FAIR VALUE (Tables)

3 Months Ended

Mar. 31, 2019

Assets and Liabilities Measured at Fair Value on Recurring Basis


	Fair Value Measurements at
	March 31, 2019 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	$	—	$	178,757	$	—	$	178,757
Private label mortgage backed security		—		—		3,659		3,659
Mortgage backed securities - residential		—		163,068		—		163,068
Collateralized mortgage obligations		—		71,322		—		71,322
Corporate bonds		—		9,694		—		9,694
Trust preferred security		—		—		4,100		4,100
Total available-for-sale debt securities	$	—	$	422,841	$	7,759	$	430,600

Equity securities with readily determinable fair value:
Freddie Mac preferred stock	$	—	$	662	$	—	$	662
Community Reinvestment Act mutual fund		2,433		—		—		2,433
Total equity securities with readily determinable fair value	$	2,433	$	662	$	—	$	3,095

Mortgage loans held for sale	$	—	$	11,313	$	—	$	11,313
Consumer loans held for investment		—		—		1,718		1,718
Rate lock loan commitments		—		843		—		843
Interest rate swap agreements		—		2,260		—		2,260

Financial liabilities:
Mandatory forward contracts	$	—	$	282	$	—	$	282
Interest rate swap agreements		—		2,234		—		2,234


	Fair Value Measurements at
	December 31, 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	$	—	$	216,873	$	—	$	216,873
Private label mortgage backed security		—		—		3,712		3,712
Mortgage backed securities - residential		—		169,209		—		169,209
Collateralized mortgage obligations		—		72,811		—		72,811
Corporate bonds		—		9,058		—		9,058
Trust preferred security		—		—		4,075		4,075
Total available-for-sale debt securities	$	—	$	467,951	$	7,787	$	475,738

Equity securities with readily determinable fair value:
Freddie Mac preferred stock	$	—	$	410	$	—	$	410
Community Reinvestment Act mutual fund		2,396		—		—		2,396
Total equity securities with readily determinable fair value	$	2,396	$	410	$	—	$	2,806

Mortgage loans held for sale	$	—	$	8,971	$	—	$	8,971
Consumer loans held for investment		—		—		1,922		1,922
Rate lock loan commitments		—		356		—		356
Interest rate swap agreements		—		1,264		—		1,264

Financial liabilities:
Mandatory forward contracts	$	—	$	262	$	—	$	262
Interest rate swap agreements		—		1,149		—		1,149

Assets Measured at Fair Value on a Non-Recurring Basis


	Fair Value Measurements at
	March 31, 2019 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	$	—	$	—	$	4,570	$	4,570
Nonowner occupied		—		—		567		567
Commercial real estate		—		—		1,220		1,220
Commercial & industrial		—		—		574		574
Home equity		—		—		351		351
Total impaired loans*	$	—	$	—	$	7,282	$	7,282

Premises	$	—	$	—	$	1,618	$	1,618


	Fair Value Measurements at
	December 31, 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	$	—	$	—	$	1,249	$	1,249

Impaired loans:
Residential real estate:
Owner occupied	$	—	$	—	$	4,708	$	4,708
Nonowner occupied		—		—		1,007		1,007
Commercial real estate		—		—		1,255		1,255
Commercial & industrial		—		—		609		609
Home equity		—		—		356		356
Total impaired loans*	$	—	$	—	$	7,935	$	7,935

Premises	$	—	$	—	$	1,694	$	1,694

* 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, 2019		December 31, 2018

Carrying amount of loans measured at fair value	$	6,761	$	7,380
Estimated selling costs considered in carrying amount		881		913
Valuation allowance		(360)		(358)
Total fair value	$	7,282	$	7,935

Provisions for loss on collateral dependent impaired loans


	Three Months Ended
	March 31,
(in thousands)	2019		2018

Provisions on collateral-dependent, impaired loans	$	14	$	429

Schedule of Impairment charges on premises and equipment


	Three Months Ended
	March 31,
(in thousands)	2019		2018

Impairment charges on premises	$	66	$	104

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


			Fair Value Measurements at
			March 31, 2019:
									Total
	Carrying								Fair
(in thousands)	Value		Level 1		Level 2		Level 3		Value

Assets:
Cash and cash equivalents	$	345,512	$	345,512	$	—	$	—	$	345,512
Available-for-sale debt securities		430,600		—		422,841		7,759		430,600
Held-to-maturity debt securities		64,623		—		65,129		—		65,129
Equity securities with readily determinable fair values		3,095		2,433		662		—		3,095
Mortgage loans held for sale, at fair value		11,313		—		11,313		—		11,313
Consumer loans held for sale, at the lower of cost or fair value		12,864		—		12,864		—		12,864
Loans, net		4,240,749		—		—		4,231,349		4,231,349
Federal Home Loan Bank stock		29,965		—		—		—		NA
Accrued interest receivable		14,256		—		14,256		—		14,256
Rate lock loan commitments		843		—		843		—		843
Interest rate swap agreements		2,260		—		2,260		—		2,260

Liabilities:
Noninterest-bearing deposits	$	1,184,480		—	$	1,184,480		—	$	1,184,480
Transaction deposits		2,056,556		—		2,056,556		—		2,056,556
Time deposits		533,280		—		531,373		—		531,373
Securities sold under agreements to repurchase and other short-term borrowings		173,168		—		173,168		—		173,168
Federal Home Loan Bank advances		560,000		—		556,003		—		556,003
Subordinated note		41,240		—		32,672		—		32,672
Accrued interest payable		1,620		—		1,620		—		1,620
Mandatory forward contracts		282		—		282		—		282
Interest rate swap agreements		2,234		—		2,234		—		2,234


			Fair Value Measurements at
			December 31, 2018:
									Total
	Carrying								Fair
(in thousands)	Value		Level 1		Level 2		Level 3		Value

Assets:
Cash and cash equivalents	$	351,474	$	351,474	$	—	$	—	$	351,474
Available-for-sale debt securities		475,738		—		467,951		7,787		475,738
Held-to-maturity debt securities		65,227		—		64,858		—		64,858
Equity securities with readily determinable fair values		2,806		2,396		410		—		2,806
Mortgage loans held for sale, at fair value		8,971		—		8,971		—		8,971
Consumer loans held for sale, at the lower of cost or fair value		12,838		—		12,838		—		12,838
Loans, net		4,103,552		—		—		4,062,457		4,062,457
Federal Home Loan Bank stock		32,067		—		—		—		NA
Accrued interest receivable		13,942		—		13,942		—		13,942
Rate lock loan commitments		356		—		356		—		356
Interest rate swap agreements		1,264		—		1,264		—		1,264

Liabilities:
Noninterest-bearing deposits	$	1,003,969		—	$	1,003,969		—	$	1,003,969
Transaction deposits		2,035,701		—		2,035,701		—		2,035,701
Time deposits		416,475		—		412,477		—		412,477
Securities sold under agreements to repurchase and other short-term borrowings		182,990		—		182,990		—		182,990
Federal Home Loan Bank advances		810,000		—		804,251		—		804,251
Subordinated note		41,240		—		33,724		—		33,724
Accrued interest payable		1,084		—		1,084		—		1,084
Mandatory forward contracts		262		—		262		—		262
Interest rate swap agreements		1,149		—		1,149		—		1,149

Nonrecurring basis

Fair Value Disclosures

Fair value inputs quantitative information


					Range
	Fair		Valuation	Unobservable	(Weighted
March 31, 2019 (dollars in thousands)	Value		Technique	Inputs	Average)

Impaired loans - residential real estate owner occupied	$	4,570	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 62% (8%)

Impaired loans - residential real estate nonowner occupied	$	567	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 12% (11%)

Impaired loans - commercial real estate	$	1,220	Sales comparison approach	Adjustments determined for differences between comparable sales	13% - 25% (21%)

Impaired loans - commercial & industrial	$	574	Sales comparison approach	Adjustments determined for differences between comparable sales	3% (3%)

Impaired loans - home equity	$	351	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 22% (2%)

Premises	$	1,618	Sales comparison approach	Adjustments determined for differences between comparable sales	30% - 73% (43%)


					Range
	Fair		Valuation	Unobservable	(Weighted
December 31, 2018 (dollars in thousands)	Value		Technique	Inputs	Average)

Consumer loans held for sale	$	1,249	Sales comparison approach	Adjustments determined for differences between comparable sales	6% (6%)

Impaired loans - residential real estate owner occupied	$	4,708	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 62% (30%)

Impaired loans - residential real estate nonowner occupied	$	1,007	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 27% (54%)

Impaired loans - commercial real estate	$	123	Sales comparison approach	Adjustments determined for differences between comparable sales	21% (21%)

Impaired loans - commercial real estate	$	1,132	Income approach	Adjustments for differences between net operating income expectations	17% (17%)

Impaired loans - commercial & industrial	$	609	Sales comparison approach	Adjustments determined for differences between comparable sales	3% (3%)

Impaired loans - home equity	$	356	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 22% (8%)

Premises	$	1,694	Sales comparison approach	Adjustments determined for differences between comparable sales	27% - 72% (40%)

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)	2019		2018

Balance, beginning of period	$	3,712	$	4,449
Total gains or losses included in earnings:
Net change in unrealized gain		(33)		(2)
Recovery of actual losses previously recorded		37		38
Principal paydowns		(57)		(365)
Balance, end of period	$	3,659	$	4,120

Private label mortgage backed security | Recurring basis

Fair Value Disclosures

Fair value inputs quantitative information


	Fair		Valuation
March 31, 2019 (dollars in thousands)	Value		Technique	Unobservable Inputs	Range

Private label mortgage backed security	$	3,659	Discounted cash flow	(1) Constant prepayment rate	4.5% - 5.8%

				(2) Probability of default	1.8% - 5.0%

				(3) Loss severity	50% - 75%


	Fair		Valuation
December 31, 2018 (dollars in thousands)	Value		Technique	Unobservable Inputs	Range

Private label mortgage backed security	$	3,712	Discounted cash flow	(1) Constant prepayment rate	6.5% - 8.9%

				(2) Probability of default	1.8% - 4.7%

				(3) Loss severity	50% - 75%

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)	2019		2018

Balance, beginning of period	$	4,075	$	3,600
Total gains or losses included in earnings:
Discount accretion		10		10
Net change in unrealized gain		15		290
Balance, end of period	$	4,100	$	3,900

Mortgage loans held for sale

Fair Value Disclosures

Schedule of aggregate fair value, contractual balance and unrealized gain


(in thousands)	March 31, 2019		December 31, 2018

Aggregate fair value	$	11,313	$	8,971
Contractual balance		11,100		8,676
Unrealized gain		213		295

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


	Three Months Ended
	March 31,
(in thousands)	2019		2018

Interest income	$	102	$	72
Change in fair value		(82)		(9)
Total included in earnings	$	20	$	63

Consumer loans

Fair Value Disclosures

Schedule of aggregate fair value, contractual balance and unrealized gain


(in thousands)	March 31, 2019		December 31, 2018

Aggregate fair value	$	1,718	$	1,922
Contractual balance		1,948		2,170
Unrealized (loss) gain		(230)		(248)

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


	Three Months Ended
	March 31,
(in thousands)	2019		2018

Interest income	$	111	$	176
Change in fair value		18		(14)
Total included in earnings	$	129	$	162

Consumer loans | Recurring basis

Fair Value Disclosures

Fair value inputs quantitative information


	Fair		Valuation
March 31, 2019 (dollars in thousands)	Value		Technique	Unobservable Inputs	Rate

Consumer loans held for investment	$	1,718	Discounted Cash Flows	(1) Constant prepayment rate	15.0%

				(2) Probability of default	48.0%

				(3) Loss severity	24.0%


	Fair		Valuation
December 31, 2018 (dollars in thousands)	Value		Technique	Unobservable Inputs	Rate

Consumer loans held for investment	$	1,922	Discounted Cash Flows	(1) Constant prepayment rate	15.0%

				(2) Probability of default	45.0%

				(3) Loss severity	20.0%