FAIR VALUE (Tables)

9 Months Ended

Sep. 30, 2017

FAIR VALUE

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

			Fair Value Measurements at September 30, 2017 Using:
			Quoted Prices in		Significant		Significant
			Active Markets for		Other 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	$	116	$	—	$	116	$	—
States and municipal		389,126		—		379,646		9,480
Mortgage-backed securities — residential — Government Sponsored Entity		402,226		—		402,226		—
Collateralized mortgage obligations — Government Sponsored Entity		282,757		—		282,757		—
Equity securities		4,670		4,670		—		—
Other securities		5,008		—		—		5,008
Total investment securities available-for-sale	$	1,083,903	$	4,670	$	1,064,745	$	14,488
Mortgage banking derivative	$	854		—	$	854		—
Interest rate swap asset	$	3,666		—	$	3,666		—
Interest rate swap liability	$	(3,666)		—	$	(3,666)		—

			Fair Value Measurements at December 31, 2016 Using:
			Quoted Prices in		Significant		Significant
			Active Markets for		Other 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	$	955	$	—	$	955	$	—
States and municipal		369,286		—		359,166		10,120
Mortgage-backed securities — residential — Government Sponsored Entity		446,630		—		446,630		—
Collateralized mortgage obligations — Government Sponsored Entity		179,401		—		179,401		—
Equity securities		4,670		4,670		—		—
Other securities		6,598		—		—		6,598
Total investment securities available-for-sale	$	1,007,540	$	4,670	$	986,152	$	16,718
Mortgage banking derivative	$	648		—	$	648		—
Interest rate swap asset	$	3,003		—	$	3,003		—
Interest rate swap liability	$	(3,003)		—	$	(3,003)		—

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	2017		2016
Beginning balance, July 1	$	9,672	$	10,430
Total gains or losses (realized / unrealized)
Included in other comprehensive income		(7)		6
Settlements		(185)		(182)
Ending balance, September 30	$	9,480	$	10,254

Other securities	2017		2016
Beginning balance, July 1	$	5,009	$	6,601
Total gains or losses (realized / unrealized)
Settlement through acquisition		—		—
Included in other comprehensive income		(1)		(2)
Ending balance, September 30	$	5,008	$	6,599

The table below presents a 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) for the nine month periods ended September 30, 2017 and 2016:

States and municipal	2017		2016
Beginning balance, January 1	$	10,120	$	10,858
Total gains or losses (realized / unrealized)
Included in other comprehensive income		(12)		8
Settlements		(628)		(612)
Ending balance, September 30	$	9,480	$	10,254

Other securities	2017		2016
Beginning balance, January 1	$	6,598	$	6,524
Total gains or losses (realized / unrealized)
Settlement through acquisition		(1,590)		—
Included in other comprehensive income		—		75
Ending balance, September 30	$	5,008	$	6,599

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

			Fair Value Measurements at September 30, 2017 Using:
			Quoted Prices in	Significant	Significant
			Active Markets for	Other Observable	Unobservable
	September 30,		Identical Assets	Inputs	Inputs
	2017		(Level 1)	(Level 2)	(Level 3)
Assets:
Impaired loans
Commercial and industrial	$	855			$	855
Agricultural		779				779
Hotel		2,715				2,715
Farm real estate		794				794
Other real estate		1,746				1,746
Total impaired loans	$	6,889			$	6,889
Impaired servicing rights	$	928			$	928

			Fair Value Measurements at December 31, 2016 Using:
			Quoted Prices in	Significant	Significant
			Active Markets for	Other Observable	Unobservable
	December 31,		Identical Assets	Inputs	Inputs
	2016		(Level 1)	(Level 2)	(Level 3)
Assets:
Impaired loans
Commercial and industrial	$	260			$	260
Agricultural		972				972
Farm real estate		745				745
Other real estate		560				560
Total impaired loans	$	2,537			$	2,537
Impaired servicing rights	$	1,083			$	1,083

Schedule of breakdown of impaired loans by portfolio class

	Gross		Valuation
	Balance		Allowance		Net
Commercial and industrial	$	2,197	$	1,342	$	855
Agricultural		1,484		705		779
Hotel		2,918		203		2,715
Farm real estate		1,344		550		794
Other real estate		2,521		775		1,746
Ending Balance	$	10,464	$	3,575	$	6,889

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

	Fair Value		Valuation	Unobservable	Range/
September 30, 2017	(in thousands)		Technique(s)	Input(s)	Average
Impaired Loans:
Commercial and industrial	$	855	Sales comparison approach	Adjustment for differences between comparable sales		19% - 30%
						24% Avg
Agricultural		779	Sales comparison approach	Adjustment for differences between comparable sales		16%-25%
						24% Avg
Hotel		2,715	Sales comparison approach	Adjustment for differences between comparable sales		40%
						40% Avg
Farm real estate		794	Sales comparison approach	Adjustment for differences between comparable sales		16%-25%
						22% Avg
Other real estate		1,746	Sales comparison approach	Adjustment for differences between comparable sales, type of property, current status of property		19% - 40%
						27% Avg
	$	6,889
Mortgage servicing rights	$	928	Cash flow analysis	Discount rate		10%

	Fair Value		Valuation	Unobservable	Range/
December 31, 2016	(in thousands)		Technique(s)	Input(s)	Average
Impaired Loans:
Commercial and industrial	$	260	Sales comparison approach	Adjustment for differences between comparable sales		10% - 30%
						18% Avg
Agricultural		972	Sales comparison approach	Adjustment for differences between comparable sales		10%
						10% Avg
Farm real estate		745	Sales comparison approach	Adjustment for differences between comparable sales		10%
						10%  Avg
Other real estate		560	Sales comparison approach	Adjustment for differences between comparable sales, type of property, current status of property		16% - 31%
						27% Avg
	$	2,537
Mortgage servicing rights	$	1,083	Cash flow analysis	Discount rate		10%

Schedule of carrying amounts and estimated fair values of financial instruments

	Carrying
September 30, 2017	Amount		Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents	$	70,277	$	63,762	$	6,515	$		$	70,277
Interest bearing time deposits		2,160				2,160				2,160
Loans including loans held for sale, net		3,026,807				9,197		3,034,068		3,043,265
FHLB and other stock		27,972								N/A
Interest receivable		14,493				5,703		8,790		14,493
Liabilities
Deposits		(3,421,987)		(838,490)		(2,580,936)				(3,419,426)
Other borrowings		(271,412)				(271,412)				(271,412)
FHLB advances		(310,982)				(309,196)				(309,196)
Interest payable		(1,292)				(1,292)				(1,292)
Subordinated debentures		(48,176)				(41,021)				(41,021)

	Carrying
December 31, 2016	Amount		Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents	$	86,552	$	75,778	$	10,774	$		$	86,552
Interest bearing time deposits		1,960				1,960				1,960
Loans including loans held for sale, net		2,639,046				12,598		2,662,431		2,675,029
FHLB and other stock		21,693								N/A
Interest receivable		12,576				5,234		7,342		12,576
Liabilities
Deposits		(3,110,871)		(767,159)		(2,340,824)				(3,107,983)
Other borrowings		(209,672)				(209,686)				(209,686)
FHLB advances		(249,658)				(248,944)				(248,944)
Interest payable		(642)				(642)				(642)
Subordinated debentures		(41,239)				(34,084)				(34,084)