FAIR VALUE DISCLOSURES (Tables)

6 Months Ended

Jun. 30, 2013

Schedule of assets measured at fair value on a recurring basis

The table below presents the balances of assets measured at fair value on a recurring basis:

	June 30, 2013
	Fair Value Measurements Using						Assets
	Level 1		Level 2		Level 3		at Fair Value
Assets
U.S. Treasury securities	$	1,027	$	0	$	0	$	1,027
U.S. Government sponsored agencies		0		5,224		0		5,224
Mortgage-backed securities		0		366,418		0		366,418
Non-agency residential mortgage-backed securities		0		0		5,392		5,392
State and municipal securities		0		93,936		979		94,915
Total Securities		1,027		465,578		6,371		472,976

Mortgage banking derivative		0		417		0		417
Interest rate swap derivative		0		314		0		314

Total assets	$	1,027	$	466,309	$	6,371	$	473,707

Liabilities

Mortgage banking derivative	$	0	$	34	$	0	$	34
Interest rate swap derivative		0		242		0		242

Total liabilities	$	0	$	276	$	0	$	276

	December 31, 2012
	Fair Value Measurements Using						Assets
	Level 1		Level 2		Level 3		at Fair Value
Assets
U.S. Treasury securities	$	1,037	$	0	$	0	$	1,037
U.S. Government sponsored agencies		0		5,304		0		5,304
Mortgage-backed securities		0		365,644		0		365,644
Non-agency residential mortgage-backed securities		0		3,594		2,859		6,453
State and municipal securities		0		87,595		988		88,583
Total Securities		1,037		462,137		3,847		467,021

Mortgage banking derivative		0		739		0		739

Total assets	$	1,037	$	462,876	$	3,847	$	467,760

Liabilities
Mortgage banking derivative	$	0	$	12	$	0	$	12

Schedule of reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six months ended June 30, 2013 and 2012:

	Non-Agency Residential
	Mortgage-Backed Securities					State and Municipal Securities
	2013			2012		2013			2012
Balance of recurring Level 3 assets at January 1	$	2,859		$	0	$	988		$	686
Transfers into Level 3		3,334			0		0			0
Changes in fair value of securities		(52	)		0		(9	)		0
Principal payments		(749	)		0		0			(45	)
Balance of recurring Level 3 assets at June 30	$	5,392		$	0	$	979		$	641

Fair Value Measurements, Recurring, Valuation Techniques

The state and municipal securities measured at fair value included below are non-rated Indiana municipal revenue bonds and are not actively traded.

Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at				Range of Inputs
	June 30, 2013		Valuation Technique	Unobservable Input	(Average)

Non-agency residential mortgage-backed securities	$	5,392	Discounted cash flow	Constant prepayment rate		5.00-30.00
						(9.56)

				Average life		0.57-2.66
						(1.44)

				Swap/EDSF spread		242-327
						(297)

State and municipal securities	$	979	Price to type, par, call	Discount to benchmark index		1-7%
						(2.57%)

Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at				Range of Inputs
	December 31, 2012		Valuation Technique	Unobservable Input	(Average)

Non-agency residential mortgage-backed securities	$	2,859	Discounted cash flow	Constant prepayment rate		5.00-9.00
						(6.00)

				Average life (years)		0.20-2.86
						(2.70)

				Swap/EDSF spread		297-339
						(328)

State and municipal securities	$	988	Price to type, par, call	Discount to benchmark index		1-11%
						(4%)

Schedule of assets measured at fair value on a nonrecurring basis

The table below presents the balances of assets measured at fair value on a nonrecurring basis:

	June 30, 2013
	Fair Value Measurements Using						Assets
Assets	Level 1		Level 2		Level 3		at Fair Value
			(in thousands)
Impaired loans:
Commercial and industrial loans:
Working capital lines of credit loans	$	0	$	0	$	978	$	978
Non-working capital loans		0		0		3,265		3,265

Commercial real estate and multi-family residential loans:
Construction and land development loans		0		0		2,417		2,417
Owner occupied loans		0		0		2,914		2,914
Nonowner occupied loans		0		0		12,450		12,450
Multifamily loans		0		0		0		0

Agri-business and agricultural loans:
Loans secured by farmland		0		0		283		283
Loans for agricultural production		0		0		0		0

Other commercial loans		0		0		0		0

Consumer 1-4 family mortgage loans:
Closed end first mortgage loans		0		0		404		404
Open end and junior lien loans		0		0		25		25
Residential construction loans		0		0		0		0

Other consumer loans		0		0		40		40

Total impaired loans	$	0	$	0	$	22,776	$	22,776

Mortgage servicing rights		0		0		8		8
Other real estate owned		0		0		75		75

Total assets	$	0	$	0	$	22,859	$	22,859

December 31, 2012
	Fair Value Measurements Using						Assets
Assets	Level 1		Level 2		Level 3		at Fair Value
			(in thousands)
Impaired loans:
Commercial and industrial loans:
Working capital lines of credit loans	$	0	$	0	$	990	$	990
Non-working capital loans		0		0		2,990		2,990

Commercial real estate and multi-family residential loans:
Construction and land development loans		0		0		2,026		2,026
Owner occupied loans		0		0		3,892		3,892
Nonowner occupied loans		0		0		18,642		18,642
Multifamily loans		0		0		0		0

Agri-business and agricultural loans:
Loans secured by farmland		0		0		268		268
Loans for agricultural production		0		0		0		0

Other commercial loans		0		0		0		0

Consumer 1-4 family mortgage loans:
Closed end first mortgage loans		0		0		352		352
Open end and junior lien loans		0		0		158		158
Residential construction loans		0		0		0		0

Other consumer loans		0		0		46		46

Total impaired loans	$	0	$	0	$	29,364	$	29,364

Mortgage servicing rights		0		0		1,906		1,906
Other real estate owned		0		0		75		75

Total assets	$	0	$	0	$	31,345	$	31,345

Fair Value Measured On Nonrecurring Basis Valuation Techniques

The table below presents the balances of assets measured at fair value on a nonrecurring basis:

	June 30, 2013
	Fair Value Measurements Using						Assets
	Level 1		Level 2		Level 3		at Fair Value
			(in thousands)
Assets
Impaired loans:
Commercial and industrial loans:
Working capital lines of credit loans	$	0	$	0	$	978	$	978
Non-working capital loans		0		0		3,265		3,265

Commercial real estate and multi-family residential loans:
Construction and land development loans		0		0		2,417		2,417
Owner occupied loans		0		0		2,914		2,914
Nonowner occupied loans		0		0		12,450		12,450
Multifamily loans		0		0		0		0

Agri-business and agricultural loans:
Loans secured by farmland		0		0		283		283
Loans for agricultural production		0		0		0		0

Other commercial loans		0		0		0		0

Consumer 1-4 family mortgage loans:
Closed end first mortgage loans		0		0		404		404
Open end and junior lien loans		0		0		25		25
Residential construction loans		0		0		0		0

Other consumer loans		0		0		40		40

Total impaired loans	$	0	$	0	$	22,776	$	22,776

Mortgage servicing rights		0		0		8		8
Other real estate owned		0		0		75		75

Total assets	$	0	$	0	$	22,859	$	22,859

The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a non-recurring basis at June 30, 2013:

Fair Value

Valuation Methodology

Unobservable Inputs

Average

Range of Inputs

Impaired Loans:

Commercial and industrial

4,243

Collateral based

Discount to reflect

(8% - 90%)

measurements

current market conditions

and ultimate collectability

Impaired loans:

Commercial real estate

17,781

Collateral based

Discount to reflect

(3% - 42%)

measurements

current market conditions

and ultimate collectability

Impaired loans:

Agri-business and agricultural

283

Collateral based

Discount to reflect

measurements

current market conditions

and ultimate collectability

Impaired loans:

Consumer 1-4 family mortgage

429

Collateral based

Discount to reflect

(8% - 59%)

measurements

current market conditions

and ultimate collectability

Impaired loans:

Other consumer

Collateral based

Discount to reflect

(33% - 79%)

measurements

current market conditions

and ultimate collectability

Mortgage servicing rights

Discounted cash flows

Discount rate

9.50

Other real estate owned

Appraisal

Discount to reflect

current market conditions

Schedule of fair values and the related carrying values of financial instruments

The following table contains the estimated fair values and the related carrying values of the Company’s financial instruments. Items which are not financial instruments are not included.

	June 30, 2013
	Carrying			Estimated Fair Value
	Value			Level 1			Level 2			Level 3			Total

Financial Assets:
Cash and cash equivalents	$	63,555		$	63,555		$	0		$	0		$	63,555
Securities available for sale		472,976			1,027			465,578			6,371			472,976
Real estate mortgages held for sale		5,486			0			5,567			0			5,567
Loans, net		2,284,065			0			0			2,285,426			2,285,426
Federal Home Loan Bank stock		7,313			N/A			N/A			N/A			N/A
Federal Reserve Bank stock		3,420			N/A			N/A			N/A			N/A
Accrued interest receivable		9,208			6			2,266			6,936			9,208
Financial Liabilities:
Certificates of deposit		(804,564	)		0			(815,860	)		0			(815,860	)
All other deposits		(1,678,928	)		(1,678,928	)		0			0			(1,678,928	)
Securities sold under agreements to repurchase		(102,655	)		0			(102,655	)		0			(102,655	)
Federal funds purchased		(37,000	)		0			(37,000	)		0			(37,000	)
Long-term borrowings		(37	)		0			(44	)		0			(44	)
Subordinated debentures		(30,928	)		0			0			(31,230	)		(31,230	)
Standby letters of credit		(316	)		0			0			(316	)		(316	)
Accrued interest payable		(4,405	)		(135	)		(4,267	)		(3	)		(4,405	)

	December 31, 2012
	Carrying			Estimated Fair Value
	Value			Level 1			Level 2			Level 3			Total

Financial Assets:
Cash and cash equivalents	$	232,237		$	232,237		$	0		$	0		$	232,237
Securities available for sale		467,021			1,037			462,137			3,847			467,021
Real estate mortgages held for sale		9,452			0			9,663			0			9,663
Loans, net		2,206,075			0			0			2,230,993			2,230,993
Federal Home Loan Bank stock		7,313			N/A			N/A			N/A			N/A
Federal Reserve Bank stock		3,420			N/A			N/A			N/A			N/A
Accrued interest receivable		8,485			6			2,215			6,264			8,485
Financial Liabilities:
Certificates of deposit		(907,505	)		0			(922,397	)		0			(922,397	)
All other deposits		(1,674,251	)		(1,674,251	)		0			0			(1,674,251	)
Securities sold under agreements to repurchase		(121,883	)		0			(121,883	)		0			(121,883	)
Long-term borrowings		(15,038	)		0			(15,607	)		0			(15,607	)
Subordinated debentures		(30,928	)		0			0			(31,223	)		(31,223	)
Standby letters of credit		(262	)		0			0			(262	)		(262	)
Accrued interest payable		(4,757	)		(298	)		(4,456	)		(3	)		(4,757	)

- 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.

+ References+ Details

- 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.

+ References+ Details