FAIR VALUE (Tables)

9 Months Ended

Sep. 30, 2018

Assets and Liabilities Measured at Fair Value on Recurring Basis


	Fair Value Measurements at
	September 30, 2018 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:
Available-for-sale debt securities:
U.S. Treasury securities and U.S. Government agencies	$	—	$	235,638	$	—	$	235,638
Private label mortgage backed security		—		—		3,849		3,849
Mortgage backed securities - residential		—		115,942		—		115,942
Collateralized mortgage obligations		—		75,365		—		75,365
Corporate bonds		—		10,080		—		10,080
Trust preferred security		—		—		4,250		4,250
Total available-for-sale debt securities	$	—	$	437,025	$	8,099	$	445,124

Equity securities with readily determinable fair value:
Freddie Mac preferred stock	$	—	$	332	$	—	$	332
Community Reinvestment Act mutual fund		2,385		—		—		2,385
Total equity securities with readily determinable fair value	$	2,385	$	332	$	—	$	2,717

Mortgage loans held for sale	$	—	$	7,862	$	—	$	7,862
Consumer loans held for investment		—		—		2,097		2,097
Rate lock loan commitments		—		348		—		348
Mandatory forward contracts		—		113		—		113
Interest rate swap agreements		—		2,658		—		2,658

Financial liabilities:
Interest rate swap agreements		—		2,383		—		2,383


	Fair Value Measurements at
	December 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:
Available-for-sale debt securities:
U.S. Treasury securities and U.S. Government agencies	$	—	$	307,592	$	—	$	307,592
Private label mortgage backed security		—		—		4,449		4,449
Mortgage backed securities - residential		—		106,374		—		106,374
Collateralized mortgage obligations		—		87,163		—		87,163
Corporate bonds		—		15,125		—		15,125
Trust preferred security		—		—		3,600		3,600
Total available-for-sale debt securities	$	—	$	516,254	$	8,049	$	524,303

Equity securities with readily determinable fair value:
Freddie Mac preferred stock	$	—	$	473	$	—	$	473
Community Reinvestment Act mutual fund		2,455		—		—		2,455
Total equity securities with readily determinable fair value	$	2,455	$	473	$	—	$	2,928

Mortgage loans held for sale	$	—	$	5,761	$	—	$	5,761
Consumer loans held for sale		—		—		2,677		2,677
Rate lock loan commitments		—		310		—		310
Interest rate swap agreements		—		312		—		312

Financial liabilities:
Mandatory forward contracts	$	—	$	9	$	—	$	9
Interest rate swap agreements		—		403		—		403

Assets Measured at Fair Value on a Non-Recurring Basis


	Fair Value Measurements at
	September 30, 2018 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

Consumer loans held for sale	$	—	$	—	$	1,519	$	1,519

Impaired loans:
Residential real estate:
Owner occupied	$	—	$	—	$	4,040	$	4,040
Nonowner occupied		—		—		1,083		1,083
Commercial real estate		—		—		1,230		1,230
Commercial & industrial		—		—		666		666
Home equity		—		—		51		51
Total impaired loans*	$	—	$	—	$	7,070	$	7,070

Premises	$	—	$	—	$	2,607	$	2,607


	Fair Value Measurements at
	December 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	$	—	$	—	$	4,107	$	4,107
Nonowner occupied		—		—		237		237
Commercial real estate		—		—		1,366		1,366
Home equity		—		—		393		393
Total impaired loans*	$	—	$	—	$	6,103	$	6,103

Other real estate owned:
Residential real estate	$	—	$	—	$	83	$	83
Total other real estate owned	$	—	$	—	$	83	$	83

Premises	$	—	$	—	$	3,017	$	3,017

* 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.

Schedule of Consumer Loans Held for Sale


(in thousands)	September 30, 2018		December 31, 2017

Carrying amount of loans measured at fair value	$	3,592	$	—
Estimated discount for loan losses		(2,073)		—
Total fair value	$	1,519	$	—

Impaired collateral dependent loans classified with Level 3 fair value hierarchy


(in thousands)	September 30, 2018		December 31, 2017

Carrying amount of loans measured at fair value	$	6,771	$	5,358
Estimated selling costs considered in carrying amount		709		752
Valuation allowance		(410)		(7)
Total fair value	$	7,070	$	6,103

Provisions for loss on collateral dependent impaired loans


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2018		2017		2018		2017

Provisions on collateral-dependent, impaired loans	$	117	$	59	$	901	$	281

Other Real Estate Owned



(in thousands)	September 30, 2018		December 31, 2017

Other real estate owned carried at fair value	$	—	$	83
Other real estate owned carried at cost		70		32
Total carrying value of other real estate owned	$	70	$	115


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2018		2017		2018		2017

Other real estate owned write-downs during the period	$	—	$	76	$	—	$	155

Schedule of Impairment charges on premises and equipment


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2018		2017		2018		2017

Impairment charges on premises	$	126	$	965	$	356	$	1,082

Carrying amount and estimated exit-price fair values of financial instruments


			Fair Value Measurements at
			September 30, 2018:
									Total
	Carrying								Fair
(in thousands)	Value		Level 1		Level 2		Level 3		Value

Assets:
Cash and cash equivalents	$	365,512	$	365,512	$	—	$	—	$	365,512
Available-for-sale debt securities		445,124		—		437,025		8,099		445,124
Held-to-maturity debt securities		65,925		—		66,667		—		66,667
Equity securities with readily determinable fair values		2,717		2,385		332		—		2,717
Mortgage loans held for sale, at fair value		7,862		—		7,862		—		7,862
Consumer loans held for sale, at the lower of cost or fair value		21,037		—		21,037		—		21,037
Loans, net		4,092,371		—		—		4,035,387		4,035,387
Federal Home Loan Bank stock		32,067		—		—		—		NA
Accrued interest receivable		13,696		—		13,696		—		13,696
Rate lock loan commitments		348		—		348		—		348
Community Reinvestment Act mutual fund		113		—		113		—		113
Interest rate swap agreements		2,658		—		2,658		—		2,658

Liabilities:
Noninterest-bearing deposits	$	1,103,461		—	$	1,103,461		—	$	1,103,461
Transaction deposits		2,051,907		—		2,051,907		—		2,051,907
Time deposits		411,317		—		404,562		—		404,562
Securities sold under agreements to repurchase and other short-term borrowings		163,768		—		163,768		—		163,768
Federal Home Loan Bank advances		715,000		—		707,306		—		707,306
Subordinated note		41,240		—		31,832		—		31,832
Accrued interest payable		1,106		—		1,106		—		1,106
Interest rate swap agreements		2,383		—		2,383		—		2,383

NA - Not applicable


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

Assets:
Cash and cash equivalents	$	299,351	$	299,351	$	—	$	—	$	299,351
Available-for-sale debt securities		524,303		—		516,254		8,049		524,303
Held-to-maturity debt securities		64,227		—		65,133		—		65,133
Equity securities with readily determinable fair values		2,928		2,455		473		—		2,928
Mortgage loans held for sale, at fair value		5,761		—		5,761		—		5,761
Consumer loans held for sale, at fair value		2,677		—		—		2,677		2,677
Consumer loans held for sale, at the lower of cost or fair value		8,551		—		8,551		—		8,551
Loans, net		3,971,265		—		—		3,938,998		3,938,998
Federal Home Loan Bank stock		32,067		—		—		—		NA
Accrued interest receivable		12,082		—		12,082		—		12,082
Rate lock loan commitments		310		—		310		—		310
Interest rate swap agreements		312		—		312		—		312

Liabilities:
Noninterest-bearing deposits	$	1,022,042		—	$	1,022,042		—	$	1,022,042
Transaction deposits		2,049,493		—		2,049,493		—		2,049,493
Time deposits		361,623		—		358,627		—		358,627
Securities sold under agreements to repurchase and other short-term borrowings		204,021		—		204,021		—		204,021
Federal Home Loan Bank advances		737,500		—		730,712		—		730,712
Subordinated note		41,240		—		31,763		—		31,763
Accrued interest payable		1,100		—		1,100		—		1,100
Mandatory forward contracts		9		—		9		—		9
Interest rate swap agreements		403		—		403		—		403

NA - Not applicable

Nonrecurring basis

Fair Value Disclosures

Fair value inputs quantitative information


					Range
	Fair		Valuation	Unobservable	(Weighted
September 30, 2018 (dollars in thousands)	Value		Technique	Inputs	Average)

Consumer loans held for sale	$	1,519	Sales comparison approach	Adjustments determined for differences between comparable sales	6% (6%)

Impaired loans - residential real estate owner occupied	$	4,040	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 77% (13%)

Impaired loans - residential real estate nonowner occupied	$	1,083	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 27% (14%)

Impaired loans - commercial real estate	$	70	Sales comparison approach	Adjustments determined for differences between comparable sales	21% (21%)

Impaired loans - commercial real estate	$	1,160	Income approach	Adjustments for differences between net operating income expectations	17% (17%)

Impaired loans - commercial & industrial	$	666	Sales comparison approach	Adjustments determined for differences between comparable sales	3% (3%)

Impaired loans - home equity	$	51	Sales comparison approach	Adjustments determined for differences between comparable sales	5% - 53% (42%)

Premises	$	2,607	Sales comparison approach	Adjustments determined for differences between comparable sales	21% - 71% (32%)


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

Impaired loans - residential real estate owner occupied	$	4,107	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 54% (10%)

Impaired loans - residential real estate nonowner occupied	$	237	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 8% (5%)

Impaired loans - commercial real estate	$	79	Sales comparison approach	Adjustments determined for differences between comparable sales	21% (21%)

Impaired loans - commercial real estate	$	1,287	Income approach	Adjustments for differences between net operating income expectations	17% (17%)

Impaired loans - home equity	$	393	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 23% (15%)

Other real estate owned - residential real estate	$	83	Sales comparison approach	Adjustments determined for differences between comparable sales	86% (86%)

Premises	$	3,017	Sales comparison approach	Adjustments determined for differences between comparable sales	4% - 67% (21%)

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)	2018		2017		2018		2017

Balance, beginning of period	$	3,926	$	4,540	$	4,449	$	4,777
Total gains or losses included in earnings:
Net change in unrealized gain		(2)		90		(19)		244
Recovery of actual losses previously recorded		39		—		114		—
Principal paydowns		(114)		(55)		(695)		(446)
Balance, end of period	$	3,849	$	4,575	$	3,849	$	4,575

Private label mortgage backed security | Recurring basis

Fair Value Disclosures

Fair value inputs quantitative information


	Fair		Valuation
September 30, 2018 (dollars in thousands)	Value		Technique	Unobservable Inputs	Range

Private label mortgage backed security	$	3,849	Discounted cash flow	(1) Constant prepayment rate	2.0% - 9.0%

				(2) Probability of default	1.8% - 4.0%

				(3) Loss severity	50% - 85%


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

Private label mortgage backed security	$	4,449	Discounted cash flow	(1) Constant prepayment rate	3.5% - 6.5%

				(2) Probability of default	1.8% - 8.0%

				(3) Loss severity	60% - 85%

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)	2018		2017		2018		2017

Balance, beginning of period	$	4,150	$	3,453	$	3,600	$	3,200
Total gains or losses included in earnings:
Discount accretion		10		11		30		33
Net change in unrealized gain		90		36		620		267
Balance, end of period	$	4,250	$	3,500	$	4,250	$	3,500

Mortgage loans held for sale

Fair Value Disclosures

Schedule of aggregate fair value, contractual balance and unrealized gain


(in thousands)	September 30, 2018		December 31, 2017

Aggregate fair value	$	7,862	$	5,761
Contractual balance		7,736		5,668
Unrealized gain		126		93

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)	2018		2017		2018		2017

Interest income	$	133	$	102	$	308	$	255
Change in fair value		(110)		(102)		33		9
Total included in earnings	$	23	$	—	$	341	$	264

Consumer loans

Fair Value Disclosures

Schedule of aggregate fair value, contractual balance and unrealized gain


(in thousands)	September 30, 2018		December 31, 2017

Aggregate fair value	$	2,097	$	2,677
Contractual balance		2,361		2,535
Unrealized (loss) gain		(264)		142

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)	2018		2017		2018		2017

Interest income	$	130	$	240	$	457	$	748
Change in fair value		21		7		(406)		65
Total included in earnings	$	151	$	247	$	51	$	813

Consumer loans | Recurring basis

Fair Value Disclosures

Fair value inputs quantitative information


	Fair		Valuation
September 30, 2018 (dollars in thousands)	Value		Technique	Unobservable Inputs	Rate

Consumer loans held for investment	$	2,097	Discounted Cash Flows	(1) Constant prepayment rate	15.0%

				(2) Probability of default	45.0%

				(3) Loss severity	11.5%


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

Consumer loans held for sale	$	2,677	Contractual Sales Terms	(1) Net Premium	0.9%

				(2) Discounted Sales	5.0%