FAIR VALUE (Tables)

3 Months Ended

Mar. 31, 2018

Assets and Liabilities Measured at Fair Value on Recurring Basis


	Fair Value Measurements at
	March 31, 2018 Using:
	Quoted Prices in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable		Total
	Assets		Inputs		Inputs		Fair
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Value
Financial assets:
Available-for-sale debt securities:
U.S. Treasury securities and U.S. Government agencies	$	—	$	217,001	$	—	$	217,001
Private label mortgage backed security		—		—		4,120		4,120
Mortgage backed securities - residential		—		100,238		—		100,238
Collateralized mortgage obligations		—		82,745		—		82,745
Corporate bonds		—		9,979		—		9,979
Trust preferred security		—		—		3,900		3,900
Total available-for-sale debt securities	$	—	$	409,963	$	8,020	$	417,983

Equity securities with readily determinable fair value:
Freddie Mac preferred stock	$	—	$	328	$	—	$	328
Community Reinvestment Act mutual fund		2,418		—		—		2,418
Total equity securities with readily determinable fair value	$	2,418	$	328	$	—	$	2,746

Mortgage loans held for sale	$	—	$	4,496	$	—	$	4,496
Consumer loans held for sale		—		—		2,419		2,419
Rate lock loan commitments		—		443		—		443
Mandatory forward contracts		—		47		—		47
Interest rate swap agreements		—		1,494		—		1,494

Financial liabilities:
Interest rate swap agreements	$	—	$	1,360	$	—	$	1,360


	Fair Value Measurements at
	December 31, 2017 Using:
	Quoted Prices in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable		Total
	Assets		Inputs		Inputs		Fair
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Value
Financial assets:
Available-for-sale debt securities:
U.S. Treasury securities and U.S. Government agencies	$	—	$	307,592	$	—	$	307,592
Private label mortgage backed security		—		—		4,449		4,449
Mortgage backed securities - residential		—		106,374		—		106,374
Collateralized mortgage obligations		—		87,163		—		87,163
Corporate bonds		—		15,125		—		15,125
Trust preferred security		—		—		3,600		3,600
Total available-for-sale debt securities	$	—	$	516,254	$	8,049	$	524,303

Equity securities with readily determinable fair value:
Freddie Mac preferred stock	$	—	$	473	$	—	$	473
Community Reinvestment Act mutual fund		2,455		—		—		2,455
Total equity securities with readily determinable fair value	$	2,455	$	473	$	—	$	2,928

Mortgage loans held for sale	$	—	$	5,761	$	—	$	5,761
Consumer loans held for sale		—		—		2,677		2,677
Rate lock loan commitments		—		310		—		310
Interest rate swap agreements		—		312		—		312

Financial liabilities:
Mandatory forward contracts	$	—	$	9	$	—	$	9
Interest rate swap agreements		—		403		—		403

Assets Measured at Fair Value on a Non-Recurring Basis


	Fair Value Measurements at
	March 31, 2018 Using:
	Quoted Prices in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable		Total
	Assets		Inputs		Inputs		Fair
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Value

Impaired loans:
Residential real estate:
Owner occupied	$	—	$	—	$	3,269	$	3,269
Nonowner occupied		—		—		1,339		1,339
Commercial real estate		—		—		1,342		1,342
Commercial & industrial		—		—		744		744
Home equity		—		—		308		308
Total impaired loans*	$	—	$	—	$	7,002	$	7,002

Premises	$	—	$	—	$	2,896	$	2,896


	Fair Value Measurements at
	December 31, 2017 Using:
	Quoted Prices in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable		Total
	Assets		Inputs		Inputs		Fair
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Value

Impaired loans:
Residential real estate:
Owner occupied	$	—	$	—	$	4,107	$	4,107
Nonowner occupied		—		—		237		237
Commercial real estate		—		—		1,366		1,366
Home equity		—		—		393		393
Total impaired loans*	$	—	$	—	$	6,103	$	6,103

Other real estate owned:
Residential real estate	$	—	$	—	$	83	$	83
Total other real estate owned	$	—	$	—	$	83	$	83

Premises	$	—	$	—	$	3,017	$	3,017

* The difference between the carrying value and the fair value of impaired loans measured at fair value is reconciled in a subsequent table of this Footnote.

Impaired collateral dependent loans classified with Level 3 fair value hierarchy


(in thousands)	March 31, 2018		December 31, 2017

Carrying amount of loans measured at fair value	$	6,293	$	5,358
Estimated selling costs considered in carrying amount		725		752
Valuation allowance		(16)		(7)
Total fair value	$	7,002	$	6,103

Provisions for loss on collateral dependent impaired loans


	Three Months Ended
	March 31,
(in thousands)	2018		2017

Provisions on collateral-dependent, impaired loans	$	429	$	8

Other Real Estate Owned



(in thousands)	March 31, 2018		December 31, 2017

Other real estate owned carried at fair value	$	—	$	83
Other real estate owned carried at cost		160		32
Total carrying value of other real estate owned	$	160	$	115


	Three Months Ended
	March 31,
(in thousands)	2018		2017

Other real estate owned write-downs during the period	$	—	$	70

Schedule of Impairment charges on premises and equipment


	Three Months Ended
	March 31,
(in thousands)	2018		2017

Impairment charges on premises	$	104	$	58

Carrying Amount and Estimated Fair Values of Financial Instruments


			Fair Value Measurements at
			March 31, 2018:
									Total
	Carrying								Fair
(in thousands)	Value		Level 1		Level 2		Level 3		Value

Assets:
Cash and cash equivalents	$	362,122	$	362,122	$	—	$	—	$	362,122
Available-for-sale debt securities		417,983		—		409,963		8,020		417,983
Held-to-maturity debt securities		62,844		—		63,515		—		63,515
Equity securities with readily determinable fair values		2,746		2,418		328		—		2,746
Mortgage loans held for sale, at fair value		4,496		—		4,496		—		4,496
Consumer loans held for sale, at fair value		2,419		—		—		2,419		2,419
Consumer loans held for sale, at the lower of cost or fair value		7,380		—		7,380		—		7,380
Loans, net		4,000,159		—		—		3,978,974		3,978,974
Federal Home Loan Bank stock		32,067		—		—		—		NA
Accrued interest receivable		11,772		—		11,772		—		11,772

Liabilities:
Noninterest-bearing deposits	$	1,241,127		—	$	1,241,127		—	$	1,241,127
Transaction deposits		2,098,796		—		2,098,796		—		2,098,796
Time deposits		377,700		—		373,075		—		373,075
Securities sold under agreements to repurchase and other short-term borrowings		175,682		—		175,682		—		175,682
Federal Home Loan Bank advances		440,000		—		432,140		—		432,140
Subordinated note		41,240		—		32,352		—		32,352
Accrued interest payable		1,041		—		1,041		—		1,041

NA - Not applicable


			Fair Value Measurements at
			December 31, 2017:
									Total
	Carrying								Fair
(in thousands)	Value		Level 1		Level 2		Level 3		Value

Assets:
Cash and cash equivalents	$	299,351	$	299,351	$	—	$	—	$	299,351
Available-for-sale debt securities		524,303		—		516,727		8,049		524,303
Held-to-maturity debt securities		64,227		—		65,133		—		65,133
Equity securities with readily determinable fair values		2,928		2,455		473		—		2,928
Mortgage loans held for sale, at fair value		5,761		—		5,761		—		5,761
Consumer loans held for sale, at fair value		2,677		—		—		2,677		2,677
Consumer loans held for sale, at the lower of cost or fair value		8,551		—		8,551		—		8,551
Loans, net		3,971,265		—		—		3,938,998		3,938,998
Federal Home Loan Bank stock		32,067		—		—		—		NA
Accrued interest receivable		12,082		—		12,082		—		12,082

Liabilities:
Noninterest-bearing deposits	$	1,022,042		—	$	1,022,042		—	$	1,022,042
Transaction deposits		2,049,493		—		2,049,493		—		2,049,493
Time deposits		361,623		—		358,627		—		358,627
Securities sold under agreements to repurchase and other short-term borrowings		204,021		—		204,021		—		204,021
Federal Home Loan Bank advances		737,500		—		730,712		—		730,712
Subordinated note		41,240		—		31,763		—		31,763
Accrued interest payable		1,100		—		1,100		—		1,100

NA - Not applicable

Nonrecurring basis

Fair Value Disclosures

Fair value inputs quantitative information


					Range
	Fair		Valuation	Unobservable	(Weighted
March 31, 2018 (dollars in thousands)	Value		Technique	Inputs	Average)

Impaired loans - residential real estate owner occupied	$	3,269	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 54% (12%)

Impaired loans - residential real estate nonowner occupied	$	1,339	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 27% (13%)

Impaired loans - commercial real estate	$	79	Sales comparison approach	Adjustments determined for differences between comparable sales	21% (21%)

Impaired loans - commercial real estate	$	1,263	Income approach	Adjustments for differences between net operating income expectations	17% (17%)

Impaired loans - commercial & industrial	$	744	Sales comparison approach	Adjustments determined for differences between comparable sales	3% (3%)

Impaired loans - home equity	$	308	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 22% (14%)

Premises	$	2,896	Sales comparison approach	Adjustments determined for differences between comparable sales	8% - 68% (24%)


					Range
	Fair		Valuation	Unobservable	(Weighted
December 31, 2017 (dollars in thousands)	Value		Technique	Inputs	Average)

Impaired loans - residential real estate owner occupied	$	4,107	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 54% (10%)

Impaired loans - residential real estate nonowner occupied	$	237	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 8% (5%)

Impaired loans - commercial real estate	$	79	Sales comparison approach	Adjustments determined for differences between comparable sales	21% (21%)

Impaired loans - commercial real estate	$	1,287	Income approach	Adjustments for differences between net operating income expectations	17% (17%)

Impaired loans - home equity	$	393	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 23% (15%)

Other real estate owned - residential real estate	$	83	Sales comparison approach	Adjustments determined for differences between comparable sales	86% (86%)

Premises	$	3,017	Sales comparison approach	Adjustments determined for differences between comparable sales	4% - 67% (21%)

Mortgage loans held for sale

Fair Value Disclosures

Schedule of aggregate fair value, contractual balance and unrealized gain


(in thousands)	March 31, 2018		December 31, 2017

Aggregate fair value	$	4,496	$	5,761
Contractual balance		4,412		5,668
Unrealized gain		84		93

Schedule of gains and losses from changes in fair value included in earnings


	Three Months Ended
	March 31,
(in thousands)	2018		2017

Interest income	$	72	$	67
Change in fair value		(9)		(7)
Total included in earnings	$	63	$	60

Consumer Loans Held For Sale

Fair Value Disclosures

Schedule of aggregate fair value, contractual balance and unrealized gain


(in thousands)	March 31, 2018		December 31, 2017

Aggregate fair value	$	2,419	$	2,677
Contractual balance		2,291		2,535
Unrealized gain		128		142

Schedule of gains and losses from changes in fair value included in earnings


	Three Months Ended
	March 31,
(in thousands)	2018		2017

Interest income	$	176	$	186
Change in fair value		(14)		82
Total included in earnings	$	162	$	268

Consumer Loans Held For Sale | Recurring basis

Fair Value Disclosures

Fair value inputs quantitative information


	Fair		Valuation
March 31, 2018 (dollars in thousands)	Value		Technique	Unobservable Inputs	Rate

Consumer loans held for sale	$	2,419	Contractual Terms	(1) Net Premium	0.9%

				(2) Discounted Sales	5.0%


	Fair		Valuation
December 31, 2017 (dollars in thousands)	Value		Technique	Unobservable Inputs	Rate

Consumer loans held for sale	$	2,677	Contractual Terms	(1) Net Premium	0.9%

				(2) Discounted Sales	5.0%

Private label mortgage backed security

Fair Value Disclosures

Reconciliation of the Bank's investments measured at fair value on a recurring basis using significant unobservable inputs


	Three Months Ended
	March 31,
(in thousands)	2018		2017

Balance, beginning of period	$	4,449	$	4,777
Total gains or losses included in earnings:
Net change in unrealized gain		(2)		53
Recovery of actual losses previously recorded		38		—
Principal paydowns		(365)		(148)
Balance, end of period	$	4,120	$	4,682

Private label mortgage backed security | Recurring basis

Fair Value Disclosures

Fair value inputs quantitative information


	Fair		Valuation
March 31, 2018 (dollars in thousands)	Value		Technique	Unobservable Inputs	Range

Private label mortgage backed security	$	4,120	Discounted cash flow	(1) Constant prepayment rate	5.0% - 6.5%

				(2) Probability of default	1.8% - 8.0%

				(3) Loss severity	50% - 85%


	Fair		Valuation
December 31, 2017 (dollars in thousands)	Value		Technique	Unobservable Inputs	Range

Private label mortgage backed security	$	4,449	Discounted cash flow	(1) Constant prepayment rate	3.5% - 6.5%

				(2) Probability of default	1.8% - 8.0%

				(3) Loss severity	60% - 85%

Trust preferred security

Fair Value Disclosures

Reconciliation of the Bank's investments measured at fair value on a recurring basis using significant unobservable inputs


	Three Months Ended
	March 31,
(in thousands)	2018		2017

Balance, beginning of period	$	3,600	$	3,200
Total gains or losses included in earnings:
Discount accretion		10		11
Net change in unrealized gain		290		(11)
Balance, end of period	$	3,900	$	3,200