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FAIR VALUE (Tables)

9 Months Ended

Sep. 30, 2016

Assets and Liabilities Measured at Fair Value on Recurring Basis


	Fair Value Measurements at
	September 30, 2016 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	$	—	$	287,645	$	—	$	287,645
Private label mortgage backed security		—		—		4,868		4,868
Mortgage backed securities - residential		—		80,832		—		80,832
Collateralized mortgage obligations		—		95,595		—		95,595
Freddie Mac preferred stock		—		193		—		193
Community Reinvestment Act mutual fund		2,544		—		—		2,544
Corporate bonds		—		15,128		—		15,128
Trust preferred security		—		—		3,100		3,100
Total securities available for sale	$	2,544	$	479,393	$	7,968	$	489,905

Mortgage loans held for sale	$	—	$	8,442	$	—	$	8,442
Consumer loans held for sale		—		—		1,691		1,691
Rate lock commitments		—		910		—		910
Interest rate swap agreements		—		1,736		—		1,736

Financial liabilities:
Mandatory forward contracts	$	—	$	130	$	—	$	130
Interest rate swap agreements		—		2,772		—		2,772


	Fair Value Measurements at
	December 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	$	—	$	286,479	$	—	$	286,479
Private label mortgage backed security		—		—		5,132		5,132
Mortgage backed securities - residential		—		92,268		—		92,268
Collateralized mortgage obligations		—		113,668		—		113,668
Freddie Mac preferred stock		—		173		—		173
Community Reinvestment Act mutual fund		1,011		—		—		1,011
Corporate bonds		—		14,922		—		14,922
Trust preferred security		—		—		3,405		3,405
Total securities available for sale	$	1,011	$	507,510	$	8,537	$	517,058

Mortgage loans held for sale	$	—	$	4,083	$	—	$	4,083
Rate lock commitments		—		306		—		306
Interest rate swap agreements		—		400		—		400

Financial liabilities:
Mandatory forward contracts	$	—	$	25	$	—	$	25
Interest rate swap agreements		—		1,000		—		1,000

Assets Measured at Fair Value on a Non-Recurring Basis


	Fair Value Measurements at
	September 30, 2016 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	$	—	$	—	$	3,555	$	3,555
Non owner occupied		—		—		9		9
Commercial real estate		—		—		3,217		3,217
Home equity		—		—		383		383
Total impaired loans*	$	—	$	—	$	7,164	$	7,164

Other real estate owned:
Construction & land development	$	—	$	—	$	205	$	205
Total other real estate owned	$	—	$	—	$	205	$	205

Premises and equipment	$	—	$	—	$	1,086	$	1,086


	Fair Value Measurements at
	December 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	$	—	$	—	$	3,631	$	3,631
Non owner occupied		—		—		689		689
Commercial real estate		—		—		3,443		3,443
Home equity		—		—		1,245		1,245
Total impaired loans*	$	—	$	—	$	9,008	$	9,008

Other real estate owned:
Residential real estate	$	—	$	—	$	128	$	128
Commercial real estate		—		—		442		442
Construction & land development		—		—		300		300
Total other real estate owned	$	—	$	—	$	870	$	870

Premises and equipment	$	—	$	—	$	1,185	$	1,185

* 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)	September 30, 2016		December 31, 2015

Carrying amount of loans measured at fair value	$	6,446	$	8,162
Estimated selling costs considered in carrying amount		752		946
Valuation allowance		(34)		(100)
Total fair value	$	7,164	$	9,008

Provisions for loss on collateral dependent impaired loans


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2016		2015		2016		2015

Provisions for loss on collateral-dependent, impaired loans	$	(16)	$	17	$	(40)	$	73

Other Real Estate Owned



(in thousands)	September 30, 2016		December 31, 2015

Other real estate owned carried at fair value	$	205	$	870
Other real estate owned carried at cost		2,230		350
Total carrying value of other real estate owned	$	2,435	$	1,220


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2016		2015		2016		2015

Other real estate owned write-downs during the period	$	200	$	312	$	200	$	1,016

Carrying Amount and Estimated Fair Values of Financial Instruments


			Fair Value Measurements at
			September 30, 2016:
									Total
	Carrying								Fair
(in thousands)	Value		Level 1		Level 2		Level 3		Value

Assets:
Cash and cash equivalents	$	302,167	$	302,167	$	—	$	—	$	302,167
Securities available for sale		489,905		2,544		479,393		7,968		489,905
Securities held to maturity		34,539		—		34,651		—		34,651
Mortgage loans held for sale, at fair value		8,442		—		8,442		—		8,442
Consumer loans held for sale, at fair value		1,691		—		—		1,691		1,691
Consumer loans held for sale, at the lower of cost or fair value		1,093		—		1,093		—		1,093
Loans, net		3,792,595		—		—		3,821,130		3,821,130
Federal Home Loan Bank stock		28,208		—		—		—		NA
Accrued interest receivable		9,780		—		9,780		—		9,780

Liabilities:
Noninterest-bearing deposits	$	947,602		—	$	947,602		—	$	947,602
Transaction deposits		1,930,028		—		1,930,028		—		1,930,028
Time deposits		258,263		—		260,002		—		260,002
Securities sold under agreements to repurchase and other short-term borrowings		152,458		—		152,458		—		152,458
Federal Home Loan Bank advances		862,500		—		868,148		—		868,148
Subordinated note		41,240		—		31,169		—		31,169
Accrued interest payable		1,027		—		1,027		—		1,027


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

Assets:
Cash and cash equivalents	$	210,082	$	210,082	$	—	$	—	$	210,082
Securities available for sale		517,058		1,011		507,510		8,537		517,058
Securities held to maturity		38,727		—		39,196		—		39,196
Mortgage loans held for sale, at fair value		4,083		—		4,083		—		4,083
Consumer loans held for sale, at the lower of cost or fair value		514		—		514		—		514
Loans, net		3,299,119		—		—		3,332,608		3,332,608
Federal Home Loan Bank stock		28,208		—		—		—		NA
Accrued interest receivable		9,233		—		9,233		—		9,233

Liabilities:
Noninterest-bearing deposits	$	634,863		—	$	634,863		—	$	634,863
Transaction deposits		1,601,647		—		1,601,647		—		1,601,647
Time deposits		250,967		—		250,882		—		250,882
Securities sold under agreements to repurchase and other short-term borrowings		395,433		—		395,433		—		395,433
Federal Home Loan Bank advances		699,500		—		708,722		—		708,722
Subordinated note		41,240		—		33,358		—		33,358
Accrued interest payable		1,229		—		1,229		—		1,229

NA - Not applicable

Nonrecurring basis

Fair Value Disclosures

Fair value inputs quantitative information


					Range
	Fair		Valuation	Unobservable	(Weighted
September 30, 2016 (dollars in thousands)	Value		Technique	Inputs	Average)

Impaired loans - residential real estate owner occupied	$	3,555	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 53% (6%)

Impaired loans - residential real estate non owner occupied	$	9	Sales comparison approach	Adjustments determined for differences between comparable sales	0% (0%)

Impaired loans - commercial real estate	$	1,713	Sales comparison approach	Adjustments determined for differences between comparable sales	3% - 42% (19%)

Impaired loans - commercial real estate	$	1,504	Income approach	Adjustments for differences between net operating income expectations	17% (17%)

Impaired loans - home equity	$	383	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 29% (15%)

Other real estate owned - construction & land development	$	205	Sales comparison approach	Adjustments determined for differences between comparable sales	60% (60%)

Premises and equipment	$	1,086	Sales comparison approach	Adjustments determined for differences between comparable sales	5% (5%)


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

Impaired loans - residential real estate owner occupied	$	3,631	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 53% (7%)

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	$	1,839	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 58% (19%)

Impaired loans - commercial real estate	$	1,604	Income approach	Adjustments for differences between net operating income expectations	17% (17%)

Impaired loans - home equity	$	1,245	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 29% (20%)

Other real estate owned - residential real estate	$	128	Sales comparison approach	Adjustments determined for differences between comparable sales	18% (18%)

Other real estate owned - commercial real estate	$	442	Sales comparison approach	Adjustments determined for differences between comparable sales	12% - 23% (13%)

Other real estate owned - construction & land development	$	300	Sales comparison approach	Adjustments determined for differences between comparable sales	49% (49%)

Premises and equipment	$	1,185	Sales comparison approach	Adjustments determined for differences between comparable sales	5% (5%)

Mortgage loans held for sale

Fair Value Disclosures

Schedule of aggregate fair value, contractual balance and unrealized gain


(in thousands)	September 30, 2016		December 31, 2015

Aggregate fair value	$	8,442	$	4,083
Contractual balance		8,197		3,993
Unrealized gain		245		90

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)	2016		2015		2016		2015

Interest income	$	76	$	67	$	148	$	180
Change in fair value		57		10		155		107
Total included in earnings	$	133	$	77	$	303	$	287

Consumer Loans Held For Sale

Fair Value Disclosures

Schedule of aggregate fair value, contractual balance and unrealized gain


(in thousands)	September 30, 2016

Aggregate fair value	$	1,691
Contractual balance		1,608
Unrealized gain		83

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)	2016		2016

Interest income	$	378	$	537
Change in fair value		(279)		83
Total included in earnings	$	99	$	620

Consumer Loans Held For Sale | Recurring basis

Fair Value Disclosures

Fair value inputs quantitative information


	Fair		Valuation
September 30, 2016 (dollars in thousands)	Value		Technique	Unobservable Inputs	Range

Consumer loans held for sale	$	1,691	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				Nine Months Ended
	September 30,				September 30,
(in thousands)	2016		2015		2016		2015

Balance, beginning of period	$	4,946	$	5,231	$	5,132	$	5,250
Total gains or losses included in earnings:
Net change in unrealized gain		57		(58)		(91)		(84)
Recovery of actual losses previously recorded		—		—		—		35
Principal paydowns		(135)		—		(173)		(28)
Balance, end of period	$	4,868	$	5,173	$	4,868	$	5,173

Private label mortgage backed security | Recurring basis

Fair Value Disclosures

Fair value inputs quantitative information


	Fair		Valuation
September 30, 2016 (dollars in thousands)	Value		Technique	Unobservable Inputs	Range

Private label mortgage backed security	$	4,868	Discounted cash flow	(1) Constant prepayment rate	0.0% - 6.5%

				(2) Probability of default	3.0% - 9.0%

				(3) Loss severity	60% - 90%


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

Private label mortgage backed security	$	5,132	Discounted cash flow	(1) Constant prepayment rate	0.0% - 6.5%

				(2) Probability of default	3.0% - 9.0%

				(3) Loss severity	60% - 90%

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		Nine Months Ended
	September 30,		September 30,
(in thousands)	2016		2016

Balance, beginning of period	$	3,150	$	3,405
Total gains or losses included in earnings:
Net change in unrealized loss		(50)		(305)
Balance, end of period	$	3,100	$	3,100