FAIR VALUE (Tables)

6 Months Ended

Jun. 30, 2014

Schedule of assets and liabilities measured at fair value on a recurring basis

			Fair Value Measurements at June 30, 2014 Using:
					Significant
			Quoted Prices in		Other		Significant
			Active Markets for		Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
(Dollars in thousands)	Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets
Investment securities available-for sale
U. S. government agency	$	643			$	643
States and municipals	325,257				312,174		13,083
Mortgage-backed securities — residential —Government Sponsored Entity	153,881				153,881
Collateralized mortgage obligations — Government Sponsored Entity	364,394				364,394
Equity securities	4,689		4,689
Other securities	3,510				999		2,511
Total investment securities available-for-sale	$	852,374	$	4,689	$	832,091	$	15,594

Mortgage banking derivative	$	850			$	850

			Fair Value Measurements at December 31, 2013 Using:
					Significant
			Quoted Prices in		Other		Significant
			Active Markets for		Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
(Dollars in thousands)	Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets
Investment securities available-for sale
U. S. government agency	$	798			$	798
States and municipals	331,112				316,692		14,420
Mortgage-backed securities — residential —Government Sponsored Entity	185,429				185,429
Collateralized mortgage obligations — Government Sponsored Entity	365,309				365,309
Equity securities	4,939		4,689				250
Other securities	3,519				993		2,526
Total investment securities available-for-sale	$	891,106	$	4,689	$	869,221	$	17,196

Mortgage banking derivative	$	525			$	525

Schedule of reconciliation and income statement classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3)

Three months ended June 30:

States and municipal	2014			2013
Beginning balance, April 1	$	14,017		$	14,992
Total gains or losses (realized / unrealized)
Included in other comprehensive income	9			(61		)
Settlements	(943		)	(243		)
Ending balance, June 30	$	13,083		$	14,688

Equity securities	2014			2013
Beginning balance, April 1	$	250		$	250
Total gains or losses (realized / unrealized)
Settlements	(250		)	—
Ending balance, June 30	$	—		$	250

Other securities	2014			2013
Beginning balance, April 1	$	2,518		$	2,549
Total gains or losses (realized / unrealized)
Included in other comprehensive income	(7		)	(7		)
Ending balance, June 30	$	2,511		$	2,542

Six months ended June 30:

States and municipal	2014			2013
Beginning balance, January 1	$	14,420		$	15,470
Total gains or losses (realized / unrealized)
Included in other comprehensive income	23			(72		)
Settlements	(1,360		)	(710		)
Ending balance, June 30	$	13,083		$	14,688

Equity securities	2014			2013
Beginning balance, January 1	$	250		$	250
Total gains or losses (realized / unrealized)
Settlements	(250		)	—
Ending balance, June 30	$	—		$	250

Other securities	2014			2013
Beginning balance, January 1	$	2,526		$	2,557
Total gains or losses (realized / unrealized)
Included in other comprehensive income	(15		)	(15		)
Ending balance, June 30	$	2,511		$	2,542

Schedule of assets and liabilities measured at fair value on a non-recurring basis

			Fair Value Measurements at June 30, 2014 Using
	June 30, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans
Farm real estate	$	55			$	55
Other commercial real estate	2,677				2,677
Total impaired loans	$	2,732			$	2,732
Impaired servicing rights	$	1,529			$	1,529
Other real estate owned
Construction and development	$	32			$	32
Other commercial real estate	198				198
1-4 family	83				83
Total other real estate owned	$	313			$	313

			Fair Value Measurements at December 31, 2013 Using
	December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans
Commercial and industrial	$	76			$	76
Farm estate	375				375
Construction and development	226				226
Other commercial real estate	5,112				5,112
Total impaired loans	$	5,789			$	5,789
Impaired servicing rights	$	1,794			$	1,794
Other real estate owned
Construction and development	$	522			$	522
Home equity	67				67
Other commercial real estate	425				425
Total other real estate owned	$	1,014			$	1,014

Schedule of breakdown of impaired loans by portfolio class

	Gross Balance		Valuation Allowance		Net
Farm	$	76	$	21	$	55
Other commercial real estate	3,280		603		2,677
Ending Balance	$	3,356	$	624	$	2,732

Schedule of properties by portfolio class, net

	Gross Balance		Valuation Allowance		Net
Construction and development	$	42	$	10	$	32
Other commercial real estate	219		21		198
1-4 family	115		32		83
Ending Balance	$	376	$	63	$	313

Schedule of quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis

June 30, 2014	Fair Value (in thousands)		Valuation Technique(s)	Unobservable Input(s)	Range
Impaired Loans:
Farm real estate	55		Sales comparison approach	Adjustment for differences between comparable sales	40% 40% Avg
Other	2,677		Sales comparison approach	Adjustment for differences between comparable sales, type of property, current status of property	0%-40% 15% Avg
	$	2,732
Other real estate owned:
Construction and development	$	32	Sales comparison approach	Adjustment for differences between comparable sales.	14% 14% Avg
Other & 1-4 Family	281		Sales comparison approach	Adjustment for differences between comparable sales.	10% 10% Avg
	$	313

Mortgage servicing rights	$	1,529	Cash flow analysis	Discount rate	10%

December 31, 2013	Fair Value (in thousands)		Valuation Technique(s)	Unobservable Input(s)	Range
Impaired Loans:
Commercial & industrial	$	76	Sales comparison approach	Adjustment for differences between comparable sales	0%-10% 10% Avg
Farm real estate	375		Sales comparison approach	Adjustment for differences between comparable sales	40% 40% Avg
Other/ 1-4 Family	5,338		Sales comparison approach	Adjustment for differences between comparable sales, type of property, current status of property	0%-40% 25% Avg
	5,789
Other real estate owned:
Construction and development	$	522	Sales comparison approach	Adjustment for differences between comparable sales.	10% 10%Avg
Other & Home Equity	492		Sales comparison approach	Adjustment for differences between comparable sales.	10%-15% 10%Avg
	1,014

Mortgage servicing rights	1,794		Cash flow analysis	Discount rate	10%

Schedule of carrying amounts and estimated fair values of financial instruments

June 30, 2014	Carrying Amount			Level 1		Level 2		Level 3	Total
Financial assets:
Cash and cash equivalents	$	72,771		64,729		8,042			72,771
Interest bearing time deposits	980			980					980
Loans including loans held for sale, net	1,679,545					5,493		1,684,353	1,689,846
Restricted stock	15,625								N/A
Interest receivable	9,302					4,320		4,982	9,302
Financial liabilities
Deposits	(2,256,345		)	(455,496	)	(1,800,252	)		(2,255,748	)
Other borrowings	(30,735		)			(30,735	)		(30,735	)
FHLB advances	(179,424		)			(184,447	)		(184,447	)
Interest payable	(574		)			(574	)		(574	)
Subordinated debentures	(41,239		)			(20,560	)		(20,560	)

December 31, 2013	Carrying Amount			Level 1			Level 2			Level 3	Total
Financial assets:
Cash and cash equivalents	$	61,320		$	55,826		$	5,494			$	61,320
Loans including loans held for sale, net	1,644,527						6,158			1,657,199	1,663,357
Restricted stock	15,629										N/A
Interest receivable	9,616						4,573			5,043	9,616
Financial liabilities
Deposits	(2,200,628		)	(436,550		)	(1,764,719		)		(2,201,269		)
Other borrowings	(38,594		)				(38,594		)		(38,594		)
FHLB advances	(247,858		)				(252,402		)		(252,402		)
Interest payable	(799		)				(799		)		(799		)
Subordinated debentures	(46,394		)				(23,130		)		(23,130		)

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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