FAIR VALUE (Tables)

9 Months Ended

Sep. 30, 2015

Assets and Liabilities Measured at Fair Value on Recurring Basis


	Fair Value Measurements at
	September 30, 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	$	—	$	218,084	$	—	$	218,084
Private label mortgage backed security		—		—		5,173		5,173
Mortgage backed securities - residential		—		100,936		—		100,936
Collateralized mortgage obligations		—		121,022		—		121,022
Freddie Mac preferred stock		—		269		—		269
Mutual fund		1,025		—		—		1,025
Corporate bonds		—		15,049		—		15,049
Total securities available for sale	$	1,025	$	455,360	$	5,173	$	461,558

Mortgage loans held for sale	$	—	$	8,526	$	—	$	8,526
Rate lock commitments		—		339		—		339
Interest rate swap agreements		—		510		—		510

Financial liabilities:
Mandatory forward contracts		—		64		—		64
Interest rate swap agreements		—		1,418		—		1,418


	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				Nine Months Ended
	September 30,				September 30,
(in thousands)	2015		2014		2015		2014

Balance, beginning of period	$	5,231	$	5,461	$	5,250	$	5,485

Total gains or losses included in earnings:
Net change in unrealized gain		(58)		65		(84)		434
Recovery of actual losses previously recorded		—		35		35		101
Principal paydowns		—		(224)		(28)		(683)
Balance, end of period	$	5,173	$	5,337	$	5,173	$	5,337

Schedule of aggregate fair value, contractual balance and gain


(in thousands)	September 30, 2015		December 31, 2014

Aggregate fair value	$	8,526	$	6,388
Contractual balance		8,296		6,265
Gain		230		123

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2015		2014		2015		2014

Interest income	$	67	$	38	$	180	$	133
Change in fair value		10		(65)		107		59
Total included in earnings	$	77	$	(27)	$	287	$	192

Assets Measured at Fair Value on a Non-Recurring Basis


	Fair Value Measurements at
	September 30, 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	$	—	$	—	$	4,238	$	4,238
Non owner occupied		—		—		689		689
Commercial real estate		—		—		3,411		3,411
Home equity		—		—		1,276		1,276
Total impaired loans*	$	—	$	—	$	9,614	$	9,614

Other real estate owned:
Residential real estate	$	—	$	—	$	135	$	135
Commercial real estate		—		—		1,425		1,425
Construction & land development		—		—		483		483
Total other real estate owned	$	—	$	—	$	2,043	$	2,043

Premises, held for sale	$	—	$	—	$	1,218	$	1,218


	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 loans measured for impairment using the fair value of the collateral


(in thousands)	September 30, 2015		December 31, 2014

Carrying amount of loans measured at fair value	$	8,818	$	8,343
Estimated selling costs considered in carrying amount		869		1,505
Valuation allowance		(73)		—
Total fair value	$	9,614	$	9,848

Other Real Estate Owned



(in thousands)	September 30, 2015		December 31, 2014

Other real estate carried at fair value	$	2,043	$	9,188
Other real estate carried at cost		789		2,055
Total carrying value of other real estate owned	$	2,832	$	11,243


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2015		2014		2015		2014

Other real estate owned write-downs during the period	$	312	$	825	$	1,016	$	2,042

Carrying Amount and Estimated Fair Values of Financial Instruments


			Fair Value Measurements at
			September 30, 2015:
									Total
	Carrying								Fair
(in thousands)	Value		Level 1		Level 2		Level 3		Value

Assets:
Cash and cash equivalents	$	90,731	$	90,731	$	—	$	—	$	90,731
Securities available for sale		461,558		1,025		455,360		5,173		461,558
Securities to be held to maturity		41,041		—		41,601		—		41,601
Mortgage loans held for sale, at fair value		8,526		—		8,526		—		8,526
Other loans held for sale, at the lower of cost or fair value		3,800		—		3,800		—		3,800
Loans, net		3,270,915		—		—		3,315,082		3,315,082
Federal Home Loan Bank stock		28,208		—		—		—		NA
Accrued interest receivable		9,035		—		9,035		—		9,035

Liabilities:
Non interest-bearing deposits		637,875		—		637,875		—		637,875
Transaction deposits		1,475,699		—		1,475,699		—		1,475,699
Time deposits		254,256		—		255,490		—		255,490
Securities sold under agreements to repurchase and other short-term borrowings		309,624		—		309,624		—		309,624
Federal Home Loan Bank advances		711,500		—		725,442		—		725,442
Subordinated note		41,240		—		39,005		—		39,005
Accrued interest payable		1,167		—		1,167		—		1,167


			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 to 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

Recurring basis

Fair Value Disclosures

Fair value inputs quantitative information


	Fair		Valuation
September 30, 2015 (dollars in thousands)	Value		Technique	Unobservable Inputs	Range

Private label mortgage backed security	$	5,173	Discounted cash flow	(1) Constant prepayment rate	0.0% - 6.5%

				(2) Probability of default	3.0% - 10.0%

				(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
September 30, 2015 (dollars in thousands)	Value		Technique	Inputs	Average)

Impaired loans - residential real estate owner occupied	$	4,238	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 53% (8%)

Impaired loans - residential real estate non owner occupied	$	689	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 1% (1%)

Impaired loans - commercial real estate	$	1,790	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 58% (19%)

Impaired loans - commercial real estate	$	1,621	Income approach	Adjustments for differences between net operating income expectations	17% (17%)

Impaired loans - home equity	$	1,276	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 29% (20%)

Other real estate owned - residential real estate	$	135	Sales comparison approach	Adjustments determined for differences between comparable sales	10% (10%)

Other real estate owned - commercial real estate	$	1,425	Sales comparison approach	Adjustments determined for differences between comparable sales	3% - 17% (13%)

Other real estate owned - construction & land development	$	483	Sales comparison approach	Adjustments determined for differences between comparable sales	37% - 43% (41%)

Premises, held for sale	$	1,218	Sales comparison approach	Adjustments determined for differences between comparable sales	5% (5%)


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

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

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

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

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

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

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

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

Other real estate owned - commercial real estate	$	1,467	Income approach	Adjustments for differences between net operating income expectations	19% (19%)

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

Other real estate owned - construction & land development	$	2,427	Income approach	Adjustments for differences between net operating income expectations	8% - 9% (8%)

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