What changed in this filing

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Item 1. Financial Statements

2021-11-03 compared with 2021-08-04 · 180 added, 170 removed, 1152 unchanged (23% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets

September 30,

2021 December 31,

34 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 June 30, 2021 and December 31, 2020, respectively

Common stock, $ 1 par value, 10,000,000 shares authorized, 6,177,300 and 6,251,004 issued and outstanding at September 30, 2021 and December 31, 2020, respectively

Additional paid-in capital 38,929 41,808

6 unchanged sentences

Consolidated Statements of Income

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

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

14 unchanged sentences

(Benefit) provision for credit losses ( 1,106 ) 567 ( 3,021 ) 3,031

Net Interest Income After Provision for Credit Losses 19,619 17,053 40,600 30,683

Net Interest Income After (Benefit) Provision for Credit Losses 21,538 17,727 62,138 48,410

Other Operating Income

3 unchanged sentences

Service charges on deposit accounts 345 269 943 802

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

Interest rate swap income 195 726 390 743

Gain on sale of marketable equity securities, net 36 — 67 98

Unrealized gain (loss) on marketable equity securities ( 67 ) 375 27 ( 347 )

Other income 848 1,040 2,250 2,270

4 unchanged sentences

Occupancy expense 1,707 1,648 5,236 4,923

Marketing expense 672 696 1,076 1,279

Professional and outside services 703 884 1,969 2,206

Marketing expense 533 302 1,609 1,581

Insurance expense 322 315 965 928

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

Intangible asset amortization expense 9 12 27 36

OREO (income) expense, net ( 378 ) 23 ( 367 ) 8

Other operating expense 1,684 2,053 4,918 5,321

10 unchanged sentences

Consolidated Statements of Comprehensive Income

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

Three Months Ended September 30, Nine Months Ended September 30,

(In Thousands) 2021 2020 2021 2020

68 unchanged sentences

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

Cash dividend on common stock ($ 0.38 per share)

— — — ( 2,384 ) — ( 2,384 )

Stock-based compensation expense — — 232 — — 232

Exercise of stock options and vesting of restricted stock units, net — — — — — —

Repurchase of common stock ( 30 ) ( 30 ) ( 1,174 ) — — ( 1,204 )

Other comprehensive income, net of tax — — — — ( 265 ) ( 265 )

Net income — — — 8,877 — 8,877

Balance as of September 30, 2021 6,177 $ 6,177 $ 38,929 $ 198,284 ($ 916 ) $ 242,474

See notes to consolidated financial statements

1 unchanged sentence

Consolidated Statements of Cash Flows

Six Months Ended June 30,

Nine Months Ended September 30,

(In Thousands) 2021 2020

3 unchanged sentences

Gain on sale of securities, net ( 67 ) ( 98 )

Loss on disposal of premises and equipment — 22

Depreciation and amortization of premises and equipment 2,473 2,337

29 unchanged sentences

Proceeds from redemption of FHLB stock 12 5,514

Decrease in purchased receivables, net 1,422 12,825

(Increase) decrease in purchased receivables, net ( 6,196 ) 10,860

Increase in loans, net ( 9,990 ) ( 459,346 )

17 unchanged sentences

Transfer of loans to other real estate owned $ 274 $ 162

Loans made to facilitate sales of other real estate owned $ 1,012 $ —

Non-cash lease liability arising from obtaining right of use assets $ 79 $ 370

12 unchanged sentences

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

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.

Operating results for the interim period ended September 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 June 30, 2021, the Company’s held to maturity securities consisted of investments in corporate bonds.

At September 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.

1 unchanged sentence

Allowance for Credit Losses - Loans :

Under the current expected credit loss model adopted by the Company on January 1, 2021, the allowance for credit losses on loans is a valuation allowance estimated at each balance sheet date that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans.

Under the current expected credit loss model adopted by the Company on January 1, 2021, the ACL on loans is a valuation allowance estimated at each balance sheet date that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans.

The Company estimates the ACL on loans based on the underlying assets’ amortized cost basis, which is the amount at which the financing receivable is originated or acquired, adjusted for applicable accretion or amortization of premium, discount, and net deferred fees or costs, collection of cash, and charge-offs.

7 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 loan pools at June 30, 2021.

The Company uses a DCF method for 8 of its 11 loan pools, which represent 96 % of the amortized cost basis of total loan pools at September 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.

73 unchanged sentences

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.

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

The analysis of collateral dependent loans includes appraisals on loans secured by real property, management’s assessment of the current market, recent payment history and an evaluation of other sources of repayment.

18 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 June 30, 2021 or December 31, 2020.

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

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

4 unchanged sentences

Such financial instruments are recorded when they are funded.

The Company records an allowance for credit losses on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancellable, through a charge to provision for credit loss expense in the Company’s consolidated statements of income.

The Company records an ACL on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancellable, through a charge to provision for credit loss expense in the Company’s consolidated statements of income.

The ACL on off-balance sheet credit exposures is estimated by loan segment at each balance sheet date under the current expected credit loss model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur, and is included in other liabilities on the Company’s consolidated balance sheets.

1 unchanged sentence

The Company purchases accounts receivable from its customers.

The purchased receivables are carried at amortized cost, net of an allowance for credit losses.

The purchased receivables are carried at amortized cost, net of an ACL.

Management measures expected credit losses on purchased receivables by evaluating each receivable individually.

3 unchanged sentences

Fees charged to the customer are earned while the balances of the purchases are outstanding, which is typically less than one year.

Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense.

Changes in the ACL are recorded as provision for (or reversal of) credit loss expense.

Reclassification of Prior Year Presentation

3 unchanged sentences

Accounting pronouncements implemented in 2021

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (“ASU 2016-13” or “CECL”).

In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13, Financial Instruments - Credit Losses (“ASU 2016-13” or “CECL”).

ASU 2016-13 is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations.

30 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 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.

As of September 30, 2021, we had approximately $ 191.8 million of assets, including $ 119.5 million in commercial loans and $ 72.3 million in debt securities, and $ 10.0 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 June 30, 2021, the notional amount of our USD LIBOR-linked interest rate derivative contracts was $ 156.7 million.

As of September 30, 2021, the notional amount of our USD LIBOR-linked interest rate derivative contracts was $ 154.8 million.

Of this amount, $ 72.4 million in notional value represent commercial loan interest rate swap agreements with commercial banking customers.

6 unchanged sentences

Cash and Cash Equivalents

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 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.

The Company is no longer 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 Company is required to maintain a $ 300,000 and $ 250,000 balance with a correspondent bank for outsourced servicing of ATMs as of September 30, 2021 and December 31, 2020, respectively.

As of September 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 $ 9.6 million and $ 9.1 million at June 30, 2021 and December 31, 2020, respectively.

The Company held marketable equity securities with fair values of $ 8.6 million and $ 9.1 million at September 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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In Thousands) 2021 2020 2021 2020

4 unchanged sentences

Debt securities have been classified in the financial statements as available for sale or held to maturity.

The following table summarizes the amortized cost, estimated fair value, and allowance for credit losses of debt securities and the corresponding amounts of gross unrealized gains and losses of available-for-sale securities recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses of held to maturity securities at the periods indicated:

The following table summarizes the amortized cost, estimated fair value, and ACL of debt securities and the corresponding amounts of gross unrealized gains and losses of available-for-sale securities recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses of held to maturity securities at the periods indicated:

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

June 30, 2021

September 30, 2021

Securities available for sale

5 unchanged sentences

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

June 30, 2021

September 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 June 30, 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 September 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

June 30, 2021:

September 30, 2021:

Securities available for sale

11 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 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.

At September 30, 2021, the Company had 33 available for sale securities in an unrealized loss position without an ACL.

At September 30, 2021, the Company had two held to maturity securities in an unrealized loss position without an ACL.

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 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.

Accordingly, as of September 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 September 30, 2021 and December 31, 2020, $ 59.3 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 September 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.

(In Thousands) Amortized Cost Fair Value Weighted Average Yield

(In Thousands) Amortized Cost Fair Value

US Treasury and government sponsored entities

14 unchanged sentences

Total $ 820 $ 850

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,

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

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

Three Months Ended September 30, Nine Months Ended September 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 June 30, 2021 and December 31, 2020.

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

Loans Held for Investment

34 unchanged sentences

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

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

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

15 unchanged sentences

$ 1,436,841 $ 1,465,528 ($ 14,871 ) $ 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 $ 17.4 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.

The difference between the amortized cost and unpaid principal balance is primarily net deferred origination fees totaling $ 14.9 million and $ 11.7 million at September 30, 2021 and December 31, 2020, respectively, and premiums and discounts associated with acquired loans totaling $ 9,000 and $ 47,000 at September 30, 2021 and December 31, 2020, respectively.

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $ 6.3 million and $ 7.1 million at September 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 $ 203.4 million and $ 304.6 million as of September 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 June 30, Beginning Balance Credit Loss Expense Charge-offs Recoveries Ending Balance

Three Months Ended September 30, Beginning Balance Credit Loss Expense (Benefit) Charge-offs Recoveries Ending Balance

(In Thousands)

13 unchanged sentences

Total $ 14,539 ($ 762 ) $ — $ 39 $ 13,816

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

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

(In Thousands)

9 unchanged sentences

Total $ 20,653 $ 567 ($ 141 ) $ 604 $ 21,683

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

Nine Months Ended September 30, Beginning Balance Impact of adopting ASC 326 Credit Loss Expense (Benefit) Charge-offs Recoveries Ending Balance

(In Thousands)

22 unchanged sentences

Total $ 21,136 ($ 4,511 ) ($ 2,828 ) ($ 273 ) $ 292 $ 13,816

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

Nine Months Ended September 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.

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.

The Company utilizes and forecasts unemployment in Alaska as our primary loss driver.

As of September 30, 2021 the ACL decreased to $ 13.8 million.

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

The Company utilizes and forecasts unemployment in Alaska as the primary loss driver in the DCF model.

The Company also utilizes and forecasts either the one-year percentage change in the Alaska home price index or the one-year percentage change in the national commercial real estate price index as a second loss driver depending on the nature of the underlying loan pool and how well that loss driver correlates to expected future losses.

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

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.

At September 30, 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 September 30, 2021 ACL, management expects unemployment to remain consistent with actual levels observed in Alaska as of August 2021.

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

Management's projections for economic indicators as of September 30, 2021 improved slightly as compared to June 30, 2021.

The Company also applies qualitative factors in our CECL model, and these factors also improved in the third quarter as compared to the second quarter of 2021 due to increases in oil prices and improvement in loan portfolio quality trends.

Additionally, the ACL for individually impaired loans decreased during the third quarter of 2021 due to pay downs.

These factors, which decreased the ACL during the third quarter of 2021, were only partially offset by an increase in loan balances.

The following table presents loans individually and collectively evaluated for impairment and their respective allowance for credit loss allocations as of December 31, 2020, as determined in accordance with ASC 310 prior to the adoption of ASU 2016-13:

23 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 three and six-month periods ended June 30, 2020:

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

Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020

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

35 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.

June 30, 2021 2021 2020 2019 2018 2017 Prior Total

September 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

June 30, 2021

September 30, 2021

Commercial & industrial loans $ 266 $ 19 $ 4,227 $ 4,512 $ 499,793 $ 504,305 $ —

4 unchanged sentences

1-4 family residential properties secured by first liens — 168 — 168 29,380 29,548 —

1-4 family residential properties secured by junior liens

and revolving secured by 1-4 family first liens 113 44 139 296 17,497 17,793 —

1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens 44 — 139 183 18,566 18,749 —

1-4 family residential construction loans — — 109 109 36,277 36,386 —

12 unchanged sentences

1-4 family residential properties secured by first liens 446 — — 446 32,969 33,415 —

1-4 family residential properties secured by junior liens

and revolving secured by 1-4 family first liens 38 — 139 177 18,059 18,236 —

1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens 38 — 139 177 18,059 18,236 —

1-4 family residential construction loans — — 702 702 31,798 32,500 —

6 unchanged sentences

Nonaccrual loans:

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:

June 30, 2021 December 31, 2020

Nonaccrual loans net of government guarantees totaled $ 11.5 million and $ 9.6 million at September 30, 2021 and December 31, 2020, respectively.

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

September 30, 2021 December 31, 2020

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

9 unchanged sentences

Consumer loans — — 3 —

Total nonperforming loans 12,976 8,529 11,120 10,723

Total nonaccrual loans 12,493 8,212 11,120 10,723

Government guarantees on nonaccrual loans ( 1,017 ) ( 1,017 ) ( 1,483 ) ( 1,483 )

Net nonaccrual loans $ 11,476 $ 7,195 $ 9,637 $ 9,240

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.

There was no interest on nonaccrual loans reversed through interest income during three and nine-month periods ending September 30, 2021.

There was no interest on nonaccrual loans reversed through interest income during the three-month period ending September 30, 2020 and $ 12,000 in interest on nonaccrual loans reversed through interest income during the nine-month period ending September 30, 2020, respectively.

There was no interest earned on nonaccrual loans with a principal balance during the three and nine-month periods ending September 30, 2021 and September 30, 2020, respectively.

However, the Company recognized interest income of $ 198,000 and $ 780,000 in the three-month periods ending September 30, 2021 and 2020 and $ 565,000 and $ 986,000 in the nine-month periods ending September 30, 2021 and 2020, respectively, related to interest collected on nonaccrual loans whose principal had been paid down to zero.

Troubled Debt Restructurings:

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

Loans classified as TDRs totaled $ 7.0 million and $ 7.9 million at September 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.

The provisions of the CARES Act included an election to not apply the guidance on accounting for troubled debt restructurings to loan modifications, such as extensions or deferrals, related to COVID-19 made between March 1, 2020 and the earlier of (i) January 1, 2022 or (ii) 60 days after the end of the COVID-19 national emergency.

The provisions of the Coronavirus Aid, Relief, and Economic Security ("CARES") Act included an election to not apply the guidance on accounting for TDRs to loan modifications, such as extensions or deferrals, related to COVID-19 made between March 1, 2020 and the earlier of (i) January 1, 2022 or (ii) 60 days after the end of the COVID-19 national emergency.

The relief can only be applied to modifications for borrowers that were not more than 30 days past due as of December 31, 2019.

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

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:

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:

Loan Modifications due to COVID-19 as of September 30, 2021

(Dollars in thousands) Interest Only Full Payment Deferral Total

1 unchanged sentence

Number of modifications 21 3 24

Loan Modifications due to COVID-19 as of December 31, 2020

(Dollars in thousands) Interest Only Full Payment Deferral Total

Portfolio loans $ 43,379 $ 22,165 $ 65,544

Number of modifications 23 11 34

The Company has granted a variety of concessions to borrowers in the form of loan modifications.

11 unchanged sentences

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

The following table presents the breakout between newly restructured loans that occurred during the nine months ended September 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.

4 unchanged sentences

Commercial & industrial loans $ — $ 249 $ 249

Commercial real estate:

Owner occupied properties — 360 360

Other construction, land development and raw land loans — 578 578

Subtotal $ — $ 1,187 $ 1,187

1 unchanged sentence

Total $ 2,382 $ 4,654 $ 7,036

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

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

September 30, 2021

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

1 unchanged sentence

Pre-Modification Outstanding Recorded Investment:

Commercial - AQR substandard 1 $ — $ 254 $ — $ — $ 254

Commercial & industrial loans 1 $ — $ 254 $ — $ — $ 254

Commercial real estate:

Owner occupied properties 1 — 360 — — 360

Other construction, land development and raw land loans 1 — 577 — — 360

Total 3 $ — $ 1,191 $ — $ — $ 974

Post-Modification Outstanding Recorded Investment:

Commercial - AQR substandard 1 $ — $ 251 $ — $ — $ 251

Commercial & industrial loans 1 $ — $ 249 $ — $ — $ 249

Commercial real estate:

Owner occupied properties 1 — 360 — — 360

Other construction, land development and raw land loans 1 — 577 — — 577

Total 3 $ — $ 1,186 $ — $ — $ 1,186

June 30, 2020

September 30, 2020

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

1 unchanged sentence

Pre-Modification Outstanding Recorded Investment:

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

Commercial & industrial loans 2 $ — $ 3,249 $ 164 $ — $ 3,413

Total 2 $ — $ 3,249 $ 164 $ — $ 3,413

Post-Modification Outstanding Recorded Investment:

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

Commercial & industrial loans 2 $ — $ 1,565 $ 163 $ — $ 1,728

Total 2 $ — $ 1,565 $ 163 $ — $ 1,728

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 six months ended June 30, 2021 on loans that were newly classified as TDRs during the same period.

There were no in charge-offs in the nine months ended September 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.

The Company had no TDRs that defaulted within twelve months of restructure and defaulted during the nine months ended September 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 June 30, 2021 or December 31, 2020, and there were no restructured purchased receivables at June 30, 2021 or December 31, 2020.

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

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

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

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

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

Purchased receivables $ 20,118 $ 13,995

1 unchanged sentence

Total $ 20,118 $ 13,922

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,

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

Three Months Ended September 30, Nine Months Ended September 30,

(In Thousands) 2021 2020 2021 2020

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Mortgage servicing rights

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,

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

Three Months Ended September 30, Nine Months Ended September 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 June 30, 2021 and December 31, 2020:

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

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

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

Balance of mortgage loans serviced for others $ 750,327 $ 683,117

MSR as a percentage of serviced loans 1.74 % 1.64 %

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

The Company recognized servicing fees of $ 745,000 and $ 671,000 during the three-month periods ending September 30, 2021 and 2020, respectively, and $ 2.2 million and $ 2 million during the nine-month periods ending September 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 September 30, 2021 and December 31, 2020:

September 30, 2021 December 31, 2020

Constant prepayment rate 12.31 % 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 June 30, 2021 and December 31, 2020 were as follows:

(In Thousands) June 30, 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 September 30, 2021 and December 31, 2020 were as follows:

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

Aggregate portfolio principal balance $ 750,327 $ 683,117

Weighted average rate of note 3.36 % 3.62 %

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

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

Constant prepayment rate 12.31 % 24.63 % 36.19 %

14 unchanged sentences

in reality, changes in one factor may be associated with changes in another (for example, decreases in market interest rates may provide an incentive to refinance;

however, this may also indicate a slowing economy and an increase in the unemployment rate, which reduces the number of borrowers who qualify for refinancing), which may magnify or counteract the sensitivities.

however, this may also indicate a slowing economy and an increase in the unemployment rate, which reduces the

number of borrowers who qualify for refinancing), which may magnify or counteract the sensitivities.

Thus, any measurement of MSR fair value is limited by the conditions existing and assumptions made at a particular point in time.

1 unchanged sentence

Commercial servicing rights

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 commercial servicing rights asset ("CSR") has a carrying value $ 1.3 million at both September 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 $ 267.9 million and $ 274.6 million at September 30, 2021 and December 31, 2020, respectively.

Key assumptions used in measuring the fair value of the CSR as of September 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 June 30, 2021, the Company has operating lease ROU assets of $ 11.4 million and operating lease liabilities of $ 11.3 million.

As of September 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 June 30, 2021 or December 31, 2020.

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

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

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

Three Months Ended September 30, Nine Months Ended September 30,

(In Thousands) 2021 2020 2021 2020

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(In Thousands) Operating Leases

2020 (Six months) $ 1,299

2021 (Three months) $ 644

Thereafter 4,926

2 unchanged sentences

Present value of future minimum lease payments $ 11,334

The Company's revenue is included in net interest income and other operating income on its Consolidated Statements of Income.

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 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.

In addition, certain noninterest income streams such as fees associated with MSRs, purchased receivable income, financial guarantees, and derivatives are also not in scope of the guidance.

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 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

In-scope of Topic 606:

Bankcard fees $ 879 $ 681 $ 1,619 $ 1,324

Service charges on deposit accounts 308 171 598 533

Other 460 421 830 735

Other operating income (in-scope of Topic 606) $ 1,647 $ 1,273 $ 3,047 $ 2,592

Other operating income (out-of-scope of Topic 606) 12,485 16,262 26,981 21,376

Total other operating income $ 14,132 $ 17,535 $ 30,028 $ 23,968

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 $ 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

3 unchanged sentences

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 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.

The Company pledged $ 8.3 million as of September 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 $ 224.0 million and $ 196.0 million at September 30, 2021 and December 31, 2020, respectively.

At September 30, 2021, the notional amount of interest rate swaps is made up of 20 variable to fixed rate swaps to commercial loan customers totaling $ 112.0 million, and 20 fixed to variable rate swaps with a counterparty totaling $ 112.0 million.

Changes in fair value from these 20 interest rate swaps offset each other in the first nine months of 2021.

The Company recognized $ 195,000 and $ 726,000 in fee income related to interest rate swaps in the three-month periods ending September 30, 2021 and 2020, and $ 390,000 and $ 743,000 in fee income related to interest rate swaps in the nine-month periods ending September 30, 2021 and 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 1.49 % 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.

This rate was 1.49 % as of September 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 September 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 $ 1.1 million as of June 30, 2021 and the unrealized loss was $ 1.7 million as of December 31, 2020.

The unrealized loss on this interest rate swap was $ 0.9 million as of September 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 $ 174.0 million and $ 150.3 million at June 30, 2021 and December 31, 2020, respectively.

RML had commitments to originate mortgage loans held for sale totaling $ 169.4 million and $ 150.3 million at September 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 June 30, 2021 and December 31, 2020:

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

(In Thousands) Asset Derivatives

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Balance Sheet Location Fair Value Fair Value

1 unchanged sentence

Interest rate lock commitments Other assets 3,248 4,034

Retail interest rate contracts Other assets 126 —

Total $ 9,506 $ 11,421

(In Thousands) Liability Derivatives

June 30, 2021 December 31, 2020

September 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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In Thousands) Income Statement Location 2021 2020 2021 2020

5 unchanged sentences

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 June 30, 2021 and December 31, 2020:

June 30, 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 September 30, 2021 and December 31, 2020:

September 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 $ 6,132 $ — $ 6,132 $ — $ — $ 6,132

Retail interest rate contracts 126 — 126 — — 126

Liability Derivatives

Interest rate swaps $ 6,132 $ — $ 6,132 $ — $ 6,132 $ —

Retail interest rate contracts 209 — 209 — — 209

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

20 unchanged sentences

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 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.

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 September 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:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

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

28 unchanged sentences

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

June 30, 2021

September 30, 2021

Available for sale securities

10 unchanged sentences

Commercial servicing rights 1,278 — — 1,278

Retail interest rate contracts 126 — 126 —

Total other assets $ 23,864 $ — $ 6,258 $ 17,606

Interest rate swaps $ 7,032 $ — $ 7,032 $ —

Retail interest rate contracts 209 — 209 —

Total other liabilities $ 7,032 $ — $ 7,032 $ —

16 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 and six-month periods ended June 30, 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 June 30, 2021

Three Months Ended September 30, 2021

Interest rate lock commitments $ 3,044 ($ 867 ) $ 7,428 ($ 6,357 ) $ 3,248 $ 3,248

2 unchanged sentences

Total $ 17,171 ($ 2,383 ) $ 9,175 ($ 6,357 ) $ 17,606 $ 3,248

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Interest rate lock commitments $ 4,653 ($ 1,784 ) $ 15,329 ($ 11,679 ) $ 6,519 $ 6,519

3 unchanged sentences

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Interest rate lock commitments $ 4,034 ($ 2,881 ) $ 23,879 ($ 21,784 ) $ 3,248 $ 3,248

2 unchanged sentences

Total $ 16,562 ($ 6,049 ) $ 28,877 ($ 21,784 ) $ 17,606 $ 3,248

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Interest rate lock commitments $ 810 ($ 4,923 ) $ 40,441 ($ 29,809 ) $ 6,519 $ 6,519

2 unchanged sentences

Total $ 13,944 ($ 9,466 ) $ 43,725 ($ 29,809 ) $ 18,394 $ 6,519

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.

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

As of and for the periods ending September 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)

June 30, 2021

September 30, 2021

Loans measured for impairment $ 4,282 $ — $ — $ 4,282

3 unchanged sentences

Total $ 308 $ — $ — $ 308

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,

The following table presents the (gains) losses resulting from nonrecurring fair value adjustments for the three and nine-month periods ended September 30, 2021 and 2020:

Three Months Ended September 30, Nine Months Ended September 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 June 30, 2021 and December 31, 2020:

Financial Instrument Valuation Technique Unobservable Input Weighted Average Rate Range

June 30, 2021

September 30, 2021

Loans measured for impairment In-house valuation of collateral Discount rate 10 % - 100 %

15 unchanged sentences

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

As of September 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 June 30, 2021

Three Months Ended September 30, 2021

(In Thousands) Community Banking Home Mortgage Lending Consolidated

8 unchanged sentences

Net income $ 6,795 $ 2,082 $ 8,877

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

(In Thousands) Community Banking Home Mortgage Lending Consolidated

6 unchanged sentences

Income before provision for income taxes 6,164 9,685 15,849

Provision (benefit) for income taxes ( 124 ) 2,138 2,014

Provision for income taxes 1,249 2,745 3,994

Net income $ 4,915 $ 6,940 $ 11,855

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

(In Thousands) Community Banking Home Mortgage Lending Consolidated

6 unchanged sentences

Income before provision for income taxes 24,698 13,929 38,627

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

Provision for income taxes 5,257 3,967 9,224

Net income $ 19,441 $ 9,962 $ 29,403

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

(In Thousands) Community Banking Home Mortgage Lending Consolidated

6 unchanged sentences

Income before provision for income taxes 11,961 17,078 29,039

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

Provision for income taxes 1,391 4,860 6,251

Net income $ 10,570 $ 12,218 $ 22,788

June 30, 2021

September 30, 2021

(In Thousands) Community Banking Home Mortgage Lending Consolidated

6 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