FAIR VALUE (Tables)

9 Months Ended

Sep. 30, 2014

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

			Fair Value Measurements at September 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	$	582			$	582
States and municipals	323,698				310,841		12,857
Mortgage-backed securities — residential —Government Sponsored Entity	156,904				156,904
Collateralized mortgage obligations — Government Sponsored Entity	350,719				350,719
Equity securities	4,689		4,689
Other securities	3,509				1,002		2,507
Total investment securities available-for-sale	$	840,101	$	4,689	$	820,048	$	15,364

Mortgage banking derivative	$	750			$	750

			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 September 30:

States and municipal	2014			2013
Beginning balance, July 1	$	13,083		$	14,688
Total gains or losses (realized / unrealized)
Included in other comprehensive income	(8		)	(12		)
Settlements	(218		)	(206		)
Ending balance, September 30	$	12,857		$	14,470

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

Other securities	2014			2013
Beginning balance, July 1	$	2,511		$	2,542
Total gains or losses (realized / unrealized)
Included in other comprehensive income	(4		)	(8		)
Ending balance, September 30	$	2,507		$	2,534

Nine months ended September 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	15			(84		)
Settlements	(1,578		)	(916		)
Ending balance, September 30	$	12,857		$	14,470

Equity securities	2014			2013
Beginning balance, January 1	$	250		$	250
Total gains or losses (realized / unrealized)
Settlements	(250		)	—
Ending balance, September 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	(19		)	(23		)
Ending balance, September 30	$	2,507		$	2,534

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

			Fair Value Measurements at September 30, 2014 Using
	September 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
Hotel	1,292				1,292
Other commercial real estate	1,313				1,313
Total impaired loans	$	2,660			$	2,660
Impaired servicing rights	$	1,459			$	1,459
Other real estate owned
Other commercial real estate	$	198			$	198
1-4 family	28				28
Total other real estate owned	$	226			$	226

			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 real estate	$	76	$	21	$	55
Hotel	1,909		617		1,292
Other commercial real estate	2,247		934		1,313
Ending Balance	$	4,232	$	1,572	$	2,660

Schedule of properties by portfolio class, net

	Gross Balance		Valuation Allowance		Net
Other commercial real estate	$	219	$	21	$	198
1-4 family	37		9		28
Ending Balance	$	256	$	30	$	226

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

September 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
Hotel	1,292		Income approach	Adjustment for type of property, current status of property	20% 20% Avg
Other commercial real estate	1,313		Sales comparison approach	Adjustment for differences between comparable sales, type of property, current status of property	0%-50% 43% Avg
	$	2,660
Other real estate owned:
Other commercial real estate	$	198	Sales comparison approach	Adjustment for differences between comparable sales.	10% 10% Avg
1-4 Family	28		Sales comparison approach	Adjustment for differences between comparable sales.	10% 10% Avg
	$	226

Mortgage servicing rights	$	1,459	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

September 30, 2014	Carrying Amount			Level 1		Level 2		Level 3	Total
Financial assets:
Cash and cash equivalents	$	69,914		60,150		9,764			69,914
Interest bearing time deposits	1,915					1,915			1,915
Loans including loans held for sale, net	1,730,793					4,928		1,732,588	1,737,516
Restricted stock	15,625								N/A
Interest receivable	9,266					4,158		5,108	9,266
Financial liabilities
Deposits	(2,221,699		)	(464,058	)	(1,756,444	)		(2,220,502	)
Other borrowings	(34,490		)			(34,490	)		(34,490	)
FHLB advances	(240,343		)			(244,060	)		(244,060	)
Interest payable	(491		)			(491	)		(491	)
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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