0000802681bmtc:Banking1Memberus-gaap:~~DepositAccountMember2020-04-012020-06-30~~AssetManagement1Member2019-01-012019-09-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For ~~Quarter~~the quarterly period ended ~~June~~September 30, 2020

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

For the transition period from to

Commission File Number 1-35746

Bryn Mawr Bank Corporation

(Exact name of registrant as specified in its charter)


Pennsylvania			23-2434506
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

801 Lancaster Avenue, Bryn Mawr, Pennsylvania			19010
(Address of principal executive offices)			(Zip Code)

(610) 525-1700

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading ~~Symbol~~Symbol(s)	Name of each exchange on which registered
Common Stock, $1 par value	BMTC	The NASDAQ Stock Market

________________________________________________________________________________

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

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

Large accelerated filer ☒ Accelerated filer ☐

Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Classes						Outstanding at ~~August 4,~~November 2, 2020
Common Stock, par value $1						~~19,928,481~~19,958,186

Table of Contents

BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED ~~June~~September 30, 2020

Index


PART I -	FINANCIAL INFORMATION

ITEM 1.	Financial Statements (unaudited)

	Consolidated Financial Statements (unaudited)	Page 3

	Notes to Consolidated Financial Statements (unaudited)	Page 12

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	Page 57

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	Page 81

ITEM 4.	Controls and Procedures	Page 81

PART II -	OTHER INFORMATION	Page 82

ITEM 1.	Legal Proceedings	Page 82

ITEM 1A.	Risk Factors	Page 82

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	Page 85

ITEM 3.	Defaults Upon Senior Securities	Page 86

ITEM 4.	Mine Safety Disclosures	Page 86

ITEM 5.	Other Information	Page 86

ITEM 6.	Exhibits	Page 87

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets - Unaudited


(dollars in thousands)	(dollars in thousands)	June 30, 2020		December 31, 2019		(dollars in thousands)	September 30, 2020		December 31, 2019
Assets	Assets					Assets
Cash and due from banks	Cash and due from banks	$	16,408	$	11,603	Cash and due from banks	$	15,670	$	11,603
Interest bearing deposits with banks	Interest bearing deposits with banks	448,113		42,328		Interest bearing deposits with banks	241,763		42,328
Cash and cash equivalents	Cash and cash equivalents	464,521		53,931		Cash and cash equivalents	257,433		53,931
Investment securities available for sale, at fair value (amortized cost of $517,041 and $1,001,034 as of June 30, 2020 and December 31, 2019, respectively)		530,581		1,005,984
Investment securities held to maturity, at amortized cost (fair value of $12,995 and $12,661 as of June 30, 2020 and December 31, 2019, respectively)		12,592		12,577
Investment securities available for sale, at fair value (amortized cost of $549,846 and $1,001,034 as of September 30, 2020 and December 31, 2019, respectively)						Investment securities available for sale, at fair value (amortized cost of $549,846 and $1,001,034 as of September 30, 2020 and December 31, 2019, respectively)	564,774		1,005,984
Investment securities held to maturity, at amortized cost (fair value of $12,144 and $12,661 as of September 30, 2020 and December 31, 2019, respectively)						Investment securities held to maturity, at amortized cost (fair value of $12,144 and $12,661 as of September 30, 2020 and December 31, 2019, respectively)	11,725		12,577
Investment securities, trading	Investment securities, trading	7,801		8,621		Investment securities, trading	8,030		8,621
Loans held for sale	Loans held for sale	4,116		4,249		Loans held for sale	4,574		4,249
Portfolio loans and leases, originated	Portfolio loans and leases, originated	3,422,890		3,320,816		Portfolio loans and leases, originated	3,396,068		3,320,816
Portfolio loans and leases, acquired	Portfolio loans and leases, acquired	299,275		368,497		Portfolio loans and leases, acquired	280,616		368,497
Total portfolio loans and leases	Total portfolio loans and leases	3,722,165		3,689,313		Total portfolio loans and leases	3,676,684		3,689,313
Less: Allowance for credit losses on originated loans and leases	Less: Allowance for credit losses on originated loans and leases	(51,659)		(22,526)		Less: Allowance for credit losses on originated loans and leases	(52,968)		(22,526)
Less: Allowance for credit losses on acquired loans and leases	Less: Allowance for credit losses on acquired loans and leases	(3,315)		(76)		Less: Allowance for credit losses on acquired loans and leases	(3,460)		(76)
Total allowance for credit losses on loans and leases	Total allowance for credit losses on loans and leases	(54,974)		(22,602)		Total allowance for credit losses on loans and leases	(56,428)		(22,602)
Net portfolio loans and leases	Net portfolio loans and leases	3,667,191		3,666,711		Net portfolio loans and leases	3,620,256		3,666,711
Premises and equipment, net	Premises and equipment, net	61,778		64,965		Premises and equipment, net	60,369		64,965
Operating lease right-of-use assets	Operating lease right-of-use assets	39,348		40,961		Operating lease right-of-use assets	38,536		40,961
Accrued interest receivable	Accrued interest receivable	15,577		12,482		Accrued interest receivable	16,609		12,482
Mortgage servicing rights	Mortgage servicing rights	3,440		4,450		Mortgage servicing rights	2,881		4,450
Bank owned life insurance	Bank owned life insurance	59,728		59,079		Bank owned life insurance	60,072		59,079
Federal Home Loan Bank stock	Federal Home Loan Bank stock	4,506		23,744		Federal Home Loan Bank stock	4,506		23,744
Goodwill	Goodwill	184,012		184,012		Goodwill	184,012		184,012
Intangible assets	Intangible assets	17,303		19,131		Intangible assets	16,433		19,131
Other investments	Other investments	17,055		16,683		Other investments	17,129		16,683
Other assets	Other assets	181,762		85,679		Other assets	179,600		85,679
Total assets	Total assets	$	5,271,311	$	5,263,259	Total assets	$	5,046,939	$	5,263,259
Liabilities	Liabilities					Liabilities
Deposits:	Deposits:					Deposits:
Noninterest-bearing	Noninterest-bearing	$	1,217,496	$	898,173	Noninterest-bearing	$	1,230,391	$	898,173
Interest-bearing	Interest-bearing	3,026,152		2,944,072		Interest-bearing	2,783,188		2,944,072
Total deposits	Total deposits	4,243,648		3,842,245		Total deposits	4,013,579		3,842,245

Short-term borrowings	Short-term borrowings	28,891		493,219		Short-term borrowings	23,456		493,219
Long-term FHLB advances	Long-term FHLB advances	44,837		52,269		Long-term FHLB advances	44,872		52,269
Subordinated notes	Subordinated notes	98,794		98,705		Subordinated notes	98,839		98,705
Junior subordinated debentures	Junior subordinated debentures	21,843		21,753		Junior subordinated debentures	21,889		21,753
Operating lease liabilities	Operating lease liabilities	43,693		45,258		Operating lease liabilities	42,895		45,258
Accrued interest payable	Accrued interest payable	7,907		6,248		Accrued interest payable	7,984		6,248
Other liabilities	Other liabilities	178,024		91,335		Other liabilities	180,808		91,335
Total liabilities	Total liabilities	4,667,637		4,651,032		Total liabilities	4,434,322		4,651,032
Shareholders' equity	Shareholders' equity					Shareholders' equity
Common stock, par value $1; authorized 100,000,000 shares; issued 24,662,161 and 24,650,051 shares as of June 30, 2020 and December 31, 2019, respectively and outstanding of 19,927,893 and 20,126,296 as of June 30, 2020 and December 31, 2019, respectively		24,662		24,650
Common stock, par value $1; authorized 100,000,000 shares; issued 24,709,662 and 24,650,051 shares as of September 30, 2020 and December 31, 2019, respectively and outstanding of 19,958,186 and 20,126,296 as of September 30, 2020 and December 31, 2019, respectively						Common stock, par value $1; authorized 100,000,000 shares; issued 24,709,662 and 24,650,051 shares as of September 30, 2020 and December 31, 2019, respectively and outstanding of 19,958,186 and 20,126,296 as of September 30, 2020 and December 31, 2019, respectively	24,710		24,650
Paid-in capital in excess of par value	Paid-in capital in excess of par value	380,167		378,606		Paid-in capital in excess of par value	380,770		378,606
Less: Common stock in treasury at cost - 4,734,268 and 4,523,755 shares as of June 30, 2020 and December 31, 2019, respectively		(88,612)		(81,174)
Less: Common stock in treasury at cost - 4,751,476 and 4,523,755 shares as of September 30, 2020 and December 31, 2019, respectively						Less: Common stock in treasury at cost - 4,751,476 and 4,523,755 shares as of September 30, 2020 and December 31, 2019, respectively	(89,100)		(81,174)
Accumulated other comprehensive income, net of tax	Accumulated other comprehensive income, net of tax	9,019		2,187		Accumulated other comprehensive income, net of tax	10,139		2,187
Retained earnings	Retained earnings	279,165		288,653		Retained earnings	286,865		288,653
Total Bryn Mawr Bank Corporation shareholders' equity	Total Bryn Mawr Bank Corporation shareholders' equity	604,401		612,922		Total Bryn Mawr Bank Corporation shareholders' equity	613,384		612,922
Noncontrolling interest	Noncontrolling interest	(727)		(695)		Noncontrolling interest	(767)		(695)
Total shareholders' equity	Total shareholders' equity	603,674		612,227		Total shareholders' equity	612,617		612,227
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	5,271,311	$	5,263,259	Total liabilities and shareholders' equity	$	5,046,939	$	5,263,259

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

Page 3

Table of Contents

BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income - Unaudited


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands, except share and per share data)	(dollars in thousands, except share and per share data)	2020		2019		2020		2019		(dollars in thousands, except share and per share data)	2020		2019		2020		2019
Interest income:	Interest income:									Interest income:
Interest and fees on loans and leases	Interest and fees on loans and leases	$	40,690	$	44,783	$	83,485	$	89,620	Interest and fees on loans and leases	$	36,799	$	45,527	$	120,284	$	135,147
Interest on cash and cash equivalents	Interest on cash and cash equivalents	37		73		148		205		Interest on cash and cash equivalents	85		143		233		348
Interest on investment securities:	Interest on investment securities:									Interest on investment securities:
Taxable	Taxable	2,870		3,494		6,046		6,944		Taxable	2,639		3,870		8,685		10,814
Non-taxable	Non-taxable	22		37		46		84		Non-taxable	18		31		64		115
Dividends	Dividends	2		1		3		3		Dividends	1		2		4		5
Total interest income	Total interest income	43,621		48,388		89,728		96,856		Total interest income	39,542		49,573		129,270		146,429
Interest expense:	Interest expense:									Interest expense:
Interest on deposits	Interest on deposits	4,476		9,655		12,113		17,752		Interest on deposits	2,967		9,510		15,080		27,262
Interest on short-term borrowings	Interest on short-term borrowings	232		357		685		1,300		Interest on short-term borrowings	8		937		693		2,237
Interest on FHLB advances and other borrowings	Interest on FHLB advances and other borrowings	155		269		399		547		Interest on FHLB advances and other borrowings	234		243		633		790
Interest on subordinated notes	Interest on subordinated notes	1,144		1,144		2,289		2,289		Interest on subordinated notes	1,094		1,145		3,383		3,434
Interest on junior subordinated debentures	Interest on junior subordinated debentures	229		352		524		710		Interest on junior subordinated debentures	207		340		731		1,050
Total interest expense	Total interest expense	6,236		11,777		16,010		22,598		Total interest expense	4,510		12,175		20,520		34,773
Net interest income	Net interest income	37,385		36,611		73,718		74,258		Net interest income	35,032		37,398		108,750		111,656
Provision for credit losses on loans and leases	Provision for credit losses on loans and leases	4,302		1,627		36,637		5,363		Provision for credit losses on loans and leases	3,641		919		40,278		6,282
Net interest income after provision for credit losses on loans and leases	Net interest income after provision for credit losses on loans and leases	33,083		34,984		37,081		68,895		Net interest income after provision for credit losses on loans and leases	31,391		36,479		68,472		105,374
Noninterest income:	Noninterest income:									Noninterest income:
Fees for wealth management services	Fees for wealth management services	9,069		11,510		20,237		21,902		Fees for wealth management services	11,707		10,826		31,944		32,728
Insurance commissions	Insurance commissions	1,303		1,697		2,836		3,369		Insurance commissions	1,682		1,842		4,518		5,211
Capital markets revenue	Capital markets revenue	2,975		1,489		5,336		3,708		Capital markets revenue	3,314		2,113		8,650		5,821
Service charges on deposits	Service charges on deposits	603		852		1,449		1,660		Service charges on deposits	663		856		2,112		2,516
Loan servicing and other fees	Loan servicing and other fees	452		553		913		1,162		Loan servicing and other fees	373		555		1,286		1,717
Net gain on sale of loans	Net gain on sale of loans	3,134		752		3,916		1,071		Net gain on sale of loans	1,021		674		4,937		1,745

Net gain (loss) on sale of other real estate owned ("OREO")	Net gain (loss) on sale of other real estate owned ("OREO")	—		—		148		(24)		Net gain (loss) on sale of other real estate owned ("OREO")	0		(12)		148		(36)
Dividends on FHLB and FRB stock	Dividends on FHLB and FRB stock	243		316		687		727		Dividends on FHLB and FRB stock	127		346		814		1,073
Other operating income	Other operating income	2,787		3,052		3,344		5,899		Other operating income	2,212		2,255		5,556		8,154
Total noninterest income	Total noninterest income	20,566		20,221		38,866		39,474		Total noninterest income	21,099		19,455		59,965		58,929
Noninterest expenses:	Noninterest expenses:									Noninterest expenses:
Salaries and wages	Salaries and wages	16,926		17,038		33,915		37,939		Salaries and wages	17,201		17,765		51,116		55,704
Employee benefits	Employee benefits	3,221		3,317		6,721		7,483		Employee benefits	3,026		3,288		9,747		10,771

Occupancy and bank premises	Occupancy and bank premises	3,033		3,125		6,048		6,377		Occupancy and bank premises	3,055		3,008		9,103		9,385

Furniture, fixtures, and equipment	Furniture, fixtures, and equipment	2,120		2,568		4,551		4,957		Furniture, fixtures, and equipment	2,481		2,335		7,032		7,292
Advertising	Advertising	196		504		597		919		Advertising	458		587		1,055		1,506
Amortization of intangible assets	Amortization of intangible assets	910		956		1,828		1,894		Amortization of intangible assets	870		954		2,698		2,848

Professional fees	Professional fees	1,575		1,316		2,943		2,636		Professional fees	1,718		1,044		4,661		3,680
Pennsylvania bank shares tax	Pennsylvania bank shares tax	116		513		232		922		Pennsylvania bank shares tax	115		514		347		1,436
Data processing	Data processing	1,479		1,303		2,873		2,623		Data processing	1,403		1,377		4,276		4,000
Other operating expenses	Other operating expenses	5,060		4,548		11,346		9,162		Other operating expenses	5,330		4,301		16,676		13,463
Total noninterest expenses	Total noninterest expenses	34,636		35,188		71,054		74,912		Total noninterest expenses	35,657		35,173		106,711		110,085
Income before income taxes	Income before income taxes	19,013		20,017		4,893		33,457		Income before income taxes	16,833		20,761		21,726		54,218
Income tax expense	Income tax expense	4,010		4,239		1,053		7,003		Income tax expense	3,709		4,402		4,762		11,405
Net income	Net income	15,003		15,778		3,840		26,454		Net income	13,124		16,359		16,964		42,813
Net loss attributable to noncontrolling interest	Net loss attributable to noncontrolling interest	(32)		(7)		(32)		(8)		Net loss attributable to noncontrolling interest	(40)		(1)		(72)		(9)
Net income attributable to Bryn Mawr Bank Corporation	Net income attributable to Bryn Mawr Bank Corporation	$	15,035	$	15,785	$	3,872	$	26,462	Net income attributable to Bryn Mawr Bank Corporation	$	13,164	$	16,360	$	17,036	$	42,822
Basic earnings per common share	Basic earnings per common share	$	0.75	$	0.78	$	0.19	$	1.31	Basic earnings per common share	$	0.66	$	0.81	$	0.85	$	2.13
Diluted earnings per common share	Diluted earnings per common share	0.75		0.78		0.19		1.31		Diluted earnings per common share	0.66		0.81		0.85		2.12
Dividends paid or accrued per common share	Dividends paid or accrued per common share	0.26		0.25		0.52		0.50		Dividends paid or accrued per common share	0.27		0.26		0.79		0.76
Weighted-average basic shares outstanding	Weighted-average basic shares outstanding	19,926,737		20,144,651		19,989,948		20,156,509		Weighted-average basic shares outstanding	19,945,634		20,132,117		19,975,069		20,148,289
Dilutive shares	Dilutive shares	81,482		99,758		87,211		99,960		Dilutive shares	75,983		76,513		87,039		88,042
Adjusted weighted-average diluted shares	Adjusted weighted-average diluted shares	20,008,219		20,244,409		20,077,159		20,256,469		Adjusted weighted-average diluted shares	20,021,617		20,208,630		20,062,108		20,236,331

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

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BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income - Unaudited


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2020		2019		2020		2019		(dollars in thousands)	2020		2019		2020		2019
Net income attributable to Bryn Mawr Bank Corporation	Net income attributable to Bryn Mawr Bank Corporation	$	15,035	$	15,785	$	3,872	$	26,462	Net income attributable to Bryn Mawr Bank Corporation	$	13,164	$	16,360	$	17,036	$	42,822

Other comprehensive income:	Other comprehensive income:									Other comprehensive income:
Net change in unrealized gains on investment securities available for sale:	Net change in unrealized gains on investment securities available for sale:									Net change in unrealized gains on investment securities available for sale:

Unrealized investment gains, net of tax expense of $34, $1,319, $1,804 and $2,441, respectively		127		4,962		6,786		9,181
Unrealized investment gains, net of tax expense of $291, $261, $2,095 and $2,702, respectively										Unrealized investment gains, net of tax expense of $291, $261, $2,095 and $2,702, respectively	1,097		983		7,883		10,164
Net change in unfunded pension liability:	Net change in unfunded pension liability:									Net change in unfunded pension liability:
Change in unfunded pension liability related to unrealized loss, prior service cost and transition obligation, net of tax expense of $6, $4, $12 and $8, respectively		23		16		46		32
Change in unfunded pension liability related to unrealized loss, prior service cost and transition obligation, net of tax expense of $6, $4, $19 and $12, respectively										Change in unfunded pension liability related to unrealized loss, prior service cost and transition obligation, net of tax expense of $6, $4, $19 and $12, respectively	23		15		69		47

Total other comprehensive income	Total other comprehensive income	150		4,978		6,832		9,213		Total other comprehensive income	1,120		998		7,952		10,211

Total comprehensive income	Total comprehensive income	$	15,185	$	20,763	$	10,704	$	35,675	Total comprehensive income	$	14,284	$	17,358	$	24,988	$	53,033

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

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BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows - Unaudited


		Six Months Ended June 30,							Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2020		2019		(dollars in thousands)	2020		2019
Operating activities:	Operating activities:					Operating activities:
Net income attributable to Bryn Mawr Bank Corporation	Net income attributable to Bryn Mawr Bank Corporation	$	3,872	$	26,462	Net income attributable to Bryn Mawr Bank Corporation	$	17,036	$	42,822
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses on loans and leases	Provision for credit losses on loans and leases	36,637		5,363		Provision for credit losses on loans and leases	40,278		6,282
Depreciation of fixed assets	Depreciation of fixed assets	4,001		3,896		Depreciation of fixed assets	6,028		5,719
Amortization of operating lease right-of-use assets		1,613		1,828
Non-cash operating lease expense						Non-cash operating lease expense	2,425		2,744

Net amortization of investment premiums and discounts	Net amortization of investment premiums and discounts	1,891		1,316		Net amortization of investment premiums and discounts	3,384		1,987

Net gain on sale of loans	Net gain on sale of loans	(3,916)		(1,071)		Net gain on sale of loans	(4,937)		(1,745)
Stock based compensation	Stock based compensation	1,513		1,987		Stock based compensation	2,157		2,921
Amortization and net impairment of mortgage servicing rights	Amortization and net impairment of mortgage servicing rights	1,010		303		Amortization and net impairment of mortgage servicing rights	1,569		467
Net accretion of fair value adjustments	Net accretion of fair value adjustments	(1,989)		(2,285)		Net accretion of fair value adjustments	(2,789)		(3,843)
Amortization of intangible assets	Amortization of intangible assets	1,828		1,894		Amortization of intangible assets	2,698		2,848

Net (gain) loss on sale of OREO	Net (gain) loss on sale of OREO	(148)		24		Net (gain) loss on sale of OREO	(148)		36
Net increase in cash surrender value of bank owned life insurance ("BOLI")	Net increase in cash surrender value of bank owned life insurance ("BOLI")	(649)		(593)		Net increase in cash surrender value of bank owned life insurance ("BOLI")	(993)		(905)
Other, net	Other, net	1,216		(832)		Other, net	1,102		(418)
Loans originated for sale	Loans originated for sale	(46,750)		(35,781)		Loans originated for sale	(80,695)		(65,373)
Proceeds from loans sold	Proceeds from loans sold	48,211		35,187		Proceeds from loans sold	82,719		65,939
Provision for deferred income taxes	Provision for deferred income taxes	99		51		Provision for deferred income taxes	476		446

Change in income taxes payable/receivable, net	Change in income taxes payable/receivable, net	(4,963)		6,906		Change in income taxes payable/receivable, net	(5,323)		6,147
Change in accrued interest receivable	Change in accrued interest receivable	(3,095)		(727)		Change in accrued interest receivable	(4,127)		(161)
Change in accrued interest payable	Change in accrued interest payable	1,659		1,592		Change in accrued interest payable	1,736		2,363
Change in operating lease liabilities	Change in operating lease liabilities	(1,565)		(1,726)		Change in operating lease liabilities	(2,363)		(2,613)
Change in other assets	Change in other assets	(96,979)		(68,444)		Change in other assets	(95,577)		(107,390)
Change in other liabilities	Change in other liabilities	90,831		30,744		Change in other liabilities	87,533		54,348
Net cash provided by operating activities	Net cash provided by operating activities	34,327		6,094		Net cash provided by operating activities	52,189		12,621

Investing activities:	Investing activities:					Investing activities:
Purchases of investment securities available for sale	Purchases of investment securities available for sale	(120,458)		(121,976)		Purchases of investment securities available for sale	(238,008)		(219,735)
Purchases of investment securities held to maturity	Purchases of investment securities held to maturity	(1,103)		(1,827)		Purchases of investment securities held to maturity	(1,103)		(4,868)
Proceeds from maturity and paydowns of investment securities available for sale	Proceeds from maturity and paydowns of investment securities available for sale	557,125		238,349		Proceeds from maturity and paydowns of investment securities available for sale	594,650		266,526
Proceeds from maturity and paydowns of investment securities held to maturity	Proceeds from maturity and paydowns of investment securities held to maturity	1,023		273		Proceeds from maturity and paydowns of investment securities held to maturity	1,842		548

Net change in FHLB stock	Net change in FHLB stock	19,238		(147)		Net change in FHLB stock	19,238		(1,618)
Proceeds from calls of investment securities	Proceeds from calls of investment securities	45,500		43,285		Proceeds from calls of investment securities	97,775		97,406

Net change in other investments	Net change in other investments	(372)		9		Net change in other investments	(446)		(157)

Purchase of customer relationships	Purchase of customer relationships	—		(18)		Purchase of customer relationships	0		(18)

Net portfolio loan and lease originations	Net portfolio loan and lease originations	(337,951)		(112,046)		Net portfolio loan and lease originations	(293,873)		(117,952)
Proceeds from sales of loans originally classified as portfolio loans and leases	Proceeds from sales of loans originally classified as portfolio loans and leases	302,169		—		Proceeds from sales of loans originally classified as portfolio loans and leases	302,169		0
Purchases of premises and equipment	Purchases of premises and equipment	(814)		(6,339)		Purchases of premises and equipment	(1,430)		(6,509)

Proceeds from sale of OREO	Proceeds from sale of OREO	534		309		Proceeds from sale of OREO	534		380
Net cash provided by investing activities	Net cash provided by investing activities	464,891		39,872		Net cash provided by investing activities	481,348		14,003

Financing activities:	Financing activities:					Financing activities:
Change in deposits	Change in deposits	401,624		33,719		Change in deposits	171,651		99,945
Change in short-term borrowings	Change in short-term borrowings	(464,328)		(44,539)		Change in short-term borrowings	(469,763)		(48,896)
Dividends paid	Dividends paid	(10,438)		(10,086)		Dividends paid	(15,957)		(15,445)
Change in long-term FHLB advances and other borrowings	Change in long-term FHLB advances and other borrowings	(7,501)		(7,500)		Change in long-term FHLB advances and other borrowings	(7,500)		(10,740)
Payment of contingent consideration for business combinations	Payment of contingent consideration for business combinations	(507)		(523)		Payment of contingent consideration for business combinations	(507)		(875)

Cash payments to taxing authorities on employees' behalf from shares withheld from stock-based compensation	Cash payments to taxing authorities on employees' behalf from shares withheld from stock-based compensation	(144)		(45)		Cash payments to taxing authorities on employees' behalf from shares withheld from stock-based compensation	(594)		(572)
Net purchase of treasury stock for deferred compensation plans	Net purchase of treasury stock for deferred compensation plans	(90)		(82)		Net purchase of treasury stock for deferred compensation plans	(128)		(140)

Net purchase of treasury stock through publicly announced plans	Net purchase of treasury stock through publicly announced plans	(7,249)		(2,603)		Net purchase of treasury stock through publicly announced plans	(7,249)		(4,524)

Proceeds from exercise of stock options	Proceeds from exercise of stock options	5		622		Proceeds from exercise of stock options	12		907
Net cash used in financing activities		(88,628)		(31,037)
Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	(330,035)		19,660

Change in cash and cash equivalents	Change in cash and cash equivalents	410,590		14,929		Change in cash and cash equivalents	203,502		46,284
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	53,931		48,456		Cash and cash equivalents at beginning of period	53,931		48,456
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	464,521	$	63,385	Cash and cash equivalents at end of period	$	257,433	$	94,740

Supplemental cash flow information:	Supplemental cash flow information:					Supplemental cash flow information:
Cash paid during the year for:	Cash paid during the year for:					Cash paid during the year for:
Income taxes	Income taxes	$	5,922	$	4,580	Income taxes	$	9,613	$	9,344
Interest	Interest	$	14,351	$	21,006	Interest	$	18,784	$	32,410

Non-cash information:	Non-cash information:					Non-cash information:

Available for sale securities purchased, not settled						Available for sale securities purchased, not settled	$	6,500	$	0
Change in other comprehensive income	Change in other comprehensive income	$	6,832	$	9,213	Change in other comprehensive income	$	7,952	$	10,211
Change in deferred tax due to change in comprehensive income	Change in deferred tax due to change in comprehensive income	$	1,816	$	2,449	Change in deferred tax due to change in comprehensive income	$	2,114	$	2,714
Transfer of loans to OREO and repossessed assets	Transfer of loans to OREO and repossessed assets	$	386	$	72	Transfer of loans to OREO and repossessed assets	$	386	$	72

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

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BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes In Shareholders’ Equity - Unaudited


		For the Three Months Ended June 30, 2020																													For the Three Months Ended September 30, 2020
(dollars in thousands, except share and per share data)	(dollars in thousands, except share and per share data)	Shares of Common Stock Issued	Common Stock		Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Income		Retained Earnings		Noncontrolling Interest		Total Shareholders' Equity		(dollars in thousands, except share and per share data)	Shares of Common Stock Issued	Common Stock		Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Income		Retained Earnings		Noncontrolling Interest		Total Shareholders' Equity
Balance March 31, 2020		24,655,362	$	24,655	$	379,495	$	(88,540)	$	8,869	$	269,395	$	(695)	$	593,179
Net loss attributable to Bryn Mawr Bank Corporation		—	—		—		—		—		15,035		—		15,035
Balance June 30, 2020																	Balance June 30, 2020	24,662,161	$	24,662	$	380,167	$	(88,612)	$	9,019	$	279,165	$	(727)	$	603,674
Net income attributable to Bryn Mawr Bank Corporation																	Net income attributable to Bryn Mawr Bank Corporation	—	—		—		—		—		13,164		—		13,164
Net loss attributable to noncontrolling interest	Net loss attributable to noncontrolling interest	—	—		—		—		—		—		(32)		(32)		Net loss attributable to noncontrolling interest	—	—		—		—		—		—		(40)		(40)

Dividends paid or accrued, $0.26 per share		—	—		—		—		—		(5,265)		—		(5,265)
Other comprehensive income, net of tax expense of $40		—	—		—		—		150		—		—		150
Dividends paid or accrued, $0.27 per share																	Dividends paid or accrued, $0.27 per share	—	—		—		—		—		(5,464)		—		(5,464)
Other comprehensive income, net of tax expense of $297																	Other comprehensive income, net of tax expense of $297	—	—		—		—		1,120		—		—		1,120
Stock based compensation	Stock based compensation	—	—		624		—		—		—		—		624		Stock based compensation	—	—		644		—		—		—		—		644
Retirement of treasury stock		(3,816)	(4)		(41)		45		—		—		—		—

Net purchase of treasury stock from stock awards for statutory tax withholdings	Net purchase of treasury stock from stock awards for statutory tax withholdings	—	—		—		(63)		—		—		—		(63)		Net purchase of treasury stock from stock awards for statutory tax withholdings	—	—		—		(450)		—		—		—		(450)
Net treasury stock activity for deferred compensation trusts	Net treasury stock activity for deferred compensation trusts	—	—		—		(54)		—		—		—		(54)		Net treasury stock activity for deferred compensation trusts	—	—		—		(38)		—		—		—		(38)

Common stock issued:	Common stock issued:																Common stock issued:
Common stock issued through share-based awards and options exercises	Common stock issued through share-based awards and options exercises	10,615	11		89		—		—		—		—		100		Common stock issued through share-based awards and options exercises	47,501	48		(41)		—		—		—		—		7

Balance June 30, 2020		24,662,161	$	24,662	$	380,167	$	(88,612)	$	9,019	$	279,165	$	(727)	$	603,674
Balance September 30, 2020																	Balance September 30, 2020	24,709,662	$	24,710	$	380,770	$	(89,100)	$	10,139	$	286,865	$	(767)	$	612,617

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BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes In Shareholders’ Equity - Unaudited


		For the Three Months Ended June 30, 2019																													For the Three Months Ended September 30, 2019
		Shares of Common Stock Issued	Common Stock		Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive (Loss) Income		Retained Earnings		Noncontrolling Interest		Total Shareholders' Equity			Shares of Common Stock Issued	Common Stock		Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Income		Retained Earnings		Noncontrolling Interest		Total Shareholders' Equity
Balance March 31, 2019		24,577,248	$	24,577	$	375,655	$	(76,974)	$	(3,278)	$	255,813	$	(686)	$	575,107
Balance June 30, 2019																	Balance June 30, 2019	24,582,557	$	24,583	$	376,652	$	(78,583)	$	1,700	$	266,496	$	(693)	$	590,155
Net income attributable to Bryn Mawr Bank Corporation	Net income attributable to Bryn Mawr Bank Corporation	—	—		—		—		—		15,785		—		15,785		Net income attributable to Bryn Mawr Bank Corporation	—	—		—		—		—		16,360		—		16,360
Net loss attributable to noncontrolling interest	Net loss attributable to noncontrolling interest	—	—		—		—		—		—		(7)		(7)		Net loss attributable to noncontrolling interest	—	—		—		—		—		—		(1)		(1)
Dividends paid or accrued, $0.25 per share		—	—		—		—		—		(5,102)		—		(5,102)
Other comprehensive income, net of tax expense of $1,323		—	—		—		—		4,978		—		—		4,978
Dividends paid or accrued, $0.26 per share																	Dividends paid or accrued, $0.26 per share	—	—		—		—		—		(5,288)		—		(5,288)
Other comprehensive income, net of tax expense of $265																	Other comprehensive income, net of tax expense of $265	—	—		—		—		998		—		—		998
Stock based compensation	Stock based compensation	—	—		850		—		—		—		—		850		Stock based compensation	—	—		934		—		—		—		—		934
Retirement of treasury stock		(2,704)	(3)		(27)		30		—		—		—		—

Net purchase of treasury stock from stock awards for statutory tax withholdings	Net purchase of treasury stock from stock awards for statutory tax withholdings	—	—		—		(11)		—		—		—		(11)		Net purchase of treasury stock from stock awards for statutory tax withholdings	—	—		—		(527)		—		—		—		(527)
Net treasury stock activity for deferred compensation trusts	Net treasury stock activity for deferred compensation trusts	—	—		—		(82)		—		—		—		(82)		Net treasury stock activity for deferred compensation trusts	—��	—		—		(58)		—		—		—		(58)
Purchase of treasury stock through publicly announced plans	Purchase of treasury stock through publicly announced plans	—	—		—		(1,546)		—		—		—		(1,546)		Purchase of treasury stock through publicly announced plans	—	—		—		(1,921)		—		—		—		(1,921)

Common stock issued:	Common stock issued:																Common stock issued:
Common stock issued through share-based awards and options exercises	Common stock issued through share-based awards and options exercises	8,013	9		174		—		—		—		—		183		Common stock issued through share-based awards and options exercises	63,188	63		220		—		—		—		—		283

Balance June 30, 2019		24,582,557	$	24,583	$	376,652	$	(78,583)	$	1,700	$	266,496	$	(693)	$	590,155
Balance September 30, 2019																	Balance September 30, 2019	24,645,745	$	24,646	$	377,806	$	(81,089)	$	2,698	$	277,568	$	(694)	$	600,935

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BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes In Shareholders’ Equity - Unaudited


		For the Six Months Ended June 30, 2020																													For the Nine Months Ended September 30, 2020
(dollars in thousands, except share and per share data)	(dollars in thousands, except share and per share data)	Shares of Common Stock Issued	Common Stock		Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Income		Retained Earnings		Noncontrolling Interest		Total Shareholders' Equity		(dollars in thousands, except share and per share data)	Shares of Common Stock Issued	Common Stock		Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Income		Retained Earnings		Noncontrolling Interest		Total Shareholders' Equity
Balance December 31, 2019	Balance December 31, 2019	24,650,051	$	24,650	$	378,606	$	(81,174)	$	2,187	$	288,653	$	(695)	$	612,227	Balance December 31, 2019	24,650,051	$	24,650	$	378,606	$	(81,174)	$	2,187	$	288,653	$	(695)	$	612,227
Net income attributable to Bryn Mawr Bank Corporation	Net income attributable to Bryn Mawr Bank Corporation	—	—		—		—		—		3,872		—		3,872		Net income attributable to Bryn Mawr Bank Corporation	—	—		—		—		—		17,036		—		17,036
Net loss attributable to noncontrolling interest	Net loss attributable to noncontrolling interest	—	—		—		—		—		—		(32)		(32)		Net loss attributable to noncontrolling interest	—	—		—		—		—		—		(72)		(72)
Cumulative-effect adjustment due to the adoption of ASU No. 2016-13	Cumulative-effect adjustment due to the adoption of ASU No. 2016-13	—	—		—		—		—		(2,801)		—		(2,801)		Cumulative-effect adjustment due to the adoption of ASU No. 2016-13	—	—		—		—		—		(2,801)		—		(2,801)
Dividends paid or accrued, $0.52 per share		—	—		—		—		—		(10,559)		—		(10,559)
Other comprehensive income, net of tax expense of $1,816		—	—		—		—		6,832		—		—		6,832
Dividends paid or accrued, $0.79 per share																	Dividends paid or accrued, $0.79 per share	—	—		—		—		—		(16,023)		—		(16,023)
Other comprehensive income, net of tax expense of $2,114																	Other comprehensive income, net of tax expense of $2,114	—	—		—		—		7,952		—		—		7,952
Stock based compensation	Stock based compensation	—	—		1,513		—		—		—		—		1,513		Stock based compensation	—	—		2,157		—		—		—		—		2,157
Retirement of treasury stock	Retirement of treasury stock	(3,816)	(4)		(41)		45		—		—		—		—		Retirement of treasury stock	(3,816)	(4)		(41)		45		—		—		—		0
Net purchase of treasury stock from stock awards for statutory tax withholdings	Net purchase of treasury stock from stock awards for statutory tax withholdings	—	—		—		(144)		—		—		—		(144)		Net purchase of treasury stock from stock awards for statutory tax withholdings	—	—		—		(594)		—		—		—		(594)
Net treasury stock activity for deferred compensation trusts	Net treasury stock activity for deferred compensation trusts	—	—		—		(90)		—		—		—		(90)		Net treasury stock activity for deferred compensation trusts	—	—		—		(128)		—		—		—		(128)
Purchase of treasury stock through publicly announced plans	Purchase of treasury stock through publicly announced plans	—	—		—		(7,249)		—		—		—		(7,249)		Purchase of treasury stock through publicly announced plans	—	—		—		(7,249)		—		—		—		(7,249)

Common stock issued:	Common stock issued:																Common stock issued:
Common stock issued through share-based awards and options exercises	Common stock issued through share-based awards and options exercises	15,926	16		89		—		—		—		—		105		Common stock issued through share-based awards and options exercises	63,427	64		48		—		—		—		—		112

Balance June 30, 2020		24,662,161	$	24,662	$	380,167	$	(88,612)	$	9,019	$	279,165	$	(727)	$	603,674
Balance September 30, 2020																	Balance September 30, 2020	24,709,662	$	24,710	$	380,770	$	(89,100)	$	10,139	$	286,865	$	(767)	$	612,617

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BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes In Shareholders’ Equity - Unaudited


		For the Six Months Ended June 30, 2019																													For the Nine Months Ended September 30, 2019
		Shares of Common Stock Issued	Common Stock		Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive (Loss) Income		Retained Earnings		Noncontrolling Interest		Total Shareholders' Equity			Shares of Common Stock Issued	Common Stock		Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive (Loss) Income		Retained Earnings		Noncontrolling Interest		Total Shareholders' Equity
Balance December 31, 2018	Balance December 31, 2018	24,545,348	$	24,545	$	374,010	$	(75,883)	$	(7,513)	$	250,230	$	(685)	$	564,704	Balance December 31, 2018	24,545,348	$	24,545	$	374,010	$	(75,883)	$	(7,513)	$	250,230	$	(685)	$	564,704
Net income attributable to Bryn Mawr Bank Corporation	Net income attributable to Bryn Mawr Bank Corporation	—	—		—		—		—		26,462		—		26,462		Net income attributable to Bryn Mawr Bank Corporation	—	—		—		—		—		42,822		—		42,822
Net loss attributable to noncontrolling interest	Net loss attributable to noncontrolling interest	—	—		—		—		—		—		(8)		(8)		Net loss attributable to noncontrolling interest	—	—		—		—		—		—		(9)		(9)
Dividends paid or accrued, $0.50 per share		—	—		—		—		—		(10,196)		—		(10,196)
Other comprehensive income, net of tax expense of $2,449		—	—		—		—		9,213		—		—		9,213
Dividends paid or accrued, $0.76 per share																	Dividends paid or accrued, $0.76 per share	—	—		—		—		—		(15,484)		—		(15,484)
Other comprehensive income, net of tax expense of $2,714																	Other comprehensive income, net of tax expense of $2,714	—	—		—		—		10,211		—		—		10,211
Stock based compensation	Stock based compensation	—	—		1,987		—		—		—		—		1,987		Stock based compensation	—	—		2,921		—		—		—		—		2,921
Retirement of treasury stock	Retirement of treasury stock	(2,704)	(3)		(27)		30		—		—		—		—		Retirement of treasury stock	(2,704)	(3)		(27)		30		—		—		—		0
Net purchase of treasury stock from stock awards for statutory tax withholdings	Net purchase of treasury stock from stock awards for statutory tax withholdings	—	—		—		(45)		—		—		—		(45)		Net purchase of treasury stock from stock awards for statutory tax withholdings	—	—		—		(572)		—		—		—		(572)
Net treasury stock activity for deferred compensation trusts	Net treasury stock activity for deferred compensation trusts	—	—		—		(82)		—		—		—		(82)		Net treasury stock activity for deferred compensation trusts	—	—		—		(140)		—		—		—		(140)
Purchase of treasury stock through publicly announced plans	Purchase of treasury stock through publicly announced plans	—	—		—		(2,603)		—		—		—		(2,603)		Purchase of treasury stock through publicly announced plans	—	—		—		(4,524)		—		—		—		(4,524)

Common stock issued:	Common stock issued:																Common stock issued:
Common stock issued through share-based awards and options exercises	Common stock issued through share-based awards and options exercises	39,913	41		682		—		—		—		—		723		Common stock issued through share-based awards and options exercises	103,101	104		902		—		—		—		—		1,006

Balance June 30, 2019		24,582,557	$	24,583	$	376,652	$	(78,583)	$	1,700	$	266,496	$	(693)	$	590,155
Balance September 30, 2019																	Balance September 30, 2019	24,645,745	$	24,646	$	377,806	$	(81,089)	$	2,698	$	277,568	$	(694)	$	600,935

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

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BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

Note 1 – Basis of Presentation, Principles of Consolidation, and Significant Accounting Policies

The Unaudited Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).

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

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

In preparing the Unaudited Consolidated Financial Statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the dates of the balance sheets, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

These Unaudited Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto in BMBC’s Annual Report on Form 10-K for the twelve months ended December 31, 2019 (the “2019 Annual Report”). Except as described below, the accounting policies applied in these Unaudited Consolidated Financial Statements are the same as those applied in the 2019 Annual Report.

Updates to Significant Accounting Policies:

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

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

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

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

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

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

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

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

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

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

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

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

Home equity lines of credit: The Bank originates the majority of its home equity lines of credit through its retail channel. The primary risk characteristics associated with home equity lines of credit typically involve major living or lifestyle changes to the borrower, including unemployment or other loss of income; unexpected significant expenses, such as major medical expenses,

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catastrophic events, divorce and death. Home equity lines of credit are typically originated with variable or floating interest rates, which could expose the borrower to higher payments in a rising interest rate environment. Real estate values could decrease and cause the value of the underlying property to fall below the loan amount, creating additional potential loss exposure for the Bank.

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

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

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

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

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

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

Accrued interest receivable on loans and leases, which is reported in Accrued interest receivable on the Consolidated Balance Sheet, totaled ~~$12.5~~$13.7 million as of ~~June~~September 30, 2020 and is excluded from the estimate of credit ~~losses.~~losses due to our charge-off policy to reverse accrued interest in a timely manner on loans and leases that are 90-days past due and deemed nonperforming. However, the Corporation continued to accrue interest on loans and leases for which payment deferrals have been extended to borrowers affected by the COVID-19 pandemic. Deferrals under the Corporation's modification program may be for durations which exceed the Corporation’s 90-day write-off policy for accrued interest. Therefore, these interest deferrals do not qualify for the Corporation’s election to not recognize a credit loss allowance for credit losses on accrued interest receivable. Accordingly, as of September 30, 2020, the Corporation has estimated credit losses for COVID-19 interest deferrals of $264 thousand, which is included as a reduction to Accrued interest receivable on the Consolidated Balance Sheet.

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

Management estimates expected credit losses over the contractual period in which the Corporation is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Corporation. The ACL on OBS credit exposure, included within Other Liabilities on the Consolidated Balance Sheet, is adjusted as a provision for credit loss expense included within other operating expense on the Consolidated Statement of Income. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be

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funded over its estimated life. Management estimates the amount of expected losses by calculating a commitment usage factor over the contractual period for exposures that are not unconditionally cancellable by the bank and applying the loss factors used in the ACL on loans and leases methodology to the results of the usage calculation to estimate the liability for credit losses related to unfunded commitments for each loan type. No credit loss estimate is reported for OBS credit exposures that are unconditionally cancellable by the Bank.

The ACL on OBS credit exposure as of ~~June~~September 30, 2020 was ~~$3.3~~$3.5 million. For the three and nine months ended ~~June~~September 30, 2020 the Corporation recorded a ~~$867 thousand release of reserves for credit losses on OBS credit exposures. For the six months ended June 30, 2020, the Corporation recorded a $2.1 million~~ provision for credit losses on OBS credit ~~exposures.~~exposures of $195 thousand and $2.3 million, respectively.

C.Troubled Debt Restructurings (“TDRs”)

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

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

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

E.ACL on Held to Maturity Securities

Management measures expected credit losses on held to maturity debt securities on a collective basis by major security type. The Corporation’s held to maturity debt securities consist of mortgage-backed securities issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. With respect to these securities, management considers the history of credit losses, current conditions and reasonable and supportable forecasts, which may indicate that the expectation that nonpayment of the amortized cost basis is or continues to be zero, even if the U.S. government were to default. Therefore, for those securities, the Corporation does not record expected credit losses. Accrued interest receivable on held to maturity debt securities, which is reported in Accrued interest receivable on the Consolidated Balance Sheet, totaled ~~$36~~$34 thousand as of ~~June~~September 30, 2020 and is excluded from the estimate of credit losses.

F.ACL on Available for Sale Securities

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

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

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

Accrued interest receivable on available for sale debt securities, which is reported in Accrued interest receivable on the Consolidated Balance Sheet, totaled ~~$1.9~~$1.7 million at ~~June~~September 30, 2020 and is excluded from the estimate of credit losses.

Note 2 – Recent Accounting Pronouncements

The following FASB Accounting Standards Updates (“ASUs”) are divided into pronouncements which have been adopted by the Corporation since January 1, 2020, and those which are not yet effective and have been evaluated or are currently being evaluated by management as of ~~June~~September 30, 2020.

Adopted Pronouncements:

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

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

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

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

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

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

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


		January 1, 2020																			January 1, 2020
		Pre-CECL Adoption		Reclassification to CECL Portfolio Segmentation		Pre-CECL Adoption Portfolio Segmentation		Post-CECL Adoption Portfolio Segmentation		Impact of CECL Adoption			Pre-CECL Adoption		Reclassification to CECL Portfolio Segmentation		Pre-CECL Adoption Portfolio Segmentation		Post-CECL Adoption Portfolio Segmentation		Impact of CECL Adoption
Assets:	Assets:											Assets:
Loans and leases:	Loans and leases:											Loans and leases:
Commercial mortgage	Commercial mortgage	$	1,913,430	$	(1,913,430)	$	—	$	—	$	—	Commercial mortgage	$	1,913,430	$	(1,913,430)	$	0	$	0	$	0
CRE - nonowner-occupied	CRE - nonowner-occupied	—		1,337,167		1,337,167		1,337,464		297		CRE - nonowner-occupied	0		1,337,167		1,337,167		1,337,464		297
CRE - owner-occupied	CRE - owner-occupied	—		527,607		527,607		527,607		—		CRE - owner-occupied	0		527,607		527,607		527,607		0
Home equity lines of credit	Home equity lines of credit	194,639		29,623		224,262		224,262		—		Home equity lines of credit	194,639		29,623		224,262		224,262		0
Residential mortgage	Residential mortgage	489,903		(489,903)		—		—		—		Residential mortgage	489,903		(489,903)		0		0		0
Residential mortgage - first liens	Residential mortgage - first liens	—		706,690		706,690		706,843		153		Residential mortgage - first liens	0		706,690		706,690		706,843		153
Residential mortgage - junior liens	Residential mortgage - junior liens	—		36,843		36,843		36,843		—		Residential mortgage - junior liens	0		36,843		36,843		36,843		0
Construction	Construction	159,867		42,331		202,198		202,198		—		Construction	159,867		42,331		202,198		202,198		0
Commercial & Industrial	Commercial & Industrial	709,257		(277,030)		432,227		432,248		21		Commercial & Industrial	709,257		(277,030)		432,227		432,248		21
Consumer	Consumer	57,139		102		57,241		57,241		—		Consumer	57,139		102		57,241		57,241		0
Leases	Leases	165,078		—		165,078		165,088		10		Leases	165,078		0		165,078		165,088		10
Total loans and leases	Total loans and leases	$	3,689,313	$	—	$	3,689,313	$	3,689,794	$	481	Total loans and leases	$	3,689,313	$	0	$	3,689,313	$	3,689,794	$	481

ACL on loans and leases	ACL on loans and leases											ACL on loans and leases
Commercial mortgage	Commercial mortgage	$	10,434	$	(10,434)	$	—	$	—	$	—	Commercial mortgage	$	10,434	$	(10,434)	$	0	$	0	$	0
CRE - nonowner-occupied	CRE - nonowner-occupied	—		7,960		7,960		7,493		(467)		CRE - nonowner-occupied	0		7,960		7,960		7,493		(467)
CRE - owner-occupied	CRE - owner-occupied	—		2,825		2,825		2,841		16		CRE - owner-occupied	0		2,825		2,825		2,841		16
Home equity lines of credit	Home equity lines of credit	890		224		1,114		1,068		(46)		Home equity lines of credit	890		224		1,114		1,068		(46)
Residential mortgage	Residential mortgage	1,538		(1,538)		—		—		—		Residential mortgage	1,538		(1,538)		0		0		0
Residential mortgage - first liens	Residential mortgage - first liens	—		2,501		2,501		4,909		2,408		Residential mortgage - first liens	0		2,501		2,501		4,909		2,408
Residential mortgage - junior liens	Residential mortgage - junior liens	—		338		338		417		79		Residential mortgage - junior liens	0		338		338		417		79
Construction	Construction	997		233		1,230		871		(359)		Construction	997		233		1,230		871		(359)
Commercial & Industrial	Commercial & Industrial	6,029		(2,194)		3,835		3,676		(159)		Commercial & Industrial	6,029		(2,194)		3,835		3,676		(159)
Consumer	Consumer	353		85		438		578		140		Consumer	353		85		438		578		140
Leases	Leases	2,361		—		2,361		3,955		1,594		Leases	2,361		0		2,361		3,955		1,594
Total ACL on loans and leases	Total ACL on loans and leases	$	22,602	$	—	$	22,602	$	25,808	$	3,206	Total ACL on loans and leases	$	22,602	$	0	$	22,602	$	25,808	$	3,206

Liabilities:	Liabilities:											Liabilities:
ACL on OBS credit exposures	ACL on OBS credit exposures	$	360	$	—	$	360	$	1,181	$	821	ACL on OBS credit exposures	$	360	$	0	$	360	$	1,181	$	821

Total ACL	Total ACL	$	22,962	$	—	$	22,962	$	26,989	$	4,027	Total ACL	$	22,962	$	0	$	22,962	$	26,989	$	4,027

Retained earnings:	Retained earnings:											Retained earnings:
Total increase in ACL	Total increase in ACL									$	4,027	Total increase in ACL									$	4,027
Balance sheet reclassification	Balance sheet reclassification									(481)		Balance sheet reclassification									(481)
Total pre-tax impact	Total pre-tax impact									3,546		Total pre-tax impact									3,546
Tax effect	Tax effect									(745)		Tax effect									(745)
Decrease to retained earnings	Decrease to retained earnings									$	2,801	Decrease to retained earnings									$	2,801

FASB ASU 2017-04 (Topic 350), “Intangibles – Goodwill and Others”

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

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

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

Pronouncements Not Yet Effective:

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

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

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

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

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

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

Note 3 – Investment Securities

The amortized cost and fair value of investment securities available for sale as of ~~June~~September 30, 2020 and December 31, 2019 are as follows:

As of ~~June~~September 30, 2020

(dollars in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses
Fair
Value
U.S. Treasury securities $ 100 $ — $ — $ 100
Obligations of the U.S. government and agencies 113,046 1,120 (17) 114,149
Obligations of state and political subdivisions 4,553 30 — 4,583
Mortgage-backed securities 365,521 12,056 (373) 377,204
Collateralized mortgage obligations 25,171 702 — 25,873
Corporate bonds 8,000 22 — 8,022
Other investment securities 650 — — 650
Total $ 517,041 $ 13,930 $ (390) $ 530,581


(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Treasury securities	$	100	$	0	$	0	$	100
Obligations of the U.S. government and agencies	89,933		1,100		(105)		90,928
Obligations of state and political subdivisions	3,151		27		0		3,178
Mortgage-backed securities	418,921		13,372		(471)		431,822
Collateralized mortgage obligations	21,591		662		0		22,253
Collateralized loan obligations	6,500		0		0		6,500
Corporate bonds	9,000		343		0		9,343
Other investment securities	650		0		0		650
Total	$	549,846	$	15,504	$	(576)	$	564,774

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As of December 31, 2019


(dollars in thousands)	(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Treasury securities	U.S. Treasury securities	$	500,066	$	35	$	—	$	500,101	U.S. Treasury securities	$	500,066	$	35	$	0	$	500,101
Obligations of the U.S. government and agencies	Obligations of the U.S. government and agencies	102,179		193		(352)		102,020		Obligations of the U.S. government and agencies	102,179		193		(352)		102,020
Obligations of state and political subdivisions	Obligations of state and political subdivisions	5,366		13		—		5,379		Obligations of state and political subdivisions	5,366		13		0		5,379
Mortgage-backed securities	Mortgage-backed securities	360,977		5,182		(157)		366,002		Mortgage-backed securities	360,977		5,182		(157)		366,002
Collateralized mortgage obligations	Collateralized mortgage obligations	31,796		195		(159)		31,832		Collateralized mortgage obligations	31,796		195		(159)		31,832

Other investment securities	Other investment securities	650		—		—		650		Other investment securities	650		0		0		650
Total	Total	$	1,001,034	$	5,618	$	(668)	$	1,005,984	Total	$	1,001,034	$	5,618	$	(668)	$	1,005,984

The following tables present the aggregate amount of gross unrealized losses as of ~~June~~September 30, 2020 and December 31, 2019 on available for sale investment securities classified according to the amount of time those securities have been in a continuous unrealized loss position:

As of ~~June~~September 30, 2020


		Less than 12 Months						12 Months or Longer								Total					Less than 12 Months				12 Months or Longer		Total
(dollars in thousands)	(dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		(dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of the U.S. government and agencies	Obligations of the U.S. government and agencies	$	6,005	$	(17)	$	—	$	—	$	6,005	$	(17)	Obligations of the U.S. government and agencies	$	30,890	$	(105)	$	0	$	0	$	30,890	$	(105)

Mortgage-backed securities	Mortgage-backed securities	32,503		(373)		—		—		32,503		(373)		Mortgage-backed securities	73,538		(471)		0		0		73,538		(471)

Total	Total	$	38,508	$	(390)	$	—	$	—	$	38,508	$	(390)	Total	$	104,428	$	(576)	$	0	$	0	$	104,428	$	(576)

As of December 31, 2019


	Less than 12 Months				12 Months or Longer				Total
(dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses

Obligations of the U.S. government and agencies	$	48,497	$	(315)	$	7,966	$	(37)	$	56,463	$	(352)

Mortgage-backed securities	33,783		(119)		5,977		(38)		39,760		(157)
Collateralized mortgage obligations	6,978		(67)		10,861		(92)		17,839		(159)

Total	$	89,258	$	(501)	$	24,804	$	(167)	$	114,062	$	(668)

As of ~~June~~September 30, 2020, the Corporation’s available for sale investment securities consisted of ~~392~~401 securities, 1431 of which were in an unrealized loss position.

As of ~~June~~September 30, 2020, management had not made a decision to sell any of the Corporation’s available for sale investment securities in an unrealized loss position, nor did management consider it more likely than not that it would be required to sell such securities before recovery of their amortized cost basis. Management has evaluated available for sale debt securities that are in an unrealized loss position and has determined that the decline in value is unrelated to credit loss and is related to the change in market interest rates since purchase. Factors considered in this evaluation included the extent to which fair value is less than amortized cost, any explicit or implicit guarantees by the U.S. government, any changes to the rating of the security by the rating agency, and adverse conditions specifically related to the security, among other factors. As of ~~June~~September 30, 2020, approximately ~~97.0%~~96.5% of the Corporation’s available for sale investment securities were U.S. Treasuries or mortgage-backed securities or collateral mortgage obligations which were issued or guaranteed by U.S. government-sponsored entities and agencies. In addition, none of the available for sale debt securities held by the Corporation are past due as of ~~June~~September 30, 2020.

As of ~~June~~September 30, 2020 and December 31, 2019, there were no holdings of securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of shareholders’ equity.

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As of ~~June~~September 30, 2020 and December 31, 2019, securities having a fair value of ~~$268.2~~$274.9 million and $156.4 million, respectively, were specifically pledged as collateral for public funds, trust deposits, the Federal Reserve Bank of Philadelphia (the “FRB”) discount window program, Federal Home Loan Bank (“FHLB”) borrowings, collateral requirements in derivative contracts, and other purposes. Advances by the FHLB are collateralized by a blanket lien on non-pledged, mortgage-related loans as part of the Corporation’s borrowing agreement with the FHLB as well as certain securities individually pledged by the Corporation.

The amortized cost and fair value of available for sale investment and mortgage-related securities available for sale as of ~~June~~September 30, 2020 and December 31, 2019, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


		June 30, 2020						December 31, 2019							September 30, 2020				December 31, 2019
(dollars in thousands)	(dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		(dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Investment securities:	Investment securities:									Investment securities:
Due in one year or less	Due in one year or less	$	2,511	$	2,514	$	504,851	$	504,890	Due in one year or less	$	3,133	$	3,161	$	504,851	$	504,890
Due after one year through five years	Due after one year through five years	11,808		11,905		38,710		38,623		Due after one year through five years	15,396		15,771		38,710		38,623
Due after five years through ten years	Due after five years through ten years	102,829		103,479		53,598		53,457		Due after five years through ten years	76,204		76,772		53,598		53,457
Due after ten years	Due after ten years	9,201		9,606		11,102		11,180		Due after ten years	14,601		14,995		11,102		11,180
Subtotal	Subtotal	126,349		127,504		608,261		608,150		Subtotal	109,334		110,699		608,261		608,150
Mortgage-related securities⁽¹⁾	Mortgage-related securities⁽¹⁾	390,692		403,077		392,773		397,834		Mortgage-related securities(1)	440,512		454,075		392,773		397,834

Total	Total	$	517,041	$	530,581	$	1,001,034	$	1,005,984	Total	$	549,846	$	564,774	$	1,001,034	$	1,005,984

(1) Expected maturities of mortgage-related securities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

The amortized cost and fair value of investment securities held to maturity as of ~~June~~September 30, 2020 and December 31, 2019 are as follows:

As of ~~June~~September 30, 2020


(dollars in thousands)	(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Mortgage-backed securities	Mortgage-backed securities	$	12,592	$	403	$	—	$	12,995	Mortgage-backed securities	$	11,725	$	419	$	0	$	12,144

As of December 31, 2019


(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Mortgage-backed securities	$	12,577	$	104	$	(20)	$	12,661

The Corporation had no held to maturity securities with gross unrealized losses as of ~~June~~September 30, 2020. The following table presents the aggregate amount of gross unrealized losses as of December 31, 2019 on held to maturity securities classified according to the amount of time those securities have been in a continuous unrealized loss position:

As of December 31, 2019


		Less than 12 Months						12 Months or Longer								Total					Less than 12 Months				12 Months or Longer		Total
(dollars in thousands)	(dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		(dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Mortgage-backed securities	Mortgage-backed securities	$	3,159	$	(20)	$	—	$	—	$	3,159	$	(20)	Mortgage-backed securities	$	3,159	$	(20)	$	0	$	0	$	3,159	$	(20)

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As of ~~June~~September 30, 2020, none of the Corporation’s held to maturity investment securities were in an unrealized loss position. The Corporation’s held to maturity debt securities consist of mortgage-backed securities issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. With respect to these securities, the bank considers the history of credit

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losses, current conditions and reasonable and supportable forecasts, which may indicate that the expectation that nonpayment of the amortized cost basis is or continues to be zero, even if the U.S. government were to default. The bank does not record expected credit losses for these securities. Accrued interest receivable on held to maturity debt securities totaled ~~$36~~$34 thousand at ~~June~~September 30, 2020 and is excluded from the estimate of credit losses.

The amortized cost and fair value of held to maturity investment securities as of ~~June~~September 30, 2020 and December 31, 2019, by contractual maturity, are shown below:


		June 30, 2020						December 31, 2019							September 30, 2020				December 31, 2019
(dollars in thousands)	(dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		(dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Mortgage-backed securities⁽¹⁾	Mortgage-backed securities⁽¹⁾	$	12,592	$	12,995	$	12,577	$	12,661	Mortgage-backed securities(1)	$	11,725	$	12,144	$	12,577	$	12,661

As of ~~June~~September 30, 2020 and December 31, 2019, the Corporation’s investment securities held in trading accounts totaled ~~$7.8~~$8.0 million and $8.6 million, respectively, and primarily consist of deferred compensation trust accounts which are invested in listed mutual funds whose diversification is at the discretion of the deferred compensation plan participants and rabbi trust accounts established to fund certain unqualified pension obligations. Investment securities held in trading accounts are reported at fair value, with adjustments in fair value reported through income. Changes in the fair value of investments held in the deferred compensation trust accounts create corresponding changes in the liability to the deferred compensation plan participants.

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Note 4 – Loans and Leases

The loan and lease portfolio consists of loans and leases originated by the Corporation, as well as loans acquired in prior acquisitions. Certain tables in this footnote are presented with a breakdown between originated and acquired loans and leases.

A. The following table details the amortized cost of loans and leases as of the dates indicated:


Loans and Leases	Loans and Leases																									Loans and Leases
		June 30, 2020										December 31, 2019											September 30, 2020				December 31, 2019
(dollars in thousands)	(dollars in thousands)	Originated		Acquired		Total Loans and Leases		Originated		Acquired		Total Loans and Leases		(dollars in thousands)	Originated		Acquired		Total Loans and Leases		Originated		Acquired		Total Loans and Leases
Loans held for sale	Loans held for sale	$	4,116	$	—	$	4,116	$	4,249	$	—	$	4,249	Loans held for sale	$	4,574	$	0	$	4,574	$	4,249	$	0	$	4,249
Real estate loans:	Real estate loans:													Real estate loans:
Commercial real estate (CRE) - nonowner-occupied	Commercial real estate (CRE) - nonowner-occupied	1,252,173		123,731		1,375,904		1,161,815		175,352		1,337,167		Commercial real estate (CRE) - nonowner-occupied	1,264,257		118,500		1,382,757		1,161,815		175,352		1,337,167
Commercial real estate (CRE) - owner-occupied	Commercial real estate (CRE) - owner-occupied	499,650		43,038		542,688		479,466		48,141		527,607		Commercial real estate (CRE) - owner-occupied	527,908		40,310		568,218		479,466		48,141		527,607
Home equity lines of credit	Home equity lines of credit	182,035		12,732		194,767		209,239		15,023		224,262		Home equity lines of credit	166,765		12,360		179,125		209,239		15,023		224,262
Residential mortgage - 1st liens	Residential mortgage - 1st liens	596,597		98,673		695,270		604,884		101,806		706,690		Residential mortgage - 1st liens	570,906		90,017		660,923		604,884		101,806		706,690
Residential mortgage - junior liens	Residential mortgage - junior liens	32,083		1,561		33,644		34,903		1,940		36,843		Residential mortgage - junior liens	24,730		1,420		26,150		34,903		1,940		36,843
Construction	Construction	203,833		8,541		212,374		193,307		8,891		202,198		Construction	178,055		8,360		186,415		193,307		8,891		202,198
Total real estate loans	Total real estate loans	2,766,371		288,276		3,054,647		2,683,614		351,153		3,034,767		Total real estate loans	2,732,621		270,967		3,003,588		2,683,614		351,153		3,034,767
Commercial & Industrial	Commercial & Industrial	451,228		6,301		457,529		425,322		6,905		432,227		Commercial & Industrial	459,182		6,134		465,316		425,322		6,905		432,227
Consumer	Consumer	43,672		90		43,762		54,913		2,328		57,241		Consumer	46,956		87		47,043		54,913		2,328		57,241
Leases	Leases	161,619		4,608		166,227		156,967		8,111		165,078		Leases	157,309		3,428		160,737		156,967		8,111		165,078
Total portfolio loans and leases	Total portfolio loans and leases	3,422,890		299,275		3,722,165		3,320,816		368,497		3,689,313		Total portfolio loans and leases	3,396,068		280,616		3,676,684		3,320,816		368,497		3,689,313
Total loans and leases	Total loans and leases	$	3,427,006	$	299,275	$	3,726,281	$	3,325,065	$	368,497	$	3,693,562	Total loans and leases	$	3,400,642	$	280,616	$	3,681,258	$	3,325,065	$	368,497	$	3,693,562
Loans with fixed rates	Loans with fixed rates	$	1,298,849	$	165,053	$	1,463,902	$	1,251,762	$	216,269	$	1,468,031	Loans with fixed rates	$	1,262,807	$	153,830	$	1,416,637	$	1,251,762	$	216,269	$	1,468,031
Loans with adjustable or floating rates	Loans with adjustable or floating rates	2,128,157		134,222		2,262,379		2,073,303		152,228		2,225,531		Loans with adjustable or floating rates	2,137,835		126,786		2,264,621		2,073,303		152,228		2,225,531
Total loans and leases	Total loans and leases	$	3,427,006	$	299,275	$	3,726,281	$	3,325,065	$	368,497	$	3,693,562	Total loans and leases	$	3,400,642	$	280,616	$	3,681,258	$	3,325,065	$	368,497	$	3,693,562
Net deferred loan origination fees (costs) included in the above loan table	Net deferred loan origination fees (costs) included in the above loan table	$	210	$	—	$	210	$	(193)	$	—	$	(193)	Net deferred loan origination fees (costs) included in the above loan table	$	222	$	0	$	222	$	(193)	$	0	$	(193)

B. The following table details the components of net investment in leases:


Components of Net Investment in Leases	Components of Net Investment in Leases																									Components of Net Investment in Leases
		June 30, 2020										December 31, 2019											September 30, 2020				December 31, 2019
(dollars in thousands)	(dollars in thousands)	Originated		Acquired		Total Leases		Originated		Acquired		Total Leases		(dollars in thousands)	Originated		Acquired		Total Leases		Originated		Acquired		Total Leases
Minimum lease payments receivable	Minimum lease payments receivable	$	178,407	$	4,874	$	183,281	$	174,385	$	8,753	$	183,138	Minimum lease payments receivable	$	173,146	$	3,603	$	176,749	$	174,385	$	8,753	$	183,138
Unearned lease income	Unearned lease income	(23,182)		(346)		(23,528)		(23,641)		(813)		(24,454)		Unearned lease income	(22,221)		(231)		(22,452)		(23,641)		(813)		(24,454)
Initial direct costs and deferred fees	Initial direct costs and deferred fees	6,394		80		6,474		6,223		171		6,394		Initial direct costs and deferred fees	6,384		56		6,440		6,223		171		6,394
Total Leases	Total Leases	$	161,619	$	4,608	$	166,227	$	156,967	$	8,111	$	165,078	Total Leases	$	157,309	$	3,428	$	160,737	$	156,967	$	8,111	$	165,078

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C. The following table details the amortized cost of nonperforming loans and leases as of the dates indicated:


Nonperforming Loans and Leases	Nonperforming Loans and Leases																									Nonperforming Loans and Leases
		June 30, 2020										December 31, 2019											September 30, 2020				December 31, 2019
(dollars in thousands)	(dollars in thousands)	Originated		Acquired		Total Loans and Leases		Originated		Acquired		Total Loans and Leases		(dollars in thousands)	Originated		Acquired		Total Loans and Leases		Originated		Acquired		Total Loans and Leases
CRE - nonowner-occupied	CRE - nonowner-occupied	$	245	$	—	$	245	$	199	$	—	$	199	CRE - nonowner-occupied	$	242	$	607	$	849	$	199	$	0	$	199
CRE - owner-occupied	CRE - owner-occupied	2,937		1,109		4,046		1,523		2,636		4,159		CRE - owner-occupied	2,537		1,060		3,597		1,523		2,636		4,159
Home equity lines of credit	Home equity lines of credit	741		174		915		636		—		636		Home equity lines of credit	616		274		890		636		0		636
Residential mortgage - 1st liens	Residential mortgage - 1st liens	899		13		912		630		1,817		2,447		Residential mortgage - 1st liens	830		32		862		630		1,817		2,447
Residential mortgage - junior liens	Residential mortgage - junior liens	72		—		72		83		—		83		Residential mortgage - junior liens	50		0		50		83		0		83

Commercial & Industrial	Commercial & Industrial	1,642		331		1,973		1,799		381		2,180		Commercial & Industrial	1,474		310		1,784		1,799		381		2,180
Consumer	Consumer	36		—		36		19		42		61		Consumer	31		0		31		19		42		61
Leases	Leases	190		29		219		747		136		883		Leases	512		22		534		747		136		883
Total non-performing loans and leases	Total non-performing loans and leases	$	6,762	$	1,656	$	8,418	$	5,636	$	5,012	$	10,648	Total non-performing loans and leases	$	6,292	$	2,305	$	8,597	$	5,636	$	5,012	$	10,648

D. Age Analysis of Past Due Loans and Leases

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


Payment Status of All Portfolio Loans and Leases	Payment Status of All Portfolio Loans and Leases																																																												Payment Status of All Portfolio Loans and Leases
		Accruing Loans and Leases																																																		Accruing Loans and Leases
As of June 30, 2020		30 – 59 Days Past Due			60 – 89 Days Past Due			Over 89 Days Past Due			Total Past Due				Current			Total Accruing Loans and Leases					Nonaccrual Loans and Leases			Total Loans and Leases
As of September 30, 2020													As of September 30, 2020	30 – 59 Days Past Due							60 – 89 Days Past Due							Over 89 Days Past Due			Total Past Due					Current					Total Accruing Loans and Leases					Nonaccrual Loans and Leases				Total Loans and Leases
(dollars in thousands)	(dollars in thousands)			30 – 59 Days Past Due						60 – 89 Days Past Due							Over 89 Days Past Due			Total Past Due					Current					Total Accruing Loans and Leases									Nonaccrual Loans and Leases									Total Loans and Leases													(dollars in thousands)			Current	Total Accruing Loans and Leases	Nonaccrual Loans and Leases	Total Loans and Leases
CRE - nonowner-occupied	CRE - nonowner-occupied												CRE - nonowner-occupied		$	0						$	230			$	0				$	230				$	1,381,678						$	1,381,908						$	849				$	1,382,757
CRE - owner-occupied	CRE - owner-occupied	995					501				—				1,496			537,146						538,642				4,046			542,688			CRE - owner-occupied	1,934					743					0				2,677					561,944					564,621			3,597	568,218
Home equity lines of credit	Home equity lines of credit	214			22			—			236				193,616			193,852					915			194,767		Home equity lines of credit	45				0					0				45					178,190					178,235					890			179,125
Residential mortgage - 1st liens	Residential mortgage - 1st liens	4,826			153			—			4,979				689,379			694,358					912			695,270		Residential mortgage - 1st liens	3,368				0					0				3,368					656,693					660,061					862			660,923
Residential mortgage - junior liens	Residential mortgage - junior liens	—			—			—			—				33,572			33,572					72			33,644		Residential mortgage - junior liens	4				0					0				4					26,096					26,100					50			26,150
Construction	Construction	—			—			—			—				212,374			212,374					—			212,374		Construction	0				0					0				0					186,415					186,415					0			186,415
Commercial & Industrial	Commercial & Industrial	12			271			—			283				455,273			455,556					1,973			457,529		Commercial & Industrial	1,237				240					0				1,477					462,055					463,532					1,784			465,316
Consumer	Consumer	9			76			—			85				43,641			43,726					36			43,762		Consumer	15				12					0				27					46,985					47,012					31			47,043
Leases	Leases	1,337			148			—			1,485				164,523			166,008					219			166,227		Leases	1,108				415					0				1,523					158,680					160,203					534			160,737
Total portfolio loans and leases	Total portfolio loans and leases	$	7,931		$	2,091		$	—		$	10,022			$	3,703,725		$	3,713,747				$	8,418		$	3,722,165	Total portfolio loans and leases	$	7,711			$	1,640				$	0			$	9,351				$	3,658,736				$	3,668,087				$	8,597		$	3,676,684

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Payment Status of All Portfolio Loans and Leases	Payment Status of All Portfolio Loans and Leases																																					Payment Status of All Portfolio Loans and Leases
		Accruing Loans and Leases																												Accruing Loans and Leases
As of December 31, 2019	As of December 31, 2019	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases		As of December 31, 2019	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due			Current		Total Accruing Loans and Leases				Nonaccrual Loans and Leases			Total Loans and Leases
(dollars in thousands)	(dollars in thousands)																										(dollars in thousands)									Current					Total Accruing Loans and Leases	Nonaccrual Loans and Leases			Total Loans and Leases
CRE - nonowner-occupied	CRE - nonowner-occupied	$	184	$	—	$	—	$	184	$	1,336,784	$	1,336,968	$	199	$	1,337,167	CRE - nonowner-occupied	$	184	$	0	$	0	$	184		$	1,336,784			$	1,336,968						$	199			$	1,337,167
CRE - owner-occupied	CRE - owner-occupied	2,462		—		—		2,462		520,986		523,448		4,159		527,607		CRE - owner-occupied	2,462		0		0		2,462			520,986		523,448				4,159			527,607
Home equity lines of credit	Home equity lines of credit	354		365		—		719		222,907		223,626		636		224,262		Home equity lines of credit	354		365		0		719			222,907		223,626				636			224,262
Residential mortgage - 1st liens	Residential mortgage - 1st liens	1,639		388		—		2,027		702,216		704,243		2,447		706,690		Residential mortgage - 1st liens	1,639		388		0		2,027			702,216		704,243				2,447			706,690
Residential mortgage - junior liens	Residential mortgage - junior liens	116		—		—		116		36,644		36,760		83		36,843		Residential mortgage - junior liens	116		0		0		116			36,644		36,760				83			36,843
Construction	Construction	—		—		—		—		202,198		202,198		—		202,198		Construction	0		0		0		0			202,198		202,198				0			202,198
Commercial & Industrial	Commercial & Industrial	—		—		—		—		430,047		430,047		2,180		432,227		Commercial & Industrial	0		0		0		0			430,047		430,047				2,180			432,227
Consumer	Consumer	98		140		—		238		56,942		57,180		61		57,241		Consumer	98		140		0		238			56,942		57,180				61			57,241
Leases	Leases	857		594		—		1,451		162,744		164,195		883		165,078		Leases	857		594		0		1,451			162,744		164,195				883			165,078
Total portfolio loans and leases	Total portfolio loans and leases	$	5,710	$	1,487	$	—	$	7,197	$	3,671,468	$	3,678,665	$	10,648	$	3,689,313	Total portfolio loans and leases	$	5,710	$	1,487	$	0	$	7,197		$	3,671,468	$	3,678,665			$	10,648		$	3,689,313

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


Payment Status of Originated Portfolio Loans and Leases	Payment Status of Originated Portfolio Loans and Leases																																																												Payment Status of Originated Portfolio Loans and Leases
		Accruing Loans and Leases																																																		Accruing Loans and Leases
As of June 30, 2020		30 – 59 Days Past Due			60 – 89 Days Past Due			Over 89 Days Past Due			Total Past Due				Current			Total Accruing Loans and Leases					Nonaccrual Loans and Leases			Total Loans and Leases
As of September 30, 2020													As of September 30, 2020	30 – 59 Days Past Due							60 – 89 Days Past Due							Over 89 Days Past Due			Total Past Due					Current					Total Accruing Loans and Leases					Nonaccrual Loans and Leases				Total Loans and Leases
(dollars in thousands)	(dollars in thousands)			30 – 59 Days Past Due						60 – 89 Days Past Due							Over 89 Days Past Due			Total Past Due					Current					Total Accruing Loans and Leases									Nonaccrual Loans and Leases									Total Loans and Leases													(dollars in thousands)			Current	Total Accruing Loans and Leases	Nonaccrual Loans and Leases	Total Loans and Leases
CRE - nonowner-occupied	CRE - nonowner-occupied												CRE - nonowner-occupied		$	0						$	0			$	0				$	0				$	1,264,015						$	1,264,015						$	242				$	1,264,257
CRE - owner-occupied	CRE - owner-occupied	995					383				—				1,378			495,335						496,713				2,937			499,650			CRE - owner-occupied	924					743					0				1,667					523,704					525,371			2,537	527,908
Home equity lines of credit	Home equity lines of credit	112			22			—			134				181,160			181,294					741			182,035		Home equity lines of credit	45				0					0				45					166,104					166,149					616			166,765
Residential mortgage - 1st liens	Residential mortgage - 1st liens	1,007			121			—			1,128				594,570			595,698					899			596,597		Residential mortgage - 1st liens	668				0					0				668					569,408					570,076					830			570,906
Residential mortgage - junior liens	Residential mortgage - junior liens	—			—			—			—				32,011			32,011					72			32,083		Residential mortgage - junior liens	4				0					0				4					24,676					24,680					50			24,730
Construction	Construction	—			—			—			—				203,833			203,833					—			203,833		Construction	0				0					0				0					178,055					178,055					0			178,055
Commercial & Industrial	Commercial & Industrial	12			271			—			283				449,303			449,586					1,642			451,228		Commercial & Industrial	1,237				240					0				1,477					456,231					457,708					1,474			459,182
Consumer	Consumer	9			76			—			85				43,551			43,636					36			43,672		Consumer	15				12					0				27					46,898					46,925					31			46,956
Leases	Leases	1,256			147			—			1,403				160,026			161,429					190			161,619		Leases	1,044				377					0				1,421					155,376					156,797					512			157,309
Total portfolio loans and leases	Total portfolio loans and leases	$	3,786		$	1,020		$	—		$	4,806			$	3,411,322		$	3,416,128				$	6,762		$	3,422,890	Total portfolio loans and leases	$	3,937			$	1,372				$	0			$	5,309				$	3,384,467				$	3,389,776				$	6,292		$	3,396,068


Payment Status of Originated Portfolio Loans and Leases	Payment Status of Originated Portfolio Loans and Leases																																					Payment Status of Originated Portfolio Loans and Leases
		Accruing Loans and Leases																												Accruing Loans and Leases
As of December 31, 2019	As of December 31, 2019	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases		As of December 31, 2019	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due			Current		Total Accruing Loans and Leases				Nonaccrual Loans and Leases			Total Loans and Leases
(dollars in thousands)	(dollars in thousands)																										(dollars in thousands)									Current					Total Accruing Loans and Leases	Nonaccrual Loans and Leases			Total Loans and Leases
CRE - nonowner-occupied	CRE - nonowner-occupied	$	184	$	—	$	—	$	184	$	1,161,432	$	1,161,616	$	199	$	1,161,815	CRE - nonowner-occupied	$	184	$	0	$	0	$	184		$	1,161,432			$	1,161,616						$	199			$	1,161,815
CRE - owner-occupied	CRE - owner-occupied	2,462		—		—		2,462		475,481		477,943		1,523		479,466		CRE - owner-occupied	2,462		0		0		2,462			475,481		477,943				1,523			479,466
Home equity lines of credit	Home equity lines of credit	254		365		—		619		207,984		208,603		636		209,239		Home equity lines of credit	254		365		0		619			207,984		208,603				636			209,239
Residential mortgage - 1st liens	Residential mortgage - 1st liens	890		102		—		992		603,262		604,254		630		604,884		Residential mortgage - 1st liens	890		102		0		992			603,262		604,254				630			604,884
Residential mortgage - junior liens	Residential mortgage - junior liens	116		—		—		116		34,704		34,820		83		34,903		Residential mortgage - junior liens	116		0		0		116			34,704		34,820				83			34,903
Construction	Construction	—		—		—		—		193,307		193,307		—		193,307		Construction	0		0		0		0			193,307		193,307				0			193,307
Commercial & Industrial	Commercial & Industrial	—		—		—		—		423,523		423,523		1,799		425,322		Commercial & Industrial	0		0		0		0			423,523		423,523				1,799			425,322
Consumer	Consumer	18		88		—		106		54,788		54,894		19		54,913		Consumer	18		88		0		106			54,788		54,894				19			54,913
Leases	Leases	781		566		—		1,347		154,873		156,220		747		156,967		Leases	781		566		0		1,347			154,873		156,220				747			156,967
Total portfolio loans and leases	Total portfolio loans and leases	$	4,705	$	1,121	$	—	$	5,826	$	3,309,354	$	3,315,180	$	5,636	$	3,320,816	Total portfolio loans and leases	$	4,705	$	1,121	$	0	$	5,826		$	3,309,354	$	3,315,180			$	5,636		$	3,320,816

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


Payment Status of Acquired Portfolio Loans and Leases	Payment Status of Acquired Portfolio Loans and Leases																																																												Payment Status of Acquired Portfolio Loans and Leases
		Accruing Loans and Leases																																																		Accruing Loans and Leases
As of June 30, 2020		30 – 59 Days Past Due			60 – 89 Days Past Due			Over 89 Days Past Due			Total Past Due				Current			Total Accruing Loans and Leases					Nonaccrual Loans and Leases			Total Loans and Leases
As of September 30, 2020													As of September 30, 2020	30 – 59 Days Past Due							60 – 89 Days Past Due							Over 89 Days Past Due			Total Past Due					Current					Total Accruing Loans and Leases					Nonaccrual Loans and Leases				Total Loans and Leases
(dollars in thousands)	(dollars in thousands)			30 – 59 Days Past Due						60 – 89 Days Past Due							Over 89 Days Past Due			Total Past Due					Current					Total Accruing Loans and Leases									Nonaccrual Loans and Leases									Total Loans and Leases													(dollars in thousands)			Current	Total Accruing Loans and Leases	Nonaccrual Loans and Leases	Total Loans and Leases
CRE - nonowner-occupied	CRE - nonowner-occupied												CRE - nonowner-occupied		$	0						$	230			$	0				$	230				$	117,663						$	117,893						$	607				$	118,500
CRE - owner-occupied	CRE - owner-occupied	—					118				—				118			41,811						41,929				1,109			43,038			CRE - owner-occupied	1,010					0					0				1,010					38,240					39,250			1,060	40,310
Home equity lines of credit	Home equity lines of credit	102			—			—			102				12,456			12,558					174			12,732		Home equity lines of credit	0				0					0				0					12,086					12,086					274			12,360
Residential mortgage - 1st liens	Residential mortgage - 1st liens	3,819			32			—			3,851				94,809			98,660					13			98,673		Residential mortgage - 1st liens	2,700				0					0				2,700					87,285					89,985					32			90,017
Residential mortgage - junior liens	Residential mortgage - junior liens	—			—			—			—				1,561			1,561					—			1,561		Residential mortgage - junior liens	0				0					0				0					1,420					1,420					0			1,420
Construction	Construction	—			—			—			—				8,541			8,541					—			8,541		Construction	0				0					0				0					8,360					8,360					0			8,360
Commercial & Industrial	Commercial & Industrial	—			—			—			—				5,970			5,970					331			6,301		Commercial & Industrial	0				0					0				0					5,824					5,824					310			6,134
Consumer	Consumer	—			—			—			—				90			90					—			90		Consumer	—				0					0				0					87					87					0			87
Leases	Leases	81			1			—			82				4,497			4,579					29			4,608		Leases	64				38					0				102					3,304					3,406					22			3,428
Total portfolio loans and leases	Total portfolio loans and leases	$	4,145		$	1,071		$	—		$	5,216			$	292,403		$	297,619				$	1,656		$	299,275	Total portfolio loans and leases	$	3,774			$	268				$	0			$	4,042				$	274,269				$	278,311				$	2,305		$	280,616


Payment Status of Acquired Portfolio Loans and Leases	Payment Status of Acquired Portfolio Loans and Leases																																					Payment Status of Acquired Portfolio Loans and Leases
		Accruing Loans and Leases																												Accruing Loans and Leases
As of December 31, 2019	As of December 31, 2019	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases		As of December 31, 2019	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due			Current		Total Accruing Loans and Leases				Nonaccrual Loans and Leases			Total Loans and Leases
(dollars in thousands)	(dollars in thousands)																										(dollars in thousands)									Current					Total Accruing Loans and Leases	Nonaccrual Loans and Leases			Total Loans and Leases
CRE - nonowner-occupied	CRE - nonowner-occupied	$	—	$	—	$	—	$	—	$	175,352	$	175,352	$	—	$	175,352	CRE - nonowner-occupied	$	0	$	0	$	0	$	0		$	175,352			$	175,352						$	0			$	175,352
CRE - owner-occupied	CRE - owner-occupied	—		—		—		—		45,505		45,505		2,636		48,141		CRE - owner-occupied	0		0		0		0			45,505		45,505				2,636			48,141
Home equity lines of credit	Home equity lines of credit	100		—		—		100		14,923		15,023		—		15,023		Home equity lines of credit	100		0		0		100			14,923		15,023				0			15,023
Residential mortgage - 1st liens	Residential mortgage - 1st liens	749		286		—		1,035		98,954		99,989		1,817		101,806		Residential mortgage - 1st liens	749		286		0		1,035			98,954		99,989				1,817			101,806
Residential mortgage - junior liens	Residential mortgage - junior liens	—		—		—		—		1,940		1,940		—		1,940		Residential mortgage - junior liens	0		0		0		0			1,940		1,940				0			1,940
Construction	Construction	—		—		—		—		8,891		8,891		—		8,891		Construction	0		0		0		0			8,891		8,891				0			8,891
Commercial & Industrial	Commercial & Industrial	—		—		—		—		6,524		6,524		381		6,905		Commercial & Industrial	0		0		0		0			6,524		6,524				381			6,905
Consumer	Consumer	80		52		—		132		2,154		2,286		42		2,328		Consumer	80		52		0		132			2,154		2,286				42			2,328
Leases	Leases	76		28		—		104		7,871		7,975		136		8,111		Leases	76		28		0		104			7,871		7,975				136			8,111
Total portfolio loans and leases	Total portfolio loans and leases	$	1,005	$	366	$	—	$	1,371	$	362,114	$	363,485	$	5,012	$	368,497	Total portfolio loans and leases	$	1,005	$	366	$	0	$	1,371		$	362,114	$	363,485			$	5,012		$	368,497

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

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and the measurement of expected credit losses for such individual loans; and second, a collective (pooled) component for estimated expected credit losses for pools of loans and leases that share similar risk characteristics.

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

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

For the three months ended ~~June~~September 30, 2020, there was a ~~significant~~slight, favorable change in the economic outlook impacting the ACL on loans and leases. Our CECL model, which had included a sharp deterioration in the Pennsylvania unemployment rate ~~to levels observed~~ during the ~~last recessionary period, projected to be sustained in the third~~first and ~~fourth~~second quarters of 2020, ~~with~~is forecasting a declining rate of Pennsylvania unemployment for the fourth quarter of 2020 and the first quarter of 2021, followed by a reversion to athe long-term 15-year average.

In addition to these assumptions, management applied additional qualitative factors related to the loss mitigation expected to be provided by the various governmental aid programs, such as increased unemployment benefits, stimulus payments, and the SBA's Paycheck Protection Program, as well as the Bank's loan payment deferral programs being offered to borrowers which provide a three- or ~~six-month~~six-month payment deferral to borrowers affected by the COVID-19 pandemic. These qualitative factors were applied to all segments of the portfolio except the construction segment and the retail and hospitality sectors of the nonowner-occupied CRE segment, due to the significant expected impact on these specific segments and sectors from the economic shutdown, such as government mandated ~~stay at home~~stay-at-home orders and the closure or partial closure of non-essential businesses.

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

Roll-Forward of ACL on Loans and Leases


(dollars in thousands)	(dollars in thousands)	CRE - nonowner-occupied		CRE - owner-occupied		Home equity lines of credit		Residential mortgage - 1st liens		Residential mortgage - junior liens		Construction		Commercial & Industrial		Consumer		Leases		Total		(dollars in thousands)	CRE - nonowner-occupied		CRE - owner-occupied		Home equity lines of credit		Residential mortgage - 1st liens		Residential mortgage - junior liens		Construction		Commercial & Industrial		Consumer		Leases		Total
Balance, March 31, 2020		$	13,329	$	4,192	$	2,748	$	8,316	$	517	$	6,984	$	8,734	$	341	$	8,909	$	54,070
Balance, June 30, 2020																						Balance, June 30, 2020	$	15,331	$	5,083	$	1,627	$	8,198	$	521	$	6,061	$	7,988	$	440	$	9,725	$	54,974
Loans and leases charged-off	Loans and leases charged-off	—		(1,234)		—		(556)		—		—		(522)		(296)		(1,443)		(4,051)		Loans and leases charged-off	0		(508)		0		(15)		0		0		(1,630)		(152)		(588)		(2,893)
Recoveries collected	Recoveries collected	4		—		4		136		—		1		22		57		428		652		Recoveries collected	2		14		0		27		0		1		109		19		534		706
PCL on loans and leases	PCL on loans and leases	1,998		2,125		(1,125)		302		4		(924)		(246)		338		1,831		4,303		PCL on loans and leases	1,209		1,419		180		192		(70)		(1,090)		1,906		232		(337)		3,641
Balance, June 30, 2020		$	15,331	$	5,083	$	1,627	$	8,198	$	521	$	6,061	$	7,988	$	440	$	9,725	$	54,974
Balance, September 30, 2020																						Balance, September 30, 2020	$	16,542	$	6,008	$	1,807	$	8,402	$	451	$	4,972	$	8,373	$	539	$	9,334	$	56,428

Roll-Forward of ACL on Loans and Leases


(dollars in thousands)	(dollars in thousands)	CRE - nonowner-occupied		CRE - owner-occupied		Home equity lines of credit		Residential mortgage - 1st liens		Residential mortgage - junior liens		Construction		Commercial & Industrial		Consumer		Leases		Total		(dollars in thousands)	CRE - nonowner-occupied		CRE - owner-occupied		Home equity lines of credit		Residential mortgage - 1st liens		Residential mortgage - junior liens		Construction		Commercial & Industrial		Consumer		Leases		Total
Balance, December 31, 2019 Prior to Adoption of ASC 326	Balance, December 31, 2019 Prior to Adoption of ASC 326	$	7,960	$	2,825	$	1,114	$	2,501	$	338	$	1,230	$	3,835	$	438	$	2,361	$	22,602	Balance, December 31, 2019 Prior to Adoption of ASC 326	$	7,960	$	2,825	$	1,114	$	2,501	$	338	$	1,230	$	3,835	$	438	$	2,361	$	22,602
Impact of Adopting ASC 326	Impact of Adopting ASC 326	(467)		16		(46)		2,408		79		(359)		(159)		140		1,594		3,206		Impact of Adopting ASC 326	(467)		16		(46)		2,408		79		(359)		(159)		140		1,594		3,206
Loans and leases charged-off	Loans and leases charged-off	—		(1,233)		(114)		(1,284)		—		—		(1,149)		(590)		(4,069)		(8,439)		Loans and leases charged-off	0		(1,742)		(114)		(1,298)		0		0		(2,779)		(741)		(4,658)		(11,332)
Recoveries collected	Recoveries collected	6		—		4		137		—		2		37		90		692		968		Recoveries collected	8		14		4		164		0		3		146		109		1,226		1,674
PCL on loans and leases	PCL on loans and leases	7,832		3,475		669		4,436		104		5,188		5,424		362		9,147		36,637		PCL on loans and leases	9,041		4,895		849		4,627		34		4,098		7,330		593		8,811		40,278
Balance, June 30, 2020		$	15,331	$	5,083	$	1,627	$	8,198	$	521	$	6,061	$	7,988	$	440	$	9,725	$	54,974
Balance, September 30, 2020																						Balance, September 30, 2020	$	16,542	$	6,008	$	1,807	$	8,402	$	451	$	4,972	$	8,373	$	539	$	9,334	$	56,428

Roll-Forward of ACL on Loans and Leases


(dollars in thousands)	(dollars in thousands)	CRE - nonowner-occupied		CRE - owner-occupied		Home equity lines of credit		Residential mortgage - 1st liens		Residential mortgage - junior liens		Construction		Commercial & Industrial		Consumer		Leases		Total		(dollars in thousands)	CRE - nonowner-occupied		CRE - owner-occupied		Home equity lines of credit		Residential mortgage - 1st liens		Residential mortgage - junior liens		Construction		Commercial & Industrial		Consumer		Leases		Total
Balance, March 31, 2019		$	6,308	$	2,740	$	1,222	$	2,634	$	350	$	1,372	$	3,507	$	439	$	2,044	$	20,616
Balance, June 30, 2019																						Balance, June 30, 2019	$	6,833	$	2,660	$	1,252	$	2,644	$	343	$	1,280	$	3,582	$	339	$	2,249	$	21,182
Loans and leases charged-off	Loans and leases charged-off	—		—		(211)		(341)		(56)		—		(20)		(127)		(624)		(1,379)		Loans and leases charged-off	0		(681)		0		(4)		0		0		(4)		(202)		(657)		(1,548)
Recoveries collected	Recoveries collected	5		—		83		2		4		1		37		7		179		318		Recoveries collected	7		1		22		11		0		1		20		15		147		224
PCL on loans and leases	PCL on loans and leases	520		(80)		158		349		45		(93)		58		20		650		1,627		PCL on loans and leases	160		244		(92)		(139)		(9)		(49)		16		231		557		919
Balance, June 30, 2019		$	6,833	$	2,660	$	1,252	$	2,644	$	343	$	1,280	$	3,582	$	339	$	2,249	$	21,182
Balance, September 30, 2019																						Balance, September 30, 2019	$	7,000	$	2,224	$	1,182	$	2,512	$	334	$	1,232	$	3,614	$	383	$	2,296	$	20,777

Roll-Forward of ACL on Loans and Leases
(dollars in thousands) CRE - nonowner-occupied CRE -
owner-occupied Home equity lines of credit Residential mortgage - 1st liens Residential mortgage - junior liens Construction Commercial & Industrial Consumer Leases Total
Balance, December 31, 2018 $ 5,856 $ 2,454 $ 1,140 $ 2,561 $ 364 $ 1,715 $ 3,166 $ 303 $ 1,867 $ 19,426
Loans and leases charged-off (1,515) — (313) (682) (56) — (217) (247) (1,192) (4,222)
Recoveries collected 7 — 84 15 4 2 45 25 433 615
PCL on loans and leases 2,485 206 341 750 31 (437) 588 258 1,141 5,363
Balance, June 30, 2019 $ 6,833 $ 2,660 $ 1,252 $ 2,644 $ 343 $ 1,280 $ 3,582 $ 339 $ 2,249 $ 21,182


Roll-Forward of ACL on Loans and Leases
(dollars in thousands)	CRE - nonowner-occupied		CRE - owner-occupied		Home equity lines of credit		Residential mortgage - 1st liens		Residential mortgage - junior liens		Construction		Commercial & Industrial		Consumer		Leases		Total
Balance, December 31, 2018	$	5,856	$	2,454	$	1,140	$	2,561	$	364	$	1,715	$	3,166	$	303	$	1,867	$	19,426
Loans and leases charged-off	(1,515)		(681)		(314)		(685)		(56)		0		(221)		(448)		(1,849)		(5,769)
Recoveries collected	14		1		106		25		4		3		65		40		580		838
PCL on loans and leases	2,645		450		250		611		22		(486)		604		488		1,698		6,282
Balance, September 30, 2019	$	7,000	$	2,224	$	1,182	$	2,512	$	334	$	1,232	$	3,614	$	383	$	2,296	$	20,777

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As part of the process of determining the ACL for the different segments of the loan and lease portfolio, management considers certain credit quality indicators. Periodic reviews of loans are conducted by both in-house staff as well as external loan reviewers. The result of these reviews is reflected in the risk grade assigned to each loan. These internally assigned grades are as follows:

•Pass – Loans considered satisfactory with no indications of deterioration.

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

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

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

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

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


				Term Loans																																												Revolving Loans																			Term Loans												Revolving Loans
				Amortized Cost Basis by Origination Year⁽¹⁾																																												Amortized Cost Basis																			Amortized Cost Basis by Origination Year(1)												Amortized Cost Basis
(dollars in thousands)	(dollars in thousands)	Risk Rating		2020				2019				2018				2017				2016				2015 and Prior				Revolving Lines of Credit				Revolving Lines of Credit Converted to Term Loans				Total		(dollars in thousands)		Risk Rating			2020				2019				2018				2017				2016				2015 and Prior				Revolving Lines of Credit				Revolving Lines of Credit Converted to Term Loans				Total
CRE - nonowner-occupied	CRE - nonowner-occupied	Pass		$	171,485			$	454,690			$	192,252			$	124,010			$	120,715			$	140,138			$	32,668			$	—			$	1,235,958	CRE - nonowner-occupied		Pass			$	207,004			$	414,730			$	149,261			$	118,961			$	112,469			$	98,340			$	40,131			$	0			$	1,140,896
			Pass-Watch			332				676				2,963				—				1,686				2,455				—				—							CRE - nonowner-occupied	Pass-Watch			1,849				31,579				38,925				3,840				3,100				17,504				0				0				96,797
			Special Mention			17,817				—				10,931				—				—				—				—				—								Special Mention			14,123				0				9,907				387				4,600				0				0				0				29,017
			Substandard			2,443				33,386				11,868				4,780				43,235				7,374				—				—								Substandard			13,060				33,778				12,817				5,599				43,031				7,762				0				0				116,047
			Total			$	192,077			$	488,752			$	218,014			$	128,790			$	165,636			$	149,967			$	32,668			$	—							Total			$	236,036			$	480,087			$	210,910			$	128,787			$	163,200			$	123,606			$	40,131			$	0			$	1,382,757
CRE - owner-occupied	CRE - owner-occupied	Pass		$	73,670			$	111,679			$	109,629			$	87,028			$	51,683			$	50,568			$	13,430			$	—			$	497,687	CRE - owner-occupied		Pass			$	114,385			$	105,663			$	120,453			$	68,781			$	46,220			$	43,428			$	12,854			$	0			$	511,784
			Pass-Watch			4,914				1,786				—				—				2,401				1,747				441				—							CRE - owner-occupied	Pass-Watch			3,018				2,407				2,411				7,180				3,478				1,899				0				0				20,393
			Special Mention			3,367				434				3,698				—				—				879				50				—								Special Mention			3,723				1,909				3,691				0				0				864				50				0				10,237
			Substandard			3,153				6,746				7,597				860				5,907				858				163				—								Substandard			3,695				6,532				6,988				680				5,819				1,927				163				0				25,804
			Total			$	85,104			$	120,645			$	120,924			$	87,888			$	59,991			$	54,052			$	14,084			$	—							Total			$	124,821			$	116,511			$	133,543			$	76,641			$	55,517			$	48,118			$	13,067			$	0			$	568,218
Home equity lines of credit	Home equity lines of credit	Pass		$	98			$	887			$	332			$	123			$	276			$	2,777			$	184,201			$	4,327			$	193,021	Home equity lines of credit		Pass			$	2,936			$	208			$	0			$	71			$	276			$	2,259			$	168,211			$	4,190			$	178,151
			Special Mention			—				—				—				—				—				—				—				—							Home equity lines of credit	Special Mention			0				0				0				0				0				0				39				0				39
			Substandard			831				251				195				58				—				352				59				—								Substandard			0				309				0				58				—				306				262				0				935
			Total			$	929			$	1,138			$	527			$	181			$	276			$	3,129			$	184,260			$	4,327							Total			$	2,936			$	517			$	0			$	129			$	276			$	2,565			$	168,512			$	4,190			$	179,125
Residential mortgage - 1st liens	Residential mortgage - 1st liens	Pass		$	62,318			$	135,324			$	91,917			$	87,672			$	77,890			$	228,862			$	1,135			$	—			$	685,118	Residential mortgage - 1st liens		Pass			$	77,374			$	131,083			$	81,884			$	83,352			$	74,824			$	199,430			$	988			$	0			$	648,935
			Pass-Watch			505				—				—				—				—				265				—				—							Residential mortgage - 1st liens	Pass-Watch			1,488				0				0				0				0				262				0				0				1,750
			Special Mention			—				—				—				—				—				7,505				—				—								Special Mention			0				0				0				0				0				7,480				0				0				7,480
			Substandard			—				86				689				26				977				99				—				—								Substandard			881				81				805				26				933				32				0				0				2,758
			Total			$	62,823			$	135,410			$	92,606			$	87,698			$	78,867			$	236,731			$	1,135			$	—							Total			$	79,743			$	131,164			$	82,689			$	83,378			$	75,757			$	207,204			$	988			$	0			$	660,923
Residential mortgage - junior liens	Residential mortgage - junior liens	Pass		$	1,825			$	5,056			$	9,251			$	4,371			$	3,412			$	9,425			$	177			$	—			$	33,517	Residential mortgage - junior liens		Pass			$	2,181			$	4,753			$	3,994			$	3,481			$	3,055			$	8,448			$	188			$	0			$	26,100
			Substandard			55				—				—				—				36				36				—				—							Residential mortgage - junior liens	Substandard			0				0				0				0				35				15				0				0				50
			Total			$	1,880			$	5,056			$	9,251			$	4,371			$	3,448			$	9,461			$	177			$	—							Total			$	2,181			$	4,753			$	3,994			$	3,481			$	3,090			$	8,463			$	188			$	0			$	26,150
Construction	Construction	Pass		$	85,546			$	66,421			$	25,739			$	10,134			$	—			$	5,079			$	13,033			$	—			$	205,952	Construction		Pass			$	70,638			$	73,261			$	9,271			$	1,607			$	0			$	4,963			$	9,945			$	0			$	169,685
			Pass-Watch			—				—				—				—				—				—				—				—							Construction	Pass-Watch			10,275				0				1,012				0				0				0				0				0				11,287
			Substandard			6,422				—				—				—				—				—				—				—								Substandard			5,443				0				0				0				0				0				0				0				5,443
			Total			$	91,968			$	66,421			$	25,739			$	10,134			$	—			$	5,079			$	13,033			$	—							Total			$	86,356			$	73,261			$	10,283			$	1,607			$	0			$	4,963			$	9,945			$	0			$	186,415
Commercial & Industrial	Commercial & Industrial	Pass		$	87,861			$	70,042			$	70,867			$	15,637			$	30,559			$	23,068			$	104,645			$	—			$	402,679	Commercial & Industrial		Pass			$	108,017			$	72,526			$	66,745			$	14,777			$	29,331			$	20,327			$	97,839			$	0			$	409,562
			Pass-Watch			10,564				7,656				205				3,492				305				916				6,486				—							Commercial & Industrial	Pass-Watch			5,375				9,036				62				8,779				305				79				8,162				0				31,798
			Special Mention			532				—				4,685				212				—				1,127				3,934				—								Special Mention			523				0				0				210				0				0				802				0				1,535
			Substandard			1,774				1,962				3,298				1,531				1,307				3,119				1,745				—								Substandard			1,694				2,815				9,627				1,484				1,265				1,489				4,047				0				22,421
			Total			$	100,731			$	79,660			$	79,055			$	20,872			$	32,171			$	28,230			$	116,810			$	—							Total			$	115,609			$	84,377			$	76,434			$	25,250			$	30,901			$	21,895			$	110,850			$	0			$	465,316
Consumer	Consumer	Pass		$	1,154			$	4,817			$	2,554			$	379			$	32			$	235			$	33,401			$	—			$	42,572	Consumer		Pass			$	1,276			$	4,210			$	2,123			$	282			$	23			$	214			$	37,408			$	0			$	45,536
			Substandard			1,154				18				6				12				—				—				—				—							Consumer	Substandard			1,489				5				13				0				0				0				0				0				1,507
			Total			$	2,308			$	4,835			$	2,560			$	391			$	32			$	235			$	33,401			$	—							Total			$	2,765			$	4,215			$	2,136			$	282			$	23			$	214			$	37,408			$	0			$	47,043
Leases	Leases	Pass		$	34,974			$	69,578			$	45,476			$	12,391			$	3,163			$	426			$	—			$	—			$	166,008	Leases		Pass			$	45,011			$	62,933			$	40,025			$	9,988			$	2,153			$	94			$	0			$	0			$	160,204
			Substandard			—				69				66				68				16				—				—				—							Leases	Substandard			85				174				205				56				13				0				0				0				533
			Total			$	34,974			$	69,647			$	45,542			$	12,459			$	3,179			$	426			$	—			$	—							Total			$	45,096			$	63,107			$	40,230			$	10,044			$	2,166			$	94			$	0			$	0			$	160,737
Total portfolio loans and leases	Total portfolio loans and leases					$	572,794			$	971,564			$	594,218			$	352,784			$	343,600			$	487,310			$	395,568			$	4,327			$	3,722,165			Total portfolio loans and leases			$	695,543			$	957,992			$	560,219			$	329,599			$	330,930			$	417,122			$	381,089			$	4,190			$	3,676,684

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

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


As of June 30, 2020
As of September 30, 2020								As of September 30, 2020
(dollars in thousands)	(dollars in thousands)	Nonaccrual with No ACL		Nonaccrual with ACL		Loans Past Due Over 89 Days Still Accruing		(dollars in thousands)	Nonaccrual with No ACL		Nonaccrual with ACL		Loans Past Due Over 89 Days Still Accruing
CRE - nonowner-occupied	CRE - nonowner-occupied	$	245	$	—	$	—	CRE - nonowner-occupied	$	849	$	0	$	0
CRE - owner-occupied	CRE - owner-occupied	4,046		—		—		CRE - owner-occupied	3,597		0		0
Home equity lines of credit	Home equity lines of credit	915		—		—		Home equity lines of credit	890		0		0
Residential mortgage - 1st liens	Residential mortgage - 1st liens	912		—		—		Residential mortgage - 1st liens	862		0		0
Residential mortgage - junior liens	Residential mortgage - junior liens	72		—		—		Residential mortgage - junior liens	50		0		0
Construction	Construction	—		—		—		Construction	0		0		0
Commercial & Industrial	Commercial & Industrial	1,973		—		—		Commercial & Industrial	1,784		0		0
Consumer	Consumer	—		36		—		Consumer	0		31		0
Leases	Leases	—		219		—		Leases	0		534		0
Total non-performing loans and leases	Total non-performing loans and leases	$	8,163	$	255	$	—	Total non-performing loans and leases	$	8,032	$	565	$	0


As of December 31, 2019	As of December 31, 2019													As of December 31, 2019
(dollars in thousands)	(dollars in thousands)	Nonaccrual with No ACL		Nonaccrual with ACL		Loans Past Due Over 89 Days Still Accruing		(dollars in thousands)	Nonaccrual with No ACL		Nonaccrual with ACL		Loans Past Due Over 89 Days Still Accruing
CRE - nonowner-occupied	CRE - nonowner-occupied	$	199	$	—	$	—	CRE - nonowner-occupied	$	199	$	0	$	0
CRE - owner-occupied	CRE - owner-occupied	4,159		—		—		CRE - owner-occupied	4,159		0		0
Home equity lines of credit	Home equity lines of credit	636		—		—		Home equity lines of credit	636		0		0
Residential mortgage - 1st liens	Residential mortgage - 1st liens	2,447		—		—		Residential mortgage - 1st liens	2,447		0		0
Residential mortgage - junior liens	Residential mortgage - junior liens	83		—		—		Residential mortgage - junior liens	83		0		0
Construction	Construction	—		—		—		Construction	0		0		0
Commercial & Industrial	Commercial & Industrial	2,180		—		—		Commercial & Industrial	2,180		0		0
Consumer	Consumer	42		19		—		Consumer	42		19		0
Leases	Leases	—		883		—		Leases	0		883		0
Total non-performing loans and leases	Total non-performing loans and leases	$	9,746	$	902	$	—	Total non-performing loans and leases	$	9,746	$	902	$	0

For the three and nine months ended ~~June~~September 30, 2020, ~~$78~~$4 thousand and $133 thousand, respectively, of interest income was recognized on nonaccrual loans and leases.

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

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


As of June 30, 2020
As of September 30, 2020								As of September 30, 2020
(dollars in thousands)	(dollars in thousands)	Real Estate Collateral		Non-Real Estate Collateral		Individually Evaluated ACL		(dollars in thousands)	Real Estate Collateral		Non-Real Estate Collateral		Individually Evaluated ACL
CRE - nonowner-occupied	CRE - nonowner-occupied	$	245	$	—	$	—	CRE - nonowner-occupied	$	849	$	0	$	0
CRE - owner-occupied	CRE - owner-occupied	4,046		—		—		CRE - owner-occupied	3,597		0		0
Home equity lines of credit	Home equity lines of credit	915		—		—		Home equity lines of credit	890		0		0
Residential mortgage - 1st liens	Residential mortgage - 1st liens	912		—		—		Residential mortgage - 1st liens	862		0		0
Residential mortgage - junior liens	Residential mortgage - junior liens	72		—		—		Residential mortgage - junior liens	50		0		0
Construction	Construction	—		—		—		Construction	0		0		0
Commercial & Industrial	Commercial & Industrial	—		1,973		—		Commercial & Industrial	0		1,784		0
Consumer	Consumer	—		36		36		Consumer	0		31		31
Leases	Leases	—		219		165		Leases	0		534		269
Total collateral-dependent loans and leases	Total collateral-dependent loans and leases	$	6,190	$	2,228	$	201	Total collateral-dependent loans and leases	$	6,248	$	2,349	$	300


As of December 31, 2019	As of December 31, 2019											As of December 31, 2019
(dollars in thousands)	(dollars in thousands)	Real Estate Collateral		Non-Real Estate Collateral		Individually Evaluated ACL		(dollars in thousands)	Real Estate Collateral		Non-Real Estate Collateral		Individually Evaluated ACL
CRE - nonowner-occupied	CRE - nonowner-occupied	$	199	$	—	$	—	CRE - nonowner-occupied	$	199	$	0	$	0
CRE - owner-occupied	CRE - owner-occupied	4,159		—		—		CRE - owner-occupied	4,159		0		0
Home equity lines of credit	Home equity lines of credit	636		—		—		Home equity lines of credit	636		0		0
Residential mortgage - 1st liens	Residential mortgage - 1st liens	2,447		—		—		Residential mortgage - 1st liens	2,447		0		0
Residential mortgage - junior liens	Residential mortgage - junior liens	83		—		—		Residential mortgage - junior liens	83		0		0
Construction	Construction	—		—		—		Construction	0		0		0
Commercial & Industrial	Commercial & Industrial	—		2,180		—		Commercial & Industrial	0		2,180		0
Consumer	Consumer	—		61		19		Consumer	0		61		19
Leases	Leases	—		883		60		Leases	0		883		60
Total collateral-dependent loans and leases	Total collateral-dependent loans and leases	$	7,524	$	3,124	$	79	Total collateral-dependent loans and leases	$	7,524	$	3,124	$	79

F. Troubled Debt Restructurings (“TDRs”)

The restructuring of a loan is considered a “troubled debt restructuring” if both of the following conditions are met: (i) the borrower is experiencing financial difficulties, and (ii) the creditor has granted a concession. The most common concessions granted include one or more modifications to the terms of the debt, such as (a) a reduction in the interest rate for the remaining life of the debt, (b) an extension of the maturity date at an interest rate lower than the current market rate for new debt with similar risk, (c) a temporary period of interest-only payments, (d) a reduction in the contractual payment amount for either a short period or remaining term of the loan, and (e) for leases, a reduced lease payment. A less common concession granted is the forgiveness of a portion of the principal.

The determination of whether a borrower is experiencing financial difficulties takes into account not only the current financial condition of the borrower, but also the potential financial condition of the borrower, were a concession not granted. Similarly, the determination of whether a concession has been granted is very subjective in nature. For example, simply extending the term of a loan at its original interest rate or even at a higher interest rate could be interpreted as a concession unless the borrower could readily obtain similar credit terms from a different lender.

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


Troubled Debt Restructurings⁽¹⁾	Troubled Debt Restructurings⁽¹⁾									Troubled Debt Restructurings(1)
(dollars in thousands)	(dollars in thousands)	June 30, 2020		December 31, 2019		(dollars in thousands)	September 30, 2020		December 31, 2019
TDRs included in nonperforming loans and leases	TDRs included in nonperforming loans and leases	$	1,792	$	3,018	TDRs included in nonperforming loans and leases	$	1,393	$	3,018
TDRs in compliance with modified terms	TDRs in compliance with modified terms	10,013		5,071		TDRs in compliance with modified terms	8,590		5,071
Total TDRs	Total TDRs	$	11,805	$	8,089	Total TDRs	$	9,983	$	8,089

(1) The Corporation ~~began entering~~has entered into loan modifications with borrowers in response to the COVID-19 pandemic, which have not been classified as TDRs, and therefore are not included in the above table. For more information on the criteria for classifying loans as TDRs, see Note 1 – Basis of Presentation, Principles of Consolidation, and Significant Accounting Policies to the Unaudited Consolidated Financial Statements.

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


Troubled Debt Restructurings⁽¹⁾	Troubled Debt Restructurings⁽¹⁾											Troubled Debt Restructurings(1)
		For the Three Months Ended June 30, 2020									For the Three Months Ended September 30, 2020
(dollars in thousands)	(dollars in thousands)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		(dollars in thousands)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
CRE - nonowner-occupied		2	$	1,818	$	1,818
Residential mortgage - 1st liens		1	200		200
Construction		4	3,419		3,419
CRE - owner-occupied							CRE - owner-occupied	1	337		337
Leases	Leases	6	141		141		Leases	7	375		375
Total	Total	13	$	5,578	$	5,578	Total	8	$	712	$	712


Troubled Debt Restructurings⁽¹⁾	Troubled Debt Restructurings⁽¹⁾											Troubled Debt Restructurings(1)
		For the Six Months Ended June 30, 2020									For the Nine Months Ended September 30, 2020
(dollars in thousands)	(dollars in thousands)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		(dollars in thousands)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
CRE - nonowner-occupied	CRE - nonowner-occupied	2	$	1,818	$	1,818	CRE - nonowner-occupied	2	$	1,818	$	1,818
Residential mortgage - 1st liens		1	200		200
CRE - owner-occupied							CRE - owner-occupied	1	337		337
Construction	Construction	4	3,419		3,419		Construction	2	2,379		2,379
Leases	Leases	6	141		141		Leases	7	375		375
Total	Total	13	$	5,578	$	5,578	Total	12	$	4,909	$	4,909

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


Troubled Debt Restructurings⁽¹⁾	Troubled Debt Restructurings⁽¹⁾												Troubled Debt Restructurings(1)
		Number of Contracts for the Three Months Ended June 30, 2020										Number of Contracts for the Three Months Ended September 30, 2020
		Loan Term Extension	Interest Rate Change and Term Extension	Interest Rate Change and/or Interest-Only Period	Contractual Payment Reduction (Leases only)	Temporary Payment Deferral		Loan Term Extension	Interest Rate Change and Term Extension	Interest Rate Change and/or Interest-Only Period	Contractual Payment Reduction (Leases only)	Temporary Payment Deferral
CRE - nonowner-occupied		—	—	—	—	2
Residential mortgage - 1st liens		1	—	—	—	—
Construction		—	—	—	—	4
CRE - owner-occupied							CRE - owner-occupied	0	1	0	0	0
Leases	Leases	—	—	—	6	—	Leases	0	0	0	7	0
Total	Total	1	—	—	6	6	Total	0	1	0	7	0


Troubled Debt Restructurings⁽¹⁾	Troubled Debt Restructurings⁽¹⁾												Troubled Debt Restructurings(1)
		Number of Contracts for the Six Months Ended June 30, 2020										Number of Contracts for the Nine Months Ended September 30, 2020
		Loan Term Extension	Interest Rate Change and Term Extension	Interest Rate Change and/or Interest-Only Period	Contractual Payment Reduction (Leases only)	Temporary Payment Deferral		Loan Term Extension	Interest Rate Change and Term Extension	Interest Rate Change and/or Interest-Only Period	Contractual Payment Reduction (Leases only)	Temporary Payment Deferral
CRE - nonowner-occupied	CRE - nonowner-occupied	—	—	—	—	2	CRE - nonowner-occupied	0	0	0	0	2
Residential mortgage - 1st liens		1	—	—	—	—
CRE - owner-occupied							CRE - owner-occupied	0	1	0	0	0
Construction	Construction	—	—	—	—	4	Construction	0	0	0	0	2
Leases	Leases	—	—	—	6	—	Leases	0	0	0	7	0
Total	Total	1	—	—	6	6	Total	0	1	0	7	4

For the ~~six~~nine months ended ~~June~~September 30, 2020, ~~two~~three residential mortgage loans, in the aggregate amount of ~~$228~~$192 thousand, one owner-occupied commercial real estate loan in the amount of $992 thousand, one lease in the amount of $94 thousand and one commercial and industrial loan in the amount of ~~$477~~$472 thousand that were modified as a TDR during the past 12 months defaulted and were charged off.

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Note 5 – Mortgage Servicing Rights

The following table summarizes the Corporation’s activity related to mortgage servicing rights (“MSRs”) for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019:


		Three Months Ended June 30,							Three Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2020		2019		(dollars in thousands)	2020		2019
Balance, beginning of period	Balance, beginning of period	$	4,115	$	4,910	Balance, beginning of period	$	3,440	$	4,744
Additions	Additions	—		—		Additions	0		0
Amortization	Amortization	(453)		(156)		Amortization	(413)		(183)
Impairment		(222)		(10)
(Impairment) / Recovery						(Impairment) / Recovery	(146)		19
Balance, end of period	Balance, end of period	$	3,440	$	4,744	Balance, end of period	$	2,881	$	4,580

Fair value	Fair value	$	3,440	$	5,175	Fair value	$	2,881	$	4,925
Residential mortgage loans serviced for others	Residential mortgage loans serviced for others	$	445,233	$	545,743	Residential mortgage loans serviced for others	$	407,781	$	527,869


		Six Months Ended June 30,							Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2020		2019		(dollars in thousands)	2020		2019
Balance, beginning of period	Balance, beginning of period	$	4,450	$	5,047	Balance, beginning of period	$	4,450	$	5,047
Additions	Additions	—		—		Additions	0		0
Amortization	Amortization	(557)		(276)		Amortization	(970)		(459)
Impairment	Impairment	(453)		(27)		Impairment	(599)		(8)
Balance, end of period	Balance, end of period	$	3,440	$	4,744	Balance, end of period	$	2,881	$	4,580

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


(dollars in thousands)	(dollars in thousands)	June 30, 2020			December 31, 2019			(dollars in thousands)	September 30, 2020			December 31, 2019
Fair value amount of MSRs	Fair value amount of MSRs	$	3,440		$	4,838		Fair value amount of MSRs	$	2,881		$	4,838
Weighted average life (in years)	Weighted average life (in years)	4.7			6.0			Weighted average life (in years)	4.8			6.0
Prepayment speeds (constant prepayment rate)⁽¹⁾	Prepayment speeds (constant prepayment rate)⁽¹⁾	14.4		%	10.5		%	Prepayment speeds (constant prepayment rate)(1)	13.6		%	10.5		%
Impact on fair value:	Impact on fair value:							Impact on fair value:
10% adverse change	10% adverse change	$	(151)		$	(149)		10% adverse change	$	(154)		$	(149)
20% adverse change	20% adverse change	(292)			(297)			20% adverse change	(297)			(297)
Discount rate	Discount rate	9.56		%	9.55		%	Discount rate	9.56		%	9.55		%
Impact on fair value:	Impact on fair value:							Impact on fair value:
10% adverse change	10% adverse change	$	(88)		$	(166)		10% adverse change	$	(85)		$	(166)
20% adverse change	20% adverse change	(172)			(321)			20% adverse change	(165)			(321)

(1) Represents the weighted average prepayment rate for the life of the MSR asset.

At ~~June~~September 30, 2020 and December 31, 2019, the fair value of the MSRs was ~~$3.4~~$2.9 million and $4.8 million, respectively. The fair value of the MSRs for these dates was determined using values obtained from a third party which utilizes a valuation model which calculates the present value of estimated future servicing income. The model incorporates assumptions that market participants use in estimating future net servicing income, including estimates of prepayment speeds and discount rates. Mortgage loan prepayment speed is the annual rate at which borrowers are forecasted to repay their mortgage loan principal and is based on historical experience. The discount rate is used to determine the present value of future net servicing income. Another key assumption in the model is the required rate of return the market would expect for an asset with similar risk. These assumptions can, and generally will, change quarterly valuations as market conditions and interest rates change. Management reviews, annually, the process utilized by its independent third-party valuation experts.

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These assumptions and sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on a 10% variation in assumptions generally cannot be extrapolated because the relationship of the change in assumptions to the change in fair value may not be linear. Also, the effect of a variation in a particular assumption on the fair value of the MSRs is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another, which could magnify or counteract the sensitivities.

Note 6 – Goodwill and Intangible Assets

The following table presents activity in the Corporation's goodwill by its reporting units and finite-lived and indefinite-lived intangible assets, other than MSRs, for the ~~six~~nine months ended ~~June~~September 30, 2020:


(dollars in thousands)	(dollars in thousands)	Balance December 31, 2019		Additions		Amortization		Balance June 30, 2020		Amortization Period	(dollars in thousands)	Balance December 31, 2019		Additions		Amortization		Balance September 30, 2020		Amortization Period
Goodwill – Wealth	Goodwill – Wealth	$	20,412	$	—	$	—	$	20,412	Indefinite	Goodwill – Wealth	$	20,412	$	0	$	—	$	20,412	Indefinite
Goodwill – Banking	Goodwill – Banking	156,991		—		—		156,991		Indefinite	Goodwill – Banking	156,991		0		—		156,991		Indefinite
Goodwill – Insurance	Goodwill – Insurance	6,609		—		—		6,609		Indefinite	Goodwill – Insurance	6,609		0		—		6,609		Indefinite
Total Goodwill	Total Goodwill	184,012		—		—		184,012			Total Goodwill	184,012		0		—		184,012
Core deposit intangible	Core deposit intangible	4,598		—		(584)		4,014		10 years	Core deposit intangible	4,598		0		(847)		3,751		10 years
Customer relationships	Customer relationships	11,820		—		(906)		10,914		5 to 20 years	Customer relationships	11,820		0		(1,357)		10,463		5 to 20 years
Non-compete agreements	Non-compete agreements	911		—		(94)		817		5 to 10 years	Non-compete agreements	911		0		(142)		769		5 to 10 years
Trade name	Trade name	1,651		—		(244)		1,407		3 to 5 years	Trade name	1,651		0		(352)		1,299		3 to 5 years
Domain name	Domain name	151		—		—		151		Indefinite	Domain name	151		0		—		151		Indefinite
Total Intangible Assets	Total Intangible Assets	19,131		—		(1,828)		17,303			Total Intangible Assets	19,131		0		(2,698)		16,433
Total Goodwill and Intangible Assets	Total Goodwill and Intangible Assets	$	203,143	$	—	$	(1,828)	$	201,315		Total Goodwill and Intangible Assets	$	203,143	$	0	$	(2,698)	$	200,445

Management conducted its annual impairment tests for goodwill and indefinite-lived intangible assets as of October 31, 2019 using generally accepted valuation methods. Management determined that 0 impairment of goodwill or indefinite-lived intangible assets was identified as a result of the annual impairment analyses. Future impairment testing will be conducted each October 31, unless a triggering event occurs in the interim that would suggest possible impairment, in which case it would be tested as of the date of the triggering event. For the ~~five~~eleven months ended ~~June~~September 30, 2020, management determined there were 0 events that would necessitate impairment testing of goodwill or indefinite-lived intangible assets. Management continues to monitor the economic environment as impacted by the COVID-19 pandemic in the markets we serve and resulting effect on the Corporation's long-term forecast.

Note 7 – Deposits

The following table details the components of deposits:


(dollars in thousands)	(dollars in thousands)	June 30, 2020		December 31, 2019		(dollars in thousands)	September 30, 2020		December 31, 2019

Interest-bearing demand	Interest-bearing demand	$	910,441	$	944,915	Interest-bearing demand	$	815,561	$	944,915
Money market	Money market	1,239,523		1,106,478		Money market	1,199,429		1,106,478
Savings	Savings	249,636		220,450		Savings	245,167		220,450
Retail time deposits	Retail time deposits	400,186		405,123		Retail time deposits	366,245		405,123
Wholesale non-maturity deposits	Wholesale non-maturity deposits	146,463		177,865		Wholesale non-maturity deposits	77,356		177,865
Wholesale time deposits	Wholesale time deposits	79,903		89,241		Wholesale time deposits	79,430		89,241
Total interest-bearing deposits	Total interest-bearing deposits	3,026,152		2,944,072		Total interest-bearing deposits	2,783,188		2,944,072
Noninterest-bearing deposits	Noninterest-bearing deposits	1,217,496		898,173		Noninterest-bearing deposits	1,230,391		898,173
Total deposits	Total deposits	$	4,243,648	$	3,842,245	Total deposits	$	4,013,579	$	3,842,245

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Note 8 – Short-Term Borrowings and Long-Term FHLB Advances

A. Short-term borrowings

The Corporation’s short-term borrowings (original maturity of one year or less), which consist of funds obtained from overnight repurchase agreements with commercial customers, FHLB advances with original maturities of one year or less and overnight fed funds, are detailed below.

A summary of short-term borrowings is as follows:


(dollars in thousands)	(dollars in thousands)	June 30, 2020		December 31, 2019		(dollars in thousands)	September 30, 2020		December 31, 2019
Repurchase agreements⁽¹⁾ – commercial customers	Repurchase agreements⁽¹⁾ – commercial customers	$	28,891	$	10,819	Repurchase agreements(1) – commercial customers	$	23,456	$	10,819
Short-term FHLB advances	Short-term FHLB advances	—		482,400		Short-term FHLB advances	0		482,400

Total short-term borrowings	Total short-term borrowings	$	28,891	$	493,219	Total short-term borrowings	$	23,456	$	493,219

(1) Overnight repurchase agreements with no expiration date

The following table sets forth information concerning short-term borrowings:


		Three Months Ended June 30,									Six Months Ended June 30,										Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2020			2019			2020			2019			(dollars in thousands)	2020			2019			2020			2019
Balance at period-end	Balance at period-end	$	28,891		$	207,828		$	28,891		$	207,828		Balance at period-end	$	23,456		$	203,471		$	23,456		$	203,471
Maximum amount outstanding at any month end	Maximum amount outstanding at any month end	174,431			207,828			174,431			207,828			Maximum amount outstanding at any month end	123,629			262,699			174,431			262,699
Average balance outstanding during the period	Average balance outstanding during the period	136,816			68,529			138,700			112,844			Average balance outstanding during the period	29,913			169,985			102,173			132,100

Weighted-average interest rate:	Weighted-average interest rate:													Weighted-average interest rate:
As of the period-end	As of the period-end	0.10		%	2.33		%	0.10		%	2.33		%	As of the period-end	0.10		%	1.98		%	0.10		%	1.98		%
Paid during the period	Paid during the period	0.68		%	2.09		%	0.99		%	2.32		%	Paid during the period	0.11		%	2.19		%	0.91		%	2.26		%

Average balances outstanding during the year represent daily average balances and average interest rates represent interest expense divided by the related average balance.

B. Long-term FHLB Advances

As of ~~June~~September 30, 2020 and December 31, 2019, the Corporation had ~~$44.8~~$44.9 million and $52.3 million, respectively, of long-term FHLB advances (original maturities exceeding one year).

The following table presents the remaining periods until maturity of long-term FHLB advances:


(dollars in thousands)	(dollars in thousands)	June 30, 2020		December 31, 2019		(dollars in thousands)	September 30, 2020		December 31, 2019
Within one year	Within one year	$	4,861	$	12,363	Within one year	$	19,872	$	12,363
Over one year through five years	Over one year through five years	39,976		39,906		Over one year through five years	25,000		39,906
Total	Total	$	44,837	$	52,269	Total	$	44,872	$	52,269

The following table presents rate and maturity information on FHLB advances and other borrowings:

Maturity Range⁽¹⁾

Weighted Average Rate⁽¹⁾

Coupon Rate⁽¹⁾

Balance at

Maturity Range(1)

Weighted Average Rate(1)

Coupon Rate(1)

Balance at

Description

From

June 30,
2020

December 31,
2019

Description

From

Weighted Average Rate(1)

From

September 30,
2020

December 31,
2019

Bullet maturity – fixed rate

12/9/2020

11/12/2021

1.73

1.40

2.13

44,837

52,269

Bullet maturity – fixed rate

12/9/2020

11/12/2021

1.73

1.40

2.13

44,837

52,269

(1) Maturity range, weighted average rate and coupon rate range refers to ~~June~~September 30, 2020 balances.

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C. Other Borrowings Information

In connection with its FHLB borrowings, the Corporation is required to hold the capital stock of the FHLB. The amount of capital stock held was $4.5 million at ~~June~~September 30, 2020, and $23.7 million at December 31, 2019. The carrying amount of the FHLB stock approximates its redemption value.

The level of required investment in FHLB stock is based on the balance of outstanding borrowings the Corporation has from the FHLB. Although FHLB stock is a financial instrument that represents an equity interest in the FHLB, it does not have a readily determinable fair value. FHLB stock is generally viewed as a long-term investment. Accordingly, when evaluating FHLB stock for impairment, its value should be determined based on the ultimate recoverability of the par value rather than by recognizing temporary declines in value.

The Corporation had a maximum borrowing capacity with the FHLB of ~~$1.83~~$1.78 billion as of ~~June~~September 30, 2020 of which the unused capacity was ~~$1.78~~$1.73 billion. In addition, there were $74.0 million in the overnight federal funds line available and ~~$166.8~~$153.0 million of FRB discount window capacity.

Note 9 – Subordinated Notes

On December 13, 2017, BMBC completed the issuance of $70.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes due 2027 (the “2027 Notes”) in an underwritten public offering. On August 6, 2015, BMBC completed the issuance of $30.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes due 2025 (the “2025 Notes”) in a private placement transaction to institutional accredited investors. The net proceeds of both offerings increased Tier II regulatory capital at BMBC.

The following tables detail the subordinated notes, including debt issuance costs, as of ~~June~~September 30, 2020, and December 31, 2019:


		June 30, 2020						December 31, 2019							September 30, 2020				December 31, 2019
(dollars in thousands)	(dollars in thousands)	Balance		Rate⁽¹⁾⁽²⁾		Balance		Rate⁽¹⁾⁽²⁾		(dollars in thousands)	Balance		Rate(1)(2)		Balance		Rate(1)(2)
Subordinated notes – due 2027	Subordinated notes – due 2027	$	69,071	4.25	%	$	69,009	4.25	%	Subordinated notes – due 2027	$	69,103	4.25	%	$	69,009	4.25	%
Subordinated notes – due 2025	Subordinated notes – due 2025	29,723		4.75		29,696		4.75		Subordinated notes – due 2025	29,736		3.35		29,696		4.75
Total subordinated notes	Total subordinated notes	$	98,794			$	98,705			Total subordinated notes	$	98,839			$	98,705

(1) The 2027 Notes bear interest at an annual fixed rate of 4.25% from the date of issuance until and including December 14, 2022, and will thereafter bear interest at a variable rate that will reset quarterly to a level equal to the then-current three-month LIBOR rate plus 2.050% until December 15, 2027, or any early redemption date.

(2) The 2025 Notes ~~bear~~were bearing interest at an annual fixed rate of 4.75% ~~from the date of issuance~~ until and including August 14, 2020, and ~~will~~ thereafter bear interest at a variable rate that will reset quarterly to a level equal to the then-current three-month LIBOR rate plus 3.068% until August 15, 2025, or any early redemption date.

Note 10 – Junior Subordinated Debentures

In connection with the RBPI Merger, BMBC acquired Royal Bancshares Capital Trust I (“Trust I”) and Royal Bancshares Capital Trust II (“Trust II”) (collectively, the “Trusts”), which were utilized for the sole purpose of issuing and selling capital securities representing preferred beneficial interests. Although BMBC owns an aggregate of $774 thousand of the common securities of Trust I and Trust II, the Trusts are not consolidated into the Corporation’s Consolidated Financial Statements as the Corporation is not deemed to be the primary beneficiary of these entities. In connection with the issuance and sale of the capital securities, RBPI issued, and the Corporation assumed as a result of the RBPI Merger, junior subordinated debentures to the Trusts of $10.7 million each, totaling $21.4 ~~million representing the Corporation’s maximum exposure to loss.~~million. The junior subordinated debentures incur interest at a coupon rate of ~~2.46%~~2.40% as of ~~June~~September 30, 2020. The rate resets quarterly based on 3-month LIBOR plus 2.15%.

Each of Trust I and Trust II issued an aggregate principal amount of $12.5 million of capital securities initially bearing fixed and/or fixed/floating interest rates corresponding to the debt securities held by each trust to an unaffiliated investment vehicle and an aggregate principal amount of $387 thousand of common securities bearing fixed and/or fixed/floating interest rates corresponding to the debt securities held by each trust to the Corporation. As a result of the RBPI Merger, the Corporation has

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fully and unconditionally guaranteed all of the obligations of the Trusts, including any distributions and payments on liquidation or redemption of the capital securities.

The rights of holders of common securities of the Trusts are subordinate to the rights of the holders of capital securities only in the event of a default; otherwise, the common securities’ economic and voting rights are pari passu with the capital securities. The capital and common securities of the Trusts are subject to mandatory redemption upon the maturity or call of the junior subordinated debentures held by each. Unless earlier dissolved, the Trusts will dissolve on December 15, 2034. The junior subordinated debentures are the sole assets of Trusts, mature on December 15, 2034, currently and may be called at par by the Corporation. The Corporation records its investments in the Trusts’ common securities of $387 thousand each as investments in unconsolidated entities and records dividend income upon declaration by Trust I and Trust II.

Note 11 – Operating Leases

The Corporation’s operating leases consist of various retail branch locations and corporate offices. As of ~~June~~September 30, 2020, the Corporation’s leases have remaining lease terms ranging from ~~three~~six months to 22 years including extension options that the Corporation is reasonably certain will be exercised.

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

As of ~~June~~September 30, 2020 the Corporation’s ROU assets and related lease liabilities were ~~$39.3~~$38.5 million and ~~$43.7~~$42.9 million, respectively.

The components of lease expense were as follows:


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2020		2019		2020		2019
(dollars in thousands)	(dollars in thousands)									(dollars in thousands)
Operating lease expense	Operating lease expense	$	1,198	$	1,333	$	2,396	$	2,663	Operating lease expense	$	1,199	$	1,331	$	3,595	$	3,994
Short term lease expense	Short term lease expense	14		14		29		29		Short term lease expense	15		15		44		44
Variable lease expense	Variable lease expense	308		392		665		810		Variable lease expense	323		297		988��		1,107
Sublease income	Sublease income	(8)		(7)		(17)		(16)		Sublease income	(11)		(7)		(28)		(23)
Total lease expense	Total lease expense	$	1,512	$	1,732	$	3,073	$	3,486	Total lease expense	$	1,526	$	1,636	$	4,599	$	5,122

Supplemental cash flow information related to leases was as follows:


		Six Months Ended June 30,							Nine Months Ended September 30,
		2020		2019			2020		2019
(dollars in thousands)	(dollars in thousands)					(dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Operating cash flows from operating leases	$	2,348	$	2,561	Operating cash flows from operating leases	$	3,532	$	3,865
ROU assets obtained in exchange for lease liabilities	ROU assets obtained in exchange for lease liabilities	—		44,944		ROU assets obtained in exchange for lease liabilities	0		44,944

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


		June 30, 2020			September 30, 2020
(dollars in thousands)	(dollars in thousands)			(dollars in thousands)
2020	2020	$	2,357	2020	$	1,173
2021	2021	4,479		2021	4,479
2022	2022	4,200		2022	4,200
2023	2023	4,047		2023	4,047
2024	2024	4,076		2024	4,076
2025 and thereafter	2025 and thereafter	37,308		2025 and thereafter	37,308
Total lease payments	Total lease payments	56,467		Total lease payments	55,283
Less: imputed interest	Less: imputed interest	12,774		Less: imputed interest	12,388
Present value of operating lease liabilities	Present value of operating lease liabilities	$	43,693	Present value of operating lease liabilities	$	42,895

As of ~~June~~September 30, 2020, the weighted-average remaining lease term, including extension options that the Corporation is reasonably certain will be exercised, for all operating leases is ~~13.94~~13.79 years.

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

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

Note 12 – Derivative Instruments and Hedging Activities

Derivative financial instruments involve, to varying degrees, interest rate, market and credit risk. Management manages these risks as part of its asset and liability management process and through credit policies and procedures. Management seeks to minimize counterparty credit risk by establishing credit limits and collateral agreements and utilizes certain derivative financial instruments to enhance its ability to manage interest rate risk that exists as part of its ongoing business operations. The derivative transactions entered into by the Corporation are an economic hedge of a derivative offerings to Bank customers. The Corporation does not use derivative financial instruments for trading purposes.

Customer Derivatives – Interest Rate Swaps. The Corporation enters into interest rate swaps with commercial loan customers and correspondent banks wishing to manage interest rate risk. The Corporation then enters into corresponding swap agreements with swap dealer counterparties to economically hedge the exposure arising from these contracts. The interest rate swaps with both the customers and third parties are not designated as hedges under FASB ASC 815 and are marked to market through earnings. As the interest rate swaps are structured to offset each other, changes to the underlying benchmark interest rates considered in the valuation of these instruments do not result in an impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by FASB ASC 820. As of ~~June~~September 30, 2020, there were no fair value adjustments related to credit quality.

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

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

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Corporation has provided a loan structured with a derivative, the Corporation may purchase an RPA from an institution participating in the facility in exchange for a fee commensurate with the risk shared. This type of derivative is referred to as an “RPA purchased.”

The following tables detail the derivative instruments as of ~~June~~September 30, 2020 and December 31, 2019:


		Asset Derivatives						Liability Derivatives							Asset Derivatives				Liability Derivatives
(dollars in thousands)	(dollars in thousands)	Notional Amount		Fair Value		Notional Amount		Fair Value		(dollars in thousands)	Notional Amount		Fair Value		Notional Amount		Fair Value
Derivatives not designated as hedging instruments	Derivatives not designated as hedging instruments									Derivatives not designated as hedging instruments
As of June 30, 2020:
As of September 30, 2020:										As of September 30, 2020:
Customer derivatives – interest rate swaps	Customer derivatives – interest rate swaps	$	970,146	$	143,339	$	970,146	$	143,339	Customer derivatives – interest rate swaps	$	1,076,229	$	135,998	$	1,076,229	$	135,998
FX forwards	FX forwards	3,528		36		4,116		107		FX forwards	0		0		692		24
RPAs sold	RPAs sold	—		—		14,164		39		RPAs sold	0		0		15,009		36
RPAs purchased	RPAs purchased	39,995		358		—		—		RPAs purchased	55,547		490		0		0
Total derivatives	Total derivatives	$	1,013,669	$	143,733	$	988,426	$	143,485	Total derivatives	$	1,131,776	$	136,488	$	1,091,930	$	136,058
As of December 31, 2019:	As of December 31, 2019:									As of December 31, 2019:
Customer derivatives – interest rate swaps	Customer derivatives – interest rate swaps	$	790,209	$	47,627	$	790,209	$	47,627	Customer derivatives – interest rate swaps	$	790,209	$	47,627	$	790,209	$	47,627
RPAs sold	RPAs sold	—		—		4,232		16		RPAs sold	0		0		4,232		16
RPAs purchased	RPAs purchased	20,249		90		—		—		RPAs purchased	20,249		90		0		0
Total derivatives	Total derivatives	$	810,458	$	47,717	$	794,441	$	47,643	Total derivatives	$	810,458	$	47,717	$	794,441	$	47,643

The Corporation has International Swaps and Derivatives Association agreements with third parties that requires a minimum dollar transfer amount upon a margin call. This requirement is dependent on certain specified credit measures. The amount of collateral posted with third parties at ~~June~~September 30, 2020 and December 31, 2019 was ~~$157.5~~$151.0 million and $63.8 million, respectively, and is comprised of a combination of cash and investment securities. The amount of collateral posted with third parties is deemed to be sufficient to collateralize both the fair market value change as well as any additional amounts that may be required as a result of a change in the specified credit measures. The aggregate fair value of all derivative financial instruments in a liability position with credit measure contingencies and entered into with third parties was ~~$143.3~~$136.0 million and $46.7 million as of ~~June~~September 30, 2020 and December 31, 2019, respectively.

Note 13 – Accounting for Uncertainty in Income Taxes

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

The Corporation is subject to income taxes in the United States federal jurisdiction and multiple state jurisdictions. The Corporation is no longer subject to U.S. federal income tax examination by taxing authorities for years before ~~2016.~~2017.

The Corporation’s policy is to record interest and penalties on uncertain tax positions as income tax expense. NaN interest or penalties were accrued for the ~~six~~nine months ended ~~June~~September 30, 2020 or 2019.

Note 14 – Shareholders’ Equity

Dividend

On ~~July 20,~~October 22, 2020, BMBC’s Board of Directors declared a regular quarterly dividend of $0.27 per share payable ~~September~~December 1, 2020 to shareholders of record as of ~~August 3,~~November 2, 2020. During the ~~second~~third quarter of 2020, the Corporation paid or accrued, as applicable, a regular quarterly dividend of ~~$0.26~~$0.27 per share. This dividend totaled ~~$5.3~~$5.6 million, based on outstanding shares and restricted stock units as of ~~April 30,~~August 3, 2020 of ~~20,251,459~~20,247,855 shares.

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S-3 Shelf Registration Statement and Offerings Thereunder

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

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

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

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

In addition to shares that may be issued through the Plan, the Corporation also issues shares through the exercise of stock options and the vesting of RSUs and PSUs. During the ~~six~~three and nine months ended ~~June~~September 30, 2020, 338 and 676 shares were issued pursuant to the exercise of stock options, increasing shareholders’ equity by $5$7 thousand and $12 thousand. ~~NaN shares were issued pursuant to the exercise of stock options during the three months ended June 30, 2020.~~ The increase in shareholders’ equity related to the vesting of RSUs and PSUs, which is recognized over the vesting period through stock based compensation expense, was ~~$624~~$644 thousand and ~~$1.5~~$2.2 million for the three and ~~six~~nine months ended ~~June~~September 30, ~~2020.~~2020, respectively.

Stock Repurchases

On April 18, 2019, BMBC announced a ~~new~~ stock repurchase program (the “2019 Program”) pursuant to which the Corporation may repurchase up to 1,000,000 shares of BMBC's common stock. Under the 2019 Program, the Corporation may repurchase BMBC's common stock at any price, but the aggregate purchase price is not to exceed $45 million. The 2019 Program became effective in the second quarter of 2019. During the three months ended March 31, 2020, 207,201 shares were repurchased under the 2019 Program at an average price of $34.99. NoNaN shares were repurchased during the three months ended June 30, 2020 or three months ended September 30, 2020. All share repurchases were accomplished in open market transactions. As of ~~June~~September 30, 2020, the maximum number of shares remaining authorized for repurchase under the 2019 Program was 710,032, at an aggregate purchase price not to exceed $34.8 million.

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

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Note 15 – Accumulated Other Comprehensive Income (Loss)

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


(dollars in thousands)	(dollars in thousands)	Net Change in Unrealized Gains on Available-for- Sale Investment Securities		Net Change in Unfunded Pension Liability		Accumulated Other Comprehensive Income (Loss)		(dollars in thousands)	Net Change in Unrealized Gains on Available-for- Sale Investment Securities		Net Change in Unfunded Pension Liability		Accumulated Other Comprehensive Income (Loss)
Balance, March 31, 2020		$	10,569	$	(1,700)	$	8,869
Balance, June 30, 2020								Balance, June 30, 2020	$	10,696	$	(1,677)	$	9,019
Other comprehensive income	Other comprehensive income	127		23		150		Other comprehensive income	1,097		23		1,120
Balance, June 30, 2020		$	10,696	$	(1,677)	$	9,019
Balance, September 30, 2020								Balance, September 30, 2020	$	11,793	$	(1,654)	$	10,139

Balance, March 31, 2019		$	(2,010)	$	(1,268)	$	(3,278)
Balance, June 30, 2019								Balance, June 30, 2019	$	2,952	$	(1,252)	$	1,700
Other comprehensive income	Other comprehensive income	4,962		16		4,978		Other comprehensive income	983		15		998
Balance, June 30, 2019		$	2,952	$	(1,252)	$	1,700
Balance, September 30, 2019								Balance, September 30, 2019	$	3,935	$	(1,237)	$	2,698


(dollars in thousands)	(dollars in thousands)	Net Change in Unrealized Gains on Available-for- Sale Investment Securities		Net Change in Unfunded Pension Liability		Accumulated Other Comprehensive Income (Loss)		(dollars in thousands)	Net Change in Unrealized Gains on Available-for- Sale Investment Securities		Net Change in Unfunded Pension Liability		Accumulated Other Comprehensive Income (Loss)
Balance, December 31, 2019	Balance, December 31, 2019	$	3,910	$	(1,723)	$	2,187	Balance, December 31, 2019	$	3,910	$	(1,723)	$	2,187
Other comprehensive income	Other comprehensive income	6,786		46		6,832		Other comprehensive income	7,883		69		7,952
Balance, June 30, 2020		$	10,696	$	(1,677)	$	9,019
Balance, September 30, 2020								Balance, September 30, 2020	$	11,793	$	(1,654)	$	10,139

Balance, December 31, 2018	Balance, December 31, 2018	$	(6,229)	$	(1,284)	$	(7,513)	Balance, December 31, 2018	$	(6,229)	$	(1,284)	$	(7,513)
Other comprehensive income	Other comprehensive income	9,181		32		9,213		Other comprehensive income	10,164		47		10,211
Balance, June 30, 2019		$	2,952	$	(1,252)	$	1,700
Balance, September 30, 2019								Balance, September 30, 2019	$	3,935	$	(1,237)	$	2,698

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


		Amount Reclassified from Accumulated Other Comprehensive Income (Loss)									Amount Reclassified from Accumulated Other Comprehensive Income (Loss)
Description of Accumulated Other Comprehensive Income (Loss) Component	Description of Accumulated Other Comprehensive Income (Loss) Component	Three Months Ended June 30,						Affected Income Statement Category		Description of Accumulated Other Comprehensive Income (Loss) Component	Three Months Ended September 30,			Affected Income Statement Category
		2020		2019					2020		2019

Unfunded pension liability:	Unfunded pension liability:						Unfunded pension liability:
Amortization of net loss included in net periodic pension costs⁽¹⁾	Amortization of net loss included in net periodic pension costs⁽¹⁾	$	17	$	13	Other operating expenses	Amortization of net loss included in net periodic pension costs(1)		$	18	$	10	Other operating expenses
Income tax effect	Income tax effect	(3)		(3)		Income tax expense	Income tax effect		(4)		(2)		Income tax expense
Net of income tax	Net of income tax	$	14	$	10	Net income	Net of income tax		$	14	$	8	Net income

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		Amount Reclassified from Accumulated Other Comprehensive Income (Loss)									Amount Reclassified from Accumulated Other Comprehensive Income (Loss)
Description of Accumulated Other Comprehensive Income (Loss) Component	Description of Accumulated Other Comprehensive Income (Loss) Component	Six Months Ended June 30,						Affected Income Statement Category		Description of Accumulated Other Comprehensive Income (Loss) Component	Nine Months Ended September 30,			Affected Income Statement Category
		2020		2019					2020		2019

Unfunded pension liability:	Unfunded pension liability:						Unfunded pension liability:
Amortization of net loss included in net periodic pension costs⁽¹⁾	Amortization of net loss included in net periodic pension costs⁽¹⁾	$	35	$	24	Other operating expenses	Amortization of net loss included in net periodic pension costs(1)		$	53	$	34	Other operating expenses
Income tax effect	Income tax effect	(7)		(5)		Income tax expense	Income tax effect		(11)		(7)		Income tax expense
Net of income tax	Net of income tax	$	28	$	19	Net income	Net of income tax		$	42	$	27	Net income

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

Note 16 – Earnings per Common Share

Basic earnings per common share excludes dilution and is computed by dividing income available to common shareholders by the weighted-average common shares outstanding during the period. Diluted earnings per common share takes into account the potential dilution that would occur if in-the-money stock options were exercised and converted into common shares and RSUs and PSUs were vested. Proceeds assumed to have been received on option exercises are assumed to be used to purchase shares of BMBC’s common stock at the average market price during the period, as required by the treasury stock method of accounting. The effects of stock options are excluded from the computation of diluted earnings per share in periods in which the effect would be antidilutive.


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands except share and per share data)	(dollars in thousands except share and per share data)	2020		2019		2020		2019		(dollars in thousands except share and per share data)	2020		2019		2020		2019
Numerator:	Numerator:									Numerator:
Net income available to common shareholders	Net income available to common shareholders	$	15,035	$	15,785	$	3,872	$	26,462	Net income available to common shareholders	$	13,164	$	16,360	$	17,036	$	42,822
Denominator for basic earnings per share – weighted average shares outstanding	Denominator for basic earnings per share – weighted average shares outstanding	19,926,737		20,144,651		19,989,948		20,156,509		Denominator for basic earnings per share – weighted average shares outstanding	19,945,634		20,132,117		19,975,069		20,148,289
Effect of dilutive common shares	Effect of dilutive common shares	81,482		99,758		87,211		99,960		Effect of dilutive common shares	75,983		76,513		87,039		88,042
Denominator for diluted earnings per share – adjusted weighted average shares outstanding	Denominator for diluted earnings per share – adjusted weighted average shares outstanding	20,008,219		20,244,409		20,077,159		20,256,469		Denominator for diluted earnings per share – adjusted weighted average shares outstanding	20,021,617		20,208,630		20,062,108		20,236,331
Basic earnings per share	Basic earnings per share	$	0.75	$	0.78	$	0.19	$	1.31	Basic earnings per share	$	0.66	$	0.81	$	0.85	$	2.13
Diluted earnings per share	Diluted earnings per share	0.75		0.78		0.19		1.31		Diluted earnings per share	0.66		0.81		0.85		2.12
Antidilutive shares excluded from computation of average dilutive earnings per share	Antidilutive shares excluded from computation of average dilutive earnings per share	76,038		14,441		71,260		30,506		Antidilutive shares excluded from computation of average dilutive earnings per share	90,518		769		85,723		1,840

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Note 17 – Revenue from Contracts with Customers

All of the Corporation’s revenue from contracts with customers in the scope of ASC 606 is recognized within noninterest income. The following table presents the Corporation’s noninterest income by revenue stream and reportable segment for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019. Items outside the scope of ASC 606 are noted as such.


		Three Months Ended June 30, 2020										Three Months Ended June 30, 2019											Three Months Ended September 30, 2020				Three Months Ended September 30, 2019
(dollars in thousands)	(dollars in thousands)	Banking		Wealth Management		Consolidated		Banking		Wealth Management		Consolidated		(dollars in thousands)	Banking		Wealth Management		Consolidated		Banking		Wealth Management		Consolidated
Fees for wealth management services	Fees for wealth management services	$	—	$	9,069	$	9,069	$	—	$	11,510	$	11,510	Fees for wealth management services	$	0	$	11,707	$	11,707	$	0	$	10,826	$	10,826
Insurance commissions	Insurance commissions	—		1,303		1,303		—		1,697		1,697		Insurance commissions	0		1,682		1,682		0		1,842		1,842
Capital markets revenue⁽¹⁾	Capital markets revenue⁽¹⁾	2,975		—		2,975		1,489		—		1,489		Capital markets revenue(1)	3,314		0		3,314		2,113		0		2,113
Service charges on deposit accounts	Service charges on deposit accounts	603		—		603		852		—		852		Service charges on deposit accounts	663		0		663		856		0		856
Loan servicing and other fees⁽¹⁾	Loan servicing and other fees⁽¹⁾	452		—		452		553		—		553		Loan servicing and other fees(1)	373		0		373		555		0		555
Net gain on sale of loans⁽¹⁾	Net gain on sale of loans⁽¹⁾	3,134		—		3,134		752		—		752		Net gain on sale of loans(1)	1,021		0		1,021		674		0		674

Dividends on FHLB and FRB stock⁽¹⁾	Dividends on FHLB and FRB stock⁽¹⁾	243		—		243		316		—		316		Dividends on FHLB and FRB stock(1)	127		0		127		346		0		346
Other operating income⁽²⁾	Other operating income⁽²⁾	2,699		88		2,787		3,026		26		3,052		Other operating income(2)	2,198		14		2,212		2,219		36		2,255
Total noninterest income	Total noninterest income	$	10,106	$	10,460	$	20,566	$	6,988	$	13,233	$	20,221	Total noninterest income	$	7,696	$	13,403	$	21,099	$	6,751	$	12,704	$	19,455

(1) Not within the scope of ASC 606.

(2) Other operating income includes Visa debit card income, safe deposit box rentals, and rent income totaling ~~$733~~$870 thousand and ~~$525~~$588 thousand for the three months ended ~~June~~September 30, 2020 and 2019, respectively, which are within the scope of ASC 606.


		Six Months Ended June 30, 2020										Six Months Ended June 30, 2019											Nine Months Ended September 30, 2020				Nine Months Ended September 30, 2019
(dollars in thousands)	(dollars in thousands)	Banking		Wealth Management		Consolidated		Banking		Wealth Management		Consolidated		(dollars in thousands)	Banking		Wealth Management		Consolidated		Banking		Wealth Management		Consolidated
Fees for wealth management services	Fees for wealth management services	$	—	$	20,237	$	20,237	$	—	$	21,902	$	21,902	Fees for wealth management services	$	0	$	31,944	$	31,944	$	0	$	32,728	$	32,728
Insurance commissions	Insurance commissions	—		2,836		2,836		—		3,369		3,369		Insurance commissions	0		4,518		4,518		0		5,211		5,211
Capital markets revenue⁽¹⁾	Capital markets revenue⁽¹⁾	5,336		—		5,336		3,708		—		3,708		Capital markets revenue(1)	8,650		0		8,650		5,821		0		5,821
Service charges on deposit accounts	Service charges on deposit accounts	1,449		—		1,449		1,660		—		1,660		Service charges on deposit accounts	2,112		0		2,112		2,516		0		2,516
Loan servicing and other fees⁽¹⁾	Loan servicing and other fees⁽¹⁾	913		—		913		1,162		—		1,162		Loan servicing and other fees(1)	1,286		0		1,286		1,717		0		1,717
Net gain on sale of loans⁽¹⁾	Net gain on sale of loans⁽¹⁾	3,916		—		3,916		1,071		—		1,071		Net gain on sale of loans(1)	4,937		0		4,937		1,745		0		1,745

Net gain (loss) on sale of OREO	Net gain (loss) on sale of OREO	148		—		148		(24)		—		(24)		Net gain (loss) on sale of OREO	148		0		148		(36)		0		(36)
Dividends on FHLB and FRB stock⁽¹⁾	Dividends on FHLB and FRB stock⁽¹⁾	687		—		687		727		—		727		Dividends on FHLB and FRB stock(1)	814		0		814		1,073		0		1,073
Other operating income⁽²⁾	Other operating income⁽²⁾	3,243		101		3,344		5,852		47		5,899		Other operating income(2)	5,441		115		5,556		8,071		83		8,154
Total noninterest income	Total noninterest income	$	15,692	$	23,174	$	38,866	$	14,156	$	25,318	$	39,474	Total noninterest income	$	23,388	$	36,577	$	59,965	$	20,907	$	38,022	$	58,929

(1) Not within the scope of ASC 606.

(2) Other operating income includes Visa debit card income, safe deposit box rentals, and rent income totaling ~~$1.4~~$2.2 million and ~~$1.0~~$1.6 million for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively, which are within the scope of ASC 606.

A description of the Corporation’s primary revenue streams accounted for under ASC 606 follows:

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

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Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance.

Wealth Management Fees: The Corporation earns wealth management fee revenue from a variety of sources including fees from trust administration and other related fiduciary services, custody, investment management and advisory services, employee benefit account and IRA administration, estate settlement, tax service fees, shareholder service fees and brokerage.

Fees that are determined based on the market value of the assets held in their accounts are generally billed monthly or quarterly, in arrears, based on the market value of assets at the end of the previous billing period. Other related services that are based on a fixed fee schedule are recognized when the services are rendered. Fees that are transaction based, including trade execution services, are recognized at the point in time that the transaction is executed, i.e. the trade date.

Included in other assets on the balance sheet is a receivable for wealth management fees that have been earned but not yet collected.

Insurance Commissions: The Corporation earns commissions from the sale of insurance policies, which are generally calculated as a percentage of the policy premium, and contingent income, which is calculated based on the volume and performance of the policies held by each carrier. Obligations for the sale of insurance policies are generally satisfied at the point in time which the policy is executed and are recognized at the point in time in which the amounts are known and collection is reasonably assured. Performance metrics for contingent income are generally satisfied over time, not exceeding one year, and are recognized at the point in time in which the amounts are known and collection is reasonably assured.

Visa Debit Card Income: The Corporation earns income fees from debit cardholder transactions conducted through the Visa payment network. Fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder.

Gains/Losses on Sales of OREO: The Corporation records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed.

Note 18 – Stock-Based Compensation

A. General Information

BMBC permits the issuance of stock options, dividend equivalents, performance stock awards, stock appreciation rights and restricted stock units or awards to employees and directors of the Corporation under several plans. The performance awards and restricted awards may be in the form of stock awards or stock units. Stock awards and stock units differ in that for a stock award, shares of restricted stock are issued in the name of the grantee, whereas a stock unit constitutes a promise to issue shares of stock upon vesting. The accounting for awards and units is identical. The terms and conditions of awards under the plans are determined by the Corporation’s Management Development and Compensation Committee.

Prior to April 25, 2007, all shares authorized for grant as stock-based compensation were limited to grants of stock options. On April 25, 2007, the shareholders approved BMBC’s “2007 Long-Term Incentive Plan” (the “2007 LTIP”) under which a total of 428,996 shares of BMBC’s common stock were made available for award grants. On April 28, 2010, the shareholders approved BMBC’s “2010 Long Term Incentive Plan” under which a total of 445,002 shares of BMBC’s common stock were made available for award grants, and on April 30, 2015, the shareholders approved an amendment and restatement of such plan (as amended and restated, the “2010 LTIP”) to, among other things, increase the number of shares available for award grants by 500,000 to 945,002.

In addition to the shareholder-approved plans mentioned in the preceding paragraph, BMBC periodically authorizes grants of stock-based compensation as inducement awards to new employees. This type of award does not require shareholder approval in accordance with Rule 5635(c)(4) of the NASDAQ listing rules.

The equity awards are authorized to be in the form of, among others, options to purchase BMBC’s common stock, RSUs and PSUs.

RSUs have a restriction based on the passage of time. The grant date fair value of the RSUs is based on the closing price on the date of the grant.

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PSUs have restrictions based on performance criteria and the passage of time. The performance criteria may be a market-based criteria measured by BMBC’s total shareholder return (“TSR”) relative to the performance of the community bank index for the respective period. The fair value of the PSUs based on BMBC’s TSR relative to the performance of a designated peer group or the NASDAQ Community Bank Index is calculated using the Monte Carlo Simulation method. The performance criteria may also be based on a non-market-based criteria such as return on average equity relative to that designated peer group. The grant date fair value of these PSUs is based on the closing price of BMBC’s stock on the date of the grant. PSU grants may have a vesting percent ranging from 0% to 150%.

B. Other Stock Option Information

The following table provides information about options outstanding for the three and ~~six~~nine months ended ~~June~~September 30, 2020:


		Shares	Weighted Average Exercise Price		Weighted Average Grant Date Fair Value			Shares	Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
Options outstanding, March 31, 2020		563	$	21.32	$	19.09
Options outstanding, June 30, 2020							Options outstanding, June 30, 2020	563	$	21.32	$	19.09
Forfeited	Forfeited	—	—		—		Forfeited	0	0		0
Expired	Expired	—	—		—		Expired	0	0		0
Exercised	Exercised	—	—		—		Exercised	(338)	23.32		23.20
Options outstanding, June 30, 2020		563	21.32		19.09
Options outstanding, September 30, 2020							Options outstanding, September 30, 2020	225	18.33		12.93


		Shares	Weighted Average Exercise Price		Weighted Average Grant Date Fair Value			Shares	Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
Options outstanding, December 31, 2019	Options outstanding, December 31, 2019	901	$	19.33	$	16.78	Options outstanding, December 31, 2019	901	$	19.33	$	16.78
Forfeited	Forfeited	—	—		—		Forfeited	0	0		0
Expired	Expired	—	—		—		Expired	0	0		0
Exercised	Exercised	(338)	16.02		12.93		Exercised	(676)	19.67		18.06
Options outstanding, June 30, 2020		563	21.32		19.09
Options outstanding, September 30, 2020							Options outstanding, September 30, 2020	225	18.33		12.93

As of ~~June~~September 30, 2020 there were 0 unvested options.

Proceeds, related tax benefits realized from options exercised and intrinsic value of options exercised were as follows for the periods presented:


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2020		2019		2020		2019		(dollars in thousands)	2020		2019		2020		2019
Proceeds from exercise of stock options	Proceeds from exercise of stock options	$	—	$	82	$	5	$	622	Proceeds from exercise of stock options	$	7	$	285	$	12	$	907
Related tax benefit recognized	Related tax benefit recognized	—		18		2		155		Related tax benefit recognized	0		57		2		212
Net proceeds of options exercised	Net proceeds of options exercised	$	—	$	100	$	7	$	777	Net proceeds of options exercised	$	7	$	342	$	14	$	1,119

Intrinsic value of options exercised	Intrinsic value of options exercised	$	—	$	86	$	8	$	738	Intrinsic value of options exercised	$	4	$	272	$	12	$	1,010

The following table provides information about options outstanding and exercisable at ~~June~~September 30, 2020:


(dollars in thousands, except share data and exercise price)	(dollars in thousands, except share data and exercise price)	Outstanding		Exercisable		(dollars in thousands, except share data and exercise price)	Outstanding		Exercisable
Number of shares	Number of shares	563		563		Number of shares	225		225
Weighted average exercise price	Weighted average exercise price	$	21.32	$	21.32	Weighted average exercise price	$	18.33	$	18.33
Aggregate intrinsic value	Aggregate intrinsic value	$	4	$	4	Aggregate intrinsic value	$	1	$	1
Weighted average remaining contractual term in years	Weighted average remaining contractual term in years	3.6		3.6		Weighted average remaining contractual term in years	3.3		3.3

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C. Restricted Stock Units and Performance Stock Units

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

RSUs

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

For the three and ~~six~~nine months ended ~~June~~September 30, 2020, the Corporation recognized ~~$471~~$406 thousand and ~~$0.9~~$1.3 million, respectively, of expense related to the Corporation’s RSUs. As of ~~June~~September 30, 2020, there was ~~$2.8~~$2.4 million of unrecognized compensation cost related to RSUs. This cost will be recognized over a weighted average period of 21.8 years.

The following table details the RSUs for the three and ~~six~~nine months ended ~~June~~September 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
		Number of Shares	Weighted Average Grant Date Fair Value		Number of Shares	Weighted Average Grant Date Fair Value			Number of Shares	Weighted Average Grant Date Fair Value		Number of Shares	Weighted Average Grant Date Fair Value
Beginning balance	Beginning balance	136,725	$	38.02	115,466	$	38.57	Beginning balance	129,926	$	37.92	115,466	$	38.57
Granted	Granted	—	—		26,818	35.90		Granted	0	0		26,818	35.90
Vested	Vested	(6,799)	39.82		(11,772)	39.73		Vested	(9,707)	38.83		(21,479)	39.32
Forfeited	Forfeited	—	—		(586)	35.74		Forfeited	(1,067)	40.97		(1,653)	39.12
Ending balance	Ending balance	129,926	37.92		129,926	37.92		Ending balance	119,152	37.82		119,152	37.82

PSUs

For the three and ~~six~~nine months ended ~~June~~September 30, 2020, the Corporation recognized ~~$153~~$238 thousand and ~~$0.6 million,~~$818 thousand, respectively, of expense related to the PSUs. As of ~~June~~September 30, 2020, there was $2.3 million of unrecognized compensation cost related to PSUs. This cost will be recognized over a weighted average period of 1.8 years.

The following table details the PSUs for the three and ~~six~~nine months ended ~~June~~September 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
		Number of Shares	Weighted Average Grant Date Fair Value		Number of Shares	Weighted Average Grant Date Fair Value			Number of Shares	Weighted Average Grant Date Fair Value		Number of Shares	Weighted Average Grant Date Fair Value
Beginning balance	Beginning balance	189,808	$	37.31	136,271	$	37.87	Beginning balance	189,808	$	37.31	136,271	$	37.87
Granted	Granted	—	—		53,685	35.90		Granted	0	0		53,685	35.90

Vested	Vested	—	—		—	—		Vested	(37,456)	36.45		(37,456)	36.45
Forfeited	Forfeited	—	—		(148)	40.35		Forfeited	(4,149)	36.31		(4,297)	36.44
Ending balance	Ending balance	189,808	37.31		189,808	37.31		Ending balance	148,203	37.56		148,203	37.56

Note 19 – Fair Value Measurement

FASB ASC 820, “Fair Value Measurements and Disclosures,” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. FASB ASC 820 also establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

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The three levels of the fair value hierarchy under FASB ASC Topic 820 are:

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

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

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

A. Assets and liabilities measured on a recurring basis

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

Investment Securities

The value of the Corporation’s available for sale investment securities, which include obligations of the U.S. government and its agencies, mortgage-backed securities issued by U.S. government- and U.S. government sponsored agencies, obligations of state and political subdivisions, corporate bonds and other debt securities are determined by the Corporation, taking into account the input of an independent third party valuation service provider. The third party’s evaluations are based on market data, utilizing pricing models that vary by asset and incorporate available trade, bid and other market information. For securities that do not trade on a daily basis, their pricing models apply available information such as benchmarking and matrix pricing. The market inputs normally sought in the evaluation of securities include benchmark yields, reported trades, broker/dealer quotes (only obtained from market makers or broker/dealers recognized as market participants), issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. For certain securities, additional inputs may be used or some market inputs may not be applicable. Inputs are prioritized differently on any given day based on market conditions. Management reviews, annually, the process utilized by its independent third-party valuation service provider. On a quarterly basis, management tests the validity of the prices provided by the third party by selecting a representative sample of the portfolio and obtaining actual trade results, or if actual trade results are not available, competitive broker pricing. On an annual basis, management evaluates, for appropriateness, the methodology utilized by the independent third-party valuation service provider.

U.S. government agencies are evaluated and priced using multi-dimensional relational models and option adjusted spreads. State and municipal securities are evaluated on a series of matrices including reported trades and material event notices. Mortgage-backed securities are evaluated using matrix correlation to treasury or floating index benchmarks, prepayment speeds, monthly payment information and other benchmarks. Other available-for-sale investments are evaluated using a broker-quote based application, including quotes from issuers.

Interest Rate Swaps, FX Forwards, and Risk Participation Agreements

The Corporation’s interest rate swaps, FX forwards, and RPAs are reported at fair value utilizing Level 2 inputs. Prices of these instruments are obtained through an independent pricing source utilizing pricing information which may include market observed quotations for swaps, LIBOR rates, forward rates and rate volatility. When entering into a derivative contract, the Corporation is exposed to fair value changes due to interest rate movements, and the potential non-performance of our contract counterparty. The Corporation has developed a methodology to value the non-performance risk based on internal credit risk metrics and the unique characteristics of derivative instruments, which include notional exposure rather than principle at risk and interest payment netting. The results of this methodology are used to adjust the base fair value of the instrument for the potential counterparty credit risk.

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


As of June 30, 2020
As of September 30, 2020										As of September 30, 2020
(dollars in thousands)	(dollars in thousands)	Total		Level 1		Level 2		Level 3		(dollars in thousands)	Total		Level 1		Level 2		Level 3
Investment securities available for sale:	Investment securities available for sale:									Investment securities available for sale:
U.S. Treasury securities	U.S. Treasury securities	$	100	$	100	$	—	$	—	U.S. Treasury securities	$	100	$	100	$	0	$	0
Obligations of U.S. government & agencies	Obligations of U.S. government & agencies	114,149		—		114,149		—		Obligations of U.S. government & agencies	90,928		0		90,928		0
Obligations of state & political subdivisions	Obligations of state & political subdivisions	4,583		—		4,583		—		Obligations of state & political subdivisions	3,178		0		3,178		0
Mortgage-backed securities	Mortgage-backed securities	377,204		—		377,204		—		Mortgage-backed securities	431,822		0		431,822		0
Collateralized mortgage obligations	Collateralized mortgage obligations	25,873		—		25,873		—		Collateralized mortgage obligations	22,253		0		22,253		0
Collateralized loan obligations										Collateralized loan obligations	6,500		0		6,500		0
Corporate bonds	Corporate bonds	8,022		—		8,022		—		Corporate bonds	9,343		0		9,343		0
Other investment securities	Other investment securities	650		—		650		—		Other investment securities	650		0		650		0
Total investment securities available for sale	Total investment securities available for sale	530,581		100		530,481		—		Total investment securities available for sale	564,774		100		564,674		0

Investment securities trading:	Investment securities trading:									Investment securities trading:
Mutual funds	Mutual funds	7,801		7,801		—		—		Mutual funds	8,030		8,030		0		0

Derivatives:	Derivatives:									Derivatives:
Interest rate swaps	Interest rate swaps	143,339		—		143,339		—		Interest rate swaps	135,998		0		135,998		0
RPAs purchased	RPAs purchased	358		—		358		—		RPAs purchased	490		0		490		0
FX forwards		36		—		36		—

Total derivatives	Total derivatives	143,733		—		143,733		—		Total derivatives	136,488		0		136,488		0

Total recurring fair value measurements	Total recurring fair value measurements	$	682,115	$	7,901	$	674,214	$	—	Total recurring fair value measurements	$	709,292	$	8,130	$	701,162	$	0


As of December 31, 2019	As of December 31, 2019									As of December 31, 2019
(dollars in thousands)	(dollars in thousands)	Total		Level 1		Level 2		Level 3		(dollars in thousands)	Total		Level 1		Level 2		Level 3
Investment securities available for sale:	Investment securities available for sale:									Investment securities available for sale:
U.S. Treasury securities	U.S. Treasury securities	$	500,101	$	500,101	$	—	$	—	U.S. Treasury securities	$	500,101	$	500,101	$	0	$	0
Obligations of U.S. government & agencies	Obligations of U.S. government & agencies	102,020		—		102,020		—		Obligations of U.S. government & agencies	102,020		0		102,020		0
Obligations of state & political subdivisions	Obligations of state & political subdivisions	5,379		—		5,379		—		Obligations of state & political subdivisions	5,379		0		5,379		0
Mortgage-backed securities	Mortgage-backed securities	366,002		—		366,002		—		Mortgage-backed securities	366,002		0		366,002		0
Collateralized mortgage obligations	Collateralized mortgage obligations	31,832		—		31,832		—		Collateralized mortgage obligations	31,832		0		31,832		0

Other investment securities	Other investment securities	650		—		650		—		Other investment securities	650		0		650		0
Total investment securities available for sale	Total investment securities available for sale	1,005,984		500,101		505,883		—		Total investment securities available for sale	1,005,984		500,101		505,883		0

Investment securities trading:	Investment securities trading:									Investment securities trading:
Mutual funds	Mutual funds	8,621		8,621		—		—		Mutual funds	8,621		8,621		0		0

Derivatives:	Derivatives:									Derivatives:
Interest rate swaps	Interest rate swaps	47,627		—		47,627		—		Interest rate swaps	47,627		0		47,627		0
RPAs purchased	RPAs purchased	90		—		90		—		RPAs purchased	90		0		90		0

Total derivatives	Total derivatives	47,717		—		47,717		—		Total derivatives	47,717		0		47,717		0

Total recurring fair value measurements	Total recurring fair value measurements	$	1,062,322	$	508,722	$	553,600	$	—	Total recurring fair value measurements	$	1,062,322	$	508,722	$	553,600	$	0

There have been no transfers between levels during the three and ~~six~~nine months ended ~~June~~September 30, 2020.

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B. Assets and liabilities measured on a non-recurring basis

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

Collateral-dependent Loans and Leases

Collateral-dependent loans and leases for which the repayment is expected to be provided substantially through the sale of the collateral and the borrower is experiencing financial difficulty are, in general, individually evaluated for credit losses. Management evaluates and values collateral-dependent loans and leases when management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, and the fair values of such loans and leases are estimated using Level 3 inputs in the fair value hierarchy. Each loan’s collateral has a unique appraisal and management’s discount of the value is based on the factors unique to each loan or lease. The significant unobservable input in determining the fair value is management’s subjective discount on appraisals of the collateral securing the loan, which range from 10% - 50%. Collateral may consist of real estate and/or business assets including equipment, inventory and/or accounts receivable and the value of these assets is determined based on the appraisals by qualified licensed appraisers hired by the Corporation. Appraised and reported values may be discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, estimated costs to sell, and/or management’s expertise and knowledge of the client and the client’s business.

The Corporation has an appraisal policy in which an appraisal is obtained for a commercial loan at the point at which the loan either becomes nonperforming or is downgraded to a substandard or worse classification. For consumer loans, management obtains updated appraisals when a loan becomes 90 days past due or when it receives other information that may indicate possible impairment. Based on the appraisals obtained by the Corporation, a partial or full charge-off may be necessary.

Other Real Estate Owned (“OREO”)

OREO consists of properties acquired as a result of foreclosures and deeds in-lieu-of foreclosure. Properties classified as OREO are reported at the lower of cost or fair value less cost to sell, and are classified as Level 3 in the fair value hierarchy. The Corporation did not have any OREO at ~~June~~September 30, 2020 or December 31, 2019.

Mortgage Servicing Rights

The model to value MSRs estimates the present value of projected net servicing cash flows of the remaining servicing portfolio based on various assumptions, including changes in anticipated loan prepayment rates, the discount rate, reflective of a market participant's required return on an investment for similar assets, and other market-based economic factors. All of these assumptions are considered to be unobservable inputs. Accordingly, MSRs are classified within Level 3 of the fair value hierarchy.

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


As of June 30, 2020
As of September 30, 2020										As of September 30, 2020
(dollars in thousands)	(dollars in thousands)	Total		Level 1		Level 2		Level 3		(dollars in thousands)	Total		Level 1		Level 2		Level 3
MSRs	MSRs	$	3,440	$	—	$	—	$	3,440	MSRs	$	2,881	$	0	$	0	$	2,881
Collateral-dependent loans and leases	Collateral-dependent loans and leases	8,217		—		—		8,217		Collateral-dependent loans and leases	8,297		0		0		8,297

Total non-recurring fair value measurements	Total non-recurring fair value measurements	$	11,657	$	—	$	—	$	11,657	Total non-recurring fair value measurements	$	11,178	$	0	$	0	$	11,178


As of December 31, 2019	As of December 31, 2019									As of December 31, 2019
(dollars in thousands)	(dollars in thousands)	Total		Level 1		Level 2		Level 3		(dollars in thousands)	Total		Level 1		Level 2		Level 3
MSRs	MSRs	$	4,838	$	—	$	—	$	4,838	MSRs	$	4,838	$	0	$	0	$	4,838
Impaired loans and leases	Impaired loans and leases	15,311		—		—		15,311		Impaired loans and leases	15,311		0		0		15,311

Total non-recurring fair value measurements	Total non-recurring fair value measurements	$	20,149	$	—	$	—	$	20,149	Total non-recurring fair value measurements	$	20,149	$	0	$	0	$	20,149

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During the three and ~~six~~nine months ended ~~June~~September 30, 2020, a net ~~decrease and a net increase~~increases of ~~$110~~$99 thousand and ~~$122~~$221 thousand were recorded in the ACL on loans and leases as a result of adjusting the carrying value and estimated fair value of the collateral-dependent loans in the above tables.

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Note 20 – Fair Value of Financial Instruments

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

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


			June 30, 2020						December 31, 2019								September 30, 2020				December 31, 2019
(dollars in thousands)	(dollars in thousands)	Fair Value Hierarchy Level⁽¹⁾	Carrying Amount		Fair Value		Carrying Amount		Fair Value		(dollars in thousands)	Fair Value Hierarchy Level(1)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:	Financial assets:										Financial assets:
Cash and cash equivalents	Cash and cash equivalents	Level 1	$	464,521	$	464,521	$	53,931	$	53,931	Cash and cash equivalents	Level 1	$	257,433	$	257,433	$	53,931	$	53,931
Investment securities - available for sale	Investment securities - available for sale	See Note 19	530,581		530,581		1,005,984		1,005,984		Investment securities - available for sale	See Note 19	564,774		564,774		1,005,984		1,005,984
Investment securities - trading	Investment securities - trading	See Note 19	7,801		7,801		8,621		8,621		Investment securities - trading	See Note 19	8,030		8,030		8,621		8,621
Investment securities – held to maturity	Investment securities – held to maturity	Level 2	12,592		12,995		12,577		12,661		Investment securities – held to maturity	Level 2	11,725		12,144		12,577		12,661
Loans held for sale	Loans held for sale	Level 2	4,116		4,116		4,249		4,249		Loans held for sale	Level 2	4,574		4,574		4,249		4,249
Net portfolio loans and leases	Net portfolio loans and leases	Level 3	3,667,191		3,564,380		3,666,711		3,596,268		Net portfolio loans and leases	Level 3	3,620,256		3,561,812		3,666,711		3,596,268
MSRs	MSRs	Level 3	3,440		3,440		4,450		4,838		MSRs	Level 3	2,881		2,881		4,450		4,838
Interest rate swaps	Interest rate swaps	Level 2	143,339		143,339		47,627		47,627		Interest rate swaps	Level 2	135,998		135,998		47,627		47,627
FX forwards	FX forwards	Level 2	36		36		—		—		FX forwards	Level 2	0		0		0		0
RPAs purchased	RPAs purchased	Level 2	358		358		90		90		RPAs purchased	Level 2	490		490		90		90
Other assets	Other assets	Level 3	37,137		37,137		52,908		52,908		Other assets	Level 3	38,244		38,244		52,908		52,908
Total financial assets	Total financial assets		$	4,871,112	$	4,768,704	$	4,857,148	$	4,787,177	Total financial assets		$	4,644,405	$	4,586,380	$	4,857,148	$	4,787,177
Financial liabilities:	Financial liabilities:										Financial liabilities:
Deposits	Deposits	Level 2	$	4,243,648	$	4,248,488	$	3,842,245	$	3,842,014	Deposits	Level 2	$	4,013,579	$	4,017,533	$	3,842,245	$	3,842,014
Short-term borrowings	Short-term borrowings	Level 2	28,891		28,891		493,219		493,219		Short-term borrowings	Level 2	23,456		23,456		493,219		493,219
Long-term FHLB advances	Long-term FHLB advances	Level 2	44,837		45,664		52,269		52,380		Long-term FHLB advances	Level 2	44,872		45,589		52,269		52,380
Subordinated notes	Subordinated notes	Level 2	98,794		91,748		98,705		97,199		Subordinated notes	Level 2	98,839		91,534		98,705		97,199
Junior subordinated debentures	Junior subordinated debentures	Level 2	21,843		26,097		21,753		25,652		Junior subordinated debentures	Level 2	21,889		26,984		21,753		25,652
Interest rate swaps	Interest rate swaps	Level 2	143,339		143,339		47,627		47,627		Interest rate swaps	Level 2	135,998		135,998		47,627		47,627
FX forwards	FX forwards	Level 2	107		107		—		—		FX forwards	Level 2	24		24		0		0
RPAs sold	RPAs sold	Level 2	39		39		16		16		RPAs sold	Level 2	36		36		16		16
Other liabilities	Other liabilities	Level 3	42,447		42,447		50,251		50,251		Other liabilities	Level 3	52,735		52,735		50,251		50,251
Total financial liabilities	Total financial liabilities		$	4,623,945	$	4,626,820	$	4,606,085	$	4,608,358	Total financial liabilities		$	4,391,428	$	4,393,889	$	4,606,085	$	4,608,358

(1) See Note 19 in the Notes to Unaudited Consolidated Financial Statements above for a description of hierarchy levels.

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Note 21 – Financial Instruments with Off-Balance Sheet Risk, Contingencies and Concentration of Credit Risk

Off-Balance Sheet Arrangements

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

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

Commitments to extend credit, which include unused lines of credit and unfunded commitments to originate loans, are agreements to lend to a customer as long as there is no violation of any condition established in the agreement. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Some of the commitments are expected to expire without being drawn upon, and the total commitment amounts do not necessarily represent future cash requirements. Total commitments to extend credit at ~~June~~September 30, 2020 and December 31, 2019 were ~~$826.3~~$834.4 million and $828.9 million, respectively. Management evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Corporation upon extension of credit, is based on a credit evaluation of the counterparty. Collateral varies but may include accounts receivable, marketable securities, inventory, property, plant and equipment, residential real estate, and income-producing commercial properties.

Standby letters of credit are conditional commitments issued by the Bank to a customer for a third party. Such standby letters of credit are issued to support private borrowing arrangements. The credit risk involved in issuing standby letters of credit is similar to that involved in extending loan facilities to customers. The collateral varies, but may include accounts receivable, marketable securities, inventory, property, plant and equipment, and residential real estate for those commitments for which collateral is deemed necessary. The Corporation’s obligations under standby letters of credit as of ~~June~~September 30, 2020 and December 31, 2019 were ~~$13.2~~$20.2 million and $20.7 million, respectively.

Contingencies

Legal Matters

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

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

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

Indemnifications

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

Concentrations of Credit Risk

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

Note 22 – Segment Information

FASB Codification 280 – “Segment Reporting” identifies operating segments as components of an enterprise which are evaluated regularly by the Corporation’s chief operating decision maker, our Chief Executive Officer, in deciding how to allocate resources and assess performance. The Corporation has applied the aggregation criterion set forth in this codification to the results of its operations.

The Corporation’s Banking segment consists of commercial and retail banking. The Banking segment is evaluated as a single strategic unit which generates revenues from a variety of products and services. The Banking segment generates interest income from its lending (including leases) and investing activities and is dependent on the gathering of lower cost deposits from its branch network or borrowed funds from other sources for funding its loans, resulting in the generation of net interest income. The Banking segment also derives revenues from other sources including gains on the sale in available for sale investment securities, gains on the sale of residential mortgage loans, service charges on deposit accounts, cash sweep fees, overdraft fees, bank owned life insurance (“BOLI”) income and revenue associated with its Visa Check Card offering. Also included in the Banking segment are two subsidiaries of the Bank, KCMI Capital, Inc. and Bryn Mawr Equipment Financing, Inc., both of which provide specialized lending solutions to our customers.

The Wealth Management segment has responsibility for a number of activities within the Corporation, including trust administration, other related fiduciary services, custody, investment management and advisory services, employee benefits and IRA administration, estate settlement, tax services and brokerage. Bryn Mawr Trust of Delaware is included in the Wealth Management segment of the Corporation since it has similar economic characteristics, products and services to those of the Wealth Management Division of the Bank. Effective January 1, 2020, the business of Lau Associates LLC was transitioned into the Wealth Management Division of the Bank. BMT Investment Advisers, formed in May 2017, which ~~serves~~served as investment adviser to BMT Investment Funds, a Delaware statutory trust, isprior to its wind-down in the second quarter of 2020, was also reported under the Wealth Management segment. In addition, the Wealth Management Division oversees all insurance services of the Corporation, which are conducted through the Bank’s insurance subsidiary, BMT Insurance Advisors, Inc., and are reported in the Wealth Management segment.

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The accounting policies of the Corporation are applied by segment in the following tables. The segments are presented on a pre-tax basis.

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The following tables detail the Corporation’s segments for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019:


		Three Months Ended June 30, 2020															Three Months Ended June 30, 2019																Three Months Ended September 30, 2020						Three Months Ended September 30, 2019
(dollars in thousands)	(dollars in thousands)	Banking			Wealth Management			Consolidated			Banking			Wealth Management			Consolidated			(dollars in thousands)	Banking			Wealth Management			Consolidated			Banking			Wealth Management			Consolidated
Net interest income	Net interest income	$	37,384		$	1		$	37,385		$	36,610		$	1		$	36,611		Net interest income	$	35,031		$	1		$	35,032		$	37,397		$	1		$	37,398
PCL on loans and leases	PCL on loans and leases	4,302			—			4,302			1,627			—			1,627			PCL on loans and leases	3,641			0			3,641			919			0			919
Net interest income after PCL on loans and leases	Net interest income after PCL on loans and leases	33,082			1			33,083			34,983			1			34,984			Net interest income after PCL on loans and leases	31,390			1			31,391			36,478			1			36,479
Noninterest income:	Noninterest income:																			Noninterest income:
Fees for wealth management services	Fees for wealth management services	—			9,069			9,069			—			11,510			11,510			Fees for wealth management services	0			11,707			11,707			0			10,826			10,826
Insurance commissions	Insurance commissions	—			1,303			1,303			—			1,697			1,697			Insurance commissions	0			1,682			1,682			0			1,842			1,842
Capital markets revenue	Capital markets revenue	2,975			—			2,975			1,489			—			1,489			Capital markets revenue	3,314			0			3,314			2,113			0			2,113
Service charges on deposit accounts	Service charges on deposit accounts	603			—			603			852			—			852			Service charges on deposit accounts	663			0			663			856			0			856
Loan servicing and other fees	Loan servicing and other fees	452			—			452			553			—			553			Loan servicing and other fees	373			0			373			555			0			555
Net gain on sale of loans	Net gain on sale of loans	3,134			—			3,134			752			—			752			Net gain on sale of loans	1,021			0			1,021			674			0			674

Other operating income	Other operating income	2,942			88			3,030			3,342			26			3,368			Other operating income	2,325			14			2,339			2,565			36			2,601
Total noninterest income	Total noninterest income	10,106			10,460			20,566			6,988			13,233			20,221			Total noninterest income	7,696			13,403			21,099			6,751			12,704			19,455

Noninterest expenses:	Noninterest expenses:																			Noninterest expenses:
Salaries & wages	Salaries & wages	11,699			5,227			16,926			12,295			4,743			17,038			Salaries & wages	11,883			5,318			17,201			12,674			5,091			17,765
Employee benefits	Employee benefits	2,301			920			3,221			2,338			979			3,317			Employee benefits	2,200			826			3,026			2,343			945			3,288
Occupancy and bank premises	Occupancy and bank premises	2,535			498			3,033			2,608			517			3,125			Occupancy and bank premises	2,559			496			3,055			2,502			506			3,008
Amortization of intangible assets	Amortization of intangible assets	291			619			910			328			628			956			Amortization of intangible assets	263			607			870			327			627			954
Professional fees	Professional fees	1,357			218			1,575			1,221			95			1,316			Professional fees	1,549			169			1,718			902			142			1,044
Other operating expenses	Other operating expenses	7,496			1,475			8,971			7,983			1,453			9,436			Other operating expenses	8,587			1,200			9,787			7,643			1,471			9,114
Total noninterest expenses	Total noninterest expenses	25,679			8,957			34,636			26,773			8,415			35,188			Total noninterest expenses	27,041			8,616			35,657			26,391			8,782			35,173
Segment profit	Segment profit	17,509			1,504			19,013			15,198			4,819			20,017			Segment profit	12,045			4,788			16,833			16,838			3,923			20,761
Intersegment (revenues) expenses⁽¹⁾	Intersegment (revenues) expenses⁽¹⁾	(177)			177			—			(125)			125			—			Intersegment (revenues) expenses(1)	(133)			133			0			(124)			124			0
Pre-tax segment profit after eliminations	Pre-tax segment profit after eliminations	$	17,332		$	1,681		$	19,013		$	15,073		$	4,944		$	20,017		Pre-tax segment profit after eliminations	$	11,912		$	4,921		$	16,833		$	16,714		$	4,047		$	20,761
% of segment pre-tax profit after eliminations	% of segment pre-tax profit after eliminations	91.2		%	8.8		%	100.0		%	75.3		%	24.7		%	100.0		%	% of segment pre-tax profit after eliminations	70.8		%	29.2		%	100.0		%	80.5		%	19.5		%	100.0		%
Segment assets (dollars in millions)	Segment assets (dollars in millions)	$	5,221.7		$	49.6		$	5,271.3		$	4,682.0		$	54.6		$	4,736.6		Segment assets (dollars in millions)	$	4,996.7		$	50.2		$	5,046.9		$	4,771.9		$	56.7		$	4,828.6

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		Six Months Ended June 30, 2020															Six Months Ended June 30, 2019																Nine Months Ended September 30, 2020						Nine Months Ended September 30, 2019
(dollars in thousands)	(dollars in thousands)	Banking			Wealth Management			Consolidated			Banking			Wealth Management			Consolidated			(dollars in thousands)	Banking			Wealth Management			Consolidated			Banking			Wealth Management			Consolidated
Net interest income	Net interest income	$	73,716		$	2		$	73,718		$	74,255		$	3		$	74,258		Net interest income	$	108,747		$	3		$	108,750		$	111,652		$	4		$	111,656
PCL on loans and leases	PCL on loans and leases	36,637			—			36,637			5,363			—			5,363			PCL on loans and leases	40,278			0			40,278			6,282			0			6,282
Net interest income after PCL on loans and leases	Net interest income after PCL on loans and leases	37,079			2			37,081			68,892			3			68,895			Net interest income after PCL on loans and leases	68,469			3			68,472			105,370			4			105,374
Noninterest income:	Noninterest income:																			Noninterest income:
Fees for wealth management services	Fees for wealth management services	—			20,237			20,237			—			21,902			21,902			Fees for wealth management services	0			31,944			31,944			0			32,728			32,728
Insurance commissions	Insurance commissions	—			2,836			2,836			—			3,369			3,369			Insurance commissions	0			4,518			4,518			0			5,211			5,211
Capital markets revenue	Capital markets revenue	5,336			—			5,336			3,708			—			3,708			Capital markets revenue	8,650			0			8,650			5,821			0			5,821
Service charges on deposit accounts	Service charges on deposit accounts	1,449			—			1,449			1,660			—			1,660			Service charges on deposit accounts	2,112			0			2,112			2,516			0			2,516
Loan servicing and other fees	Loan servicing and other fees	913			—			913			1,162			—			1,162			Loan servicing and other fees	1,286			0			1,286			1,717			0			1,717
Net gain on sale of loans	Net gain on sale of loans	3,916			—			3,916			1,071			—			1,071			Net gain on sale of loans	4,937			0			4,937			1,745			0			1,745

Net gain (loss) on sale of OREO	Net gain (loss) on sale of OREO	148			—			148			(24)			—			(24)			Net gain (loss) on sale of OREO	148			0			148			(36)			0			(36)
Other operating income	Other operating income	3,930			101			4,031			6,579			47			6,626			Other operating income	6,255			115			6,370			9,144			83			9,227
Total noninterest income	Total noninterest income	15,692			23,174			38,866			14,156			25,318			39,474			Total noninterest income	23,388			36,577			59,965			20,907			38,022			58,929

Noninterest expenses:	Noninterest expenses:																			Noninterest expenses:
Salaries & wages	Salaries & wages	23,558			10,357			33,915			28,070			9,869			37,939			Salaries & wages	35,441			15,675			51,116			40,744			14,960			55,704
Employee benefits	Employee benefits	4,898			1,823			6,721			5,510			1,973			7,483			Employee benefits	7,098			2,649			9,747			7,853			2,918			10,771
Occupancy and bank premises	Occupancy and bank premises	5,051			997			6,048			5,340			1,037			6,377			Occupancy and bank premises	7,610			1,493			9,103			7,842			1,543			9,385
Amortization of intangible assets	Amortization of intangible assets	583			1,245			1,828			655			1,239			1,894			Amortization of intangible assets	846			1,852			2,698			982			1,866			2,848
Professional fees	Professional fees	2,454			489			2,943			2,384			252			2,636			Professional fees	4,003			658			4,661			3,286			394			3,680
Other operating expenses	Other operating expenses	16,732			2,867			19,599			15,252			3,331			18,583			Other operating expenses	25,319			4,067			29,386			22,895			4,802			27,697
Total noninterest expenses	Total noninterest expenses	53,276			17,778			71,054			57,211			17,701			74,912			Total noninterest expenses	80,317			26,394			106,711			83,602			26,483			110,085
Segment (loss) profit		(505)			5,398			4,893			25,837			7,620			33,457
Segment profit																				Segment profit	11,540			10,186			21,726			42,675			11,543			54,218
Intersegment (revenues) expenses⁽¹⁾	Intersegment (revenues) expenses⁽¹⁾	(355)			355			—			(248)			248			—			Intersegment (revenues) expenses(1)	(488)			488			0			(372)			372			0
Pre-tax segment profit after eliminations	Pre-tax segment profit after eliminations	$	(860)		$	5,753		$	4,893		$	25,589		$	7,868		$	33,457		Pre-tax segment profit after eliminations	$	11,052		$	10,674		$	21,726		$	42,303		$	11,915		$	54,218
% of segment pre-tax profit after eliminations	% of segment pre-tax profit after eliminations	(17.6)		%	117.6		%	100.0		%	76.5		%	23.5		%	100.0		%	% of segment pre-tax profit after eliminations	50.9		%	49.1		%	100.0		%	78.0		%	22.0		%	100.0		%
Segment assets (dollars in millions)	Segment assets (dollars in millions)	$	5,221.7		$	49.6		$	5,271.3		$	4,682.0		$	54.6		$	4,736.6		Segment assets (dollars in millions)	$	4,996.7		$	50.2		$	5,046.9		$	4,771.9		$	56.7		$	4,828.6

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

Wealth Management Segment Information


(dollars in millions)	(dollars in millions)	June 30, 2020		December 31, 2019		(dollars in millions)	September 30, 2020		December 31, 2019
Assets under management, administration, supervision and brokerage	Assets under management, administration, supervision and brokerage	$	17,012.9	$	16,548.1	Assets under management, administration, supervision and brokerage	$	17,244.3	$	16,548.1

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ITEM 2. Management’s Discussion and Analysis of Results of Operation and Financial Condition

The following discussion describes the significant changes to the financial condition of the Corporation that have occurred during the first ~~six~~nine months of 2020 compared to the financial condition as of December 31, 2019. In addition, this discussion summarizes the significant factors affecting the results of operations, liquidity and cash flows of the Corporation for the three and ~~six~~nine months ended ~~June~~September 30, 2020, compared to the same periods in 2019. This discussion should be read in conjunction with the accompanying condensed consolidated financial statements included in this report and our Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Annual Report”). Certain financial condition comparisons to the prior year and results of operations comparisons for the linked quarter are included for additional trend analysis.

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS

Certain of the statements contained in this Quarterly Report on Form 10-Q and the documents incorporated by reference herein may constitute forward-looking statements for the purposes of the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Such forward-looking statements may include financial and other projections as well as statements regarding the Corporation’s financial goals, future business plans, business prospects, credit quality, credit risk, reserve adequacy, liquidity, origination and sale of residential mortgage loans, mortgage servicing rights, the effect of changes in accounting standards, and market and pricing trends loss. The words “may,” “might,” “would,” “should,” “could,” “will,” “likely,” “possibly,” “expect,” “anticipate,” “intend,” “indicate,” “estimate,” “target,” “potentially,” “promising,” “probably,” “outlook,” “predict,” “contemplate,” “continue,” “plan,” “strategy,” “forecast,” “project,” “annualized,” “are optimistic,” “are looking,” “are looking forward,” and “believe” or other similar expressions may identify statements that constitute forward-looking statements. Persons reading this Quarterly Report on Form 10-Q are cautioned that such statements are only predictions and may involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements of the Corporation to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.

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

•local, regional, national and international economic conditions, their impact on us and our customers, and our ability to assess those impacts;

•our need for capital;

•reduced demand for our products and services, and lower revenues and earnings due to an economic recession;

•lower earnings due to other-than-temporary impairment charges related to our investment securities portfolios or other assets;

•changes in monetary or fiscal policy, or existing statutes, regulatory guidance, legislation or judicial decisions, including those concerning banking, securities. insurance or taxes, that adversely affect our business, the financial services industry as a whole, the Corporation, or our subsidiaries individually or collectively;

•changes in the level of non-performing assets and charge-offs;

•effectiveness of capital management strategies and activities;

•uncertainty relating to the LIBOR calculation process and potential phasing out of LIBOR after 2021;

•the effect of changes in accounting policies and practices or accounting standards, as may be adopted from time-to-time by bank regulatory agencies, the SEC, the Public Company Accounting Oversight Board, the FASB or other accounting standards setters, including ASU 2016-13 (Topic 326), “Measurement of Credit Losses on Financial Instruments,” commonly referenced as the Current Expected Credit Loss (“CECL”) model, which has changed how we estimate credit losses and may result in further increases in the required level of our allowance for credit losses;

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•inflation, securities market and monetary fluctuations, including changes in the market values of financial assets and the stability of particular securities markets;

•changes in interest rates, spreads on interest-earning assets and interest-bearing liabilities, and interest rate sensitivity;

•prepayment speeds, loan originations and credit losses;

•changes in the value of our mortgage servicing rights;

•sources of liquidity and financial resources in the amounts, at the times, and on the terms required to support our future business;

•possible credit-related impairments of securities held by us;

•results of examinations by the Board of Governors of the Federal Reserve System (the “Federal Reserve”) of the Corporation, including the possibility that such regulator may, among other things, require us to increase our allowance for loan losses or to write down assets, or restrict our ability to: engage in new products or services; engage in future mergers or acquisitions; open new branches; pay future dividends; or otherwise take action, or refrain from taking action, in order to correct activities or practices that the Federal Reserve believes may violate applicable law or constitute an unsafe or unsound banking practice;

•variances in common stock outstanding and/or volatility in common stock price;

•fair value of and number of stock-based compensation awards to be issued in future periods;

•risks related to our past or future, if any, mergers and acquisitions, including, but not limited to: reputational risks; client and customer retention risks; diversion of management’s time for integration-related issues; integration may take longer than anticipated or cost more than expected; anticipated benefits of the merger or acquisition, including any anticipated cost savings or strategic gains, may take longer or be significantly harder to achieve, or may not be realized;

•deposit attrition, operating costs, customer loss and business disruption following a merger or acquisition, including, without limitation, difficulties in maintaining relationships with employees, customers, and/or suppliers may be greater than expected;

•the credit risks of lending activities and overall quality of the composition of acquired loan, lease and securities portfolio;

•our success in continuing to generate new business in our existing markets, as well as identifying and penetrating targeted markets and generating a profit in those markets in a reasonable time;

•our ability to continue to generate investment results for customers or introduce competitive new products and services on a timely, cost-effective basis, including investment and banking products that meet customers’ needs;

•changes in consumer and business spending, borrowing and savings habits and demand for financial services in the relevant market areas;

•extent to which products or services previously offered (including but not limited to mortgages and asset back securities) require us to incur liabilities or absorb losses not contemplated at their initiation or origination;

•rapid technological developments and changes;

•technological systems failures, interruptions and security breaches, internally or through a third-party provider, could negatively impact our operations, customers and/or reputation;

•competitive pressure and practices of other commercial banks, thrifts, mortgage companies, finance companies, credit unions, securities brokerage firms, insurance companies, money-market and mutual funds and other institutions operating in our market areas and elsewhere, including institutions operating locally, regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone, computer and the internet;

•protection and validity of intellectual property rights;

•reliance on large customers;

•technological, implementation and cost/financial risks in contracts;

•the outcome of pending and future litigation and governmental proceedings;

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•any extraordinary events (such as natural disasters, global health risks or pandemics, acts of terrorism, wars or political conflicts), including the COVID-19 pandemic, and the effects of the economic and business environments in which we operate, including our credit quality and business operations, as well as the impact on general economic and financial market conditions;

•ability to retain key employees and members of senior management;

•changes in relationships with employees, customers, and/or suppliers;

•the ability of key third-party providers to perform their obligations to us and our subsidiaries;

•our need for capital, or our ability to control operating costs and expenses or manage loan and lease delinquency rates;

•other material adverse changes in operations or earnings; and

•our success in managing the risks involved in the foregoing.

All written or oral forward-looking statements attributed to the Corporation are expressly qualified in their entirety by the factors, risks, and uncertainties set forth in the foregoing cautionary statements, along with those set forth under the caption titled “Risk Factors” beginning on page 14 of the Corporation's 2019 Annual ~~Report.~~Report, as supplemented by those set forth under the caption titled “Risk Factors” beginning on page 82 of this Quarterly Report on Form 10-Q. All forward-looking statements included in this Quarterly Report and the documents incorporated by reference herein are based upon the Corporation’s beliefs and assumptions as of the date of this Quarterly Report. The Corporation assumes no obligation to update any forward-looking statement, whether the result of new information, future events, uncertainties or otherwise, as of any future date. In light of these risks, uncertainties and assumptions, you should not put undue reliance on any forward-looking statements discussed in this Quarterly Report or incorporated documents. For a complete discussion of the assumptions, risks and uncertainties related to our business, you are encouraged to review our filings with the SEC, including our 2019 Annual Report, as updated by our quarterly or other reports subsequently filed with the SEC.

Brief History of the Corporation

The Bryn Mawr Trust Company (the “Bank”) received its Pennsylvania banking charter in 1889 and is a member of the Federal Reserve System. In 1986, Bryn Mawr Bank Corporation (“BMBC”, and together with its subsidiaries, the “Corporation”) was formed and the Bank became a wholly-owned subsidiary of BMBC. The Bank and BMBC are headquartered in Bryn Mawr, Pennsylvania, a western suburb of Philadelphia. The Corporation offers a full range of personal and business banking services, consumer and commercial loans, equipment ~~leasing,~~finance, mortgages, insurance and wealth management services, including investment management, trust and estate administration, retirement planning, custody services, and tax planning and preparation from, 43as of September 30, 2020, 42 banking locations, five wealth management offices and two insurance and risk management locations in the following counties: Montgomery, Chester, Delaware, Philadelphia, and Dauphin Counties in Pennsylvania; New Castle County in Delaware; and Mercer and Camden Counties in New Jersey. The common stock of BMBC trades on the NASDAQ Stock Market (“NASDAQ”) under the symbol BMTC.

The Corporation operates in a highly competitive market area that includes local, national and regional banks as competitors along with savings banks, credit unions, insurance companies, trust companies, registered investment advisors and mutual fund families. BMBC and its subsidiaries are regulated by many agencies including the Securities and Exchange Commission (“SEC”), NASDAQ, Federal Deposit Insurance Corporation (“FDIC”), the Federal Reserve Bank of Philadelphia (the “FRB”) and the Pennsylvania Department of Banking and Securities. The goal of the Corporation is to become the preeminent community bank and wealth management organization in the Philadelphia area.

Critical Accounting Policies, Judgments and Estimates

The accounting and reporting policies of the Corporation conform to U.S. generally accepted accounting principles (“GAAP”). All significant intercompany balances and transactions are eliminated in consolidation and certain prior-period amounts have been reclassified when necessary in order to conform to current period presentation. In preparing the Consolidated Financial Statements, management is required to make estimates and assumptions that affect the reported amount of assets and liabilities as of the dates of the balance sheets and revenues and expenditures for the periods presented. Therefore, actual results could differ from these estimates. In preparing the Consolidated Financial Statements, the Corporation is required to make estimates and assumptions that affect the reported amount of assets and liabilities as of the dates of the balance sheets and revenues and expenditures for the periods presented. However, there are uncertainties inherent in making these estimates and actual results could differ from these estimates. The Corporation has identified certain areas that require estimates and assumptions, which include the allowance for credit losses (“ACL”) on loans and leases, the ACL on Off-Balance Sheet (“OBS”) Credit Exposures, the valuation of goodwill and intangible assets, the fair value of investment securities, the fair value of derivative financial instruments, and the valuation of mortgage servicing rights, deferred tax assets and liabilities, benefit plans and stock-based compensation. In addition, certain assets are measured at fair value on a

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~~compensation. In addition, certain assets are measured at fair value on a~~ nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances.

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

As a result, management has identified the accounting policies and estimates related to the ACL on loans and leases that, due to the inherent judgments and assumptions and the potential sensitivity of the financial statements to those judgments and assumptions, are critical to an understanding of our financial statements. We believe that the judgments, estimates and assumptions used in the preparation of the Company’s financial statements are appropriate. For a further description of our accounting policies, see Note 1, “Summary of Significant Accounting Policies,” in the Notes to the audited Consolidated Financial Statements in the 2019 Annual Report, as well as Note 1, “Basis of Presentation, Principles of Consolidation, and Significant Accounting Policies,” in the accompanying Notes to Unaudited Consolidated Financial Statements.

Allowance for Credit Losses on Loans and Leases

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and curtailments, incorporating loss expectations, and a weighted average remaining maturity (“WARM”) methodology which contemplates expected losses at a pool-level, utilizing historic loss information.

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

Impact of COVID-19

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

To address the economic impact in the U.S., in March and April 2020, the President signed into law four economic stimulus packages to provide relief to businesses and individuals, including the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). Among other measures, the CARES Act created funding for the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”), which provides loans to small businesses to keep their employees on payroll and make other eligible payments. The original funding for the PPP was fully allocated by mid-April 2020, with additional funding made available on April 24, 2020 under the Paycheck Protection Program and Health Care Enhancement Act.

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

We participated in the PPP and during the second quarter of 2020 originated 1,866 loans with a recorded investment of $307.9 million. Recognizing the significance of operational risk that this portfolio poses, and the continued complexity and uncertainty surrounding evolving regulatory pronouncements regarding various aspects of the PPP, management reviewed several options for continued servicing of the PPP loan portfolio through forgiveness and beyond. After thoughtful consideration, management decided that it is in the best interests of both the Bank and our PPP borrowers that the loans be serviced by an organization that has the servicing infrastructure in place to support the significant volume and short timeframe involved in the complex and evolving PPP forgiveness process. In that regard, in late June the Bank sold substantially all of its PPP loans to The Loan Source, Inc., which, together with its servicing partner, ACAP SME, LLC, have taken over the forgiveness and ongoing servicing process for the PPP loans. In connection with the sale, the Corporation recognized a $2.4 million gain on the sale of approximately $292.1 million of PPP loans in the second quarter of 2020. The remaining loans within the Bank's PPP portfolio were sold in the third quarter of 2020 and did not result in a material impact on our Consolidated Financial Statements. Also, the Corporation recognized $1.8 million of net deferred PPP loan origination fees during the second quarter of 2020, which is

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included within interest and fees on loans and leases on the Consolidated Statement of ~~Income.~~

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Income for the nine months ended September 30, 2020.

To provide relief from the economic impacts of COVID-19, the Corporation has offered assistance to our commercial, consumer and small business clients by waiving fees for early CD redemptions, overdrafts, and minimum deposit balance requirements, as well as implemented consumer and commercial loan modification programs.

The Corporation’s modification program for consumer credit products includes a six-month deferral of principal and interest, with interest continuing to accrue on unpaid principal. Upon completion of the deferral period, resumed payments will be applied to the interest accrued during the deferral period, followed by principal and interest payments through the extended maturity date. As of ~~June~~September 30, 2020, ~~209~~166 consumer loans in the amount of ~~$48.3~~$57.5 million were within ~~their~~a deferral ~~periods~~period under the ~~program.~~program, of which 162 consumer loans in the amount of $56.9 million are scheduled to resume contractual payments during the fourth quarter of 2020. Management is taking proactive measures and is working prudently with borrowers who may be unable to meet their obligations due to continuing financial challenges caused by COVID-19. As a result, the Bank ~~continues~~may enter into an additional modification in an effort to ~~receive~~mitigate losses for the Bank and ~~process applications, management expects additional modifications under~~ the ~~program.~~borrower.

The Corporation’s modification programs for commercial loan and lease products include a three- or six-month deferral of principal and interest or a three- or six-month period of interest-only payments, with interest continuing to accrue on unpaid principal. Upon completion of the deferral period, resumed payments will be applied to the interest accrued during the deferral period, followed by principal and interest payments through the contractual maturity date. As of ~~June~~September 30, 2020 ~~1,532~~386 commercial loans and leases in the amount of ~~$721.9~~$247.7 million were within ~~their~~a deferral ~~periods~~period under the ~~program.~~program, of which 384 commercial loans and leases in the amount of $247.6 million are scheduled to resume contractual payments during the fourth quarter of 2020. Management is taking proactive measures and is working prudently with borrowers who may be unable to meet their obligations due to continuing financial challenges caused by COVID-19. As a result, the Bank ~~continues~~may enter into an additional modification in an effort to ~~receive~~mitigate losses for the Bank and ~~process applications, management expects additional modifications under~~ the ~~program.~~borrower.

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

As discussed in more detail below, we recorded an increase in PCL and ACL on loans and leases, both of which were driven by the current and forward-looking adverse economic impacts of the COVID-19 pandemic.

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

Executive Overview

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

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

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Three Month Results of Operations

•Net income attributable to the Corporation was ~~$15.0~~$13.2 million, or ~~$0.75~~$0.66 diluted earnings per share, for the three months ended ~~June~~September 30, 2020 as compared to ~~$15.8~~$16.4 million, or ~~$0.78~~$0.81 diluted earnings per share for the same period in 2019.

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•Return on average equity (“ROAE”) and return on average assets (“ROAA”) for the three months ended ~~June~~September 30, 2020 were ~~10.07%~~8.60% and ~~1.16%~~1.02%, respectively, as compared to ROAE and ROAA of ~~10.89%~~10.90% and 1.36% respectively, for the same period in 2019.

•Tax-equivalent net interest income ~~increased $741 thousand,~~decreased $2.4 million, or ~~2.0%~~6.3%, to ~~$37.5~~$35.1 million for the three months ended ~~June~~September 30, 2020, as compared to ~~$36.7~~$37.5 million for the same period in 2019.

•Provision for credit losses (“PCL”) on loans and leases of ~~$4.3~~$3.6 million for the three months ended ~~June~~September 30, 2020 was an increase of $2.7 million from the $919 thousand PCL on loans and leases recorded for the same period in 2019.

•Noninterest income of $21.1 million for the three months ended September 30, 2020 increased $1.6 million as compared to $19.5 million for the same period in 2019.

•Fees for wealth management services and capital markets revenue of $11.7 million and $3.3 million, respectively, for the three months ended September 30, 2020 increased $881 thousand and $1.2 million, respectively, as compared to the same period in 2019. Insurance commissions of $1.7 million for the three months ended September 30, 2020 decreased $160 thousand as compared to the same period in 2019.

•Noninterest expense of $35.7 million for the three months ended September 30, 2020 increased $484 thousand, from $35.2 million for the same period in 2019.

Nine Month Results of Operations

•Net income attributable to the Corporation for the nine months ended September 30, 2020 was $17.0 million, a decrease of $25.8 million as compared to $42.8 million for the same period in 2019. Diluted earnings per share was $0.85 for the nine months ended September 30, 2020 as compared to $2.12 for the same period in 2019.

•ROAE and ROAA for the nine months ended September 30, 2020 were 3.74% and 0.45%, respectively, as compared to 9.82% and 1.23% respectively, for the same period in 2019.

•Tax-equivalent net interest income decreased $2.9 million, or 2.7%, to $109.1 million for the nine months ended September 30, 2020, as compared to $112.0 million for the same period in 2019.

•PCL on loans and leases of $40.3 million for the nine months ended September 30, 2020 was an increase of $34.0 million from the $6.3 million PCL on loans and leases recorded for the same period in 2019.

•Noninterest income of ~~$20.6~~$60.0 million for the ~~three~~nine months ended ~~June~~September 30, 2020 increased ~~$345 thousand~~$1.1 million as compared to ~~$20.2~~$58.9 million for the same period in 2019.

•Capital markets revenue of ~~$3.0~~$8.7 million for the ~~three~~nine months ended ~~June~~September 30, 2020 increased $1.5 million as compared to the same period in 2019. Fees for wealth management services and insurance commissions of $9.1 million and $1.3 million, respectively, for the three months ended June 30, 2020 decreased $2.4 million and $394 thousand, respectively, as compared to the same period in 2019.

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

~~Six Month Results of Operations~~

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

•~~ROAE and ROAA for the six months ended June 30, 2020 were 1.28% and 0.15%, respectively, as compared to 9.25% and 1.16% respectively, for the same period in 2019.~~

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

•~~PCL on loans and leases of $36.6 million for the six months ended June 30, 2020 was an increase of $31.2 million from the $5.4 million PCL on loans and leases recorded for the same period in 2019.~~

•~~Noninterest income of $38.9 million for the six months ended June 30, 2020 decreased $608 thousand as compared to $39.5 million for the same period in 2019.~~

•~~Capital markets revenue of $5.3 million for the six months ended June 30, 2020 increased $1.6~~$2.8 million as compared to the same period in 2019. Fees for wealth management services of ~~$20.2~~$31.9 million for the ~~six~~nine months ended ~~June~~September 30, 2020 decreased ~~$1.7 million~~$784 thousand as compared to the same period in 2019. Insurance commissions of ~~$2.8~~$4.5 million for the ~~six~~nine months ended ~~June~~September 30, 2020 decreased ~~$533~~$693 thousand as compared to the same period in 2019.

•Noninterest expense of ~~$71.1~~$106.7 million for the ~~six~~nine months ended ~~June~~September 30, 2020 decreased ~~$3.8~~$3.4 million, from ~~$74.9~~$110.1 million for the same period in 2019.

Changes in Financial Condition

•Total assets of ~~$5.27~~$5.05 billion as of ~~June~~September 30, 2020 ~~increased $8.1~~decreased $216.3 million from $5.26 billion ~~as of December 31, 2019.~~

•~~Total shareholders’ equity of $603.7 million as of June 30, 2020 decreased $8.5 million from $612.2 million as of December 31, 2019.~~

•~~Total portfolio loans and leases as of June 30, 2020 were $3.72 billion, an increase of $32.9 million from $3.69 billion as of December 31, 2019.~~

•~~Total non-performing loans and leases of $8.4 million represented 0.23% of portfolio loans and leases as of June 30, 2020 as compared to $10.6 million, or 0.29% of portfolio loans and leases~~ as of December 31, 2019.

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•Total shareholders’ equity of $612.6 million as of September 30, 2020 increased $390 thousand from $612.2 million as of December 31, 2019.

•Total portfolio loans and leases as of September 30, 2020 were $3.68 billion, a decrease of $12.6 million from $3.69 billion as of December 31, 2019.

•Total non-performing loans and leases of $8.6 million represented 0.23% of portfolio loans and leases as of September 30, 2020 as compared to $10.6 million, or 0.29% of portfolio loans and leases as of December 31, 2019.

•The ~~$55.0~~$56.4 million ACL on loans and leases, as of ~~June~~September 30, 2020, represented ~~1.48%~~1.53% of portfolio loans and leases, as compared to $22.6 million or 0.61% of portfolio loans and leases as of December 31, 2019.

•Total deposits of ~~$4.24~~$4.01 billion as of ~~June~~September 30, 2020 increased ~~$401.4~~$171.3 million from $3.84 billion as of December 31, 2019.

•Wealth assets under management, administration, supervision and brokerage as of ~~June~~September 30, 2020 were ~~$17.01~~$17.24 billion, an increase of ~~$464.8~~$696.2 million from $16.55 billion as of December 31, 2019.

Key Performance Ratios

Key financial performance ratios for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019 are shown in the table below:


		Three Months Ended June 30,									Six Months Ended June 30,										Three Months Ended September 30,						Nine Months Ended September 30,
		2020			2019			2020			2019				2020			2019			2020			2019
Return on average equity	Return on average equity	10.07		%	10.89		%	1.28		%	9.25		%	Return on average equity	8.60		%	10.90		%	3.74		%	9.82		%
Return on average assets	Return on average assets	1.16			1.36			0.15			1.16			Return on average assets	1.02			1.36			0.45			1.23
Tax-equivalent net interest margin	Tax-equivalent net interest margin	3.22			3.55			3.30			3.65			Tax-equivalent net interest margin	3.03			3.54			3.21			3.61
Equity to assets ratio	Equity to assets ratio	11.49			12.50			12.07			12.54			Equity to assets ratio	11.81			12.51			11.98			12.53
Basic earnings per share	Basic earnings per share	$	0.75		$	0.78		$	0.19		$	1.31		Basic earnings per share	$	0.66		$	0.81		$	0.85		$	2.13
Diluted earnings per share	Diluted earnings per share	0.75			0.78			0.19			1.31			Diluted earnings per share	0.66			0.81			0.85			2.12
Dividends paid or accrued per share	Dividends paid or accrued per share	0.26			0.25			0.52			0.50			Dividends paid or accrued per share	0.27			0.26			0.79			0.76
Dividends paid or accrued per share to net income per basic common share	Dividends paid or accrued per share to net income per basic common share	34.7		%	32.1		%	273.7		%	38.2		%	Dividends paid or accrued per share to net income per basic common share	40.9		%	32.1		%	92.9		%	35.7		%

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


(dollars in millions, except per share amounts)	(dollars in millions, except per share amounts)	June 30, 2020			December 31, 2019			(dollars in millions, except per share amounts)	September 30, 2020			December 31, 2019
Book value per share	Book value per share	$	30.29		$	30.42		Book value per share	$	30.70		$	30.42

ACL on loans and leases as a percentage of portfolio loans and leases	ACL on loans and leases as a percentage of portfolio loans and leases	1.48		%	0.61		%	ACL on loans and leases as a percentage of portfolio loans and leases	1.53		%	0.61		%
Tier I capital to risk weighted assets	Tier I capital to risk weighted assets	11.27			11.42			Tier I capital to risk weighted assets	11.48			11.42

Loan to deposit ratio	Loan to deposit ratio	87.7			96.0			Loan to deposit ratio	91.6			96.0
Wealth assets under management, administration, supervision and brokerage	Wealth assets under management, administration, supervision and brokerage	$	17,012.9		$	16,548.1		Wealth assets under management, administration, supervision and brokerage	$	17,244.3		$	16,548.1
Portfolio loans and leases	Portfolio loans and leases	3,722.2			3,689.3			Portfolio loans and leases	3,676.7			3,689.3
Total assets	Total assets	5,271.3			5,263.3			Total assets	5,046.9			5,263.3
Total shareholders’ equity	Total shareholders’ equity	603.7			612.2			Total shareholders’ equity	612.6			612.2

The following sections discuss, in greater detail, the Corporation’s results of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2020, as compared to the same period in 2019, and the changes in its financial condition as of ~~June~~September 30, 2020 as compared to December 31, 2019.

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Other Matters

Crusader Servicing Corporation (“Crusader”), which was an 80% owned subsidiary of Royal Bank America that was acquired by the Bank in the RBPI merger, along with the Bank as successor-in-interest to Royal Bank America, are defendants in the case captioned Snyder v. Crusader Servicing Corporation et al., Case No. 2007-01027, in the Court of Common Pleas of Montgomery County, Pennsylvania. The case involves claims brought by a former Crusader shareholder in 2007 against Crusader, its former directors and remaining shareholders related, among other things, to a purported failure to pay amounts allegedly due to Snyder for his shares of Crusader stock. On May 1, 2019, the Court rendered a decision in favor of Snyder and ordered Crusader to pay Snyder the amount of $2,190,000 plus interest at the rate of 6% from December 1, 2006. The matter was appealed, and on March 18, 2020, the Superior Court of the Commonwealth of Pennsylvania returned an opinion reversing in part and affirming in part the trial court's judgment. The effect of this was to vacate the judgment of $2,190,000 plus interest, and instead to require an appraisal process in accordance with Crusader's Shareholders' Agreement to determine the value of

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Mr. Snyder's shares. The parties anticipate the appraisal to commence within the coming months. We do not believe that this ruling and any monetary award ultimately payable by Crusader will be material to the consolidated financial position, consolidated results of operations or consolidated cash flows of the Corporation.

Components of Net Income

Net income is comprised of five major elements:

•Net Interest Income, or the difference between the interest income earned on loans, leases and investments and the interest expense paid on deposits and borrowed funds;

•Provision for Credit Losses on Loans and Leases, or ~~the amount added to~~changes in the ACL on ~~loans and leases to provide for estimated inherent losses on portfolio~~ loans and leases;

•Noninterest Income, which is made up primarily of wealth management revenue, capital markets revenue, gains and losses from the sale of residential mortgage loans, gains and losses from the sale of available for sale investment securities and other fees from loan and deposit services;

•Noninterest Expense, which consists primarily of salaries and employee benefits, occupancy, intangible asset amortization, professional fees, due diligence, merger-related and merger integration expenses, and other operating expenses; and

•Income Tax Expense, which includes state and federal jurisdictions.

TAX-EQUIVALENT NET INTEREST INCOME

Net interest income is the primary source of the Corporation’s revenue. The tables within "Management’s Discussion and Analysis of Results of Operation and Financial Condition – Analyses of Interest Rates and Interest Differential” beginning at page 67below ~~table presents~~present a summary, for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, of the Corporation’s average balances and tax-equivalent yields earned on its interest-earning assets and the rates paid on its interest-bearing liabilities. The tax-equivalent net interest margin is the tax-equivalent net interest income as a percentage of average interest-earning assets. The tax-equivalent net interest spread is the difference between the weighted average tax-equivalent yield on interest-earning assets and the weighted average cost of interest-bearing liabilities. The effect of noninterest-bearing liabilities represents the effect on the net interest margin of net funding provided by noninterest-earning assets, noninterest-bearing liabilities and shareholders’ equity.

Three Months Ended ~~June~~September 30, 2020 Compared to the Same Period in 2019

For the three months ended ~~June~~September 30, 2020, tax-equivalent net interest income ~~increased $741 thousand,~~decreased $2.4 million, or ~~2.0%~~6.3%, to ~~$37.5~~$35.1 million, as compared to ~~$36.7~~$37.5 million for the same period in 2019.

Items contributing to the ~~increase~~decrease in tax-equivalent net interest income included ~~a decrease of $5.2 million in interest paid on deposits, partially offset by~~ decreases of ~~$4.1~~$8.7 million and ~~$642 thousand~~$1.2 million in tax-equivalent interest and fees earned on loans and leases and tax-equivalent interest income on available for sale investment securities, respectively, partially offset by decreases of $6.5 million and $929 thousand in interest paid on deposits and interest expense on short-term borrowings, respectively, for the three months ended ~~June 30, 2020 as compared to the same period in 2019.~~

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

Tax-equivalent interest and fees earned on loans and leases for the three months ended ~~June~~September 30, 2020 decreased ~~$4.1~~$8.7 million as compared to the same period in 2019. The ~~decrease was primarily due to a 95 basis point decrease in the~~ tax-equivalent yield on average loans and leases for the three months ended ~~June~~September 30, 2020 was 3.97%, a 116 basis point decrease as compared to the same period in 2019. The effect of the decrease in the tax-equivalent yield was partially offset by an increase of ~~$415.8~~$168.6 million in average loans and leases for the three months ended ~~June~~September 30, 2020 as compared to same period in 2019.

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Tax-equivalent interest income on available for sale investment securities for the three months ended September 30, 2020 decreased $1.2 million as compared to the same period in 2019. The tax-equivalent yield on average available for sale investment securities for the three months ended September 30, 2020 was 1.86%, a 65 basis point decrease as compared to the same period in 2019 coupled with a decrease of $47.7 million in average available for sale investment securities for the three months ended September 30, 2020 as compared to the same period in 2019.

Interest expense on deposits for the three months ended September 30, 2020 decreased $6.5 million as compared to the same period in 2019. The rate paid on average interest-bearing deposits for the three months ended September 30, 2020 was 0.41%, a 95 basis point decrease as compared to the same period in 2019. The effect of the decrease in the tax-equivalent rate paid was partially offset by an increase of $115.4 million in average interest-bearing deposits for the three months ended September 30, 2020 as compared to the same period in 2019.

Interest expense on short-term borrowings for the three months ended September 30, 2020 decreased $929 thousand as compared to the same period in 2019. The decrease was primarily due to a $140.1 million decrease in average short-term borrowings for the three months ended September 30, 2020 as compared to the same period in 2019 coupled with a 208 basis point decrease in the rate paid for the three months ended September 30, 2020 as compared to the same period in 2019.

Nine Months Ended September 30, 2020 Compared to the Same Period in 2019

For the nine months ended September 30, 2020, tax-equivalent net interest income decreased $2.9 million, or 2.7%, to $109.1 million, as compared to $112.0 million for the same period in 2019.

Items contributing to the decrease in tax-equivalent net interest income included decreases of $14.9 million and $2.2 million in tax-equivalent interest and fees earned on loans and leases and tax-equivalent interest income on available for sale investment securities, respectively, partially offset by decreases of $12.2 million and $1.5 million in interest paid on deposits and interest expense on short-term borrowings, respectively, for the nine months ended September 30, 2020 as compared to the same period in 2019.

Tax-equivalent interest and fees earned on loans and leases for the nine months ended September 30, 2020 decreased $14.9 million as compared to the same period in 2019. The tax-equivalent yield on average loans and leases for the nine months ended September 30, 2020 was 4.25%, a 91 basis point decrease as compared to the same period in 2019. The effect of the decrease in the tax-equivalent yield was partially offset by an increase of $281.1 million in average loans and leases for the nine months ended September 30, 2020 as compared to same period in 2019. Included in tax-equivalent interest and fees earned on loans and leases for the ~~three~~nine months ended ~~June~~September 30, 2020 was the recognition of $1.8 million of net deferred PPP loan origination fees.

Tax-equivalent interest income on available for sale investment securities for the ~~three~~nine months ended ~~June~~September 30, 2020 decreased ~~$642 thousand~~$2.2 million as compared to the same period in 2019. The ~~decrease was primarily due to a 27 basis point decrease in the~~ tax-equivalent yield on average available for sale investment securities for the ~~three~~nine months ended ~~June~~September 30, 2020 was 2.13%, a 35 basis point decrease as compared to the same period in 2019 coupled with a decrease of ~~$47.1~~$42.5 million in average available for sale investment securities for the ~~three~~nine months ended ~~June 30, 2020 as compared to the same period in 2019.~~

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

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

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

Tax-equivalent interest and fees earned on loans and leases for the six months ended June 30, 2020 decreased $6.2 million as compared to the same period in 2019. The decrease was primarily due to an 80 basis point decrease in the tax-equivalent yield on average loans and leases for the six months ended June 30, 2020 as compared to the same period in 2019. The effect of the decrease in the tax-equivalent yield was partially offset by an increase of $338.1 million in average loans and leases for the six months ended June 30, 2020 as compared to same period in 2019. Included in tax-equivalent interest and fees earned on loans and leases for the six months ended June 30, 2020 was the recognition of $1.8 million of net deferred PPP loan origination fees.

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

Interest expense on deposits for the ~~six~~nine months ended ~~June~~September 30, 2020 decreased ~~$5.6~~$12.2 million as compared to the same period in 2019. The ~~decrease was primarily due to a 47 basis point decrease in the~~ rate paid on average interest-bearing deposits for the ~~six~~nine months ended ~~June~~September 30, 2020 was 0.69%, a 64 basis point decrease as compared to the same period in 2019. The effect of the decrease in the tax-equivalent rate paid was partially offset by an increase of ~~$176.6~~$156.0 million in average interest-bearing deposits for the ~~six~~nine months ended ~~June~~September 30, 2020 as compared to the same period in 2019.

Interest expense on short-term borrowings for the ~~six~~nine months ended ~~June~~September 30, 2020 decreased ~~$615 thousand~~$1.5 million as compared to the same period in 2019. The decrease was primarily due to a ~~133~~135 basis point decrease in the rate paid ~~on average short-term borrowings~~ for the ~~six~~nine months ended ~~June~~September 30, 2020 as compared to the same period in ~~2019. The effect of the~~2019 coupled with a $29.9 million decrease ~~in the rate paid was partially offset by an increase of $25.9 million~~ in average short-term borrowings for the ~~six~~nine months ended ~~June~~September 30, 2020 as compared to the same period in 2019.

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Analyses of Interest Rates and Interest Differential

The tables below present the major asset and liability categories on an average daily balance basis for the periods presented, along with interest income, interest expense and key rates and yields.


		Three Months Ended June 30,																								Three Months Ended September 30,
		2020										2019											2020					2019
(dollars in thousands)	(dollars in thousands)	Average Balance		Interest Income/ Expense		Average Rates Earned/ Paid		Average Balance		Interest Income/ Expense		Average Rates Earned/ Paid		(dollars in thousands)	Average Balance		Interest Income/ Expense		Average Rates Earned/ Paid		Average Balance			Interest Income/ Expense		Average Rates Earned/ Paid
Assets:	Assets:													Assets:
Interest-bearing deposits with banks	Interest-bearing deposits with banks	$	195,966	$	37	0.08	%	$	37,843	$	73	0.77	%	Interest-bearing deposits with banks	$	336,225	$	85	0.10	%	$	48,597		$	143	1.17	%
Investment securities - available for sale:	Investment securities - available for sale:													Investment securities - available for sale:
Taxable	Taxable	516,823		2,775		2.16		560,999		3,400		2.43		Taxable	550,199		2,562		1.85		594,975			3,765		2.51
Tax-exempt⁽⁴⁾	Tax-exempt⁽⁴⁾	4,572		26		2.29		7,530		43		2.29		Tax-exempt(4)	3,690		23		2.48		6,594			36		2.17
Total investment securities – available for sale	Total investment securities – available for sale	521,395		2,801		2.16		568,529		3,443		2.43		Total investment securities – available for sale	553,889		2,585		1.86		601,569			3,801		2.51
Investment securities – held to maturity	Investment securities – held to maturity	13,126		73		2.24		10,417		71		2.73		Investment securities – held to maturity	12,248		57		1.85		12,360			80		2.57
Investment securities – trading	Investment securities – trading	7,800		24		1.24		8,572		24		1.12		Investment securities – trading	7,957		21		1.05		8,407			27		1.27
Loans and leases^(1)(2)(3)(4)	Loans and leases^(1)(2)(3)(4)	3,940,032		40,779		4.16		3,524,219		44,903		5.11		Loans and leases(1)(2)(3)(4)	3,701,495		36,901		3.97		3,532,923			45,642		5.13
Total interest-earning assets	Total interest-earning assets	4,678,319		43,714		3.76		4,149,580		48,514		4.69		Total interest-earning assets	4,611,814		39,649		3.42		4,203,856			49,693		4.69
Cash and due from banks	Cash and due from banks	16,263						13,725						Cash and due from banks	16,557						12,890
ACL on loans and leases	ACL on loans and leases	(54,113)						(20,844)						ACL on loans and leases	(55,285)						(21,438)
Other assets	Other assets	585,605						509,164						Other assets	584,502						564,766
Total assets	Total assets	$	5,226,074					$	4,651,625					Total assets	$	5,157,588					$	4,760,074
Liabilities:	Liabilities:													Liabilities:
Savings, NOW, and market rate accounts	Savings, NOW, and market rate accounts	$	2,313,150	$	2,341	0.41		$	1,928,755	$	5,040	1.05		Savings, NOW, and market rate accounts	$	2,282,591	$	1,042	0.18		$	1,996,181		$	5,445	1.08
Wholesale deposits	Wholesale deposits	245,052		486		0.80		345,782		2,143		2.49		Wholesale deposits	223,527		465		0.83		299,309			1,729		2.29
Retail time deposits	Retail time deposits	410,911		1,649		1.61		520,317		2,472		1.91		Retail time deposits	385,534		1,460		1.51		480,736			2,336		1.93
Total interest-bearing deposits	Total interest-bearing deposits	2,969,113		4,476		0.61		2,794,854		9,655		1.39		Total interest-bearing deposits	2,891,652		2,967		0.41		2,776,226			9,510		1.36
Short-term borrowings	Short-term borrowings	136,816		232		0.68		68,529		357		2.09		Short-term borrowings	29,913		8		0.11		169,985			937		2.19
Long-term FHLB advances	Long-term FHLB advances	46,161		155		1.35		52,397		269		2.06		Long-term FHLB advances	44,849		234		2.08		45,698			243		2.11
Subordinated notes	Subordinated notes	98,770		1,144		4.66		98,587		1,144		4.65		Subordinated notes	98,815		1,094		4.40		98,634			1,145		4.61
Junior subordinated debt	Junior subordinated debt	21,814		229		4.22		21,637		352		6.53		Junior subordinated debt	21,859		207		3.77		21,680			340		6.22
Total interest-bearing liabilities	Total interest-bearing liabilities	3,272,674		6,236		0.77		3,036,004		11,777		1.56		Total interest-bearing liabilities	3,087,088		4,510		0.58		3,112,223			12,175		1.55
Noninterest-bearing deposits	Noninterest-bearing deposits	1,126,139						909,945						Noninterest-bearing deposits	1,220,570						903,314
Other liabilities	Other liabilities	226,698						124,211						Other liabilities	240,737						149,226
Total noninterest-bearing liabilities	Total noninterest-bearing liabilities	1,352,837						1,034,156						Total noninterest-bearing liabilities	1,461,307						1,052,540
Total liabilities	Total liabilities	4,625,511						4,070,160						Total liabilities	4,548,395						4,164,763
Shareholders’ equity	Shareholders’ equity	600,563						581,465						Shareholders’ equity	609,193						595,311
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	5,226,074					$	4,651,625					Total liabilities and shareholders’ equity	$	5,157,588					$	4,760,074
Net interest spread	Net interest spread					2.99						3.13		Net interest spread					2.84							3.14
Effect of noninterest-bearing sources	Effect of noninterest-bearing sources					0.23						0.42		Effect of noninterest-bearing sources					0.19							0.40
Net interest income/margin on earning assets⁽⁴⁾	Net interest income/margin on earning assets⁽⁴⁾			$	37,478	3.22				$	36,737	3.55		Net interest income/margin on earning assets(4)			$	35,139	3.03					$	37,518	3.54
Tax-equivalent adjustment⁽⁴⁾	Tax-equivalent adjustment⁽⁴⁾			$	93	0.01	%			$	126	0.01	%	Tax-equivalent adjustment(4)			$	107	0.01	%				$	120	0.01	%

(1)Non-accrual loans have been included in average loan balances, but interest on non-accrual loans has not been included for purposes of determining interest income.

(2)Includes portfolio loans and leases and loans held for sale.

(3)Interest on loans and leases includes net accretion of deferred fees of ~~$258~~$267 thousand and ~~$634~~$885 thousand for the three months ended ~~June~~September 30, 2020 and 2019, respectively.

(4)Tax rate used for tax-equivalent calculations is 21% for 2020 and 2019.

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		Six Months Ended June 30,																								Nine Months Ended September 30,
		2020										2019											2020					2019
(dollars in thousands)	(dollars in thousands)	Average Balance		Interest Income/ Expense		Average Rates Earned/ Paid		Average Balance		Interest Income/ Expense		Average Rates Earned/ Paid		(dollars in thousands)	Average Balance		Interest Income/ Expense		Average Rates Earned/ Paid		Average Balance			Interest Income/ Expense		Average Rates Earned/ Paid
Assets:	Assets:													Assets:
Interest-bearing deposits with banks	Interest-bearing deposits with banks	$	123,148	$	148	0.24	%	$	35,306	$	205	1.17	%	Interest-bearing deposits with banks	$	194,652	$	233	0.16	%	$	39,785		$	348	1.17	%
Investment securities - available for sale:	Investment securities - available for sale:													Investment securities - available for sale:
Taxable	Taxable	516,534		5,840		2.27		552,391		6,763		2.47		Taxable	527,837		8,402		2.13		566,742			10,528		2.48
Tax-exempt⁽⁴⁾	Tax-exempt⁽⁴⁾	4,740		54		2.29		8,656		98		2.28		Tax-exempt(4)	4,388		77		2.34		7,961			134		2.25
Total investment securities – available for sale	Total investment securities – available for sale	521,274		5,894		2.27		561,047		6,861		2.47		Total investment securities – available for sale	532,225		8,479		2.13		574,703			10,662		2.48
Investment securities – held to maturity	Investment securities – held to maturity	13,160		160		2.44		9,615		138		2.89		Investment securities – held to maturity	12,854		217		2.26		10,540			218		2.77
Investment securities – trading	Investment securities – trading	8,164		49		1.21		8,103		46		1.14		Investment securities – trading	8,095		70		1.16		8,206			73		1.19
Loans and leases^(1)(2)(3)(4)	Loans and leases^(1)(2)(3)(4)	3,839,208		83,677		4.38		3,501,107		89,861		5.18		Loans and leases(1)(2)(3)(4)	3,792,969		120,578		4.25		3,511,829			135,503		5.16
Total interest-earning assets	Total interest-earning assets	4,504,954		89,928		4.01		4,115,178		97,111		4.76		Total interest-earning assets	4,540,795		129,577		3.81		4,145,063			146,804		4.74
Cash and due from banks	Cash and due from banks	14,371						14,068						Cash and due from banks	15,145						13,671
Allowance for loan and lease losses	Allowance for loan and lease losses	(39,950)						(20,368)						Allowance for loan and lease losses	(45,099)						(20,729)
Other assets	Other assets	556,120						489,794						Other assets	565,649						515,059
Total assets	Total assets	$	5,035,495					$	4,598,672					Total assets	$	5,076,490					$	4,653,064
Liabilities:	Liabilities:													Liabilities:
Savings, NOW, and market rate accounts	Savings, NOW, and market rate accounts	$	2,255,215	$	7,322	0.65		$	1,863,790	$	8,804	0.95		Savings, NOW, and market rate accounts	$	2,264,407	$	8,364	0.49		$	1,908,405		$	14,249	1.00
Wholesale deposits	Wholesale deposits	249,186		1,463		1.18		344,247		4,155		2.43		Wholesale deposits	240,571		1,928		1.07		329,103			5,884		2.39
Retail time deposits	Retail time deposits	407,011		3,328		1.64		526,820		4,793		1.83		Retail time deposits	399,799		4,788		1.60		511,290			7,129		1.86
Total interest-bearing deposits	Total interest-bearing deposits	2,911,412		12,113		0.84		2,734,857		17,752		1.31		Total interest-bearing deposits	2,904,777		15,080		0.69		2,748,798			27,262		1.33
Short-term borrowings	Short-term borrowings	138,700		685		0.99		112,844		1,300		2.32		Short-term borrowings	102,173		693		0.91		132,100			2,237		2.26
Long-term FHLB advances	Long-term FHLB advances	46,748		399		1.72		53,883		547		2.05		Long-term FHLB advances	46,110		633		1.83		51,125			790		2.07
Subordinated notes	Subordinated notes	98,748		2,289		4.66		98,564		2,289		4.68		Subordinated notes	98,770		3,383		4.58		98,588			3,434		4.66
Junior subordinated debt	Junior subordinated debt	21,791		524		4.84		21,616		710		6.62		Junior subordinated debt	21,814		731		4.48		21,638			1,050		6.49
Total interest-bearing liabilities	Total interest-bearing liabilities	3,217,399		16,010		1.00		3,021,764		22,598		1.51		Total interest-bearing liabilities	3,173,644		20,520		0.86		3,052,249			34,773		1.52
Noninterest-bearing deposits	Noninterest-bearing deposits	1,010,202						890,941						Noninterest-bearing deposits	1,080,837						895,111
Other liabilities	Other liabilities	200,107						109,165						Other liabilities	213,750						122,665
Total noninterest-bearing liabilities	Total noninterest-bearing liabilities	1,210,309						1,000,106						Total noninterest-bearing liabilities	1,294,587						1,017,776
Total liabilities	Total liabilities	4,427,708						4,021,870						Total liabilities	4,468,231						4,070,025
Shareholders’ equity	Shareholders’ equity	607,787						576,802						Shareholders’ equity	608,259						583,039
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	5,035,495					$	4,598,672					Total liabilities and shareholders’ equity	$	5,076,490					$	4,653,064
Net interest spread	Net interest spread					3.01						3.25		Net interest spread					2.95							3.22
Effect of noninterest-bearing sources	Effect of noninterest-bearing sources					0.29						0.40		Effect of noninterest-bearing sources					0.26							0.39
Net interest income/margin on earning assets⁽⁴⁾	Net interest income/margin on earning assets⁽⁴⁾			$	73,918	3.30				$	74,513	3.65		Net interest income/margin on earning assets(4)			$	109,057	3.21					$	112,031	3.61
Tax-equivalent adjustment⁽⁴⁾	Tax-equivalent adjustment⁽⁴⁾			$	200	0.01	%			$	255	0.01	%	Tax-equivalent adjustment(4)			$	307	0.01	%				$	375	0.01	%

(1)Non-accrual loans have been included in average loan balances, but interest on non-accrual loans has not been included for purposes of determining interest income.

(2)Includes portfolio loans and leases and loans held for sale.

(3)Interest on loans and leases includes deferred fees of ~~$620~~$887 thousand and ~~$919 thousand~~$1.8 million for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively.

(4)Tax rate used for tax-equivalent calculations is 21% for 2020 and 2019.

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Rate/Volume Analysis (tax-equivalent basis)⁽¹⁾

The rate/volume analysis in the table below analyzes dollar changes in the components of interest income and interest expense as they relate to the change in balances (volume) and the change in interest rates (rate) of tax-equivalent net interest income for

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the three and ~~six~~nine months ended ~~June~~September 30, 2020 as compared to the same period in 2019, allocated by rate and volume. The change in interest income and/or expense due to both volume and rate has been allocated to changes in volume.


		2020 Compared to 2019																								2020 Compared to 2019
(dollars in thousands)	(dollars in thousands)	Three Months Ended June 30,										Six Months Ended June 30,											(dollars in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
increase/(decrease)	increase/(decrease)	Volume		Rate		Total		Volume		Rate		Total		increase/(decrease)	Volume		Rate		Total		Volume			Rate		Total
Interest Income:	Interest Income:													Interest Income:
Interest-bearing deposits with banks	Interest-bearing deposits with banks	$	1,264	$	(1,300)	$	(36)	$	1,056	$	(1,113)	$	(57)	Interest-bearing deposits with banks	$	3,450	$	(3,508)	$	(58)	$	1,831		$	(1,946)	$	(115)
Investment securities - taxable	Investment securities - taxable	(211)		(412)		(623)		(337)		(561)		(898)		Investment securities - taxable	(286)		(946)		(1,232)		(666)			(1,464)		(2,130)
Investment securities -nontaxable	Investment securities -nontaxable	(17)		—		(17)		(45)		1		(44)		Investment securities -nontaxable	(30)		17		(13)		(62)			5		(57)
Loans and leases	Loans and leases	25,614		(29,738)		(4,124)		20,061		(26,245)		(6,184)		Loans and leases	12,931		(21,672)		(8,741)		16,011			(30,936)		(14,925)
Total interest income	Total interest income	26,650		(31,450)		(4,800)		20,735		(27,918)		(7,183)		Total interest income	16,065		(26,109)		(10,044)		17,114			(34,341)		(17,227)
Interest expense:	Interest expense:													Interest expense:
Savings, NOW and market rate accounts	Savings, NOW and market rate accounts	5,765		(8,464)		(2,699)		4,274		(5,756)		(1,482)		Savings, NOW and market rate accounts	4,801		(9,204)		(4,403)		4,056			(9,941)		(5,885)
Wholesale deposits	Wholesale deposits	(625)		(1,032)		(1,657)		(1,146)		(1,546)		(2,692)		Wholesale deposits	(439)		(825)		(1,264)		(1,582)			(2,374)		(3,956)
Retail time deposits	Retail time deposits	(518)		(305)		(823)		(1,083)		(382)		(1,465)		Retail time deposits	(466)		(410)		(876)		(1,559)			(782)		(2,341)
Short-term borrowings	Short-term borrowings	1,587		(1,712)		(125)		754		(1,369)		(615)		Short-term borrowings	(772)		(157)		(929)		(508)			(1,036)		(1,544)
Long-term FHLB advances	Long-term FHLB advances	(32)		(82)		(114)		(72)		(76)		(148)		Long-term FHLB advances	(5)		(4)		(9)		(76)			(81)		(157)
Subordinated notes	Subordinated notes	—		—		—		12		(12)		—		Subordinated notes	14		(65)		(51)		10			(61)		(51)
Junior subordinated debt	Junior subordinated debt	20		(143)		(123)		17		(203)		(186)		Junior subordinated debt	19		(152)		(133)		14			(333)		(319)
Total interest expense	Total interest expense	6,197		(11,738)		(5,541)		2,756		(9,344)		(6,588)		Total interest expense	3,152		(10,817)		(7,665)		355			(14,608)		(14,253)
Interest differential	Interest differential	$	20,453	$	(19,712)	$	741	$	17,979	$	(18,574)	$	(595)	Interest differential	$	12,913	$	(15,292)	$	(2,379)	$	16,759		$	(19,733)	$	(2,974)

(1) The tax rate used in the calculation of the tax-equivalent income is 21% for 2020 and 2019.

Tax-Equivalent Net Interest Margin

The tax-equivalent net interest margin of ~~3.22%~~3.03% for the three months ended ~~June~~September 30, 2020 was a 3351 basis point decrease from ~~3.55%~~3.54% for the same period in 2019. The decrease in the tax-equivalent net interest margin was primarily due to the reduced interest rates during the three months ended ~~June~~September 30, 2020 as compared to the same period in ~~2019 and driven by management's active balance sheet management in the current interest rate environment.~~2019.

The tax-equivalent net interest margin and related components for the past five consecutive quarters are shown in the table below:


Quarter	Quarter	Interest- Earning Asset Yield	Interest- Bearing Liability Cost	Net Interest Spread	Effect of Noninterest Bearing Sources	Net Interest Margin	Quarter	Interest- Earning Asset Yield	Interest- Bearing Liability Cost	Net Interest Spread	Effect of Noninterest Bearing Sources	Net Interest Margin
3rd Quarter 2020							3rd Quarter 2020	3.42%	0.58%	2.84%	0.19%	3.03%
2nd Quarter 2020	2nd Quarter 2020	3.76%	0.77%	2.99%	0.23%	3.22%	2nd Quarter 2020	3.76	0.77	2.99	0.23	3.22
1st Quarter 2020	1st Quarter 2020	4.29	1.24	3.05	0.33	3.38	1st Quarter 2020	4.29	1.24	3.05	0.33	3.38
4th Quarter 2019	4th Quarter 2019	4.39	1.41	2.98	0.38	3.36	4th Quarter 2019	4.39	1.41	2.98	0.38	3.36
3rd Quarter 2019	3rd Quarter 2019	4.69	1.55	3.14	0.40	3.54	3rd Quarter 2019	4.69	1.55	3.14	0.40	3.54
2nd Quarter 2019		4.69	1.56	3.13	0.42	3.55

Interest Rate Sensitivity

Management actively manages the Corporation’s interest rate sensitivity position. The objectives of interest rate risk management are to control exposure of net interest income changes associated with interest rate movements and to achieve sustainable growth in net interest income. The Corporation’s Asset Liability Committee (“ALCO”), using policies approved by

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the Corporation’s Board of Directors, is responsible for the management of the Corporation’s interest rate sensitivity position. The Corporation manages interest rate sensitivity by changing the mix, pricing and re-pricing characteristics of its assets and liabilities. This is accomplished through the management of the investment portfolio, the pricings of loans and deposit offerings and through wholesale funding. Wholesale funding is available from multiple sources including borrowings from the FHLB, the

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Federal Reserve Bank of Philadelphia’s discount window, federal funds from correspondent banks, certificates of deposit from institutional brokers, Certificate of Deposit Account Registry Service (“CDARS”), Insured Network Deposit (“IND”) Program, and Insured Cash Sweep (“ICS”).

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

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

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

Summary of Interest Rate Simulation


		Change in Net Interest Income Over the Twelve Months Beginning After June 30, 2020						Change in Net Interest Income Over the Twelve Months Beginning After December 31, 2019							Change in Net Interest Income Over the Twelve Months Beginning After September 30, 2020				Change in Net Interest Income Over the Twelve Months Beginning After December 31, 2019
		Amount		Percentage		Amount		Percentage			Amount		Percentage		Amount		Percentage
+300 basis points	+300 basis points	$	5,902	4.13	%	$	15,357	10.52	%	+300 basis points	$	18,816	13.18	%	$	15,357	10.52	%
+200 basis points	+200 basis points	4,291		3.01		10,217		7.00		+200 basis points	12,165		8.52		10,217		7.00
+100 basis points	+100 basis points	2,534		1.78		5,079		3.48		+100 basis points	5,844		4.09		5,079		3.48
-100 basis points	-100 basis points	(894)		0.63		(6,817)		(4.67)		-100 basis points	(3,239)		(2.27)		(6,817)		(4.67)

The above interest rate simulation suggests that the Corporation’s balance sheet is asset sensitive as of ~~June~~September 30, 2020 in the +100 basis point scenario, demonstrating that a 100 basis point increase in interest rates would have a positive impact on net interest income over the next 12 months. The balance sheet is ~~significantly less~~more asset sensitive in a rising-rate environment as of ~~June~~September 30, 2020 than it was as of December 31, 2019. Rates declined significantly during the quarter due to economic conditions related to the COVID-19 pandemic. The Bank responded to ~~these concerns~~the declining rate environment due to the COVID-19 pandemic economic downturn by decreasing rates on deposit accounts to offset some of the ~~decline that it would experience~~loss experienced on the asset side. The reduction of loss of net interest income as rates decline 100 basis points is partially the result of floor rates being implemented on the asset side as well as the inability for rates to decline much further on the deposit side.

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

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Gap Analysis

The interest sensitivity, or gap analysis, identifies interest rate risk by showing repricing gaps in the Corporation’s balance sheet. All assets and liabilities are reflected based on behavioral sensitivity, which is usually the earliest of: repricing, maturity, contractual amortization, prepayments or likely call dates. Non-maturity deposits, such as NOW, savings and money market accounts are spread over various time periods based on the expected sensitivity of these rates considering liquidity. Non-rate-sensitive assets and liabilities are spread over time periods to reflect management’s view of the maturity of these funds.

Non-maturity deposits (demand deposits in particular) are recognized by the industry to have different sensitivities to interest rate environments. Consequently, it is an accepted practice to spread non-maturity deposits over defined time periods to capture that sensitivity. Commercial demand deposits are often in the form of compensating balances, and fluctuate inversely to the level of interest rates; the maturity of these deposits is reported as having a shorter life than typical retail demand deposits. Additionally, the industry practice has suggested distribution limits for non-maturity deposits. However, management has taken a more conservative approach than these limits would suggest by forecasting these deposit types with a shorter maturity. These assumptions are also reflected in the above interest rate simulation.

The following table presents the Corporation’s gap analysis as of ~~June~~September 30, 2020:


(dollars in millions)	(dollars in millions)	0 to 90 Days			91 to 365 Days			1 - 5 Years			Over 5 Years			Non-Rate Sensitive		Total		(dollars in millions)	0 to 90 Days			91 to 365 Days			1 - 5 Years			Over 5 Years			Non-Rate Sensitive		Total
Assets:	Assets:																	Assets:
Interest-bearing deposits with banks	Interest-bearing deposits with banks	$	448.1		$	—		$	—		$	—		$	—	$	448.1	Interest-bearing deposits with banks	$	241.8		$	—		$	—		$	—		$	—	$	241.8
Investment securities⁽¹⁾	Investment securities⁽¹⁾	89.2			123.1			231.0			107.7			—		551.0		Investment securities(1)	48.6			161.8			268.8			105.3			—		584.5
Loans and leases⁽²⁾	Loans and leases⁽²⁾	1,374.6			497.1			1,395.0			459.6			—		3,726.3		Loans and leases(2)	1,805.5			372.6			1,168.6			334.6			—		3,681.3
ACL on loans and leases	ACL on loans and leases	—			—			—			—			(55.0)		(55.0)		ACL on loans and leases	—			—			—			—			(56.4)		(56.4)
Cash and due from banks	Cash and due from banks	—			—			—			—			16.4		16.4		Cash and due from banks	—			—			—			—			15.7		15.7
Operating lease right-of-use assets	Operating lease right-of-use assets	0.7			2.2			10.4			26.0			—		39.3		Operating lease right-of-use assets	0.7			2.1			10.4			25.3			—		38.5
Other assets	Other assets	—			—			—			—			545.2		545.2		Other assets	—			—			—			—			541.5		541.5
Total assets	Total assets	1,912.6			622.4			1,636.4			593.3			506.6		5,271.3		Total assets	2,096.6			536.5			1,447.8			465.2			500.8		5,046.9
Liabilities and shareholders’ equity:	Liabilities and shareholders’ equity:																	Liabilities and shareholders’ equity:
Demand, noninterest-bearing	Demand, noninterest-bearing	34.5			103.5			355.9			723.6			—		1,217.5		Demand, noninterest-bearing	34.9			104.6			360.6			730.3			—		1,230.4
Savings, NOW and market rate	Savings, NOW and market rate	92.7			278.0			898.8			1,130.1			—		2,399.6		Savings, NOW and market rate	90.2			270.5			858.0			1,041.5			—		2,260.2
Time deposits	Time deposits	92.1			207.6			99.2			1.3			—		400.2		Time deposits	82.8			193.5			88.6			1.3			—		366.2
Wholesale non-maturity deposits	Wholesale non-maturity deposits	146.5			—			—			—			—		146.5		Wholesale non-maturity deposits	77.4			—			—			—			—		77.4
Wholesale time deposits	Wholesale time deposits	0.5			43.4			36.0			—			—		79.9		Wholesale time deposits	43.4			—			36.0			—			—		79.4
Short-term borrowings	Short-term borrowings	28.9			—			—			—			—		28.9		Short-term borrowings	23.5			—			—			—			—		23.5
Long-term FHLB advances	Long-term FHLB advances	—			5.0			39.8			—			—		44.8		Long-term FHLB advances	5.0			15.0			24.9			—			—		44.9
Subordinated notes	Subordinated notes	30.0			—			68.8			—			—		98.8		Subordinated notes	30.0			—			68.8			—			—		98.8
Junior subordinated debentures	Junior subordinated debentures	21.8			—			—			—			—		21.8		Junior subordinated debentures	21.9			—			—			—			—		21.9
Operating lease liabilities	Operating lease liabilities	0.8			2.4			11.6			28.9			—		43.7		Operating lease liabilities	0.8			2.3			11.6			28.2			—		42.9
Other liabilities	Other liabilities	—			—			—			—			185.9		185.9		Other liabilities	—			—			—			—			188.7		188.7
Shareholders’ equity	Shareholders’ equity	21.6			64.7			345.0			172.4			—		603.7		Shareholders’ equity	21.6			64.7			345.0			172.4			—		603.7
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	469.4			704.6			1,855.1			2,056.3			185.9		5,271.3		Total liabilities and shareholders’ equity	431.5			650.6			1,793.5			1,973.7			188.7		5,038.0
Interest-earning assets	Interest-earning assets	1,911.9			620.2			1,626.0			567.3			—		4,725.4		Interest-earning assets	2,095.9			534.4			1,437.4			439.9			—		4,507.6
Interest-bearing liabilities	Interest-bearing liabilities	412.5			534.0			1,142.6			1,131.4			—		3,220.5		Interest-bearing liabilities	374.2			479.0			1,076.3			1,042.8			—		2,972.3
Difference between interest-earning assets and interest-bearing liabilities	Difference between interest-earning assets and interest-bearing liabilities	1,499.4			86.2			483.4			(564.1)			—		1,504.9		Difference between interest-earning assets and interest-bearing liabilities	1,721.7			55.4			361.1			(602.9)			—		1,535.3
Cumulative difference between interest earning assets and interest-bearing liabilities	Cumulative difference between interest earning assets and interest-bearing liabilities	$	1,499.4		$	1,585.6		$	2,069.0		$	1,504.9		$	—	$	1,504.9	Cumulative difference between interest earning assets and interest-bearing liabilities	$	1,721.7		$	1,777.1		$	2,138.2		$	1,535.3		$	—	$	1,535.3
Cumulative earning assets as a % of cumulative interest-bearing liabilities	Cumulative earning assets as a % of cumulative interest-bearing liabilities	463		%	268		%	199		%	147		%					Cumulative earning assets as a % of cumulative interest-bearing liabilities	560		%	308		%	211		%	152		%

(1) Investment securities include available for sale, held to maturity and trading.

(2) Loans include portfolio loans and leases and loans held for sale.

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The table above indicates that the Corporation is asset-sensitive in the immediate 90-day time frame and may experience an increase in net interest income during that time period if rates rise. Conversely, if rates decline, net interest income may decline. It should be noted that the gap analysis is only one tool used to measure interest rate sensitivity and should be used in conjunction with other measures such as the interest rate simulation discussed above. The gap analysis measures the timing of changes in rate, but not the true weighting of any specific component of the Corporation’s balance sheet. The asset-sensitive position reflected in this gap analysis is similar to the Corporation’s position at December 31, 2019.

PROVISION FOR CREDIT LOSSES ON LOANS AND LEASES

For the three and ~~six~~nine months ended ~~June~~September 30, 2020, the Corporation recorded a PCL on loans and leases of ~~$4.3~~$3.6 million and ~~$36.6~~$40.3 million, respectively, bringing the ~~June~~September 30, 2020 ACL to ~~$55.0~~$56.4 million, or ~~1.48%~~1.53% of portfolio loans and leases, as compared to an ACL of ~~$21.2~~$20.8 million, or ~~0.60%~~0.59% of portfolio loans and leases, as of ~~June~~September 30, 2019. The ACL at ~~June~~September 30, 2020 reflects management's current estimate of expected future credit losses considering the adverse economic indicators and other assumptions largely driven by the COVID-19 pandemic. Net charge-offs for the three months ended ~~June~~September 30, 2020 were ~~$3.4~~$2.2 million as compared to ~~$1.1~~$1.3 million for the same period in 2019. Net charge-offs for the ~~six~~nine months ended ~~June~~September 30, 2020 were ~~$7.5~~$9.7 million as compared to ~~$3.6~~$4.9 million for the same period in 2019.

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


Allocation of ACL	Allocation of ACL																	Allocation of ACL
		June 30, 2020						December 31, 2019							September 30, 2020					December 31, 2019
(dollars in thousands)	(dollars in thousands)	ACL		% Loans and Leases to Total Loans and Leases		ACL		% Loans and Leases to Total Loans and Leases		(dollars in thousands)	ACL		% Loans and Leases to Total Loans and Leases		ACL		% Loans and Leases to Total Loans and Leases
CRE - nonowner-occupied	CRE - nonowner-occupied	$	15,331	37.0	%	$	7,960	36.2	%	CRE - nonowner-occupied	$	16,542	37.6	%	$	7,960	36.2		%
CRE - owner-occupied	CRE - owner-occupied	5,083		14.6		2,825		14.3		CRE - owner-occupied	6,008		15.5		2,825		14.3
Home equity lines of credit	Home equity lines of credit	1,627		5.2		1,114		6.1		Home equity lines of credit	1,807		4.9		1,114		6.1
Residential mortgage - 1st liens	Residential mortgage - 1st liens	8,198		18.7		2,501		19.2		Residential mortgage - 1st liens	8,402		18.0		2,501		19.2
Residential mortgage - junior liens	Residential mortgage - junior liens	521		0.9		338		1.0		Residential mortgage - junior liens	451		0.7		338		1.0
Construction	Construction	6,061		5.7		1,230		5.5		Construction	4,972		5.1		1,230		5.5
Commercial & Industrial	Commercial & Industrial	7,988		12.3		3,835		11.7		Commercial & Industrial	8,373		12.7		3,835		11.7
Consumer	Consumer	440		1.2		438		1.6		Consumer	539		1.3		438		1.6
Leases	Leases	9,725		4.5		2,361		4.5		Leases	9,334		4.4		2,361		4.5

Total ACL on loans and leases	Total ACL on loans and leases	$	54,974	100.0	%	$	22,602	100.0	%	Total ACL on loans and leases	$	56,428	100.0	%	$	22,602	100.0		%

Asset Quality and Analysis of Credit Risk

As of ~~June~~September 30, 2020, total nonperforming loans and leases decreased by ~~$2.2~~$2.0 million to ~~$8.4~~$8.6 million, representing 0.23% of portfolio loans and leases, as compared to $10.6 million, or 0.29% of portfolio loans and leases, as of December 31, 2019. The decrease in nonperforming loans and leases was related to pay-offs and pay-downs of ~~$2.4~~$3.0 million, charge-offs of ~~$2.7~~$2.8 million, transfers to OREO of $380 thousand and the sale of $1.7 million of loans and leases classified as nonperforming as of December 31, 2019, offset by the addition of ~~$5.0~~$5.9 million of new nonperforming loans and leases during the ~~six~~nine months ended ~~June~~September 30, 2020. All nonperforming loans are evaluated for impairment and charged-off to net realizable value, when necessary.

As of ~~June~~September 30, 2020, the ACL on loans and leases of ~~$55.0~~$56.4 million represented ~~1.48%~~1.53% of portfolio loans and leases, an increase of 8792 basis points from December 31, 2019. The significant increase was driven by the current and forward-looking adverse economic impacts of the COVID-19 pandemic included in the estimation of expected credit losses on loans and leases as of ~~June~~September 30, 2020 as compared to our initial adoption of CECL effective January 1, 2020.

As of ~~June~~September 30, 2020, the Corporation had ~~$11.8~~$10.0 million of TDRs, of which ~~$10.0~~$8.6 million were in compliance with modified terms and excluded from non-performing loans and leases. As of December 31, 2019, the Corporation had $8.1 million of TDRs, of which $5.1 million were in compliance with modified terms, and were excluded from non-performing loans and leases. As of September 30, 2020, 552 loans and leases in the amount of $305.2 million, comprising 8.3% of the Bank's portfolio loans and leases, are within a deferral period under the Bank's consumer and commercial loan and lease modification programs, as compared to 1,668 loans and leases in the amount of $767.1 million, comprising 20.6% of the Bank's

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Asportfolio loans and leases, as of June 30, ~~2020, 1,690 loan and lease modifications totaling $768.2 million, which were related to COVID-19 and were not classified as TDRs, had been completed.~~2020. For more information on our loan modification programs offered in response to the COVID-19 pandemic, which are not classified as TDRs, see COVID-19 Impact within ITEM 2. Management’s

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Discussion and Analysis of Results of Operation and Financial Condition and Note 1 – Basis of Presentation, Principles of Consolidation, and Significant Accounting Policies to the Unaudited Consolidated Financial Statements.

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

Nonperforming Assets and Related Ratios

Nonperforming assets and related ratios as of ~~June~~September 30, 2020 and December 31, 2019 were as follows:


(dollars in thousands)	(dollars in thousands)	June 30, 2020			December 31, 2019			(dollars in thousands)	September 30, 2020			December 31, 2019
Nonperforming Assets:	Nonperforming Assets:							Nonperforming Assets:
Nonperforming loans and leases	Nonperforming loans and leases	$	8,418		$	10,648		Nonperforming loans and leases	$	8,597		$	10,648
Other real estate owned	Other real estate owned	—			—			Other real estate owned	—			—
Total nonperforming assets	Total nonperforming assets	$	8,418		$	10,648		Total nonperforming assets	$	8,597		$	10,648

Troubled Debt Restructurings⁽¹⁾:	Troubled Debt Restructurings⁽¹⁾:							Troubled Debt Restructurings(1):
TDRs included in non-performing loans	TDRs included in non-performing loans	$	1,792		$	3,018		TDRs included in non-performing loans	$	1,393		$	3,018
TDRs in compliance with modified terms	TDRs in compliance with modified terms	10,013			5,071			TDRs in compliance with modified terms	8,590			5,071
Total TDRs	Total TDRs	$	11,805		$	8,089		Total TDRs	$	9,983		$	8,089

Loan and Lease quality indicators:	Loan and Lease quality indicators:							Loan and Lease quality indicators:
Allowance for credit losses on loans and leases to nonperforming loans and leases	Allowance for credit losses on loans and leases to nonperforming loans and leases	653.1		%	212.3		%	Allowance for credit losses on loans and leases to nonperforming loans and leases	656.4		%	212.3		%
Nonperforming loans and leases to total portfolio loans and leases	Nonperforming loans and leases to total portfolio loans and leases	0.23			0.29			Nonperforming loans and leases to total portfolio loans and leases	0.23			0.29
Allowance for credit losses on loans and leases to total portfolio loans and leases	Allowance for credit losses on loans and leases to total portfolio loans and leases	1.48			0.61			Allowance for credit losses on loans and leases to total portfolio loans and leases	1.53			0.61
Nonperforming assets to total loans and leases and OREO	Nonperforming assets to total loans and leases and OREO	0.23			0.29			Nonperforming assets to total loans and leases and OREO	0.23			0.29
Nonperforming assets to total assets	Nonperforming assets to total assets	0.16			0.20			Nonperforming assets to total assets	0.17			0.20
Total portfolio loans and leases	Total portfolio loans and leases	$	3,722,165		$	3,689,313		Total portfolio loans and leases	$	3,676,684		$	3,689,313
Allowance for credit losses on loans and leases	Allowance for credit losses on loans and leases	54,974			22,602			Allowance for credit losses on loans and leases	56,428			22,602

(1) For more information on our loan modification programs offered in response to the COVID-19 pandemic, which are not TDRs, see COVID-19 Impact within ITEM 2. Management’s Discussion and Analysis of Results of Operation and Financial Condition and Note 1 – Basis of Presentation, Principles of Consolidation, and Significant Accounting Policies to the Unaudited Consolidated Financial Statements.

NONINTEREST INCOME

Three Months Ended ~~June~~September 30, 2020 Compared to the Same Period in 2019

Noninterest income of ~~$20.6~~$21.1 million for the three months ended ~~June~~September 30, 2020 increased ~~$345 thousand~~$1.6 million as compared to ~~$20.2~~$19.5 million for the same period in 2019. The increase was primarily due to increases of ~~$2.4~~$1.2 million, $881 thousand, and $347 thousand in capital markets revenue, fees for wealth management services, and net gain on sale of loans, respectively, partially offset by decreases of $219 thousand, $193 thousand, $182 thousand, and $160 thousand in dividends on FHLB and FRB stock, service charges on deposits, loan servicing fees, and insurance commissions, respectively.

Nine Months Ended September 30, 2020 Compared to the Same Period in 2019

Noninterest income of $60.0 million for the nine months ended September 30, 2020 increased $1.1 million as compared to $58.9 million for the same period in 2019. The increase was primarily due to increases of $3.2 million and ~~$1.5~~$2.8 million in net gain on sale of loans and capital markets revenue, respectively, partially offset by decreases of ~~$2.4~~$2.6 million, ~~$394 thousand, $265~~$784 thousand, and ~~$249~~$693 thousand in other operating income, fees for wealth management services, and insurance commissions, ~~other operating income, and service charges on deposits,~~ respectively. The increase in net gain on sale of loans was driven by a $2.4 million gain on the sale of approximately $292.1 million of PPP loans in the second quarter of 2020. The increase in capital markets revenue was primarily due to increased volume and size of

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interest rate swap transactions with commercial loan customers for the ~~three~~nine months ended ~~June~~September 30, 2020 as compared to the same period in 2019. The decrease in fees for wealth management services was primarily driven by ~~$2.2 million of~~non-recurring costs ~~incurred in the second quarter of 2020~~ associated with the wind-down of BMT Investment ~~Advisers.~~

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

~~Noninterest income of $38.9~~Advisers, which had a $2.2 million for the six months ended June 30, 2020 decreased $608 thousand as compared to $39.5 million for the same period in 2019. The decrease was primarily due to decreases of $2.6 million, $1.7 million, and $533 thousand in other operating income,impact on fees for wealth management services ~~and insurance commissions, respectively, partially offset by increases of $2.8 million and $1.6 million in net gain on sale of loans and capital markets revenue, respectively. The~~

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

The following table provides details of other operating income for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019:


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2020		2019		2020		2019		(dollars in thousands)	2020		2019		2020		2019
Visa debit card income	Visa debit card income	$	643	$	431	$	1,174	$	850	Visa debit card income	$	753	$	464	$	1,927	$	1,314
BOLI income	BOLI income	330		303		650		597		BOLI income	343		312		993		909
Commissions and fees	Commissions and fees	264		344		568		699		Commissions and fees	339		348		907		1,047
Safe deposit box rentals	Safe deposit box rentals	82		87		162		171		Safe deposit box rentals	106		117		268		288
Other investment income	Other investment income	20		411		39		447		Other investment income	13		37		52		484
Rental income	Rental income	8		7		17		16		Rental income	11		7		28		23
Gain on trading investments		1,017		214		39		946
Gain (loss) on trading investments										Gain (loss) on trading investments	357		(19)		396		927
Recovery of purchase accounting fair value loan mark	Recovery of purchase accounting fair value loan mark	—		36		—		48		Recovery of purchase accounting fair value loan mark	—		11		—		59
Miscellaneous other income	Miscellaneous other income	423		1,219		695		2,125		Miscellaneous other income	290		978		985		3,103
Other operating income	Other operating income	$	2,787	$	3,052	$	3,344	$	5,899	Other operating income	$	2,212	$	2,255	$	5,556	$	8,154

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


		As of or for the Three Months Ended June 30,									As of or for the Six Months Ended June 30,										As of or for the Three Months Ended September 30,						As of or for the Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2020			2019			2020			2019			(dollars in thousands)	2020			2019			2020			2019
Mortgage originations	Mortgage originations	$	38,771		$	49,614		$	68,134		$	84,058		Mortgage originations	$	37,621		$	48,614		$	105,755		$	132,672
Mortgage loans sold:	Mortgage loans sold:													Mortgage loans sold:
Servicing retained	Servicing retained	—			—			—			—			Servicing retained	—			—			—			—
Servicing released	Servicing released	31,984			21,979			46,883			31,197			Servicing released	33,487			30,158			80,370			61,355
Total mortgage loans sold	Total mortgage loans sold	$	31,984		$	21,979		$	46,883		$	31,197		Total mortgage loans sold	$	33,487		$	30,158		$	80,370		$	61,355
Percentage of originated mortgage loans sold	Percentage of originated mortgage loans sold	82.5		%	44.3		%	68.8		%	37.1		%	Percentage of originated mortgage loans sold	89.0		%	62.0		%	76.0		%	46.2		%
Servicing retained %	Servicing retained %	—			—			—			—			Servicing retained %	—			—			—			—
Servicing released %	Servicing released %	100.0			100.0			100.0			100.0			Servicing released %	100.0			100.0			100.0			100.0
Residential mortgage loans serviced for others	Residential mortgage loans serviced for others	$	445,233		$	545,743		$	445,233		$	545,743		Residential mortgage loans serviced for others	$	407,781		$	527,869		$	407,781		$	527,869
Mortgage servicing rights	Mortgage servicing rights	3,440			4,744			3,440			4,744			Mortgage servicing rights	2,881			4,580			2,881			4,580
Gain on sale of mortgage loans	Gain on sale of mortgage loans	615			622			1,213			883			Gain on sale of mortgage loans	986			471			2,199			1,354
Loan servicing and other fees	Loan servicing and other fees	452			553			913			1,162			Loan servicing and other fees	373			555			1,286			1,717
Amortization of MSRs	Amortization of MSRs	453			156			557			276			Amortization of MSRs	413			183			970			459
Impairment of MSRs		(222)			(10)			(453)			(27)
(Impairment) recovery of MSRs														(Impairment) recovery of MSRs	(146)			19			(599)			(8)

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Wealth Assets Under Management, Administration, Supervision and Brokerage (“Wealth Assets”)

Wealth Asset accounts are categorized into two groups. The first account group consists predominantly of clients whose fees are determined based on the market value of the assets held in their accounts (“Market Value” basis). The second account group consists predominantly of clients whose fees are set at fixed amounts (“Fixed Fee” basis), and, as such, are not affected by market value changes.

The following tables detail the composition of Wealth Assets as it relates to the calculation of fees for wealth management services:


(dollars in thousands)	(dollars in thousands)	Wealth Assets as of:																			(dollars in thousands)	Wealth Assets as of:
Fee Basis	Fee Basis	June 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019		June 30, 2019		Fee Basis	September 30, 2020		June 30, 2020		March 31, 2020		December 31, 2019			September 30, 2019
Market value	Market value	$	6,661,996	$	6,001,999	$	6,977,009	$	6,396,399	$	6,346,861	Market value	$	6,557,898	$	6,661,996	$	6,001,999	$	6,977,009		$	6,396,399
Fixed fee	Fixed fee	10,350,908		9,591,733		9,571,051		9,213,387		8,468,437		Fixed fee	10,686,409		10,350,908		9,591,733		9,571,051			9,213,387
Total	Total	$	17,012,904	$	15,593,732	$	16,548,060	$	15,609,786	$	14,815,298	Total	$	17,244,307	$	17,012,904	$	15,593,732	$	16,548,060		$	15,609,786


		Percentage of Wealth Assets as of:																			Percentage of Wealth Assets as of:
Fee Basis	Fee Basis	June 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019		June 30, 2019		Fee Basis	September 30, 2020		June 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019
Market value	Market value	39.2	%	38.5	%	42.2	%	41.0	%	42.8	%	Market value	38.0	%	39.2	%	38.5	%	42.2	%	41.0	%
Fixed fee	Fixed fee	60.8	%	61.5	%	57.8	%	59.0	%	57.2	%	Fixed fee	62.0	%	60.8	%	61.5	%	57.8	%	59.0	%
Total	Total	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	Total	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

The following tables detail the composition of fees for wealth management services for the periods indicated:


(dollars in thousands)	(dollars in thousands)	For the Three Months Ended:																			(dollars in thousands)	For the Three Months Ended:
Fee Basis	Fee Basis	June 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019		June 30, 2019		Fee Basis	September 30, 2020		June 30, 2020		March 31, 2020		December 31, 2019			September 30, 2019
Market value	Market value	$	5,525	$	8,131	$	8,126	$	7,924	$	7,802	Market value	$	8,344	$	5,525	$	8,131	$	8,126		$	7,924
Fixed fee	Fixed fee	3,544		3,037		3,546		2,902		3,708		Fixed fee	3,363		3,544		3,037		3,546			2,902
Total	Total	$	9,069	$	11,168	$	11,672	$	10,826	$	11,510	Total	$	11,707	$	9,069	$	11,168	$	11,672		$	10,826


		Percentage of Fees for Wealth Management for the Three Months Ended:																			Percentage of Fees for Wealth Management for the Three Months Ended:
Fee Basis	Fee Basis	June 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019		June 30, 2019		Fee Basis	September 30, 2020		June 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019
Market value	Market value	60.9	%	72.8	%	69.6	%	73.2	%	67.8	%	Market value	71.3	%	60.9	%	72.8	%	69.6	%	73.2	%
Fixed fee	Fixed fee	39.1	%	27.2	%	30.4	%	26.8	%	32.2	%	Fixed fee	28.7	%	39.1	%	27.2	%	30.4	%	26.8	%
Total	Total	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	Total	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

Customer Derivatives

To accommodate the risk management needs of qualified commercial customers, the Bank enters into financial derivative transactions consisting of interest rate swaps, options, risk participation agreements and foreign exchange contracts. Derivative financial instruments involve, to varying degrees, interest rate, market and credit risk. Market risk exposure from customer derivative positions is managed by simultaneously entering into matching transactions with institutional dealer counterparties that offset customer contracts in notional amount and term. Derivative contracts create counterparty credit risk with both the Bank’s customers and with institutional dealer counterparties. The Corporation manages customer counterparty credit risk through its credit policy, approval processes, monitoring procedures and by obtaining adequate collateral, when appropriate. The Bank seeks to minimize dealer counterparty credit risk by establishing credit limits and collateral agreements through industry standard agreements published by the International Swaps and Derivatives Association (ISDA) and associated credit support annex (CSA) agreements. None of the Bank’s outstanding derivative contracts associated with the customer derivative program is designated as a hedge and none is entered into for speculative purposes. Derivative instruments are recorded at fair value, with changes in fair values recognized in earnings as components of noninterest income and noninterest expense on the consolidated statements of income.

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NONINTEREST EXPENSE

Three Months Ended ~~June~~September 30, 2020 Compared to the Same Period in 2019

Noninterest expense of ~~$34.6~~$35.7 million for the three months ended ~~June~~September 30, 2020 ~~decreased $552~~increased $484 thousand as compared to $35.2 million for the same period in 2019. Increases of $1.0 million and $674 thousand in other operating expenses and professional fees, respectively, were partially offset by decreases of $564 thousand, $399 thousand, and $262 thousand in salaries and wages, Pennsylvania bank shares tax, and employee benefits, respectively. The increase in other operating expenses included a $627 increase in FDIC insurance expense primarily due to a small bank assessment credit of $407 thousand applied in the third quarter of 2019.

Nine Months Ended September 30, 2020 Compared to the Same Period in 2019

Noninterest expense for the nine months ended September 30, 2020 decreased $3.4 million, to $106.7 million, as compared to $110.1 million for the same period in 2019. The decrease was primarily due to decreases of ~~$448 thousand, $397 thousand,~~$4.6 million, $1.1 million, and ~~$308 thousand~~$1.0 million in ~~furniture, fixtures~~salaries and ~~equipment expenses,~~wages, Pennsylvania bank shares tax, and ~~advertising expenses,~~employee benefits, respectively, partially offset by ~~increases~~an increase of ~~$512 thousand~~$3.2 million and ~~$259~~$981 thousand in other operating expenses and professional fees, respectively.

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

Noninterest expense for the six months ended June 30, 2020 decreased $3.8 million, to $71.1 million, as compared to $74.9 million for the same period in 2019. The decrease was primarily due to decreases of $4.0 million, $762 thousand, and $690 thousand in salaries and wages, employee benefits, and Pennsylvania bank shares tax, respectively, partially offset by an increase of $1.8 million in other operating expenses. The decrease in salaries and wages and employee benefits was largely driven by a pre-tax, non-recurring, charge of $4.5 million in the first quarter of 2019 related to Corporation’s voluntary Years of Service Incentive Program (the “Incentive Program”), which offered certain benefits to eligible employees who met the Incentive Program requirements and voluntarily exited from service with the Corporation, the Bank or one of their subsidiaries. The increase in other operating expenses ~~was primarily driven by~~included a ~~$2.3~~$2.4 million increase in provision for credit losses on off-balance sheet credit exposures primarily driven by the adverse economic impacts of the COVID-19 pandemic as well as the Corporation’s adoption of CECL effective January 1, 2020.

The following table provides details of other operating expenses for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019:


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2020		2019		2020		2019		(dollars in thousands)	2020		2019		2020		2019
Contributions	Contributions	$	521	$	410	$	968	$	754	Contributions	$	396	$	349	$	1,364	$	1,103
Deferred compensation expense	Deferred compensation expense	654		178		(441)		721		Deferred compensation expense	129		(49)		(312)		672
Director fees	Director fees	151		141		304		286		Director fees	152		144		456		430
Dues and subscriptions	Dues and subscriptions	523		524		884		819		Dues and subscriptions	401		406		1,285		1,225
FDIC insurance	FDIC insurance	673		509		823		910		FDIC insurance	627		—		1,450		910

Insurance	Insurance	302		217		541		431		Insurance	237		224		778		655
Loan processing	Loan processing	139		199		282		451		Loan processing	90		127		372		578
Miscellaneous other expenses	Miscellaneous other expenses	1,331		761		2,651		1,751		Miscellaneous other expenses	1,394		1,503		4,045		3,254
MSR amortization and impairment	MSR amortization and impairment	675		166		1,010		303		MSR amortization and impairment	559		165		1,569		468
Other taxes	Other taxes	2		33		24		123		Other taxes	5		30		29		153
Outsourced services	Outsourced services	63		65		125		130		Outsourced services	62		65		187		195
Wealth custodian fees	Wealth custodian fees	116		98		229		216		Wealth custodian fees	105		101		334		317
Postage	Postage	158		188		314		390		Postage	138		141		452		531
(Release of reserve) / provision for credit losses on off-balance sheet credit exposures		(867)		(17)		2,148		(138)
Provision for credit losses / (release of reserve) on off-balance sheet credit exposures										Provision for credit losses / (release of reserve) on off-balance sheet credit exposures	196		47		2,344		(91)
Provision credit losses on accrued interest receivable on loans										Provision credit losses on accrued interest receivable on loans	264		—		264		—
Stationary and supplies	Stationary and supplies	79		120		224		256		Stationary and supplies	100		163		324		419
Telephone and data lines	Telephone and data lines	438		446		866		870		Telephone and data lines	426		432		1,292		1,302
Temporary help and recruiting	Temporary help and recruiting	67		174		134		380		Temporary help and recruiting	41		182		175		562
Travel and entertainment	Travel and entertainment	35		336		260		509		Travel and entertainment	8		271		268		780
Other operating expenses	Other operating expenses	$	5,060	$	4,548	$	11,346	$	9,162	Other operating expenses	$	5,330	$	4,301	$	16,676	$	13,463

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INCOME TAXES

Income tax expense for the three months ended ~~June~~September 30, 2020 was ~~$4.0~~$3.7 million, a decrease of ~~$229~~$693 thousand as compared to ~~$4.2~~$4.4 million for the same period in 2019. The effective tax rate for the three months ended ~~June~~September 30, 2020 ~~was 21.1%, relatively unchanged~~increased to 22.0% as compared to 21.2% ~~for the same period in 2019.~~

Income tax expense for the six months ended June 30, 2020 was $1.1 million, a decrease of $5.9 million as compared to $7.0 million for the same period in 2019. Income before income taxes decreased $28.6 million for the six months ended June 30, 2020 as compared for the same period in 2019. The effective tax rate for the six months ended June 30, 2020 increased to 21.5% from 20.9% for the same period in 2019. The increase in the effective tax rate was primarily due to a ~~$144~~$106 thousand ~~decrease~~increase in net discrete tax ~~benefits~~expense for the ~~six~~three months ended ~~June~~September 30, 2020 as compared to the same period in 2019.

Income tax expense for the nine months ended September 30, 2020 was $4.8 million, a decrease of $6.6 million as compared to $11.4 million for the same period in 2019. Income before income taxes decreased $32.5 million for the nine months ended September 30, 2020 as compared for the same period in 2019. The effective tax rate for the nine months ended September 30, 2020 increased to 21.9% as compared to 21.0% for the same period in 2019. The increase in the effective tax rate was primarily due to a $250 thousand increase in net discrete tax expense for the nine months ended September 30, 2020 as compared to the same period in 2019.

BALANCE SHEET ANALYSIS

Total assets of ~~$5.27~~$5.05 billion as of ~~June~~September 30, 2020 ~~increased $8.1~~decreased $216.3 million from $5.26 billion as of December 31, 2019. The following sections detail the balance sheet changes:

Loans and Leases

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


		June 30, 2020						December 31, 2019								Change					September 30, 2020				December 31, 2019		Change
(dollars in thousands)	(dollars in thousands)	Balance		Percent of Portfolio		Balance		Percent of Portfolio		Amount		Percent		(dollars in thousands)	Balance		Percent of Portfolio		Balance		Percent of Portfolio		Amount		Percent
CRE - nonowner-occupied	CRE - nonowner-occupied	$	1,375,904	37.0	%	$	1,337,167	36.2	%	$	38,737	2.9	%	CRE - nonowner-occupied	$	1,382,757	37.6	%	$	1,337,167	36.2	%	$	45,590	3.4	%
CRE - owner-occupied	CRE - owner-occupied	542,688		14.6		527,607		14.3		15,081		2.9		CRE - owner-occupied	568,218		15.5		527,607		14.3		40,611		7.7
Home equity lines of credit	Home equity lines of credit	194,767		5.2		224,262		6.1		(29,495)		(13.2)		Home equity lines of credit	179,125		4.9		224,262		6.1		(45,137)		(20.1)
Residential mortgage - 1st liens	Residential mortgage - 1st liens	695,270		18.7		706,690		19.2		(11,420)		(1.6)		Residential mortgage - 1st liens	660,923		18.0		706,690		19.2		(45,767)		(6.5)
Residential mortgage - jr. liens	Residential mortgage - jr. liens	33,644		0.9		36,843		1.0		(3,199)		(8.7)		Residential mortgage - jr. liens	26,150		0.7		36,843		1.0		(10,693)		(29.0)
Construction	Construction	212,374		5.7		202,198		5.5		10,176		5.0		Construction	186,415		5.1		202,198		5.5		(15,783)		(7.8)
Commercial & Industrial	Commercial & Industrial	457,529		12.3		432,227		11.7		25,302		5.9		Commercial & Industrial	465,316		12.7		432,227		11.7		33,089		7.7
Consumer	Consumer	43,762		1.2		57,241		1.6		(13,479)		(23.5)		Consumer	47,043		1.3		57,241		1.6		(10,198)		(17.8)
Leases	Leases	166,227		4.5		165,078		4.5		1,149		0.7		Leases	160,737		4.4		165,078		4.5		(4,341)		(2.6)
Total portfolio loans and leases	Total portfolio loans and leases	3,722,165		100.0	%	3,689,313		100.0	%	32,852		0.9		Total portfolio loans and leases	3,676,684		100.0	%	3,689,313		100.0	%	(12,629)		(0.3)
Loans held for sale	Loans held for sale	4,116				4,249				(133)		(3.1)		Loans held for sale	4,574				4,249				325		7.6
Total loans and leases	Total loans and leases	$	3,726,281			$	3,693,562			$	32,719	0.9	%	Total loans and leases	$	3,681,258			$	3,693,562			$	(12,304)	(0.3)	%

Investment Securities

Investment securities available for sale as of ~~June~~September 30, 2020 totaled ~~$530.6~~$564.8 million, a decrease of $441.2 million as compared to $1.01 billion as of December 31, 2019. The decrease was primarily related to the maturing of $500.0 million of short-term U.S. Treasury securities in the first quarter of 2020, partially offset by increases of ~~$12.1~~$65.8 million, ~~$11.2~~$9.3 million, and ~~$8.0~~$6.5 million of ~~U.S. government and agency securities,~~ mortgage-backed securities, ~~and~~ corporate bonds, and collateralized loan obligations, respectively.

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Deposits

Deposits as of ~~June~~September 30, 2020 and December 31, 2019 were as follows:


		June 30, 2020						December 31, 2019								Change					September 30, 2020				December 31, 2019		Change
(dollars in thousands)	(dollars in thousands)	Balance		Percent of Deposits		Balance		Percent of Deposits		Amount		Percent		(dollars in thousands)	Balance		Percent of Deposits		Balance		Percent of Deposits		Amount		Percent
Interest-bearing demand	Interest-bearing demand	$	910,441	21.5	%	$	944,915	24.6	%	$	(34,474)	(3.6)	%	Interest-bearing demand	$	815,561	20.3	%	$	944,915	24.6	%	$	(129,354)	(13.7)	%
Money market	Money market	1,239,523		29.2		1,106,478		28.8		133,045		12.0		Money market	1,199,429		29.9		1,106,478		28.8		92,951		8.4
Savings	Savings	249,636		5.9		220,450		5.7		29,186		13.2		Savings	245,167		6.1		220,450		5.7		24,717		11.2
Retail time deposits	Retail time deposits	400,186		9.4		405,123		10.5		(4,937)		(1.2)		Retail time deposits	366,245		9.1		405,123		10.5		(38,878)		(9.6)
Wholesale non-maturity deposits	Wholesale non-maturity deposits	146,463		3.5		177,865		4.6		(31,402)		(17.7)		Wholesale non-maturity deposits	77,356		1.9		177,865		4.6		(100,509)		(56.5)
Wholesale time deposits	Wholesale time deposits	79,903		1.9		89,241		2.3		(9,338)		(10.5)		Wholesale time deposits	79,430		2.0		89,241		2.3		(9,811)		(11.0)
Interest-bearing deposits	Interest-bearing deposits	3,026,152		71.3		2,944,072		76.6		82,080		2.8		Interest-bearing deposits	2,783,188		69.3		2,944,072		76.6		(160,884)		(5.5)
Noninterest-bearing deposits	Noninterest-bearing deposits	1,217,496		28.7		898,173		23.4		319,323		35.6		Noninterest-bearing deposits	1,230,391		30.7		898,173		23.4		332,218		37.0
Total deposits	Total deposits	$	4,243,648	100.0	%	$	3,842,245	100.0	%	$	401,403	10.4	%	Total deposits	$	4,013,579	100.0	%	$	3,842,245	100.0	%	$	171,334	4.5	%

Borrowings

Borrowings as of ~~June~~September 30, 2020 and December 31, 2019 were as follows:


		June 30, 2020						December 31, 2019								Change					September 30, 2020				December 31, 2019		Change
(dollars in thousands)	(dollars in thousands)	Balance		Percent of Borrowings		Balance		Percent of Borrowings		Amount		Percent		(dollars in thousands)	Balance		Percent of Borrowings		Balance		Percent of Borrowings		Amount		Percent
Short-term borrowings	Short-term borrowings	$	28,891	14.9	%	$	493,219	74.1	%	$	(464,328)	(94.1)	%	Short-term borrowings	$	23,456	12.4	%	$	493,219	74.1	%	$	(469,763)	(95.2)	%
Long-term FHLB advances	Long-term FHLB advances	44,837		23.1		52,269		7.8		(7,432)		(14.2)		Long-term FHLB advances	44,872		23.7		52,269		7.8		(7,397)		(14.2)
Subordinated notes	Subordinated notes	98,794		50.8		98,705		14.8		89		0.1		Subordinated notes	98,839		52.3		98,705		14.8		134		0.1
Junior subordinated debentures	Junior subordinated debentures	21,843		11.2		21,753		3.3		90		0.4		Junior subordinated debentures	21,889		11.6		21,753		3.3		136		0.6
Total borrowed funds	Total borrowed funds	$	194,365	100.0	%	$	665,946	100.0	%	$	(471,581)	(70.8)	%	Total borrowed funds	$	189,056	100.0	%	$	665,946	100.0	%	$	(476,890)	(71.6)	%

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Capital

Consolidated shareholders' equity of the Corporation was ~~$603.7~~$612.6 million, or ~~11.5%~~12.1% of total assets, as of ~~June~~September 30, 2020, as compared to $612.2 million, or 11.6% of total assets, as of December 31, 2019. The following table presents BMBC’s and Bank’s regulatory capital ratios and the minimum capital requirements for the Bank to be considered “Well Capitalized” by regulators as of ~~June~~September 30, 2020 and December 31, 2019:


		Actual						Minimum to be Well Capitalized							Actual				Minimum to be Well Capitalized
(dollars in thousands)	(dollars in thousands)	Amount		Ratio		Amount		Ratio		(dollars in thousands)	Amount		Ratio		Amount		Ratio
June 30, 2020
September 30, 2020										September 30, 2020
Total capital to risk weighted assets:	Total capital to risk weighted assets:									Total capital to risk weighted assets:
BMBC	BMBC	$	569,428	15.14	%	$	375,986	10.00	%	BMBC	$	573,309	15.19	%	$	377,345	10.00	%
Bank	Bank	485,780		12.93		375,633		10.00		Bank	500,242		13.27		376,981		10.00
Tier I capital to risk weighted assets:	Tier I capital to risk weighted assets:									Tier I capital to risk weighted assets:
BMBC	BMBC	423,762		11.27		300,789		8.00		BMBC	433,302		11.48		301,876		8.00
Bank	Bank	438,908		11.68		300,506		8.00		Bank	453,107		12.02		301,585		8.00
Common equity Tier I risk weighted assets:	Common equity Tier I risk weighted assets:									Common equity Tier I risk weighted assets:
BMBC	BMBC	402,646		10.71		244,391		6.50		BMBC	412,180		10.92		245,275		6.50
Bank	Bank	438,908		11.68		244,161		6.50		Bank	453,107		12.02		245,038		6.50
Tier I leverage ratio (Tier I capital to total quarterly average assets):	Tier I leverage ratio (Tier I capital to total quarterly average assets):									Tier I leverage ratio (Tier I capital to total quarterly average assets):
BMBC	BMBC	423,762		8.44		250,950		5.00		BMBC	433,302		8.75		247,626		5.00
Bank	Bank	438,908		8.75		250,775		5.00		Bank	453,107		9.16		247,452		5.00

December 31, 2019	December 31, 2019									December 31, 2019
Total capital to risk weighted assets:	Total capital to risk weighted assets:									Total capital to risk weighted assets:
BMBC	BMBC	547,440		14.69		372,690		10.00		BMBC	547,440		14.69		372,690		10.00
Bank	Bank	450,212		12.09		372,435		10.00		Bank	450,212		12.09		372,435		10.00
Tier I capital to risk weighted assets:	Tier I capital to risk weighted assets:									Tier I capital to risk weighted assets:
BMBC	BMBC	425,773		11.42		298,152		8.00		BMBC	425,773		11.42		298,152		8.00
Bank	Bank	427,250		11.47		297,948		8.00		Bank	427,250		11.47		297,948		8.00
Common equity Tier I risk weighted assets:	Common equity Tier I risk weighted assets:									Common equity Tier I risk weighted assets:
BMBC	BMBC	404,715		10.86		242,249		6.50		BMBC	404,715		10.86		242,249		6.50
Bank	Bank	427,250		11.47		242,083		6.50		Bank	427,250		11.47		242,083		6.50
Tier I leverage ratio (Tier I capital to total quarterly average assets):	Tier I leverage ratio (Tier I capital to total quarterly average assets):									Tier I leverage ratio (Tier I capital to total quarterly average assets):
BMBC	BMBC	425,773		9.33		228,216		5.00		BMBC	425,773		9.33		228,216		5.00
Bank	Bank	427,250		9.37		227,997		5.00		Bank	427,250		9.37		227,997		5.00

In ~~March~~September 2020, the U.S. banking agencies issued ~~an interim~~a final rule that provides banking organizations with an alternative option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period. This final rule is consistent with the interim final rule issued by the U.S. banking agencies in March 2020. The ~~June~~September 30, 2020 ratios reflect the Corporation's election of the five-year transition provision.

Liquidity

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

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Unused availability is detailed on the following table:


(dollars in millions)	(dollars in millions)	Available Funds as of June 30, 2020		Percent of Total Borrowing Capacity		Available Funds as of December 31, 2019		Percent of Total Borrowing Capacity		Dollar Change		Percent Change		(dollars in millions)	Available Funds as of September 30, 2020		Percent of Total Borrowing Capacity		Available Funds as of December 31, 2019		Percent of Total Borrowing Capacity		Dollar Change		Percent Change
FHLB of Pittsburgh	FHLB of Pittsburgh	$	1,783.7	97.5	%	$	1,110.6	67.5	%	$	673.1	60.6	%	FHLB of Pittsburgh	$	1,733.8	97.5	%	$	1,110.6	67.5	%	$	623.2	56.1	%
FRB of Philadelphia	FRB of Philadelphia	166.8		100.0		174.3		100.0		(7.5)		(4.3)		FRB of Philadelphia	153.0		100.0		174.3		100.0		(21.3)		(12.2)
Fed Funds Lines (six banks)	Fed Funds Lines (six banks)	74.0		100.0		79.0		100.0		(5.0)		(6.3)		Fed Funds Lines (six banks)	74.0		100.0		79.0		100.0		(5.0)		(6.3)
Total	Total	$	2,024.5	97.8		$	1,363.9	71.8		$	660.6	48.4		Total	$	1,960.8	97.8		$	1,363.9	71.8		$	596.9	43.8

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

The Corporation has an agreement with Insured Network Deposits to provide up to $175 million, excluding accrued interest, of money market and NOW funds at an agreed upon interest rate equal to the current Fed Funds rate plus 20 basis points. The Corporation had ~~$146.5~~$77.4 million in balances as of ~~June~~September 30, 2020 under this program.

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

Discussion of Segments

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

The Wealth Management segment recorded a pre-tax segment profit (“PTSP”) of ~~$1.7~~$4.9 million and ~~$5.8~~$10.7 million for the three and ~~six~~nine months ended ~~June~~September 30, 2020, as compared to a PTSP of ~~$4.9~~$4.0 million and ~~$7.9~~$11.9 million for the same periods in 2019. Fees for wealth management services increased $881 thousand and decreased ~~$2.4 million and $1.7 million, respectively,~~$784 thousand for the three and ~~six~~nine months ended ~~June~~September 30, 2020 as compared to the same periods in 2019. The decrease in PTSP and fees for wealth management services for the ~~three and six~~nine months ended ~~June~~September 30, 2020 as compared to the same periods in 2019 was primarily driven by ~~$2.2 million of~~non-recurring costs ~~incurred in the second quarter of 2020~~ associated with the wind-down of BMT Investment ~~Advisers. Also contributing to~~Advisers, which had a $2.2 million impact on fees for wealth management services in the ~~decrease in PTSP were decreases in insurance~~second quarter of 2020. Insurance commissions ~~of $394~~decreased $160 thousand and ~~$533~~$693 thousand for the three and ~~six~~nine months ended ~~June~~September 30, 2020 as compared to the same periods in 2019. Effective January 1, 2020, the business of Lau Associates LLC was transitioned into the Wealth Management Division of the Bank, also reported in the Wealth Management segment.

The Banking segment recorded a PTSP of ~~$17.3~~$11.9 million and ~~a pre-tax segment loss of $860 thousand~~$11.1 million for the three and ~~six~~nine months ended ~~June~~September 30, 2020, as compared to a PTSP of ~~$15.1~~$16.7 million and ~~$25.6~~$42.3 million for the same periods in 2019. The ~~decrease~~decreases in PTSP were primarily driven by increases of $2.7 million and $34.0 million in provision for credit losses on loans and leases for the ~~six~~three and nine months ended ~~June~~September 30, 2020 as compared to the same period in 2019, ~~was primarily driven by~~reflecting the ~~first quarter 2020 provision for credit losses on loans and leases,~~impact of the adverse economic outlook due to the COVID-19 pandemic, as calculated under the CECL ~~framework,~~framework. To a smaller extent, the decreases in PTSP were also due to decreases of $2.4 million and $2.9 million in net interest margin for the three and nine months ended September 30, 2020 as compared to the same period in 2019, driven by the ~~COVID-19 pandemic.~~current interest rate environment.

Off Balance Sheet Arrangements

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the loan agreement. Total commitments to extend credit at ~~June~~September 30, 2020 were ~~$826.3~~$834.4 million, as compared to $828.9 million at December 31, 2019.

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similar to that involved in granting loan facilities to customers. The Bank’s obligation under standby letters of credit at ~~June~~September 30, 2020 amounted to ~~$13.2~~$20.2 million, as compared to $20.7 million at December 31, 2019.

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

Contractual Cash Obligations of the Corporation as of ~~June~~September 30, 2020:


(dollars in thousands)	(dollars in thousands)	Total		Less Than 1 Year		1 - 3 Years		3 - 5 Years		More Than 5 Years		(dollars in thousands)	Total		Less Than 1 Year		1 - 3 Years		3 - 5 Years		More Than 5 Years
Deposits without a stated maturity	Deposits without a stated maturity	$	3,763,559	$	3,763,559	$	—	$	—	$	—	Deposits without a stated maturity	$	3,567,904	$	3,567,904	$	—	$	—	$	—
Wholesale and retail time deposit	Wholesale and retail time deposit	480,089		343,479		122,473		13,255		882		Wholesale and retail time deposit	445,675		319,640		111,232		13,822		981
Short-term borrowings	Short-term borrowings	28,891		28,891		—		—		—		Short-term borrowings	23,456		23,456		—		—		—
Long-term FHLB Advances	Long-term FHLB Advances	44,837		4,861		39,976		—		—		Long-term FHLB Advances	44,872		19,872		25,000		—		—
Subordinated Notes	Subordinated Notes	100,000		—		—		—		100,000		Subordinated Notes	100,000		—		—		30,000		70,000
Junior subordinated debentures	Junior subordinated debentures	25,800		—		—		—		25,800		Junior subordinated debentures	25,800		—		—		—		25,800
Operating lease liabilities	Operating lease liabilities	56,467		4,680		8,395		8,145		35,247		Operating lease liabilities	55,283		4,570		8,324		8,180		34,209
Purchase obligations	Purchase obligations	22,785		6,560		9,161		3,904		3,160		Purchase obligations	24,539		7,713		10,726		2,663		3,437
Total	Total	$	4,522,428	$	4,152,030	$	180,005	$	25,304	$	165,089	Total	$	4,287,529	$	3,943,155	$	155,282	$	54,665	$	134,427

Other Information

Effects of Inflation

Inflation has some impact on the Corporation’s operating costs. Unlike many industrial companies, however, substantially all of the Corporation’s assets and liabilities are monetary in nature. As a result, interest rates have a more significant impact on the Corporation’s performance than the general level of inflation. Over short periods of time, interest rates may not necessarily move in the same direction or in the same magnitude as prices of goods and services.

Effects of Government Monetary Policies

The earnings of the Corporation are and will be affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. An important function of the Federal Reserve Board is to regulate the money supply and interest rates. Among the instruments used to implement those objectives are open market operations in United States government securities and changes in reserve requirements against member bank deposits. These instruments are used in varying combinations to influence overall growth and distribution of bank loans, investments, and deposits, and their use may also affect rates charged on loans or paid for deposits.

The Corporation is a member of the Federal Reserve System and, therefore, the policies and regulations of the Federal Reserve Board have a significant effect on its deposits, loans and investment growth, as well as the rate of interest earned and paid, and are expected to affect the Corporation’s operations in the future. The effect of such policies and regulations upon the future business and earnings of the Corporation cannot be predicted.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risks

See the discussion of quantitative and qualitative disclosures about market risks in the Corporation’s 2019 Annual Report, as updated by the disclosure in “Management’s Discussion and Analysis of Results of Operations – Impact of COVID-19,” “–Interest Rate Sensitivity,” “– Summary of Interest Rate Simulation,” “Customer Derivatives” and “– Gap Analysis” in this Quarterly Report on Form 10-Q.

ITEM 4. Controls and Procedures

As of the end of the period covered by this report, the Corporation carried out an evaluation, under the supervision and with the participation of the Corporation’s management, including the Corporation’s Chief Executive Officer, Francis J. Leto, and Chief

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Financial Officer, Michael W. Harrington, of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon the evaluation, the Chief

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Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures were effective as of ~~June~~September 30, 2020.

The adoption of ASU 2016-13 (Topic 326 - Credit Losses) required the implementation of new accounting policies and procedures which changed the Corporation's internal controls over financial reporting for the analysis of the allowance for credit losses and related disclosures. Other than the changes related to the adoption of ASU 2016-13 (Topic 326 - Credit Losses), there were no changes during the period covered by this Quarterly Report on Form 10-Q in the Corporation’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, those controls.

PART II OTHER INFORMATION.

ITEM 1. Legal Proceedings.

The information required by this Item is set forth in the “Legal Matters” discussion in Note 21 “Contingencies” in the Notes to Unaudited Consolidated Financial Statements in Part I Item I of this Form 10-Q, which is incorporated herein by reference in response to this Item.

ITEM 1A. Risk Factors

The section titled Risk Factors in Part I, Item 1A of our 2019 Annual Report includes a discussion of the many risks and uncertainties we face, any one or more of which could have a material adverse effect on our business, results of operations, financial condition (including capital and liquidity), or prospects or the value of or return on an investment in the Corporation. The information presented below provides an update to, and should be read in conjunction with, the risk factors and other information contained in our 2019 Annual Report.

The recent global coronavirus (COVID-19) pandemic has led to periods of significant volatility in financial, commodities and other markets and could harm our business and results of operations.

In December 2019, a novel strain of coronavirus (COVID-19) was first reported in Wuhan, Hubei Province, China. Since then, COVID-19 infections have spread to additional countries including the United States. In March 2020, the World Health Organization declared COVID-19 to be a pandemic. Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the impact of the coronavirus pandemic on our business, and there is no guarantee that our efforts to address or mitigate the adverse impacts of the coronavirus will be effective. The impact to date has included periods of significant volatility in financial, commodities and other markets. This volatility, if it continues, could have an adverse impact on our customers and on our business, financial condition and results of operations as well as our growth strategy.

Our business is dependent upon the willingness and ability of our customers to conduct banking and other financial transactions. The spread of COVID-19 has caused and could continue to cause severe disruptions in the U.S. economy at large, and has resulted and may continue to result in disruptions to our customers’ businesses, and a decrease in consumer confidence and business generally. In addition, recent actions by US federal, state and local governments to address the pandemic, including travel bans, stay-at-home orders and school, business and entertainment venue closures, may have a significant adverse effect on our customers and the markets in which we conduct our business. The extent of impacts resulting from the coronavirus pandemic and other events beyond our control will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus pandemic and actions taken to contain the coronavirus or its impact, among others.

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

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

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

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

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

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

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

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

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

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

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

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

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

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ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

Share Repurchase

The following table presents the shares repurchased by the Corporation during the ~~second~~third quarter of 2020:

Period
Total Number of Shares Purchased⁽¹⁾⁽²⁾
Average Price Paid Per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽³⁾
Maximum
Number of
Shares that
May Yet Be
Purchased
Under the Plan
or Programs
April 1, 2020 – April 30, 2020 414 $ 25.56 — 710,032
May 1, 2020 – May 31, 2020 953 $ 27.98 �� 710,032
June 1, 2020 – June 30, 2020 2,879 $ 27.78 — 710,032
Total 4,246 $ 27.61 —


Period	Total Number of Shares Purchased(1)(2)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(3)	Maximum Number of Shares that May Yet Be Purchased Under the Plan or Programs
July 1, 2020 – July 31, 2020	110	$	26.23	—	710,032
August 1, 2020 – August 31, 2020	15,568	$	28.71	—	710,032
September 1, 2020 – September 30, 2020	1,530	$	24.94	—	710,032
Total	17,208	$	28.36	—

(1)On ~~June~~September 30, 2020, ~~2,017~~1,530 shares were purchased by the Corporation’s deferred compensation plans through open market transactions.

(2)Includes shares purchased to cover statutory tax withholding requirements on vested stock awards for certain officers of BMBC or the Bank as follows: ~~414~~110 shares on ~~April 4,~~July 2, 2020, ~~953~~15,299 shares on ~~May 6,~~August 11, 2020, and ~~862~~269 shares on ~~June 5,~~August 19, 2020.

(3)On April 18, 2019, BMBC announced a ~~new~~ stock repurchase program (the “2019 Program”) pursuant to which the Corporation may repurchase up to 1,000,000 shares of BMBC's common stock. Under the 2019 Program, the Corporation may repurchase BMBC's common stock at any price, but the aggregate purchase price is not to exceed $45 million. No shares were repurchased during the three months ended ~~June~~September 30, 2020. As of ~~June~~September 30, 2020, the maximum number of shares remaining authorized for repurchase under the 2019 Program was 710,032, at an aggregate purchase price not to exceed $34.8 million.

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ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures.

Not applicable.

ITEM 5. Other Information

~~None.~~On November 4, 2020, the Corporation entered into separate Indemnification Agreements (each, an “Indemnification Agreement”) with named executive officers Francis J. Leto, Jennifer D. Fox and Michael W. Harrington (the “Indemnitees”), who served as officers and/or trustees of BMT Multi-Cap Fund, a series of BMT Investment Funds (the “Fund”), prior to its wind-down. Pursuant to their respective Indemnification Agreements, the Corporation has agreed to provide indemnification to the Indemnitees to cover expenses and costs incurred by each Indemnitee in connection with claims, suits or proceedings arising as a result of the liquidation, or the Indemnitee’s status as a current or former officer or trustee, of the Fund, provided that those expenses and costs exceed the limits of insurance coverage available to the Indemnitee. There are no such claims, suits or proceedings currently pending or, to management's knowledge, threatened.

The foregoing description of the Indemnification Agreement does not purport to be complete and is qualified in its entirety by reference to the form of Indemnification Agreement, a copy of which is attached as Exhibit 10.1 hereto and incorporated herein by reference.

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ITEM 6. Exhibits

Exhibit No.

Description and References

3.1

Amended and Restated By-Laws, effective November 20, 2007, incorporated by reference to Exhibit 3.2 of the Corporation’s Form 8-K filed with the SEC on November 21, 2007

3.2

Amended and Restated Articles of Incorporation, effective November 21, 2007, incorporated by reference to Exhibit 3.1 of the Corporation’s Form 8-K filed with the SEC on November 21, 2007

10.1

Form of Indemnification Agreement

31.1

Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith

31.2

Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith

*32.1

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith

*32.2

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith

101.INS XBRL

Instance Document - the Instance Document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL Document

101.SCH XBRL

Taxonomy Extension Schema Document, filed herewith

101.CAL XBRL

Taxonomy Extension Calculation Linkbase Document, filed herewith

101.DEF XBRL

Taxonomy Extension Definition Linkbase Document, filed herewith

101.LAB XBRL

Taxonomy Extension Label Linkbase Document, filed herewith

101.PRE XBRL

Taxonomy Extension Presentation Linkbase Document, filed herewith

104

The cover page of Bryn Mawr Bank Corporation's Quarterly Report on Form 10-Q for the quarter ended ~~June~~September 30, 2020, formatted in Inline XBRL (contained in Exhibit 101)

*Furnished herewith. Notwithstanding any incorporation of this Quarterly Statement on Form 10-Q in any other filing by
the Registrant, Exhibits furnished herewith and designated with one (*) shall not be deemed incorporated by reference to
any other filing unless specifically otherwise set forth herein or therein.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

BRYN MAWR BANK CORPORATION

Date: ~~August 10,~~November 5, 2020

By:

/s/ Francis J. Leto

Francis J. Leto

Chief Executive Officer

(Principal Executive Officer)

Date: ~~August 10,~~November 5, 2020

By:

/s/ Michael W. Harrington

Michael W. Harrington

Chief Financial Officer

(Principal Financial Officer)

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Period	Total Number of Shares Purchased⁽¹⁾⁽²⁾	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽³⁾	Maximum Number of Shares that May Yet Be Purchased Under the Plan or Programs
April 1, 2020 – April 30, 2020	414	$	25.56	—	710,032
May 1, 2020 – May 31, 2020	953	$	27.98	��	710,032
June 1, 2020 – June 30, 2020	2,879	$	27.78	—	710,032
Total	4,246	$	27.61	—