FAIR VALUE (Tables)

9 Months Ended

Sep. 30, 2015

FAIR VALUE.

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

				Fair Value Measurements at September 30, 2015 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/Liabilities
Investment securities available-for sale
U. S. government agency	$	543				$	543
States and municipals	348,816					337,469			$	11,347
Mortgage-backed securities — residential —Government Sponsored Entity	303,845					303,845
Collateralized mortgage obligations — Government Sponsored Entity	249,080					249,080
Equity securities	4,689			$	4,689
Other securities	2,525								2,525
Total investment securities available-for-sale	$	909,498		$	4,689	$	890,937		$	13,872
Mortgage banking derivative	$	925				$	925
Interest rate swap asset	$	1,798				$	1,798
Interest rate swap liability	$	(1,798	)			$	(1,798	)

				Fair Value Measurements at December 31, 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/Liabilities
Investment securities available-for sale
U. S. government agency	$	661				$	661
States and municipals	334,298					321,488			$	12,810
Mortgage-backed securities — residential —Government Sponsored Entity	182,172					182,172
Collateralized mortgage obligations — Government Sponsored Entity	343,437					343,437
Equity securities	4,689			$	4,689
Other securities	2,503								2,503
Total investment securities available-for-sale	$	867,760		$	4,689	$	847,758		$	15,313
Mortgage banking derivative	$	975				$	975
Interest rate swap asset	$	56				$	56
Interest rate swap liability	$	(56	)			$	(56	)

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	2015			2014
Beginning balance, July 1	$	11,863		$	13,083
Total gains or losses (realized / unrealized)
Included in other comprehensive income	(6		)	(8		)
Settlements	(510		)	(218		)
Ending balance, September 30	$	11,347		$	12,857

Other securities	2015			2014
Beginning balance, July 1	$	2,527		$	2,511
Total gains or losses (realized / unrealized)
Included in other comprehensive income	(2		)	(4		)
Ending balance, September 30	$	2,525		$	2,507

Nine months ended September 30:

States and municipal	2015			2014
Beginning balance, January 1	$	12,810		$	14,420
Total gains or losses (realized / unrealized)
Included in other comprehensive income	(36		)	15
Settlements	(1,427		)	(1,578		)
Ending balance, September 30	$	11,347		$	12,857

Equity securities	2015		2014
Beginning balance, January 1	$	—	$	250
Total gains or losses (realized / unrealized)
Settlements	—		(250		)
Ending balance, September 30	$	—	$	—

Other securities	2015		2014
Beginning balance, January 1	$	2,503	$	2,526
Total gains or losses (realized / unrealized)
Included in other comprehensive income	22		(19		)
Ending balance, September 30	$	2,525	$	2,507

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

			Fair Value Measurements at September 30, 2015 Using
	September 30, 2015		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	$	81			$	81
Other commercial real estate	1,092				1,092
Total impaired loans	$	1,173			$	1,173
Impaired servicing rights	$	1,101			$	1,101

			Fair Value Measurements at December 31, 2014 Using
	December 31, 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	1,235				1,235
Total impaired loans	$	1,290			$	1,290
Impaired servicing rights	$	1,854			$	1,854
Other real estate owned
Construction and development	$	21			$	21
Other commercial real estate	291				291
1-4 Family	150				150
Total other real estate owned	$	462			$	462

Schedule of breakdown of impaired loans by portfolio class

A breakdown of these loans by portfolio class at September 30, 2015 is as follows:

	Gross Balance		Valuation Allowance		Net
Commercial and industrial	$	339	$	258	$	81
Other commercial real estate	2,191		1,099		1,092
Ending Balance	$	2,530	$	1,357	$	1,173

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

September 30, 2015	Fair Value (in thousands)		Valuation Technique(s)	Unobservable Input(s)	Range
Impaired Loans:
Commercial and industrial	$	81	Fair value of collateral	Adjustment for collateral value	57% 57% Avg
Other commercial real estate	1,092		Sales comparison approach	Adjustment for differences between comparable sales, type of property, current status of property	0%-20% 11% Avg
	$	1,173
Mortgage servicing rights	$	1,101	Cash flow analysis	Discount rate	10%

December 31, 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 commercial real estate	1,235		Sales comparison approach	Adjustment for differences between comparable sales, type of property, current status of property	20%-45% 36% Avg
	$	1,290
Other real estate owned:
Construction and development	$	21	Sales comparison approach	Adjustment for differences between comparable sales.	15% 15% Avg
Other commercial real estate and 1-4 family	441		Sales comparison approach	Adjustment for differences between comparable sales.	10%-19% 11% Avg
	$	462
Mortgage servicing rights	$	1,854	Cash flow analysis	Discount rate	10%

Schedule of carrying amounts and estimated fair values of financial instruments

September 30, 2015	Carrying Amount			Level 1			Level 2			Level 3		Total
Financial assets:
Cash and cash equivalents	$	112,353		$	86,728		$	25,625				$	112,353
Interest bearing time deposits	1,960						1,960					1,960
Loans including loans held for sale, net	2,063,117						4,957			$	2,132,058	2,137,015
FHLB and other stock	11,070											N/A
Interest receivable	10,720						4,592			6,128		10,720
Financial liabilities
Deposits	(2,607,598		)	(606,218		)	(2,000,841		)			(2,607,059		)
Other borrowings	(39,439		)				(39,439		)			(39,439		)
FHLB advances	(255,416		)				(259,460		)			(259,460		)
Interest payable	(553		)				(553		)			(553		)
Subordinated debentures	(41,239		)				(24,212		)			(24,212		)

December 31, 2014	Carrying Amount			Level 1			Level 2			Level 3		Total
Financial assets:
Cash and cash equivalents	$	62,485		$	60,662		$	1,823				$	62,485
Interest bearing time deposits	1,915						1,915					1,915
Loans including loans held for sale, net	1,941,507						8,514			$	1,946,843	1,955,357
FHLB and other stock	13,854											N/A
Interest receivable	10,064						4,459			5,605		10,064
Financial liabilities
Deposits	(2,468,321		)	(513,393		)	(1,952,833		)			(2,466,226		)
Other borrowings	(26,349		)				(26,349		)			(26,349		)
FHLB advances	(214,413		)				(219,050		)			(219,050		)
Interest payable	(599		)				(599		)			(599		)
Subordinated debentures	(41,239		)				(24,212		)			(24,212		)