What changed in this filing

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Item 1. Financial Statements

2021-08-04 compared with 2021-05-05 · 231 added, 155 removed, 1091 unchanged (26% of the section changed)

39 unchanged sentences

Preferred stock, $ 1 par value, 2,500,000 shares authorized, none issued or outstanding

Common stock, $ 1 par value, 10,000,000 shares authorized, 6,206,913 and 6,251,004 issued and outstanding at March 31, 2021 and December 31, 2020, respectively

Common stock, $ 1 par value, 10,000,000 shares authorized, 6,206,913 and 6,251,004 issued and outstanding at June 30, 2021 and December 31, 2020, respectively

Additional paid-in capital 39,871 41,808

6 unchanged sentences

Consolidated Statements of Income

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

(In Thousands, Except Per Share Data) 2021 2020 2021 2020

20 unchanged sentences

Service charges on deposit accounts 308 171 598 533

Unrealized (loss) on marketable equity securities ( 84 ) ( 871 )

Unrealized gain (loss) on marketable equity securities 178 149 94 ( 722 )

Interest rate swap income 103 17 195 17

6 unchanged sentences

Occupancy expense 1,869 1,618 3,529 3,275

Professional and outside services 624 608

Marketing expense 672 696 1,076 1,279

Professional and outside services 642 714 1,266 1,322

Insurance expense 329 301 643 613

OREO expense (income), net 47 21 11 ( 15 )

Intangible asset amortization expense 9 12 18 24

OREO (income) expense, net ( 36 ) ( 36 )

Other operating expense 1,645 1,642 3,234 3,268

10 unchanged sentences

Consolidated Statements of Comprehensive Income

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In Thousands) 2021 2020 2021 2020

2 unchanged sentences

Securities available for sale:

Unrealized (losses) arising during the period ($ 1,518 ) ($ 1,330 )

Reclassification of net gains included in net income, net of tax expense

of $ 0 and $ 28 for the first quarters of 2021 and 2020, respectively

Unrealized (losses) gains arising during the period ($ 90 ) $ 1,753 ($ 1,608 ) $ 423

Derivatives and hedging activities:

Unrealized gains (losses) arising during the period 1,260 ( 1,867 )

Income tax benefit related to unrealized gains and losses 77 1,131

Other comprehensive loss, net of tax ( 181 ) ( 2,136 )

Unrealized (losses) gains arising during the period ( 587 ) — 673 ( 1,867 )

Income tax benefit (expense) related to reclassifications and unrealized gains

and losses 189 ( 497 ) 266 564

Other comprehensive (loss) gain, net of tax ( 488 ) 1,256 ( 669 ) ( 880 )

Comprehensive income $ 7,857 $ 11,156 $ 19,857 $ 10,053

52 unchanged sentences

Balance as of March 31, 2021 6,207 $ 6,207 $ 39,642 $ 185,766 ($ 163 ) $ 231,452

Cash dividend on common stock ($ 0.37 per share)

— — — ( 2,320 ) — ( 2,320 )

Stock-based compensation expense — — 229 — — 229

Other comprehensive loss, net of tax — — — — ( 488 ) ( 488 )

Net income — — — 8,345 — 8,345

Balance as of June 30, 2021 6,207 $ 6,207 $ 39,871 $ 191,791 ($ 651 ) $ 237,218

See notes to consolidated financial statements

1 unchanged sentence

Consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

(In Thousands) 2021 2020

1 unchanged sentence

Net income $ 20,526 $ 10,933

Adjustments to Reconcile Net Income to Net Cash Used by Operating Activities:

Adjustments to Reconcile Net Income to Net Cash Provided (Used) by Operating Activities:

Gain on sale of securities, net ( 31 ) ( 98 )

3 unchanged sentences

Amortization of investment security premium, net of discount accretion 223 ( 63 )

Unrealized loss (gain) on marketable equity securities 84 871

Deferred tax (benefit) expense 881 ( 1,061 )

Unrealized (gain) loss on marketable equity securities ( 94 ) 722

Deferred tax expense (benefit) 692 ( 562 )

Stock-based compensation 509 480

Deferred loan fees and amortization, net of costs 5,710 9,921

Provision (benefit) for credit losses ( 1,488 ) 2,060

Provision for purchased receivables — 5

(Benefit) provision for credit losses ( 1,915 ) 2,464

(Benefit) provision for purchased receivables — ( 1 )

Additions to home mortgage servicing rights carried at fair value ( 3,193 ) ( 1,659 )

6 unchanged sentences

Net changes in assets and liabilities:

(Increase) in accrued interest receivable ( 264 ) ( 495 )

Decrease (Increase) in other assets 2,795 ( 3,186 )

Decrease (increase) in accrued interest receivable 132 ( 3,877 )

Increase (decrease) in other assets 6,543 ( 4,309 )

(Increase) decrease in other liabilities ( 4,698 ) 617

43 unchanged sentences

The Company has evaluated subsequent events and transactions for potential recognition or disclosure.

Operating results for the interim period ended March 31, 2021 are not necessarily indicative of the results anticipated for the year ending December 31, 2021.

Operating results for the interim period ended June 30, 2021 are not necessarily indicative of the results anticipated for the year ending December 31, 2021.

These consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

13 unchanged sentences

The ACL on held to maturity securities is estimated on a collective basis by major security type.

At March 31, 2021, the Company’s held to maturity securities consisted of investments in corporate bonds.

At June 30, 2021, the Company’s held to maturity securities consisted of investments in corporate bonds.

Expected credit losses for these securities are estimated using a discounted cash flow ("DCF") methodology which considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

11 unchanged sentences

Depending on the nature and size of the pool of financial assets with similar risk characteristics, the Company uses a DCF method or a weighted average remaining life method to estimate expected credit losses quantitatively.

The Company uses a DCF method for 8 of its 11 loan pools, which represent 98 % of the amortized cost basis of total loans at March 31, 2021.

The Company uses a DCF method for 8 of its 11 loan pools, which represent 98 % of the amortized cost basis of total loan pools at June 30, 2021.

The weighted average remaining life method is used for the remaining 3 loan pools primarily because loan level data constraints preclude the use of the DCF model.

5 unchanged sentences

The Company determines a reasonable and supportable forecast and applies that forecast to the regression model to estimate defaults over the forecast period.

Management leverages economic projections from a reputable and independent third-party to inform its loss driver forecasts over the Company's 4 quarter forecast period.

Management leverages economic projections from a reputable and independent third-party to inform its loss driver forecasts over the Company's four quarter forecast period.

Management utilizes and forecasts Alaska unemployment as a loss driver for all of the loans pools that utilized the DCF method.

1 unchanged sentence

Other internal and external indicators of economic forecasts are also considered by management when developing the forecast metrics.

Following the forecast period, the economic variables used to calculate PD revert to a historical average at a constant rate over an 8 quarter reversion period.

Following the forecast period, the economic variables used to calculate PD revert to a historical average at a constant rate over an eight quarter reversion period.

Other assumptions relevant to the discounted cash flow model to derive the quantitative allowance include the LGD, which is the estimate of loss for a defaulted loan, prepayment speeds, and the discount rate applied to future cash flows.

60 unchanged sentences

A loan is generally identified for individual evaluation when management determines that we will probably not be able to collect all amounts due according to the loan contract, including scheduled interest payments.

When we identify a loan for individual evaluation, we measure expected credit losses using discounted cash flows, except when the sole remaining source of the repayment for the loan is the liquidation of the collateral.

When we identify a loan for individual evaluation, we measure expected credit losses using DCF, except when the sole remaining source of the repayment for the loan is the liquidation of the collateral.

In these cases, we use the current fair value of the collateral, less selling costs, instead of discounted cash flows.

19 unchanged sentences

government and absent any specific loss information on any of our guaranteed loans, the Company does not carry an ACL on its PPP and other loans guaranteed by the U.S.

government at March 31, 2021 or December 31, 2020.

government at June 30, 2021 or December 31, 2020.

Loan Commitments and Allowance for Credit Losses on Off-Balance Sheet Credit Exposures:

34 unchanged sentences

Results for periods beginning after January 1, 2021 and presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable US GAAP.

The Company recorded a net increase in retained earnings of $ 2.4 million upon adoption.

The transition adjustment includes a decrease in the allowance for credit losses on loans of $ 4.5 million, a decrease in the allowance for credit losses on purchased receivables of $ 73,000 , and an increase in the allowance for credit losses on unfunded commitments of $ 1.2 million, net of the corresponding net decrease in deferred tax assets of $ 954,000 .

The Company recorded a net increase in retained earnings of $ 2.4 million upon adoption of ASU 2016-13.

The transition adjustment includes a decrease in the ACL on loans of $ 4.5 million, a decrease in the ACL on purchased receivables of $ 73,000 , and an increase in the ACL on unfunded commitments of $ 1.2 million, net of the corresponding net decrease in deferred tax assets of $ 954,000 .

Accounting pronouncements to be implemented in future periods

15 unchanged sentences

The Company has some assets and liabilities referenced to LIBOR, such as commercial loans, derivatives, debt securities, and junior subordinated debentures.

As of March 31, 2021, we had approximately $ 206.0 million of assets, including $ 128.7 million in commercial loans and $ 77.3 million in debt securities, and $ 10.3 million of liabilities in the form of our junior subordinated debentures linked to USD LIBOR.

As of June 30, 2021, we had approximately $ 164.9 million of assets, including $ 111.4 million in commercial loans and $ 43.5 million in debt securities, and $ 10.3 million of liabilities in the form of our junior subordinated debentures linked to USD LIBOR.

These amounts exclude derivative assets and liabilities on our consolidated balance sheet.

As of March 31, 2021, the notional amount of our USD LIBOR-linked interest rate derivative contracts was $ 158.3 million.

As of June 30, 2021, the notional amount of our USD LIBOR-linked interest rate derivative contracts was $ 156.7 million.

Of this amount, $ 73.2 million in notional value represent commercial loan interest rate swap agreements with commercial banking customers.

4 unchanged sentences

(i) develop more robust fallback language and disclosures related to the LIBOR transition, (ii) develop a plan to seek to amend legacy contracts to reference such fallback language or alternative reference rates, (iii) enhance systems to support commercial loans, securities, and derivatives linked to the Secured Overnight Financing Rate and other alternative reference rates, (iv) develop and evaluate internal guidance, policies and procedures focused on the transition away from LIBOR to alternative reference rate products, and (v) prepare and disseminate internal and external communications regarding the LIBOR transition.

The amendments are in effect from March 12, 2020, through December 31, 2022.

ASU 2021-01 does not have a material impact on the Company's consolidated financial statements.

1 unchanged sentence

The Company is required to maintain cash balances or deposits with the Federal Reserve Bank of San Francisco ("Federal Reserve Bank") sufficient to meet its statutory reserve requirements and for purposes of settling financial transactions and charges for the Federal Reserve Bank services.

The average reserve requirement for the maintenance period for the quarter ended March 31, 2021, was zero .

The Company is required to maintain a $ 250,000 balance with a correspondent bank for outsourced servicing of ATMs.

As of March 31, 2021, the Company was required to maintain a $ 100,000 and $ 2.8 million balance with a correspondent bank to collateralize the initial margin and the fair value exposure, respectively, of its interest rate swap to hedge the variability in cash flows arising out of its junior subordinated debentures.

The average reserve requirement for the maintenance periods ended June 30, 2021 and December 31, 2020, were zero .

The Company is required to maintain a $ 300,000 and $ 250,000 balance with a correspondent bank for outsourced servicing of ATMs as of June 30, 2021 and December 31, 2020, respectively.

As of June 30, 2021 and December 31, 2020, the Company was required to maintain a $ 100,000 and $ 2.8 million balance with a correspondent bank to collateralize the initial margin and the fair value exposure, respectively, of its interest rate swap to hedge the variability in cash flows arising out of its junior subordinated debentures.

Investment Securities

Marketable Equity Securities

The Company held marketable equity securities with fair values of $ 9.5 million and $ 9.1 million at March 31, 2021 and December 31, 2020, respectively.

The Company held marketable equity securities with fair values of $ 9.6 million and $ 9.1 million at June 30, 2021 and December 31, 2020, respectively.

The gross realized and unrealized gains (losses) recognized on marketable equity securities in other operating income in the Company's Consolidated Statements of Income were as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In Thousands) 2021 2020 2021 2020

Unrealized (loss) gain on marketable equity securities ($ 84 ) ($ 871 )

Unrealized gain (loss) on marketable equity securities $ 178 $ 149 $ 94 ($ 722 )

Gain on sale of marketable equity securities, net 31 — 31 98

4 unchanged sentences

(In Thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Allowance for Credit Losses Fair Value

March 31, 2021

June 30, 2021

Securities available for sale

5 unchanged sentences

(In Thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

March 31, 2021

June 30, 2021

Securities held to maturity

13 unchanged sentences

Total securities held to maturity $ 10,000 $ — $ — $ 10,000

Gross unrealized losses on available for sale securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at March 31, 2021 and December 31, 2020 were as follows:

Gross unrealized losses on available for sale securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2021 and December 31, 2020 were as follows:

Less Than 12 Months More Than 12 Months Total

(In Thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses

March 31, 2021:

June 30, 2021:

Securities available for sale

Treasury and government sponsored entities $ 185,079 ($ 995 ) $ — $ — $ 185,079 ($ 995 )

Corporate bonds $ 2,016 ($ 2 ) $ — $ — $ 2,016 ($ 2 )

Collateralized loan obligations 7,961 ( 32 ) 577 ( 1 ) 8,538 ( 33 )

1 unchanged sentence

December 31, 2020:

Securities available for sale

Treasury and government sponsored entities $ 31,270 ($ 47 ) $ — $ — $ 31,270 ($ 47 )

4 unchanged sentences

Consideration is given to the extent to which the fair value is less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment in the security for a period of time sufficient to allow for any anticipated recovery in fair value.

At March 31, 2021, the Company had 22 available for sale securities in an unrealized loss position without an allowance for credit losses.

At March 31, 2021, the Company had one held to maturity security in an unrealized loss position without an allowance for credit losses.

At June 30, 2021, the Company had 27 available for sale securities in an unrealized loss position without an allowance for credit losses.

At June 30, 2021, the Company had two held to maturity securities in an unrealized loss position without an allowance for credit losses.

Management does not have the intent to sell any of these securities and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost.

The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline.

Accordingly, as of March 31, 2021, management believes that the unrealized losses detailed in the previous table are due to noncredit-related factors, including changes in interest rates and other market conditions, and therefore no losses have been recognized in the Company's Consolidated Statements of Income.

At March 31, 2021 and December 31, 2020, $ 80.6 million and $ 77.9 million in securities were pledged for deposits and borrowings, respectively.

The amortized cost and estimated fair values of debt securities at March 31, 2021, are distributed by contractual maturity as shown below.

Accordingly, as of June 30, 2021, management believes that the unrealized losses detailed in the previous table are due to noncredit-related factors, including changes in interest rates and other market conditions, and therefore no losses have been recognized in the Company's Consolidated Statements of Income.

At June 30, 2021 and December 31, 2020, $ 49.4 million and $ 77.9 million in securities were pledged for deposits and borrowings, respectively.

The amortized cost and estimated fair values of debt securities at June 30, 2021, are distributed by contractual maturity as shown below.

Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

16 unchanged sentences

Total $ 820 $ 852 2.14 %

The proceeds and resulting gains and losses, computed using specific identification, from sales of investment securities for the three-month periods ending March 31, 2021 and 2020, are as follows:

(In Thousands) Proceeds Gross Gains Gross Losses

Three Months Ended March 31, 2021

Available for sale securities $ — $ — $ —

Three Months Ended March 31, 2020

Available for sale securities $ — $ — $ —

A summary of interest income for the three-month periods ending March 31, 2021 and 2020, on available for sale investment securities are as follows:

Three Months Ended March 31,

There were no proceeds from sales of investment securities for the three and six-month periods ending June 30, 2021 and 2020.

A summary of interest income for the three and six-month periods ending June 30, 2021 and 2020, on available for sale investment securities are as follows:

Three Months Ended June 30, Six Months Ended June 30,

(In Thousands) 2021 2020 2021 2020

7 unchanged sentences

Loans Held for Sale

Loans held for sale are comprised entirely of 1-4 family residential mortgage loans as of March 31, 2021 and December 31, 2020.

Loans held for sale are comprised entirely of 1-4 family residential mortgage loans as of June 30, 2021 and December 31, 2020.

Loans Held for Investment

The Company adopted ASU 2016-13 effective January 1, 2021.

Upon adoption, the Company changed its loan segments for purposes of the calculation of the allowance for credit losses.

Upon adoption, the Company changed its loan segments for purposes of the calculation of the ACL.

Prior to January 1, 2021, the Company's loan segments were based on a combination of loan purpose and loan collateral.

30 unchanged sentences

Total portfolio loans $ 1,444,050

The following table presents amortized cost and unpaid principal balance of loans:

March 31, 2021 December 31, 2020

The following table presents amortized cost and unpaid principal balance of loans for the periods indicated:

June 30, 2021 December 31, 2020

(In Thousands) Amortized Cost Unpaid Principal Difference Amortized Cost Unpaid Principal Difference

15 unchanged sentences

$ 1,473,429 $ 1,505,434 ($ 17,466 ) $ 1,422,914 $ 1,455,830 ($ 11,780 )

The difference between the amortized cost and unpaid principal balance is primarily net deferred origination fees totaling $ 17.8 million and $ 11.7 million at March 31, 2021 and December 31, 2020, respectively, and premiums and discounts associated with acquired loans totaling $ 34,000 and $ 47,000 at March 31, 2021 and December 31, 2020, respectively.

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $ 7.1 million and $ 7.1 million at March 31, 2021 and December 31, 2020, respectively, and was included in other assets in the Consolidated Balance Sheets.

Amortized cost in the above table includes $ 402.5 million and $ 304.6 million as of March 31, 2021 and December 31, 2020, respectively, in PPP loans administered by the U.S.

The difference between the amortized cost and unpaid principal balance is primarily net deferred origination fees totaling $ 17.4 million and $ 11.7 million at June 30, 2021 and December 31, 2020, respectively, and premiums and discounts associated with acquired loans totaling $ 21,000 and $ 47,000 at June 30, 2021 and December 31, 2020, respectively.

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $ 6.6 million and $ 7.1 million at June 30, 2021 and December 31, 2020, respectively, and was included in other assets in the Consolidated Balance Sheets.

Amortized cost in the above table includes $ 300.9 million and $ 304.6 million as of June 30, 2021 and December 31, 2020, respectively, in PPP loans administered by the U.S.

Small Business Administration ("SBA") within the Commercial & industrial loan segment.

1 unchanged sentence

The activity in the ACL related to loans held for investment is as follows:

Three Months Ended March 31, Beginning Balance Impact of adopting ASC 326 Credit Loss Expense Charge-offs Recoveries Ending Balance

Three Months Ended June 30, Beginning Balance Credit Loss Expense Charge-offs Recoveries Ending Balance

(In Thousands)

Commercial & industrial loans $ 4,269 $ 105 ($ 110 ) $ 27 $ 4,291

Commercial real estate:

Owner occupied properties 3,366 ( 28 ) — 2 3,340

Non-owner occupied and multifamily properties 3,704 137 — — 3,841

Residential real estate:

1-4 family residential properties secured by first liens 813 ( 183 ) — — 630

1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens 342 ( 12 ) — 10 340

1-4 family residential construction loans 260 ( 29 ) — — 231

Other construction, land development and raw land loans 1,821 ( 151 ) — — 1,670

Obligations of states and political subdivisions in the US 36 3 — — 39

Agricultural production, including commercial fishing 46 4 — 7 57

Consumer loans 104 ( 10 ) — — 94

Other loans 3 3 — — 6

Total $ 14,764 ($ 161 ) ($ 110 ) $ 46 $ 14,539

Three Months Ended June 30, Beginning Balance Provision (benefit) Charge-offs Recoveries Ending Balance

(In Thousands)

Commercial $ 8,269 ($ 129 ) ($ 804 ) $ 30 $ 7,366

7 unchanged sentences

Unallocated 1,467 554 — — 2,021

Total $ 21,017 $ 404 ($ 804 ) $ 36 $ 20,653

Six Months Ended June 30, Beginning Balance Impact of adopting ASC 326 Credit Loss Expense Charge-offs Recoveries Ending Balance

(In Thousands)

Commercial $ 7,973 ($ 7,973 ) $— $— $— —

Real estate construction 1-4 family 679 ( 679 ) — — — —

Real estate construction other 1,179 ( 1,179 ) — — — —

Real estate term owner occupied 2,625 ( 2,625 ) — — — —

Real estate term non-owner occupied 5,133 ( 5,133 ) — — — —

Real estate term other 779 ( 779 ) — — — —

Consumer secured by 1st deed of trust 261 ( 261 ) — — — —

Consumer other 400 ( 400 ) — — — —

Unallocated 2,107 ( 2,107 ) — — — —

Commercial & industrial loans — 4,348 4 ( 273 ) 212 4,291

12 unchanged sentences

Total $ 21,136 ($ 4,511 ) ($ 2,066 ) ($ 273 ) $ 253 $ 14,539

Three Months Ended March 31, Beginning Balance Provision (benefit) Charge-offs Recoveries Ending Balance

Six Months Ended June 30, Beginning Balance Provision (benefit) Charge-offs Recoveries Ending Balance

(In Thousands)

11 unchanged sentences

Upon adoption, the Company established an ACL of $ 16.6 million.

The ACL as of March 31, 2021 the ACL decreased to $ 14.8 million primary due to projected improvement in the economic indicators, or loss drivers, that the Company uses to calculate expected lifetime losses.

As of June 30, 2021 the ACL decreased to $ 14.5 million primary due to projected improvement in the economic indicators, or loss drivers, that the Company uses to calculate expected lifetime losses.

Management's projections for these economic indicators as of June 30, 2021 have not changed significantly as compared to March 31, 2021.

The Company primarily uses the DCF method to estimate ACL for loans.

2 unchanged sentences

Consistent forecasts of the loss drivers are used across the loan segments.

At March 31, 2021, as compared to January 1, 2021, the Company forecasted a significantly lower unemployment rate in Alaska, a slightly lower one-year percentage change in the national commercial real estate price index , and a slightly higher one-year percentage change in the Alaska home price index over the reasonable and supportable forecast period.

Specifically regarding the forecasts used to calculate the March 31, 2021 ACL, management expects unemployment to remain consistent with actual levels observed in Alaska as of December 2020, which remained relatively unchanged in January and February 2021.

At June 30, 2021 and March 31, 2021, as compared to January 1, 2021, the Company forecasted a significantly lower unemployment rate in Alaska, a slightly lower one-year percentage change in the national commercial real estate price index, and a slightly higher one-year percentage change in the Alaska home price index over the reasonable and supportable forecast period.

Specifically regarding the forecasts used to calculate the June 30, 2021, management expects unemployment to remain consistent with actual levels observed in Alaska as of December 2020, which remained relatively unchanged in January through May 2021.

This rate is above pre-pandemic levels over the forecast period, but is lower than rates previously projected by management.

24 unchanged sentences

Total $ 308 $ 308 $ 13 $ 17,720 $ 18,619

The following table presents average impaired loans information, as determined in accordance with ASC 310 prior to the adoption of ASU 2016-13, and interest recognized on such loans, for the quarter ended March 31, 2020:

Three Months Ended March 31, 2020

(In Thousands) Average Impaired Loans Interest Recognized

Three Months Ended June 30, 2020 Six Months Ended June 30, 2020

(In Thousands) Average Impaired Loans Interest Recognized Average Impaired Loans Interest Recognized

Commercial $ 12,892 $ 65 $ 13,161 $ 95

34 unchanged sentences

Generally, current period renewals of credit are re-underwritten at the point of renewal and considered current period originations for purposes of the table below.

March 31, 2021 2021 2020 2019 2018 2017 Prior Total

June 30, 2021 2021 2020 2019 2018 2017 Prior Total

(In Thousands)

75 unchanged sentences

Due Current Total Greater Than 90 Days Past Due Still Accruing

March 31, 2021

June 30, 2021

Commercial & industrial loans $ 3,763 $ 14 $ 862 $ 4,639 $ 604,575 $ 609,214 $ —

30 unchanged sentences

Nonaccrual loans:

Nonaccrual loans net of government guarantees totaled $ 13.1 million and $ 9.6 million at March 31, 2021 and December 31, 2020, respectively.

Nonaccrual loans net of government guarantees totaled $ 11.9 million and $ 9.6 million at June 30, 2021 and December 31, 2020, respectively.

The following table presents loans on nonaccrual status and loan on nonaccrual status for which there was no related allowance for credit losses:

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

(In Thousands) Nonaccrual Nonaccrual With No ACL Nonaccrual Nonaccrual With No ACL

12 unchanged sentences

Net nonaccrual loans $ 11,880 $ 7,433 $ 9,637 $ 9,240

There was no interest on nonaccrual loans reversed through interest income during three-month periods ending March 31, 2021 and March 31, 2020, respectively.

There was no interest earned on nonaccrual loans during three-month periods ending March 31, 2021 and March 31, 2020, respectively.

There was no interest on nonaccrual loans reversed through interest income during three and six-month periods ending June 30, 2021 and June 30, 2020, respectively.

There was no interest earned on nonaccrual loans during three and six-month periods ending June 30, 2021 and June 30, 2020, respectively.

Troubled Debt Restructurings:

Loans classified as TDRs totaled $ 6.5 million and $ 7.9 million at March 31, 2021 and December 31, 2020, respectively.

Loans classified as TDRs totaled $ 6.2 million and $ 7.9 million at June 30, 2021 and December 31, 2020, respectively.

A TDR is a loan to a borrower that is experiencing financial difficulty that has been modified from its original terms and conditions in such a way that the Company is granting the borrower a concession that it would not grant otherwise.

2 unchanged sentences

The Company has elected to adopt these provisions of the CARES Act.

As of March 31, 2021, the Company has made the following types of loan modifications related to COVID-19, which are not classified as TDRs with principal balance outstanding of:

As of June 30, 2021, the Company has made the following types of loan modifications related to COVID-19, which are not classified as TDRs with principal balance outstanding of:

(Dollars in thousands) Interest Only Full Payment Deferral Total

14 unchanged sentences

All of the Company's TDRs are included in impaired loans.

There were no newly restructured loans that occurred during the three months ended March 31, 2021.

There were $ 2.4 million accruing restructured loans and $ 4.2 million nonaccrual restructured loans that occurred prior to 2021 that are still included in portfolio loans.

The following table presents the breakout between newly restructured loans that occurred during the six months ended June 30, 2021 and restructured loans that occurred prior to 2021 that are still included in portfolio loans.

As discussed above, the CARES Act provided banks an option to elect to not account for certain loan modifications related to COVID-19 as TDRs as long as the borrowers were not more than 30 days past due as of December 31, 2020.

The disclosed restructurings were not related to COVID-19 modifications.

March 31, 2020

Accrual Status Nonaccrual Status Total Modifications

(In Thousands)

New Troubled Debt Restructurings

Commercial & industrial loans $ — $ 251 $ 251

Subtotal $ — $ 251 $ 251

Existing Troubled Debt Restructurings $ 2,341 $ 3,629 $ 5,970

Total $ 2,341 $ 3,880 $ 6,221

The following tables present newly restructured loans that occurred during the six months ended June 30, 2021 and 2020, by concession (terms modified):

June 30, 2021

Number of Contracts Rate Modification Term Modification Payment Modification Combination Modification Total Modifications

6 unchanged sentences

Total 1 $ — $ 251 $ — $ — $ 251

June 30, 2020

Number of Contracts Rate Modification Term Modification Payment Modification Combination Modification Total Modifications

(In Thousands)

Pre-Modification Outstanding Recorded Investment:

Commercial - AQR substandard 1 $ — $ 3,249 $ — $ — $ 3,249

Total 1 $ — $ 3,249 $ — $ — $ 3,249

Post-Modification Outstanding Recorded Investment:

Commercial - AQR substandard 1 $ — $ 2,031 $ — $ — $ 2,031

Total 1 $ — $ 3,281 $ — $ — $ 2,031

The Company had no commitments to extend additional credit to borrowers whose terms have been modified in TDRs.

There were no in charge-offs in the three months ended March 31, 2021 on loans that were newly classified as TDRs during the same period.

All TDRs are also classified as impaired loans and are included in the loans individually evaluated for impairment in the calculation of the ACL.

There were no TDRs with specific impairment at March 31, 2021 and December 31, 2020, respectively.

The Company had no TDRs that defaulted within twelve months of restructure and defaulted during the three months ended March 31, 2021 and 2020, respectively.

There were no in charge-offs in the six months ended June 30, 2021 on loans that were newly classified as TDRs during the same period.

As of December 31, 2020, all TDRs are also classified as impaired loans and are included in the loans individually evaluated for impairment.

There were no TDRs with specific impairment at December 31, 2020.

The Company had no TDRs that defaulted within twelve months of restructure and defaulted during the six months ended June 30, 2021 and 2020, respectively.

Purchased Receivables

Purchased receivables are carried at their principal amount outstanding, net of an allowance for credit losses, and have a maturity of less than one year .

There were no purchased receivables past due at March 31, 2021 or December 31, 2020, and there were no restructured purchased receivables at March 31, 2021 or December 31, 2020.

There were no purchased receivables past due at June 30, 2021 or December 31, 2020, and there were no restructured purchased receivables at June 30, 2021 or December 31, 2020.

Income on purchased receivables is accrued and recognized on the principal amount outstanding using an effective interest method except when management believes doubt exists as to the collectability of the income or principal.

There were no nonperforming purchased receivables as of March 31, 2021 and December 31, 2020, respectively.

There were no nonperforming purchased receivables as of June 30, 2021 and December 31, 2020, respectively.

The following table summarizes the components of net purchased receivables for the periods indicated:

(In Thousands) March 31, 2021 December 31, 2020

(In Thousands) June 30, 2021 December 31, 2020

Purchased receivables $ 12,500 $ 13,995

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Total $ 12,500 $ 13,922

The following table sets forth information regarding changes in the ACL on purchased receivables for the three-month periods ending March 31, 2021 and 2020, respectively:

Three Months Ended March 31,

The following table sets forth information regarding changes in the ACL on purchased receivables for the three and six-month periods ending June 30, 2021 and 2020, respectively:

Three Months Ended June 30, Six Months Ended June 30,

(In Thousands) 2021 2020 2021 2020

7 unchanged sentences

Mortgage servicing rights

The following table details the activity in the Company's mortgage servicing rights ("MSR") for the three-month periods ended March 31, 2021 and 2020:

Three Months Ended March 31,

The following table details the activity in the Company's mortgage servicing rights ("MSR") for the three and six-month periods ended June 30, 2021 and 2020:

Three Months Ended June 30, Six Months Ended June 30,

(In Thousands) 2021 2020 2021 2020

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(2) Represents changes due to collection/realization of expected cash flows over time.

The following table details information related to our serviced mortgage loan portfolio as of March 31, 2021 and December 31, 2020:

(In Thousands) March 31, 2021 December 31, 2020

The following table details information related to our serviced mortgage loan portfolio as of June 30, 2021 and December 31, 2020:

(In Thousands) June 30, 2021 December 31, 2020

Balance of mortgage loans serviced for others $ 713,926 $ 683,117

MSR as a percentage of serviced loans 1.80 % 1.64 %

The Company recognized servicing fees of $ 705,000 and $ 663,000 during the three-month periods ending March 31, 2021 and 2020, respectively, which includes contractually specified servicing fees and ancillary fees as a component of other noninterest income in the Company's Consolidated Statements of Income.

The following table outlines the weighted average key assumptions used in measuring the fair value of MSR as of March 31, 2021 and December 31, 2020:

March 31, 2021 December 31, 2020

The Company recognized servicing fees of $ 707,000 and $ 639,000 during the three-month periods ending June 30, 2021 and 2020, respectively, and $ 1.4 million and $ 1.3 million during the six-month periods ending June 30, 2021 and 2020, respectively, which includes contractually specified servicing fees and ancillary fees as a component of other noninterest income in the Company's Consolidated Statements of Income.

The following table outlines the weighted average key assumptions used in measuring the fair value of MSR as of June 30, 2021 and December 31, 2020:

June 30, 2021 December 31, 2020

Constant prepayment rate 11.68 % 13.05 %

Discount rate 8.00 % 7.75 %

Key economic assumptions and the sensitivity of the current fair value for MSR to immediate adverse changes in those assumptions at March 31, 2021 and December 31, 2020 were as follows:

(In Thousands) March 31, 2021 December 31, 2020

Key economic assumptions and the sensitivity of the current fair value for MSR to immediate adverse changes in those assumptions at June 30, 2021 and December 31, 2020 were as follows:

(In Thousands) June 30, 2021 December 31, 2020

Aggregate portfolio principal balance $ 713,926 $ 683,117

Weighted average rate of note 3.43 % 3.62 %

March 31, 2021 Base 1.0% Adverse Rate Change 2.0% Adverse Rate Change

June 30, 2021 Base 1.0% Adverse Rate Change 2.0% Adverse Rate Change

Constant prepayment rate 11.68 % 23.36 % 34.68 %

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Commercial servicing rights

The commercial servicing right asset ("CSR") has a carrying value $ 1.3 million at March 31, 2021 and December 31, 2020, and is included in other assets and carried at fair value on the Company's Consolidated Balance Sheets.

Total commercial loans serviced for others were $ 278.3 million and $ 274.6 million at March 31, 2021 and December 31, 2020, respectively.

Key assumptions used in measuring the fair value of the CSR as of March 31, 2021 and December 31, 2020 include a constant prepayment rate of 9.66 % and a discount rate of 9.46 %.

The commercial servicing right asset ("CSR") has a carrying value $ 1.3 million at June 30, 2021 and December 31, 2020, and is included in other assets and carried at fair value on the Company's Consolidated Balance Sheets.

Total commercial loans serviced for others were $ 270.8 million and $ 274.6 million at June 30, 2021 and December 31, 2020, respectively.

Key assumptions used in measuring the fair value of the CSR as of June 30, 2021 and December 31, 2020 include a constant prepayment rate of 9.66 % and a discount rate of 9.46 %.

The Company's lease commitments consist primarily of agreements to lease land and office facilities that it occupies to operate several of its retail branch locations that are classified as operating leases and are recognized on the balance sheet as right-of-use ("ROU") assets and lease liabilities.

As of March 31, 2021, the Company has operating lease ROU assets of $ 11.9 million and operating lease liabilities of $ 11.9 million.

As of June 30, 2021, the Company has operating lease ROU assets of $ 11.4 million and operating lease liabilities of $ 11.3 million.

As of December 31, 2020, the Company had operating lease ROU assets of $ 12.4 million and operating lease liabilities of $ 12.4 million.

The Company did not have any agreements that are classified as finance leases as of March 31, 2021 or December 31, 2020.

The Company did not have any agreements that are classified as finance leases as of June 30, 2021 or December 31, 2020.

The following table presents additional information about the Company's operating leases:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In Thousands) 2021 2020 2021 2020

Operating lease cost (1)

$ 702 $ 706 $ 1,418 $ 1,401

Short term lease cost (1)

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(In Thousands) Operating Leases

2020 (Nine months) $ 1,951

2020 (Six months) $ 1,299

Thereafter 4,880

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Topic 606 in the Accounting Standards Codification ("Topic 606") includes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers.

The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The core principle requires an entity to recognize revenue to depict the transfer of goods or services to

customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The majority of our ongoing revenue-generating transactions are not subject to Topic 606, including revenue associated with financial instruments and revenue from loans and securities.

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Topic 606 is applicable to noninterest revenue streams such as deposit related fees, interchange fees, merchant services income, and commissions from the sales of mutual funds and other investments.

The following presents other operating income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three-month periods ended March 31, 2021 and 2020:

(In Thousands) Three Months Ended March 31,

The following presents other operating income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and six-month periods ended June 30, 2021 and 2020:

(In Thousands) Three Months Ended June 30, Six Months Ended June 30,

Other operating income 2021 2020 2021 2020

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Gains on the sale of other real estate owned ("OREO") are also within the scope of Topic 606 and are recorded within other operating expense on the Company's Consolidated Statements of Income.

Gains on the sale of OREO properties were $ 31,000 and $ 37,000 for the three months ended March 31, 2021 and 2020, respectively.

Gains on the sale of OREO properties were $ 157,000 and $ 38,000 for the three months ended June 30, 2021 and 2020, respectively, and $ 189,000 and $ 75,000 for the six months ended June 30, 2021 and 2020, respectively.

Derivatives swaps related to community banking activities

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Similarly, the Company could be required to settle its obligations under the agreement if specific regulatory events occur, such as if the Company were issued a prompt corrective action directive or a cease and desist order, or if certain regulatory ratios fall below specified levels.

The Company pledged $ 7.1 million as of March 31, 2021 and $ 10.7 million as of December 31, 2020 in available for sale securities to collateralize fair value shortfalls on interest rate swap agreements.

The Company had interest rate swaps related to commercial loans with an aggregate notional amount of $ 201.4 million and $ 196.0 million at March 31, 2021 and December 31, 2020, respectively.

At March 31, 2021, the notional amount of interest rate swaps is made up of 17 variable to fixed rate swaps to commercial loan customers totaling $ 100.7 million, and 17 fixed to variable rate swaps with a counterparty totaling $ 100.7 million.

Changes in fair value from these 17 interest rate swaps offset each other in the first three months of 2021.

The Company recognized $ 92,000 and zero in fee income related to interest rate swaps in the three month periods ending March 31, 2021 and March 31, 2020, respectively.

The Company pledged $ 7.1 million as of June 30, 2021 and $ 10.7 million as of December 31, 2020 in available for sale securities to collateralize fair value shortfalls on interest rate swap agreements.

The Company had interest rate swaps related to commercial loans with an aggregate notional amount of $ 209.0 million and $ 196.0 million at June 30, 2021 and December 31, 2020, respectively.

At June 30, 2021, the notional amount of interest rate swaps is made up of 18 variable to fixed rate swaps to commercial loan customers totaling $ 104.5 million, and 18 fixed to variable rate swaps with a counterparty totaling $ 104.5 million.

Changes in fair value from these 18 interest rate swaps offset each other in the first six months of 2021.

The Company recognized $ 103,000 and $ 195,000 in fee income related to interest rate swaps in the three and six-month periods ending June 30, 2021 and $ 17,000 in fee income related to interest rate swaps in the three and six-month periods ending June 30, 2020, respectively.

Interest rate swap income is recorded in other operating income on the Consolidated Statements of Income.

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The floating rate that the dealer pays is equal to the three month LIBOR plus 1.37 % which reprices quarterly on the payment date.

This rate was 1.55 % as of March 31, 2021.

The Company pledged $ 2.9 million and $ 2.9 million in cash to collateralize initial margin and fair value exposure of our counterparty on this interest rate swap as of March 31, 2021 and December 31, 2020, respectively.

This rate was 1.49 % as of June 30, 2021.

The Company pledged $ 2.9 million in cash to collateralize initial margin and fair value exposure of our counterparty on this interest rate swap as of June 30, 2021 and December 31, 2020.

Changes in the fair value of this interest rate swap are reported in other comprehensive income on the Consolidated Statements of Income.

The unrealized loss on this interest rate swap was $ 475,000 as of March 31, 2021 and the unrealized loss was $ 1.7 million as of December 31, 2020.

The unrealized loss on this interest rate swap was $ 1.1 million as of June 30, 2021 and the unrealized loss was $ 1.7 million as of December 31, 2020.

Derivatives related to home mortgage banking activities

4 unchanged sentences

Market risk with respect to commitments to originate loans arises from changes in the value of contractual positions due to changes in interest rates.

RML had commitments to originate mortgage loans held for sale totaling $ 181.4 million and $ 150.3 million at March 31, 2021 and December 31, 2020, respectively.

RML had commitments to originate mortgage loans held for sale totaling $ 174.0 million and $ 150.3 million at June 30, 2021 and December 31, 2020, respectively.

Changes in the value of RML's interest rate derivatives are recorded in mortgage banking income on the Consolidated Statements of Income.

None of these derivatives are designated as hedging instruments.

The following table presents the fair value of derivatives not designated as hedging instruments at March 31, 2021 and December 31, 2020:

The following table presents the fair value of derivatives not designated as hedging instruments at June 30, 2021 and December 31, 2020:

(In Thousands) Asset Derivatives

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Balance Sheet Location Fair Value Fair Value

1 unchanged sentence

Interest rate lock commitments Other assets 3,044 4,034

Retail interest rate contracts Other assets 588 —

Total $ 9,345 $ 11,421

(In Thousands) Liability Derivatives

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Balance Sheet Location Fair Value Fair Value

3 unchanged sentences

The following table presents the net gains (losses) of derivatives not designated as hedging instruments for periods indicated below:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In Thousands) Income Statement Location 2021 2020 2021 2020

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We do not offset such financial instruments for financial reporting purposes.

The following table summarizes the derivatives that have a right of offset as of March 31, 2021 and December 31, 2020:

March 31, 2021 Gross amounts not offset in the Statement of Financial Position

The following table summarizes the derivatives that have a right of offset as of June 30, 2021 and December 31, 2020:

June 30, 2021 Gross amounts not offset in the Statement of Financial Position

(In Thousands) Gross amounts of recognized assets and liabilities Gross amounts offset in the Statement of Financial Position Net amounts of assets and liabilities presented in the Statement of Financial Position Financial Instruments Collateral Posted Net Amount

1 unchanged sentence

Interest rate swaps $ 6,301 $ — $ 6,301 $ — $ — $ 6,301

Retail interest rate contracts 588 — 588 — — 588

Liability Derivatives

Interest rate swaps $ 6,301 $ — $ 6,301 $ — $ 6,301 $ —

Retail interest rate contracts 209 — 209 — — 209

December 31, 2020 Gross amounts not offset in the Statement of Financial Position

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as such, the interest rate lock commitment derivatives are classified as Level 3.

Interest rate contracts are valued in a model, which uses as its basis a discounted cash flow technique incorporating credit valuation

adjustments to reflect nonperformance risk in the measurement of fair value.

Although the Company has determined that the majority of inputs used to value its interest rate derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties.

However, as of March 31, 2021, the Company has assessed the significance of the impact of these adjustments on the overall valuation of its interest rate positions and has determined that they are not significant to the overall valuation of its interest rate derivatives.

Interest rate contracts are valued in a model, which uses as its basis a discounted cash flow technique incorporating credit valuation adjustments to reflect nonperformance risk in the measurement of fair value.

Although the Company has determined that the

majority of inputs used to value its interest rate derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties.

However, as of June 30, 2021, the Company has assessed the significance of the impact of these adjustments on the overall valuation of its interest rate positions and has determined that they are not significant to the overall valuation of its interest rate derivatives.

As a result, the Company has classified its interest rate derivative valuations in Level 2 of the fair value hierarchy.

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Estimated fair values as of the periods indicated are as follows:

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

(In Thousands) Carrying Amount Fair Value Carrying Amount Fair Value

10 unchanged sentences

Interest rate swaps 6,301 6,301 7,387 7,387

Retail interest rate contracts 588 588 — —

Level 3 inputs:

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(In Thousands) Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)

March 31, 2021

June 30, 2021

Available for sale securities

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Total marketable equity securities $ 9,588 $ 9,588 $ — $ —

Corporate bonds $ 19,906 $ — $ — $ 19,906

Total held to maturity securities $ 19,906 $ — $ — $ 19,906

Interest rate swaps 6,301 — 6,301 —

2 unchanged sentences

Commercial servicing rights 1,292 — — 1,292

Retail interest rate contracts 588 — 588 —

Total other assets $ 23,472 $ — $ 6,301 $ 17,171

Interest rate swaps $ 7,363 $ — $ 7,363 $ —

Retail interest rate contracts 209 — 209 —

Total other liabilities $ 7,572 $ — $ 7,572 $ —

8 unchanged sentences

Total marketable securities $ 9,052 $ 9,052 $ — $ —

Corporate bonds $ 10,000 $ — $ — $ 10,000

Total held to maturity securities $ 10,000 $ — $ — $ 10,000

Interest rate swaps 7,387 — 7,387 —

6 unchanged sentences

Total other liabilities $ 10,002 $ — $ 10,002 $ —

The following tables provide a reconciliation of the assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring basis during the three-month periods ended March 31, 2021 and 2020:

(In Thousands) Beginning balance Change included in earnings Purchases and issuances Sales and settlements Ending balance Net change in unrealized gains (losses) relating to items held at end of period

Three Months Ended March 31, 2021

Held to maturity securities $ 10,000 $ — $ 10,000 $ — $ 20,000 ($ 94 )

Three Months Ended June 30, 2021

Interest rate lock commitments $ 2,713 ($ 867 ) $ 7,183 ($ 5,985 ) $ 3,044 $ 3,044

2 unchanged sentences

Total $ 15,697 ($ 1,487 ) $ 8,946 ($ 5,985 ) $ 17,171 $ 3,044

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Interest rate lock commitments $ 3,188 ($ 2,242 ) $ 17,605 ($ 13,898 ) $ 4,653 $ 4,653

2 unchanged sentences

Total $ 16,041 ($ 4,228 ) $ 18,621 ($ 13,898 ) $ 16,536 $ 4,653

There were no changes in unrealized gains and losses for the three-month periods ending March 31, 2021 and 2020 included in other comprehensive income for recurring Level 3 fair value measurements.

As of and for the periods ending March 31, 2021 and December 31, 2020, except for certain assets as shown in the following table, no impairment or valuation adjustment was recognized for assets recognized at fair value on a nonrecurring basis.

Six Months Ended June 30, 2021

Interest rate lock commitments $ 4,034 ($ 2,014 ) $ 16,451 ($ 15,427 ) $ 3,044 $ 3,044

Mortgage servicing rights 11,218 ( 1,576 ) 3,193 — 12,835 —

Commercial servicing rights 1,310 ( 76 ) 58 — 1,292 —

Total $ 16,562 ($ 3,666 ) $ 19,702 ($ 15,427 ) $ 17,171 $ 3,044

Six Months Ended June 30, 2020

Interest rate lock commitments $ 810 ($ 3,139 ) $ 25,112 ($ 18,130 ) $ 4,653 $ 4,653

Mortgage servicing rights 11,920 ( 2,858 ) 1,659 — 10,721 —

Commercial servicing rights 1,214 ( 79 ) 27 — 1,162 —

Total $ 13,944 ($ 6,076 ) $ 26,798 ($ 18,130 ) $ 16,536 $ 4,653

There were no changes in unrealized gains and losses for the three and six-month periods ending June 30, 2021 and 2020 included in other comprehensive income for recurring Level 3 fair value measurements.

As of and for the periods ending June 30, 2021 and December 31, 2020, except for certain assets as shown in the following table, no impairment or valuation adjustment was recognized for assets recognized at fair value on a nonrecurring basis.

For loans measured for impairment, the Company classifies fair value measurements using observable inputs, such as external appraisals, as Level 2 valuations in the fair value hierarchy, and unobservable inputs, such as in-house evaluations, as Level 3 valuations in the fair value hierarchy.

(In Thousands) Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)

March 31, 2021

June 30, 2021

Loans measured for impairment $ 4,325 $ — $ — $ 4,325

3 unchanged sentences

Total $ 308 $ — $ — $ 308

The following table presents the gains resulting from nonrecurring fair value adjustments for the three-month periods ended March 31, 2021 and 2020:

Three Months Ended March 31,

The following table presents the gains resulting from nonrecurring fair value adjustments for the three and six-month periods ended June 30, 2021 and 2020:

Three Months Ended June 30, Six Months Ended June 30,

(In Thousands) 2021 2020 2021 2020

2 unchanged sentences

Assets and Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3)

The following table provides a description of the valuation technique, unobservable input, and qualitative information about the unobservable inputs for the Company’s assets and liabilities classified as Level 3 and measured at fair value on a recurring and nonrecurring basis at March 31, 2021 and December 31, 2020:

Financial Instrument Valuation Technique Unobservable Input Weighted Average Rate Range

March 31, 2021

June 30, 2021

Loans measured for impairment In-house valuation of collateral Discount rate 5 % - 100 %

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The Community Banking segment's principal business focus is the offering of loan and deposit products to business and consumer customers in its primary market areas.

As of March 31, 2021, the Community Banking segment operated 17 branches throughout Alaska.

As of June 30, 2021, the Community Banking segment operated 17 branches throughout Alaska.

The Home Mortgage Lending segment's principal business focus is the origination and sale of mortgage loans for 1-4 family residential properties.

Summarized financial information for the Company's reportable segments and the reconciliation to the consolidated financial results is shown in the following tables:

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

(In Thousands) Community Banking Home Mortgage Lending Consolidated

8 unchanged sentences

Net income $ 5,266 $ 3,079 $ 8,345

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

(In Thousands) Community Banking Home Mortgage Lending Consolidated

8 unchanged sentences

Net income $ 4,564 $ 5,336 $ 9,900

March 31, 2021

Six Months Ended June 30, 2021

(In Thousands) Community Banking Home Mortgage Lending Consolidated

Interest income $ 39,275 $ 1,574 $ 40,849

Interest expense 2,073 91 2,164

Net interest income 37,202 1,483 38,685

Provision for credit losses ( 1,915 ) — ( 1,915 )

Other operating income 5,046 24,982 30,028

Other operating expense 28,215 15,448 43,663

Income before provision for income taxes 15,948 11,017 26,965

Provision (benefit) for income taxes 3,302 3,137 6,439

Net income $ 12,646 $ 7,880 $ 20,526

Six Months Ended June 30, 2020

(In Thousands) Community Banking Home Mortgage Lending Consolidated

Interest income $ 34,997 $ 1,346 $ 36,343

Interest expense 3,087 109 3,196

Net interest income 31,910 1,237 33,147

Provision for credit losses 2,464 — 2,464

Other operating income 4,076 19,892 23,968

Other operating expense 27,725 13,736 41,461

Income before provision for income taxes 5,797 7,393 13,190

Provision (benefit) for income taxes 142 2,115 2,257

Net income $ 5,655 $ 5,278 $ 10,933

June 30, 2021

(In Thousands) Community Banking Home Mortgage Lending Consolidated

Total assets $ 2,308,286 $ 145,281 $ 2,453,567

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements