FAIR VALUE (Tables)

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures

Assets and Liabilities Measured at Fair Value on Recurring Basis

	Fair Value Measurements at
	September 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	$	—	$	236,259	$	—	$	236,259
Private label mortgage backed security		—		—		4,575		4,575
Mortgage backed securities - residential		—		104,002		—		104,002
Collateralized mortgage obligations		—		92,234		—		92,234
Freddie Mac preferred stock		—		407		—		407
Community Reinvestment Act mutual fund		2,481		—		—		2,481
Corporate bonds		—		15,261		—		15,261
Trust preferred security		—		—		3,500		3,500
Total securities available for sale	$	2,481	$	448,163	$	8,075	$	458,719
Mortgage loans held for sale	$	—	$	4,083	$	—	$	4,083
Consumer loans held for sale		—		—		3,368		3,368
Rate lock loan commitments		—		484		—		484
Interest rate swap agreements		—		620		—		620
Financial liabilities:
Mandatory forward contracts	$	—	$	44	$	—	$	44
Interest rate swap agreements		—		905		—		905

	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
	September 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	$	—	$	—	$	4,206	$	4,206
Nonowner occupied		—		—		26		26
Commercial real estate		—		—		2,668		2,668
Home equity		—		—		449		449
Total impaired loans*	$	—	$	—	$	7,349	$	7,349
Other real estate owned:
Residential real estate	$	—	$	—	$	83	$	83
Total other real estate owned	$	—	$	—	$	83	$	83
Premises and equipment	$	—	$	—	$	3,196	$	3,196

	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
Premises and equipment	$	—	$	—	$	2,407	$	2,407

* 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, 2017		December 31, 2016
Carrying amount of loans measured at fair value	$	6,576	$	6,963
Estimated selling costs considered in carrying amount		862		936
Valuation allowance		(89)		(35)
Total fair value	$	7,349	$	7,864

Provisions for loss on collateral dependent impaired loans

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2017		2016		2017		2016
Provisions on collateral-dependent, impaired loans	$	59	$	(16)	$	281	$	(40)

Other Real Estate Owned

(in thousands)	September 30, 2017		December 31, 2016
Other real estate owned carried at fair value	$	83	$	400
Other real estate owned carried at cost		84		991
Total carrying value of other real estate owned	$	167	$	1,391

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2017		2016		2017		2016
Other real estate owned write-downs during the period	$	76	$	200	$	155	$	200

Schedule of Impairment charges on premises and equipment

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2017		2016		2017		2016
Impairment charges on premises and equipment	$	965	$	58	$	1,082	$	133

Carrying Amount and Estimated Fair Values of Financial Instruments

			Fair Value Measurements at
			September 30, 2017:
									Total
	Carrying								Fair
(in thousands)	Value		Level 1		Level 2		Level 3		Value
Assets:
Cash and cash equivalents	$	329,862	$	329,862	$	—	$	—	$	329,862
Securities available for sale		458,719		2,481		448,163		8,075		458,719
Securities held to maturity		65,177		—		65,949		—		65,949
Mortgage loans held for sale, at fair value		4,083		—		4,083		—		4,083
Consumer loans held for sale, at fair value		3,368		—		—		3,368		3,368
Consumer loans held for sale, at the lower of cost or fair value		5,684		—		5,684		—		5,684
Loans, net		3,917,321		—		—		3,895,200		3,895,200
Federal Home Loan Bank stock		32,067		—		—		—		NA
Accrued interest receivable		11,357		—		11,357		—		11,357
Liabilities:
Noninterest-bearing deposits	$	1,040,414		—	$	1,040,414		—	$	1,040,414
Transaction deposits		1,966,819		—		1,966,819		—		1,966,819
Time deposits		342,496		—		341,510		—		341,510
Securities sold under agreements to repurchase and other short-term borrowings		173,311		—		173,311		—		173,311
Federal Home Loan Bank advances		757,500		—		753,504		—		753,504
Subordinated note		41,240		—		36,188		—		36,188
Accrued interest payable		936		—		936		—		936

			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
September 30, 2017 (dollars in thousands)	Value		Technique	Inputs	Average)
Impaired loans - residential real estate owner occupied	$	4,206	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 53% (6%)
Impaired loans - residential real estate nonowner occupied	$	26	Sales comparison approach	Adjustments determined for differences between comparable sales	4% (4%)
Impaired loans - commercial real estate	$	1,357	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 23% (8%)
Impaired loans - commercial real estate	$	1,311	Income approach	Adjustments for differences between net operating income expectations	17% (17%)
Impaired loans - home equity	$	449	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 71% (24%)
Other real estate owned - residential real estate	$	83	Sales comparison approach	Adjustments determined for differences between comparable sales	86%  (86%)
Premises and equipment	$	3,196	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 61%  (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%)
Premises and equipment	$	2,407	Sales comparison approach	Adjustments determined for differences between comparable sales	6% - 50%  (22%)

Mortgage loans held for sale

Fair Value Disclosures

Schedule of aggregate fair value, contractual balance and unrealized gain

(in thousands)	September 30, 2017		December 31, 2016
Aggregate fair value	$	4,083	$	11,662
Contractual balance		3,980		11,568
Unrealized gain		103		94

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)	2017		2016		2017		2016
Interest income	$	102	$	76	$	255	$	148
Change in fair value		(102)		57		9		155
Total included in earnings	$	—	$	133	$	264	$	303

Consumer Loans Held For Sale

Fair Value Disclosures

Schedule of aggregate fair value, contractual balance and unrealized gain

(in thousands)	September 30, 2017		December 31, 2016
Aggregate fair value	$	3,368	$	2,198
Contractual balance		3,189		2,084
Unrealized gain		179		114

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)	2017		2016		2017		2016
Interest income	$	240	$	378	$	748	$	537
Change in fair value		7		(279)		65		83
Total included in earnings	$	247	$	99	$	813	$	620

Consumer Loans Held For Sale | Recurring basis

Fair Value Disclosures

Fair value inputs quantitative information

	Fair		Valuation
September 30, 2017 (dollars in thousands)	Value		Technique	Unobservable Inputs	Rate
Consumer loans held for sale	$	3,368	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				Nine Months Ended
	September 30,				September 30,
(in thousands)	2017		2016		2017		2016
Balance, beginning of period	$	4,540	$	4,946	$	4,777	$	5,132
Total gains or losses included in earnings:
Net change in unrealized gain		91		57		244		(91)
Principal paydowns		(56)		(135)		(446)		(173)
Balance, end of period	$	4,575	$	4,868	$	4,575	$	4,868

Private label mortgage backed security | Recurring basis

Fair Value Disclosures

Fair value inputs quantitative information

	Fair		Valuation
September 30, 2017 (dollars in thousands)	Value		Technique	Unobservable Inputs	Range
Private label mortgage backed security	$	4,575	Discounted cash flow	(1) Constant prepayment rate	3.5% - 6.5%
				(2) Probability of default	2.5% - 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				Nine Months Ended
	September 30,				September 30,
(in thousands)	2017		2016		2017		2016
Balance, beginning of period	$	3,453	$	3,150	$	3,200	$	3,405
Total gains or losses included in earnings:
Discount accretion		11		11		33		33
Net change in unrealized loss		36		(61)		267		(338)
Balance, end of period	$	3,500	$	3,100	$	3,500	$	3,100