FAIR VALUE (Tables)

3 Months Ended

Mar. 31, 2017

Assets and Liabilities Measured at Fair Value on Recurring Basis


	Fair Value Measurements at
	March 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:
Securities available for sale:
U.S. Treasury securities and U.S. Government agencies	$	—	$	319,525	$	—	$	319,525
Private label mortgage backed security		—		—		4,682		4,682
Mortgage backed securities - residential		—		97,822		—		97,822
Collateralized mortgage obligations		—		82,931		—		82,931
Freddie Mac preferred stock		—		394		—		394
Community Reinvestment Act mutual fund		2,458		—		—		2,458
Corporate bonds		—		15,258		—		15,258
Trust preferred security		—		—		3,200		3,200
Total securities available for sale	$	2,458	$	515,930	$	7,882	$	526,270

Mortgage loans held for sale	$	—	$	5,193	$	—	$	5,193
Consumer loans held for sale		—		—		3,679		3,679
Rate lock loan commitments		—		618		—		618
Interest rate swap agreements		—		137		—		137

Financial liabilities:
Mandatory forward contracts	$	—	$	71	$	—	$	71
Interest rate swap agreements		—		436		—		436


	Fair Value Measurements at
	December 31, 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	$	—	$	294,544	$	—	$	294,544
Private label mortgage backed security		—		—		4,777		4,777
Mortgage backed securities - residential		—		73,004		—		73,004
Collateralized mortgage obligations		—		87,654		—		87,654
Freddie Mac preferred stock		—		483		—		483
Community Reinvestment Act mutual fund		2,455		—		—		2,455
Corporate bonds		—		15,158		—		15,158
Trust preferred security		—		—		3,200		3,200
Total securities available for sale	$	2,455	$	470,843	$	7,977	$	481,275

Mortgage loans held for sale	$	—	$	11,662	$	—	$	11,662
Consumer loans held for sale		—		—		2,198		2,198
Rate lock loan commitments		—		299		—		299
Mandatory forward contracts		—		204		—		204
Interest rate swap agreements		—		305		—		305

Financial liabilities:
Interest rate swap agreements	$	—	$	597	$	—		597

Assets Measured at Fair Value on a Non-Recurring Basis


	Fair Value Measurements at
	March 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	$	—	$	—	$	4,151	$	4,151
Nonowner occupied		—		—		38		38
Commercial real estate		—		—		2,496		2,496
Home equity		—		—		535		535
Total impaired loans*	$	—	$	—	$	7,220	$	7,220

Other real estate owned:
Residential real estate	$	—	$	—	$	630	$	630
Total other real estate owned	$	—	$	—	$	630	$	630


	Fair Value Measurements at
	December 31, 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	$	—	$	—	$	4,787	$	4,787
Nonowner occupied		—		—		8		8
Commercial real estate		—		—		2,643		2,643
Home equity		—		—		426		426
Total impaired loans*	$	—	$	—	$	7,864	$	7,864

Other real estate owned:
Residential real estate	$	—	$	—	$	400	$	400
Total other real estate owned	$	—	$	—	$	400	$	400

* 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, 2017		December 31, 2016

Carrying amount of loans measured at fair value	$	6,435	$	6,963
Estimated selling costs considered in carrying amount		813		936
Valuation allowance		(28)		(35)
Total fair value	$	7,220	$	7,864

Provisions for loss on collateral dependent impaired loans

Other Real Estate Owned



(in thousands)	March 31, 2017		December 31, 2016

Other real estate owned carried at fair value	$	630	$	400
Other real estate owned carried at cost		732		991
Total carrying value of other real estate owned	$	1,362	$	1,391


	Three Months Ended
	March 31,
(in thousands)	2017		2016

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

Carrying Amount and Estimated Fair Values of Financial Instruments


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

Assets:
Cash and cash equivalents	$	206,187	$	206,187	$	—	$	—	$	206,187
Securities available for sale		526,270		2,458		515,930		7,882		526,270
Securities held to maturity		51,860		—		52,479		—		52,479
Mortgage loans held for sale, at fair value		5,193		—		5,193		—		5,193
Consumer loans held for sale, at fair value		3,679		—		—		3,679		3,679
Consumer loans held for sale, at the lower of cost or fair value		1,420		—		1,420		—		1,420
Loans, net		3,668,014		—		—		3,648,482		3,648,482
Federal Home Loan Bank stock		28,208		—		—		—		NA
Accrued interest receivable		10,147		—		10,147		—		10,147

Liabilities:
Noninterest-bearing deposits	$	1,070,237		—	$	1,070,237		—	$	1,070,237
Transaction deposits		2,024,954		—		2,024,954		—		2,024,954
Time deposits		253,593		—		252,543		—		252,543
Securities sold under agreements to repurchase and other short-term borrowings		144,375		—		144,375		—		144,375
Federal Home Loan Bank advances		467,500		—		463,357		—		463,357
Subordinated note		41,240		—		32,174		—		32,174
Accrued interest payable		858		—		858		—		858


			Fair Value Measurements at
			December 31, 2016:
									Total
	Carrying								Fair
(in thousands)	Value		Level 1		Level 2		Level 3		Value

Assets:
Cash and cash equivalents	$	289,309	$	289,309	$	—	$	—	$	289,309
Securities available for sale		481,275		2,455		470,843		7,977		481,275
Securities held to maturity		52,864		—		53,249		—		53,249
Mortgage loans held for sale, at fair value		11,662		—		11,662		—		11,662
Consumer loans held for sale, at fair value		2,198		—		—		2,198		2,198
Consumer loans held for sale, at the lower of cost or fair value		1,310		—		1,310		—		1,310
Loans, net		3,777,858		—		—		3,757,698		3,757,698
Federal Home Loan Bank stock		28,208		—		—		—		NA
Accrued interest receivable		10,356		—		10,356		—		10,356

Liabilities:
Noninterest-bearing deposits	$	971,952		—	$	971,952		—	$	971,952
Transaction deposits		1,939,338		—		1,939,338		—		1,939,338
Time deposits		249,417		—		248,684		—		248,684
Securities sold under agreements to repurchase and other short-term borrowings		173,473		—		173,473		—		173,473
Federal Home Loan Bank advances		802,500		—		798,594		—		798,594
Subordinated note		41,240		—		30,821		—		30,821
Accrued interest payable		948		—		948		—		948

NA - Not applicable

Nonrecurring basis

Fair Value Disclosures

Fair value inputs quantitative information


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

Impaired loans - residential real estate owner occupied	$	4,151	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 53% (6%)

Impaired loans - residential real estate nonowner occupied	$	38	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 45% (18%)

Impaired loans - commercial real estate	$	1,089	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 49% (6%)

Impaired loans - commercial real estate	$	1,407	Income approach	Adjustments for differences between net operating income expectations	17% (17%)

Impaired loans - home equity	$	535	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 29% (13%)

Other real estate owned - residential real estate	$	630	Sales comparison approach	Adjustments determined for differences between comparable sales	24% - 27% (25%)


					Range
	Fair		Valuation	Unobservable	(Weighted
December 31, 2016 (dollars in thousands)	Value		Technique	Inputs	Average)

Impaired loans - residential real estate owner occupied	$	4,787	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 53% (6%)

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

Impaired loans - commercial real estate	$	1,214	Sales comparison approach	Adjustments determined for differences between comparable sales	3% - 49% (30%)

Impaired loans - commercial real estate	$	1,429	Income approach	Adjustments for differences between net operating income expectations	17% (17%)

Impaired loans - home equity	$	426	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 29% (16%)

Other real estate owned - residential real estate	$	400	Sales comparison approach	Adjustments determined for differences between comparable sales	17% (17%)

Mortgage loans held for sale

Fair Value Disclosures

Schedule of aggregate fair value, contractual balance and unrealized gain


(in thousands)	March 31, 2017		December 31, 2016

Aggregate fair value	$	5,193	$	11,662
Contractual balance		5,106		11,568
Unrealized gain		87		94

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


	Three Months Ended
	March 31,
(in thousands)	2017		2016

Interest income	$	67	$	32
Change in fair value		(7)		59
Total included in earnings	$	60	$	91

Consumer Loans Held For Sale

Fair Value Disclosures

Schedule of aggregate fair value, contractual balance and unrealized gain


(in thousands)	March 31, 2017		December 31, 2016

Aggregate fair value	$	3,679	$	2,198
Contractual balance		3,597		2,084
Unrealized gain		82		114

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


	Three Months Ended
	March 31,
(in thousands)	2017		2016

Interest income	$	186	$	—
Change in fair value		82		—
Total included in earnings	$	268	$	—

Consumer Loans Held For Sale | Recurring basis

Fair Value Disclosures

Fair value inputs quantitative information


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

Consumer loans held for sale	$	3,679	Contractual Terms	(1) Net Premium	0.9%

				(2) Discounted Sales	5.0%


	Fair		Valuation
December 31, 2016 (dollars in thousands)	Value		Technique	Unobservable Inputs	Rate

Consumer loans held for sale	$	2,198	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)	2017		2016

Balance, beginning of period	$	4,777	$	5,132
Total gains or losses included in earnings:
Net change in unrealized gain		53		(149)
Principal paydowns		(148)		—
Balance, end of period	$	4,682	$	4,983

Private label mortgage backed security | Recurring basis

Fair Value Disclosures

Fair value inputs quantitative information


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

Private label mortgage backed security	$	4,682	Discounted cash flow	(1) Constant prepayment rate	2.0% - 6.5%

				(2) Probability of default	3.0% - 9.0%

				(3) Loss severity	60% - 90%


	Fair		Valuation
December 31, 2016 (dollars in thousands)	Value		Technique	Unobservable Inputs	Range

Private label mortgage backed security	$	4,777	Discounted cash flow	(1) Constant prepayment rate	2.0% - 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
	March 31,
(in thousands)	2017		2016

Balance, beginning of period	$	3,200	$	3,405
Total gains or losses included in earnings:
Net change in unrealized loss		—		(5)
Balance, end of period	$	3,200	$	3,400

Three Months Ended

(in thousands)

Provisions for loss on collateral-dependent, impaired loans