to maturity using a market interest rate.
Borrowings
The fair values of Federal Home Loan Bank ("FHLB") advances were derived based upon the present value of the principal and interest payments using a current market discount rate.
Selected Pro Forma Results
The following summarizes the unaudited pro forma results of operations as if the Company acquired Island Bancorp on January 1, 2017 (2016 amounts represent combined results for the Company and Island Bancorp). The selected pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the financial results of the combined companies had the acquisition actually been completed at the beginning of the periods presented, nor does it indicate future results for any other interim or full-year period.
 
Three Months Ended
 
Six Months Ended
 
June 30
 
June 30
 
2017
 
2016
 
2017
 
2016
 
(Dollars in thousands)
Net interest income after provision for loan losses
$
63,370

 
$
57,352

 
$
124,412

 
$
113,102

Net income
22,698

 
20,629

 
44,109

 
39,488

Excluded from the pro forma results of operations for the three and six months ended June 30, 2017 are merger-related costs of $2.1 million and $2.6 million, net of tax, recognized by both the Company and Island Bancorp in the aggregate. There were no merger and acquisition expenses recognized during the three and six months ended June 30, 2016. These costs were primarily made up of contract terminations arising due to the change in control, the acceleration of certain compensation and benefit costs, and other merger expenses.


15


NOTE 4 - SECURITIES
Trading Securities

The Company had trading securities of $1.3 million and $804,000 as of June 30, 2017 and December 31, 2016, respectively. These securities are held in a rabbi trust and will be used for future payments associated with the Company’s non-qualified
401(k) Restoration Plan and Non-Qualified Deferred Compensation Plan.
Available for Sale and Held to Maturity Securities
The following table presents a summary of the amortized cost, gross unrealized gains and losses and fair value of securities available for sale and securities held to maturity for the periods indicated:
 
June 30, 2017
 
December 31, 2016
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross Unrealized
Losses
 
Fair
Value
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross Unrealized
Losses
 
Fair
Value
 
(Dollars in thousands)
Available for sale securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency securities
$
24,009

 
$
269

 
$

 
$
24,278

 
$
24,006

 
$
238

 
$

 
$
24,244

Agency mortgage-backed securities
189,780

 
3,065

 
(175
)
 
192,670

 
173,268

 
2,852

 
(736
)
 
175,384

Agency collateralized mortgage obligations
121,292

 
433

 
(1,028
)
 
120,697

 
101,094

 
106

 
(1,332
)
 
99,868

State, county, and municipal securities
3,723

 
52

 

 
3,775

 
3,743

 
50

 

 
3,793

Single issuer trust preferred securities issued by banks
2,285

 
43

 

 
2,328

 
2,311

 
3

 
(3
)
 
2,311

Pooled trust preferred securities issued by banks and insurers
2,202

 

 
(609
)
 
1,593

 
2,200

 

 
(616
)
 
1,584

Small business administration pooled securities
51,044

 

 
(265
)
 
50,779

 
37,561

 

 
(372
)
 
37,189

Equity securities
19,161

 
1,086

 
(424
)
 
19,823

 
19,183

 
641

 
(553
)
 
19,271

Total available for sale securities
$
413,496

 
$
4,948

 
$
(2,501
)
 
$
415,943

 
$
363,366

 
$
3,890

 
$
(3,612
)
 
$
363,644

Held to maturity securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
$
1,006

 
$
46

 
$

 
$
1,052

 
$
1,007

 
$
47

 
$

 
$
1,054

Agency mortgage-backed securities
178,358

 
2,506

 
(416
)
 
180,448

 
156,088

 
2,274

 
(858
)
 
157,504

Agency collateralized mortgage obligations
288,428

 
1,285

 
(2,881
)
 
286,832

 
297,445

 
1,002

 
(3,797
)
 
294,650

Single issuer trust preferred securities issued by banks
1,500

 
37

 

 
1,537

 
1,500

 
44

 

 
1,544

Small business administration pooled securities
29,100

 
247

 
(157
)
 
29,190

 
31,036

 
189

 
(327
)
 
30,898

Total held to maturity securities
$
498,392

 
$
4,121

 
$
(3,454
)
 
$
499,059

 
$
487,076

 
$
3,556

 
$
(4,982
)
 
$
485,650

Total
$
911,888

 
$
9,069

 
$
(5,955
)
 
$
915,002

 
$
850,442

 
$
7,446

 
$
(8,594
)
 
$
849,294

When securities are sold, the adjusted cost of the specific security sold is used to compute the gain or loss on the sale.
 
The actual maturities of certain securities may differ from the contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. A schedule of the contractual maturities of securities available for sale and securities held to maturity as of June 30, 2017 is presented below:
 
Available for Sale
 
Held to Maturity
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
 
(Dollars in thousands)
Due in one year or less
$
3,660

 
$
3,672

 
$

 
$

Due after one year to five years
35,607

 
36,122

 
15,824

 
16,064

Due after five to ten years
96,985

 
97,760

 
19,574

 
20,045

Due after ten years
258,083

 
258,566

 
462,994

 
462,950

Total debt securities
$
394,335

 
$
396,120

 
$
498,392

 
$
499,059

Equity securities
$
19,161

 
$
19,823

 
$

 
$

Total
$
413,496

 
$
415,943

 
$
498,392

 
$
499,059


16


Inclusive in the table above are $9.4 million of callable securities in the Company’s investment portfolio at June 30, 2017.
The carrying value of securities pledged to secure public funds, trust deposits, repurchase agreements and for other purposes, as required or permitted by law, was $515.0 million and $482.1 million at June 30, 2017 and December 31, 2016, respectively.
At June 30, 2017 and December 31, 2016, the Company had no investments in obligations of individual states, counties, or municipalities which exceeded 10% of stockholders’ equity.
Other-Than-Temporary Impairment ("OTTI")
The Company continually reviews investment securities for the existence of OTTI, taking into consideration current market conditions, the extent and nature of changes in fair value, issuer rating changes and trends, the credit worthiness of the obligor of the security, volatility of earnings, current analysts’ evaluations, the Company’s intent to sell the security, whether it is more likely than not that the Company will be required to sell the debt security before its anticipated recovery, as well as other qualitative factors. The term “other-than-temporary” is not intended to indicate that the decline is permanent, but indicates that the prospects for a near-term recovery of value is not necessarily favorable, or that there is a lack of evidence to support a realizable value equal to or greater than the carrying value of the investment.
The following tables show the gross unrealized losses and fair value of the Company’s investments in an unrealized loss position, which the Company has not deemed to be OTTI, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:
 
June 30, 2017
 
 
 
Less than 12 months
 
12 months or longer
 
Total
 
# of holdings
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
(Dollars in thousands)
Agency mortgage-backed securities
36

 
$
111,741

 
$
(589
)
 
$
325

 
$
(2
)
 
$
112,066

 
$
(591
)
Agency collateralized mortgage obligations
25

 
163,824

 
(2,228
)
 
44,015

 
(1,681
)
 
207,839

 
(3,909
)
Pooled trust preferred securities issued by banks and insurers
1

 

 

 
1,593

 
(609
)
 
1,593

 
(609
)
Small business administration pooled securities
6

 
72,140

 
(422
)
 

 

 
72,140

 
(422
)
Equity securities
21

 
1,703

 
(37
)
 
5,953

 
(387
)
 
7,656

 
(424
)
Total temporarily impaired securities
89

 
$
349,408

 
$
(3,276
)
 
$
51,886

 
$
(2,679
)
 
$
401,294

 
$
(5,955
)

 
December 31, 2016
 
 
 
Less than 12 months
 
12 months or longer
 
Total
 
# of holdings
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
(Dollars in thousands)
Agency mortgage-backed securities
57

 
$
137,949

 
$
(1,594
)
 
$

 
$

 
$
137,949

 
$
(1,594
)
Agency collateralized mortgage obligations
32

 
243,051

 
(3,140
)
 
47,403

 
(1,989
)
 
290,454

 
(5,129
)
Single issuer trust preferred securities issued by banks and insurers
1

 

 

 
1,036

 
(3
)
 
1,036

 
(3
)
Pooled trust preferred securities issued by banks and insurers
1

 

 

 
1,583

 
(616
)
 
1,583

 
(616
)
Small business administration pooled securities
5

 
59,846

 
(699
)
 

 

 
59,846

 
(699
)
Equity securities
25

 
3,625

 
(77
)
 
6,334

 
(476
)
 
9,959

 
(553
)
Total temporarily impaired securities
121

 
$
444,471

 
$
(5,510
)
 
$
56,356

 
$
(3,084
)
 
$
500,827

 
$
(8,594
)
The Company does not intend to sell these investments and has determined based upon available evidence that it is more likely than not that the Company will not be required to sell the security before the recovery of its amortized cost basis. As a result, the Company does not consider these investments to be OTTI. The Company made this determination by reviewing various

17


qualitative and quantitative factors regarding each investment category, such as current market conditions, extent and nature of changes in fair value, issuer rating changes and trends, volatility of earnings, and current analysts’ evaluations.
As a result of the Company’s review of these qualitative and quantitative factors, the causes of the impairments listed in the table above by category are as follows at June 30, 2017:
Agency Mortgage-Backed Securities, Agency Collateralized Mortgage Obligations and Small Business Administration Pooled Securities: These portfolios have contractual terms that generally do not permit the issuer to settle the securities at a price less than the current par value of the investment. The decline in market value of these securities is attributable to changes in interest rates and not credit quality. Additionally, these securities are either implicitly or explicitly guaranteed by the U.S. Government or one of its agencies.
Pooled Trust Preferred Securities: This portfolio consists of one below investment grade security which is performing. The unrealized loss on this security is attributable to the illiquid nature of the trust preferred market in the current economic and regulatory environment. Management evaluates collateral credit and instrument structure, including current and expected deferral and default rates and timing. In addition, discount rates are determined by evaluating comparable spreads observed currently in the market for similar instruments.
Equity Securities: This portfolio consists of mutual funds and other equity investments. During some periods, the mutual funds in the Company’s investment portfolio may have unrealized losses resulting from market fluctuations, as well as the risk premium associated with that particular asset class. For example, emerging market equities tend to trade at a higher risk premium than U.S. government bonds and thus, will fluctuate to a greater degree on both the upside and the downside. In the context of a well-diversified portfolio, however, the correlation amongst the various asset classes represented by the funds serves to minimize downside risk. The Company evaluates each mutual fund in the portfolio regularly and measures performance on both an absolute and relative basis. A reasonable recovery period for positions with an unrealized loss is based on management’s assessment of general economic data, trends within a particular asset class, valuations, earnings forecasts and bond durations. The Company has the ability and intent to hold these equity securities until a recovery of fair value.
For the three and six months ended June 30, 2017 and 2016 there was no OTTI recorded and no cumulative credit related component of OTTI.



18


NOTE 5 - LOANS, ALLOWANCE FOR LOAN LOSSES, AND CREDIT QUALITY
The following tables bifurcate the amount of loans and the allowance allocated to each loan category based on the type of impairment analysis as of the periods indicated:
 
June 30, 2017
 
 
(Dollars in thousands)
 
 
Commercial and
Industrial
 
Commercial
Real Estate
 
Commercial
Construction
 
Small
Business
 
Residential
Real Estate
 

Home Equity
 
Other Consumer
 
Total
 
Financing receivables ending balance:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Collectively evaluated for impairment
$
874,664

 
$
3,055,924

 
$
340,757

 
$
130,804

 
$
728,109

 
$
1,037,064

 
$
10,124

 
$
6,177,446

  
Individually evaluated for impairment
$
36,272

 
$
17,065

 
$

 
$
859

 
$
13,879

 
$
6,190

 
$
345

 
$
74,610

  
Purchased credit impaired loans
$

 
$
10,031

 
$

 
$

 
$
7,404

 
$
205

 
$

 
$
17,640

 
Total loans by group
$
910,936

 
$
3,083,020

 
$
340,757

 
$
131,663

 
$
749,392

 
$
1,043,459

 
$
10,469

 
$
6,269,696

(1
)
 
December 31, 2016
 
 
(Dollars in thousands)
 
 
Commercial and
Industrial
 
Commercial
Real Estate
 
Commercial
Construction
 
Small
Business
 
Residential
Real Estate
 

Home Equity
 
Other Consumer
 
Total
 
Financing receivables ending balance:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Collectively evaluated for impairment
$
862,875

 
$
2,983,642

 
$
320,391

 
$
121,855

 
$
622,392

 
$
982,095

 
$
10,666

 
$
5,903,916

 
Individually evaluated for impairment
$
39,178

 
$
16,813

 
$

 
$
871

 
$
14,175

 
$
5,863

 
$
397

 
$
77,297

  
Purchased credit impaired loans
$

 
$
10,343

 
$

 
$

 
$
7,859

 
$
189

 
$
1

 
$
18,392

 
Total loans by group
$
902,053

 
$
3,010,798

 
$
320,391

 
$
122,726

 
$
644,426

 
$
988,147

 
$
11,064

 
$
5,999,605

(1
)
 
(1)
The amount of net deferred costs on originated loans included in the ending balance was $5.6 million and $5.1 million at June 30, 2017 and December 31, 2016, respectively. Net unamortized discounts on acquired loans not deemed to be purchased credit impaired ("PCI") included in the ending balance was $10.2 million and $8.6 million at June 30, 2017 and December 31, 2016, respectively.
    













19


The following tables summarize changes in allowance for loan losses by loan category for the periods indicated:

 
Three Months Ended June 30, 2017
 
(Dollars in thousands)
 
Commercial and
Industrial
 
Commercial
Real Estate
 
Commercial
Construction
 
Small
Business
 
Residential
Real Estate
 

Home Equity
 
Other Consumer
 
Total
Allowance for loan losses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
16,518

 
$
30,743

 
$
5,023

 
$
1,533

 
$
2,716

 
$
5,345

 
$
440

 
$
62,318

Charge-offs
(3,591
)
 

 

 
(24
)
 
(116
)
 
(122
)
 
(345
)
 
(4,198
)
Recoveries
13

 
26

 

 
13

 
2

 
26

 
229

 
309

Provision (benefit)
604

 
178

 
(209
)
 
91

 
91

 
104

 
191

 
1,050

Ending balance
$
13,544

 
$
30,947

 
$
4,814

 
$
1,613

 
$
2,693

 
$
5,353

 
$
515

 
$
59,479

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2016
 
(Dollars in thousands)
 
Commercial and
Industrial
 
Commercial
Real Estate
 
Commercial
Construction
 
Small
Business
 
Residential
Real Estate
 

Home Equity
 
Other Consumer
 
Total
Allowance for loan losses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
13,485

 
$
28,595

 
$
5,100

 
$
1,341

 
$
2,567

 
$
4,915

 
$
429

 
$
56,432

Charge-offs
(2
)
 
(25
)
 

 
(30
)
 
(8
)
 
(190
)
 
(322
)
 
(577
)
Recoveries
649

 
223

 

 
73

 
51

 
26

 
250

 
1,272

Provision (benefit)
(105
)
 
218

 
116

 
57

 
(32
)
 
235

 
111

 
600

Ending balance
$
14,027

 
$
29,011

 
$
5,216

 
$
1,441

 
$
2,578

 
$
4,986

 
$
468

 
$
57,727



20


 
Six Months Ended June 30, 2017
 
(Dollars in thousands)
 
Commercial and
Industrial
 
Commercial
Real Estate
 
Commercial
Construction
 
Small
Business
 
Residential
Real Estate
 

Home Equity
 
Other Consumer
 
Total
Allowance for loan losses