FAIR VALUE (Tables)

3 Months Ended

Mar. 31, 2015

Assets and Liabilities Measured at Fair Value on Recurring Basis

	Fair Value Measurements at
	March 31, 2015 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	$	—	$	187,937	$	—	$	187,937
Private label mortgage backed security	—		—		5,235		5,235
Mortgage backed securities - residential	—		117,973		—		117,973
Collateralized mortgage obligations	—		136,607		—		136,607
Freddie Mac preferred stock	—		271		—		271
Mutual fund	1,027		—		—		1,027
Corporate bonds	—		15,095		—		15,095
Total securities available for sale	$	1,027	$	457,883	$	5,235	$	464,145

Mortgage loans held for sale	$	—	$	12,748	$	—	$	12,748
Rate lock commitments	—		497		—		497

Financial liabilities:
Mandatory forward contracts	—		125		—		125
Interest rate swap agreements	—		783		—		783

	Fair Value Measurements at
	December 31, 2014 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	$	—	$	146,922	$	—	$	146,922
Private label mortgage backed security	—		—		5,250		5,250
Mortgage backed securities - residential	—		124,256		—		124,256
Collateralized mortgage obligations	—		143,171		—		143,171
Freddie Mac preferred stock	—		231		—		231
Mutual fund	1,018		—		—		1,018
Corporate bonds	—		15,063		—		15,063
Total securities available for sale	$	1,018	$	429,643	$	5,250	$	435,911

Mortgage loans held for sale	$	—	$	6,388	$	—	$	6,388
Rate lock commitments	—		250		—		250

Financial liabilities:
Mandatory forward contracts	—		33		—		33
Interest rate swap agreements	—		488		—		488

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

	Three Months Ended
	March 31,
(in thousands)	2015			2014

Balance, beginning of period	$	5,250		$	5,485
Total gains or losses included in earnings:
Net change in unrealized gain	(22		)	54
Recovery of actual losses previously recorded	35			32
Principal paydowns	(28		)	(301		)
Balance, end of period	$	5,235		$	5,270

Schedule of aggregate fair value, contractual balance and gain

(in thousands)	March 31, 2015		December 31, 2014

Aggregate fair value	$	12,748	$	6,388
Contractual balance	12,446		6,265
Gain	302		123

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

	Three Months Ended
	March 31,
(in thousands)	2015		2014

Interest income	$	56	$	46
Change in fair value	178		(35		)
Total included in earnings	$	234	$	11

Assets Measured at Fair Value on a Non-Recurring Basis

	Fair Value Measurements at
	March 31, 2015 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	$	—	$	—	$	1,615	$	1,615
Non owner occupied	—		—		686		686
Commercial real estate	—		—		5,283		5,283
Home equity	—		—		1,191		1,191
Total impaired loans*	$	—	$	—	$	8,775	$	8,775

Other real estate owned:
Residential real estate	$	—	$	—	$	1,110	$	1,110
Commercial real estate	—		—		1,267		1,267
Construction & land development	—		—		2,443		2,443
Total other real estate owned	$	—	$	—	$	4,820	$	4,820

Premises, held for sale	$	—	$	—	$	1,284	$	1,284

	Fair Value Measurements at
	December 31, 2014 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	$	—	$	—	$	1,678	$	1,678
Non owner occupied	—		—		702		702
Commercial real estate	—		—		6,122		6,122
Home equity	—		—		1,346		1,346
Total impaired loans*	$	—	$	—	$	9,848	$	9,848

Other real estate owned:
Residential real estate	$	—	$	—	$	1,916	$	1,916
Commercial real estate	—		—		2,845		2,845
Construction & land development	—		—		4,427		4,427
Total other real estate owned	$	—	$	—	$	9,188	$	9,188

Premises, held for sale	$	—	$	—	$	1,317	$	1,317

* - The impaired loan balances in the above two tables exclude TDRs which are not collateral dependent. 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 6 and represents estimated selling costs to liquidate the underlying collateral on such debt.

Impaired loas measured for impairment using the fair value of the collateral

(in thousands)	March 31, 2015		December 31, 2014

Carrying amount of loans measured at fair value	$	7,646	$	8,343
Estimated selling costs considered in carrying amount	1,129		1,505
Total fair value	$	8,775	$	9,848

Other Real Estate Owned

(in thousands)	March 31, 2015		December 31, 2014

Other real estate carried at fair value	$	4,820	$	9,188
Other real estate carried at cost	1,916		2,055
Total carrying value of other real estate owned	$	6,736	$	11,243

	Three Months Ended
	March 31,
(in thousands)	2015		2014

Other real estate owned write-downs during the period	$	484	$	884

Carrying Amount and Estimated Fair Values of Financial Instruments

			Fair Value Measurements at
			March 31, 2015:
									Total
	Carrying								Fair
(in thousands)	Value		Level 1		Level 2		Level 3		Value

Assets:
Cash and cash equivalents	$	136,349	$	136,349	$	—	$	—	$	136,349
Securities available for sale	464,145		1,027		457,883		5,235		464,145
Securities be held to maturity	44,574		—		45,133		—		45,133
Mortgage loans held for sale, at fair value	12,748		—		12,748		—		12,748
Loans, net	3,130,805		—		—		3,168,766		3,168,766
Federal Home Loan Bank stock	28,208		—		—		—		NA
Accrued interest receivable	8,885		—		8,885		—		8,885

Liabilities:
Non interest-bearing deposits	666,166		—		666,166		—		666,166
Transaction deposits	1,459,592		—		1,459,592		—		1,459,592
Time deposits	254,459		—		254,586		—		254,586
Securities sold under agreements to repurchase and other short-term borrowings	332,534		—		332,534		—		332,534
Federal Home Loan Bank advances	596,500		—		613,356		—		613,356
Subordinated note	41,240		—		41,235		—		41,235
Accrued interest payable	1,271		—		1,271		—		1,271

NA - Not applicable

			Fair Value Measurements at
			December 31, 2014:
									Total
	Carrying								Fair
(in thousands)	Value		Level 1		Level 2		Level 3		Value

Assets:
Cash and cash equivalents	$	72,878	$	72,878	$	—	$	—	$	72,878
Securities available for sale	435,911		1,018		429,643		5,250		435,911
Securities be held to maturity	45,437		—		45,807		—		45,807
Mortgage loans held for sale, at fair value	6,388		—		6,388		—		6,388
Loans, net	3,016,085		—		—		3,045,443		3,045,443
Federal Home Loan Bank stock	28,208		—		—		—		NA
Accrued interest receivable	8,807		—		8,807		—		8,807

Liabilities:
Non interest-bearing deposits	502,569		—		502,569		—		502,569
Transaction deposits	1,290,400		—		1,290,400		—		1,290,400
Time deposits	265,213		—		265,858		—		265,858
Securities sold under agreements to repurchase and other short-term borrowings	356,108		—		356,108		—		356,108
Federal Home Loan Bank advances	707,500		—		721,346		—		721,346
Subordinated note	41,240		—		41,198		—		41,198
Accrued interest payable	1,262		—		1,262		—		1,262

NA - Not applicable

Recurring basis

Fair Value Disclosures

Fair value inputs quantitative information

	Fair		Valuation
March 31, 2015 (dollars in thousands)	Value		Technique	Unobservable Inputs	Range

Private label mortgage backed security	$	5,235	Discounted cash flow	(1) Constant prepayment rate	(1.5)% - 6.5%
				(2) Probability of default	3.0% - 9.1%
				(2) Loss severity	60% - 90%

	Fair		Valuation
December 31, 2014 (dollars in thousands)	Value		Technique	Unobservable Inputs	Range

Private label mortgage backed security	$	5,250	Discounted cash flow	(1) Constant prepayment rate	0.5% - 6.5%
				(2) Probability of default	3.0% - 6.2%
				(2) Loss severity	60% - 75%

Nonrecurring basis

Fair Value Disclosures

Fair value inputs quantitative information

					Range
	Fair		Valuation	Unobservable	(Weighted
March 31, 2015 (dollars in thousands)	Value		Technique	Inputs	Average)

Impaired loans - residential real estate	$	1,615	Sales comparison approach	Adjustments determined for	0% - 28% (7%)
owner occupied				differences between
				comparable sales

Impaired loans - residential real estate	$	686	Sales comparison approach	Adjustments determined for	0% - 33% (18%)
non owner occupied				differences between
				comparable sales

Impaired loans - commercial real estate	$	1,791	Sales comparison approach	Adjustments determined for	0% - 9% (3%)
				differences between
				comparable sales

	$	3,492	Income approach	Adjustments for differences	3%-37% (22%)
				between net operating income
				expectations

Impaired loans - home equity	$	1,191	Sales comparison approach	Adjustments determined for	0% - 35% (17%)
				differences between
				comparable sales

Other real estate owned - residential	$	1,110	Sales comparison approach	Adjustments determined for	10% - 39% (25%)
real estate				differences between
				comparable sales

Other real estate owned - commercial	$	1,267	Sales comparison approach	Adjustments determined for	18% - 28% (20%)
real estate				differences between
				comparable sales

Other real estate owned - construction	$	374	Sales comparison approach	Adjustments determined for	13% (13%)
& land development				differences between
				comparable sales

	$	2,069	Income approach	Adjustments for differences	6% (6%)
				between net operating income
				expectations

Premises, held for sale	$	1,284	Sales comparison approach	Adjustments determined for	1% (1%)
				differences between
				comparable sales

					Range
	Fair		Valuation	Unobservable	(Weighted
December 31, 2014 (dollars in thousands)	Value		Technique	Inputs	Average)

Impaired loans - residential real estate	$	1,678	Sales comparison approach	Adjustments determined for	0% - 33% (7%)
owner occupied				differences between
				comparable sales

Impaired loans - residential real estate	$	702	Sales comparison approach	Adjustments determined for	0% - 33% (18%)
non owner occupied				differences between
				comparable sales

Impaired loans - commercial real estate	$	2,615	Sales comparison approach	Adjustments determined for	0% - 9% (2%)
				differences between
				comparable sales

	$	3,507	Income approach	Adjustments for differences	3%-37% (22%)
				between net operating income
				expectations

Impaired loans - home equity	$	1,346	Sales comparison approach	Adjustments determined for	0% - 35% (12%)
				differences between
				comparable sales

Other real estate owned - residential	$	1,916	Sales comparison approach	Adjustments determined for	9% - 23% (19%)
real estate				differences between
				comparable sales

Other real estate owned - commercial	$	1,378	Sales comparison approach	Adjustments determined for	11% - 14% (13%)
real estate				differences between
				comparable sales

	$	1,467	Income approach	Adjustments for differences	19% (19%)
				between net operating income
				expectations

Other real estate owned - construction	$	2,000	Sales comparison approach	Adjustments determined for	13% - 70% (38%)
& land development				differences between
				comparable sales

	$	2,427	Income approach	Adjustments for differences	8% - 9% (8%)
				between net operating income
				expectations

Premises, held for sale	$	1,317	Sales comparison approach	Adjustments determined for	1% (1%)
				differences between
				comparable sales