FAIR VALUE (Tables)

6 Months Ended

Jun. 30, 2017

Assets and Liabilities Measured at Fair Value on Recurring Basis


	Fair Value Measurements at
	June 30, 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	$	—	$	269,585	$	—	$	269,585
Private label mortgage backed security		—		—		4,540		4,540
Mortgage backed securities - residential		—		90,455		—		90,455
Collateralized mortgage obligations		—		78,404		—		78,404
Freddie Mac preferred stock		—		337		—		337
Community Reinvestment Act mutual fund		2,479		—		—		2,479
Corporate bonds		—		15,272		—		15,272
Trust preferred security		—		—		3,453		3,453
Total securities available for sale	$	2,479	$	454,053	$	7,993	$	464,525

Mortgage loans held for sale	$	—	$	6,057	$	—	$	6,057
Consumer loans held for sale		—		—		3,235		3,235
Rate lock loan commitments		—		582		—		582
Interest rate swap agreements		—		432		—		432

Financial liabilities:
Mandatory forward contracts	$	—	$	48	$	—	$	48
Interest rate swap agreements		—		777		—		777


	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
	June 30, 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	$	—	$	—	$	4,359	$	4,359
Nonowner occupied		—		—		38		38
Commercial real estate		—		—		2,382		2,382
Home equity		—		—		642		642
Total impaired loans*	$	—	$	—	$	7,421	$	7,421


	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)	June 30, 2017		December 31, 2016

Carrying amount of loans measured at fair value	$	6,652	$	6,963
Estimated selling costs considered in carrying amount		843		936
Valuation allowance		(74)		(35)
Total fair value	$	7,421	$	7,864

Provisions for loss on collateral dependent impaired loans


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands)	2017		2016		2017		2016

Provisions on collateral-dependent, impaired loans	$	118	$	47	$	190	$	92

Other Real Estate Owned



(in thousands)	June 30, 2017		December 31, 2016

Other real estate owned carried at fair value	$	—	$	400
Other real estate owned carried at cost		300		991
Total carrying value of other real estate owned	$	300	$	1,391


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands)	2017		2016		2017		2016

Other real estate owned write-downs during the period	$	9	$	—	$	79	$	—

Carrying Amount and Estimated Fair Values of Financial Instruments


			Fair Value Measurements at
			June 30, 2017:
									Total
	Carrying								Fair
(in thousands)	Value		Level 1		Level 2		Level 3		Value

Assets:
Cash and cash equivalents	$	332,695	$	332,695	$	—	$	—	$	332,695
Securities available for sale		464,525		2,479		454,053		7,993		464,525
Securities held to maturity		61,159		—		61,594		—		61,594
Mortgage loans held for sale, at fair value		6,057		—		6,057		—		6,057
Consumer loans held for sale, at fair value		3,235		—		—		3,235		3,235
Consumer loans held for sale, at the lower of cost or fair value		2,464		—		2,464		—		2,464
Loans, net		3,878,422		—		—		3,858,270		3,858,270
Federal Home Loan Bank stock		32,067		—		—		—		NA
Accrued interest receivable		10,575		—		10,575		—		10,575

Liabilities:
Noninterest-bearing deposits	$	1,061,637		—	$	1,061,637		—	$	1,061,637
Transaction deposits		1,767,494		—		1,767,494		—		1,767,494
Time deposits		304,807		—		303,846		—		303,846
Securities sold under agreements to repurchase and other short-term borrowings		113,334		—		113,334		—		113,334
Federal Home Loan Bank advances		1,002,500		—		998,996		—		998,996
Subordinated note		41,240		—		32,469		—		32,469
Accrued interest payable		842		—		842		—		842


			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
June 30, 2017 (dollars in thousands)	Value		Technique	Inputs	Average)

Impaired loans - residential real estate owner occupied	$	4,359	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	$	997	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 23% (4%)

Impaired loans - commercial real estate	$	1,385	Income approach	Adjustments for differences between net operating income expectations	17% (17%)

Impaired loans - home equity	$	642	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 71% (18%)


					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)	June 30, 2017		December 31, 2016

Aggregate fair value	$	6,057	$	11,662
Contractual balance		5,852		11,568
Unrealized gain		205		94

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)	2017		2016		2017		2016

Interest income	$	86	$	40	$	153	$	72
Change in fair value		118		39		111		98
Total included in earnings	$	204	$	79	$	264	$	170

Consumer Loans Held For Sale

Fair Value Disclosures

Schedule of aggregate fair value, contractual balance and unrealized gain


(in thousands)	June 30, 2017		December 31, 2016

Aggregate fair value	$	3,235	$	2,198
Contractual balance		3,063		2,084
Unrealized gain		172		114

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)	2017		2016		2017		2016

Interest income	$	322	$	161	$	508	$	161
Change in fair value		(24)		362		58		362
Total included in earnings	$	298	$	523	$	566	$	523

Consumer Loans Held For Sale | Recurring basis

Fair Value Disclosures

Fair value inputs quantitative information


	Fair		Valuation
June 30, 2017 (dollars in thousands)	Value		Technique	Unobservable Inputs	Rate

Consumer loans held for sale	$	3,235	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				Six Months Ended
	June 30,				June 30,
(in thousands)	2017		2016		2017		2016

Balance, beginning of period	$	4,682	$	4,983	$	4,777	$	5,132
Total gains or losses included in earnings:
Net change in unrealized gain		101		1		154		(148)
Principal paydowns		(243)		(38)		(391)		(38)
Balance, end of period	$	4,540	$	4,946	$	4,540	$	4,946

Private label mortgage backed security | Recurring basis

Fair Value Disclosures

Fair value inputs quantitative information


	Fair		Valuation
June 30, 2017 (dollars in thousands)	Value		Technique	Unobservable Inputs	Range

Private label mortgage backed security	$	4,540	Discounted cash flow	(1) Constant prepayment rate	3.0% - 6.5%

				(2) Probability of default	3.0% - 8.0%

				(3) Loss severity	60% - 85%


	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				Six Months Ended
	June 30,				June 30,
(in thousands)	2017		2016		2017		2016

Balance, beginning of period	$	3,200	$	3,400	$	3,200	$	3,405
Total gains or losses included in earnings:
Discount accretion		11		11		22		22
Net change in unrealized loss		242		(261)		231		(277)
Balance, end of period	$	3,453	$	3,150	$	3,453	$	3,150