FAIR VALUE (Tables)

6 Months Ended

Jun. 30, 2013

Fair Value Disclosures

Assets and Liabilities Measured at Fair Value on Recurring Basis

	Fair Value Measurements at
	June 30, 2013 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:
Securities available for sale:
U.S. Treasury securities and U.S. Government agencies	$	—	$	45,516	$	—	$	45,516
Private label mortgage backed security	—		—		5,641		5,641
Mortgage backed securities - residential	—		150,055		—		150,055
Collateralized mortgage obligations			204,148				204,148
Corporate bonds	—		14,971		—		14,971
Total securities available for sale	$	—	$	414,690	$	5,641	$	420,331
Mandatory forward contracts	$	—	$	279	$	—	$	279
Rate lock loan commitments	—		446		—		446
Mortgage loans held for sale	—		24,174		—		24,174

	Fair Value Measurements at
	December 31, 2012 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:
Securities available for sale:
U.S. Treasury securities and U.S. Government agencies	$	—	$	39,472	$	—	$	39,472
Private label mortgage backed security	—		—		5,687		5,687
Mortgage backed securities - residential	—		197,210		—		197,210
Collateralized mortgage obligations	—		195,877		—		195,877
Total securities available for sale	$	—	$	432,559	$	5,687	$	438,246
Mandatory forward contracts	$	—	$	47	$	—	$	47
Rate lock loan commitments	—		833		—		833
Mortgage loans held for sale	—		10,614		—		10,614

Reconciliation of the Bank's Private Label Mortgage Backed Security Measured at Fair Value on Recurring Basis

	Three Months Ended					Six Months Ended
	June 30,					June 30,
(in thousands)	2013			2012		2013			2012
Balance, beginning of period	$	5,688		$	4,520	$	5,687		$	4,542
Total gains or losses included in earnings:
Net change in unrealized gain/(loss)	238			59		422			37
Principal paydowns	(285		)	—		(468		)	—
Balance, end of period	$	5,641		$	4,579	$	5,641		$	4,579

Assets Measured at Fair Value on a Non-Recurring Basis

	Fair Value Measurements at
	June 30, 2013 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	$	—	$	—	$	1,005	$	1,005
Commercial real estate	—		—		7,030		7,030
Real estate construction	—		—		97		97
Commercial	—		—		49		49
Total impaired loans *	$	—	$	—	$	8,181	$	8,181
Other real estate owned:
Residential real estate:
Owner occupied	$	—	$	—	$	143	$	143
Non owner occupied	—		—		10		10
Commercial real estate	—		—		260		260
Real estate construction	—		—		4,908		4,908
Total other real estate owned	$	—	$	—	$	5,321	$	5,321
Mortgage servicing rights**	$	—	$	683	$	—	$	683

	Fair Value Measurements at
	December 31, 2012 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	$	—	$	—	$	782	$	782
Non owner occupied	—		—		1,788		1,788
Commercial real estate	—		—		15,618		15,618
Real estate construction	—		—		1,552		1,552
Commercial	—		—		182		182
Home equity	—		—		303		303
Total impaired loans *	$	—	$	—	$	20,225	$	20,225
Other real estate owned:
Residential real estate:
Owner occupied	$	—	$	—	$	1,195	$	1,195
Non owner occupied	—		—		—		—
Commercial real estate	—		—		1,219		1,219
Real estate construction	—		—		5,161		5,161
Total other real estate owned	$	—	$	—	$	7,575	$	7,575
Mortgage servicing rights**	$	—	$	3,484	$	—	$	3,484

* - Impaired loan balances exclude TDRs measured for impairment using the present value of future cash flows.

** - Mortgage Servicing Rights at fair value only include those tranches which were considered impaired at the reported period end.

Impaired Loans Carrying Amount and Valuation Allowance

(in thousands)	June 30, 2013			December 31, 2012
Carrying amount of loans measured at fair value	$	8,181		$	23,070
Estimated selling costs considered in carrying amount	1,114			1,839
Valuation allowance	(1,114		)	(4,684		)
Total fair value	$	8,181		$	20,225

Other Real Estate Owned

(in thousands)	June 30, 2013		December 31, 2012
Carrying value of other real estate owned	$	15,248	$	26,203

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands)	2013		2012		2013		2012
Other real estate owned write-downs	$	518	$	115	$	884	$	341

Mortgage Servicing Rights

(in thousands)	June 30, 2013			December 31, 2012
Outstanding balance	$	716		$	3,829
Valuation allowance	(33		)	(345		)
Fair value	$	683		$	3,484

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in thousands)	2013			2012			2013			2012
Charge (credit) to mortgage banking income due to impairment evaluation	$	(160	)	$	(42	)	$	(312	)	$	(31	)

Schedule of aggregate fair value, contractual balance and gain or loss

(in thousands)	June 30, 2013		December 31, 2012
Aggregate fair value	$	24,174	$	10,614
Contractual balance	23,710		10,037
Gain	464		577

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in thousands)	2013			2012			2013			2012
Interest income	$	145		$	53		$	258		$	173
Change in fair value	(247		)	(5		)	(113		)	52
Total change in fair value	$	(102	)	$	48		$	145		$	225

Carrying Amount and Estimated Fair Values of Financial Instruments

			Fair Value Measurements at
			June 30, 2013 Using:
									Total
	Carrying								Fair
(in thousands)	Value		Level 1		Level 2		Level 3		Value
Assets:
Cash and cash equivalents	$	97,690	$	97,690	$	—	$	—	$	97,690
Securities available for sale	420,331		—		414,690		5,641		420,331
Securities to be held to maturity	55,169		—		55,704		—		55,704
Mortgage loans held for sale	24,174		—		24,174		—		24,174
Loans, net of allowance for loan losses	2,595,538		—		—		2,629,630		2,629,630
Federal Home Loan Bank stock	28,342		—		—		—		N/A
Accrued interest receivable	8,641		—		8,641		—		8,641
Liabilities:
Non interest-bearing deposits	487,787		—		487,787		—		487,787
Transaction and money market deposits	1,216,793		—		1,216,793		—		1,216,793
Time deposits	266,467		—		268,871		—		268,871
Securities sold under agreements to repurchase and other short-term borrowings	128,532		—		128,532		—		128,532
Federal Home Loan Bank advances	592,044		—		609,308		—		609,308
Subordinated note	41,240		—		38,088		—		38,088
Accrued interest payable	1,414		—		1,414		—		1,414

			Fair Value Measurements at
			December 31, 2012 Using:
									Total
	Carrying								Fair
(in thousands)	Value		Level 1		Level 2		Level 3		Value
Assets:
Cash and cash equivalents	$	137,691	$	137,691	$	—	$	—	$	137,691
Securities available for sale	438,246		—		432,559		5,687		438,246
Securities to be held to maturity	46,010		—		46,416		—		46,416
Mortgage loans held for sale	10,614		—		10,614		—		10,614
Loans, net of allowance for loan losses	2,626,468		—		—		2,702,686		2,702,686
Federal Home Loan Bank stock	28,377		—		—		—		N/A
Accrued interest receivable	9,245		—		9,245		—		9,245
Liabilities:
Non interest-bearing deposits	479,046		—		479,046		—		479,046
Transaction and money market deposits	1,193,339		—		1,193,339		—		1,193,339
Time deposits	310,543		—		314,972		—		314,972
Securities sold under agreements to repurchase and other short-term borrowings	250,884		—		250,884		—		250,884
Federal Home Loan Bank advances	542,600		—		576,158		—		576,158
Subordinated note	41,240		—		37,917		—		37,917
Accrued interest payable	1,403		—		1,403		—		1,403

Recurring basis

Fair Value Disclosures

Fair value inputs quantitative information

	Fair		Valuation	Unobservable
June 30, 2013 (dollars in thousands)	Value		Technique	Inputs	Range
Private label mortgage backed security	$	5,641	Discounted cash flow	Constant prepayment rate	0.5% - 7%
				Probability of default	3% - 6.50%
				Loss severity	60% - 85%

	Fair		Valuation
December 31, 2012 (dollars in thousands)	Value		Technique	Unobservable Inputs	Range
Private label mortgage backed security	$	5,687	Discounted cash flow	Constant prepayment rate	1% - 6%
				Probability of default	3.50% - 7%
				Loss severity	60% - 70%

Nonrecurring basis

Fair Value Disclosures

Fair value inputs quantitative information

					Range
	Fair		Valuation	Unobservable	(Weighted
June 30, 2013 (dollars in thousands)	Value		Technique	Inputs	Average)
Impaired loans - commercial real estate	$	7,127	Sales comparison approach	Adjustments determined by Management for differences between the comparable sales	13% - 22% (17%)
Impaired loans - residential real estate	$	1,005	Sales comparison approach	Adjustments determined by Management for differences between the comparable sales	10% - 76% (14%)
Impaired loans - commercial	$	49	Sales comparison approach	Adjustments determined by Management for differences between the comparable sales	12% (12%)
Other real estate owned - residential	$	153	Sales comparison approach	Adjustments determined by Management for differences between the comparable sales	13% - 60% (35%)
Other real estate owned - commercial real estate	$	260	Sales comparison approach	Adjustments determined by Management for differences between the comparable sales	4% (4%)
Other real estate owned - real estate construction	$	635	Sales comparison approach	Adjustments determined by Management for differences between the comparable sales	26% - 47% (39%)
	$	4,273	Income approach	Adjustments for differences between net operating income expectations	14% (14%)

					Range
	Fair		Valuation	Unobservable	(Weighted
December 31, 2012 (dollars in thousands)	Value		Technique	Inputs	Average)
Impaired loans - commercial real estate	$	15,230	Sales comparison approach	Adjustments determined by Management for differences between the comparable sales	0% - 50% (18%)
	$	1,940	Income approach	Adjustments for differences between net operating income expectations	12% - 12% (12%)
Impaired loans - residential real estate	$	2,873	Sales comparison approach	Adjustments determined by Management for differences between the comparable sales	2% - 60% (17%)
Impaired loans - commercial	$	182	Sales comparison approach	Adjustments determined by Management for differences between the comparable sales	0% - 50% (44%)
Other real estate owned - residential	$	1,195	Sales comparison approach	Adjustments determined by Management for differences between the comparable sales	4% - 71% (14%)
Other real estate owned - commercial real estate	$	1,219	Sales comparison approach	Adjustments determined by Management for differences between the comparable sales	1% - 33% (16%)
Other real estate owned - real estate construction	$	663	Sales comparison approach	Adjustments determined by Management for differences between the comparable sales	1% - 54% (35%)
	$	4,498	Income approach	Adjustments for differences between net operating income expectations	25% - 25% (25%)