10-Q

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________________

[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _______ to _______

Commission File Number 0-17071

FIRST MERCHANTS CORPORATION

(Exact name of registrant as specified in its charter)

Indiana                                                                            35-1544218

(State or other jurisdiction of                                   (I.R.S. Employer

incorporation or organization)                               Identification No.)

200 East Jackson Street, Muncie, IN                  47305-2814

(Address of principal executive offices)                   (Zip code)

(Registrant’s telephone number, including area code): (765) 747-1500

Not Applicable

(Former name, former address and former fiscal year,

if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934 during the preceding 12 months (or for such shorter  period that the  registrant was  required  to file such  reports),  and (2) has been subject to such filing requirements for the past 90 days. Yes [X]   No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X]   No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,”  “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer [X]   Accelerated filer [ ]   Non-accelerated filer [ ] (Do not check if smaller reporting company)  Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ]   No [X]

As of July 29, 2016, there were 40,774,224 outstanding common shares of the registrant.

1

TABLE OF CONTENTS

FIRST MERCHANTS CORPORATION

Part I. Financial Information		Page No.
Item 1.	Financial  Statements:
	Consolidated Condensed Balance Sheets	3
	Consolidated Condensed Statements of Income	4
	Consolidated Condensed Statements of Comprehensive Income	5
	Consolidated Condensed Statement of Stockholders' Equity	6
	Consolidated Condensed Statements of Cash Flows	7
	Notes to Consolidated Condensed Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53
Item 4.	Controls and Procedures	54
Part II. Other Information
Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	55
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3.	Defaults Upon Senior Securities	55
Item 4.	Mine Safety Disclosures	55
Item 5.	Other Information	55
Item 6.	Exhibits	56
	Signatures	57
	Index to Exhibits	58

2

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

CONSOLIDATED CONDENSED BALANCE SHEETS

	June 30, 2016		December 31, 2015
	(Unaudited)
ASSETS
Cash and cash equivalents	$	120,471	$	102,170
Interest-bearing time deposits	62,533		32,315
Investment securities available for sale	658,829		658,400
Investment securities held to maturity (fair value of $665,066 and $632,380)	638,972		618,599
Loans held for sale	18,854		9,894
Loans, net of allowance for loan losses of $62,186 and $62,453	4,729,243		4,631,369
Premises and equipment	95,170		97,648
Federal Reserve and Federal Home Loan Bank stock	18,096		37,633
Interest receivable	23,351		24,415
Core deposit intangibles	16,821		16,635
Goodwill	244,000		243,129
Cash surrender value of life insurance	201,417		200,539
Other real estate owned	13,219		17,257
Tax asset, deferred and receivable	32,547		46,977
Other assets	32,895		24,023
TOTAL ASSETS	$	6,906,418	$	6,761,003
LIABILITIES
Deposits:
Noninterest-bearing	$	1,253,747	$	1,266,027
Interest-bearing	4,153,807		4,023,620
Total Deposits	5,407,554		5,289,647
Borrowings:
Federal funds purchased	20,000		49,721
Securities sold under repurchase agreements	140,777		155,325
Federal Home Loan Bank advances	268,579		235,652
Subordinated debentures and term loans	127,678		127,846
Total Borrowings	557,034		568,544
Interest payable	3,051		3,092
Other liabilities	51,229		49,211
Total Liabilities	6,018,868		5,910,494
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY
Cumulative Preferred Stock, $1,000 par value, $1,000 liquidation value:
Authorized - 600 shares
Issued and outstanding - 125 shares	125		125
Common Stock, $.125 stated value:
Authorized - 50,000,000 shares
Issued and outstanding - 40,772,896 and 40,664,259 shares	5,097		5,083
Additional paid-in capital	505,725		504,530
Retained earnings	369,568		342,133
Accumulated other comprehensive income (loss)	7,035		(1,362		)
Total Stockholders' Equity	887,550		850,509
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	6,906,418	$	6,761,003

See NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.

3

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended June 30,					Six Months Ended June 30,
	2016		2015			2016		2015
INTEREST INCOME
Loans receivable:
Taxable	$	52,099	$	45,320		$	102,588	$	88,871
Tax exempt	1,465		736			2,780		984
Investment securities:
Taxable	4,202		4,425			8,530		9,148
Tax exempt	4,583		4,231			9,092		8,066
Deposits with financial institutions	122		31			228		68
Federal Reserve and Federal Home Loan Bank stock	233		459			713		1,009
Total Interest Income	62,704		55,202			123,931		108,146
INTEREST EXPENSE
Deposits	4,039		3,686			8,102		7,202
Federal funds purchased	7		19			35		42
Securities sold under repurchase agreements	92		90			192		168
Federal Home Loan Bank advances	818		706			1,614		1,397
Subordinated debentures and term loans	1,786		1,670			3,571		3,330
Total Interest Expense	6,742		6,171			13,514		12,139
NET INTEREST INCOME	55,962		49,031			110,417		96,007
Provision for loan losses	790		417			1,340		417
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	55,172		48,614			109,077		95,590
OTHER INCOME
Service charges on deposit accounts	4,416		4,090			8,561		7,638
Fiduciary activities	2,376		2,309			4,870		4,816
Other customer fees	4,695		4,602			9,754		8,269
Commission income			1,815					4,143
Earnings on cash surrender value of life insurance	1,297		640			2,773		1,387
Net gains and fees on sales of loans	1,717		1,781			3,177		3,270
Net realized gains (losses) on sales of available for sale securities	706		(93		)	1,703		932
Gain on sale of insurance subsidiary			8,265					8,265
Other income	1,178		697			1,384		785
Total Other Income	16,385		24,106			32,222		39,505
OTHER EXPENSES
Salaries and employee benefits	25,570		26,434			52,907		50,975
Net occupancy	4,059		3,503			8,081		7,293
Equipment	3,243		2,840			6,481		5,406
Marketing	851		951			1,588		1,731
Outside data processing fees	2,025		1,768			4,094		3,485
Printing and office supplies	369		303			733		667
Core deposit amortization	977		729			1,955		1,450
FDIC assessments	1,002		895			1,952		1,758
Other real estate owned and foreclosure expenses	915		845			1,666		1,241
Professional and other outside services	1,478		3,134			3,640		4,625
Other expenses	4,346		4,494			8,213		7,634
Total Other Expenses	44,835		45,896			91,310		86,265
INCOME BEFORE INCOME TAX	26,722		26,824			49,989		48,830
Income tax expense	6,716		8,856			12,290		14,690
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	20,006	$	17,968		$	37,699	$	34,140
Per Share Data:
Basic Net Income Available to Common Stockholders	$	0.50	$	0.47		$	0.93	$	0.90
Diluted Net Income Available to Common Stockholders	$	0.49	$	0.47		$	0.92	$	0.90
Cash Dividends Paid	$	0.14	$	0.11		$	0.25	$	0.19
Average Diluted Shares Outstanding (in thousands)	40,969		38,043			40,941		38,022

See NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.

4

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Net income	$	20,006		$	17,968		$	37,699		$	34,140
Other comprehensive income net of tax:
Unrealized holding gain (loss) on securities available for sale arising during the period, net of tax of $3,096, $2,904, $5,861 and $2,376	5,750			(5,393		)	10,885			(4,413		)
Unrealized gain (loss) on cash flow hedges arising during the period, net of tax of $284, $282, $969 and $165	(529		)	525			(1,798		)	(304		)
Reclassification adjustment for net losses (gains) included in net income, net of tax of $136, $158, $371 and $77	(252		)	293			(690		)	(143		)
	4,969			(4,575		)	8,397			(4,860		)
Comprehensive income	$	24,975		$	13,393		$	46,096		$	29,280

See NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.

5

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY

(Unaudited)

	Preferred			Common Stock					Additional						Accumulated Other
	Shares	Amount		Shares		Amount			Paid in Capital			Retained Earnings			Comprehensive Income (Loss)			Total
Balances, December 31, 2015	125	$	125	40,664,259		$	5,083		$	504,530		$	342,133		$	(1,362	)	$	850,509
Comprehensive income
Net income												37,699						37,699
Other comprehensive income, net of tax															8,397			8,397
Cash dividends on common stock ($.25 per share)												(10,264		)				(10,264		)
Share-based compensation				106,290		13			1,222									1,235
Stock issued under employee benefit plans				10,536		1			215									216
Stock issued under dividend reinvestment and stock purchase plan				15,703		2			382									384
Stock options exercised				13,828		2			212									214
Stock redeemed				(37,720	)	(4		)	(836		)							(840		)
Balances, June 30, 2016	125	$	125	40,772,896		$	5,097		$	505,725		$	369,568		$	7,035		$	887,550

See NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.

6

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended
	June 30, 2016			June 30, 2015
Cash Flow From Operating Activities:
Net income	$	37,699		$	34,140
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	1,340			417
Depreciation and amortization	3,604			3,123
Change in deferred taxes	5,571			2,341
Share-based compensation	1,235			1,130
Tax benefit from stock options exercised	(3		)	(35		)
Loans originated for sale	(199,281		)	(176,552		)
Proceeds from sales of loans	190,321			175,492
Gain on sale of insurance subsidiary				(8,265		)
Gains on sales of securities available for sale	(1,703		)	(932		)
Change in interest receivable	1,064			396
Change in interest payable	(41		)	(19		)
Other adjustments	(5,237		)	5,170
Net cash provided by operating activities	34,569			36,406
Cash Flows from Investing Activities:
Net change in interest-bearing deposits	(30,218		)	21,773
Purchases of:
Securities available for sale	(96,873		)	(101,627		)
Securities held to maturity	(76,395		)	(55,415		)
Proceeds from sales of securities available for sale	85,081			42,117
Proceeds from maturities of:
Securities available for sale	32,286			31,917
Securities held to maturity	54,810			44,035
Change in Federal Reserve and Federal Home Loan Bank stock	19,537			7,578
Net change in loans	(102,735		)	(213,356		)
Net cash and cash equivalents paid in acquisition				(12,004		)
Net cash received from sale of insurance subsidiary				15,155
Proceeds from the sale of other real estate owned	4,633			4,444
Other adjustments	(1,671		)	1,464
Net cash used in investing activities	(111,545		)	(213,919		)
Cash Flows from Financing Activities:
Net change in :
Demand and savings deposits	173,705			51,914
Certificates of deposit and other time deposits	(56,969		)	(8,357		)
Borrowings	279,518			200,467
Repayment of borrowings	(290,687		)	(71,916		)
Cash dividends on common stock	(10,264		)	(7,246		)
Stock issued under employee benefit plans	216			231
Stock issued under dividend reinvestment and stock purchase plans	384			310
Stock options exercised	211			619
Tax benefit from stock options exercised	3			35
Stock redeemed	(840		)	(1,232		)
Net cash provided by financing activities	95,277			164,825
Net Change in Cash and Cash Equivalents	18,301			(12,688		)
Cash and Cash Equivalents, January 1	102,170			118,616
Cash and Cash Equivalents, June 30	$	120,471		$	105,928
Additional cash flow information:
Interest paid	$	13,555		$	12,129
Income tax paid	$	3,155		$	3,000
Loans transferred to other real estate owned	$	320		$	3,360
Fixed assets transferred to other real estate owned	$	360		$	1,003
Non-cash investing activities using trade date accounting	$	4,414		$	1,887
In conjunction with the acquisition, liabilities were assumed as follows:
Fair value of assets acquired				$	141,724
Cash received (paid) in acquisition				$	(14,500	)
Less: Common stock issued
Liabilities assumed	$	—		$	127,224

See NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.

7

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

NOTE 1 

GENERAL

Financial Statement Preparation

The significant accounting policies followed by First Merchants Corporation (the “Corporation”) and its wholly owned subsidiaries for interim financial reporting are consistent with the accounting policies followed for annual financial reporting. All adjustments, which are of a normal recurring nature and are in the opinion of management necessary for a fair statement of the results for the periods reported, have been included in the accompanying consolidated condensed financial statements.

The Consolidated Condensed Balance Sheet of the Corporation as of December 31, 2015, has been derived from the audited consolidated balance sheet of the Corporation as of that date. Certain information and note disclosures normally included in the Corporation’s annual financial statements, prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted. These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission. The results of operations for the three and six months ended June 30, 2016, are not necessarily indicative of the results to be expected for the year. Reclassifications have been made to prior financial statements to conform to the current financial statement presentation. These reclassifications had no effect on net income.

NOTE 2

ACQUISITIONS AND DIVESTITURES

Acquisition - Ameriana Bancorp, Inc.

On December 31, 2015, the Corporation acquired 100 percent of Ameriana Bancorp, Inc. ("Ameriana"). Ameriana merged with and into the Corporation (the "Ameriana Merger") whereupon the separate corporate existence of Ameriana ceased and the Corporation survived. Immediately following the Ameriana Merger, Ameriana Bank, an Indiana bank and wholly-owned subsidiary of Ameriana, merged with and into First Merchants Bank, National Association, a national bank and wholly-owned subsidiary of the Corporation (the "Bank"), with the Bank continuing as the surviving bank. Ameriana was headquartered in New Castle, Indiana and had 13 banking centers serving central and east central Indiana. Pursuant to the merger agreement, each Ameriana shareholder received 0.9037 shares of the Corporation's common stock for each outstanding share of Ameriana common stock held. The Corporation issued approximately 2.8 million shares of common stock, which was valued at approximately $70.4 million. The Corporation engaged in this transaction with the expectation that it would be accretive and expand the existing footprint in central and east central Indiana. Goodwill resulted from this transaction due to the expected synergies and economies of scale that are expected.

Under the acquisition method of accounting, the total purchase price is allocated to net tangible and intangible assets based on their current estimated fair values on the date of the acquisition. Based on preliminary valuations of the fair value of tangible and intangible assets acquired and liabilities assumed, which are based on assumptions that are subject to change, the purchase price for the Ameriana acquisition is detailed in the following table. If prior to the end of the one year measurement period for finalizing the purchase price allocation, information becomes available which would indicate adjustments are required to the purchase price allocation, such adjustments will be included in the purchase price allocation retrospectively.

	Fair Value
Cash and cash equivalents	$	4,068
Interest-bearing time deposits	8,790
Investment securities	61,754
Loans	316,929
Premises and equipment	13,946
Federal Home Loan Bank stock	2,693
Other real estate owned	5,613
Interest receivable	1,306
Cash surrender value of life insurance	28,188
Other assets	6,713
Deposits	(383,718		)
Interest payable	(24		)
Federal Home Loan Bank Advances	(24,884		)
Subordinated debentures	(5,487		)
Other liabilities	(9,451		)
Net tangible assets acquired	26,436
Core deposit intangible	5,342
Goodwill	38,624
Purchase price	$	70,402

8

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

Of the total purchase price, $5,342,000 has been allocated to a core deposit intangible that will be amortized over its estimated life of 10 years. The remaining purchase price has been allocated to goodwill, which is not deductible for tax purposes.

Acquisition - C Financial Corporation

On April 17, 2015, the Corporation acquired 100 percent of C Financial Corporation, ("C Financial"). C Financial merged with and into the Corporation (the “C Financial Merger”) whereupon the separate corporate existence of C Financial ceased and the Corporation survived.  Immediately following the C Financial Merger, Cooper State Bank, an Ohio state bank and wholly-owned subsidiary of C Financial, merged with and into the Bank, with the Bank continuing as the surviving bank.  C Financial was headquartered in Columbus, Ohio and had 6 full service banking centers serving the Columbus, Ohio market. As part of the $14.5 million C Financial Merger, shareholders of C Financial received $6.738 in cash for each share of C Financial common stock held.

The Corporation expects the transaction to be accretive to income and expand the existing footprint in Columbus, Ohio. Goodwill resulted from this transaction due to the synergies and economies of scale that were expected. The purchase price of the C Financial acquisition was allocated as follows:

	Fair Value
Cash and cash equivalents	$	2,496
Federal Funds sold	7,018
Interest-bearing time deposits	922
Loans	110,625
Premises and equipment	7,290
Federal Home Loan Bank stock	855
Interest receivable	292
Other assets	119
Deposits	(105,326		)
Interest payable	(29		)
Federal Home Loan Bank Advances	(18,958		)
Other liabilities	(2,911		)
Net tangible assets acquired	2,393
Core deposit intangible	981
Goodwill	11,126
Purchase price	$	14,500

Of the total purchase price, $981,000 has been allocated to a core deposit intangible that will be amortized over its estimated life of 10 years. The remaining purchase price has been allocated to goodwill, which is deductible over a 15 year period for tax purposes as the transaction was considered a taxable exchange.

Subsidiary Divestiture - First Merchants Insurance Services, Inc.

On June 12, 2015, the Corporation sold all of its stock in First Merchants Insurance Services, Inc., an Indiana corporation ("FMIG"), to USI Insurance Services LLC, a Delaware limited liability company. The sale price was $18 million, of which $16 million was paid at closing with the remaining $2 million paid through a two-year promissory note. The sale of FMIG generated a gain on sale of $8.3 million.

9

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

NOTE 3

INVESTMENT SECURITIES

The amortized cost, gross unrealized gains and losses and approximate fair value of the investment securities portfolio at the dates indicated were:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale at June 30, 2016
U.S. Government-sponsored agency securities	$	100	$	2			$	102
State and municipal	329,042		24,438				353,480
U.S. Government-sponsored mortgage-backed securities	292,822		8,469		$	20	301,271
Corporate obligations	31						31
Equity securities	3,882		63				3,945
Total available for sale	625,877		32,972		20		658,829
Held to maturity at June 30, 2016
Federal agencies	28,980		34		5		29,009
State and municipal	207,731		11,621				219,352
U.S. Government-sponsored mortgage-backed securities	402,261		14,444				416,705
Total held to maturity	638,972		26,099		5		665,066
Total Investment Securities	$	1,264,849	$	59,071	$	25	$	1,323,895

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale at December 31, 2015
U.S. Government-sponsored agency securities	$	100	$	4			$	104
State and municipal	291,730		14,241		$	60	305,911
U.S. Government-sponsored mortgage-backed securities	342,550		4,234		518		346,266
Corporate obligations	31						31
Equity securities	3,912						3,912
Certificates of deposit	2,176						2,176
Total available for sale	640,499		18,479		578		658,400
Held to maturity at December 31, 2015
State and municipal	219,767		6,982		15		226,734
U.S. Government-sponsored mortgage-backed securities	398,832		7,601		787		405,646
Total held to maturity	618,599		14,583		802		632,380
Total Investment Securities	$	1,259,098	$	33,062	$	1,380	$	1,290,780

The amortized cost and fair value of available for sale and held to maturity securities at June 30, 2016 and December 31, 2015, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Maturity Distribution at June 30, 2016:
Due in one year or less	$	3,065	$	3,086	$	2,500	$	2,532
Due after one through five years	19,909		21,060		42,528		44,205
Due after five through ten years	60,972		64,871		82,937		85,365
Due after ten years	245,227		264,596		108,746		116,259
	$	329,173	$	353,613	$	236,711	$	248,361
U.S. Government-sponsored mortgage-backed securities	292,822		301,271		402,261		416,705
Equity securities	3,882		3,945
Total Investment Securities	$	625,877	$	658,829	$	638,972	$	665,066

10

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Maturity Distribution at December 31, 2015
Due in one year or less	$	4,658	$	4,704	$	4,144	$	4,148
Due after one through five years	13,725		14,295		28,054		29,175
Due after five through ten years	52,878		55,375		81,483		83,646
Due after ten years	220,600		231,672		106,086		109,765
	$	291,861	$	306,046	$	219,767	$	226,734
U.S. Government-sponsored mortgage-backed securities	342,550		346,266		398,832		405,646
Equity securities	3,912		3,912
Certificates of deposit	2,176		2,176
Total Investment Securities	$	640,499	$	658,400	$	618,599	$	632,380

The carrying value of securities pledged as collateral, to secure borrowings and for other purposes, was $607,799,000 at June 30, 2016, and $637,358,000 at December 31, 2015.

The book value of securities sold under agreements to repurchase amounted to $135,855,000 at June 30, 2016, and $153,789,000 at December 31, 2015.

Gross gains on the sales and redemptions of available for sale securities for the three and six months ended June 30, 2016 and 2015 are shown below.

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Sales and Redemptions of Available for Sale Securities:
Gross gains	$	706	$	7	$	1,703	$	1,032
Gross losses			100				100

The following table shows investment securities with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2016, and December 31, 2015:

	Less than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Temporarily Impaired Available for Sale Securities at June 30, 2016
U.S. Government-sponsored mortgage-backed securities	4,007		$	15	$	1,053	$	5	5,060		$	20
Total Temporarily Impaired Available for Sale Securities	4,007		15		1,053		5		5,060		20
Temporarily Impaired Held to Maturity Securities at June 30, 2016
Federal agencies	4,995		5						4,995		5
Total Temporarily Impaired Held to Maturity Securities	4,995		5						4,995		5
Total Temporarily Impaired Investment Securities	$	9,002	$	20	$	1,053	$	5	$	10,055	$	25

	Less than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Temporarily Impaired Available for Sale Securities at December 31, 2015
State and municipal	$	7,558	$	60					$	7,558	$	60
U.S. Government-sponsored mortgage-backed securities	83,396		445		$	2,101	$	73	85,497		518
Total Temporarily Impaired Available for Sale Securities	90,954		505		2,101		73		93,055		578
Temporarily Impaired Held to Maturity Securities at December 31, 2015
State and municipal					1,982		15		1,982		15
U.S. Government-sponsored mortgage-backed securities	69,641		519		12,906		268		82,547		787
Total Temporarily Impaired Held to Maturity Securities	69,641		519		14,888		283		84,529		802
Total Temporarily Impaired Investment Securities	$	160,595	$	1,024	$	16,989	$	356	$	177,584	$	1,380

11

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

Certain investments in debt and equity securities are reported in the financial statements at an amount less than their historical cost as indicated in the table below.

	June 30, 2016			December 31, 2015
Investments reported at less than historical cost:
Historical cost	$	10,081		$	178,964
Fair value	$	10,055		$	177,584
Percent of the Corporation's available for sale and held to maturity portfolio	0.8		%	13.9		%

Management believes the decline in fair value for these securities was temporary. Should the impairment of any of these securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income during the period the other-than-temporary impairment is identified.

The Corporation’s management has evaluated all securities with unrealized losses for other-than temporary impairment as of June 30, 2016. The evaluations are based on the nature of the securities, the extent and duration of the loss and the intent and ability of the Corporation to hold these securities either to maturity or through the expected recovery period.

In determining the fair value of the investment securities portfolio, the Corporation utilizes a third party for portfolio accounting services, including market value input, for those securities classified as Level 1 and Level 2 in the fair value hierarchy. The Corporation has obtained an understanding of what inputs are being used by the vendor in pricing the portfolio and how the vendor was classifying these securities based upon these inputs.  From these discussions, the Corporation’s management is comfortable that the classifications are proper. The Corporation has gained trust in the data for two reasons:  (a) independent spot testing of the data is conducted by the Corporation through obtaining market quotes from various brokers on a periodic basis and (b) actual gains or losses resulting from the sale of certain securities has proven the data to be accurate over time.  The fair value of securities classified as Level 3 in the valuation hierarchy was determined using a discounted cash flow model that incorporated market estimates of interest rates and volatility in markets that have not been active.

U.S. Government-Sponsored Mortgage-Backed Securities

The unrealized losses on the Corporation’s investments in securities of U.S. Government-sponsored mortgage-backed securities were caused by changes in interest rates and not credit quality. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. The Corporation does not intend to sell the investments and more likely than not the Corporation won't be required to sell the investments before recovery of its lower amortized cost basis, which may be maturity. The Corporation does not consider the investment securities to be other-than-temporarily impaired at June 30, 2016.

Credit Losses Recognized on Investments

Certain corporate obligations experienced fair value deterioration due to credit losses and other market factors. The following table provides information about those securities for which only a credit loss was recognized in income and other losses were recorded in other comprehensive income.

	Accumulated Credit Losses in 2016		Accumulated Credit Losses in 2015
Credit losses on debt securities held:
Balance, January 1	$	—	$	500
Reductions for previous other-than-temporary losses realized on securities sold during the year	—		(500		)
Balance, June 30	$	—	$	—

In the first quarter of 2015, the Corporation sold its remaining trust preferred security which had no remaining book value as a result of other than temporary impairment of approximately $500,000 taken in 2009. The sale of this security resulted in a gain of $45,000, which is included in the Consolidated Condensed Statement of Income for the six months ended June 30, 2015.

12

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

NOTE 4  

LOANS AND ALLOWANCE

The Corporation’s primary lending focus is small business and middle market commercial, commercial real estate, residential real estate and consumer, which results in portfolio diversification.  The following tables show the composition of the loan portfolio, the allowance for loan losses and certain credit quality aspects, all excluding loans held for sale.  Loans held for sale as of June 30, 2016, and December 31, 2015, were $18,854,000 and $9,894,000, respectively.

The following table shows the composition of the Corporation’s loan portfolio by loan class for the periods indicated:

	June 30, 2016			December 31, 2015
Commercial and industrial loans	$	1,084,890		$	1,057,075
Agricultural production financing and other loans to farmers	95,131			97,711
Real estate loans:
Construction	352,980			366,704
Commercial and farmland	1,869,703			1,802,921
Residential	758,870			786,105
Home Equity	374,159			348,613
Individuals' loans for household and other personal expenditures	75,205			74,717
Lease financing receivables, net of unearned income	388			588
Other commercial loans	180,103			159,388
Loans	$	4,791,429		$	4,693,822
Allowance for loan losses	(62,186		)	(62,453		)
Net Loans	$	4,729,243		$	4,631,369

Allowance, Credit Quality and Loan Portfolio

The Corporation maintains an allowance for loan losses to cover probable credit losses identified during its loan review process. Management believes the allowance for loan losses is adequate to cover probable losses inherent in the loan portfolio at June 30, 2016.  The process for determining the adequacy of the allowance for loan losses is critical to the Corporation’s financial results.  It requires management to make difficult, subjective and complex judgments, to estimate the effect of uncertain matters.  The allowance for loan losses considers current factors, including economic conditions and ongoing internal and external examinations, and will increase or decrease as deemed necessary to ensure it remains adequate.  In addition, the allowance as a percentage of charge offs and nonperforming loans will change at different points in time based on credit performance, portfolio mix and collateral values.

The allowance for loan losses is maintained through the provision for loan losses, which is a charge against earnings. The allowance is increased by provision expense and decreased by charge offs less recoveries. All charge offs are approved by the Bank’s senior loan officers or loan committees, depending on the amount of the charge off. The Bank charges off a loan when a determination is made that all or a portion of the loan is uncollectible. The amount provided for loan losses in a given period may be greater than or less than net loan losses experienced during the period, and is based on management’s judgment as to the appropriate level of the allowance for loan losses. The determination of the provision amount is based on management’s ongoing review and evaluation of the loan portfolio, including an internally administered loan "watch" list and independent loan reviews.  The evaluation takes into consideration identified credit problems, the possibility of losses inherent in the loan portfolio that are not specifically identified and management’s judgment as to the impact of the current environment and economic conditions on the portfolio.

The allowance consists of specific impairment reserves as required by ASC 310-10-35, a component for historical losses in accordance with ASC 450 and the consideration of current environmental factors in accordance with ASC 450. A loan is deemed impaired when, based on current information or events, it is probable that all amounts due of principal and interest according to the contractual terms of the loan agreement will not be collected.

The historical loss allocation for loans not deemed impaired according to ASC 310 is the product of the volume of loans within the non-impaired criticized and non-criticized risk grade classifications, each segmented by call code, and the historical loss factor for each respective classification and call code segment. The historical loss factors are based upon actual loss experience within each risk and call code classification. The historical look back period for non-criticized loans looks to the most recent rolling-four-quarter average and aligns with the look back period for non-impaired criticized loans. Each of the rolling four quarter periods used to obtain the average, include all charge offs for the previous twelve-month period, therefore the historical look back period includes seven quarters. The resulting allocation is reflective of current conditions. Criticized loans are grouped based on the risk grade assigned to the loan. Loans with a special mention grade are assigned a loss factor, and loans with a classified grade but not impaired are assigned a separate loss factor. The loss factor computation for this allocation includes a segmented historical loss migration analysis of risk grades to charge off.

13

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

In addition to the specific reserves and historical loss components of the allowance, consideration is given to various environmental factors to ensure that losses inherent in the portfolio are reflected in the allowance for loan losses. The environmental component adjusts the historical loss allocations for non-impaired loans to reflect relevant current conditions that, in management's opinion, have an impact on loss recognition. Environmental factors that management reviews in the analysis include: national and local economic trends and conditions; trends in growth in the loan portfolio and growth in higher risk areas; levels of, and trends in, delinquencies and non-accruals; experience and depth of lending management and staff; adequacy of, and adherence to, lending policies and procedures including those for underwriting; industry concentrations of credit; and adequacy of risk identification systems and controls through the internal loan review and internal audit processes.

In conformance with ASC 805 and ASC 820, loans purchased after December 31, 2008 are recorded at the acquisition date fair value. Such loans are included in the allowance to the extent a specific impairment is identified that exceeds the fair value adjustment on an impaired loan or the historical loss and environmental factor analysis indicates losses inherent in a purchased portfolio exceeds the fair value adjustment on the portion of the purchased portfolio not deemed impaired.

The following tables summarize changes in the allowance for loan losses by loan segment for the three and six months ended June 30, 2016, and June 30, 2015:

	Three Months Ended June 30, 2016
	Commercial			Commercial Real Estate			Consumer			Residential			Finance Leases		Total
Allowance for loan losses:
Balances, April 1	$	26,264		$	22,317		$	2,647		$	10,856		$	2	$	62,086
Provision for losses	400			200			44			146					790
Recoveries on loans	683			276			107			273					1,339
Loans charged off	(1,026		)	(513		)	(114		)	(376		)			(2,029		)
Balances, June 30, 2016	$	26,321		$	22,280		$	2,684		$	10,899		$	2	$	62,186

	Six Months Ended June 30, 2016
	Commercial			Commercial Real Estate			Consumer			Residential			Finance Leases		Total
Allowance for loan losses:
Balances, January 1	$	26,478		$	22,145		$	2,689		$	11,139		$	2	$	62,453
Provision for losses	539			414			77			310					1,340
Recoveries on loans	975			1,228			185			585					2,973
Loans charged off	(1,671		)	(1,507		)	(267		)	(1,135		)			(4,580		)
Balances, June 30, 2016	$	26,321		$	22,280		$	2,684		$	10,899		$	2	$	62,186

	Three Months Ended June 30, 2015
	Commercial			Commercial Real Estate			Consumer			Residential			Finance Leases		Total
Allowance for loan losses:
Balances, April 1	$	30,007		$	16,383		$	3,138		$	13,269		$	4	$	62,801
Provision for losses	1,190			(502		)	(200		)	(72		)	1		417
Recoveries on loans	437			147			101			747					1,432
Loans charged off	(155		)	(200		)	(112		)	(1,633		)			(2,100		)
Balances, June 30, 2015	$	31,479		$	15,828		$	2,927		$	12,311		$	5	$	62,550

	Six Months Ended June 30, 2015
	Commercial			Commercial Real Estate			Consumer			Residential			Finance Leases		Total
Allowance for loan losses:
Balances, January 1	$	28,824		$	19,327		$	2,658		$	13,152		$	3	$	63,964
Provision for losses	3,024			(3,398		)	327			462			2		417
Recoveries on loans	887			559			179			879					2,504
Loans charged off	(1,256		)	(660		)	(237		)	(2,182		)			(4,335		)
Balances, June 30, 2015	$	31,479		$	15,828		$	2,927		$	12,311		$	5	$	62,550

14

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

The following tables show the Corporation’s allowance for loan losses and loan portfolio by segment as of the periods indicated:

	June 30, 2016
	Commercial		Commercial Real Estate		Consumer		Residential		Finance Leases		Total
Allowance Balances:
Individually evaluated for impairment	$	1,573	$	276			$	69			$	1,918
Collectively evaluated for impairment	24,748		21,824		$	2,684	10,808		$	2	60,066
Loans Acquired with Deteriorated Credit Quality			180				22				202
Total Allowance for Loan Losses	$	26,321	$	22,280	$	2,684	$	10,899	$	2	$	62,186
Loan Balances:
Individually evaluated for impairment	$	7,841	$	21,118			$	3,462			$	32,421
Collectively evaluated for impairment	1,345,826		2,155,077		$	75,205	1,126,707		$	388	4,703,203
Loans Acquired with Deteriorated Credit Quality	6,457		46,488				2,860				55,805
Loans	$	1,360,124	$	2,222,683	$	75,205	$	1,133,029	$	388	$	4,791,429

	December 31, 2015
	Commercial		Commercial Real Estate		Consumer		Residential		Finance Leases		Total
Allowance Balances:
Individually evaluated for impairment	$	1,277	$	243			$	169			$	1,689
Collectively evaluated for impairment	25,201		21,753		$	2,689	10,966		$	2	60,611
Loans Acquired with Deteriorated Credit Quality			149				4				153
Total Allowance for Loan Losses	$	26,478	$	22,145	$	2,689	$	11,139	$	2	$	62,453
Loan Balances:
Individually evaluated for impairment	$	7,877	$	16,670			$	4,020			$	28,567
Collectively evaluated for impairment	1,298,988		2,096,089		$	74,717	1,125,316		$	588	4,595,698
Loans Acquired with Deteriorated Credit Quality	7,309		56,866				5,382				69,557
Loans	$	1,314,174	$	2,169,625	$	74,717	$	1,134,718	$	588	$	4,693,822

The risk characteristics of the Corporation’s material portfolio segments are as follows:

Commercial

Commercial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

Commercial real estate

These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. Management monitors and evaluates commercial real estate loans based on collateral and risk grade criteria. In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied loans.

Residential and Consumer

With respect to residential loans that are secured by 1-4 family residences and are typically owner occupied, the Corporation generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Home equity loans are typically secured by a subordinate interest in 1-4 family residences, and consumer loans are secured by consumer assets such as automobiles or recreational vehicles. Some consumer loans are unsecured such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income and credit rating of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

15

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

Loans are reclassified to a non-accruing status when, in management’s judgment, the collateral value and financial condition of the borrower do not justify accruing interest. Uncollected interest previously recorded, but not deemed collectible, is reversed and charged against current income. Payments subsequently received on non-accrual loans are applied to principal. A loan is returned to accrual status when principal and interest are no longer past due and collectability is probable, typically after a minimum of six consecutive months of performance.  Payments received on impaired accruing or delinquent loans are applied to interest income as accrued.

The following table summarizes the Corporation’s non-accrual loans by loan class as of the periods indicated:

	June 30, 2016		December 31, 2015
Commercial and industrial loans	$	3,413	$	4,634
Agriculture production financing and other loans to farmers	1,471		827
Real estate Loans:
Construction	721		736
Commercial and farmland	15,541		11,277
Residential	9,952		11,818
Home Equity	2,345		1,952
Individuals' loans for household and other personal expenditures	122		145
Total	$	33,565	$	31,389

Commercial impaired loans include non-accrual loans, loans accounted for under ASC 310-30, and loans risk graded as substandard, doubtful and loss that were still accruing but deemed impaired according to the guidance set forth in ASC 310. Also included in impaired loans are accruing loans that are contractually past due 90 days or more and troubled debt restructurings.

Allowable methods for determining the amount of impairment include estimating fair value using the fair value of the collateral for collateral dependent loans. If the impaired loan is identified as collateral dependent, then the fair value method of measuring the amount of impairment is utilized.  This method requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value. The fair value of real estate is generally based on appraisals by qualified licensed appraisers. The appraisers typically determine the value of the real estate by utilizing an income or market valuation approach. If an appraisal is not available, the fair value may be determined by using a cash flow analysis. Fair value on other collateral such as business assets is typically ascertained by assessing, either singularly or some combination of, asset appraisals, accounts receivable aging reports, inventory listings andor customer financial statements. Both appraised values and values based on borrower’s financial information are discounted as considered appropriate based on age and quality of the information and current market conditions.

The following tables show the composition of the Corporation’s commercial impaired loans by loan class as of the periods indicated:

	June 30, 2016
	Unpaid Principal Balance		Recorded Investment		Related Allowance
Impaired loans with no related allowance:
Commercial and industrial loans	$	19,322	$	10,183
Agriculture production financing and other loans to farmers	709		701
Real estate Loans:
Construction	8,089		4,091
Commercial and farmland	83,028		61,319
Residential	8,650		5,016
Home equity	176		139
Other commercial loans	16
Total	$	119,990	$	81,449
Impaired loans with related allowance:
Commercial and industrial loans	$	2,491	$	2,114	$	1,007
Agriculture production financing and other loans to farmers	1,331		1,301		566
Real estate Loans:
Commercial and farmland	2,145		1,978		456
Residential	877		801		91
Total	$	6,844	$	6,194	$	2,120
Total Impaired Loans	$	126,834	$	87,643	$	2,120

16

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

	December 31, 2015
	Unpaid Principal Balance		Recorded Investment		Related Allowance
Impaired loans with no related allowance:
Commercial and industrial loans	$	22,151	$	11,669
Agriculture production financing and other loans to farmers	370		361
Real estate Loans:
Construction	4,551		2,336
Commercial and farmland	95,930		69,024
Residential	11,262		7,338
Home equity	297		247
Other commercial loans	20
Total	$	134,581	$	90,975
Impaired loans with related allowance:
Commercial and industrial loans	$	3,043	$	2,690	$	1,247
Agriculture production financing and other loans to farmers	466		466		30
Real estate Loans:
Commercial and farmland	2,144		1,933		392
Residential	2,300		1,463		173
Total	$	7,953	$	6,552	$	1,842
Total Impaired Loans	$	142,534	$	97,527	$	1,842

	Three Months Ended June 30, 2016				Six Months Ended June 30, 2016
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Impaired loans with no related allowance:
Commercial and industrial loans	$	10,372	$	128	$	10,307	$	231
Agriculture production financing and other loans to farmers	834		2		882		2
Real estate Loans:
Construction	4,085		74		4,074		147
Commercial and farmland	62,173		861		63,136		1,706
Residential	5,069		54		5,390		107
Home equity	138				139
Total	$	82,671	$	1,119	$	83,928	$	2,193
Impaired loans with related allowance:
Commercial and industrial loans	$	2,120	$	9	$	2,129	$	19
Agriculture production financing and other loans to farmers	1,321				1,405
Real estate Loans:
Commercial and farmland	1,986				2,008
Residential	840				860
Total	$	6,267	$	9	$	6,402	$	19
Total Impaired Loans	$	88,938	$	1,128	$	90,330	$	2,212

	Three Months Ended June 30, 2015				Six Months Ended June 30, 2015
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Impaired loans with no related allowance:
Commercial and industrial loans	$	12,154	$	111	$	12,942	$	200
Agriculture production financing and other loans to farmers	1,325				1,343
Real estate Loans:
Construction	7,648		95		7,898		191
Commercial and farmland	66,625		894		66,957		1,765
Residential	7,114		57		7,150		107
Home equity	208				208
Total	$	95,074	$	1,157	$	96,498	$	2,263
Impaired loans with related allowance:
Commercial and industrial loans	$	3,204	$	10	$	3,214	$	19
Real estate Loans:
Commercial and farmland	2,622				2,727
Residential	2,600				2,603
Total	$	8,426	$	10	$	8,544	$	19
Total Impaired Loans	$	103,500	$	1,167	$	105,042	$	2,282

17

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

As part of the ongoing monitoring of the credit quality of the Corporation's loan portfolio, management tracks certain credit quality indicators including trends related to: (i) the level of criticized commercial loans, (ii) net charge offs, (iii) non-performing loans and (iv) the general national and local economic conditions.

The Corporation utilizes a risk grading of pass, special mention, substandard, doubtful and loss to assess the overall credit quality of large commercial loans. All large commercial credit grades are reviewed at a minimum of once a year for pass grade loans. Loans with grades below pass are reviewed more frequently depending on the grade. A description of the general characteristics of these grades is as follows:

• Pass - Loans that are considered to be of acceptable credit quality.

• Special Mention - Loans which possess some credit deficiency or potential weakness, which deserves close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Corporation's credit position at some future date. Special mention assets are not adversely classified and do not expose the Corporation to sufficient risk to warrant adverse classification. The key distinctions of this category's classification are that it is indicative of an unwarranted level of risk; and weaknesses are considered “potential”, not “defined”, impairments to the primary source of repayment. Examples include businesses that may be suffering from inadequate management, loss of key personnel or significant customer or litigation.

• Substandard - A substandard loan is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified have a well-defined weakness that jeopardizes the liquidation of the debt. They are characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected. Other characteristics may include:

o the likelihood that a loan will be paid from the primary source of repayment is uncertain or financial deterioration is underway and very close attention is warranted to ensure that the loan is collected without loss,

o the primary source of repayment is gone, and the Corporation is forced to rely on a secondary source of repayment, such as collateral liquidation or guarantees,

o loans have a distinct possibility that the Corporation will sustain some loss if deficiencies are not corrected,

o unusual courses of action are needed to maintain a high probability of repayment,

o the borrower is not generating enough cash flow to repay loan principal; however, it continues to make interest payments,

o the Corporation is forced into a subordinated or unsecured position due to flaws in documentation,

o loans have been restructured so that payment schedules, terms and collateral represent concessions to the borrower when compared to the normal loan terms,

o the Corporation is seriously contemplating foreclosure or legal action due to the apparent deterioration of the loan, and

o there is significant deterioration in market conditions to which the borrower is highly vulnerable.

• Doubtful - Loans that have all of the weaknesses of those classified as Substandard. However, based on currently existing facts, conditions and values, these weaknesses make full collection of principal highly questionable and improbable. Other credit characteristics may include the primary source of repayment is gone or there is considerable doubt as to the quality of the secondary sources of repayment. The possibility of loss is high, but because of certain important pending factors that may strengthen the loan, loss classification is deferred until the exact status of repayment is known.

• Loss – Loans that are considered uncollectible and of such little value that continuing to carry them as an asset is not warranted. Loans will be classified as Loss when it is neither practical not desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.

18

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

The following tables summarize the credit quality of the Corporation’s loan portfolio, by loan class for the periods indicated.  Consumer non-performing loans include accruing consumer loans 90 plus days delinquent and consumer non-accrual loans.  The entire balance of a loan is considered delinquent if the minimum payment contractually required to be made is not received by the specified date. Loans that evidenced deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected are included in the applicable categories below.

	June 30, 2016
	Commercial Pass		Commercial Special Mention		Commercial Substandard		Commercial Doubtful	Commercial Loss	Consumer Performing		Consumer Non-Performing		Total
Commercial and industrial loans	$	1,022,507	$	29,117	$	33,266							$	1,084,890
Agriculture production financing and other loans to farmers	37,114		32,784		25,233								95,131
Real estate Loans:
Construction	328,366		5,023		1,606				$	17,908	$	77	352,980
Commercial and farmland	1,733,503		51,793		84,407								1,869,703
Residential	157,186		7,953		6,352				579,403		7,976		758,870
Home equity	7,377		97		743				363,618		2,324		374,159
Individuals' loans for household and other personal expenditures									75,084		121		75,205
Lease financing receivables, net of unearned income	300				88								388
Other commercial loans	180,103												180,103
Loans	$	3,466,456	$	126,767	$	151,695			$	1,036,013	$	10,498	$	4,791,429

	December 31, 2015
	Commercial Pass		Commercial Special Mention		Commercial Substandard		Commercial Doubtful		Commercial Loss	Consumer Performing		Consumer Non-Performing		Total
Commercial and industrial loans	$	962,340	$	48,432	$	45,984	$	319						$	1,057,075
Agriculture production financing and other loans to farmers	77,884		6,665		13,162									97,711
Real estate Loans:
Construction	345,449		1,271		1,790					$	18,114	$	80	366,704
Commercial and farmland	1,679,141		46,442		77,338									1,802,921
Residential	171,576		3,107		10,428					593,533		7,461		786,105
Home equity	8,218		48		600					337,718		2,029		348,613
Individuals' loans for household and other personal expenditures										74,491		226		74,717
Lease financing receivables, net of unearned income	495				93									588
Other commercial loans	159,388													159,388
Loans	$	3,404,491	$	105,965	$	149,395	$	319		$	1,023,856	$	9,796	$	4,693,822

The tables below show a past due aging of the Corporation’s loan portfolio, by loan class, as of June 30, 2016, and December 31, 2015.

	June 30, 2016
	Current		30-59 Days Past Due		60-89 Days Past Due		Loans > 90 Days And Accruing		Non-Accrual		Total Past Due & Non-Accrual		Total
Commercial and industrial loans	$	1,080,184	$	998	$	282	$	13	$	3,413	$	4,706	$	1,084,890
Agriculture production financing and other loans to farmers	92,979		250		431				1,471		2,152		95,131
Real estate Loans:
Construction	351,147				1,112				721		1,833		352,980
Commercial and farmland	1,850,882		2,384		896				15,541		18,821		1,869,703
Residential	743,951		3,847		888		232		9,952		14,919		758,870
Home equity	370,602		628		467		117		2,345		3,557		374,159
Individuals' loans for household and other personal expenditures	74,744		297		42				122		461		75,205
Lease financing receivables, net of unearned income	388												388
Other commercial loans	180,103												180,103
Loans	$	4,744,980	$	8,404	$	4,118	$	362	$	33,565	$	46,449	$	4,791,429

19

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

	December 31, 2015
	Current		30-59 Days Past Due		60-89 Days Past Due		Loans > 90 Days And Accruing		Non-Accrual		Total Past Due & Non-Accrual		Total
Commercial and industrial loans	$	1,052,275	$	166					$	4,634	$	4,800	$	1,057,075
Agriculture production financing and other loans to farmers	96,884								827		827		97,711
Real estate Loans:
Construction	362,084		3,884						736		4,620		366,704
Commercial and farmland	1,786,092		5,552						11,277		16,829		1,802,921
Residential	765,634		6,090		$	2,061	$	502	11,818		20,471		786,105
Home equity	344,344		1,433		560		324		1,952		4,269		348,613
Individuals' loans for household and other personal expenditures	73,990		445		56		81		145		727		74,717
Lease financing receivables, net of unearned income	588												588
Other commercial loans	159,324				64						64		159,388
Loans	$	4,641,215	$	17,570	$	2,741	$	907	$	31,389	$	52,607	$	4,693,822

See the information regarding the analysis of loan loss experience in the "LOAN QUALITY/PROVISION FOR LOAN LOSSES" section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included as ITEM 2 of this Quarterly Report on Form 10-Q.

On occasion, borrowers experience declines in income and cash flow. As a result, these borrowers seek to reduce contractual cash outlays including debt payments. Concurrently, in an effort to preserve and protect its earning assets, specifically troubled loans, the Corporation works to maintain its relationship with certain customers who are experiencing financial difficulty by contractually modifying the borrower's debt agreement with the Corporation. In certain loan restructuring situations, the Corporation may grant a concession to a debtor experiencing financial difficulty, resulting in a trouble debt restructuring. A concession is deemed to be granted when, as a result of the restructuring, the Corporation does not expect to collect all original amounts due, including interest accrued at the original contract rate. If the payment of principal at original maturity is primarily dependent on the value of collateral, the current value of the collateral is considered in determining whether the principal will be paid.

The following tables summarize troubled debt restructurings in the Corporation's loan portfolio that occurred during the periods indicated:

	Three Months Ended June 30, 2016					Six Months Ended June 30, 2016
	Pre-Modification Recorded Balance		Post-Modification Recorded Balance		Number of Loans	Pre-Modification Recorded Balance		Post-Modification Recorded Balance		Number of Loans
Commercial and industrial loans						$	260	$	260	3
Agriculture production financing and other loans to farmers	$	1,141	$	1,141	3	1,606		1,472		5
Real estate Loans:
Commercial and farmland	3,539		3,508		5	3,891		3,860		6
Residential						113		133		3
Home Equity	174		146		1	174		146		1
Total	$	4,854	$	4,795	9	$	6,044	$	5,871	18

	Three Months Ended June 30, 2015					Six Months Ended June 30, 2015
	Pre-Modification Recorded Balance		Post-Modification Recorded Balance		Number of Loans	Pre-Modification Recorded Balance		Post-Modification Recorded Balance		Number of Loans
Commercial and industrial loans	$	1,386	$	536	1	$	3,748	$	1,897	5
Real estate Loans:
Construction						79		80		1
Commercial and farmland	537		537		1	537		2,280		2
Residential	20		871		2	44		895		3
Total	$	1,943	$	1,944	4	$	4,408	$	5,152	11

20

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

The following tables summarize the recorded investment of troubled debt restructurings as of June 30, 2016 and 2015, by modification type, that occurred during the periods indicated:

	Three Months Ended June 30, 2016
	Term Modification		Rate Modification		Combination		Total Modification
Agriculture production financing and other loans to farmers	$	1,141					$	1,141
Real estate Loans:
Commercial and farmland	418				$	3,086	3,504
Home Equity			$	143			143
Total	$	1,559	$	143	$	3,086	$	4,788

	Six Months Ended June 30, 2016
	Term Modification		Rate Modification		Combination		Total Modification
Commercial and industrial loans					$	198	$	198
Agriculture production financing and other loans to farmers	$	1,141	$	49			1,190
Real estate Loans:
Commercial and farmland	418				3,433		3,851
Residential			112				112
Home Equity			143				143
Total	$	1,559	$	304	$	3,631	$	5,494

	Three Months Ended June 30, 2015
	Term Modification		Rate Modification		Combination		Total Modification
Commercial and industrial loans	$	492					$	492
Real estate Loans:
Commercial and farmland					$	240	240
Residential	850		$	21			871
Total	$	1,342	$	21	$	240	$	1,603

	Six Months Ended June 30, 2015
	Term Modification		Rate Modification		Combination		Total Modification
Commercial and industrial loans	$	1,234			$	1,030	$	2,264
Real estate Loans:
Construction	199						199
Commercial and farmland	1,442				240		1,682
Residential	850		$	47			897
Total	$	3,725	$	47	$	1,270	$	5,042

Commercial and farmland real estate loans made up 66 percent of the post-modification balance of troubled debt restructured loans made in the six months ended June 30, 2016.

The following tables summarize troubled debt restructures that occurred during the three and six months ended June 30, 2016, that subsequently defaulted during the period indicated and remained in default at period end. There were no troubled debt restructures that occurred during the three and six months ended June 30, 2015 that subsequently defaulted during this period. For purposes of this discussion, a loan is considered in default if it is 30 or more days past due.

	Three Months Ended June 30, 2016			Six Months Ended June 30, 2016
	Number of Loans	Recorded Balance		Number of Loans	Recorded Balance
Commercial and industrial loans	1	$	72	4	$	269
Real estate Loans:
Residential	1	55		1	55
Total	2	$	127	5	$	324

21

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

For potential consumer loan restructures, impairment evaluation occurs prior to modification. Any subsequent impairment is typically addressed through the charge off process, or may be addressed through a specific reserve. Consumer troubled debt restructurings are generally included in the general historical allowance for loan loss at the post modification balance. Consumer non-accrual and delinquent troubled debt restructurings are also considered in the calculation of the non-accrual and delinquency trend environmental allowance allocation. Consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process totaled $2,735,000 and $1,391,000 at June 30, 2016 and December 31, 2015, respectively.

Commercial troubled debt restructured loans risk graded special mention, substandard, doubtful and loss are individually evaluated for impairment under ASC 310. Any resulting specific reserves are included in the allowance for loan losses. Commercial 30 - 89 day delinquent troubled debt restructurings are included in the calculation of the delinquency trend environmental allowance allocation. All commercial non-impaired loans, including non-accrual and 90+ day delinquents, are included in the ASC 450 loss migration analysis.

NOTE 5

ACCOUNTING FOR CERTAIN LOANS ACQUIRED IN A PURCHASE

The acquired loans detailed in the tables below are included in NOTE 4. LOANS AND ALLOWANCE, in the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q. As described in NOTE 4, loans purchased after December 31, 2008 are recorded at the acquisition date fair value, which could result in a fair value discount or premium. Purchased loans with evidence of credit deterioration since origination and for which it is probable at the date of acquisition that the acquirer will not collect all contractually required principal and interest payments are accounted for under ASC 310-30, Loans Acquired with Deteriorated Credit Quality. The difference between contractually required payments and the cash flows expected to be collected at acquisition is referred to as the nonaccretable portion of the fair value discount or premium. The accretable portion of the fair value discount or premium is the difference between the expected cash flows and the net present value of expected cash flows, with such difference accreted into earnings over the term of the loans. All other loans not accounted for under ASC 310-30 are accounted for under ASC 310-20.

The Corporation's recent acquisitions are detailed in NOTE 2, ACQUISITIONS AND DIVESTITURES, in the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q. In addition, the Corporation acquired Community Bancshares, Inc. ("Community") in November 2014 and CFS Bancorp, Inc. ("CFS") in November 2013. The Corporation also acquired certain loans from SCB Bank ("SCB") in February 2012. The following table includes the outstanding balance and carrying amount of all acquired loans which were included in the Corporation's balance sheet at June 30, 2016, and December 31, 2015.

	June 30, 2016
	Ameriana		C Financial		Community		CFS		SCB		Total
Commercial and industrial loans	$	21,544	$	95	$	5,613	$	49,079	$	4,408	$	80,739
Agricultural production financing and other loans to farmers					2,802		25		1,047		3,874
Real estate loans:
Construction	32,597		5,034		8,923		624				47,178
Commercial and farmland	120,330		25,024		45,281		164,742		11,265		366,642
Residential	112,520		48,782		12,159		107,895		5,467		286,823
Home Equity	13,029		8,646		7,724		29,464		12,480		71,343
Individuals' loans for household and other personal expenditures	1,101		5		238		295		38		1,677
Other commercial loans	1,840						69				1,909
Total	$	302,961	$	87,586	$	82,740	$	352,193	$	34,705	$	860,185
Carrying Amount	$	290,946	$	85,505	$	77,933	$	336,031	$	30,743	$	821,158
Allowance			180		22						202
Carrying Amount Net of Allowance	$	290,946	$	85,325	$	77,911	$	336,031	$	30,743	$	820,956

22

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

	December 31, 2015
	Ameriana		C Financial		Community		CFS		SCB		Total
Commercial and industrial loans	$	21,888	$	104	$	6,769	$	52,060	$	4,620	$	85,441
Agricultural production financing and other loans to farmers					1,761				1,288		3,049
Real estate loans:
Construction	23,365		6,214		10,436		976				40,991
Commercial and farmland	144,514		27,838		49,997		189,372		13,293		425,014
Residential	123,231		55,856		21,886		118,105		6,063		325,141
Home Equity	14,261		9,144		8,231		31,986		13,431		77,053
Individuals' loans for household and other personal expenditures	1,731		10		461		443		48		2,693
Other commercial loans	1,928						72				2,000
Total	$	330,918	$	99,166	$	99,541	$	393,014	$	38,743	$	961,382
Carrying Amount	$	319,664	$	96,829	$	93,355	$	373,649	$	34,092	$	917,589
Allowance					4		149				153
Carrying Amount Net of Allowance	$	319,664	$	96,829	$	93,351	$	373,500	$	34,092	$	917,436

The outstanding balance and related carrying amount of loans acquired and accounted for under ASC 310-30 as of June 30, 2016 were $76.6 million and $55.8 million, respectively. Additionally, the outstanding balance and related carrying amount of those loans as of December 31, 2015 were $95.8 million and $69.6 million, respectively.

As customer cash flow expectations improve, nonaccretable yield can be reclassified to accretable yield. The accretable yield, or income expected to be collected, and reclassifications from nonaccretable yield, are identified in the table below.  The table reflects only purchased loans accounted for under ASC 310-30 and not the entire portfolio of purchased loans.

	Three Months Ended June 30, 2016
	Ameriana			C Financial			Community			CFS			SCB			Total
Beginning balance	$	2,120		$	100		$	1,456		$	1,033		$	590		$	5,299
Additions
Accretion	(47		)	(71		)	(849		)	(855		)	(293		)	(2,115		)
Reclassification from nonaccretable	5			52			738			737			154			1,686
Disposals	(232		)							(11		)				(243		)
Ending balance	$	1,846		$	81		$	1,345		$	904		$	451		$	4,627

	Six Months Ended June 30, 2016
	Ameriana			C Financial			Community			CFS			SCB			Total
Beginning balance	$	2,160		$	114		$	1,508		$	1,188		$	642		$	5,612
Additions
Accretion	(87		)	(86		)	(912		)	(2,145		)	(381		)	(3,611		)
Reclassification from nonaccretable	5			53			749			1,872			190			2,869
Disposals	(232		)							(11		)				(243		)
Ending balance	$	1,846		$	81		$	1,345		$	904		$	451		$	4,627

	Three Months Ended June 30, 2015
	C Financial			Community			CFS			SCB			Total
Beginning balance				$	1,990		$	2,009		$	818		$	4,817
Additions	$	145											145
Accretion	(12		)	(353		)	(578		)	(304		)	(1,247		)
Reclassification from nonaccretable				181			309			244			734
Disposals							(8		)				(8		)
Ending balance	$	133		$	1,818		$	1,732		$	758		$	4,441

	Six Months Ended June 30, 2015
	C Financial			Community			CFS			SCB			Total
Beginning balance				$	2,122		$	2,400		$	868		$	5,390
Additions	$	145											$	145
Accretion	(12		)	(532		)	(1,919		)	(489		)	(2,952		)
Reclassification from nonaccretable				228			1,259			379			1,866
Disposals							(8		)				(8		)
Ending balance	$	133		$	1,818		$	1,732		$	758		$	4,441

23

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

NOTE 6

GOODWILL

Goodwill is recorded on the acquisition date of an entity. During the measurement period, the Corporation may record subsequent adjustments to goodwill for provisional amounts recorded at the acquisition date. The Ameriana acquisition on December 31, 2015 resulted in $38,624,000 of goodwill, of which, $871,000 was recorded during the first quarter of 2016 as a measurement period adjustment. The C Financial acquisition on April 17, 2015 resulted in goodwill of $11,126,000. On June 12, 2015, the sale of FMIG resulted in a goodwill reduction of $8,474,000. Details regarding the acquisitions and sale are discussed in NOTE 2. ACQUISITIONS AND DIVESTITURES, in the Notes to Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

	2016
Balance, January 1	$	243,129
Measurement period adjustment	871
Balance, June 30	$	244,000

	2015
Balance, January 1	$	202,724
Goodwill acquired	48,879
Goodwill reduction	(8,474		)
Balance, December 31	$	243,129

NOTE 7

CORE DEPOSIT AND OTHER INTANGIBLES

Core deposit and other intangibles are recorded on the acquisition date of an entity. During the measurement period, the Corporation may record subsequent adjustments to core deposit and other intangibles for provisional amounts recorded at the acquisition date. The Ameriana acquisition on December 31, 2015 resulted in a core deposit intangible of $5,342,000, of which, $2,142,000 was recorded as a measurement period adjustment in the first quarter of 2016. The C Financial acquisition on April 17, 2015 resulted in a core deposit intangible of $981,000. On June 12, 2015, the sale of FMIG resulted in an other intangible reduction of $742,000. Details regarding the acquisitions and sale are discussed in NOTE 2. ACQUISITIONS AND DIVESTITURES, in the Notes to Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

The carrying basis and accumulated amortization of recognized core deposit and other intangibles are noted below.

	June 30, 2016			December 31, 2015
Gross carrying amount	$	61,798		$	58,360
Core deposit and other intangibles acquired				4,181
Accumulated amortization	(47,119		)	(45,164		)
Measurement period adjustment	2,142
Core deposit and other intangibles reduction				(742		)
Core deposit and other intangibles	$	16,821		$	16,635

Estimated future amortization expense is summarized as follows:

	Amortization Expense
2016	$	1,955
2017	3,614
2018	2,299
2019	1,914
2020	1,733
After 2020	5,306
	$	16,821

24

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

NOTE 8

DERIVATIVE FINANCIAL INSTRUMENTS

Risk Management Objective of Using Derivatives

The Corporation is exposed to certain risks arising from both its business operations and economic conditions.  The Corporation principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Corporation manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities and through the use of derivative financial instruments.  Specifically, the Corporation enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates.  The Corporation’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Corporation’s known or expected cash payments principally related to certain variable-rate liabilities.  The Corporation also has derivatives that are a result of a service the Corporation provides to certain qualifying customers, and, therefore, are not used to manage interest rate risk in the Corporation’s assets or liabilities. The Corporation manages a matched book with respect to its derivative instruments offered as a part of this service to its customers in order to minimize its net risk exposure resulting from such transactions.

Cash Flow Hedges of Interest Rate Risk

The Corporation’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Corporation primarily uses interest rate swaps and interest rate caps as part of its interest rate risk management strategy.  Interest rate swaps designated as cash flow hedges involve the payment of fixed amounts to a counterparty in exchange for the Corporation receiving variable payments over the life of the agreements without exchange of the underlying notional amount.  Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium.  As of June 30, 2016 and December 31, 2015, the Corporation had five interest rate swaps with a notional amount of $56.0 million and one interest rate cap with a notional amount of $13.0 million that were designated as cash flow hedges.  

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into interest expense as interest payments are made on the Corporation’s variable-rate liabilities.  During the next twelve months, the Corporation expects to reclassify $1,274,000 from accumulated other comprehensive income to interest expense.

During 2016, $26.0 million of the interest rate swaps and the $13.0 million interest rate cap were used to hedge the LIBOR-based variable cash outflows associated with existing trust preferred securities when the outflows converted from a fixed rate to variable rate in September of 2012.  In addition, the remaining $30.0 million of interest rate swaps were used to hedge the LIBOR-based variable cash outflows associated with three Federal Home Loan Bank advances. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the six months ended June 30, 2016, and 2015, the Corporation did not recognize any ineffectiveness.

Non-designated Hedges

The Corporation does not use derivatives for trading or speculative purposes.  Derivatives not designated as hedges are not speculative and result from a service the Corporation provides to certain customers. The Corporation executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies.  Those interest rate swaps are simultaneously hedged by offsetting interest rate swaps that the Corporation executes with a third party, such that the Corporation minimizes its net risk exposure resulting from such transactions.  As the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings.  As of June 30, 2016, the notional amount of customer-facing swaps was approximately $205,884,000.  This amount is offset with third party counterparties, as described above.

25

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

Fair Values of Derivative Instruments on the Balance Sheet

The table below presents the fair value of the Corporation’s derivative financial instruments, as well as their classification on the Balance Sheet, as of June 30, 2016, and December 31, 2015.

Asset Derivatives

Liability Derivatives

June 30, 2016

December 31, 2015

June 30, 2016

December 31, 2015

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Derivatives designated as hedging instruments:

Interest rate contracts

Other Assets

$

5

Other Assets

$

36

Other Liabilities

$

5,092

Other Liabilities

$

2,921

Derivatives not designated as hedging instruments:

Interest rate contracts

Other Assets

$

11,971

Other Assets

$

4,938

Other Liabilities

$

12,669

Other Liabilities

$

5,149

The amount of gain (loss) recognized in other comprehensive income is included in the table below for the periods indicated.

Derivatives in Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative (Effective Portion)
	Three Months Ended					Six Months Ended
	June 30, 2016			June 30, 2015		June 30, 2016			June 30, 2015
Interest Rate Products	$	(813	)	$	807	$	(2,767	)	$	(469	)

Effect of Derivative Instruments on the Income Statement

The tables below present the effect of the Corporation’s derivative financial instruments on the Income Statement for the three and six months ended June 30, 2016, and 2015.

Derivatives Not Designated as Hedging Instruments under FASB ASC 815-10	Location of Gain (Loss) Recognized Income on Derivative	Amount of Gain (Loss) Recognized in Income on Derivative
		Three Months Ended June 30, 2016			Three Months Ended June 30, 2015
Interest rate contracts	Other income	$	(242	)	$	156

Derivatives Not Designated as Hedging Instruments under FASB ASC 815-10	Location of Gain (Loss) Recognized Income on Derivative	Amount of Gain (Loss) Recognized in Income on Derivative
		Six Months Ended June 30, 2016			Six Months Ended June 30, 2015
Interest rate contracts	Other income	$	(488	)	$	55

The amount of gain (loss) reclassified from other comprehensive income into income is included in the table below for the periods indicated.

Derivatives Designated as Hedging Instruments under FASB ASC 815-10	Location of Gain (Loss) Recognized Income on Derivative	Amount of Gain (Loss) Reclassed from Other Comprehensive Income into Income (Effective Portion)
		Three Months Ended June 30, 2016		Three Months Ended June 30, 2015
Interest rate contracts	Interest Expense	(318	)	(358	)

Derivatives Designated as Hedging Instruments under FASB ASC 815-10	Location of Gain (Loss) Recognized Income on Derivative	Amount of Gain (Loss) Reclassed from Other Comprehensive Income into Income (Effective Portion)
		Six Months Ended June 30, 2016			Six Months Ended June 30, 2015
Interest rate contracts	Interest Expense	$	(642	)	$	(712	)

The Corporation’s exposure to credit risk occurs because of nonperformance by its counterparties.  The counterparties approved by the Corporation are usually financial institutions, which are well capitalized and have credit ratings through Moody’s and/or Standard & Poor’s at or above investment grade.  The level of risk is monitored by performing quarterly financial reviews, comparing mark-to-mark values with policy limitations, monitoring credit ratings and pledging of collateral.

26

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

Credit-risk-related Contingent Features

The Corporation has agreements with certain of its derivative counterparties that contain a provision where if the Corporation fails to maintain its status as a well or adequately capitalized institution, then the Corporation could be required to terminate or fully collateralize all outstanding derivative contracts.

The Corporation also has agreements with certain of its derivative counterparties that contain a provision where if the Corporation defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, the Corporation could also be declared in default on its derivative obligations. As of June 30, 2016, the termination value of derivatives in a net liability position related to these agreements was $18,063,000. As of June 30, 2016, the Corporation had minimum collateral posting thresholds with certain of its derivative counterparties and had posted collateral of $18,011,000. If the Corporation had breached any of these provisions at June 30, 2016, it could have been required to settle its obligations under the agreements at their termination value.

NOTE 9 

DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES

The Corporation used fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The accounting guidance defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.  ASC 820 applies only when other guidance requires or permits assets or liabilities to be measured at fair value; it does not expand the use of fair value in any new circumstances.

As defined in ASC 820, fair value is the price to sell an asset or transfer a liability in an orderly transaction between market participants. It represents an exit price at the measurement date. Market participants are buyers and sellers, who are independent, knowledgeable, and willing and able to transact in the principal (or most advantageous) market for the asset or liability being measured. Current market conditions, including imbalances between supply and demand, are considered in determining fair value. The Corporation values its assets and liabilities in the principal market where it sells the particular asset or transfers the liability with the greatest volume and level of activity. In the absence of a principal market, the valuation is based on the most advantageous market for the asset or liability (i.e., the market where the asset could be sold or the liability transferred at a price that maximizes the amount to be received for the asset or minimizes the amount to be paid to transfer the liability).

Valuation inputs refer to the assumptions market participants would use in pricing a given asset or liability. Inputs can be observable or unobservable. Observable inputs are those assumptions which market participants would use in pricing the particular asset or liability. These inputs are based on market data and are obtained from a source independent of the Corporation. Unobservable inputs are assumptions based on the Corporation’s own information or estimate of assumptions used by market participants in pricing the asset or liability. Unobservable inputs are based on the best and most current information available on the measurement date. All inputs, whether observable or unobservable, are ranked in accordance with a prescribed fair value hierarchy which gives the highest ranking to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest ranking to unobservable inputs for which there is little or no market activity (Level 3). Fair values for assets or liabilities classified as Level 2 are based on one or a combination of the following factors: (i) quoted prices for similar assets; (ii) observable inputs for the asset or liability, such as interest rates or yield curves; or (iii) inputs derived principally from or corroborated by observable market data. The level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Corporation considers an input to be significant if it drives 10 percent or more of the total fair value of a particular asset or liability.

Recurring Measurements

The following is a description of the valuation methodologies and inputs used for instruments measured at fair value on a recurring basis and recognized in the accompanying Consolidated Condensed Balance Sheets, as well as the general classification of such instruments pursuant to the valuation hierarchy.  There have been no significant changes in the valuation techniques as of June 30, 2016.

Available for Sale Investment Securities

Where quoted, market prices are available in an active market and securities are classified within Level 1 of the valuation hierarchy. There are no securities classified within Level 1 of the hierarchy. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or a discounted cash flow model. Level 2 securities include agencies, mortgage- backed, state and municipal, and equity securities. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. Level 3 fair value, including corporate obligations, state and municipal and equity securities, was determined using a discounted cash flow model that incorporated market estimates of interest rates and volatility in markets that have not been active.

Third party vendors compile prices from various sources and may apply such techniques as matrix pricing to determine the value of identical or similar investment securities classified within Level 2. Matrix pricing is a mathematical technique widely used in the banking industry to value investment securities without relying exclusively on quoted prices for specific investment securities but rather relying on the investment securities’ relationship to other benchmark quoted investment securities. Any investment security not valued based upon the methods above are considered Level 3.

27

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

Interest Rate Derivative Agreements

See information regarding the Corporation's interest rate derivative products in NOTE 8. DERIVATIVE FINANCIAL INSTRUMENTS, included within the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q.

The following table presents the fair value measurements of assets and liabilities recognized in the Consolidated Condensed Balance Sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2016, and December 31, 2015.

			Fair Value Measurements Using:
June 30, 2016	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available for sale securities:
U.S. Government-sponsored agency securities	$	102		$	102
State and municipal	353,480			347,951		$	5,529
U.S. Government-sponsored mortgage-backed securities	301,271			301,271
Corporate obligations	31					31
Equity securities	3,945			3,941		4
Interest rate swap asset	11,971			11,971
Interest rate cap	5			5
Interest rate swap liability	17,761			17,761

			Fair Value Measurements Using:
December 31, 2015	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available for sale securities:
U.S. Government-sponsored agency securities	$	104		$	104
State and municipal	305,911			300,014		$	5,897
U.S. Government-sponsored mortgage-backed securities	346,266			346,266
Certificates of deposit	2,176			2,176
Corporate obligations	31					31
Equity securities	3,912			3,908		4
Interest rate swap asset	4,938			4,938
Interest rate cap	36			36
Interest rate swap liability	8,070			8,070

Level 3 Reconciliation

The following is a reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the Consolidated Condensed Balance Sheets using significant unobservable (Level 3) inputs for the three and six months ended June 30, 2016 and 2015.

	Available for Sale Securities
	Three Months Ended June 30, 2016		Three Months Ended June 30, 2015			Six Months Ended June 30, 2016			Six Months Ended June 30, 2015
Balance at beginning of the period	$	5,504	$	6,198		$	5,932		$	6,646
Total realized and unrealized gains and losses:
Included in net income
Included in other comprehensive income	59		50			96			141
Purchases, issuances and settlements
Transfers in/(out) of Level 3
Principal payments	1		(220		)	(464		)	(759		)
Ending balance	$	5,564	$	6,028		$	5,564		$	6,028

There were no gains or losses for the period included in earnings that were attributable to the changes in unrealized gains or losses related to assets or liabilities held at June 30, 2016 or December 31, 2015.

28

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

Transfers Between Levels

There were no transfers in or out of Level 3 for the three and six months ended June 30, 2016 and 2015.

Nonrecurring Measurements

The following table presents the fair value measurement of assets and liabilities measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2016, and December 31, 2015.

			Fair Value Measurements Using
June 30, 2016	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Impaired loans (collateral dependent)	$	11,013			$	11,013
Other real estate owned	2,256				2,256

			Fair Value Measurements Using
December 31, 2015	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable  Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Impaired loans (collateral dependent)	$	7,066			$	7,066
Other real estate owned	5,529				5,529

Following is a description of valuation methodologies used for instruments measured at fair value on a nonrecurring basis and recognized in the Consolidated Condensed Balance Sheets, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Impaired Loans (collateral dependent)

Loans for which it is probable that the Corporation will not collect all principal and interest due according to contractual terms are measured for impairment. Allowable methods for determining the amount of impairment include estimating fair value of the collateral for collateral dependent loans. If the impaired loan is identified as collateral dependent, then the fair value method of measuring the amount of impairment is utilized. This method requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value. A portion of the allowance for loan losses is allocated to impaired loans if the value of such loans is deemed to be less than the unpaid balance. If these allocations cause the allowance for loan losses to increase, such increase is reported as a component of the provision for loan losses. Loan losses are charged against the allowance when management believes the uncollectability of the loan is confirmed. During 2016, certain impaired loans were partially charged off or re-evaluated. Impaired loans that are collateral dependent are classified within Level 3 of the fair value hierarchy when impairment is determined using the fair value method.

Other Real Estate Owned

The fair value for impaired loans and other real estate owned is measured based on the value of the collateral securing those loans or real estate and is determined using several methods. The fair value of real estate is generally determined based on appraisals by qualified licensed appraisers. The appraisers typically determine the value of the real estate by utilizing an income or market valuation approach. If an appraisal is not available, the fair value may be determined by using a cash flow analysis. Fair value on other collateral such as business assets is typically ascertained by assessing, either singularly or some combination of,  asset appraisals, accounts receivable aging reports, inventory listings and/or customer financial statements. Both appraised values and values based on borrower’s financial information are discounted as considered appropriate based on age and quality of the information and current market conditions.

29

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

Unobservable (Level 3) Inputs

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements, other than goodwill, at June 30, 2016 and December 31, 2015.

June 30, 2016	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted-Average)
State and municipal securities	$	5,529	Discounted cash flow	Maturity/Call date	1 month to 20 yrs
				Blend of US Muni BQ curve	A- to BBB-
				Discount rate	.69% - 5%
Corporate obligations and Equity securities	$	35	Discounted cash flow	Risk free rate	3 month LIBOR
				plus premium for illiquidity	plus 200bps
Impaired loans (collateral dependent)	$	11,013	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability	0% - 10% (1%)
Other real estate owned	$	2,256	Appraisals	Discount to reflect current market conditions	0% - 10% (4%)

December 31, 2015	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted-Average)
State and municipal securities	$	5,897	Discounted cash flow	Maturity/Call date	1 month to 15 yrs
				Blend of US Muni BQ curve	A- to BBB-
				Discount rate	.80% - 5%
Corporate obligations and Equity securities	$	35	Discounted cash flow	Risk free rate	3 month LIBOR
				plus premium for illiquidity	plus 200bps
Impaired loans (collateral dependent)	$	7,066	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability	0% - 50% (2%)
Other real estate owned	$	5,529	Appraisals	Discount to reflect current market conditions	0% - 20% (2%)

Sensitivity of Significant Unobservable Inputs

The following is a discussion of the sensitivity of significant unobservable inputs, the interrelationships between those inputs and other unobservable inputs used in recurring fair value measurement and how those inputs might magnify or mitigate the effect of changes in the unobservable inputs on the fair value measurement.

State and Municipal Securities, Corporate Obligations and Equity Securities

The significant unobservable inputs used in the fair value measurement of the Corporation’s state and municipal securities, corporate obligations and equity securities are premiums for unrated securities and marketability discounts.  Significant increases or decreases in either of those inputs in isolation would result in a significantly lower or higher fair value measurement.  

30

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

Fair Value of Financial Instruments

The following table presents estimated fair values of the Corporation’s financial instruments and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2016, and December 31, 2015.

			June 30, 2016
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
			(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	120,471	$	120,471
Interest-bearing time deposits	62,533		62,533
Investment securities available for sale	658,829				$	653,265	$	5,564
Investment securities held to maturity	638,972				648,705		16,361
Loans held for sale	18,854				18,854
Loans	4,729,243						4,710,073
Federal Reserve Bank and Federal Home Loan Bank stock	18,096				18,096
Interest rate swap and cap asset	11,976				11,976
Interest receivable	23,351				23,351
Liabilities:
Deposits	$	5,407,554	$	4,268,709	$	1,129,241
Borrowings:
Federal funds purchased	20,000				20,000
Securities sold under repurchase agreements	140,777				140,763
Federal Home Loan Bank advances	268,579				268,150
Subordinated debentures and term loans	127,678				103,155
Interest rate swap liability	17,761				17,761
Interest payable	3,051				3,051

			December 31, 2015
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
			(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	102,170	$	102,170
Interest-bearing time deposits	32,315		32,315
Investment securities available for sale	658,400				$	652,468	$	5,932
Investment securities held to maturity	618,599				598,082		34,298
Loans held for sale	9,894				9,894
Loans	4,631,369						4,539,940
Federal Reserve Bank and Federal Home Loan Bank stock	37,633				37,633
Interest rate swap and cap asset	4,974				4,974
Interest receivable	24,415				24,415
Liabilities:
Deposits	$	5,289,647	$	4,095,004	$	1,177,142
Borrowings:
Federal funds purchased	49,721				49,721
Securities sold under repurchase agreements	155,325				155,325
Federal Home Loan Bank advances	235,652				236,375
Subordinated debentures and term loans	127,846				103,643
Interest rate swap liability	8,070				8,070
Interest payable	3,092				3,092

31

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

The following methods were used to estimate the fair value of all other financial instruments recognized in the Consolidated Condensed Balance Sheets at amounts other than fair value.

Cash and cash equivalents:  The fair value of cash and cash equivalents approximates carrying value.

Interest-bearing time deposits:  The fair value of interest-bearing time deposits approximates carrying value.

Investment securities:  Fair value is based on quoted market prices, if available.  If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. The fair value of certain Level III securities is estimated using discounted cash flow analysis, using interest rates currently being offered on investments with similar maturities and investment quality.

Loans Held For Sale:  The carrying amount approximates fair value due to the short duration between origination and date of sale.

Loans:  The fair value for loans is estimated using discounted cash flow analysis, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.  See Impaired Loans above.

Federal Reserve and Federal Home Loan Bank stock:  The fair value of Federal Reserve Bank and Federal Home Loan Bank stock is based on the price which it may be resold to the Federal Reserve and Federal Home Loan Bank.

Derivative instruments:  The fair value of the interest rate swaps reflects the estimated amounts that would have been received to terminate these contracts at the reporting date based upon pricing or valuation models applied to current market information.  Interest rate caps are valued using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rose above the strike rate of the caps.  The projected cash receipts on the caps are based on an expectation of future interest rates derived from observed market interest rate curves and volatilities.

Interest Receivable and Interest Payable:  The fair value of interest receivables/payable approximates the carrying amount.

Deposits:  The fair values of noninterest-bearing and interest-bearing demand accounts and savings deposits are equal to the amount payable on demand at the balance sheet date. The carrying amounts for variable rate, fixed-term certificates of deposit approximate their fair values at the balance sheet date. Fair values for fixed-rate certificates of deposit and other time deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered to a schedule of aggregated expected monthly maturities on such time deposits.

Federal funds purchased:  The fair value of Federal Funds purchased approximates the carrying amount.

Borrowings:  The fair value of borrowings is estimated using a discounted cash flow calculation, based on current rates for similar debt.

NOTE 10

TRANSFERS ACCOUNTED FOR AS SECURED BORROWINGS

The collateral pledged for all repurchase agreements that are accounted for as secured borrowings as of June 30, 2016 and December 31, 2015 were:

	June 30, 2016
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater Than 90 Days		Total
U.S. Government-sponsored mortgage-backed securities	$	119,935	$	1,335	$	2,672	$	16,835	$	140,777

	December 31, 2015
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater Than 90 Days		Total
U.S. Government-sponsored mortgage-backed securities	$	131,537	$	5,680	$	8,892	$	9,216	$	155,325

32

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

NOTE 11 

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes the changes in the balances of each component of accumulated other comprehensive income (loss), net of tax, as of June 30, 2016 and 2015:

	Accumulated Other Comprehensive Income (Loss)
	Unrealized Gains (Losses) on Securities Available for Sale			Unrealized Gains (Losses) on Cash Flow Hedges			Unrealized Gains (Losses) on Defined Benefit Plans			Total
Balance at December 31, 2015	$	12,325		$	(2,347	)	$	(11,340	)	$	(1,362	)
Other comprehensive income before reclassifications	10,885			(1,798		)				9,087
Amounts reclassified from accumulated other comprehensive income	(1,107		)	417						(690		)
Period change	9,778			(1,381		)	—			8,397
Balance at June 30, 2016	$	22,103		$	(3,728	)	$	(11,340	)	$	7,035
Balance at December 31, 2014	$	14,098		$	(2,182	)	$	(13,546	)	$	(1,630	)
Other comprehensive income before reclassifications	(4,413		)	(304		)				(4,717		)
Amounts reclassified from accumulated other comprehensive income	(606		)	463						(143		)
Period change	(5,019		)	159			—			(4,860		)
Balance at June 30, 2015	$	9,079		$	(2,023	)	$	(13,546	)	$	(6,490	)

The following table presents the reclassification adjustments out of accumulated other comprehensive income (loss) that were included in net income in the Consolidated Condensed Statements of Income for the three and six months ended June 30, 2016 and 2015:

	Amount Reclassified from Accumulated Other Comprehensive Income (Loss) For the Three Months Ended June 30,
Details about Accumulated Other Comprehensive Income (Loss)Components	2016			2015			Affected Line Item in the Statements of Income
Unrealized gains (losses) on available for sale securities (1)
Realized securities gains (losses) reclassified into income	$	706		$	(93	)	Other income - net realized gains on sales of available for sale securities
Related income tax expense	(247		)	33			Income tax expense
	$	459		$	(60	)
Unrealized gains (losses) on cash flow hedges (2)
Interest rate contracts	$	(318	)	$	(358	)	Interest expense - subordinated debentures and term loans
Related income tax benefit	111			125			Income tax expense
	$	(207	)	$	(233	)
Total reclassifications for the period, net of tax	$	252		$	(293	)

	Amount Reclassified from Accumulated Other Comprehensive Income (Loss) For the Six Months Ended June 30,
Details about Accumulated Other Comprehensive Income (Loss)Components	2016			2015			Affected Line Item in the Statements of Income
Unrealized gains (losses) on available for sale securities (1)
Realized securities gains reclassified into income	$	1,703		$	932		Other income - net realized gains on sales of available for sale securities
Related income tax expense	(596		)	(326		)	Income tax expense
	$	1,107		$	606
Unrealized gains (losses) on cash flow hedges (2)
Interest rate contracts	$	(642	)	$	(712	)	Interest expense - subordinated debentures and term loans
Related income tax benefit	225			249			Income tax expense
	$	(417	)	$	(463	)
Total reclassifications for the period, net of tax	$	690		$	143

⁽¹⁾ For additional detail related to unrealized gains (losses) on available for sale securities and related amounts reclassified from accumulated other comprehensive income see NOTE 3. INVESTMENT SECURITIES.

⁽²⁾ For additional detail related to unrealized gains (losses) on cash flow hedges and related amounts reclassified from accumulated other comprehensive income see NOTE 8. DERIVATIVE FINANCIAL INSTRUMENTS.

33

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

NOTE 12 

SHARE-BASED COMPENSATION

Stock options and restricted stock awards ("RSAs") have been issued to directors, officers and other management employees under the Corporation's 1999 Long-term Equity Incentive Plan and the 2009 Long-term Equity Incentive Plan.  The stock options, which have a ten year life, become 100 percent vested ranging from six months to two years and are fully exercisable when vested. Option exercise prices equal the Corporation's common stock closing price on NASDAQ on the date of grant.  RSAs issued to employees and non-employee directors provide for the issuance of shares of the Corporation's common stock at no cost to the holder and generally vest after three years.  The RSAs vest only if the employee is actively employed by the Corporation on the vesting date and, therefore, any unvested shares are forfeited.  For non-employee directors, the RSAs vest only if the non-employee director remains as an active board member on the vesting date and, therefore, any unvested shares are forfeited. RSAs for employees and non-employee directors retired from the Corporation are either immediately vested at retirement or continue to vest after retirement, depending on the plan under which the shares were granted. Deferred stock units ("DSUs") can be credited to non-employee directors who have elected to defer payment of compensation under the Corporation's 2008 Equity Compensation Plan for Non-employee Directors.  DSUs credited are equal to the restricted shares that the non-employee director would have received under the plan.  As of June 30, 2016, there were no outstanding DSUs.

The Corporation’s 2009 Employee Stock Purchase Plan (“ESPP”) provides eligible employees of the Corporation and its subsidiaries an opportunity to purchase shares of common stock of the Corporation through quarterly offerings financed by payroll deductions. The price of the stock to be paid by the employees shall be equal to 85 percent of the average of the closing price of the Corporation’s common stock on each trading day during the offering period. However, in no event shall such purchase price be less than the lesser of an amount equal to 85 percent of the market price of the Corporation’s stock on the offering date or an amount equal to 85 percent of the market value on the date of purchase. Common stock purchases are made quarterly and are paid through advance payroll deductions up to a calendar year maximum of $25,000.

Compensation expense related to unvested share-based awards is recorded by recognizing the unamortized grant date fair value of these awards over the remaining service periods of those awards, with no change in historical reported fair values and earnings.  Awards are valued at fair value in accordance with provisions of share-based compensation guidance and are recognized on a straight-line basis over the service periods of each award. To complete the exercise of vested stock options, RSA’s and ESPP options, the Corporation generally issues new shares from its authorized but unissued share pool. Share-based compensation for the three and six months ended June 30, 2016 was $641,000 and $1,235,000, respectively, compared to $614,000 and $1,130,000, respectively, for the three and six months ended June 30, 2015. Share-based compensation has been recognized as a component of salaries and benefits expense in the accompanying Consolidated Condensed Statements of Income.

The estimated fair value of the stock options granted during 2014 and in prior years was calculated using a Black Scholes option pricing model.  There have been no stock options granted since 2014.

The Black Scholes model incorporates assumptions to value share-based awards. The risk-free rate of interest, for periods equal to the expected life of the option, is based on a U.S. government instrument over a similar contractual term of the equity instrument. Expected price volatility is based on historical volatility of the Corporation’s common stock.  In addition, the Corporation generally uses historical information to determine the dividend yield and weighted-average expected life of the options until exercise. Separate groups of employees that have similar historical exercise behavior with regard to option exercise timing and forfeiture rates are considered separately for valuation and attribution purposes.

Share-based compensation expense recognized in the Consolidated Condensed Statements of Income is based on awards ultimately expected to vest and is reduced for estimated forfeitures. Share-based compensation guidance requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods, if actual forfeitures differ from those estimates. Pre-vesting forfeitures were estimated to be approximately 3.8 percent for the six months ended June 30, 2016, based on historical experience.

The following table summarizes the components of the Corporation's share-based compensation awards recorded as expense:

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Stock and ESPP Options
Pre-tax compensation expense	$	21		$	28		$	36		$	54
Income tax expense (benefit)	10						10			(1		)
Stock and ESPP option expense, net of income taxes	$	31		$	28		$	46		$	53
Restricted Stock Awards
Pre-tax compensation expense	$	620		$	586		$	1,199		$	1,076
Income tax benefit	(217		)	(198		)	(420		)	(366		)
Restricted stock awards expense, net of income taxes	$	403		$	388		$	779		$	710
Total Share-Based Compensation
Pre-tax compensation expense	$	641		$	614		$	1,235		$	1,130
Income tax benefit	(207		)	(198		)	(410		)	(367		)
Total share-based compensation expense, net of income taxes	$	434		$	416		$	825		$	763

34

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

As of June 30, 2016, unrecognized compensation expense related to RSAs was $4,688,000 and is expected to be recognized over a weighted-average period of 1.72 years. The Corporation did not have any unrecognized compensation expense related to stock options as of June 30, 2016.

Stock option activity under the Corporation's stock option plans as of June 30, 2016 and changes during the six months ended June 30, 2016, were as follows:

	Number of Shares		Weighted-Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value
Outstanding at January 1, 2016	442,012		$	19.99
Granted	—
Exercised	(13,828	)	$	15.94
Canceled	(49,482	)	$	25.14
OutstandingJune 30, 2016	378,702		$	19.47	3.05	2,313,252
Vested and Expected to Vest at June 30, 2016	378,702		$	19.47	3.02	2,313,252
Exercisable at June 30, 2016	378,702		$	19.47	3.05	2,313,252

There were no options granted during the six months ended June 30, 2016 and June 30, 2015.

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Corporation's closing stock price on the last trading day of the first six months of 2016 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their stock options on June 30, 2016.  The amount of aggregate intrinsic value will change based on the fair market value of the Corporation's common stock. The aggregate intrinsic value of stock options exercised during the six months ended June 30, 2016 and 2015 was $116,000 and $356,000, respectively. Cash receipts of stock options exercised during this same period were $211,000 and $619,000, respectively.

The following table summarizes information on unvested RSAs outstanding as of June 30, 2016:

	Number of Shares		Weighted-Average Grant Date Fair Value
Unvested RSAs at January 1, 2016	354,504		$	19.65
Granted	116,133		$	23.48
Vested	(106,290	)	$	15.39
Forfeited	(4,943	)	$	22.28
Unvested RSAs at June 30, 2016	359,404		$	22.42

The grant date fair value of ESPP options was estimated at the beginning of the April 1, 2016 quarterly offering period of approximately $21,000. The ESPP options vested during the three months ending June 30, 2016, leaving no unrecognized compensation expense related to unvested ESPP options at June 30, 2016.

NOTE 13

INCOME TAX

The following table summarizes the major components creating differences between income taxes at the federal statutory and the effective tax rate recorded in the consolidated statements of income for the three and six months ended June 30, 2016 and 2015:

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Reconciliation of Federal Statutory to Actual Tax Expense:
Federal statutory income tax at 35%	$	9,353		$	9,389		$	17,496		$	17,091
Tax-exempt interest income	(2,104		)	(1,738		)	(4,130		)	(3,167		)
Basis difference on sale of insurance subsidiary				2,252						2,252
Stock compensation	8			10			13			18
Earnings on life insurance	(453		)	(223		)	(970		)	(485		)
Tax credits	(129		)	(148		)	(258		)	(292		)
Other	41			(686		)	139			(727		)
Actual Tax Expense	$	6,716		$	8,856		$	12,290		$	14,690
Effective Tax Rate	25.1		%	33.0		%	24.6		%	30.1		%

35

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

NOTE 14

NET INCOME PER SHARE

Basic net income per share is computed by dividing net income by the weighted-average shares outstanding during the reporting period. Diluted net income per share is computed by dividing net income by the combination of all dilutive common share equivalents, comprised of shares issuable under the Corporation’s share-based compensation plans, and the weighted-average shares outstanding during the reporting period.

Dilutive common share equivalents include the dilutive effect of in-the-money share-based awards, which are calculated based on the average share price for each period using the treasury stock method. Under the treasury stock method, the exercise price of share-based awards, the amount of compensation expense, if any, for future service that the Corporation has not yet recognized, and the amount of estimated tax benefits that would be recorded in additional paid-in capital when share-based awards are exercised, are assumed to be used to repurchase common stock in the current period.

The following table reconciles basic and diluted net income per share for the three and six months ended June 30, 2016 and 2015.

	Three Months Ended June 30,
	2016					2015
	Net Income		Weighted-Average Shares	Per Share Amount		Net Income		Weighted-Average Shares	Per Share Amount
Net income available to common stockholders	20,006		40,751,720	$	0.50	17,968		37,793,448	$	0.47
Effect of dilutive stock options and warrants			217,391					249,911
Diluted net income per share	$	20,006	40,969,111	$	0.49	$	17,968	38,043,359	$	0.47

	Six Months Ended June 30,
	2016					2015
	Net Income		Weighted-Average Shares	Per Share Amount		Net Income		Weighted-Average Shares	Per Share Amount
Net income available to common stockholders	37,699		40,721,147	$	0.93	34,140		37,751,896	$	0.90
Effect of dilutive stock options and warrants			220,338					270,036
Diluted net income per share	$	37,699	40,941,485	$	0.92	$	34,140	38,021,932	$	0.90

Stock options to purchase 111,750 and 367,525 shares for the three months ended June 30, 2016 and 2015, respectively, were not included in the earnings per share calculation because the exercise price exceeded the average market price.

Stock options to purchase 142,259 and 367,550 shares for the six months ended June 30, 2016 and 2015, respectively, were not included in the earnings per share calculation because the exercise price exceeded the average market price.

NOTE 15

IMPACT OF ACCOUNTING CHANGES

The Corporation continually monitors potential accounting changes and pronouncements. The following pronouncements have been deemed to have the most applicability to the Corporation's financial statements:

FASB Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments

Summary - The FASB has issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations.

The ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates.

Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances.

The ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements.

36

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.

The ASU is effective for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 (i.e., January 1, 2020, for calendar year entities). For public companies that are not SEC filers, the ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. For all other organizations, the ASU on credit losses will take effect for fiscal years beginning after December 15, 2020, and for interim periods within fiscal years beginning after December 15, 2021.

Early application will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Corporation is evaluating the effects of this ASU on its consolidated financial statements.

FASB Accounting Standards Update No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting

Summary - The amendments in ASU 2016-09 simplify several aspects of accounting for employee share-based payments including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Some areas of the simplification apply only to nonpublic entities. The new guidance will require all income tax effects of awards to be recognized as income tax expense or benefit in the income statement when the awards vest or are settled and additional paid in capital pools will be eliminated. The guidance requires companies to present excess tax benefits as an operating activity on the statement of cash flows rather than as a financing activity. Companies will be required to account for forfeitures of share-based payments by recognizing forfeitures of awards as they occur or estimating the number of awards expected to be forfeited and adjusting the estimate when it is likely to change, as currently required, through an accounting policy election. The guidance will increase the amount an employer can withhold to cover income taxes on awards and still qualify for the exception to liability classification for shares used to satisfy the employer's income tax withholding obligation. The guidance requires an employer to classify the cash paid to a tax authority when shares are withheld to satisfy its statutory income tax withholding obligation as a financing activity on the statement of cash flows. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption will be permitted in any interim or annual period for which financial statements have not yet been issued or have not been made available for issuance, however all of the guidance must be adopted in the same period. If early adoption is elected in an interim period, any adjustments should be reflected as of the beginning of the annual period that includes that interim period. Adoption of this ASU is not expected to have a significant effect on the Corporation’s consolidated financial statements.

The amendments clarify what steps are required when assessing whether the economic characteristics and risks of call (put) options are clearly and closely related to the economic characteristics and risks of their debt hosts, which is one of the criteria for bifurcating an embedded derivative. Consequently, when a call (put) option is contingently exercisable, an entity does not have to assess whether the event that triggers the ability to exercise a call (put) option is related to interest rates or credit risks.

Public business entities must apply the new requirements for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years. If an entity early adopts the new requirements in an interim period, it must reflect any adjustments as of the beginning of the fiscal year that includes that interim period. The Corporation is evaluating the effects of this ASU on its consolidated financial statements.

FASB Accounting Standards Update No. 2016-02 - Leases (Topic 842)

Summary - The FASB has issued its new lease accounting guidance in Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date:

•A lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and

•A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers.

The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing.

Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). Early application is permitted for all public business entities and all nonpublic business entities upon issuance.

Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Corporation is evaluating the effect of this ASU on its consolidated financial statements.

37

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

FASB Accounting Standards Update No. 2014-09 - Revenue from Contracts with Customers (Topic 606)

Summary - The FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, which implements a common revenue standard that clarifies the principles for recognizing revenue. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 is effective on January 1, 2018. The Corporation is evaluating the effects of this ASU on its consolidated financial statements.

NOTE 16

GENERAL LITIGATION AND REGULATORY EXAMINATIONS

The Corporation is subject to claims and lawsuits that arise primarily in the ordinary course of business. Additionally, the Corporation is subject to periodic examinations by various regulatory agencies. It is the opinion of management that the disposition or ultimate resolution of such claims, lawsuits, and examinations will not have a material adverse effect on the consolidated financial position, results of operations and cash flow of the Corporation.

38

PART I: FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

From time to time, we include forward-looking statements in our oral and written communication. We may include forward-looking statements in filings with the Securities and Exchange Commission, such as this Quarterly Report on Form 10-Q, in other written materials and in oral statements made by senior management to analysts, investors, representatives of the media and others. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we are including this statement for purposes of these safe harbor provisions. Forward-looking statements can often be identified by the use of words like “believe”, “continue”, “pattern”, “estimate”, “project”, “intend”, “anticipate”,  “expect” and similar expressions or future or conditional verbs such as “will”, “would”,  “should”,  “could”,  “might”, “can”, “may”, or similar expressions. These forward-looking statements include:

• statements of our goals, intentions and expectations;

• statements regarding our business plan and growth strategies;

• statements regarding the asset quality of our loan and investment portfolios; and

• estimates of our risks and future costs and benefits.

These forward-looking statements are subject to significant risks, assumptions and uncertainties, including, among other things, the following important factors which could affect the actual outcome of future events:

• fluctuations in market rates of interest and loan and deposit pricing, which could negatively affect our net interest margin, asset valuations and expense expectations;

• adverse changes in the economy, which might affect our business prospects and could cause credit-related losses and expenses;

• adverse developments in our loan and investment portfolios;

• competitive factors in the banking industry, such as the trend towards consolidation in our market;

• changes in the banking legislation or the regulatory requirements of federal and state agencies applicable to bank holding companies and banks like our affiliate bank;

• acquisitions of other businesses by us and integration of such acquired businesses;

• changes in market, economic, operational, liquidity, credit and interest rate risks associated with our business; and

• the continued availability of earnings and excess capital sufficient for the lawful and prudent declaration and payment of cash dividends.

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. In addition, our past results of operations do not necessarily indicate our anticipated future results.

CRITICAL ACCOUNTING POLICIES

Generally accepted accounting principles are complex and require us to apply significant judgments to various accounting, reporting and disclosure matters. We must use assumptions and estimates to apply those principles where actual measurement is not possible or practical. For a complete discussion of our significant accounting policies, see “Notes to the Consolidated Financial Statements” in our Annual Report on Form 10-K for the year ended December 31, 2015. Certain policies are considered critical because they are highly dependent upon subjective or complex judgments, assumptions and estimates. Changes in such estimates may have a significant impact on the financial statements. We have reviewed the application of these policies with the Audit Committee of our Board of Directors.

We believe there have been no significant changes during the six months ended June 30, 2016, to the items that we disclosed as our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2015.

BUSINESS SUMMARY

First Merchants Corporation (the “Corporation”) is a financial holding company headquartered in Muncie, Indiana and was organized in September 1982. The Corporation’s Common Stock is traded on NASDAQ’s Global Select Market System under the symbol FRME. The Corporation has one full-service bank charter, First Merchants Bank (the “Bank”), which opened for business in Muncie, Indiana, in March 1893. The Bank also operates Lafayette Bank and Trust and First Merchants Private Wealth Advisors as divisions of First Merchants Bank.  The Bank includes 107 banking locations in twenty-seven Indiana, two Illinois and two Ohio counties. In addition to its branch network, the Corporation’s delivery channels include ATMs, check cards, remote deposit capture, interactive voice response systems and internet technology. The Corporation’s business activities are currently limited to one significant business segment, which is community banking.

Through the Bank, the Corporation offers a broad range of financial services, including accepting time deposits, savings and demand deposits; making consumer, commercial, agri-business and real estate mortgage loans; renting safe deposit facilities; providing personal and corporate trust services; providing full-service brokerage and private wealth management; and providing letters of credit, repurchase agreements and other corporate services.

The Corporation operated First Merchants Insurance Services, Inc., operating as First Merchants Insurance Group ("FMIG"), a full-service property, casualty, personal lines, and employee benefit insurance agency headquartered in Muncie, Indiana. On June 12, 2015, the Corporation sold all of its stock in FMIG to USI Insurance Services, LLC for $18,000,000. Additional details of the transaction are included in NOTE 2. ACQUISITIONS AND DIVESTITURES, included within the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q.

39

PART I: FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

On April 1, 2016, the Board of Directors of the Bank adopted final resolutions approving the conversion of the Bank’s banking charter from a national association to an Indiana state-chartered bank. The initial application to convert was filed with the Indiana Department of Financial Institutions (the “Indiana DFI”) on February 9, 2016. Between the date of initial application and adoption of the final resolutions by the Bank’s Board, the Indiana DFI and the Federal Deposit Insurance Corporation (the “FDIC”) conducted a joint exam of the Bank and its banking activities. Final regulatory approval of the application was obtained at the meeting of the Members of the Indiana DFI on April 14, 2016. The Bank filed official conversion documents effective April 15, 2016.

Along with economic benefits, the Board and management of the Bank feel the state charter is more consistent with the community banking philosophy embraced by the Bank. As a result of the conversion, the Indiana DFI became the Bank’s primary regulator and the FDIC became the Bank’s primary federal regulator. Upon conversion, the Bank’s official name changed from “First Merchants Bank, National Association” to “First Merchants Bank.” The Bank intends to continue operating under the following trade names in certain geographic markets: Lafayette Bank and Trust and First Merchants Private Wealth Advisors (each as a division of First Merchants Bank). The conversion is not expected to affect the Bank’s operations or customers in any way, and Bank customers will continue to receive identical protection on deposits through the FDIC’s deposit insurance program.

RESULTS OF OPERATIONS

Executive Summary

First Merchants Corporation reported second quarter 2016 net income of $20.0 million, compared to $18.0 million during the second quarter of 2015. Diluted earnings per share for the period totaled $.49 per share, an increase of $.02 per share, or 4.3 percent, over the same period in 2015. Year-to-date net income totaled $37.7 million, compared to $34.1 million during the same period in 2015. Diluted earnings per share for the six months ended June 30, 2016 totaled $.92 per share, an increase of $.02 per share, over same period in 2015.

On April 17, 2015, the Corporation acquired C Financial and on December 31, 2015, the Corporation acquired Ameriana. Additionally, on June 12, 2015, the Corporation sold all of its stock in FMIG, resulting in a gain of $8.3 million. Details of these transactions are included in NOTE 2. ACQUISITIONS AND DIVESTITURES, included within the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q.

As of June 30, 2016, total assets equaled $6.9 billion, an increase of $145.4 million, or 2.2 percent, from December 31, 2015.  The Corporation's loan portfolio increased $106.6 million, with the largest increase in real estate commercial and farmland. Additional details of the changes in the Corporation's loans and other earning assets are discussed within NOTE 4. LOANS AND ALLOWANCE, included within the Notes to Consolidated Condensed Financial Statements, and the "EARNING ASSETS" section of Management's Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report on Form 10-Q.

The Corporation’s allowance for loan losses totaled $62.2 million as of June 30, 2016.  The allowance provided 185.3 percent coverage of all non-accrual loans and 1.29 percent of total loans.  The Corporation's provision expense totaled $790,000 and $1.3 million during the three and six months ended 2016, as net charge-offs totaled $690,000 and $1.6 million, for the same periods respectively. The Corporation had $417,000 of provision expense for both the three and six months ended June 30, 2015, with net charge offs during the same periods of $668,000 and $1.8 million, respectively. Additional details are discussed within the “LOAN QUALITY/PROVISION FOR LOAN LOSSES” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report on Form 10-Q.

As of June 30, 2016, total deposits equaled $5.4 billion, an increase of $117.9 million from December 31, 2015. The largest increases were in demand deposits and savings deposits, which accounted for $141.2 million and $32.5 million of the overall increase, respectively. This increase was offset by decreases in other certificates and time deposits and certificates and other time deposits of $100,000 or more of $38.8 million and $22.0 million, respectively, compared to December 31, 2015.

Total borrowings decreased $11.5 million as of June 30, 2016 compared to December 31, 2015 as Federal Funds purchased decreased $29.7 million, which was offset by an increase in Federal Home Loan Bank Advances of $32.9 million.

The Corporation was able to maintain all regulatory capital ratios in excess of the regulatory definition of “well-capitalized” as discussed in the “CAPITAL” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report on Form 10-Q.

NET INTEREST INCOME

Net interest income is the most significant component of our earnings, comprising 77 percent of revenues for the three and six months ended June 30, 2016. Net interest income and margin are influenced by many factors, primarily the volume and mix of earnings assets, funding sources, and interest rate fluctuations. Other factors include the level of accretion income on purchased loans, prepayment risk on mortgage and investment-related assets, and the composition and maturity of earning assets and interest-bearing liabilities. Loans typically generate more interest income than investment securities with similar maturities. Funding from client deposits generally costs less than wholesale funding sources. Factors such as general economic activity, Federal Reserve Board monetary policy, and price volatility of competing alternative investments, can also exert significant influence on our ability to optimize the mix of assets and funding and the net interest income and margin.

40

PART I: FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Net interest income is the excess of interest received from earning assets over interest paid on interest-bearing liabilities. For analytical purposes, net interest income is also presented in the table that follows, adjusted to a fully taxable equivalent basis (“FTE”), to reflect what our tax-exempt assets would need to yield in order to achieve the same after-tax yield as a taxable asset. We used the federal statutory rate in effect of 35 percent for all periods adjusted for the TEFRA interest disallowance applicable to certain tax-exempt obligations. This analysis portrays the income tax benefits associated in tax-exempt assets and helps to facilitate a comparison between taxable and tax-exempt assets. Management believes that it is a standard practice in the banking industry to present net interest margin and net interest income on a fully taxable equivalent basis. Therefore, management believes these measures provide useful information for both management and investors by allowing them to make peer comparisons.

For the periods presented, the increases in net interest income was primarily driven by the increase in earning assets attributable to acquisitions of C Financial in April 2015 and Ameriana in December 2015, and core organic loan growth.

Net interest margin for the second quarter of 2016 increased to 3.86 percent compared to the second quarter of 2015 at 3.81 percent, as earning assets increased by $699,000. Asset yields increased 4 basis points FTE and interest costs decreased 1 basis point, resulting in a 5 basis point FTE increase in net interest income as compared to the same period in 2015. As a result of the acquisitions, the Corporation recognized fair value accretion income on purchased loans, which is included in interest income, of $3,192,000 and $2,158,000, respectively, for the three months ended June 30, 2016 and 2015.

Net interest margin for the six months ended June 30, 2016 increased to 3.85 percent compared to the six months ended June 30, 2015 at 3.79 percent, as earning assets increased by $757,000. Asset yields increased 4 basis points FTE and interest costs decreased 2 basis points, resulting in a 6 basis point FTE increase in net interest income as compared to the same period in 2015. As a result of the acquisitions, the Corporation recognized fair value accretion income on purchased loans, which is included in interest income, of $5,702,000 and $4,328,000, respectively, for the six months ended June 30, 2016 and 2015.

Additional details of the Corporation's acquisitions, remaining loan fair value discount, accretable and nonaccretable yield can be found in NOTE 2. ACQUISITIONS AND DIVESTITURES and NOTE 5. ACCOUNTING FOR CERTAIN LOANS ACQUIRED IN A PURCHASE, included within the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q.

41

PART I: FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table presents the Corporation’s average balance sheet, interest income/interest expense, and the average rate as a percent of average earning assets/liabilities for the three months ended June 30, 2016, and 2015.

(Dollars in Thousands)	Three Months Ended
	June 30, 2016							June 30, 2015
	Average Balance			Interest  Income / Expense		Average Rate		Average Balance			Interest  Income / Expense		Average Rate
Assets:
Interest-bearing time deposits	$	99,735		$	122	0.49	%	$	59,979		$	31	0.21	%
Federal Reserve and Federal Home Loan Bank stock	23,442			233		3.98		39,195			459		4.68
Investment Securities: (1)
Taxable	730,179			4,202		2.30		696,505			4,425		2.54
Tax-Exempt (2)	539,004			7,050		5.23		484,541			6,510		5.37
Total Investment Securities	1,269,183			11,252		3.55		1,181,046			10,935		3.70
Loans held for sale	3,664			96		10.48		6,033			146		9.68
Loans: (3)
Commercial	3,501,919			40,501		4.63		3,193,314			35,660		4.47
Real Estate Mortgage	568,746			6,116		4.30		455,470			4,962		4.36
Installment	470,254			5,386		4.58		396,378			4,552		4.59
Tax-Exempt (2)	194,496			2,254		4.64		100,665			1,132		4.49
Total Loans	4,739,079			54,353		4.59		4,151,860			46,452		4.48
Total Earning Assets	6,131,439			65,960		4.30		5,432,080			57,877		4.26
Net unrealized gain on securities available for sale	10,924							12,575
Allowance for loan losses	(62,235		)					(62,881		)
Cash and cash equivalents	104,372							97,738
Premises and equipment	96,620							84,359
Other assets	576,719							496,606
Total Assets	$	6,857,839						$	6,060,477
Liabilities:
Interest-bearing deposits:
Interest-bearing NOW deposits	$	1,429,191		$	637	0.18	%	$	1,088,896		$	283	0.10	%
Money market deposits	849,270			502		0.24		853,776			446		0.21
Savings deposits	717,044			149		0.08		612,920			166		0.11
Certificates and other time deposits	1,159,247			2,751		0.95		1,148,463			2,791		0.97
Total Interest-bearing Deposits	4,154,752			4,039		0.39		3,704,055			3,686		0.40
Borrowings	476,852			2,703		2.27		471,467			2,485		2.11
Total Interest-bearing Liabilities	4,631,604			6,742		0.58		4,175,522			6,171		0.59
Noninterest-bearing deposits	1,285,396							1,093,031
Other liabilities	64,723							45,743
Total Liabilities	5,981,723							5,314,296
Stockholders' Equity	876,116							746,181
Total Liabilities and Stockholders' Equity	$	6,857,839		6,742		0.44		$	6,060,477		6,171		0.45
Net Interest Income				$	59,218						$	51,706
Net Interest Margin						3.86	%						3.81	%
(1) Average balance of securities is computed based on the average of the historical amortized cost balances without the effects of the fair value adjustments. Annualized amounts are computed utilizing a 30/360 day basis.
(2)  Tax-exempt securities and loans are presented on a fully taxable equivalent basis, using a marginal tax rate of 35 percent for 2016 and 2015. The fully taxable equivalent adjustments equal $3,256 and $2,675 for the three months ended June 30, 2016 and 2015, respectively.
(3) Non-accruing loans have been included in the average balances.

42

PART I: FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in Thousands)	Six Months Ended
	June 30, 2016							June 30, 2015
	Average Balance			Interest  Income / Expense		Average Rate		Average Balance			Interest  Income / Expense		Average Rate
Assets:
Federal Funds Sold
Interest-bearing time deposits	$	87,722		$	228	0.52	%	$	58,452		$	68	0.23	%
Federal Reserve and Federal Home Loan Bank stock	30,537			713		4.67		40,267			1,009		5.01
Investment Securities: (1)
Taxable	723,333			8,530		2.36		716,331			9,148		2.55
Tax-Exempt (2)	529,963			13,987		5.28		459,177			12,409		5.40
Total Investment Securities	1,253,296			22,517		3.59		1,175,508			21,557		3.67
Loans held for sale	4,956			218		8.80		5,483			256		9.34
Loans: (3)
Commercial	3,475,684			79,365		4.57		3,117,698			69,830		4.48
Real Estate Mortgage	572,006			12,510		4.37		457,620			9,811		4.29
Installment	463,454			10,495		4.53		395,227			8,975		4.54
Tax-Exempt (2)	188,223			4,277		4.54		68,903			1,513		4.39
Total Loans	4,704,323			106,865		4.54		4,044,931			90,385		4.47
Total Earning Assets	6,075,878			130,323		4.29	%	5,319,158			113,019		4.25	%
Net unrealized gain on securities available for sale	10,464							13,522
Allowance for loan losses	(62,724		)					(63,154		)
Cash and cash equivalents	103,143							98,262
Premises and equipment	96,659							81,052
Other assets	577,157							492,597
Total Assets	$	6,800,577						$	5,941,437
Liabilities:
Interest-bearing deposits:
Interest-bearing NOW deposits	$	1,364,729		$	1,181	0.17	%	$	1,059,826		$	534	0.10	%
Money market deposits	857,601			993		0.23		838,852			858		0.20
Savings deposits	703,174			284		0.08		592,449			326		0.11
Certificates and other time deposits	1,172,852			5,644		0.96		1,137,342			5,484		0.96
Total Interest-bearing Deposits	4,098,356			8,102		0.40		3,628,469			7,202		0.40
Borrowings	498,470			5,412		2.17		454,758			4,937		2.17
Total Interest-bearing Liabilities	4,596,826			13,514		0.59		4,083,227			12,139		0.59
Noninterest-bearing deposits	1,270,363							1,073,173
Other liabilities	64,504							44,659
Total Liabilities	5,931,693							5,201,059
Stockholders' Equity	868,884							740,378
Total Liabilities and Stockholders' Equity	$	6,800,577		13,514		0.44		$	5,941,437		12,139		0.46
Net Interest Income				$	116,809						$	100,880
Net Interest Margin						3.85	%						3.79	%
(1)  Average balance of securities is computed based on the average of the historical amortized cost balances without the effects of the fair value adjustments. Annualized amounts are computed utilizing a 30/360 day basis.
(2)  Tax-exempt securities and loans are presented on a fully taxable equivalent basis, using a marginal tax rate of 35 percent for 2016 and 2015. The fully taxable equivalent adjustments equal $6,392 and $4,873 for the six months ended June 30, 2016 and 2015, respectively.
(3)  Non-accruing loans have been included in the average balances.

43

PART I: FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

NON-INTEREST INCOME

Non-interest income decreased $7.7 million, or 32.0 percent, in the second quarter of 2016, compared to the second quarter of 2015.  In June 2015, the Corporation sold all of its stock in FMIG, which resulted in a gain on the sale of $8.3 million. This transaction also accounted for a $1.8 million decline in insurance commission income compared to the second quarter of 2015. In December 2015, the Corporation acquired Ameriana. This acquisition contributed to a larger customer base, which resulted in an increase in service charge income of $326,000 in the second quarter of 2016 when compared to the same period in 2015. Additional details of the divestiture and acquisitions can be found in NOTE 2. ACQUISITIONS AND DIVESTITURES, included within the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q.

The sale of investment securities generated net gains of $706,000, an increase of $799,000, when compared to net losses of $93,000 during the second quarter of 2015. Additionally, second quarter 2016 earnings on cash surrender value of life insurance increased by $657,000 from the same quarter of 2015. The increase was due to death benefits from Bank Owned Life Insurance of $424,000. Also, the Ameriana acquisition included a $28.2 million Bank Owned Life Insurance portfolio that contributed to the increase in earnings.

During the first six months of 2016, non-interest income decreased $7.3 million, or 18.4 percent, over the same period in 2015. In June 2015, the sale of FMIG resulted in a gain on the sale of $8.3 million, and also accounted for a $4.1 million decline in insurance commission income compared to the first six months of 2015. The larger customer base from the C Financial and Ameriana acquisitions contributed to increases in other customer fees and service charge income of $1.5 million and $923,000, respectively.

The sale of investment securities generated net gains of $1.7 million, an increase of $771,000, when compared to the $932,000 in net gains during the six months ended June 30, 2015. Additionally, the first six months of 2016 earnings on cash surrender value of life insurance increased by $1.4 million from the same period in 2015. The increase was primarily due to death benefits from Bank Owned Life Insurance of $895,000. Also, the Ameriana acquisition included a $28.2 million Bank Owned Life Insurance portfolio that contributed to the increase in earnings.

NON-INTEREST EXPENSE

Non-interest expense decreased $1.1 million, or 2.3 percent, in the second quarter of 2016, compared to the second quarter of 2015.  The sale of FMIG resulted in $1.6 million less in expense than the second quarter of 2015, of which $1.3 million was salaries and employee benefits. The Corporation's core business, primarily through bank acquisitions, did see an increase over prior year for net occupancy, salaries and employee benefits and equipment expenses of $556,000, $418,000 and $403,000, respectively. In the second quarter of 2015, contract termination expenses related to the C Financial acquisition of $719,000 and legal and investment banker fees associated with acquisition and divestiture activities of $898,000, contributed to the decline in professional and other outside services from the same period in 2015.

During the first six months of 2016, non-interest expense increased $5.0 million, or 5.8 percent, when compared to the first six months of 2015. The sale of FMIG resulted in $3.2 million less in expense compared to the first six months of 2015, of which $2.5 million was salaries and employee benefits. This decrease in salaries and employee benefits was offset by a $4.5 million increase primarily due to the addition of personnel from C Financial and Ameriana. Additionally, investments in the Corporation's core business, primarily through bank acquisitions, drove the remaining increase over prior year. As a result of the larger franchise size from the acquisitions, the Corporation experienced increases in equipment, net occupancy and data processing expenses of $1.1 million, $788,000 and $609,000, respectively.

INCOME TAXES

Income tax expense for the second quarter of 2016 was $6,716,000 on pre-tax net income of $26,722,000.  For the same period in 2015, income tax expense was $8,856,000 on pre-tax net income of $26,824,000. The effective income tax rates for the second quarter of 2016 and 2015 were 25.1 percent and 33.0 percent, respectively.

Income tax expense for the six months ended June 30, 2016 was $12,290,000 on pre-tax net income of $49,989,000.  For the same period in 2015, income tax expense was $14,690,000 on pre-tax net income of $48,830,000. The effective income tax rates for the six months ended June 30, 2016 and 2015 were 24.6 percent and 30.1 percent, respectively.

The lower effective income tax rates during the three and six months ended June 30, 2016 when compared to the same periods in 2015 were the result of increases in tax-exempt interest income and earnings on life insurance in addition to a permanent book-to-tax difference associated with the gain on sale of FMIG in 2015.

The detailed reconciliation of federal statutory to actual tax expense is shown in NOTE 13. INCOME TAX, included within the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q.

44

PART I: FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAPITAL

Capital adequacy is an important indicator of financial stability and performance.  The Corporation and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies and are assigned to a capital category.  The assigned capital category is largely determined by four ratios that are calculated according to the regulations: total risk-based capital, tier 1 risk-based capital, common equity tier 1 capital, and tier 1 leverage ratios. The ratios are intended to measure capital relative to assets and credit risk associated with those assets and off-balance sheet exposures of the entity.  The capital category assigned to an entity can also be affected by qualitative judgments made by regulatory agencies about the risk inherent in the entity's activities that are not part of the calculated ratios.  

There are five capital categories defined in the regulations, ranging from well capitalized to critically undercapitalized. Classification of a bank in any of the undercapitalized categories can result in actions by regulators that could have a material effect on a bank's operations. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of total and tier 1 capital to risk-weighted assets, and of tier 1 capital to average assets, or leverage ratio, all of which are calculated as defined in the regulations.  Banks with lower capital levels are deemed to be undercapitalized, significantly undercapitalized or critically undercapitalized, depending on their actual levels.  The appropriate federal regulatory agency may also downgrade a bank to the next lower capital category upon a determination that the bank is in an unsafe or unsound practice.  Banks are required to monitor closely their capital levels and to notify their appropriate regulatory agency of any basis for a change in capital category.

Basel III was effective for the Corporation on January 1, 2015. Basel III requires the Corporation and the Bank to maintain minimum amounts and ratio of common equity tier 1 capital to risk weighted assets, as defined in the regulation. Under the new Basel III rules, in order to avoid limitations on capital distributions, including dividends, the Corporation must hold a capital conservation buffer above the adequately capitalized common equity tier 1 capital to risk-weighted assets ratio. The capital conservation buffer is being phased in from zero percent to 2.50 percent by 2019. As of January 1, 2016, the Corporation is required to hold a capital conservation buffer of 0.625 percent, increasing by that amount each successive year until 2019. Under Basel III, the Corporation and Bank elected to opt-out of including accumulated other comprehensive income in regulatory capital.

As of June 30, 2016, the Bank met all capital adequacy requirements to be considered well capitalized. There is no threshold for well capitalized status for bank holding companies. The Corporation's and Bank's actual and required capital ratios as of June 30, 2016 and December 31, 2015 were as follows:

					Prompt Corrective Action Thresholds
	Actual				Adequately Capitalized				Well Capitalized
June 30, 2016	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total risk-based capital to risk-weighted assets
First Merchants Corporation	$	808,369	14.67	%	$	440,925	8.00	%	N/A		N/A
First Merchants Bank	766,409		13.80		444,337		8.00		$	555,422	10.00	%
Tier 1 capital to risk-weighted assets
First Merchants Corporation	$	681,183	12.36	%	$	330,693	6.00	%	N/A		N/A
First Merchants Bank	704,223		12.68		333,253		6.00		$	444,337	8.00	%
Common equity tier 1 capital to risk-weighted assets
First Merchants Corporation	$	627,715	11.39	%	$	248,020	4.50	%	N/A		N/A
First Merchants Bank	704,223		12.68		249,940		4.50		$	361,024	6.50	%
Tier 1 capital to average assets
First Merchants Corporation	$	681,183	10.41	%	$	261,843	4.00	%	N/A		N/A
First Merchants Bank	704,223		10.66		264,191		4.00		$	330,239	5.00	%

					Prompt Corrective Action Thresholds
	Actual				Adequately Capitalized				Well Capitalized
December 31, 2015	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total risk-based capital to risk-weighted assets
First Merchants Corporation	$	783.776	14.94	%	$	419,809	8.00	%	N/A		N/A
First Merchants Bank	739.793		13.98		423,242		8.00		$	529,052	10.00	%
Tier 1 capital to risk weighted assets
First Merchants Corporation	$	656,323	12.51	%	$	314,857	6.00	%	N/A		N/A
First Merchants Bank	677,340		12.80		317,431		6.00		$	423,242	8.00	%
Common equity tier 1 capital to risk-weighted assets
First Merchants Corporation	$	603,063	11.49	%	$	236,143	4.50	%	N/A		N/A
First Merchants Bank	677,340		12.80		238,074		4.50		343,884		6.50	%
Tier 1 capital to average assets
First Merchants Corporation	$	656,323	10.85	%	$	242,001	4.00	%	N/A		N/A
First Merchants Bank	677,340		11.22		241,423		4.00		$	301,779	5.00	%

45

PART I: FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management believes that all of the above capital ratios are meaningful measurements for evaluating the safety and soundness of the Corporation. Traditionally, the banking regulators have assessed bank and bank holding company capital adequacy based on both the amount and the composition of capital, the calculation of which is prescribed in federal banking regulations. The Federal Reserve focuses its assessment of capital adequacy on a component of Tier 1 capital known as Common Equity Tier 1. Because the Federal Reserve has long indicated that voting common shareholders' equity (essentially Tier 1 risk-based capital less preferred stock and noncontrolling interest in subsidiaries) generally should be the dominant element in Tier 1 risk-based capital, this focus on common Equity Tier 1 is consistent with existing capital adequacy categories. Tier I regulatory capital consists primarily of total stockholders’ equity and subordinated debentures issued to business trusts categorized as qualifying borrowings, less non-qualifying intangible assets and unrealized net securities gains or losses.

Additionally, management believes the following tables are also meaningful when considering performance measures of the Corporation. Non-GAAP financial measures such as tangible book value per common share, tangible common equity to tangible assets, return on average tangible capital and return on average tangible assets are important measures of the strength of the Corporation's capital and ability to generate earnings on tangible common equity invested by our shareholders. These non-GAAP measures provide useful supplemental information and may assist investors in analyzing the Corporation’s capital position without regard to the effects of intangible assets and preferred stock. Disclosure of these measures also allows analysts and banking regulators to assess our capital adequacy on these same bases.

Because these measures are not defined in Generally Accepted Accounting Principles (“GAAP”) or federal banking regulations, they are considered non-GAAP financial measures. Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.

	June 30, 2016				December 31, 2015
	First Merchants Corporation		First Merchants Bank		First Merchants Corporation		First Merchants Bank
Total Risk-Based Capital
Total Stockholders' Equity (GAAP)	887,550		966,974		850,509		927,649
Adjust for Accumulated Other Comprehensive (Income) Loss (1)	(7,035	)	(9,699	)	1,362		(579	)
Less: Preferred Stock	(125	)			(125	)
Add: Qualifying Capital Securities	55,296				55,776
Less: Tier 1 Capital Deductions	(1,828	)	(1,427	)	(2,516	)	(1,903	)
Less: Disallowed Goodwill and Intangible Assets	(249,932	)	(249,484	)	(247,006	)	(246,558	)
Less: Disallowed Servicing Assets
Less: Disallowed Deferred Tax Assets	(2,743	)	(2,141	)	(1,677	)	(1,269	)
Total Tier 1 Capital (Regulatory)	681,183		704,223		656,323		677,340
Qualifying Subordinated Debentures	65,000				65,000
Allowance for Loan Losses Includible in Tier 2 Capital	62,186		62,186		62,453		62,453
Total Risk-Based Capital (Regulatory)	808,369		766,409		783,776		739,793
Net Risk-Weighted Assets (Regulatory)	5,511,557		5,554,218		5,247,617		5,290,524
Average Assets	6,546,074		6,604,787		6,050,023		6,035,575
Total Risk-Based Capital Ratio (Regulatory)	14.67	%	13.80	%	14.94	%	13.98	%
Tier 1 Capital to Risk-Weighted Assets	12.36	%	12.68	%	12.51	%	12.80	%
Tier 1 Capital to Average Assets	10.41	%	10.66	%	10.85	%	11.22	%
Common Equity Tier 1 Capital Ratio
Total Tier 1 Capital (Regulatory)	681,183		704,223		656,323		677,340
Less: Qualified Capital Securities	(55,296	)			(55,776	)
Add: Additional Tier 1 Capital Deductions	1,828				2,516
Common Equity Tier 1 Capital (Regulatory)	627,715		704,223		603,063		677,340
Net Risk-Weighted Assets (Regulatory)	5,511,557		5,554,218		5,247,617		5,290,524
Common Equity Tier 1 Capital Ratio (Regulatory)	11.39	%	12.68	%	11.49	%	12.80	%

46

PART I: FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Corporation had a strong capital position as evidenced by the tangible common equity to tangible assets ratio of 9.52 percent at June 30, 2016, and 9.17 percent at December 31, 2015.

	Tangible Common Equity to Tangible Assets (non-GAAP)
(Dollars in Thousands, Except Per Share Amounts)	June 30, 2016			December 31, 2015
Total Stockholders' Equity (GAAP)	$	887,550		$	850,509
Less: Cumulative preferred stock (GAAP)	(125		)	(125		)
Less: Intangible assets, net of tax (GAAP)	(254,368		)	(253,486		)
Tangible common equity (non-GAAP)	$	633,057		$	596,898
Total assets (GAAP)	$	6,906,418		$	6,761,003
Less: Intangible assets, net of tax (GAAP)	(254,368		)	(253,486		)
Tangible assets (non-GAAP)	$	6,652,050		6,507,517
Tangible common equity to tangible assets (non-GAAP)	9.52		%	9.17		%

The following table details and reconciles tangible earnings per share, return on tangible capital and tangible assets to traditional GAAP measures for the three and six months ended June 30, 2016 and 2015.

	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in Thousands, Except Per Share Amounts)	2016			2015			2016			2015
Average goodwill (GAAP)	$	244,000		$	210,217		$	244,000		$	206,491
Average core deposit intangible (GAAP)	17,273			15,584			17,816			15,615
Average deferred tax on CDI (GAAP)	(6,606		)	(5,724		)	(6,751		)	(5,840		)
Intangible adjustment (non-GAAP)	$	254,667		$	220,077		$	255,065		$	216,266
Average stockholders' equity (GAAP)	$	876,116		$	746,181		$	868,884		$	740,378
Average cumulative preferred stock (GAAP)	(125		)	(125		)	(125		)	(125		)
Intangible adjustment (non-GAAP)	(254,666		)	(220,077		)	(255,065		)	(216,266		)
Average tangible capital (non-GAAP)	$	621,325		$	525,979		$	613,694		$	523,987
Average assets (GAAP)	$	6,857,839		$	6,060,477		$	6,800,577		$	5,941,437
Intangible adjustment (non-GAAP)	(254,666		)	(220,077		)	(255,065		)	(216,266		)
Average tangible assets (non-GAAP)	$	6,603,173		$	5,840,400		$	6,545,512		$	5,725,171
Net income available to common stockholders (GAAP)	$	20,006		$	17,968		$	37,699		$	34,140
CDI amortization, net of tax (GAAP)	635			430			1,271			848
Tangible net income available to common stockholders (non-GAAP)	$	20,641		$	18,398		$	38,970		$	34,988
Per Share Data:
Diluted net income available to common stockholders (GAAP)	$	0.49		$	0.47		$	0.92		$	0.90
Diluted tangible net income available to common stockholders (non-GAAP)	$	0.50		$	0.48		$	0.95		$	0.92
Ratios:
Return on average GAAP capital (ROE)	9.13		%	9.63		%	8.68		%	9.22		%
Return on average tangible capital	13.29		%	13.99		%	12.70		%	13.35		%
Return on average assets (ROA)	1.17		%	1.19		%	1.11		%	1.15		%
Return on average tangible assets	1.25		%	1.26		%	1.19		%	1.22		%

Return on average tangible capital is tangible net income available to common stockholders (annualized) expressed as a percentage of average tangible capital.  Return on average tangible assets is tangible net income available to common stockholders (annualized) expressed as a percentage of average tangible assets.

LOAN QUALITY/PROVISION FOR LOAN LOSSES

The Corporation’s primary lending focus is small business and middle market commercial, commercial real estate, residential real estate and small consumer lending, which results in portfolio diversification.  Commercial loans are individually underwritten and judgmentally risk rated.  They are periodically monitored and prompt corrective actions are taken on deteriorating loans.  Retail loans are typically underwritten with statistical decision-making tools and are managed throughout their life cycle on a portfolio basis.

Loan Quality

The quality of the loan portfolio and the amount of non-performing loans may increase or decrease as a result of acquisitions, organic portfolio growth, problem loan recognition and resolution through collections, sales or charge offs. The performance of any loan can be affected by external factors such as economic conditions, or internal factors specific to a particular borrower, such as the actions of a customer's management.

47

PART I: FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

At June 30, 2016, non performing loans totaled $37,864,000, an increase of $4,552,000 from the December 31, 2015 balance of $33,312,000. Non-accrual loans decreased $3,154,000 to $33,565,000 from the March 31, 2016 balance of $36,719,000, but remained above the $31,389,000 balance at December 31, 2015. The Corporation’s coverage ratio of allowance for loan losses to non-accrual loans increased from 169.1 percent at March 31, 2016 to 185.3 percent at June 30, 2016. This non-accrual coverage ratio at December 31, 2015 was 199.0 percent. See additional information regarding the allowance for loan losses in the “Provision for Loan Losses” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included as ITEM 2 of this Quarterly Report on Form 10-Q.

Other real estate owned, totaling $13,219,000 at June 30, 2016, declined $4,038,000 from the December 31, 2015 balance of $17,257,000.  For other real estate owned, current appraisals are obtained to determine fair value as management continues to aggressively market these real estate assets.

Accruing loans delinquent 90 or more days of $362,000 at June 30, 2016 decreased $545,000 from the December 31, 2015 balance of $907,000. Residential real estate loans accounted for 64.0 percent of the total at June 30, 2016.

Commercial impaired loans include non-accrual loans, loans accounted for under ASC 310-30, and loans risk graded as substandard, doubtful and loss that were still accruing but deemed impaired according to the guidance set forth in ASC 310. Also included in impaired loans are accruing loans that are contractually past due 90 days or more and troubled debt restructurings.

A loan is deemed impaired when, based on current information or events, it is probable that all amounts due of principal and interest according to the contractual terms of the loan agreement will not be collected substantially within the contractual terms of the note.  At June 30, 2016, commercial impaired loans totaled $87,643,000 a decrease of $9,884,000 from the December 31, 2015 balance of $97,527,000. At June 30, 2016, a specific allowance for losses was not deemed necessary for commercial impaired loans totaling $81,449,000 as there was no identified loss on these credits. A specific allowance of $2,120,000 was recorded for the remaining balance of these impaired loans totaling $6,194,000 and is included in the Corporation’s allowance for loan losses.

At June 30, 2016, non-performing assets, which includes non-accrual loans, renegotiated loans, and other real estate owned, plus loans 90-days delinquent, totaled $51,445,000; a decrease of $31,000 from December 31, 2015 as noted in the table below.

(Dollars in Thousands)	June 30, 2016		December 31, 2015
Non-Performing Assets:
Non-accrual loans	$	33,565	$	31,389
Renegotiated loans	4,299		1,923
Non-performing loans (NPL)	37,864		33,312
Other real estate owned	13,219		17,257
Non-performing assets (NPA)	51,083		50,569
90+ days delinquent	362		907
Non-performing assets plus 90+ days delinquent	$	51,445	$	51,476
Impaired Loans	$	87,643	$	97,527

The non-accrual balances in the table above include troubled debt restructurings totaling $6,285,000 and $5,339,000 as of June 30, 2016 and December 31, 2015, respectively.

The composition of non-performing assets plus loans 90-days or more delinquent is reflected in the following table for the periods indicated.

(Dollars in Thousands)	June 30, 2016		December 31, 2015
Non-Performing Assets plus loans 90+ Days Delinquent:
Commercial and industrial loans	$	3,426	$	5,544
Agricultural production financing and other loans to farmers	2,000		827
Real estate loans:
Construction	9,110		9,345
Commercial and farmland	22,143		18,243
Residential	12,173		14,528
Home Equity	2,462		2,665
Individuals' loans for household and other personal expenditures	131		324
Non-performing assets plus 90+ days delinquent	$	51,445	$	51,476

Although the Corporation believes its underwriting and loan review procedures are appropriate for the various kinds of loans it makes, its results of operations and financial condition could be adversely affected in the event the quality of its loan portfolio declines.  Deterioration in the economic environment including residential and commercial real estate values may result in increased levels of loan delinquencies and credit losses.

48

PART I: FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Provision for Loan Losses

The allowance for loan losses is maintained through the provision for loan losses, which is a charge against earnings. The amount actually provided for loan losses in any period may be greater than or less than net loan losses, based on management’s judgment as to the appropriate level of the allowance for loan losses. The amount provided for loan losses and the determination of the adequacy of the allowance are based on a continuous review of the loan portfolio, including an internally administered loan “watch” list and an ongoing loan review. The evaluation takes into consideration identified credit problems, as well as the possibility of losses inherent in the loan portfolio that are not specifically identified.

In conformance with ASC 805 and ASC 820, loans purchased after December 31, 2008, are recorded at the acquisition date fair value. Such loans are only included in the allowance when deemed impaired in accordance with ASC 310-30.

At June 30, 2016, the allowance for loan losses was $62,186,000, a decrease of $267,000 from December 31, 2015. As a percent of loans, the allowance was 1.29 percent at June 30, 2016, compared to 1.33 percent at December 31, 2015. The provision for loan losses for the six months ended June 30, 2016 was $1,340,000. Comparatively, the provision for loan losses for the six months ended June 30, 2015 was $417,000. Specific reserves on impaired loans increased $278,000 from $1,842,000 at December 31, 2015, to $2,120,000 at June 30, 2016.

Net charge offs for the six months ended June 30, 2016, were $1,607,000. Comparatively, the same period in 2015 had net charge offs of $1,831,000.  For the three months ended June 30, 2016, there were no charge offs or recoveries greater than $500,000. The distribution of the net charge offs or recoveries for the three months ended June 30, 2016 and 2015 are reflected in the following table:

	Three Months Ended June 30,					Six Months Ended June 30,
(Dollars in Thousands)	2016		2015			2016			2015
Net Charge Offs (Recoveries):
Commercial and industrial loans	$	313	$	(307	)	$	644		$	(383	)
Agricultural production financing and other loans to farmers	30		29			53			760
Real estate loans:
Construction	21		35			18			39
Commercial and farmland	216		18			261			62
Residential	35		575			422			789
Home Equity	68		311			128			514
Individuals' loans for household and other personal expenditures	7		11			82			58
Other commercial loans			(4		)	(1		)	(8		)
Total Net Charge Offs	$	690	$	668		$	1,607		$	1,831

Management continually evaluates the commercial loan portfolio by including consideration of specific borrower cash flow analysis and estimated collateral values, types and amounts on non-performing loans, past and anticipated loan loss experience, changes in the composition of the loan portfolio, and the current condition and amount of loans outstanding. The determination of the provision for loan losses in any period is based on management’s continuing review and evaluation of the loan portfolio, and its judgment as to the impact of current economic conditions on the portfolio.

LIQUIDITY

Liquidity management is the process by which the Corporation ensures that adequate liquid funds are available for the holding company and its subsidiaries. These funds are necessary in order to meet financial commitments on a timely basis. These commitments include withdrawals by depositors, funding credit obligations to borrowers, paying dividends to stockholders, paying operating expenses, funding capital expenditures, and maintaining deposit reserve requirements. Liquidity is monitored and closely managed by the asset/liability committee.

The Corporation’s liquidity is dependent upon the receipt of dividends from the Bank, which is subject to certain regulatory limitations and access to other funding sources.  Liquidity of the Bank is derived primarily from core deposit growth, principal payments received on loans, the sale and maturity of investment securities, net cash provided by operating activities, and access to other funding sources.

The principal source of asset-funded liquidity is investment securities classified as available for sale, the market values of which totaled $658,829,000 at June 30, 2016, an increase of $429,000, or 0.07 percent, from December 31, 2015.  Securities classified as held to maturity that are maturing within a short period of time can also be a source of liquidity. Securities classified as held to maturity and that are maturing in one year or less totaled $2,500,000 at June 30, 2016. In addition, other types of assets such as cash and interest-bearing deposits with other banks, federal funds sold and loans maturing within one year are sources of liquidity.

The most stable source of liability-funded liquidity for both the long-term and short-term is deposit growth and retention in the core deposit base.  Federal funds purchased and securities sold under agreements to repurchase are also considered a source of liquidity. In addition, Federal Home Loan Bank (“FHLB”) advances are utilized as funding sources.  At June 30, 2016, total borrowings from the FHLB were $268,579,000. The Bank has pledged certain mortgage loans and investments to the FHLB. The total available remaining borrowing capacity from the FHLB at June 30, 2016 was $343,943,000.

49

PART I: FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

On April 11, 2014, the Corporation entered into a line of credit agreement with U.S. Bank, N.A. with a maximum borrowing capacity of $20 million. The line of credit matured on April 8, 2016 and the agreement was not renewed. Interest was payable quarterly based on one-month LIBOR plus 2.00 percent. The line of credit had a quarterly facility fee of 0.25 percent on the unused balance. The line of credit agreement contained certain customary representations and warranties and financial and negative covenants.

In the normal course of business, the Bank is a party to a number of other off-balance sheet activities that contain credit, market and operational risk that are not reflected in whole or in part in our consolidated financial statements.  Such activities include traditional off-balance sheet credit-related financial instruments, commitments under operating leases and long-term debt.

The Bank provides customers with off-balance sheet credit support through loan commitments and standby and commercial letters of credit. Summarized credit-related financial instruments at June 30, 2016 are as follows:

(Dollars in Thousands)	June 30, 2016
Amounts of commitments:
Loan commitments to extend credit	$	1,863,978
Standby and commercial letters of credit	46,205
	$	1,910,183

Since many of the commitments are expected to expire unused or be only partially used, the total amount of unused commitments in the preceding table does not necessarily represent future cash requirements.

In addition to owned banking facilities, the Corporation has entered into a number of long-term leasing arrangements to support ongoing activities.  The required payments under such commitments and borrowings at June 30, 2016, are as follows:

(Dollars in Thousands)	Remaining 2016		2017		2018		2019		2020		2021		2022 and after		ASC 805 fair value adjustments at acquisition			Total
Operating leases	$	1,636	$	2,643	$	1,650	$	1,453	$	1,291	$	970	$	6,007				$	15,650
Federal funds purchased	20,000																	20,000
Securities sold under repurchase agreements	140,777																	140,777
Federal Home Loan Bank advances	99,405		37,185		26,851		13,828		31,310		25,000		35,000					268,579
Subordinated debentures and term loans	370												132,012		(4,704		)	127,678
Total	$	262,188	$	39,828	$	28,501	$	15,281	$	32,601	$	25,970	$	173,019	$	(4,704	)	$	572,684

INTEREST SENSITIVITY AND DISCLOSURE ABOUT MARKET RISK

Asset/Liability Management has been an important factor in the Corporation's ability to record consistent earnings growth through periods of interest rate volatility and product deregulation. Management and the Board of Directors monitor the Corporation's liquidity and interest sensitivity positions at regular meetings to review how changes in interest rates may affect earnings. Decisions regarding investment and the pricing of loan and deposit products are made after analysis of reports designed to measure liquidity, rate sensitivity, the Corporation’s exposure to changes in net interest income given various rate scenarios and the economic and competitive environments.

It is the objective of the Corporation to monitor and manage risk exposure to net interest income caused by changes in interest rates.  It is the goal of the Corporation’s Asset/Liability function to provide optimum and stable net interest income. To accomplish this, management uses two asset liability tools. GAP/Interest Rate Sensitivity Reports and Net Interest Income Simulation Modeling are constructed, presented and monitored quarterly.

Net interest income simulation modeling, or earnings-at-risk, measures the sensitivity of net interest income to various interest rate movements. The Corporation's asset liability process monitors simulated net interest income under three separate interest rate scenarios; base, rising and falling. Estimated net interest income for each scenario is calculated over a 12-month horizon. The immediate and parallel changes to the base case scenario used in the model are presented below. The interest rate scenarios are used for analytical purposes and do not necessarily represent management's view of future market movements. Rather, these are intended to provide a measure of the degree of volatility interest rate movements may introduce into the earnings of the Corporation.

The base scenario is highly dependent on numerous assumptions embedded in the model, including assumptions related to future interest rates. While the base sensitivity analysis incorporates management's best estimate of interest rate and balance sheet dynamics under various market rate movements, the actual behavior and resulting earnings impact will likely differ from that projected. For certain assets, the base simulation model captures the expected prepayment behavior under changing interest rate environments. Assumptions and methodologies regarding the interest rate or balance behavior of indeterminate maturity products, such as savings, money market, NOW and demand deposits, reflect management's best estimate of expected future behavior.

50

PART I: FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The comparative rising 200 basis points and falling 100 basis points scenarios below, as of June 30, 2016, assume further interest rate changes in addition to the base simulation discussed above. These changes are immediate and parallel changes to the base case scenario. In the current rate environment, many driver rates are at or near historical lows, thus total rate movements (beginning point minus ending point) to each of the various driver rates utilized by management have the following results:

	June 30, 2016
	RISING	FALLING
Driver Rates	(200 Basis Points)	(100 Basis Points)
Prime	200	(25	)
Federal funds	200	(25	)
One-year CMT	200	(38	)
Three-year CMT	200	(46	)
Five-year CMT	200	(47	)
CD's	200	(21	)
FHLB advances	200	(36	)

Results for the base, rising 200 basis points, and falling 100 basis points interest rate scenarios are listed below based upon the Corporation’s rate sensitive assets and liabilities at June 30, 2016. The net interest income shown represents cumulative net interest income over a 12-month time horizon. Balance sheet assumptions used for the base scenario are the same for the rising and falling simulations.

	June 30, 2016
			RISING			FALLING
(Dollars in Thousands)	Base		(200 Basis Points)			(100 Basis Points)
Net interest income	$	211,909	$	231,545		$	203,522
Variance from base			$	19,636		$	(8,387	)
Percent of change from base			9.27		%	(3.96		)%

The comparative rising 200 basis points and falling 100 basis points scenarios below, as of December 31, 2015, assume further interest rate changes in addition to the base simulation discussed above. These changes are immediate and parallel changes to the base case scenario. In addition, total rate movements (beginning point minus ending point) to each of the various driver rates utilized by management in the base simulation are as follows:

	December 31, 2015
	RISING	FALLING
Driver Rates	(200 Basis Points)	(100 Basis Points)
Prime	200	(25	)
Federal funds	200	(25	)
One-year CMT	200	(56	)
Three-year CMT	200	(100	)
Five-year CMT	200	(100	)
CD's	200	(21	)
FHLB advances	200	(83	)

Results for the base, rising 200 basis points, and falling 100 basis points interest rate scenarios are listed below. The net interest income shown represents cumulative net interest income over a 12-month time horizon. Balance sheet assumptions used for the base scenario are the same for the rising and falling simulations.

	December 31, 2015
			RISING			FALLING
(Dollars in Thousands)	Base		(200 Basis Points)			(100 Basis Points)
Net interest income	$	198,711	$	213,758		$	188,921
Variance from base			$	15,047		$	(9,790	)
Percent of change from base			7.57		%	(4.93		)%

51

PART I: FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EARNING ASSETS

The following table presents the earning asset mix as of June 30, 2016, and December 31, 2015. Earning assets increased by $138,050,000 during the six months ended June 30, 2016.  Interest-bearing time deposits and investment securities increased $30,218,000 and $20,802,000, respectively. Loans and loans held for sale increased by $106,567,000. The four loan classes experiencing the largest increase from December 31, 2015, were real estate commercial and farmland, commercial and industrial loans, real estate home equity and other commercial loans. These increases were primarily offset by decreases in real estate residential and real estate construction. Additionally, the decrease in Federal Reserve and Federal Home Loan Bank stock of $19,537,000 was due to the sale of the Corporation's Federal Reserve Bank stock after the conversion to an Indiana state-chartered bank.

(Dollars in Thousands)	June 30, 2016		December 31, 2015
Interest-bearing time deposits	$	62,533	$	32,315
Investment securities available for sale	658,829		658,400
Investment securities held to maturity	638,972		618,599
Mortgage loans held for sale	18,854		9,894
Loans	4,791,429		4,693,822
Federal Reserve and Federal Home Loan Bank stock	18,096		37,633
Total	$	6,188,713	$	6,050,663

OTHER

The Securities and Exchange Commission maintains a web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission, including the Corporation, and that address is (http://www.sec.gov).

52

PART I: FINANCIAL INFORMATION

ITEM 3. QUANTITATIVE AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required under this item is included as part of Management’s Discussion and Analysis of Financial Condition and Results of Operations, under the headings “LIQUIDITY” and “INTEREST SENSITIVITY AND DISCLOSURE ABOUT MARKET RISK”.

53

PART I: FINANCIAL INFORMATION

ITEM 4. CONTROLS AND PROCEDURES

ITEM 4.  CONTROLS AND PROCEDURES

At the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective. Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 are recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

There have been no changes in the Corporation’s internal control over financial reporting identified in connection with the evaluation discussed above that occurred during the Corporation’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

54

PART II: OTHER INFORMATION

ITEM 1., ITEM 1A., ITEM 2., ITEM 3., ITEM 4. AND ITEM 5.

(table dollar amounts in thousands, except share data)

ITEM 1.  LEGAL PROCEEDINGS

There are no pending legal proceedings, other than litigation incidental to the ordinary business of the Corporation or its subsidiaries, of a material nature to which the Corporation or its subsidiaries is a party or of which any of their properties are subject. Further, there are no material legal proceedings in which any director, officer, principal shareholder, or affiliate of the Corporation, or any associate of any such director, officer or principal shareholder, is a party, or has a material interest, adverse to the Corporation or any of its subsidiaries.

None of the routine legal proceedings, individually or in the aggregate, in which the Corporation or its affiliates are involved are expected to have a material adverse impact on the financial position or the results of operations of the Corporation.

ITEM 1A.  RISK FACTORS

There have been no material changes to the risk factors previously disclosed in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2015,

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

a. None

b. None

c. Issuer Purchases of Equity Securities

The following table presents information relating to our purchases of equity securities during the three months ended June 30, 2016.

Period	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as part of Publicly announced Plans or Programs	Maximum Number of Shares that may yet be Purchased Under the Plans or Programs
April, 2016
May, 2016	112	$24.62
June, 2016	1,043	$24.80

The shares were purchased in connection with the exercise of certain outstanding stock options or restricted stock.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4.  MINE SAFETY DISCLOSURES

Not Applicable

ITEM 5.  OTHER INFORMATION

a. None

b. None

55

PART II: OTHER INFORMATION

ITEM 6. EXHIBITS

ITEM 6.  EXHIBITS

Exhibit No:	Description of Exhibits:
3.1	First Merchants Corporation Articles of Incorporation, as amended (Incorporated by reference to registrant’s Form 10-Q filed on November 9, 2011) (SEC No. 000-17071)
3.2	Bylaws of First Merchants Corporation dated October 28, 2009 (Incorporated by reference to registrant’s Form 10-Q filed on November 9, 2009) (SEC No. 000-17071)
3.3	First Merchants Corporation Articles of Amendment of the Articles of Incorporation for the Series B Preferred Stock (Incorporated by reference to registrant's Form 8-K filed on September 23, 2011) (SEC No. 000-17071)
4.1	First Merchants Corporation Amended and Restated Declaration of Trust of First Merchants Capital Trust II dated as of July 2, 2007 (Incorporated by reference to registrant's Form 8-K filed on July 3, 2007) (SEC No. 000-17071)
4.2	Indenture dated as of July 2, 2007 (Incorporated by reference to registrant's Form 8-K filed on July 3, 2007) (SEC No. 000-17071)
4.3	Guarantee Agreement dated as of July 2, 2007 (Incorporated by reference to registrant's Form 8-K filed on July 3, 2007) (SEC No. 000-17071)
4.4	Form of Capital Securities Certification of First Merchants Capital Trust II (Incorporated by reference to registrant's Form 8-K filed on July 3, 2007) (SEC No. 000-17071)
4.5	First Merchants Corporation Dividend Reinvestment and Stock Purchase Plan (Incorporated by reference to registrant’s Post-Effective Amendment No. 1 to Form S-3 filed on August 21, 2009) (SEC No. 033-45393)
4.6	Upon request, the registrant agrees to furnish supplementally to the Commission a copy of the instruments defining the rights of holders of its (a) 5.00% Fixed-to-Floating Rate Senior Notes due 2028 in the aggregate principal amount of $5 million and (b) 6.75% Fixed-to-Floating Rate Subordinated Notes due 2028 in aggregate principal amount of $65 million.
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes - Oxley Act of 2002 (1)
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes - Oxley Act of 2002 (1)
32	Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1)
101.INS	XBRL Instance Document (2)
101.SCH	XBRL Taxonomy Extension Schema Document (2)
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document (2)
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document (2)
101.LAB	XBRL Taxonomy Extension Label Linkbase Document (2)
101.PRE	XBRL Taxonomy Extension Presentation Linkebase Document (2)
	(1) Filed herewith.
	(2) Furnished herewith.

56

PART II: OTHER INFORMATION

ITEM 6. EXHIBITS

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	First Merchants Corporation
	(Registrant)
Date: August 9, 2016	by /s/ Michael C. Rechin
	Michael C. Rechin
	President and Chief Executive Officer
	(Principal Executive Officer)
Date: August 9, 2016	by /s/ Mark K. Hardwick
	Mark K. Hardwick
	Executive Vice President,
	Chief Financial Officer and Chief Operating Officer
	(Principal Financial and Accounting Officer)

57

PART II: OTHER INFORMATION

ITEM 6. EXHIBITS

INDEX TO EXHIBITS

Exhibit No:	Description of Exhibits:
3.1	First Merchants Corporation Articles of Incorporation, as amended (Incorporated by reference to registrant’s Form 10-Q filed on November 9, 2011) (SEC No. 000-17071)
3.2	Bylaws of First Merchants Corporation dated October 28, 2009 (Incorporated by reference to registrant’s Form 10-Q filed on November 9, 2009) (SEC No. 000-17071)
3.3	First Merchants Corporation Articles of Amendment of the Articles of Incorporation for the Series B Preferred Stock (Incorporated by reference to registrant's Form 8-K filed on September 23, 2011) (SEC No. 000-17071)
4.1	First Merchants Corporation Amended and Restated Declaration of Trust of First Merchants Capital Trust II dated as of July 2, 2007 (Incorporated by reference to registrant's Form 8-K filed on July 3, 2007) (SEC No. 000-17071)
4.2	Indenture dated as of July 2, 2007 (Incorporated by reference to registrant's Form 8-K filed on July 3, 2007) (SEC No. 000-17071)
4.3	Guarantee Agreement dated as of July 2, 2007 (Incorporated by reference to registrant's Form 8-K filed on July 3, 2007) (SEC No. 000-17071)
4.4	Form of Capital Securities Certification of First Merchants Capital Trust II (Incorporated by reference to registrant's Form 8-K filed on July 3, 2007) (SEC No. 000-17071)
4.5	First Merchants Corporation Dividend Reinvestment and Stock Purchase Plan (Incorporated by reference to registrant’s Post-Effective Amendment No. 1 to Form S-3 filed on August 21, 2009) (SEC No. 033-45393)
4.6	Upon request, the registrant agrees to furnish supplementally to the Commission a copy of the instruments defining the rights of holders of its (a) 5.00% Fixed-to-Floating Rate Senior Notes due 2028 in the aggregate principal amount of $5 million and (b) 6.75% Fixed-to-Floating Rate Subordinated Notes due 2028 in aggregate principal amount of $65 million.
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes - Oxley Act of 2002 (1)
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes - Oxley Act of 2002 (1)
32	Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1)
101.INS	XBRL Instance Document (2)
101.SCH	XBRL Taxonomy Extension Schema Document (2)
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document (2)
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document (2)
101.LAB	XBRL Taxonomy Extension Label Linkbase Document (2)
101.PRE	XBRL Taxonomy Extension Presentation Linkebase Document (2)
	(1) Filed herewith.
	(2) Furnished herewith.

58

EX-31.1

PART II: OTHER INFORMATION

ITEM 6. EXHIBITS

EXHIBIT-31.1

CERTIFICATIONS PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Michael C. Rechin, President and Chief Executive Officer of First Merchants Corporation, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of First Merchants Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 9, 2016                     by /s/ Michael C. Rechin

Michael C. Rechin

President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

PART II: OTHER INFORMATION

ITEM 6. EXHIBITS

EXHIBIT-31.2

CERTIFICATIONS PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Mark K. Hardwick, Executive Vice President, Chief Financial Officer and Chief Operating Officer of First Merchants Corporation, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of First Merchants Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 9, 2016                     by: /s/ Mark K. Hardwick

Mark K. Hardwick

Executive Vice President,

Chief Financial Officer and Chief Operating Officer

(Principal Financial and Accounting Officer)

EX-32

PART II: OTHER INFORMATION

ITEM 6. EXHIBITS

EXHIBIT-32

CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of First Merchants Corporation (the “Corporation”) on Form 10-Q for the period ending June 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael C. Rechin, President and Chief Executive Officer of the Corporation, do hereby certify, in accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o (d)); and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

Date: August 9, 2016                    by /s/ Michael C. Rechin

Michael C. Rechin

President and

Chief Executive Officer

(Principal Executive Officer)

A signed copy of this written statement required by Section 906 has been provided to First Merchants Corporation and will be retained by First Merchants Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

_____________________________________________________

In connection with the Quarterly Report of First Merchants Corporation (the “Corporation”) on Form 10-Q for the period ending June 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark K. Hardwick, Executive Vice President, Chief Financial Officer and Chief Operating Officer of the Corporation, do hereby certify, in accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o (d)); and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

Date: August 9, 2016                     by /s/ Mark K. Hardwick

Mark K. Hardwick

Executive Vice President,

Chief Financial Officer and Chief Operating Officer

(Principal Financial and Accounting Officer)

A signed copy of this written statement required by Section 906 has been provided to First Merchants Corporation and will be retained by First Merchants Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Jul. 29, 2016
Document and Entity Information [Abstract]
Entity Registrant Name	FIRST MERCHANTS CORP
Entity Central Index Key	0000712534
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Jun. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2
Trading Symbol	FRME
Amendment Flag	false
Entity Common Stock, Shares Outstanding		40,774,224

XML

CONSOLIDATED CONDENSED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
ASSETS
Cash and cash equivalents	$ 120,471	$ 102,170
Interest-bearing time deposits	62,533	32,315
Investment securities available for sale	658,829	658,400
Investment securities held to maturity (fair value of $665,066 and $632,380)	638,972	618,599
Loans held for sale	18,854	9,894
Loans, net of allowance for loan losses of $62,186 and $62,453	4,729,243	4,631,369
Premises and equipment	95,170	97,648
Federal Reserve and Federal Home Loan Bank stock	18,096	37,633
Interest receivable	23,351	24,415
Core deposit intangibles	16,821	16,635
Goodwill	244,000	243,129
Cash surrender value of life insurance	201,417	200,539
Other real estate owned	13,219	17,257
Tax asset, deferred and receivable	32,547	46,977
Other assets	32,895	24,023
TOTAL ASSETS	6,906,418	6,761,003
Deposits:
Noninterest-bearing	1,253,747	1,266,027
Interest-bearing	4,153,807	4,023,620
Total Deposits	5,407,554	5,289,647
Borrowings:
Federal funds purchased	20,000	49,721
Securities sold under repurchase agreements	140,777	155,325
Federal Home Loan Bank advances	268,579	235,652
Subordinated debentures and term loans	127,678	127,846
Total Borrowings	557,034	568,544
Interest payable	3,051	3,092
Other liabilities	51,229	49,211
Total Liabilities	6,018,868	5,910,494
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY
Preferred Stock, $1,000 par value, $1,000 liquidation value: Authorized - 600 shares; Issued and outstanding - 125 shares	125	125
Common Stock, $.125 stated value: Authorized - 50,000,000 shares; Issued and outstanding - 40,772,896 and 40,664,259 shares	5,097	5,083
Additional paid-in capital	505,725	504,530
Retained earnings	369,568	342,133
Accumulated other comprehensive income (loss)	7,035	(1,362)
Total Stockholders' Equity	887,550	850,509
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 6,906,418	$ 6,761,003

XML

CONSOLIDATED CONDENSED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Investment securities held to maturity - fair value	$ 665,066	$ 632,380
Loans - allowance for loan losses	$ 62,186	$ 62,453
Preferred Stock, par value (in dollars per share)	$ 1,000	$ 1,000
Preferred Stock, liquidation value per share (in dollars per share)	$ 1,000	$ 1,000
Preferred Stock, authorized (in shares)	600	600
Preferred Stock, issued (in shares)	125	125
Preferred Stock, outstanding (in shares)	125	125
Common Stock, stated value (in dollars per share)	$ 0.125	$ 0.125
Common Stock, authorized (in shares)	50,000,000	50,000,000
Common Stock, issued (in shares)	40,772,896	40,664,259
Common Stock, outstanding (in shares)	40,772,896	40,664,259

XML

CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Loans receivable:
Taxable	$ 52,099	$ 45,320	$ 102,588	$ 88,871
Tax exempt	1,465	736	2,780	984
Investment securities:
Taxable	4,202	4,425	8,530	9,148
Tax exempt	4,583	4,231	9,092	8,066
Deposits with financial institutions	122	31	228	68
Federal Reserve and Federal Home Loan Bank stock	233	459	713	1,009
Total Interest Income	62,704	55,202	123,931	108,146
INTEREST EXPENSE
Deposits	4,039	3,686	8,102	7,202
Federal funds purchased	7	19	35	42
Securities sold under repurchase agreements	92	90	192	168
Federal Home Loan Bank advances	818	706	1,614	1,397
Subordinated debentures and term loans	1,786	1,670	3,571	3,330
Total Interest Expense	6,742	6,171	13,514	12,139
NET INTEREST INCOME	55,962	49,031	110,417	96,007
Provision for loan losses	790	417	1,340	417
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	55,172	48,614	109,077	95,590
OTHER INCOME
Service charges on deposit accounts	4,416	4,090	8,561	7,638
Fiduciary activities	2,376	2,309	4,870	4,816
Other customer fees	4,695	4,602	9,754	8,269
Commission income		1,815		4,143
Earnings on cash surrender value of life insurance	1,297	640	2,773	1,387
Net gains and fees on sales of loans	1,717	1,781	3,177	3,270
Net realized gains (losses) on sales of available for sale securities	706	(93)	1,703	932
Gain on sale of insurance subsidiary		8,265		8,265
Other income	1,178	697	1,384	785
Total Other Income	16,385	24,106	32,222	39,505
OTHER EXPENSES
Salaries and employee benefits	25,570	26,434	52,907	50,975
Net occupancy	4,059	3,503	8,081	7,293
Equipment	3,243	2,840	6,481	5,406
Marketing	851	951	1,588	1,731
Outside data processing fees	2,025	1,768	4,094	3,485
Printing and office supplies	369	303	733	667
Core deposit amortization	977	729	1,955	1,450
FDIC assessments	1,002	895	1,952	1,758
Other real estate owned and foreclosure expenses	915	845	1,666	1,241
Professional and other outside services	1,478	3,134	3,640	4,625
Other expenses	4,346	4,494	8,213	7,634
Total Other Expenses	44,835	45,896	91,310	86,265
INCOME BEFORE INCOME TAX	26,722	26,824	49,989	48,830
Income tax expense	6,716	8,856	12,290	14,690
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$ 20,006	$ 17,968	$ 37,699	$ 34,140
Per Share Data:
Basic Net Income Available to Common Stockholders (in dollars per share)	$ 0.50	$ 0.47	$ 0.93	$ 0.90
Diluted Net Income Available to Common Stockholders (in dollars per share)	0.49	0.47	0.92	0.90
Cash Dividends Paid (in dollars per share)	$ 0.14	$ 0.11	$ 0.25	$ 0.19
Average Diluted Shares Outstanding (in shares)	40,969,111	38,043,359	40,941,485	38,021,932

XML

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Statement of Comprehensive Income [Abstract]
Net income	$ 20,006	$ 17,968	$ 37,699	$ 34,140
Other comprehensive income net of tax:
Unrealized holding gain (loss) on securities available for sale arising during the period, net of tax of $3,096, $2,904, $5,861 and $2,376	5,750	(5,393)	10,885	(4,413)
Unrealized gain (loss) on cash flow hedges arising during the period, net of tax of $284, $282, $969 and $165	(529)	525	(1,798)	(304)
Reclassification adjustment for net losses (gains) included in net income, net of tax of $136, $158, $371 and $77	(252)	293	(690)	(143)
Period change	4,969	(4,575)	8,397	(4,860)
Comprehensive income	$ 24,975	$ 13,393	$ 46,096	$ 29,280

XML

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Statement of Comprehensive Income [Abstract]
Unrealized holding gain (loss) on securities available for sale arising during the period, tax	$ 3,096	$ (2,904)	$ 5,861	$ (2,376)
Unrealized gain (loss) on cash flow hedges arising during the period, tax	(284)	282	(969)	(165)
Reclassification adjustment for net losses (gains) included in net income, tax	$ 136	$ (158)	$ 371	$ 77

XML

CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($) $ in Thousands	Total	Preferred	Common Stock	Additional Paid in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)
Beginning balance at Dec. 31, 2014						$ (1,630)
Comprehensive income
Net income	$ 34,140
Other comprehensive income, net of tax	(4,860)					(4,860)
Ending balance at Jun. 30, 2015						(6,490)
Beginning balance (in shares) at Dec. 31, 2015		125	40,664,259
Beginning balance at Dec. 31, 2015	850,509	$ 125	$ 5,083	$ 504,530	$ 342,133	(1,362)
Comprehensive income
Net income	37,699				37,699
Other comprehensive income, net of tax	8,397					8,397
Cash dividends on common stock ($.25 per share)	(10,264)				(10,264)
Share-based compensation (in shares)			106,290
Share-based compensation	1,235		$ 13	1,222
Stock issued under employee benefit plans (in shares)			10,536
Stock issued under employee benefit plans	216		$ 1	215
Stock issued under dividend reinvestment and stock purchase plan (in shares)			15,703
Stock issued under dividend reinvestment and stock purchase plan	$ 384		$ 2	382
Stock options exercised (in shares)	13,828		13,828
Stock options exercised	$ 214		$ 2	212
Stock redeemed (in shares)			(37,720)
Stock redeemed	(840)		$ (4)	(836)
Ending balance (in shares) at Jun. 30, 2016		125	40,772,896
Ending balance at Jun. 30, 2016	$ 887,550	$ 125	$ 5,097	$ 505,725	$ 369,568	$ 7,035

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CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) (Parenthetical) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Statement of Stockholders' Equity [Abstract]
Cash dividends on common stock (in dollars per share)	$ 0.14	$ 0.11	$ 0.25	$ 0.19

XML

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Cash Flow From Operating Activities:
Net income	$ 37,699	$ 34,140
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	1,340	417
Depreciation and amortization	3,604	3,123
Change in deferred taxes	5,571	2,341
Share-based compensation	1,235	1,130
Tax benefit from stock options exercised	(3)	(35)
Loans originated for sale	(199,281)	(176,552)
Proceeds from sales of loans	190,321	175,492
Gain on sale of insurance subsidiary		(8,265)
Gains on sales of securities available for sale	(1,703)	(932)
Change in interest receivable	1,064	396
Change in interest payable	(41)	(19)
Other adjustments	(5,237)	5,170
Net cash provided by operating activities	34,569	36,406
Cash Flows from Investing Activities:
Net change in interest-bearing deposits	(30,218)	21,773
Purchases of:
Securities available for sale	(96,873)	(101,627)
Securities held to maturity	(76,395)	(55,415)
Proceeds from sales of securities available for sale	85,081	42,117
Proceeds from maturities of:
Securities available for sale	32,286	31,917
Securities held to maturity	54,810	44,035
Change in Federal Reserve and Federal Home Loan Bank stock	19,537	7,578
Net change in loans	(102,735)	(213,356)
Net cash and cash equivalents paid in acquisition		(12,004)
Net cash received from sale of insurance subsidiary		15,155
Proceeds from the sale of other real estate owned	4,633	4,444
Other adjustments	(1,671)	1,464
Net cash used in investing activities	(111,545)	(213,919)
Net change in :
Demand and savings deposits	173,705	51,914
Certificates of deposit and other time deposits	(56,969)	(8,357)
Borrowings	279,518	200,467
Repayment of borrowings	(290,687)	(71,916)
Cash dividends on common stock	(10,264)	(7,246)
Stock issued under employee benefit plans	216	231
Stock issued under dividend reinvestment and stock purchase plans	384	310
Stock options exercised	211	619
Tax benefit from stock options exercised	3	35
Stock redeemed	(840)	(1,232)
Net cash provided by financing activities	95,277	164,825
Net Change in Cash and Cash Equivalents	18,301	(12,688)
Cash and Cash Equivalents at beginning of period	102,170	118,616
Cash and Cash Equivalents at end of period	120,471	105,928
Additional cash flow information:
Interest paid	13,555	12,129
Income tax paid	3,155	3,000
Loans transferred to other real estate owned	320	3,360
Fixed assets transferred to other real estate owned	360	1,003
Non-cash investing activities using trade date accounting	4,414	1,887
In conjunction with the acquisition, liabilities were assumed as follows:
Fair value of assets acquired		141,724
Cash received (paid) in acquisition		(14,500)
Less: Common stock issued
Liabilities assumed	$ 0	$ 127,224

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General

6 Months Ended

Jun. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

General

GENERAL

Financial Statement Preparation

The significant accounting policies followed by First Merchants Corporation (the “Corporation”) and its wholly owned subsidiaries for interim financial reporting are consistent with the accounting policies followed for annual financial reporting. All adjustments, which are of a normal recurring nature and are in the opinion of management necessary for a fair statement of the results for the periods reported, have been included in the accompanying consolidated condensed financial statements.

The Consolidated Condensed Balance Sheet of the Corporation as of December 31, 2015, has been derived from the audited consolidated balance sheet of the Corporation as of that date. Certain information and note disclosures normally included in the Corporation’s annual financial statements, prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted. These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission. The results of operations for the three and six months ended June 30, 2016, are not necessarily indicative of the results to be expected for the year. Reclassifications have been made to prior financial statements to conform to the current financial statement presentation. These reclassifications had no effect on net income.

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Acquisitions and Divestitures

6 Months Ended

Jun. 30, 2016

Business Combinations [Abstract]

Acquisitions and Divestitures

ACQUISITIONS AND DIVESTITURES

Acquisition - Ameriana Bancorp, Inc.

On December 31, 2015, the Corporation acquired 100 percent of Ameriana Bancorp, Inc. ("Ameriana"). Ameriana merged with and into the Corporation (the "Ameriana Merger") whereupon the separate corporate existence of Ameriana ceased and the Corporation survived. Immediately following the Ameriana Merger, Ameriana Bank, an Indiana bank and wholly-owned subsidiary of Ameriana, merged with and into First Merchants Bank, National Association, a national bank and wholly-owned subsidiary of the Corporation (the "Bank"), with the Bank continuing as the surviving bank. Ameriana was headquartered in New Castle, Indiana and had 13 banking centers serving central and east central Indiana. Pursuant to the merger agreement, each Ameriana shareholder received 0.9037 shares of the Corporation's common stock for each outstanding share of Ameriana common stock held. The Corporation issued approximately 2.8 million shares of common stock, which was valued at approximately $70.4 million. The Corporation engaged in this transaction with the expectation that it would be accretive and expand the existing footprint in central and east central Indiana. Goodwill resulted from this transaction due to the expected synergies and economies of scale that are expected.

Under the acquisition method of accounting, the total purchase price is allocated to net tangible and intangible assets based on their current estimated fair values on the date of the acquisition. Based on preliminary valuations of the fair value of tangible and intangible assets acquired and liabilities assumed, which are based on assumptions that are subject to change, the purchase price for the Ameriana acquisition is detailed in the following table. If prior to the end of the one year measurement period for finalizing the purchase price allocation, information becomes available which would indicate adjustments are required to the purchase price allocation, such adjustments will be included in the purchase price allocation retrospectively.

	Fair Value
Cash and cash equivalents	$	4,068
Interest-bearing time deposits	8,790
Investment securities	61,754
Loans	316,929
Premises and equipment	13,946
Federal Home Loan Bank stock	2,693
Other real estate owned	5,613
Interest receivable	1,306
Cash surrender value of life insurance	28,188
Other assets	6,713
Deposits	(383,718		)
Interest payable	(24		)
Federal Home Loan Bank Advances	(24,884		)
Subordinated debentures	(5,487		)
Other liabilities	(9,451		)
Net tangible assets acquired	26,436
Core deposit intangible	5,342
Goodwill	38,624
Purchase price	$	70,402

Of the total purchase price, $5,342,000 has been allocated to a core deposit intangible that will be amortized over its estimated life of 10 years. The remaining purchase price has been allocated to goodwill, which is not deductible for tax purposes.

Acquisition - C Financial Corporation

On April 17, 2015, the Corporation acquired 100 percent of C Financial Corporation, ("C Financial"). C Financial merged with and into the Corporation (the “C Financial Merger”) whereupon the separate corporate existence of C Financial ceased and the Corporation survived.  Immediately following the C Financial Merger, Cooper State Bank, an Ohio state bank and wholly-owned subsidiary of C Financial, merged with and into the Bank, with the Bank continuing as the surviving bank.  C Financial was headquartered in Columbus, Ohio and had 6 full service banking centers serving the Columbus, Ohio market. As part of the $14.5 million C Financial Merger, shareholders of C Financial received $6.738 in cash for each share of C Financial common stock held.

The Corporation expects the transaction to be accretive to income and expand the existing footprint in Columbus, Ohio. Goodwill resulted from this transaction due to the synergies and economies of scale that were expected. The purchase price of the C Financial acquisition was allocated as follows:

	Fair Value
Cash and cash equivalents	$	2,496
Federal Funds sold	7,018
Interest-bearing time deposits	922
Loans	110,625
Premises and equipment	7,290
Federal Home Loan Bank stock	855
Interest receivable	292
Other assets	119
Deposits	(105,326		)
Interest payable	(29		)
Federal Home Loan Bank Advances	(18,958		)
Other liabilities	(2,911		)
Net tangible assets acquired	2,393
Core deposit intangible	981
Goodwill	11,126
Purchase price	$	14,500

Of the total purchase price, $981,000 has been allocated to a core deposit intangible that will be amortized over its estimated life of 10 years. The remaining purchase price has been allocated to goodwill, which is deductible over a 15 year period for tax purposes as the transaction was considered a taxable exchange.

Subsidiary Divestiture - First Merchants Insurance Services, Inc.

On June 12, 2015, the Corporation sold all of its stock in First Merchants Insurance Services, Inc., an Indiana corporation ("FMIG"), to USI Insurance Services LLC, a Delaware limited liability company. The sale price was $18 million, of which $16 million was paid at closing with the remaining $2 million paid through a two-year promissory note. The sale of FMIG generated a gain on sale of $8.3 million.

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Investment Securities

6 Months Ended

Jun. 30, 2016

Investments, Debt and Equity Securities [Abstract]

Investment Securities

INVESTMENT SECURITIES

The amortized cost, gross unrealized gains and losses and approximate fair value of the investment securities portfolio at the dates indicated were:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale at June 30, 2016
U.S. Government-sponsored agency securities	$	100	$	2			$	102
State and municipal	329,042		24,438				353,480
U.S. Government-sponsored mortgage-backed securities	292,822		8,469		$	20	301,271
Corporate obligations	31						31
Equity securities	3,882		63				3,945
Total available for sale	625,877		32,972		20		658,829
Held to maturity at June 30, 2016
Federal agencies	28,980		34		5		29,009
State and municipal	207,731		11,621				219,352
U.S. Government-sponsored mortgage-backed securities	402,261		14,444				416,705
Total held to maturity	638,972		26,099		5		665,066
Total Investment Securities	$	1,264,849	$	59,071	$	25	$	1,323,895

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale at December 31, 2015
U.S. Government-sponsored agency securities	$	100	$	4			$	104
State and municipal	291,730		14,241		$	60	305,911
U.S. Government-sponsored mortgage-backed securities	342,550		4,234		518		346,266
Corporate obligations	31						31
Equity securities	3,912						3,912
Certificates of deposit	2,176						2,176
Total available for sale	640,499		18,479		578		658,400
Held to maturity at December 31, 2015
State and municipal	219,767		6,982		15		226,734
U.S. Government-sponsored mortgage-backed securities	398,832		7,601		787		405,646
Total held to maturity	618,599		14,583		802		632,380
Total Investment Securities	$	1,259,098	$	33,062	$	1,380	$	1,290,780

The amortized cost and fair value of available for sale and held to maturity securities at June 30, 2016 and December 31, 2015, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Maturity Distribution at June 30, 2016:
Due in one year or less	$	3,065	$	3,086	$	2,500	$	2,532
Due after one through five years	19,909		21,060		42,528		44,205
Due after five through ten years	60,972		64,871		82,937		85,365
Due after ten years	245,227		264,596		108,746		116,259
	$	329,173	$	353,613	$	236,711	$	248,361
U.S. Government-sponsored mortgage-backed securities	292,822		301,271		402,261		416,705
Equity securities	3,882		3,945
Total Investment Securities	$	625,877	$	658,829	$	638,972	$	665,066

	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Maturity Distribution at December 31, 2015
Due in one year or less	$	4,658	$	4,704	$	4,144	$	4,148
Due after one through five years	13,725		14,295		28,054		29,175
Due after five through ten years	52,878		55,375		81,483		83,646
Due after ten years	220,600		231,672		106,086		109,765
	$	291,861	$	306,046	$	219,767	$	226,734
U.S. Government-sponsored mortgage-backed securities	342,550		346,266		398,832		405,646
Equity securities	3,912		3,912
Certificates of deposit	2,176		2,176
Total Investment Securities	$	640,499	$	658,400	$	618,599	$	632,380

The carrying value of securities pledged as collateral, to secure borrowings and for other purposes, was $607,799,000 at June 30, 2016, and $637,358,000 at December 31, 2015.

The book value of securities sold under agreements to repurchase amounted to $135,855,000 at June 30, 2016, and $153,789,000 at December 31, 2015.

Gross gains on the sales and redemptions of available for sale securities for the three and six months ended June 30, 2016 and 2015 are shown below.

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Sales and Redemptions of Available for Sale Securities:
Gross gains	$	706	$	7	$	1,703	$	1,032
Gross losses			100				100

The following table shows investment securities with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2016, and December 31, 2015:

	Less than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Temporarily Impaired Available for Sale Securities at June 30, 2016
U.S. Government-sponsored mortgage-backed securities	4,007		$	15	$	1,053	$	5	5,060		$	20
Total Temporarily Impaired Available for Sale Securities	4,007		15		1,053		5		5,060		20
Temporarily Impaired Held to Maturity Securities at June 30, 2016
Federal agencies	4,995		5						4,995		5
Total Temporarily Impaired Held to Maturity Securities	4,995		5						4,995		5
Total Temporarily Impaired Investment Securities	$	9,002	$	20	$	1,053	$	5	$	10,055	$	25

	Less than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Temporarily Impaired Available for Sale Securities at December 31, 2015
State and municipal	$	7,558	$	60					$	7,558	$	60
U.S. Government-sponsored mortgage-backed securities	83,396		445		$	2,101	$	73	85,497		518
Total Temporarily Impaired Available for Sale Securities	90,954		505		2,101		73		93,055		578
Temporarily Impaired Held to Maturity Securities at December 31, 2015
State and municipal					1,982		15		1,982		15
U.S. Government-sponsored mortgage-backed securities	69,641		519		12,906		268		82,547		787
Total Temporarily Impaired Held to Maturity Securities	69,641		519		14,888		283		84,529		802
Total Temporarily Impaired Investment Securities	$	160,595	$	1,024	$	16,989	$	356	$	177,584	$	1,380

Certain investments in debt and equity securities are reported in the financial statements at an amount less than their historical cost as indicated in the table below.

	June 30, 2016			December 31, 2015
Investments reported at less than historical cost:
Historical cost	$	10,081		$	178,964
Fair value	$	10,055		$	177,584
Percent of the Corporation's available for sale and held to maturity portfolio	0.8		%	13.9		%

Management believes the decline in fair value for these securities was temporary. Should the impairment of any of these securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income during the period the other-than-temporary impairment is identified.

The Corporation’s management has evaluated all securities with unrealized losses for other-than temporary impairment as of June 30, 2016. The evaluations are based on the nature of the securities, the extent and duration of the loss and the intent and ability of the Corporation to hold these securities either to maturity or through the expected recovery period.

In determining the fair value of the investment securities portfolio, the Corporation utilizes a third party for portfolio accounting services, including market value input, for those securities classified as Level 1 and Level 2 in the fair value hierarchy. The Corporation has obtained an understanding of what inputs are being used by the vendor in pricing the portfolio and how the vendor was classifying these securities based upon these inputs.  From these discussions, the Corporation’s management is comfortable that the classifications are proper. The Corporation has gained trust in the data for two reasons:  (a) independent spot testing of the data is conducted by the Corporation through obtaining market quotes from various brokers on a periodic basis and (b) actual gains or losses resulting from the sale of certain securities has proven the data to be accurate over time.  The fair value of securities classified as Level 3 in the valuation hierarchy was determined using a discounted cash flow model that incorporated market estimates of interest rates and volatility in markets that have not been active.

U.S. Government-Sponsored Mortgage-Backed Securities

The unrealized losses on the Corporation’s investments in securities of U.S. Government-sponsored mortgage-backed securities were caused by changes in interest rates and not credit quality. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. The Corporation does not intend to sell the investments and more likely than not the Corporation won't be required to sell the investments before recovery of its lower amortized cost basis, which may be maturity. The Corporation does not consider the investment securities to be other-than-temporarily impaired at June 30, 2016.

Credit Losses Recognized on Investments

Certain corporate obligations experienced fair value deterioration due to credit losses and other market factors. The following table provides information about those securities for which only a credit loss was recognized in income and other losses were recorded in other comprehensive income.

	Accumulated Credit Losses in 2016		Accumulated Credit Losses in 2015
Credit losses on debt securities held:
Balance, January 1	$	—	$	500
Reductions for previous other-than-temporary losses realized on securities sold during the year	—		(500		)
Balance, June 30	$	—	$	—

In the first quarter of 2015, the Corporation sold its remaining trust preferred security which had no remaining book value as a result of other than temporary impairment of approximately $500,000 taken in 2009. The sale of this security resulted in a gain of $45,000, which is included in the Consolidated Condensed Statement of Income for the six months ended June 30, 2015.

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Loans and Allowance

6 Months Ended

Jun. 30, 2016

Receivables [Abstract]

Loans and Allowance

LOANS AND ALLOWANCE

The Corporation’s primary lending focus is small business and middle market commercial, commercial real estate, residential real estate and consumer, which results in portfolio diversification.  The following tables show the composition of the loan portfolio, the allowance for loan losses and certain credit quality aspects, all excluding loans held for sale.  Loans held for sale as of June 30, 2016, and December 31, 2015, were $18,854,000 and $9,894,000, respectively.

The following table shows the composition of the Corporation’s loan portfolio by loan class for the periods indicated:

	June 30, 2016			December 31, 2015
Commercial and industrial loans	$	1,084,890		$	1,057,075
Agricultural production financing and other loans to farmers	95,131			97,711
Real estate loans:
Construction	352,980			366,704
Commercial and farmland	1,869,703			1,802,921
Residential	758,870			786,105
Home Equity	374,159			348,613
Individuals' loans for household and other personal expenditures	75,205			74,717
Lease financing receivables, net of unearned income	388			588
Other commercial loans	180,103			159,388
Loans	$	4,791,429		$	4,693,822
Allowance for loan losses	(62,186		)	(62,453		)
Net Loans	$	4,729,243		$	4,631,369

Allowance, Credit Quality and Loan Portfolio

The Corporation maintains an allowance for loan losses to cover probable credit losses identified during its loan review process. Management believes the allowance for loan losses is adequate to cover probable losses inherent in the loan portfolio at June 30, 2016.  The process for determining the adequacy of the allowance for loan losses is critical to the Corporation’s financial results.  It requires management to make difficult, subjective and complex judgments, to estimate the effect of uncertain matters.  The allowance for loan losses considers current factors, including economic conditions and ongoing internal and external examinations, and will increase or decrease as deemed necessary to ensure it remains adequate.  In addition, the allowance as a percentage of charge offs and nonperforming loans will change at different points in time based on credit performance, portfolio mix and collateral values.

The allowance for loan losses is maintained through the provision for loan losses, which is a charge against earnings. The allowance is increased by provision expense and decreased by charge offs less recoveries. All charge offs are approved by the Bank’s senior loan officers or loan committees, depending on the amount of the charge off. The Bank charges off a loan when a determination is made that all or a portion of the loan is uncollectible. The amount provided for loan losses in a given period may be greater than or less than net loan losses experienced during the period, and is based on management’s judgment as to the appropriate level of the allowance for loan losses. The determination of the provision amount is based on management’s ongoing review and evaluation of the loan portfolio, including an internally administered loan "watch" list and independent loan reviews.  The evaluation takes into consideration identified credit problems, the possibility of losses inherent in the loan portfolio that are not specifically identified and management’s judgment as to the impact of the current environment and economic conditions on the portfolio.

The allowance consists of specific impairment reserves as required by ASC 310-10-35, a component for historical losses in accordance with ASC 450 and the consideration of current environmental factors in accordance with ASC 450. A loan is deemed impaired when, based on current information or events, it is probable that all amounts due of principal and interest according to the contractual terms of the loan agreement will not be collected.

The historical loss allocation for loans not deemed impaired according to ASC 310 is the product of the volume of loans within the non-impaired criticized and non-criticized risk grade classifications, each segmented by call code, and the historical loss factor for each respective classification and call code segment. The historical loss factors are based upon actual loss experience within each risk and call code classification. The historical look back period for non-criticized loans looks to the most recent rolling-four-quarter average and aligns with the look back period for non-impaired criticized loans. Each of the rolling four quarter periods used to obtain the average, include all charge offs for the previous twelve-month period, therefore the historical look back period includes seven quarters. The resulting allocation is reflective of current conditions. Criticized loans are grouped based on the risk grade assigned to the loan. Loans with a special mention grade are assigned a loss factor, and loans with a classified grade but not impaired are assigned a separate loss factor. The loss factor computation for this allocation includes a segmented historical loss migration analysis of risk grades to charge off.

In addition to the specific reserves and historical loss components of the allowance, consideration is given to various environmental factors to ensure that losses inherent in the portfolio are reflected in the allowance for loan losses. The environmental component adjusts the historical loss allocations for non-impaired loans to reflect relevant current conditions that, in management's opinion, have an impact on loss recognition. Environmental factors that management reviews in the analysis include: national and local economic trends and conditions; trends in growth in the loan portfolio and growth in higher risk areas; levels of, and trends in, delinquencies and non-accruals; experience and depth of lending management and staff; adequacy of, and adherence to, lending policies and procedures including those for underwriting; industry concentrations of credit; and adequacy of risk identification systems and controls through the internal loan review and internal audit processes.

In conformance with ASC 805 and ASC 820, loans purchased after December 31, 2008 are recorded at the acquisition date fair value. Such loans are included in the allowance to the extent a specific impairment is identified that exceeds the fair value adjustment on an impaired loan or the historical loss and environmental factor analysis indicates losses inherent in a purchased portfolio exceeds the fair value adjustment on the portion of the purchased portfolio not deemed impaired.

The following tables summarize changes in the allowance for loan losses by loan segment for the three and six months ended June 30, 2016, and June 30, 2015:

	Three Months Ended June 30, 2016
	Commercial			Commercial Real Estate			Consumer			Residential			Finance Leases		Total
Allowance for loan losses:
Balances, April 1	$	26,264		$	22,317		$	2,647		$	10,856		$	2	$	62,086
Provision for losses	400			200			44			146					790
Recoveries on loans	683			276			107			273					1,339
Loans charged off	(1,026		)	(513		)	(114		)	(376		)			(2,029		)
Balances, June 30, 2016	$	26,321		$	22,280		$	2,684		$	10,899		$	2	$	62,186

	Six Months Ended June 30, 2016
	Commercial			Commercial Real Estate			Consumer			Residential			Finance Leases		Total
Allowance for loan losses:
Balances, January 1	$	26,478		$	22,145		$	2,689		$	11,139		$	2	$	62,453
Provision for losses	539			414			77			310					1,340
Recoveries on loans	975			1,228			185			585					2,973
Loans charged off	(1,671		)	(1,507		)	(267		)	(1,135		)			(4,580		)
Balances, June 30, 2016	$	26,321		$	22,280		$	2,684		$	10,899		$	2	$	62,186

	Three Months Ended June 30, 2015
	Commercial			Commercial Real Estate			Consumer			Residential			Finance Leases		Total
Allowance for loan losses:
Balances, April 1	$	30,007		$	16,383		$	3,138		$	13,269		$	4	$	62,801
Provision for losses	1,190			(502		)	(200		)	(72		)	1		417
Recoveries on loans	437			147			101			747					1,432
Loans charged off	(155		)	(200		)	(112		)	(1,633		)			(2,100		)
Balances, June 30, 2015	$	31,479		$	15,828		$	2,927		$	12,311		$	5	$	62,550

	Six Months Ended June 30, 2015
	Commercial			Commercial Real Estate			Consumer			Residential			Finance Leases		Total
Allowance for loan losses:
Balances, January 1	$	28,824		$	19,327		$	2,658		$	13,152		$	3	$	63,964
Provision for losses	3,024			(3,398		)	327			462			2		417
Recoveries on loans	887			559			179			879					2,504
Loans charged off	(1,256		)	(660		)	(237		)	(2,182		)			(4,335		)
Balances, June 30, 2015	$	31,479		$	15,828		$	2,927		$	12,311		$	5	$	62,550

The following tables show the Corporation’s allowance for loan losses and loan portfolio by segment as of the periods indicated:

	June 30, 2016
	Commercial		Commercial Real Estate		Consumer		Residential		Finance Leases		Total
Allowance Balances:
Individually evaluated for impairment	$	1,573	$	276			$	69			$	1,918
Collectively evaluated for impairment	24,748		21,824		$	2,684	10,808		$	2	60,066
Loans Acquired with Deteriorated Credit Quality			180				22				202
Total Allowance for Loan Losses	$	26,321	$	22,280	$	2,684	$	10,899	$	2	$	62,186
Loan Balances:
Individually evaluated for impairment	$	7,841	$	21,118			$	3,462			$	32,421
Collectively evaluated for impairment	1,345,826		2,155,077		$	75,205	1,126,707		$	388	4,703,203
Loans Acquired with Deteriorated Credit Quality	6,457		46,488				2,860				55,805
Loans	$	1,360,124	$	2,222,683	$	75,205	$	1,133,029	$	388	$	4,791,429

	December 31, 2015
	Commercial		Commercial Real Estate		Consumer		Residential		Finance Leases		Total
Allowance Balances:
Individually evaluated for impairment	$	1,277	$	243			$	169			$	1,689
Collectively evaluated for impairment	25,201		21,753		$	2,689	10,966		$	2	60,611
Loans Acquired with Deteriorated Credit Quality			149				4				153
Total Allowance for Loan Losses	$	26,478	$	22,145	$	2,689	$	11,139	$	2	$	62,453
Loan Balances:
Individually evaluated for impairment	$	7,877	$	16,670			$	4,020			$	28,567
Collectively evaluated for impairment	1,298,988		2,096,089		$	74,717	1,125,316		$	588	4,595,698
Loans Acquired with Deteriorated Credit Quality	7,309		56,866				5,382				69,557
Loans	$	1,314,174	$	2,169,625	$	74,717	$	1,134,718	$	588	$	4,693,822

The risk characteristics of the Corporation’s material portfolio segments are as follows:

Commercial

Commercial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

Commercial real estate

These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. Management monitors and evaluates commercial real estate loans based on collateral and risk grade criteria. In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied loans.

Residential and Consumer

With respect to residential loans that are secured by 1-4 family residences and are typically owner occupied, the Corporation generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Home equity loans are typically secured by a subordinate interest in 1-4 family residences, and consumer loans are secured by consumer assets such as automobiles or recreational vehicles. Some consumer loans are unsecured such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income and credit rating of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

Loans are reclassified to a non-accruing status when, in management’s judgment, the collateral value and financial condition of the borrower do not justify accruing interest. Uncollected interest previously recorded, but not deemed collectible, is reversed and charged against current income. Payments subsequently received on non-accrual loans are applied to principal. A loan is returned to accrual status when principal and interest are no longer past due and collectability is probable, typically after a minimum of six consecutive months of performance.  Payments received on impaired accruing or delinquent loans are applied to interest income as accrued.

The following table summarizes the Corporation’s non-accrual loans by loan class as of the periods indicated:

	June 30, 2016		December 31, 2015
Commercial and industrial loans	$	3,413	$	4,634
Agriculture production financing and other loans to farmers	1,471		827
Real estate Loans:
Construction	721		736
Commercial and farmland	15,541		11,277
Residential	9,952		11,818
Home Equity	2,345		1,952
Individuals' loans for household and other personal expenditures	122		145
Total	$	33,565	$	31,389

Commercial impaired loans include non-accrual loans, loans accounted for under ASC 310-30, and loans risk graded as substandard, doubtful and loss that were still accruing but deemed impaired according to the guidance set forth in ASC 310. Also included in impaired loans are accruing loans that are contractually past due 90 days or more and troubled debt restructurings.

Allowable methods for determining the amount of impairment include estimating fair value using the fair value of the collateral for collateral dependent loans. If the impaired loan is identified as collateral dependent, then the fair value method of measuring the amount of impairment is utilized.  This method requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value. The fair value of real estate is generally based on appraisals by qualified licensed appraisers. The appraisers typically determine the value of the real estate by utilizing an income or market valuation approach. If an appraisal is not available, the fair value may be determined by using a cash flow analysis. Fair value on other collateral such as business assets is typically ascertained by assessing, either singularly or some combination of, asset appraisals, accounts receivable aging reports, inventory listings andor customer financial statements. Both appraised values and values based on borrower’s financial information are discounted as considered appropriate based on age and quality of the information and current market conditions.

The following tables show the composition of the Corporation’s commercial impaired loans by loan class as of the periods indicated:

	June 30, 2016
	Unpaid Principal Balance		Recorded Investment		Related Allowance
Impaired loans with no related allowance:
Commercial and industrial loans	$	19,322	$	10,183
Agriculture production financing and other loans to farmers	709		701
Real estate Loans:
Construction	8,089		4,091
Commercial and farmland	83,028		61,319
Residential	8,650		5,016
Home equity	176		139
Other commercial loans	16
Total	$	119,990	$	81,449
Impaired loans with related allowance:
Commercial and industrial loans	$	2,491	$	2,114	$	1,007
Agriculture production financing and other loans to farmers	1,331		1,301		566
Real estate Loans:
Commercial and farmland	2,145		1,978		456
Residential	877		801		91
Total	$	6,844	$	6,194	$	2,120
Total Impaired Loans	$	126,834	$	87,643	$	2,120

	December 31, 2015
	Unpaid Principal Balance		Recorded Investment		Related Allowance
Impaired loans with no related allowance:
Commercial and industrial loans	$	22,151	$	11,669
Agriculture production financing and other loans to farmers	370		361
Real estate Loans:
Construction	4,551		2,336
Commercial and farmland	95,930		69,024
Residential	11,262		7,338
Home equity	297		247
Other commercial loans	20
Total	$	134,581	$	90,975
Impaired loans with related allowance:
Commercial and industrial loans	$	3,043	$	2,690	$	1,247
Agriculture production financing and other loans to farmers	466		466		30
Real estate Loans:
Commercial and farmland	2,144		1,933		392
Residential	2,300		1,463		173
Total	$	7,953	$	6,552	$	1,842
Total Impaired Loans	$	142,534	$	97,527	$	1,842

	Three Months Ended June 30, 2016				Six Months Ended June 30, 2016
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Impaired loans with no related allowance:
Commercial and industrial loans	$	10,372	$	128	$	10,307	$	231
Agriculture production financing and other loans to farmers	834		2		882		2
Real estate Loans:
Construction	4,085		74		4,074		147
Commercial and farmland	62,173		861		63,136		1,706
Residential	5,069		54		5,390		107
Home equity	138				139
Total	$	82,671	$	1,119	$	83,928	$	2,193
Impaired loans with related allowance:
Commercial and industrial loans	$	2,120	$	9	$	2,129	$	19
Agriculture production financing and other loans to farmers	1,321				1,405
Real estate Loans:
Commercial and farmland	1,986				2,008
Residential	840				860
Total	$	6,267	$	9	$	6,402	$	19
Total Impaired Loans	$	88,938	$	1,128	$	90,330	$	2,212

	Three Months Ended June 30, 2015				Six Months Ended June 30, 2015
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Impaired loans with no related allowance:
Commercial and industrial loans	$	12,154	$	111	$	12,942	$	200
Agriculture production financing and other loans to farmers	1,325				1,343
Real estate Loans:
Construction	7,648		95		7,898		191
Commercial and farmland	66,625		894		66,957		1,765
Residential	7,114		57		7,150		107
Home equity	208				208
Total	$	95,074	$	1,157	$	96,498	$	2,263
Impaired loans with related allowance:
Commercial and industrial loans	$	3,204	$	10	$	3,214	$	19
Real estate Loans:
Commercial and farmland	2,622				2,727
Residential	2,600				2,603
Total	$	8,426	$	10	$	8,544	$	19
Total Impaired Loans	$	103,500	$	1,167	$	105,042	$	2,282

As part of the ongoing monitoring of the credit quality of the Corporation's loan portfolio, management tracks certain credit quality indicators including trends related to: (i) the level of criticized commercial loans, (ii) net charge offs, (iii) non-performing loans and (iv) the general national and local economic conditions.

The Corporation utilizes a risk grading of pass, special mention, substandard, doubtful and loss to assess the overall credit quality of large commercial loans. All large commercial credit grades are reviewed at a minimum of once a year for pass grade loans. Loans with grades below pass are reviewed more frequently depending on the grade. A description of the general characteristics of these grades is as follows:

• Pass - Loans that are considered to be of acceptable credit quality.

• Special Mention - Loans which possess some credit deficiency or potential weakness, which deserves close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Corporation's credit position at some future date. Special mention assets are not adversely classified and do not expose the Corporation to sufficient risk to warrant adverse classification. The key distinctions of this category's classification are that it is indicative of an unwarranted level of risk; and weaknesses are considered “potential”, not “defined”, impairments to the primary source of repayment. Examples include businesses that may be suffering from inadequate management, loss of key personnel or significant customer or litigation.

• Substandard - A substandard loan is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified have a well-defined weakness that jeopardizes the liquidation of the debt. They are characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected. Other characteristics may include:

o the likelihood that a loan will be paid from the primary source of repayment is uncertain or financial deterioration is underway and very close attention is warranted to ensure that the loan is collected without loss,

o the primary source of repayment is gone, and the Corporation is forced to rely on a secondary source of repayment, such as collateral liquidation or guarantees,

o loans have a distinct possibility that the Corporation will sustain some loss if deficiencies are not corrected,

o unusual courses of action are needed to maintain a high probability of repayment,

o the borrower is not generating enough cash flow to repay loan principal; however, it continues to make interest payments,

o the Corporation is forced into a subordinated or unsecured position due to flaws in documentation,

o loans have been restructured so that payment schedules, terms and collateral represent concessions to the borrower when compared to the normal loan terms,

o the Corporation is seriously contemplating foreclosure or legal action due to the apparent deterioration of the loan, and

o there is significant deterioration in market conditions to which the borrower is highly vulnerable.

• Doubtful - Loans that have all of the weaknesses of those classified as Substandard. However, based on currently existing facts, conditions and values, these weaknesses make full collection of principal highly questionable and improbable. Other credit characteristics may include the primary source of repayment is gone or there is considerable doubt as to the quality of the secondary sources of repayment. The possibility of loss is high, but because of certain important pending factors that may strengthen the loan, loss classification is deferred until the exact status of repayment is known.

• Loss – Loans that are considered uncollectible and of such little value that continuing to carry them as an asset is not warranted. Loans will be classified as Loss when it is neither practical not desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.

The following tables summarize the credit quality of the Corporation’s loan portfolio, by loan class for the periods indicated.  Consumer non-performing loans include accruing consumer loans 90 plus days delinquent and consumer non-accrual loans.  The entire balance of a loan is considered delinquent if the minimum payment contractually required to be made is not received by the specified date. Loans that evidenced deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected are included in the applicable categories below.

	June 30, 2016
	Commercial Pass		Commercial Special Mention		Commercial Substandard		Commercial Doubtful	Commercial Loss	Consumer Performing		Consumer Non-Performing		Total
Commercial and industrial loans	$	1,022,507	$	29,117	$	33,266							$	1,084,890
Agriculture production financing and other loans to farmers	37,114		32,784		25,233								95,131
Real estate Loans:
Construction	328,366		5,023		1,606				$	17,908	$	77	352,980
Commercial and farmland	1,733,503		51,793		84,407								1,869,703
Residential	157,186		7,953		6,352				579,403		7,976		758,870
Home equity	7,377		97		743				363,618		2,324		374,159
Individuals' loans for household and other personal expenditures									75,084		121		75,205
Lease financing receivables, net of unearned income	300				88								388
Other commercial loans	180,103												180,103
Loans	$	3,466,456	$	126,767	$	151,695			$	1,036,013	$	10,498	$	4,791,429

	December 31, 2015
	Commercial Pass		Commercial Special Mention		Commercial Substandard		Commercial Doubtful		Commercial Loss	Consumer Performing		Consumer Non-Performing		Total
Commercial and industrial loans	$	962,340	$	48,432	$	45,984	$	319						$	1,057,075
Agriculture production financing and other loans to farmers	77,884		6,665		13,162									97,711
Real estate Loans:
Construction	345,449		1,271		1,790					$	18,114	$	80	366,704
Commercial and farmland	1,679,141		46,442		77,338									1,802,921
Residential	171,576		3,107		10,428					593,533		7,461		786,105
Home equity	8,218		48		600					337,718		2,029		348,613
Individuals' loans for household and other personal expenditures										74,491		226		74,717
Lease financing receivables, net of unearned income	495				93									588
Other commercial loans	159,388													159,388
Loans	$	3,404,491	$	105,965	$	149,395	$	319		$	1,023,856	$	9,796	$	4,693,822

The tables below show a past due aging of the Corporation’s loan portfolio, by loan class, as of June 30, 2016, and December 31, 2015.

	June 30, 2016
	Current		30-59 Days Past Due		60-89 Days Past Due		Loans > 90 Days And Accruing		Non-Accrual		Total Past Due & Non-Accrual		Total
Commercial and industrial loans	$	1,080,184	$	998	$	282	$	13	$	3,413	$	4,706	$	1,084,890
Agriculture production financing and other loans to farmers	92,979		250		431				1,471		2,152		95,131
Real estate Loans:
Construction	351,147				1,112				721		1,833		352,980
Commercial and farmland	1,850,882		2,384		896				15,541		18,821		1,869,703
Residential	743,951		3,847		888		232		9,952		14,919		758,870
Home equity	370,602		628		467		117		2,345		3,557		374,159
Individuals' loans for household and other personal expenditures	74,744		297		42				122		461		75,205
Lease financing receivables, net of unearned income	388												388
Other commercial loans	180,103												180,103
Loans	$	4,744,980	$	8,404	$	4,118	$	362	$	33,565	$	46,449	$	4,791,429

	December 31, 2015
	Current		30-59 Days Past Due		60-89 Days Past Due		Loans > 90 Days And Accruing		Non-Accrual		Total Past Due & Non-Accrual		Total
Commercial and industrial loans	$	1,052,275	$	166					$	4,634	$	4,800	$	1,057,075
Agriculture production financing and other loans to farmers	96,884								827		827		97,711
Real estate Loans:
Construction	362,084		3,884						736		4,620		366,704
Commercial and farmland	1,786,092		5,552						11,277		16,829		1,802,921
Residential	765,634		6,090		$	2,061	$	502	11,818		20,471		786,105
Home equity	344,344		1,433		560		324		1,952		4,269		348,613
Individuals' loans for household and other personal expenditures	73,990		445		56		81		145		727		74,717
Lease financing receivables, net of unearned income	588												588
Other commercial loans	159,324				64						64		159,388
Loans	$	4,641,215	$	17,570	$	2,741	$	907	$	31,389	$	52,607	$	4,693,822

See the information regarding the analysis of loan loss experience in the "LOAN QUALITY/PROVISION FOR LOAN LOSSES" section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included as ITEM 2 of this Quarterly Report on Form 10-Q.

On occasion, borrowers experience declines in income and cash flow. As a result, these borrowers seek to reduce contractual cash outlays including debt payments. Concurrently, in an effort to preserve and protect its earning assets, specifically troubled loans, the Corporation works to maintain its relationship with certain customers who are experiencing financial difficulty by contractually modifying the borrower's debt agreement with the Corporation. In certain loan restructuring situations, the Corporation may grant a concession to a debtor experiencing financial difficulty, resulting in a trouble debt restructuring. A concession is deemed to be granted when, as a result of the restructuring, the Corporation does not expect to collect all original amounts due, including interest accrued at the original contract rate. If the payment of principal at original maturity is primarily dependent on the value of collateral, the current value of the collateral is considered in determining whether the principal will be paid.

The following tables summarize troubled debt restructurings in the Corporation's loan portfolio that occurred during the periods indicated:

	Three Months Ended June 30, 2016					Six Months Ended June 30, 2016
	Pre-Modification Recorded Balance		Post-Modification Recorded Balance		Number of Loans	Pre-Modification Recorded Balance		Post-Modification Recorded Balance		Number of Loans
Commercial and industrial loans						$	260	$	260	3
Agriculture production financing and other loans to farmers	$	1,141	$	1,141	3	1,606		1,472		5
Real estate Loans:
Commercial and farmland	3,539		3,508		5	3,891		3,860		6
Residential						113		133		3
Home Equity	174		146		1	174		146		1
Total	$	4,854	$	4,795	9	$	6,044	$	5,871	18

	Three Months Ended June 30, 2015					Six Months Ended June 30, 2015
	Pre-Modification Recorded Balance		Post-Modification Recorded Balance		Number of Loans	Pre-Modification Recorded Balance		Post-Modification Recorded Balance		Number of Loans
Commercial and industrial loans	$	1,386	$	536	1	$	3,748	$	1,897	5
Real estate Loans:
Construction						79		80		1
Commercial and farmland	537		537		1	537		2,280		2
Residential	20		871		2	44		895		3
Total	$	1,943	$	1,944	4	$	4,408	$	5,152	11

The following tables summarize the recorded investment of troubled debt restructurings as of June 30, 2016 and 2015, by modification type, that occurred during the periods indicated:

	Three Months Ended June 30, 2016
	Term Modification		Rate Modification		Combination		Total Modification
Agriculture production financing and other loans to farmers	$	1,141					$	1,141
Real estate Loans:
Commercial and farmland	418				$	3,086	3,504
Home Equity			$	143			143
Total	$	1,559	$	143	$	3,086	$	4,788

	Six Months Ended June 30, 2016
	Term Modification		Rate Modification		Combination		Total Modification
Commercial and industrial loans					$	198	$	198
Agriculture production financing and other loans to farmers	$	1,141	$	49			1,190
Real estate Loans:
Commercial and farmland	418				3,433		3,851
Residential			112				112
Home Equity			143				143
Total	$	1,559	$	304	$	3,631	$	5,494

	Three Months Ended June 30, 2015
	Term Modification		Rate Modification		Combination		Total Modification
Commercial and industrial loans	$	492					$	492
Real estate Loans:
Commercial and farmland					$	240	240
Residential	850		$	21			871
Total	$	1,342	$	21	$	240	$	1,603

	Six Months Ended June 30, 2015
	Term Modification		Rate Modification		Combination		Total Modification
Commercial and industrial loans	$	1,234			$	1,030	$	2,264
Real estate Loans:
Construction	199						199
Commercial and farmland	1,442				240		1,682
Residential	850		$	47			897
Total	$	3,725	$	47	$	1,270	$	5,042

Commercial and farmland real estate loans made up 66 percent of the post-modification balance of troubled debt restructured loans made in the six months ended June 30, 2016.

The following tables summarize troubled debt restructures that occurred during the three and six months ended June 30, 2016, that subsequently defaulted during the period indicated and remained in default at period end. There were no troubled debt restructures that occurred during the three and six months ended June 30, 2015 that subsequently defaulted during this period. For purposes of this discussion, a loan is considered in default if it is 30 or more days past due.

	Three Months Ended June 30, 2016			Six Months Ended June 30, 2016
	Number of Loans	Recorded Balance		Number of Loans	Recorded Balance
Commercial and industrial loans	1	$	72	4	$	269
Real estate Loans:
Residential	1	55		1	55
Total	2	$	127	5	$	324

For potential consumer loan restructures, impairment evaluation occurs prior to modification. Any subsequent impairment is typically addressed through the charge off process, or may be addressed through a specific reserve. Consumer troubled debt restructurings are generally included in the general historical allowance for loan loss at the post modification balance. Consumer non-accrual and delinquent troubled debt restructurings are also considered in the calculation of the non-accrual and delinquency trend environmental allowance allocation. Consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process totaled $2,735,000 and $1,391,000 at June 30, 2016 and December 31, 2015, respectively.

Commercial troubled debt restructured loans risk graded special mention, substandard, doubtful and loss are individually evaluated for impairment under ASC 310. Any resulting specific reserves are included in the allowance for loan losses. Commercial 30 - 89 day delinquent troubled debt restructurings are included in the calculation of the delinquency trend environmental allowance allocation. All commercial non-impaired loans, including non-accrual and 90+ day delinquents, are included in the ASC 450 loss migration analysis.

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Accounting for Certain Loans Acquired in a Purchase

6 Months Ended

Jun. 30, 2016

Receivables [Abstract]

Accounting for Certain Loans Acquired in a Purchase

ACCOUNTING FOR CERTAIN LOANS ACQUIRED IN A PURCHASE

The acquired loans detailed in the tables below are included in NOTE 4. LOANS AND ALLOWANCE, in the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q. As described in NOTE 4, loans purchased after December 31, 2008 are recorded at the acquisition date fair value, which could result in a fair value discount or premium. Purchased loans with evidence of credit deterioration since origination and for which it is probable at the date of acquisition that the acquirer will not collect all contractually required principal and interest payments are accounted for under ASC 310-30, Loans Acquired with Deteriorated Credit Quality. The difference between contractually required payments and the cash flows expected to be collected at acquisition is referred to as the nonaccretable portion of the fair value discount or premium. The accretable portion of the fair value discount or premium is the difference between the expected cash flows and the net present value of expected cash flows, with such difference accreted into earnings over the term of the loans. All other loans not accounted for under ASC 310-30 are accounted for under ASC 310-20.

The Corporation's recent acquisitions are detailed in NOTE 2, ACQUISITIONS AND DIVESTITURES, in the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q. In addition, the Corporation acquired Community Bancshares, Inc. ("Community") in November 2014 and CFS Bancorp, Inc. ("CFS") in November 2013. The Corporation also acquired certain loans from SCB Bank ("SCB") in February 2012. The following table includes the outstanding balance and carrying amount of all acquired loans which were included in the Corporation's balance sheet at June 30, 2016, and December 31, 2015.

	June 30, 2016
	Ameriana		C Financial		Community		CFS		SCB		Total
Commercial and industrial loans	$	21,544	$	95	$	5,613	$	49,079	$	4,408	$	80,739
Agricultural production financing and other loans to farmers					2,802		25		1,047		3,874
Real estate loans:
Construction	32,597		5,034		8,923		624				47,178
Commercial and farmland	120,330		25,024		45,281		164,742		11,265		366,642
Residential	112,520		48,782		12,159		107,895		5,467		286,823
Home Equity	13,029		8,646		7,724		29,464		12,480		71,343
Individuals' loans for household and other personal expenditures	1,101		5		238		295		38		1,677
Other commercial loans	1,840						69				1,909
Total	$	302,961	$	87,586	$	82,740	$	352,193	$	34,705	$	860,185
Carrying Amount	$	290,946	$	85,505	$	77,933	$	336,031	$	30,743	$	821,158
Allowance			180		22						202
Carrying Amount Net of Allowance	$	290,946	$	85,325	$	77,911	$	336,031	$	30,743	$	820,956

	December 31, 2015
	Ameriana		C Financial		Community		CFS		SCB		Total
Commercial and industrial loans	$	21,888	$	104	$	6,769	$	52,060	$	4,620	$	85,441
Agricultural production financing and other loans to farmers					1,761				1,288		3,049
Real estate loans:
Construction	23,365		6,214		10,436		976				40,991
Commercial and farmland	144,514		27,838		49,997		189,372		13,293		425,014
Residential	123,231		55,856		21,886		118,105		6,063		325,141
Home Equity	14,261		9,144		8,231		31,986		13,431		77,053
Individuals' loans for household and other personal expenditures	1,731		10		461		443		48		2,693
Other commercial loans	1,928						72				2,000
Total	$	330,918	$	99,166	$	99,541	$	393,014	$	38,743	$	961,382
Carrying Amount	$	319,664	$	96,829	$	93,355	$	373,649	$	34,092	$	917,589
Allowance					4		149				153
Carrying Amount Net of Allowance	$	319,664	$	96,829	$	93,351	$	373,500	$	34,092	$	917,436

The outstanding balance and related carrying amount of loans acquired and accounted for under ASC 310-30 as of June 30, 2016 were $76.6 million and $55.8 million, respectively. Additionally, the outstanding balance and related carrying amount of those loans as of December 31, 2015 were $95.8 million and $69.6 million, respectively.

As customer cash flow expectations improve, nonaccretable yield can be reclassified to accretable yield. The accretable yield, or income expected to be collected, and reclassifications from nonaccretable yield, are identified in the table below.  The table reflects only purchased loans accounted for under ASC 310-30 and not the entire portfolio of purchased loans.

	Three Months Ended June 30, 2016
	Ameriana			C Financial			Community			CFS			SCB			Total
Beginning balance	$	2,120		$	100		$	1,456		$	1,033		$	590		$	5,299
Additions
Accretion	(47		)	(71		)	(849		)	(855		)	(293		)	(2,115		)
Reclassification from nonaccretable	5			52			738			737			154			1,686
Disposals	(232		)							(11		)				(243		)
Ending balance	$	1,846		$	81		$	1,345		$	904		$	451		$	4,627

	Six Months Ended June 30, 2016
	Ameriana			C Financial			Community			CFS			SCB			Total
Beginning balance	$	2,160		$	114		$	1,508		$	1,188		$	642		$	5,612
Additions
Accretion	(87		)	(86		)	(912		)	(2,145		)	(381		)	(3,611		)
Reclassification from nonaccretable	5			53			749			1,872			190			2,869
Disposals	(232		)							(11		)				(243		)
Ending balance	$	1,846		$	81		$	1,345		$	904		$	451		$	4,627

	Three Months Ended June 30, 2015
	C Financial			Community			CFS			SCB			Total
Beginning balance				$	1,990		$	2,009		$	818		$	4,817
Additions	$	145											145
Accretion	(12		)	(353		)	(578		)	(304		)	(1,247		)
Reclassification from nonaccretable				181			309			244			734
Disposals							(8		)				(8		)
Ending balance	$	133		$	1,818		$	1,732		$	758		$	4,441

	Six Months Ended June 30, 2015
	C Financial			Community			CFS			SCB			Total
Beginning balance				$	2,122		$	2,400		$	868		$	5,390
Additions	$	145											$	145
Accretion	(12		)	(532		)	(1,919		)	(489		)	(2,952		)
Reclassification from nonaccretable				228			1,259			379			1,866
Disposals							(8		)				(8		)
Ending balance	$	133		$	1,818		$	1,732		$	758		$	4,441

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Goodwill

6 Months Ended

Jun. 30, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

GOODWILL

Goodwill is recorded on the acquisition date of an entity. During the measurement period, the Corporation may record subsequent adjustments to goodwill for provisional amounts recorded at the acquisition date. The Ameriana acquisition on December 31, 2015 resulted in $38,624,000 of goodwill, of which, $871,000 was recorded during the first quarter of 2016 as a measurement period adjustment. The C Financial acquisition on April 17, 2015 resulted in goodwill of $11,126,000. On June 12, 2015, the sale of FMIG resulted in a goodwill reduction of $8,474,000. Details regarding the acquisitions and sale are discussed in NOTE 2. ACQUISITIONS AND DIVESTITURES, in the Notes to Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

	2016
Balance, January 1	$	243,129
Measurement period adjustment	871
Balance, June 30	$	244,000

	2015
Balance, January 1	$	202,724
Goodwill acquired	48,879
Goodwill reduction	(8,474		)
Balance, December 31	$	243,129

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Core Deposit and Other Intangibles

6 Months Ended

Jun. 30, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Core Deposit and Other Intangibles

CORE DEPOSIT AND OTHER INTANGIBLES

Core deposit and other intangibles are recorded on the acquisition date of an entity. During the measurement period, the Corporation may record subsequent adjustments to core deposit and other intangibles for provisional amounts recorded at the acquisition date. The Ameriana acquisition on December 31, 2015 resulted in a core deposit intangible of $5,342,000, of which, $2,142,000 was recorded as a measurement period adjustment in the first quarter of 2016. The C Financial acquisition on April 17, 2015 resulted in a core deposit intangible of $981,000. On June 12, 2015, the sale of FMIG resulted in an other intangible reduction of $742,000. Details regarding the acquisitions and sale are discussed in NOTE 2. ACQUISITIONS AND DIVESTITURES, in the Notes to Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

The carrying basis and accumulated amortization of recognized core deposit and other intangibles are noted below.

	June 30, 2016			December 31, 2015
Gross carrying amount	$	61,798		$	58,360
Core deposit and other intangibles acquired				4,181
Accumulated amortization	(47,119		)	(45,164		)
Measurement period adjustment	2,142
Core deposit and other intangibles reduction				(742		)
Core deposit and other intangibles	$	16,821		$	16,635

Estimated future amortization expense is summarized as follows:

	Amortization Expense
2016	$	1,955
2017	3,614
2018	2,299
2019	1,914
2020	1,733
After 2020	5,306
	$	16,821

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Derivative Financial Instruments

6 Months Ended

Jun. 30, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

DERIVATIVE FINANCIAL INSTRUMENTS

Risk Management Objective of Using Derivatives

The Corporation is exposed to certain risks arising from both its business operations and economic conditions.  The Corporation principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Corporation manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities and through the use of derivative financial instruments.  Specifically, the Corporation enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates.  The Corporation’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Corporation’s known or expected cash payments principally related to certain variable-rate liabilities.  The Corporation also has derivatives that are a result of a service the Corporation provides to certain qualifying customers, and, therefore, are not used to manage interest rate risk in the Corporation’s assets or liabilities. The Corporation manages a matched book with respect to its derivative instruments offered as a part of this service to its customers in order to minimize its net risk exposure resulting from such transactions.

Cash Flow Hedges of Interest Rate Risk

The Corporation’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Corporation primarily uses interest rate swaps and interest rate caps as part of its interest rate risk management strategy.  Interest rate swaps designated as cash flow hedges involve the payment of fixed amounts to a counterparty in exchange for the Corporation receiving variable payments over the life of the agreements without exchange of the underlying notional amount.  Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium.  As of June 30, 2016 and December 31, 2015, the Corporation had five interest rate swaps with a notional amount of $56.0 million and one interest rate cap with a notional amount of $13.0 million that were designated as cash flow hedges.  

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into interest expense as interest payments are made on the Corporation’s variable-rate liabilities.  During the next twelve months, the Corporation expects to reclassify $1,274,000 from accumulated other comprehensive income to interest expense.

During 2016, $26.0 million of the interest rate swaps and the $13.0 million interest rate cap were used to hedge the LIBOR-based variable cash outflows associated with existing trust preferred securities when the outflows converted from a fixed rate to variable rate in September of 2012.  In addition, the remaining $30.0 million of interest rate swaps were used to hedge the LIBOR-based variable cash outflows associated with three Federal Home Loan Bank advances. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the six months ended June 30, 2016, and 2015, the Corporation did not recognize any ineffectiveness.

Non-designated Hedges

The Corporation does not use derivatives for trading or speculative purposes.  Derivatives not designated as hedges are not speculative and result from a service the Corporation provides to certain customers. The Corporation executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies.  Those interest rate swaps are simultaneously hedged by offsetting interest rate swaps that the Corporation executes with a third party, such that the Corporation minimizes its net risk exposure resulting from such transactions.  As the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings.  As of June 30, 2016, the notional amount of customer-facing swaps was approximately $205,884,000.  This amount is offset with third party counterparties, as described above.

Fair Values of Derivative Instruments on the Balance Sheet

The table below presents the fair value of the Corporation’s derivative financial instruments, as well as their classification on the Balance Sheet, as of June 30, 2016, and December 31, 2015.

Asset Derivatives

Liability Derivatives

June 30, 2016

December 31, 2015

June 30, 2016

December 31, 2015

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Derivatives designated as hedging instruments:

Interest rate contracts

Other Assets

$

5

Other Assets

$

36

Other Liabilities

$

5,092

Other Liabilities

$

2,921

Derivatives not designated as hedging instruments:

Interest rate contracts

Other Assets

$

11,971

Other Assets

$

4,938

Other Liabilities

$

12,669

Other Liabilities

$

5,149

The amount of gain (loss) recognized in other comprehensive income is included in the table below for the periods indicated.

Derivatives in Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative (Effective Portion)
	Three Months Ended					Six Months Ended
	June 30, 2016			June 30, 2015		June 30, 2016			June 30, 2015
Interest Rate Products	$	(813	)	$	807	$	(2,767	)	$	(469	)

Effect of Derivative Instruments on the Income Statement

The tables below present the effect of the Corporation’s derivative financial instruments on the Income Statement for the three and six months ended June 30, 2016, and 2015.

Derivatives Not Designated as Hedging Instruments under FASB ASC 815-10	Location of Gain (Loss) Recognized Income on Derivative	Amount of Gain (Loss) Recognized in Income on Derivative
		Three Months Ended June 30, 2016			Three Months Ended June 30, 2015
Interest rate contracts	Other income	$	(242	)	$	156

Derivatives Not Designated as Hedging Instruments under FASB ASC 815-10	Location of Gain (Loss) Recognized Income on Derivative	Amount of Gain (Loss) Recognized in Income on Derivative
		Six Months Ended June 30, 2016			Six Months Ended June 30, 2015
Interest rate contracts	Other income	$	(488	)	$	55

The amount of gain (loss) reclassified from other comprehensive income into income is included in the table below for the periods indicated.

Derivatives Designated as Hedging Instruments under FASB ASC 815-10	Location of Gain (Loss) Recognized Income on Derivative	Amount of Gain (Loss) Reclassed from Other Comprehensive Income into Income (Effective Portion)
		Three Months Ended June 30, 2016		Three Months Ended June 30, 2015
Interest rate contracts	Interest Expense	(318	)	(358	)

Derivatives Designated as Hedging Instruments under FASB ASC 815-10	Location of Gain (Loss) Recognized Income on Derivative	Amount of Gain (Loss) Reclassed from Other Comprehensive Income into Income (Effective Portion)
		Six Months Ended June 30, 2016			Six Months Ended June 30, 2015
Interest rate contracts	Interest Expense	$	(642	)	$	(712	)

The Corporation’s exposure to credit risk occurs because of nonperformance by its counterparties.  The counterparties approved by the Corporation are usually financial institutions, which are well capitalized and have credit ratings through Moody’s and/or Standard & Poor’s at or above investment grade.  The level of risk is monitored by performing quarterly financial reviews, comparing mark-to-mark values with policy limitations, monitoring credit ratings and pledging of collateral.

Credit-risk-related Contingent Features

The Corporation has agreements with certain of its derivative counterparties that contain a provision where if the Corporation fails to maintain its status as a well or adequately capitalized institution, then the Corporation could be required to terminate or fully collateralize all outstanding derivative contracts.

The Corporation also has agreements with certain of its derivative counterparties that contain a provision where if the Corporation defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, the Corporation could also be declared in default on its derivative obligations. As of June 30, 2016, the termination value of derivatives in a net liability position related to these agreements was $18,063,000. As of June 30, 2016, the Corporation had minimum collateral posting thresholds with certain of its derivative counterparties and had posted collateral of $18,011,000. If the Corporation had breached any of these provisions at June 30, 2016, it could have been required to settle its obligations under the agreements at their termination value.

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Disclosures About Fair Value of Assets and Liabilities

6 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

Disclosures About Fair Value of Assets and Liabilities

DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES

The Corporation used fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The accounting guidance defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.  ASC 820 applies only when other guidance requires or permits assets or liabilities to be measured at fair value; it does not expand the use of fair value in any new circumstances.

As defined in ASC 820, fair value is the price to sell an asset or transfer a liability in an orderly transaction between market participants. It represents an exit price at the measurement date. Market participants are buyers and sellers, who are independent, knowledgeable, and willing and able to transact in the principal (or most advantageous) market for the asset or liability being measured. Current market conditions, including imbalances between supply and demand, are considered in determining fair value. The Corporation values its assets and liabilities in the principal market where it sells the particular asset or transfers the liability with the greatest volume and level of activity. In the absence of a principal market, the valuation is based on the most advantageous market for the asset or liability (i.e., the market where the asset could be sold or the liability transferred at a price that maximizes the amount to be received for the asset or minimizes the amount to be paid to transfer the liability).

Valuation inputs refer to the assumptions market participants would use in pricing a given asset or liability. Inputs can be observable or unobservable. Observable inputs are those assumptions which market participants would use in pricing the particular asset or liability. These inputs are based on market data and are obtained from a source independent of the Corporation. Unobservable inputs are assumptions based on the Corporation’s own information or estimate of assumptions used by market participants in pricing the asset or liability. Unobservable inputs are based on the best and most current information available on the measurement date. All inputs, whether observable or unobservable, are ranked in accordance with a prescribed fair value hierarchy which gives the highest ranking to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest ranking to unobservable inputs for which there is little or no market activity (Level 3). Fair values for assets or liabilities classified as Level 2 are based on one or a combination of the following factors: (i) quoted prices for similar assets; (ii) observable inputs for the asset or liability, such as interest rates or yield curves; or (iii) inputs derived principally from or corroborated by observable market data. The level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Corporation considers an input to be significant if it drives 10 percent or more of the total fair value of a particular asset or liability.

Recurring Measurements

The following is a description of the valuation methodologies and inputs used for instruments measured at fair value on a recurring basis and recognized in the accompanying Consolidated Condensed Balance Sheets, as well as the general classification of such instruments pursuant to the valuation hierarchy.  There have been no significant changes in the valuation techniques as of June 30, 2016.

Available for Sale Investment Securities

Where quoted, market prices are available in an active market and securities are classified within Level 1 of the valuation hierarchy. There are no securities classified within Level 1 of the hierarchy. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or a discounted cash flow model. Level 2 securities include agencies, mortgage- backed, state and municipal, and equity securities. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. Level 3 fair value, including corporate obligations, state and municipal and equity securities, was determined using a discounted cash flow model that incorporated market estimates of interest rates and volatility in markets that have not been active.

Third party vendors compile prices from various sources and may apply such techniques as matrix pricing to determine the value of identical or similar investment securities classified within Level 2. Matrix pricing is a mathematical technique widely used in the banking industry to value investment securities without relying exclusively on quoted prices for specific investment securities but rather relying on the investment securities’ relationship to other benchmark quoted investment securities. Any investment security not valued based upon the methods above are considered Level 3.

Interest Rate Derivative Agreements

See information regarding the Corporation's interest rate derivative products in NOTE 8. DERIVATIVE FINANCIAL INSTRUMENTS, included within the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q.

The following table presents the fair value measurements of assets and liabilities recognized in the Consolidated Condensed Balance Sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2016, and December 31, 2015.

			Fair Value Measurements Using:
June 30, 2016	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available for sale securities:
U.S. Government-sponsored agency securities	$	102		$	102
State and municipal	353,480			347,951		$	5,529
U.S. Government-sponsored mortgage-backed securities	301,271			301,271
Corporate obligations	31					31
Equity securities	3,945			3,941		4
Interest rate swap asset	11,971			11,971
Interest rate cap	5			5
Interest rate swap liability	17,761			17,761

			Fair Value Measurements Using:
December 31, 2015	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available for sale securities:
U.S. Government-sponsored agency securities	$	104		$	104
State and municipal	305,911			300,014		$	5,897
U.S. Government-sponsored mortgage-backed securities	346,266			346,266
Certificates of deposit	2,176			2,176
Corporate obligations	31					31
Equity securities	3,912			3,908		4
Interest rate swap asset	4,938			4,938
Interest rate cap	36			36
Interest rate swap liability	8,070			8,070

Level 3 Reconciliation

The following is a reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the Consolidated Condensed Balance Sheets using significant unobservable (Level 3) inputs for the three and six months ended June 30, 2016 and 2015.

	Available for Sale Securities
	Three Months Ended June 30, 2016		Three Months Ended June 30, 2015			Six Months Ended June 30, 2016			Six Months Ended June 30, 2015
Balance at beginning of the period	$	5,504	$	6,198		$	5,932		$	6,646
Total realized and unrealized gains and losses:
Included in net income
Included in other comprehensive income	59		50			96			141
Purchases, issuances and settlements
Transfers in/(out) of Level 3
Principal payments	1		(220		)	(464		)	(759		)
Ending balance	$	5,564	$	6,028		$	5,564		$	6,028

There were no gains or losses for the period included in earnings that were attributable to the changes in unrealized gains or losses related to assets or liabilities held at June 30, 2016 or December 31, 2015.

Transfers Between Levels

There were no transfers in or out of Level 3 for the three and six months ended June 30, 2016 and 2015.

Nonrecurring Measurements

The following table presents the fair value measurement of assets and liabilities measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2016, and December 31, 2015.

			Fair Value Measurements Using
June 30, 2016	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Impaired loans (collateral dependent)	$	11,013			$	11,013
Other real estate owned	2,256				2,256

			Fair Value Measurements Using
December 31, 2015	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable  Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Impaired loans (collateral dependent)	$	7,066			$	7,066
Other real estate owned	5,529				5,529

Following is a description of valuation methodologies used for instruments measured at fair value on a nonrecurring basis and recognized in the Consolidated Condensed Balance Sheets, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Impaired Loans (collateral dependent)

Loans for which it is probable that the Corporation will not collect all principal and interest due according to contractual terms are measured for impairment. Allowable methods for determining the amount of impairment include estimating fair value of the collateral for collateral dependent loans. If the impaired loan is identified as collateral dependent, then the fair value method of measuring the amount of impairment is utilized. This method requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value. A portion of the allowance for loan losses is allocated to impaired loans if the value of such loans is deemed to be less than the unpaid balance. If these allocations cause the allowance for loan losses to increase, such increase is reported as a component of the provision for loan losses. Loan losses are charged against the allowance when management believes the uncollectability of the loan is confirmed. During 2016, certain impaired loans were partially charged off or re-evaluated. Impaired loans that are collateral dependent are classified within Level 3 of the fair value hierarchy when impairment is determined using the fair value method.

Other Real Estate Owned

The fair value for impaired loans and other real estate owned is measured based on the value of the collateral securing those loans or real estate and is determined using several methods. The fair value of real estate is generally determined based on appraisals by qualified licensed appraisers. The appraisers typically determine the value of the real estate by utilizing an income or market valuation approach. If an appraisal is not available, the fair value may be determined by using a cash flow analysis. Fair value on other collateral such as business assets is typically ascertained by assessing, either singularly or some combination of,  asset appraisals, accounts receivable aging reports, inventory listings and/or customer financial statements. Both appraised values and values based on borrower’s financial information are discounted as considered appropriate based on age and quality of the information and current market conditions.

Unobservable (Level 3) Inputs

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements, other than goodwill, at June 30, 2016 and December 31, 2015.

June 30, 2016	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted-Average)
State and municipal securities	$	5,529	Discounted cash flow	Maturity/Call date	1 month to 20 yrs
				Blend of US Muni BQ curve	A- to BBB-
				Discount rate	.69% - 5%
Corporate obligations and Equity securities	$	35	Discounted cash flow	Risk free rate	3 month LIBOR
				plus premium for illiquidity	plus 200bps
Impaired loans (collateral dependent)	$	11,013	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability	0% - 10% (1%)
Other real estate owned	$	2,256	Appraisals	Discount to reflect current market conditions	0% - 10% (4%)

December 31, 2015	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted-Average)
State and municipal securities	$	5,897	Discounted cash flow	Maturity/Call date	1 month to 15 yrs
				Blend of US Muni BQ curve	A- to BBB-
				Discount rate	.80% - 5%
Corporate obligations and Equity securities	$	35	Discounted cash flow	Risk free rate	3 month LIBOR
				plus premium for illiquidity	plus 200bps
Impaired loans (collateral dependent)	$	7,066	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability	0% - 50% (2%)
Other real estate owned	$	5,529	Appraisals	Discount to reflect current market conditions	0% - 20% (2%)

Sensitivity of Significant Unobservable Inputs

The following is a discussion of the sensitivity of significant unobservable inputs, the interrelationships between those inputs and other unobservable inputs used in recurring fair value measurement and how those inputs might magnify or mitigate the effect of changes in the unobservable inputs on the fair value measurement.

State and Municipal Securities, Corporate Obligations and Equity Securities

The significant unobservable inputs used in the fair value measurement of the Corporation’s state and municipal securities, corporate obligations and equity securities are premiums for unrated securities and marketability discounts.  Significant increases or decreases in either of those inputs in isolation would result in a significantly lower or higher fair value measurement.  

Fair Value of Financial Instruments

The following table presents estimated fair values of the Corporation’s financial instruments and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2016, and December 31, 2015.

			June 30, 2016
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
			(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	120,471	$	120,471
Interest-bearing time deposits	62,533		62,533
Investment securities available for sale	658,829				$	653,265	$	5,564
Investment securities held to maturity	638,972				648,705		16,361
Loans held for sale	18,854				18,854
Loans	4,729,243						4,710,073
Federal Reserve Bank and Federal Home Loan Bank stock	18,096				18,096
Interest rate swap and cap asset	11,976				11,976
Interest receivable	23,351				23,351
Liabilities:
Deposits	$	5,407,554	$	4,268,709	$	1,129,241
Borrowings:
Federal funds purchased	20,000				20,000
Securities sold under repurchase agreements	140,777				140,763
Federal Home Loan Bank advances	268,579				268,150
Subordinated debentures and term loans	127,678				103,155
Interest rate swap liability	17,761				17,761
Interest payable	3,051				3,051

			December 31, 2015
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
			(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	102,170	$	102,170
Interest-bearing time deposits	32,315		32,315
Investment securities available for sale	658,400				$	652,468	$	5,932
Investment securities held to maturity	618,599				598,082		34,298
Loans held for sale	9,894				9,894
Loans	4,631,369						4,539,940
Federal Reserve Bank and Federal Home Loan Bank stock	37,633				37,633
Interest rate swap and cap asset	4,974				4,974
Interest receivable	24,415				24,415
Liabilities:
Deposits	$	5,289,647	$	4,095,004	$	1,177,142
Borrowings:
Federal funds purchased	49,721				49,721
Securities sold under repurchase agreements	155,325				155,325
Federal Home Loan Bank advances	235,652				236,375
Subordinated debentures and term loans	127,846				103,643
Interest rate swap liability	8,070				8,070
Interest payable	3,092				3,092

The following methods were used to estimate the fair value of all other financial instruments recognized in the Consolidated Condensed Balance Sheets at amounts other than fair value.

Cash and cash equivalents:  The fair value of cash and cash equivalents approximates carrying value.

Interest-bearing time deposits:  The fair value of interest-bearing time deposits approximates carrying value.

Investment securities:  Fair value is based on quoted market prices, if available.  If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. The fair value of certain Level III securities is estimated using discounted cash flow analysis, using interest rates currently being offered on investments with similar maturities and investment quality.

Loans Held For Sale:  The carrying amount approximates fair value due to the short duration between origination and date of sale.

Loans:  The fair value for loans is estimated using discounted cash flow analysis, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.  See Impaired Loans above.

Federal Reserve and Federal Home Loan Bank stock:  The fair value of Federal Reserve Bank and Federal Home Loan Bank stock is based on the price which it may be resold to the Federal Reserve and Federal Home Loan Bank.

Derivative instruments:  The fair value of the interest rate swaps reflects the estimated amounts that would have been received to terminate these contracts at the reporting date based upon pricing or valuation models applied to current market information.  Interest rate caps are valued using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rose above the strike rate of the caps.  The projected cash receipts on the caps are based on an expectation of future interest rates derived from observed market interest rate curves and volatilities.

Interest Receivable and Interest Payable:  The fair value of interest receivables/payable approximates the carrying amount.

Deposits:  The fair values of noninterest-bearing and interest-bearing demand accounts and savings deposits are equal to the amount payable on demand at the balance sheet date. The carrying amounts for variable rate, fixed-term certificates of deposit approximate their fair values at the balance sheet date. Fair values for fixed-rate certificates of deposit and other time deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered to a schedule of aggregated expected monthly maturities on such time deposits.

Federal funds purchased:  The fair value of Federal Funds purchased approximates the carrying amount.

Borrowings:  The fair value of borrowings is estimated using a discounted cash flow calculation, based on current rates for similar debt.

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Transfers Accounted for as Secured Borrowings

6 Months Ended

Jun. 30, 2016

Banking and Thrift [Abstract]

Transfers Accounted for as Secured Borrowings

TRANSFERS ACCOUNTED FOR AS SECURED BORROWINGS

The collateral pledged for all repurchase agreements that are accounted for as secured borrowings as of June 30, 2016 and December 31, 2015 were:

	June 30, 2016
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater Than 90 Days		Total
U.S. Government-sponsored mortgage-backed securities	$	119,935	$	1,335	$	2,672	$	16,835	$	140,777

	December 31, 2015
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater Than 90 Days		Total
U.S. Government-sponsored mortgage-backed securities	$	131,537	$	5,680	$	8,892	$	9,216	$	155,325

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Accumulated Other Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 2016

Equity [Abstract]

Accumulated Other Comprehensive Income (Loss)

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes the changes in the balances of each component of accumulated other comprehensive income (loss), net of tax, as of June 30, 2016 and 2015:

	Accumulated Other Comprehensive Income (Loss)
	Unrealized Gains (Losses) on Securities Available for Sale			Unrealized Gains (Losses) on Cash Flow Hedges			Unrealized Gains (Losses) on Defined Benefit Plans			Total
Balance at December 31, 2015	$	12,325		$	(2,347	)	$	(11,340	)	$	(1,362	)
Other comprehensive income before reclassifications	10,885			(1,798		)				9,087
Amounts reclassified from accumulated other comprehensive income	(1,107		)	417						(690		)
Period change	9,778			(1,381		)	—			8,397
Balance at June 30, 2016	$	22,103		$	(3,728	)	$	(11,340	)	$	7,035
Balance at December 31, 2014	$	14,098		$	(2,182	)	$	(13,546	)	$	(1,630	)
Other comprehensive income before reclassifications	(4,413		)	(304		)				(4,717		)
Amounts reclassified from accumulated other comprehensive income	(606		)	463						(143		)
Period change	(5,019		)	159			—			(4,860		)
Balance at June 30, 2015	$	9,079		$	(2,023	)	$	(13,546	)	$	(6,490	)

The following table presents the reclassification adjustments out of accumulated other comprehensive income (loss) that were included in net income in the Consolidated Condensed Statements of Income for the three and six months ended June 30, 2016 and 2015:

	Amount Reclassified from Accumulated Other Comprehensive Income (Loss) For the Three Months Ended June 30,
Details about Accumulated Other Comprehensive Income (Loss)Components	2016			2015			Affected Line Item in the Statements of Income
Unrealized gains (losses) on available for sale securities (1)
Realized securities gains (losses) reclassified into income	$	706		$	(93	)	Other income - net realized gains on sales of available for sale securities
Related income tax expense	(247		)	33			Income tax expense
	$	459		$	(60	)
Unrealized gains (losses) on cash flow hedges (2)
Interest rate contracts	$	(318	)	$	(358	)	Interest expense - subordinated debentures and term loans
Related income tax benefit	111			125			Income tax expense
	$	(207	)	$	(233	)
Total reclassifications for the period, net of tax	$	252		$	(293	)

	Amount Reclassified from Accumulated Other Comprehensive Income (Loss) For the Six Months Ended June 30,
Details about Accumulated Other Comprehensive Income (Loss)Components	2016			2015			Affected Line Item in the Statements of Income
Unrealized gains (losses) on available for sale securities (1)
Realized securities gains reclassified into income	$	1,703		$	932		Other income - net realized gains on sales of available for sale securities
Related income tax expense	(596		)	(326		)	Income tax expense
	$	1,107		$	606
Unrealized gains (losses) on cash flow hedges (2)
Interest rate contracts	$	(642	)	$	(712	)	Interest expense - subordinated debentures and term loans
Related income tax benefit	225			249			Income tax expense
	$	(417	)	$	(463	)
Total reclassifications for the period, net of tax	$	690		$	143

⁽¹⁾ For additional detail related to unrealized gains (losses) on available for sale securities and related amounts reclassified from accumulated other comprehensive income see NOTE 3. INVESTMENT SECURITIES.

⁽²⁾ For additional detail related to unrealized gains (losses) on cash flow hedges and related amounts reclassified from accumulated other comprehensive income see NOTE 8. DERIVATIVE FINANCIAL INSTRUMENTS.

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Share-Based Compensation

6 Months Ended

Jun. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation

SHARE-BASED COMPENSATION

Stock options and restricted stock awards ("RSAs") have been issued to directors, officers and other management employees under the Corporation's 1999 Long-term Equity Incentive Plan and the 2009 Long-term Equity Incentive Plan.  The stock options, which have a ten year life, become 100 percent vested ranging from six months to two years and are fully exercisable when vested. Option exercise prices equal the Corporation's common stock closing price on NASDAQ on the date of grant.  RSAs issued to employees and non-employee directors provide for the issuance of shares of the Corporation's common stock at no cost to the holder and generally vest after three years.  The RSAs vest only if the employee is actively employed by the Corporation on the vesting date and, therefore, any unvested shares are forfeited.  For non-employee directors, the RSAs vest only if the non-employee director remains as an active board member on the vesting date and, therefore, any unvested shares are forfeited. RSAs for employees and non-employee directors retired from the Corporation are either immediately vested at retirement or continue to vest after retirement, depending on the plan under which the shares were granted. Deferred stock units ("DSUs") can be credited to non-employee directors who have elected to defer payment of compensation under the Corporation's 2008 Equity Compensation Plan for Non-employee Directors.  DSUs credited are equal to the restricted shares that the non-employee director would have received under the plan.  As of June 30, 2016, there were no outstanding DSUs.

The Corporation’s 2009 Employee Stock Purchase Plan (“ESPP”) provides eligible employees of the Corporation and its subsidiaries an opportunity to purchase shares of common stock of the Corporation through quarterly offerings financed by payroll deductions. The price of the stock to be paid by the employees shall be equal to 85 percent of the average of the closing price of the Corporation’s common stock on each trading day during the offering period. However, in no event shall such purchase price be less than the lesser of an amount equal to 85 percent of the market price of the Corporation’s stock on the offering date or an amount equal to 85 percent of the market value on the date of purchase. Common stock purchases are made quarterly and are paid through advance payroll deductions up to a calendar year maximum of $25,000.

Compensation expense related to unvested share-based awards is recorded by recognizing the unamortized grant date fair value of these awards over the remaining service periods of those awards, with no change in historical reported fair values and earnings.  Awards are valued at fair value in accordance with provisions of share-based compensation guidance and are recognized on a straight-line basis over the service periods of each award. To complete the exercise of vested stock options, RSA’s and ESPP options, the Corporation generally issues new shares from its authorized but unissued share pool. Share-based compensation for the three and six months ended June 30, 2016 was $641,000 and $1,235,000, respectively, compared to $614,000 and $1,130,000, respectively, for the three and six months ended June 30, 2015. Share-based compensation has been recognized as a component of salaries and benefits expense in the accompanying Consolidated Condensed Statements of Income.

The estimated fair value of the stock options granted during 2014 and in prior years was calculated using a Black Scholes option pricing model.  There have been no stock options granted since 2014.

The Black Scholes model incorporates assumptions to value share-based awards. The risk-free rate of interest, for periods equal to the expected life of the option, is based on a U.S. government instrument over a similar contractual term of the equity instrument. Expected price volatility is based on historical volatility of the Corporation’s common stock.  In addition, the Corporation generally uses historical information to determine the dividend yield and weighted-average expected life of the options until exercise. Separate groups of employees that have similar historical exercise behavior with regard to option exercise timing and forfeiture rates are considered separately for valuation and attribution purposes.

Share-based compensation expense recognized in the Consolidated Condensed Statements of Income is based on awards ultimately expected to vest and is reduced for estimated forfeitures. Share-based compensation guidance requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods, if actual forfeitures differ from those estimates. Pre-vesting forfeitures were estimated to be approximately 3.8 percent for the six months ended June 30, 2016, based on historical experience.

The following table summarizes the components of the Corporation's share-based compensation awards recorded as expense:

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Stock and ESPP Options
Pre-tax compensation expense	$	21		$	28		$	36		$	54
Income tax expense (benefit)	10						10			(1		)
Stock and ESPP option expense, net of income taxes	$	31		$	28		$	46		$	53
Restricted Stock Awards
Pre-tax compensation expense	$	620		$	586		$	1,199		$	1,076
Income tax benefit	(217		)	(198		)	(420		)	(366		)
Restricted stock awards expense, net of income taxes	$	403		$	388		$	779		$	710
Total Share-Based Compensation
Pre-tax compensation expense	$	641		$	614		$	1,235		$	1,130
Income tax benefit	(207		)	(198		)	(410		)	(367		)
Total share-based compensation expense, net of income taxes	$	434		$	416		$	825		$	763

As of June 30, 2016, unrecognized compensation expense related to RSAs was $4,688,000 and is expected to be recognized over a weighted-average period of 1.72 years. The Corporation did not have any unrecognized compensation expense related to stock options as of June 30, 2016.

Stock option activity under the Corporation's stock option plans as of June 30, 2016 and changes during the six months ended June 30, 2016, were as follows:

	Number of Shares		Weighted-Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value
Outstanding at January 1, 2016	442,012		$	19.99
Granted	—
Exercised	(13,828	)	$	15.94
Canceled	(49,482	)	$	25.14
OutstandingJune 30, 2016	378,702		$	19.47	3.05	2,313,252
Vested and Expected to Vest at June 30, 2016	378,702		$	19.47	3.02	2,313,252
Exercisable at June 30, 2016	378,702		$	19.47	3.05	2,313,252

There were no options granted during the six months ended June 30, 2016 and June 30, 2015.

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Corporation's closing stock price on the last trading day of the first six months of 2016 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their stock options on June 30, 2016.  The amount of aggregate intrinsic value will change based on the fair market value of the Corporation's common stock. The aggregate intrinsic value of stock options exercised during the six months ended June 30, 2016 and 2015 was $116,000 and $356,000, respectively. Cash receipts of stock options exercised during this same period were $211,000 and $619,000, respectively.

The following table summarizes information on unvested RSAs outstanding as of June 30, 2016:

	Number of Shares		Weighted-Average Grant Date Fair Value
Unvested RSAs at January 1, 2016	354,504		$	19.65
Granted	116,133		$	23.48
Vested	(106,290	)	$	15.39
Forfeited	(4,943	)	$	22.28
Unvested RSAs at June 30, 2016	359,404		$	22.42

The grant date fair value of ESPP options was estimated at the beginning of the April 1, 2016 quarterly offering period of approximately $21,000. The ESPP options vested during the three months ending June 30, 2016, leaving no unrecognized compensation expense related to unvested ESPP options at June 30, 2016.

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Income Tax

6 Months Ended

Jun. 30, 2016

Income Tax Disclosure [Abstract]

Income Tax

INCOME TAX

The following table summarizes the major components creating differences between income taxes at the federal statutory and the effective tax rate recorded in the consolidated statements of income for the three and six months ended June 30, 2016 and 2015:

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Reconciliation of Federal Statutory to Actual Tax Expense:
Federal statutory income tax at 35%	$	9,353		$	9,389		$	17,496		$	17,091
Tax-exempt interest income	(2,104		)	(1,738		)	(4,130		)	(3,167		)
Basis difference on sale of insurance subsidiary				2,252						2,252
Stock compensation	8			10			13			18
Earnings on life insurance	(453		)	(223		)	(970		)	(485		)
Tax credits	(129		)	(148		)	(258		)	(292		)
Other	41			(686		)	139			(727		)
Actual Tax Expense	$	6,716		$	8,856		$	12,290		$	14,690
Effective Tax Rate	25.1		%	33.0		%	24.6		%	30.1		%

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Net Income Per Share

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Net Income Per Share

NET INCOME PER SHARE

Basic net income per share is computed by dividing net income by the weighted-average shares outstanding during the reporting period. Diluted net income per share is computed by dividing net income by the combination of all dilutive common share equivalents, comprised of shares issuable under the Corporation’s share-based compensation plans, and the weighted-average shares outstanding during the reporting period.

Dilutive common share equivalents include the dilutive effect of in-the-money share-based awards, which are calculated based on the average share price for each period using the treasury stock method. Under the treasury stock method, the exercise price of share-based awards, the amount of compensation expense, if any, for future service that the Corporation has not yet recognized, and the amount of estimated tax benefits that would be recorded in additional paid-in capital when share-based awards are exercised, are assumed to be used to repurchase common stock in the current period.

The following table reconciles basic and diluted net income per share for the three and six months ended June 30, 2016 and 2015.

	Three Months Ended June 30,
	2016					2015
	Net Income		Weighted-Average Shares	Per Share Amount		Net Income		Weighted-Average Shares	Per Share Amount
Net income available to common stockholders	20,006		40,751,720	$	0.50	17,968		37,793,448	$	0.47
Effect of dilutive stock options and warrants			217,391					249,911
Diluted net income per share	$	20,006	40,969,111	$	0.49	$	17,968	38,043,359	$	0.47

	Six Months Ended June 30,
	2016					2015
	Net Income		Weighted-Average Shares	Per Share Amount		Net Income		Weighted-Average Shares	Per Share Amount
Net income available to common stockholders	37,699		40,721,147	$	0.93	34,140		37,751,896	$	0.90
Effect of dilutive stock options and warrants			220,338					270,036
Diluted net income per share	$	37,699	40,941,485	$	0.92	$	34,140	38,021,932	$	0.90

Stock options to purchase 111,750 and 367,525 shares for the three months ended June 30, 2016 and 2015, respectively, were not included in the earnings per share calculation because the exercise price exceeded the average market price.

Stock options to purchase 142,259 and 367,550 shares for the six months ended June 30, 2016 and 2015, respectively, were not included in the earnings per share calculation because the exercise price exceeded the average market price.

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Impact of Accounting Changes

6 Months Ended

Jun. 30, 2016

Accounting Changes and Error Corrections [Abstract]

Impact of Accounting Changes

IMPACT OF ACCOUNTING CHANGES

The Corporation continually monitors potential accounting changes and pronouncements. The following pronouncements have been deemed to have the most applicability to the Corporation's financial statements:

FASB Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments

Summary - The FASB has issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations.

The ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates.

Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances.

The ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements.

In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.

The ASU is effective for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 (i.e., January 1, 2020, for calendar year entities). For public companies that are not SEC filers, the ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. For all other organizations, the ASU on credit losses will take effect for fiscal years beginning after December 15, 2020, and for interim periods within fiscal years beginning after December 15, 2021.

Early application will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Corporation is evaluating the effects of this ASU on its consolidated financial statements.

FASB Accounting Standards Update No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting

Summary - The amendments in ASU 2016-09 simplify several aspects of accounting for employee share-based payments including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Some areas of the simplification apply only to nonpublic entities. The new guidance will require all income tax effects of awards to be recognized as income tax expense or benefit in the income statement when the awards vest or are settled and additional paid in capital pools will be eliminated. The guidance requires companies to present excess tax benefits as an operating activity on the statement of cash flows rather than as a financing activity. Companies will be required to account for forfeitures of share-based payments by recognizing forfeitures of awards as they occur or estimating the number of awards expected to be forfeited and adjusting the estimate when it is likely to change, as currently required, through an accounting policy election. The guidance will increase the amount an employer can withhold to cover income taxes on awards and still qualify for the exception to liability classification for shares used to satisfy the employer's income tax withholding obligation. The guidance requires an employer to classify the cash paid to a tax authority when shares are withheld to satisfy its statutory income tax withholding obligation as a financing activity on the statement of cash flows. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption will be permitted in any interim or annual period for which financial statements have not yet been issued or have not been made available for issuance, however all of the guidance must be adopted in the same period. If early adoption is elected in an interim period, any adjustments should be reflected as of the beginning of the annual period that includes that interim period. Adoption of this ASU is not expected to have a significant effect on the Corporation’s consolidated financial statements.

The amendments clarify what steps are required when assessing whether the economic characteristics and risks of call (put) options are clearly and closely related to the economic characteristics and risks of their debt hosts, which is one of the criteria for bifurcating an embedded derivative. Consequently, when a call (put) option is contingently exercisable, an entity does not have to assess whether the event that triggers the ability to exercise a call (put) option is related to interest rates or credit risks.

Public business entities must apply the new requirements for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years. If an entity early adopts the new requirements in an interim period, it must reflect any adjustments as of the beginning of the fiscal year that includes that interim period. The Corporation is evaluating the effects of this ASU on its consolidated financial statements.

FASB Accounting Standards Update No. 2016-02 - Leases (Topic 842)

Summary - The FASB has issued its new lease accounting guidance in Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date:

•A lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and

•A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers.

The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing.

Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). Early application is permitted for all public business entities and all nonpublic business entities upon issuance.

Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Corporation is evaluating the effect of this ASU on its consolidated financial statements.

FASB Accounting Standards Update No. 2014-09 - Revenue from Contracts with Customers (Topic 606)

Summary - The FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, which implements a common revenue standard that clarifies the principles for recognizing revenue. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 is effective on January 1, 2018. The Corporation is evaluating the effects of this ASU on its consolidated financial statements.

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General Litigation and Regulatory Examinations

6 Months Ended

Jun. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

General Litigation and Regulatory Examinations

GENERAL LITIGATION AND REGULATORY EXAMINATIONS

The Corporation is subject to claims and lawsuits that arise primarily in the ordinary course of business. Additionally, the Corporation is subject to periodic examinations by various regulatory agencies. It is the opinion of management that the disposition or ultimate resolution of such claims, lawsuits, and examinations will not have a material adverse effect on the consolidated financial position, results of operations and cash flow of the Corporation.

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Acquisitions and Divestitures (Tables)

6 Months Ended

Jun. 30, 2016

Ameriana

Business Acquisition [Line Items]

Schedule of preliminary valuations of the fair value of assets acquired and liabilities assumed

Based on preliminary valuations of the fair value of tangible and intangible assets acquired and liabilities assumed, which are based on assumptions that are subject to change, the purchase price for the Ameriana acquisition is detailed in the following table. If prior to the end of the one year measurement period for finalizing the purchase price allocation, information becomes available which would indicate adjustments are required to the purchase price allocation, such adjustments will be included in the purchase price allocation retrospectively.

	Fair Value
Cash and cash equivalents	$	4,068
Interest-bearing time deposits	8,790
Investment securities	61,754
Loans	316,929
Premises and equipment	13,946
Federal Home Loan Bank stock	2,693
Other real estate owned	5,613
Interest receivable	1,306
Cash surrender value of life insurance	28,188
Other assets	6,713
Deposits	(383,718		)
Interest payable	(24		)
Federal Home Loan Bank Advances	(24,884		)
Subordinated debentures	(5,487		)
Other liabilities	(9,451		)
Net tangible assets acquired	26,436
Core deposit intangible	5,342
Goodwill	38,624
Purchase price	$	70,402

C Financial

Business Acquisition [Line Items]

Schedule of preliminary valuations of the fair value of assets acquired and liabilities assumed

The purchase price of the C Financial acquisition was allocated as follows:

	Fair Value
Cash and cash equivalents	$	2,496
Federal Funds sold	7,018
Interest-bearing time deposits	922
Loans	110,625
Premises and equipment	7,290
Federal Home Loan Bank stock	855
Interest receivable	292
Other assets	119
Deposits	(105,326		)
Interest payable	(29		)
Federal Home Loan Bank Advances	(18,958		)
Other liabilities	(2,911		)
Net tangible assets acquired	2,393
Core deposit intangible	981
Goodwill	11,126
Purchase price	$	14,500

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Investment Securities (Tables)

6 Months Ended

Jun. 30, 2016

Investments, Debt and Equity Securities [Abstract]

Schedule of amortized cost, gross unrealized gains, gross unrealized losses and approximate fair value of investment securities

The amortized cost, gross unrealized gains and losses and approximate fair value of the investment securities portfolio at the dates indicated were:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale at June 30, 2016
U.S. Government-sponsored agency securities	$	100	$	2			$	102
State and municipal	329,042		24,438				353,480
U.S. Government-sponsored mortgage-backed securities	292,822		8,469		$	20	301,271
Corporate obligations	31						31
Equity securities	3,882		63				3,945
Total available for sale	625,877		32,972		20		658,829
Held to maturity at June 30, 2016
Federal agencies	28,980		34		5		29,009
State and municipal	207,731		11,621				219,352
U.S. Government-sponsored mortgage-backed securities	402,261		14,444				416,705
Total held to maturity	638,972		26,099		5		665,066
Total Investment Securities	$	1,264,849	$	59,071	$	25	$	1,323,895

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale at December 31, 2015
U.S. Government-sponsored agency securities	$	100	$	4			$	104
State and municipal	291,730		14,241		$	60	305,911
U.S. Government-sponsored mortgage-backed securities	342,550		4,234		518		346,266
Corporate obligations	31						31
Equity securities	3,912						3,912
Certificates of deposit	2,176						2,176
Total available for sale	640,499		18,479		578		658,400
Held to maturity at December 31, 2015
State and municipal	219,767		6,982		15		226,734
U.S. Government-sponsored mortgage-backed securities	398,832		7,601		787		405,646
Total held to maturity	618,599		14,583		802		632,380
Total Investment Securities	$	1,259,098	$	33,062	$	1,380	$	1,290,780

Schedule of amortized cost and fair value of available for sale securities and held to maturity securities

The amortized cost and fair value of available for sale and held to maturity securities at June 30, 2016 and December 31, 2015, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Maturity Distribution at June 30, 2016:
Due in one year or less	$	3,065	$	3,086	$	2,500	$	2,532
Due after one through five years	19,909		21,060		42,528		44,205
Due after five through ten years	60,972		64,871		82,937		85,365
Due after ten years	245,227		264,596		108,746		116,259
	$	329,173	$	353,613	$	236,711	$	248,361
U.S. Government-sponsored mortgage-backed securities	292,822		301,271		402,261		416,705
Equity securities	3,882		3,945
Total Investment Securities	$	625,877	$	658,829	$	638,972	$	665,066

	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Maturity Distribution at December 31, 2015
Due in one year or less	$	4,658	$	4,704	$	4,144	$	4,148
Due after one through five years	13,725		14,295		28,054		29,175
Due after five through ten years	52,878		55,375		81,483		83,646
Due after ten years	220,600		231,672		106,086		109,765
	$	291,861	$	306,046	$	219,767	$	226,734
U.S. Government-sponsored mortgage-backed securities	342,550		346,266		398,832		405,646
Equity securities	3,912		3,912
Certificates of deposit	2,176		2,176
Total Investment Securities	$	640,499	$	658,400	$	618,599	$	632,380

Schedule of gross gains on sales and redemptions of available for sale securities

Gross gains on the sales and redemptions of available for sale securities for the three and six months ended June 30, 2016 and 2015 are shown below.

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Sales and Redemptions of Available for Sale Securities:
Gross gains	$	706	$	7	$	1,703	$	1,032
Gross losses			100				100

Schedule of investment securities with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position

The following table shows investment securities with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2016, and December 31, 2015:

	Less than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Temporarily Impaired Available for Sale Securities at June 30, 2016
U.S. Government-sponsored mortgage-backed securities	4,007		$	15	$	1,053	$	5	5,060		$	20
Total Temporarily Impaired Available for Sale Securities	4,007		15		1,053		5		5,060		20
Temporarily Impaired Held to Maturity Securities at June 30, 2016
Federal agencies	4,995		5						4,995		5
Total Temporarily Impaired Held to Maturity Securities	4,995		5						4,995		5
Total Temporarily Impaired Investment Securities	$	9,002	$	20	$	1,053	$	5	$	10,055	$	25

	Less than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Temporarily Impaired Available for Sale Securities at December 31, 2015
State and municipal	$	7,558	$	60					$	7,558	$	60
U.S. Government-sponsored mortgage-backed securities	83,396		445		$	2,101	$	73	85,497		518
Total Temporarily Impaired Available for Sale Securities	90,954		505		2,101		73		93,055		578
Temporarily Impaired Held to Maturity Securities at December 31, 2015
State and municipal					1,982		15		1,982		15
U.S. Government-sponsored mortgage-backed securities	69,641		519		12,906		268		82,547		787
Total Temporarily Impaired Held to Maturity Securities	69,641		519		14,888		283		84,529		802
Total Temporarily Impaired Investment Securities	$	160,595	$	1,024	$	16,989	$	356	$	177,584	$	1,380

Schedule of investments in debt and equity securities reported in the financial statements at an amount less than their historical cost

Certain investments in debt and equity securities are reported in the financial statements at an amount less than their historical cost as indicated in the table below.

	June 30, 2016			December 31, 2015
Investments reported at less than historical cost:
Historical cost	$	10,081		$	178,964
Fair value	$	10,055		$	177,584
Percent of the Corporation's available for sale and held to maturity portfolio	0.8		%	13.9		%

Schedule of securities for which only a credit loss was recognized in income and other losses were recorded in other comprehensive income

The following table provides information about those securities for which only a credit loss was recognized in income and other losses were recorded in other comprehensive income.

	Accumulated Credit Losses in 2016		Accumulated Credit Losses in 2015
Credit losses on debt securities held:
Balance, January 1	$	—	$	500
Reductions for previous other-than-temporary losses realized on securities sold during the year	—		(500		)
Balance, June 30	$	—	$	—

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Loans and Allowance (Tables)

6 Months Ended

Jun. 30, 2016

Receivables [Abstract]

Composition of loan portfolio by loan class

The following table shows the composition of the Corporation’s loan portfolio by loan class for the periods indicated:

	June 30, 2016			December 31, 2015
Commercial and industrial loans	$	1,084,890		$	1,057,075
Agricultural production financing and other loans to farmers	95,131			97,711
Real estate loans:
Construction	352,980			366,704
Commercial and farmland	1,869,703			1,802,921
Residential	758,870			786,105
Home Equity	374,159			348,613
Individuals' loans for household and other personal expenditures	75,205			74,717
Lease financing receivables, net of unearned income	388			588
Other commercial loans	180,103			159,388
Loans	$	4,791,429		$	4,693,822
Allowance for loan losses	(62,186		)	(62,453		)
Net Loans	$	4,729,243		$	4,631,369

Changes in allowance for loan losses

The following tables summarize changes in the allowance for loan losses by loan segment for the three and six months ended June 30, 2016, and June 30, 2015:

	Three Months Ended June 30, 2016
	Commercial			Commercial Real Estate			Consumer			Residential			Finance Leases		Total
Allowance for loan losses:
Balances, April 1	$	26,264		$	22,317		$	2,647		$	10,856		$	2	$	62,086
Provision for losses	400			200			44			146					790
Recoveries on loans	683			276			107			273					1,339
Loans charged off	(1,026		)	(513		)	(114		)	(376		)			(2,029		)
Balances, June 30, 2016	$	26,321		$	22,280		$	2,684		$	10,899		$	2	$	62,186

	Six Months Ended June 30, 2016
	Commercial			Commercial Real Estate			Consumer			Residential			Finance Leases		Total
Allowance for loan losses:
Balances, January 1	$	26,478		$	22,145		$	2,689		$	11,139		$	2	$	62,453
Provision for losses	539			414			77			310					1,340
Recoveries on loans	975			1,228			185			585					2,973
Loans charged off	(1,671		)	(1,507		)	(267		)	(1,135		)			(4,580		)
Balances, June 30, 2016	$	26,321		$	22,280		$	2,684		$	10,899		$	2	$	62,186

	Three Months Ended June 30, 2015
	Commercial			Commercial Real Estate			Consumer			Residential			Finance Leases		Total
Allowance for loan losses:
Balances, April 1	$	30,007		$	16,383		$	3,138		$	13,269		$	4	$	62,801
Provision for losses	1,190			(502		)	(200		)	(72		)	1		417
Recoveries on loans	437			147			101			747					1,432
Loans charged off	(155		)	(200		)	(112		)	(1,633		)			(2,100		)
Balances, June 30, 2015	$	31,479		$	15,828		$	2,927		$	12,311		$	5	$	62,550

	Six Months Ended June 30, 2015
	Commercial			Commercial Real Estate			Consumer			Residential			Finance Leases		Total
Allowance for loan losses:
Balances, January 1	$	28,824		$	19,327		$	2,658		$	13,152		$	3	$	63,964
Provision for losses	3,024			(3,398		)	327			462			2		417
Recoveries on loans	887			559			179			879					2,504
Loans charged off	(1,256		)	(660		)	(237		)	(2,182		)			(4,335		)
Balances, June 30, 2015	$	31,479		$	15,828		$	2,927		$	12,311		$	5	$	62,550

Allowance for credit losses and loan portfolio by loan segment

The following tables show the Corporation’s allowance for loan losses and loan portfolio by segment as of the periods indicated:

	June 30, 2016
	Commercial		Commercial Real Estate		Consumer		Residential		Finance Leases		Total
Allowance Balances:
Individually evaluated for impairment	$	1,573	$	276			$	69			$	1,918
Collectively evaluated for impairment	24,748		21,824		$	2,684	10,808		$	2	60,066
Loans Acquired with Deteriorated Credit Quality			180				22				202
Total Allowance for Loan Losses	$	26,321	$	22,280	$	2,684	$	10,899	$	2	$	62,186
Loan Balances:
Individually evaluated for impairment	$	7,841	$	21,118			$	3,462			$	32,421
Collectively evaluated for impairment	1,345,826		2,155,077		$	75,205	1,126,707		$	388	4,703,203
Loans Acquired with Deteriorated Credit Quality	6,457		46,488				2,860				55,805
Loans	$	1,360,124	$	2,222,683	$	75,205	$	1,133,029	$	388	$	4,791,429

	December 31, 2015
	Commercial		Commercial Real Estate		Consumer		Residential		Finance Leases		Total
Allowance Balances:
Individually evaluated for impairment	$	1,277	$	243			$	169			$	1,689
Collectively evaluated for impairment	25,201		21,753		$	2,689	10,966		$	2	60,611
Loans Acquired with Deteriorated Credit Quality			149				4				153
Total Allowance for Loan Losses	$	26,478	$	22,145	$	2,689	$	11,139	$	2	$	62,453
Loan Balances:
Individually evaluated for impairment	$	7,877	$	16,670			$	4,020			$	28,567
Collectively evaluated for impairment	1,298,988		2,096,089		$	74,717	1,125,316		$	588	4,595,698
Loans Acquired with Deteriorated Credit Quality	7,309		56,866				5,382				69,557
Loans	$	1,314,174	$	2,169,625	$	74,717	$	1,134,718	$	588	$	4,693,822

Summary of non-accrual loans by loan class

The following table summarizes the Corporation’s non-accrual loans by loan class as of the periods indicated:

	June 30, 2016		December 31, 2015
Commercial and industrial loans	$	3,413	$	4,634
Agriculture production financing and other loans to farmers	1,471		827
Real estate Loans:
Construction	721		736
Commercial and farmland	15,541		11,277
Residential	9,952		11,818
Home Equity	2,345		1,952
Individuals' loans for household and other personal expenditures	122		145
Total	$	33,565	$	31,389

Composition of impaired loans by loan class

The following tables show the composition of the Corporation’s commercial impaired loans by loan class as of the periods indicated:

	June 30, 2016
	Unpaid Principal Balance		Recorded Investment		Related Allowance
Impaired loans with no related allowance:
Commercial and industrial loans	$	19,322	$	10,183
Agriculture production financing and other loans to farmers	709		701
Real estate Loans:
Construction	8,089		4,091
Commercial and farmland	83,028		61,319
Residential	8,650		5,016
Home equity	176		139
Other commercial loans	16
Total	$	119,990	$	81,449
Impaired loans with related allowance:
Commercial and industrial loans	$	2,491	$	2,114	$	1,007
Agriculture production financing and other loans to farmers	1,331		1,301		566
Real estate Loans:
Commercial and farmland	2,145		1,978		456
Residential	877		801		91
Total	$	6,844	$	6,194	$	2,120
Total Impaired Loans	$	126,834	$	87,643	$	2,120

	December 31, 2015
	Unpaid Principal Balance		Recorded Investment		Related Allowance
Impaired loans with no related allowance:
Commercial and industrial loans	$	22,151	$	11,669
Agriculture production financing and other loans to farmers	370		361
Real estate Loans:
Construction	4,551		2,336
Commercial and farmland	95,930		69,024
Residential	11,262		7,338
Home equity	297		247
Other commercial loans	20
Total	$	134,581	$	90,975
Impaired loans with related allowance:
Commercial and industrial loans	$	3,043	$	2,690	$	1,247
Agriculture production financing and other loans to farmers	466		466		30
Real estate Loans:
Commercial and farmland	2,144		1,933		392
Residential	2,300		1,463		173
Total	$	7,953	$	6,552	$	1,842
Total Impaired Loans	$	142,534	$	97,527	$	1,842

	Three Months Ended June 30, 2016				Six Months Ended June 30, 2016
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Impaired loans with no related allowance:
Commercial and industrial loans	$	10,372	$	128	$	10,307	$	231
Agriculture production financing and other loans to farmers	834		2		882		2
Real estate Loans:
Construction	4,085		74		4,074		147
Commercial and farmland	62,173		861		63,136		1,706
Residential	5,069		54		5,390		107
Home equity	138				139
Total	$	82,671	$	1,119	$	83,928	$	2,193
Impaired loans with related allowance:
Commercial and industrial loans	$	2,120	$	9	$	2,129	$	19
Agriculture production financing and other loans to farmers	1,321				1,405
Real estate Loans:
Commercial and farmland	1,986				2,008
Residential	840				860
Total	$	6,267	$	9	$	6,402	$	19
Total Impaired Loans	$	88,938	$	1,128	$	90,330	$	2,212

	Three Months Ended June 30, 2015				Six Months Ended June 30, 2015
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Impaired loans with no related allowance:
Commercial and industrial loans	$	12,154	$	111	$	12,942	$	200
Agriculture production financing and other loans to farmers	1,325				1,343
Real estate Loans:
Construction	7,648		95		7,898		191
Commercial and farmland	66,625		894		66,957		1,765
Residential	7,114		57		7,150		107
Home equity	208				208
Total	$	95,074	$	1,157	$	96,498	$	2,263
Impaired loans with related allowance:
Commercial and industrial loans	$	3,204	$	10	$	3,214	$	19
Real estate Loans:
Commercial and farmland	2,622				2,727
Residential	2,600				2,603
Total	$	8,426	$	10	$	8,544	$	19
Total Impaired Loans	$	103,500	$	1,167	$	105,042	$	2,282

Credit quality of loan portfolio by loan class

The following tables summarize the credit quality of the Corporation’s loan portfolio, by loan class for the periods indicated.  Consumer non-performing loans include accruing consumer loans 90 plus days delinquent and consumer non-accrual loans.  The entire balance of a loan is considered delinquent if the minimum payment contractually required to be made is not received by the specified date. Loans that evidenced deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected are included in the applicable categories below.

	June 30, 2016
	Commercial Pass		Commercial Special Mention		Commercial Substandard		Commercial Doubtful	Commercial Loss	Consumer Performing		Consumer Non-Performing		Total
Commercial and industrial loans	$	1,022,507	$	29,117	$	33,266							$	1,084,890
Agriculture production financing and other loans to farmers	37,114		32,784		25,233								95,131
Real estate Loans:
Construction	328,366		5,023		1,606				$	17,908	$	77	352,980
Commercial and farmland	1,733,503		51,793		84,407								1,869,703
Residential	157,186		7,953		6,352				579,403		7,976		758,870
Home equity	7,377		97		743				363,618		2,324		374,159
Individuals' loans for household and other personal expenditures									75,084		121		75,205
Lease financing receivables, net of unearned income	300				88								388
Other commercial loans	180,103												180,103
Loans	$	3,466,456	$	126,767	$	151,695			$	1,036,013	$	10,498	$	4,791,429

	December 31, 2015
	Commercial Pass		Commercial Special Mention		Commercial Substandard		Commercial Doubtful		Commercial Loss	Consumer Performing		Consumer Non-Performing		Total
Commercial and industrial loans	$	962,340	$	48,432	$	45,984	$	319						$	1,057,075
Agriculture production financing and other loans to farmers	77,884		6,665		13,162									97,711
Real estate Loans:
Construction	345,449		1,271		1,790					$	18,114	$	80	366,704
Commercial and farmland	1,679,141		46,442		77,338									1,802,921
Residential	171,576		3,107		10,428					593,533		7,461		786,105
Home equity	8,218		48		600					337,718		2,029		348,613
Individuals' loans for household and other personal expenditures										74,491		226		74,717
Lease financing receivables, net of unearned income	495				93									588
Other commercial loans	159,388													159,388
Loans	$	3,404,491	$	105,965	$	149,395	$	319		$	1,023,856	$	9,796	$	4,693,822

Past due aging of loan portfolio by loan class

The tables below show a past due aging of the Corporation’s loan portfolio, by loan class, as of June 30, 2016, and December 31, 2015.

	June 30, 2016
	Current		30-59 Days Past Due		60-89 Days Past Due		Loans > 90 Days And Accruing		Non-Accrual		Total Past Due & Non-Accrual		Total
Commercial and industrial loans	$	1,080,184	$	998	$	282	$	13	$	3,413	$	4,706	$	1,084,890
Agriculture production financing and other loans to farmers	92,979		250		431				1,471		2,152		95,131
Real estate Loans:
Construction	351,147				1,112				721		1,833		352,980
Commercial and farmland	1,850,882		2,384		896				15,541		18,821		1,869,703
Residential	743,951		3,847		888		232		9,952		14,919		758,870
Home equity	370,602		628		467		117		2,345		3,557		374,159
Individuals' loans for household and other personal expenditures	74,744		297		42				122		461		75,205
Lease financing receivables, net of unearned income	388												388
Other commercial loans	180,103												180,103
Loans	$	4,744,980	$	8,404	$	4,118	$	362	$	33,565	$	46,449	$	4,791,429

	December 31, 2015
	Current		30-59 Days Past Due		60-89 Days Past Due		Loans > 90 Days And Accruing		Non-Accrual		Total Past Due & Non-Accrual		Total
Commercial and industrial loans	$	1,052,275	$	166					$	4,634	$	4,800	$	1,057,075
Agriculture production financing and other loans to farmers	96,884								827		827		97,711
Real estate Loans:
Construction	362,084		3,884						736		4,620		366,704
Commercial and farmland	1,786,092		5,552						11,277		16,829		1,802,921
Residential	765,634		6,090		$	2,061	$	502	11,818		20,471		786,105
Home equity	344,344		1,433		560		324		1,952		4,269		348,613
Individuals' loans for household and other personal expenditures	73,990		445		56		81		145		727		74,717
Lease financing receivables, net of unearned income	588												588
Other commercial loans	159,324				64						64		159,388
Loans	$	4,641,215	$	17,570	$	2,741	$	907	$	31,389	$	52,607	$	4,693,822

Schedules of troubled debt restructurings

The following tables summarize troubled debt restructurings in the Corporation's loan portfolio that occurred during the periods indicated:

	Three Months Ended June 30, 2016					Six Months Ended June 30, 2016
	Pre-Modification Recorded Balance		Post-Modification Recorded Balance		Number of Loans	Pre-Modification Recorded Balance		Post-Modification Recorded Balance		Number of Loans
Commercial and industrial loans						$	260	$	260	3
Agriculture production financing and other loans to farmers	$	1,141	$	1,141	3	1,606		1,472		5
Real estate Loans:
Commercial and farmland	3,539		3,508		5	3,891		3,860		6
Residential						113		133		3
Home Equity	174		146		1	174		146		1
Total	$	4,854	$	4,795	9	$	6,044	$	5,871	18

	Three Months Ended June 30, 2015					Six Months Ended June 30, 2015
	Pre-Modification Recorded Balance		Post-Modification Recorded Balance		Number of Loans	Pre-Modification Recorded Balance		Post-Modification Recorded Balance		Number of Loans
Commercial and industrial loans	$	1,386	$	536	1	$	3,748	$	1,897	5
Real estate Loans:
Construction						79		80		1
Commercial and farmland	537		537		1	537		2,280		2
Residential	20		871		2	44		895		3
Total	$	1,943	$	1,944	4	$	4,408	$	5,152	11

The following tables summarize the recorded investment of troubled debt restructurings as of June 30, 2016 and 2015, by modification type, that occurred during the periods indicated:

	Three Months Ended June 30, 2016
	Term Modification		Rate Modification		Combination		Total Modification
Agriculture production financing and other loans to farmers	$	1,141					$	1,141
Real estate Loans:
Commercial and farmland	418				$	3,086	3,504
Home Equity			$	143			143
Total	$	1,559	$	143	$	3,086	$	4,788

	Six Months Ended June 30, 2016
	Term Modification		Rate Modification		Combination		Total Modification
Commercial and industrial loans					$	198	$	198
Agriculture production financing and other loans to farmers	$	1,141	$	49			1,190
Real estate Loans:
Commercial and farmland	418				3,433		3,851
Residential			112				112
Home Equity			143				143
Total	$	1,559	$	304	$	3,631	$	5,494

	Three Months Ended June 30, 2015
	Term Modification		Rate Modification		Combination		Total Modification
Commercial and industrial loans	$	492					$	492
Real estate Loans:
Commercial and farmland					$	240	240
Residential	850		$	21			871
Total	$	1,342	$	21	$	240	$	1,603

	Six Months Ended June 30, 2015
	Term Modification		Rate Modification		Combination		Total Modification
Commercial and industrial loans	$	1,234			$	1,030	$	2,264
Real estate Loans:
Construction	199						199
Commercial and farmland	1,442				240		1,682
Residential	850		$	47			897
Total	$	3,725	$	47	$	1,270	$	5,042

Troubled debt restructurings that subsequently defaulted

The following tables summarize troubled debt restructures that occurred during the three and six months ended June 30, 2016, that subsequently defaulted during the period indicated and remained in default at period end. There were no troubled debt restructures that occurred during the three and six months ended June 30, 2015 that subsequently defaulted during this period. For purposes of this discussion, a loan is considered in default if it is 30 or more days past due.

	Three Months Ended June 30, 2016			Six Months Ended June 30, 2016
	Number of Loans	Recorded Balance		Number of Loans	Recorded Balance
Commercial and industrial loans	1	$	72	4	$	269
Real estate Loans:
Residential	1	55		1	55
Total	2	$	127	5	$	324

XML

Accounting for Certain Loans Acquired in a Purchase (Tables)

6 Months Ended

Jun. 30, 2016

Receivables [Abstract]

Schedule of outstanding balance and carrying amount of loans acquired during the period

The following table includes the outstanding balance and carrying amount of all acquired loans which were included in the Corporation's balance sheet at June 30, 2016, and December 31, 2015.

	June 30, 2016
	Ameriana		C Financial		Community		CFS		SCB		Total
Commercial and industrial loans	$	21,544	$	95	$	5,613	$	49,079	$	4,408	$	80,739
Agricultural production financing and other loans to farmers					2,802		25		1,047		3,874
Real estate loans:
Construction	32,597		5,034		8,923		624				47,178
Commercial and farmland	120,330		25,024		45,281		164,742		11,265		366,642
Residential	112,520		48,782		12,159		107,895		5,467		286,823
Home Equity	13,029		8,646		7,724		29,464		12,480		71,343
Individuals' loans for household and other personal expenditures	1,101		5		238		295		38		1,677
Other commercial loans	1,840						69				1,909
Total	$	302,961	$	87,586	$	82,740	$	352,193	$	34,705	$	860,185
Carrying Amount	$	290,946	$	85,505	$	77,933	$	336,031	$	30,743	$	821,158
Allowance			180		22						202
Carrying Amount Net of Allowance	$	290,946	$	85,325	$	77,911	$	336,031	$	30,743	$	820,956

	December 31, 2015
	Ameriana		C Financial		Community		CFS		SCB		Total
Commercial and industrial loans	$	21,888	$	104	$	6,769	$	52,060	$	4,620	$	85,441
Agricultural production financing and other loans to farmers					1,761				1,288		3,049
Real estate loans:
Construction	23,365		6,214		10,436		976				40,991
Commercial and farmland	144,514		27,838		49,997		189,372		13,293		425,014
Residential	123,231		55,856		21,886		118,105		6,063		325,141
Home Equity	14,261		9,144		8,231		31,986		13,431		77,053
Individuals' loans for household and other personal expenditures	1,731		10		461		443		48		2,693
Other commercial loans	1,928						72				2,000
Total	$	330,918	$	99,166	$	99,541	$	393,014	$	38,743	$	961,382
Carrying Amount	$	319,664	$	96,829	$	93,355	$	373,649	$	34,092	$	917,589
Allowance					4		149				153
Carrying Amount Net of Allowance	$	319,664	$	96,829	$	93,351	$	373,500	$	34,092	$	917,436

Schedule of accretable yield, or income expected to be collected, and reclassifications from nonaccretable yield

The accretable yield, or income expected to be collected, and reclassifications from nonaccretable yield, are identified in the table below.  The table reflects only purchased loans accounted for under ASC 310-30 and not the entire portfolio of purchased loans.

	Three Months Ended June 30, 2016
	Ameriana			C Financial			Community			CFS			SCB			Total
Beginning balance	$	2,120		$	100		$	1,456		$	1,033		$	590		$	5,299
Additions
Accretion	(47		)	(71		)	(849		)	(855		)	(293		)	(2,115		)
Reclassification from nonaccretable	5			52			738			737			154			1,686
Disposals	(232		)							(11		)				(243		)
Ending balance	$	1,846		$	81		$	1,345		$	904		$	451		$	4,627

	Six Months Ended June 30, 2016
	Ameriana			C Financial			Community			CFS			SCB			Total
Beginning balance	$	2,160		$	114		$	1,508		$	1,188		$	642		$	5,612
Additions
Accretion	(87		)	(86		)	(912		)	(2,145		)	(381		)	(3,611		)
Reclassification from nonaccretable	5			53			749			1,872			190			2,869
Disposals	(232		)							(11		)				(243		)
Ending balance	$	1,846		$	81		$	1,345		$	904		$	451		$	4,627

	Three Months Ended June 30, 2015
	C Financial			Community			CFS			SCB			Total
Beginning balance				$	1,990		$	2,009		$	818		$	4,817
Additions	$	145											145
Accretion	(12		)	(353		)	(578		)	(304		)	(1,247		)
Reclassification from nonaccretable				181			309			244			734
Disposals							(8		)				(8		)
Ending balance	$	133		$	1,818		$	1,732		$	758		$	4,441

	Six Months Ended June 30, 2015
	C Financial			Community			CFS			SCB			Total
Beginning balance				$	2,122		$	2,400		$	868		$	5,390
Additions	$	145											$	145
Accretion	(12		)	(532		)	(1,919		)	(489		)	(2,952		)
Reclassification from nonaccretable				228			1,259			379			1,866
Disposals							(8		)				(8		)
Ending balance	$	133		$	1,818		$	1,732		$	758		$	4,441

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Goodwill (Tables)

6 Months Ended

Jun. 30, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of goodwill

	2016
Balance, January 1	$	243,129
Measurement period adjustment	871
Balance, June 30	$	244,000

	2015
Balance, January 1	$	202,724
Goodwill acquired	48,879
Goodwill reduction	(8,474		)
Balance, December 31	$	243,129

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Core Deposit and Other Intangibles (Tables)

6 Months Ended

Jun. 30, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of core deposit and other intangibles

The carrying basis and accumulated amortization of recognized core deposit and other intangibles are noted below.

	June 30, 2016			December 31, 2015
Gross carrying amount	$	61,798		$	58,360
Core deposit and other intangibles acquired				4,181
Accumulated amortization	(47,119		)	(45,164		)
Measurement period adjustment	2,142
Core deposit and other intangibles reduction				(742		)
Core deposit and other intangibles	$	16,821		$	16,635

Schedule of estimated future amortization expense

Estimated future amortization expense is summarized as follows:

	Amortization Expense
2016	$	1,955
2017	3,614
2018	2,299
2019	1,914
2020	1,733
After 2020	5,306
	$	16,821

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Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Fair value of derivative financial instruments and their classification on Balance Sheet

The table below presents the fair value of the Corporation’s derivative financial instruments, as well as their classification on the Balance Sheet, as of June 30, 2016, and December 31, 2015.

Asset Derivatives

Liability Derivatives

June 30, 2016

December 31, 2015

June 30, 2016

December 31, 2015

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Derivatives designated as hedging instruments:

Interest rate contracts

Other Assets

$

5

Other Assets

$

36

Other Liabilities

$

5,092

Other Liabilities

$

2,921

Derivatives not designated as hedging instruments:

Interest rate contracts

Other Assets

$

11,971

Other Assets

$

4,938

Other Liabilities

$

12,669

Other Liabilities

$

5,149

Amount of gain (loss) recognized in other comprehensive income

The amount of gain (loss) recognized in other comprehensive income is included in the table below for the periods indicated.

Derivatives in Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative (Effective Portion)
	Three Months Ended					Six Months Ended
	June 30, 2016			June 30, 2015		June 30, 2016			June 30, 2015
Interest Rate Products	$	(813	)	$	807	$	(2,767	)	$	(469	)

Schedule of derivative instruments, gain (loss) in Income Statement

The tables below present the effect of the Corporation’s derivative financial instruments on the Income Statement for the three and six months ended June 30, 2016, and 2015.

Derivatives Not Designated as Hedging Instruments under FASB ASC 815-10	Location of Gain (Loss) Recognized Income on Derivative	Amount of Gain (Loss) Recognized in Income on Derivative
		Three Months Ended June 30, 2016			Three Months Ended June 30, 2015
Interest rate contracts	Other income	$	(242	)	$	156

Derivatives Not Designated as Hedging Instruments under FASB ASC 815-10	Location of Gain (Loss) Recognized Income on Derivative	Amount of Gain (Loss) Recognized in Income on Derivative
		Six Months Ended June 30, 2016			Six Months Ended June 30, 2015
Interest rate contracts	Other income	$	(488	)	$	55

The amount of gain (loss) reclassified from other comprehensive income into income is included in the table below for the periods indicated.

Derivatives Designated as Hedging Instruments under FASB ASC 815-10	Location of Gain (Loss) Recognized Income on Derivative	Amount of Gain (Loss) Reclassed from Other Comprehensive Income into Income (Effective Portion)
		Three Months Ended June 30, 2016		Three Months Ended June 30, 2015
Interest rate contracts	Interest Expense	(318	)	(358	)

Derivatives Designated as Hedging Instruments under FASB ASC 815-10	Location of Gain (Loss) Recognized Income on Derivative	Amount of Gain (Loss) Reclassed from Other Comprehensive Income into Income (Effective Portion)
		Six Months Ended June 30, 2016			Six Months Ended June 30, 2015
Interest rate contracts	Interest Expense	$	(642	)	$	(712	)

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Disclosures About Fair Value of Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

Fair value measurements of assets and liabilities recognized in Consolidated Condensed Balance Sheets measured at fair value

The following table presents the fair value measurements of assets and liabilities recognized in the Consolidated Condensed Balance Sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2016, and December 31, 2015.

			Fair Value Measurements Using:
June 30, 2016	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available for sale securities:
U.S. Government-sponsored agency securities	$	102		$	102
State and municipal	353,480			347,951		$	5,529
U.S. Government-sponsored mortgage-backed securities	301,271			301,271
Corporate obligations	31					31
Equity securities	3,945			3,941		4
Interest rate swap asset	11,971			11,971
Interest rate cap	5			5
Interest rate swap liability	17,761			17,761

			Fair Value Measurements Using:
December 31, 2015	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available for sale securities:
U.S. Government-sponsored agency securities	$	104		$	104
State and municipal	305,911			300,014		$	5,897
U.S. Government-sponsored mortgage-backed securities	346,266			346,266
Certificates of deposit	2,176			2,176
Corporate obligations	31					31
Equity securities	3,912			3,908		4
Interest rate swap asset	4,938			4,938
Interest rate cap	36			36
Interest rate swap liability	8,070			8,070

Reconciliation of beginning and ending balances of recurring fair value measurements recognized in Consolidated Condensed Balance Sheets using significant unobservable Level 3 inputs

The following is a reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the Consolidated Condensed Balance Sheets using significant unobservable (Level 3) inputs for the three and six months ended June 30, 2016 and 2015.

	Available for Sale Securities
	Three Months Ended June 30, 2016		Three Months Ended June 30, 2015			Six Months Ended June 30, 2016			Six Months Ended June 30, 2015
Balance at beginning of the period	$	5,504	$	6,198		$	5,932		$	6,646
Total realized and unrealized gains and losses:
Included in net income
Included in other comprehensive income	59		50			96			141
Purchases, issuances and settlements
Transfers in/(out) of Level 3
Principal payments	1		(220		)	(464		)	(759		)
Ending balance	$	5,564	$	6,028		$	5,564		$	6,028

Description of valuation methodologies used for instruments measured at fair value on a non-recurring basis and recognized in Consolidated Condensed Balance Sheets

The following table presents the fair value measurement of assets and liabilities measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2016, and December 31, 2015.

			Fair Value Measurements Using
June 30, 2016	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Impaired loans (collateral dependent)	$	11,013			$	11,013
Other real estate owned	2,256				2,256

			Fair Value Measurements Using
December 31, 2015	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable  Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Impaired loans (collateral dependent)	$	7,066			$	7,066
Other real estate owned	5,529				5,529

Unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements other than goodwill

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements, other than goodwill, at June 30, 2016 and December 31, 2015.

June 30, 2016	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted-Average)
State and municipal securities	$	5,529	Discounted cash flow	Maturity/Call date	1 month to 20 yrs
				Blend of US Muni BQ curve	A- to BBB-
				Discount rate	.69% - 5%
Corporate obligations and Equity securities	$	35	Discounted cash flow	Risk free rate	3 month LIBOR
				plus premium for illiquidity	plus 200bps
Impaired loans (collateral dependent)	$	11,013	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability	0% - 10% (1%)
Other real estate owned	$	2,256	Appraisals	Discount to reflect current market conditions	0% - 10% (4%)

December 31, 2015	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted-Average)
State and municipal securities	$	5,897	Discounted cash flow	Maturity/Call date	1 month to 15 yrs
				Blend of US Muni BQ curve	A- to BBB-
				Discount rate	.80% - 5%
Corporate obligations and Equity securities	$	35	Discounted cash flow	Risk free rate	3 month LIBOR
				plus premium for illiquidity	plus 200bps
Impaired loans (collateral dependent)	$	7,066	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability	0% - 50% (2%)
Other real estate owned	$	5,529	Appraisals	Discount to reflect current market conditions	0% - 20% (2%)

Estimated fair values of financial instruments

The following table presents estimated fair values of the Corporation’s financial instruments and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2016, and December 31, 2015.

			June 30, 2016
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
			(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	120,471	$	120,471
Interest-bearing time deposits	62,533		62,533
Investment securities available for sale	658,829				$	653,265	$	5,564
Investment securities held to maturity	638,972				648,705		16,361
Loans held for sale	18,854				18,854
Loans	4,729,243						4,710,073
Federal Reserve Bank and Federal Home Loan Bank stock	18,096				18,096
Interest rate swap and cap asset	11,976				11,976
Interest receivable	23,351				23,351
Liabilities:
Deposits	$	5,407,554	$	4,268,709	$	1,129,241
Borrowings:
Federal funds purchased	20,000				20,000
Securities sold under repurchase agreements	140,777				140,763
Federal Home Loan Bank advances	268,579				268,150
Subordinated debentures and term loans	127,678				103,155
Interest rate swap liability	17,761				17,761
Interest payable	3,051				3,051

			December 31, 2015
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
			(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	102,170	$	102,170
Interest-bearing time deposits	32,315		32,315
Investment securities available for sale	658,400				$	652,468	$	5,932
Investment securities held to maturity	618,599				598,082		34,298
Loans held for sale	9,894				9,894
Loans	4,631,369						4,539,940
Federal Reserve Bank and Federal Home Loan Bank stock	37,633				37,633
Interest rate swap and cap asset	4,974				4,974
Interest receivable	24,415				24,415
Liabilities:
Deposits	$	5,289,647	$	4,095,004	$	1,177,142
Borrowings:
Federal funds purchased	49,721				49,721
Securities sold under repurchase agreements	155,325				155,325
Federal Home Loan Bank advances	235,652				236,375
Subordinated debentures and term loans	127,846				103,643
Interest rate swap liability	8,070				8,070
Interest payable	3,092				3,092

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Transfers Accounted for as Secured Borrowings (Tables)

6 Months Ended

Jun. 30, 2016

Banking and Thrift [Abstract]

Schedule of collateral pledged for all repurchase agreements accounted for as secured borrowings

The collateral pledged for all repurchase agreements that are accounted for as secured borrowings as of June 30, 2016 and December 31, 2015 were:

	June 30, 2016
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater Than 90 Days		Total
U.S. Government-sponsored mortgage-backed securities	$	119,935	$	1,335	$	2,672	$	16,835	$	140,777

	December 31, 2015
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater Than 90 Days		Total
U.S. Government-sponsored mortgage-backed securities	$	131,537	$	5,680	$	8,892	$	9,216	$	155,325

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Accumulated Other Comprehensive Income (Loss) (Tables)

6 Months Ended

Jun. 30, 2016

Equity [Abstract]

Schedule of accumulated other comprehensive income (loss)

The following table summarizes the changes in the balances of each component of accumulated other comprehensive income (loss), net of tax, as of June 30, 2016 and 2015:

	Accumulated Other Comprehensive Income (Loss)
	Unrealized Gains (Losses) on Securities Available for Sale			Unrealized Gains (Losses) on Cash Flow Hedges			Unrealized Gains (Losses) on Defined Benefit Plans			Total
Balance at December 31, 2015	$	12,325		$	(2,347	)	$	(11,340	)	$	(1,362	)
Other comprehensive income before reclassifications	10,885			(1,798		)				9,087
Amounts reclassified from accumulated other comprehensive income	(1,107		)	417						(690		)
Period change	9,778			(1,381		)	—			8,397
Balance at June 30, 2016	$	22,103		$	(3,728	)	$	(11,340	)	$	7,035
Balance at December 31, 2014	$	14,098		$	(2,182	)	$	(13,546	)	$	(1,630	)
Other comprehensive income before reclassifications	(4,413		)	(304		)				(4,717		)
Amounts reclassified from accumulated other comprehensive income	(606		)	463						(143		)
Period change	(5,019		)	159			—			(4,860		)
Balance at June 30, 2015	$	9,079		$	(2,023	)	$	(13,546	)	$	(6,490	)

Reclassification out of accumulated other comprehensive income (loss)

The following table presents the reclassification adjustments out of accumulated other comprehensive income (loss) that were included in net income in the Consolidated Condensed Statements of Income for the three and six months ended June 30, 2016 and 2015:

	Amount Reclassified from Accumulated Other Comprehensive Income (Loss) For the Three Months Ended June 30,
Details about Accumulated Other Comprehensive Income (Loss)Components	2016			2015			Affected Line Item in the Statements of Income
Unrealized gains (losses) on available for sale securities (1)
Realized securities gains (losses) reclassified into income	$	706		$	(93	)	Other income - net realized gains on sales of available for sale securities
Related income tax expense	(247		)	33			Income tax expense
	$	459		$	(60	)
Unrealized gains (losses) on cash flow hedges (2)
Interest rate contracts	$	(318	)	$	(358	)	Interest expense - subordinated debentures and term loans
Related income tax benefit	111			125			Income tax expense
	$	(207	)	$	(233	)
Total reclassifications for the period, net of tax	$	252		$	(293	)

	Amount Reclassified from Accumulated Other Comprehensive Income (Loss) For the Six Months Ended June 30,
Details about Accumulated Other Comprehensive Income (Loss)Components	2016			2015			Affected Line Item in the Statements of Income
Unrealized gains (losses) on available for sale securities (1)
Realized securities gains reclassified into income	$	1,703		$	932		Other income - net realized gains on sales of available for sale securities
Related income tax expense	(596		)	(326		)	Income tax expense
	$	1,107		$	606
Unrealized gains (losses) on cash flow hedges (2)
Interest rate contracts	$	(642	)	$	(712	)	Interest expense - subordinated debentures and term loans
Related income tax benefit	225			249			Income tax expense
	$	(417	)	$	(463	)
Total reclassifications for the period, net of tax	$	690		$	143

⁽¹⁾ For additional detail related to unrealized gains (losses) on available for sale securities and related amounts reclassified from accumulated other comprehensive income see NOTE 3. INVESTMENT SECURITIES.

⁽²⁾ For additional detail related to unrealized gains (losses) on cash flow hedges and related amounts reclassified from accumulated other comprehensive income see NOTE 8. DERIVATIVE FINANCIAL INSTRUMENTS.

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Share-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Components of share-based compensation awards

The following table summarizes the components of the Corporation's share-based compensation awards recorded as expense:

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Stock and ESPP Options
Pre-tax compensation expense	$	21		$	28		$	36		$	54
Income tax expense (benefit)	10						10			(1		)
Stock and ESPP option expense, net of income taxes	$	31		$	28		$	46		$	53
Restricted Stock Awards
Pre-tax compensation expense	$	620		$	586		$	1,199		$	1,076
Income tax benefit	(217		)	(198		)	(420		)	(366		)
Restricted stock awards expense, net of income taxes	$	403		$	388		$	779		$	710
Total Share-Based Compensation
Pre-tax compensation expense	$	641		$	614		$	1,235		$	1,130
Income tax benefit	(207		)	(198		)	(410		)	(367		)
Total share-based compensation expense, net of income taxes	$	434		$	416		$	825		$	763

Stock option activity under stock option plans

Stock option activity under the Corporation's stock option plans as of June 30, 2016 and changes during the six months ended June 30, 2016, were as follows:

	Number of Shares		Weighted-Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value
Outstanding at January 1, 2016	442,012		$	19.99
Granted	—
Exercised	(13,828	)	$	15.94
Canceled	(49,482	)	$	25.14
OutstandingJune 30, 2016	378,702		$	19.47	3.05	2,313,252
Vested and Expected to Vest at June 30, 2016	378,702		$	19.47	3.02	2,313,252
Exercisable at June 30, 2016	378,702		$	19.47	3.05	2,313,252

Unvested RSAs outstanding

The following table summarizes information on unvested RSAs outstanding as of June 30, 2016:

	Number of Shares		Weighted-Average Grant Date Fair Value
Unvested RSAs at January 1, 2016	354,504		$	19.65
Granted	116,133		$	23.48
Vested	(106,290	)	$	15.39
Forfeited	(4,943	)	$	22.28
Unvested RSAs at June 30, 2016	359,404		$	22.42

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Income Tax (Tables)

6 Months Ended

Jun. 30, 2016

Income Tax Disclosure [Abstract]

Summary of differences between income taxes at federal statutory tax rate and effective tax rate

The following table summarizes the major components creating differences between income taxes at the federal statutory and the effective tax rate recorded in the consolidated statements of income for the three and six months ended June 30, 2016 and 2015:

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Reconciliation of Federal Statutory to Actual Tax Expense:
Federal statutory income tax at 35%	$	9,353		$	9,389		$	17,496		$	17,091
Tax-exempt interest income	(2,104		)	(1,738		)	(4,130		)	(3,167		)
Basis difference on sale of insurance subsidiary				2,252						2,252
Stock compensation	8			10			13			18
Earnings on life insurance	(453		)	(223		)	(970		)	(485		)
Tax credits	(129		)	(148		)	(258		)	(292		)
Other	41			(686		)	139			(727		)
Actual Tax Expense	$	6,716		$	8,856		$	12,290		$	14,690
Effective Tax Rate	25.1		%	33.0		%	24.6		%	30.1		%

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Net Income Per Share (Tables)

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Basic and diluted net income per share

The following table reconciles basic and diluted net income per share for the three and six months ended June 30, 2016 and 2015.

	Three Months Ended June 30,
	2016					2015
	Net Income		Weighted-Average Shares	Per Share Amount		Net Income		Weighted-Average Shares	Per Share Amount
Net income available to common stockholders	20,006		40,751,720	$	0.50	17,968		37,793,448	$	0.47
Effect of dilutive stock options and warrants			217,391					249,911
Diluted net income per share	$	20,006	40,969,111	$	0.49	$	17,968	38,043,359	$	0.47

	Six Months Ended June 30,
	2016					2015
	Net Income		Weighted-Average Shares	Per Share Amount		Net Income		Weighted-Average Shares	Per Share Amount
Net income available to common stockholders	37,699		40,721,147	$	0.93	34,140		37,751,896	$	0.90
Effect of dilutive stock options and warrants			220,338					270,036
Diluted net income per share	$	37,699	40,941,485	$	0.92	$	34,140	38,021,932	$	0.90

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Acquisitions and Divestitures - Narrative (Details) $ / shares in Units, $ in Thousands, shares in Millions			6 Months Ended
	Dec. 31, 2015 USD ($) bank shares	Apr. 17, 2015 USD ($) bank $ / shares	Jun. 30, 2016 USD ($)	Jun. 30, 2015 USD ($)
Business Acquisition [Line Items]
Common stock issued, value
Ameriana
Business Acquisition [Line Items]
Percentage of interest acquired	100.00%
Number of banking centers acquired | bank	13
Stock issued as a part of acquisition (in shares) | shares	2.8
Common stock issued, value	$ 70,400
Core deposit intangible	$ 5,342
Acquired intangible asset, expected useful life	10 years
Purchase price	$ 70,402
Ameriana | Common Stock
Business Acquisition [Line Items]
Number of shares of common stock	0.9037
C Financial
Business Acquisition [Line Items]
Percentage of interest acquired		100.00%
Number of banking centers acquired | bank		6
Core deposit intangible		$ 981
Acquired intangible asset, expected useful life		10 years
Purchase price		$ 14,500
Cash received by shareholders for each share of common stock held (in dollars per share) | $ / shares		$ 6.738
Goodwill, expected tax deductible period		15 years

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Acquisitions and Divestitures - Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015	Apr. 17, 2015	Dec. 31, 2014
Business Acquisition [Line Items]
Goodwill	$ 244,000	$ 243,129		$ 202,724
Ameriana
Business Acquisition [Line Items]
Cash and cash equivalents		4,068
Interest-bearing time deposits		8,790
Investment securities		61,754
Loans		316,929
Premises and equipment		13,946
Federal Home Loan Bank stock		2,693
Other real estate owned		5,613
Interest receivable		1,306
Cash surrender value of life insurance		28,188
Other assets		6,713
Deposits		(383,718)
Interest payable		(24)
Federal Home Loan Bank Advances		(24,884)
Subordinated debentures		(5,487)
Other liabilities		(9,451)
Net tangible assets acquired		26,436
Core deposit intangible		5,342
Goodwill		38,624
Purchase price		$ 70,402
C Financial
Business Acquisition [Line Items]
Cash and cash equivalents			$ 2,496
Federal Funds sold			7,018
Interest-bearing time deposits			922
Loans			110,625
Premises and equipment			7,290
Federal Home Loan Bank stock			855
Interest receivable			292
Other assets			119
Deposits			(105,326)
Interest payable			(29)
Federal Home Loan Bank Advances			(18,958)
Other liabilities			(2,911)
Net tangible assets acquired			2,393
Core deposit intangible			981
Goodwill			11,126
Purchase price			$ 14,500

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Acquisitions and Divestitures - Subsidiary Divestiture Narrative (Details) - FMIG $ in Millions	Jun. 12, 2015 USD ($)
Noncash or Part Noncash Divestitures [Line Items]
Purchase price	$ 18.0
Amount paid at closing	16.0
Promissory note	$ 2.0
Term of promissory note (in years)	2 years
Gain on sale of subsidiary	$ 8.3

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Investment Securities - Amortized Cost and Approximate Fair Value of Securities (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Available for sale securities
Amortized Cost	$ 625,877	$ 640,499
Gross Unrealized Gains	32,972	18,479
Gross Unrealized Losses	20	578
Fair Value	658,829	658,400
Held to maturity securities
Amortized Cost	638,972	618,599
Gross Unrealized Gains	26,099	14,583
Gross Unrealized Losses	5	802
Fair Value	665,066	632,380
Amortized Cost	1,264,849	1,259,098
Gross Unrealized Gains	59,071	33,062
Gross Unrealized Losses	25	1,380
Fair Value	1,323,895	1,290,780
U.S. Government-sponsored agency securities
Available for sale securities
Amortized Cost	100	100
Gross Unrealized Gains	2	4
Gross Unrealized Losses
Fair Value	102	104
State and municipal
Available for sale securities
Amortized Cost	329,042	291,730
Gross Unrealized Gains	24,438	14,241
Gross Unrealized Losses		60
Fair Value	353,480	305,911
Held to maturity securities
Amortized Cost	207,731	219,767
Gross Unrealized Gains	11,621	6,982
Gross Unrealized Losses		15
Fair Value	219,352	226,734
U.S. Government-sponsored mortgage-backed securities
Available for sale securities
Amortized Cost	292,822	342,550
Gross Unrealized Gains	8,469	4,234
Gross Unrealized Losses	20	518
Fair Value	301,271	346,266
Held to maturity securities
Amortized Cost	402,261	398,832
Gross Unrealized Gains	14,444	7,601
Gross Unrealized Losses		787
Fair Value	416,705	405,646
Corporate obligations
Available for sale securities
Amortized Cost	31	31
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value	31	31
Equity securities
Available for sale securities
Amortized Cost	3,882	3,912
Gross Unrealized Gains	63
Gross Unrealized Losses
Fair Value	3,945	3,912
Federal agencies
Held to maturity securities
Amortized Cost	28,980
Gross Unrealized Gains	34
Gross Unrealized Losses	5
Fair Value	$ 29,009
Certificates of deposit
Available for sale securities
Amortized Cost		2,176
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value		$ 2,176

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Investment Securities - Amortized Cost and Fair Value of Available for Sale Securities and Held to Maturity Securities by Contractual Maturity (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Amortized Cost
Due in one year or less	$ 3,065	$ 4,658
Due after one through five years	19,909	13,725
Due after five through ten years	60,972	52,878
Due after ten years	245,227	220,600
Total debt securities with a single maturity date	329,173	291,861
Total Investment Securities	625,877	640,499
Fair Value
Due in one year or less	3,086	4,704
Due after one through five years	21,060	14,295
Due after five through ten years	64,871	55,375
Due after ten years	264,596	231,672
Total debt securities with a single maturity date	353,613	306,046
Total Investment Securities	658,829	658,400
Amortized Cost
Due in one year or less	2,500	4,144
Due after one through five years	42,528	28,054
Due after five through ten years	82,937	81,483
Due after ten years	108,746	106,086
Total debt securities with a single maturity date	236,711	219,767
Total Investment Securities	638,972	618,599
Fair Value
Due in one year or less	2,532	4,148
Due after one through five years	44,205	29,175
Due after five through ten years	85,365	83,646
Due after ten years	116,259	109,765
Total debt securities with a single maturity date	248,361	226,734
Investment securities held to maturity	665,066	632,380
U.S. Government-sponsored mortgage-backed securities
Amortized Cost
Without single maturity date	292,822	342,550
Fair Value
Without single maturity date	301,271	346,266
Amortized Cost
Without single maturity date	402,261	398,832
Total Investment Securities	402,261	398,832
Fair Value
Without single maturity date	416,705	405,646
Investment securities held to maturity	416,705	405,646
Equity securities
Amortized Cost
Without single maturity date	3,882	3,912
Fair Value
Without single maturity date	3,945	3,912
Amortized Cost
Without single maturity date
Fair Value
Without single maturity date
Certificates of deposit
Amortized Cost
Without single maturity date		2,176
Fair Value
Without single maturity date		2,176
Amortized Cost
Without single maturity date
Fair Value
Without single maturity date

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Investment Securities - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2009	Dec. 31, 2015
Investments, Debt and Equity Securities [Abstract]
Carrying value of securities pledged as collateral	$ 607,799		$ 607,799			$ 637,358
Book value of securities sold under agreements to repurchase	135,855		135,855			$ 153,789
Schedule of Available for sale Securities and Held to maturity Securities [Line Items]
Net realized gains on sales of available for sale securities	$ 706	$ (93)	$ 1,703	$ 932
Corporate obligations
Schedule of Available for sale Securities and Held to maturity Securities [Line Items]
Net impairment losses recognized in earnings					$ 500
Net realized gains on sales of available for sale securities				$ 45

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Investment Securities - Gross Gains on Sales and Redemptions of Available for Sale Securities (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Sales and Redemptions of Available for Sale Securities:
Gross gains	$ 706	$ 7	$ 1,703	$ 1,032
Gross losses		$ 100		$ 100

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Investment Securities - Investments' Gross Unrealized Losses and Fair Value Aggregated by Investment Category and Length of Time in Continuous Unrealized Loss Position (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Fair Value
Less than 12 Months	$ 4,007	$ 90,954
12 Months or Longer	1,053	2,101
Total	5,060	93,055
Gross Unrealized Losses
Less than 12 Months	15	505
12 Months or Longer	5	73
Total	20	578
Fair Value
Less than 12 Months	4,995	69,641
12 Months or Longer		14,888
Total	4,995	84,529
Gross Unrealized Losses
Less than 12 Months	5	519
12 Months or Longer		283
Total	5	802
Available-for-sale Securities and Held-to-maturity Securities [Abstract]
Less than 12 Months, Fair Value	9,002	160,595
12 Months or Longer, Fair Value	1,053	16,989
Total, Fair Value	10,055	177,584
Less than 12 Months, Gross Unrealized Losses	20	1,024
12 Months or Longer, Gross Unrealized Losses	5	356
Total, Gross Unrealized Losses	25	1,380
State and municipal
Fair Value
Less than 12 Months		7,558
12 Months or Longer
Total		7,558
Gross Unrealized Losses
Less than 12 Months		60
12 Months or Longer
Total		60
U.S. Government-sponsored mortgage-backed securities
Fair Value
Less than 12 Months	4,007	83,396
12 Months or Longer	1,053	2,101
Total	5,060	85,497
Gross Unrealized Losses
Less than 12 Months	15	445
12 Months or Longer	5	73
Total	20	518
Federal agencies
Fair Value
Less than 12 Months	4,995
12 Months or Longer
Total	4,995
Gross Unrealized Losses
Less than 12 Months	5
12 Months or Longer
Total	$ 5
State and municipal
Fair Value
Less than 12 Months
12 Months or Longer		1,982
Total		1,982
Gross Unrealized Losses
Less than 12 Months
12 Months or Longer		15
Total		15
U.S. Government-sponsored mortgage-backed securities
Fair Value
Less than 12 Months		69,641
12 Months or Longer		12,906
Total		82,547
Gross Unrealized Losses
Less than 12 Months		519
12 Months or Longer		268
Total		$ 787

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Investment Securities - Investments in Debt and Equity Securities Reported Less than Historical Cost (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Schedule of Investments [Line Items]
Fair value	$ 10,055	$ 177,584
Investments reported at less than historical cost
Schedule of Investments [Line Items]
Historical cost	10,081	178,964
Fair value	$ 10,055	$ 177,584
Percent of the Corporation's available for sale and held to maturity portfolio	0.80%	13.90%

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Investment Securities - Debt Securities Credit Loss Recognized in Income, and Other Losses Recorded in Other Comprehensive Income (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Credit losses on debt securities held:
Beginning balance	$ 0	$ 500
Reductions for previous other-than-temporary losses realized on securities sold during the year	0	(500)
Ending balance	$ 0	$ 0

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Loans and Allowance - Additional Information (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Receivables [Abstract]
Loans held for sale	$ 18,854	$ 9,894
Real estate loans - Commercial and farmland
Accounts, Notes, Loans and Financing Receivable [Line Items]
Percentage of troubled debt restructured loans	66.00%
Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans with formal foreclosure proceedings	$ 2,735	$ 1,391

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Loans and Allowance - Composition of Loan Portfolio by Loan Class (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 4,791,429		$ 4,693,822
Allowance for loan losses	(62,186)	$ (62,086)	(62,453)	$ (62,550)	$ (62,801)	$ (63,964)
Net Loans	4,729,243		4,631,369
Commercial and industrial loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	1,084,890		1,057,075
Agricultural production financing and other loans to farmers
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	95,131		97,711
Real estate loans - Construction
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	352,980		366,704
Real estate loans - Commercial and farmland
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	1,869,703		1,802,921
Real estate loans - Residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	758,870		786,105
Allowance for loan losses	(10,899)	(10,856)	(11,139)	(12,311)	(13,269)	(13,152)
Real estate loans - Home Equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	374,159		348,613
Individuals' loans for household and other personal expenditures
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	75,205		74,717
Allowance for loan losses	(2,684)	(2,647)	(2,689)	(2,927)	(3,138)	(2,658)
Lease financing receivables, net of unearned income
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	388		588
Allowance for loan losses	(2)	$ (2)	(2)	$ (5)	$ (4)	$ (3)
Other commercial loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 180,103		$ 159,388

XML

Loans and Allowance - Changes in Allowance for Loan Losses by Loan Segment (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Allowance for loan losses:
Beginning balance	$ 62,086	$ 62,801	$ 62,453	$ 63,964
Provision for losses	790	417	1,340	417
Recoveries on loans	1,339	1,432	2,973	2,504
Loans charged off	(2,029)	(2,100)	(4,580)	(4,335)
Ending balance	62,186	62,550	62,186	62,550
Commercial
Allowance for loan losses:
Beginning balance	26,264	30,007	26,478	28,824
Provision for losses	400	1,190	539	3,024
Recoveries on loans	683	437	975	887
Loans charged off	(1,026)	(155)	(1,671)	(1,256)
Ending balance	26,321	31,479	26,321	31,479
Commercial Real Estate
Allowance for loan losses:
Beginning balance	22,317	16,383	22,145	19,327
Provision for losses	200	(502)	414	(3,398)
Recoveries on loans	276	147	1,228	559
Loans charged off	(513)	(200)	(1,507)	(660)
Ending balance	22,280	15,828	22,280	15,828
Consumer
Allowance for loan losses:
Beginning balance	2,647	3,138	2,689	2,658
Provision for losses	44	(200)	77	327
Recoveries on loans	107	101	185	179
Loans charged off	(114)	(112)	(267)	(237)
Ending balance	2,684	2,927	2,684	2,927
Residential
Allowance for loan losses:
Beginning balance	10,856	13,269	11,139	13,152
Provision for losses	146	(72)	310	462
Recoveries on loans	273	747	585	879
Loans charged off	(376)	(1,633)	(1,135)	(2,182)
Ending balance	10,899	12,311	10,899	12,311
Finance Leases
Allowance for loan losses:
Beginning balance	2	4	2	3
Provision for losses		1		2
Recoveries on loans
Loans charged off
Ending balance	$ 2	$ 5	$ 2	$ 5

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Loans and Allowance - Allowance for Credit Losses and Loan Portfolio by Loan Segment (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance balances - Individually evaluated for impairment	$ 1,918		$ 1,689
Allowance balances - Collectively evaluated for impairment	60,066		60,611
Total Allowance for Loan Losses	62,186	$ 62,086	62,453	$ 62,550	$ 62,801	$ 63,964
Loan balances - Individually evaluated for impairment	32,421		28,567
Loan balances - Collectively evaluated for impairment	4,703,203		4,595,698
Loans	4,791,429		4,693,822
Loans Acquired with Deteriorated Credit Quality
Financing Receivable, Allowance for Credit Losses [Line Items]
Total Allowance for Loan Losses	202		153
Loans	55,805		69,557
Commercial
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance balances - Individually evaluated for impairment	1,573		1,277
Allowance balances - Collectively evaluated for impairment	24,748		25,201
Total Allowance for Loan Losses	26,321	26,264	26,478	31,479	30,007	28,824
Loan balances - Individually evaluated for impairment	7,841		7,877
Loan balances - Collectively evaluated for impairment	1,345,826		1,298,988
Loans	1,360,124		1,314,174
Commercial | Loans Acquired with Deteriorated Credit Quality
Financing Receivable, Allowance for Credit Losses [Line Items]
Total Allowance for Loan Losses
Loans	6,457		7,309
Commercial Real Estate
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance balances - Individually evaluated for impairment	276		243
Allowance balances - Collectively evaluated for impairment	21,824		21,753
Total Allowance for Loan Losses	22,280	22,317	22,145	15,828	16,383	19,327
Loan balances - Individually evaluated for impairment	21,118		16,670
Loan balances - Collectively evaluated for impairment	2,155,077		2,096,089
Loans	2,222,683		2,169,625
Commercial Real Estate | Loans Acquired with Deteriorated Credit Quality
Financing Receivable, Allowance for Credit Losses [Line Items]
Total Allowance for Loan Losses	180		149
Loans	46,488		56,866
Consumer
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance balances - Individually evaluated for impairment
Allowance balances - Collectively evaluated for impairment	2,684		2,689
Total Allowance for Loan Losses	2,684	2,647	2,689	2,927	3,138	2,658
Loan balances - Individually evaluated for impairment
Loan balances - Collectively evaluated for impairment	75,205		74,717
Loans	75,205		74,717
Consumer | Loans Acquired with Deteriorated Credit Quality
Financing Receivable, Allowance for Credit Losses [Line Items]
Total Allowance for Loan Losses
Loans
Residential
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance balances - Individually evaluated for impairment	69		169
Allowance balances - Collectively evaluated for impairment	10,808		10,966
Total Allowance for Loan Losses	10,899	10,856	11,139	12,311	13,269	13,152
Loan balances - Individually evaluated for impairment	3,462		4,020
Loan balances - Collectively evaluated for impairment	1,126,707		1,125,316
Loans	1,133,029		1,134,718
Residential | Loans Acquired with Deteriorated Credit Quality
Financing Receivable, Allowance for Credit Losses [Line Items]
Total Allowance for Loan Losses	22		4
Loans	2,860		5,382
Finance Leases
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance balances - Individually evaluated for impairment
Allowance balances - Collectively evaluated for impairment	2		2
Total Allowance for Loan Losses	2	$ 2	2	$ 5	$ 4	$ 3
Loan balances - Individually evaluated for impairment
Loan balances - Collectively evaluated for impairment	388		588
Loans	388		588
Finance Leases | Loans Acquired with Deteriorated Credit Quality
Financing Receivable, Allowance for Credit Losses [Line Items]
Total Allowance for Loan Losses
Loans

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Loans and Allowance - Summary of Non-Accrual Loans by Loan Class (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	$ 33,565	$ 31,389
Commercial and industrial loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	3,413	4,634
Agricultural production financing and other loans to farmers
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	1,471	827
Real estate loans - Construction
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	721	736
Real estate loans - Commercial and farmland
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	15,541	11,277
Real estate loans - Residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	9,952	11,818
Real estate loans - Home Equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	2,345	1,952
Individuals' loans for household and other personal expenditures
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	$ 122	$ 145

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Loans and Allowance - Composition of Impaired Loans by Loan Class (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Unpaid Principal Balance
Impaired loans with no related allowance	$ 119,990		$ 119,990		$ 134,581
Impaired loans with related allowance	6,844		6,844		7,953
Total Impaired Loans	126,834		126,834		142,534
Recorded Investment
Impaired loans with no related allowance	81,449		81,449		90,975
Impaired loans with related allowance	6,194		6,194		6,552
Total Impaired Loans	87,643		87,643		97,527
Related Allowance	2,120		2,120		1,842
Average Recorded Investment
Impaired loans with no related allowance	82,671	$ 95,074	83,928	$ 96,498
Impaired loans with related allowance	6,267	8,426	6,402	8,544
Total Impaired Loans	88,938	103,500	90,330	105,042
Interest Income Recognized
Impaired loans with no related allowance	1,119	1,157	2,193	2,263
Impaired loans with related allowance	9	10	19	19
Total Impaired Loans	1,128	1,167	2,212	2,282
Commercial and industrial loans
Unpaid Principal Balance
Impaired loans with no related allowance	19,322		19,322		22,151
Impaired loans with related allowance	2,491		2,491		3,043
Recorded Investment
Impaired loans with no related allowance	10,183		10,183		11,669
Impaired loans with related allowance	2,114		2,114		2,690
Related Allowance	1,007		1,007		1,247
Average Recorded Investment
Impaired loans with no related allowance	10,372	12,154	10,307	12,942
Impaired loans with related allowance	2,120	3,204	2,129	3,214
Interest Income Recognized
Impaired loans with no related allowance	128	111	231	200
Impaired loans with related allowance	9	10	19	19
Agricultural production financing and other loans to farmers
Unpaid Principal Balance
Impaired loans with no related allowance	709		709		370
Impaired loans with related allowance	1,331		1,331		466
Recorded Investment
Impaired loans with no related allowance	701		701		361
Impaired loans with related allowance	1,301		1,301		466
Related Allowance	566		566		30
Average Recorded Investment
Impaired loans with no related allowance	834	1,325	882	1,343
Impaired loans with related allowance	1,321		1,405
Interest Income Recognized
Impaired loans with no related allowance	2		2
Impaired loans with related allowance
Real estate loans - Construction
Unpaid Principal Balance
Impaired loans with no related allowance	8,089		8,089		4,551
Recorded Investment
Impaired loans with no related allowance	4,091		4,091		2,336
Average Recorded Investment
Impaired loans with no related allowance	4,085	7,648	4,074	7,898
Interest Income Recognized
Impaired loans with no related allowance	74	95	147	191
Real estate loans - Commercial and farmland
Unpaid Principal Balance
Impaired loans with no related allowance	83,028		83,028		95,930
Impaired loans with related allowance	2,145		2,145		2,144
Recorded Investment
Impaired loans with no related allowance	61,319		61,319		69,024
Impaired loans with related allowance	1,978		1,978		1,933
Related Allowance	456		456		392
Average Recorded Investment
Impaired loans with no related allowance	62,173	66,625	63,136	66,957
Impaired loans with related allowance	1,986	2,622	2,008	2,727
Interest Income Recognized
Impaired loans with no related allowance	861	894	1,706	1,765
Impaired loans with related allowance
Real estate loans - Residential
Unpaid Principal Balance
Impaired loans with no related allowance	8,650		8,650		11,262
Impaired loans with related allowance	877		877		2,300
Recorded Investment
Impaired loans with no related allowance	5,016		5,016		7,338
Impaired loans with related allowance	801		801		1,463
Related Allowance	91		91		173
Average Recorded Investment
Impaired loans with no related allowance	5,069	7,114	5,390	7,150
Impaired loans with related allowance	840	2,600	860	2,603
Interest Income Recognized
Impaired loans with no related allowance	54	57	107	107
Impaired loans with related allowance
Real estate loans - Home equity
Unpaid Principal Balance
Impaired loans with no related allowance	176		176		297
Recorded Investment
Impaired loans with no related allowance	139		139		247
Average Recorded Investment
Impaired loans with no related allowance	138	208	139	$ 208
Interest Income Recognized
Impaired loans with no related allowance
Other commercial loans
Unpaid Principal Balance
Impaired loans with no related allowance	16		16		20
Recorded Investment
Impaired loans with no related allowance

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Loans and Allowance - Credit Quality of Loan Portfolio by Loan Class (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Financing Receivable, Recorded Investment [Line Items]
Loans	$ 4,791,429	$ 4,693,822
Commercial and industrial loans
Financing Receivable, Recorded Investment [Line Items]
Loans	1,084,890	1,057,075
Agricultural production financing and other loans to farmers
Financing Receivable, Recorded Investment [Line Items]
Loans	95,131	97,711
Real estate loans - Construction
Financing Receivable, Recorded Investment [Line Items]
Loans	352,980	366,704
Real estate loans - Commercial and farmland
Financing Receivable, Recorded Investment [Line Items]
Loans	1,869,703	1,802,921
Real estate loans - Residential
Financing Receivable, Recorded Investment [Line Items]
Loans	758,870	786,105
Real estate loans - Home equity
Financing Receivable, Recorded Investment [Line Items]
Loans	374,159	348,613
Individuals' loans for household and other personal expenditures
Financing Receivable, Recorded Investment [Line Items]
Loans	75,205	74,717
Lease financing receivables, net of unearned income
Financing Receivable, Recorded Investment [Line Items]
Loans	388	588
Other commercial loans
Financing Receivable, Recorded Investment [Line Items]
Loans	180,103	159,388
Commercial Pass
Financing Receivable, Recorded Investment [Line Items]
Loans	3,466,456	3,404,491
Commercial Pass | Commercial and industrial loans
Financing Receivable, Recorded Investment [Line Items]
Loans	1,022,507	962,340
Commercial Pass | Agricultural production financing and other loans to farmers
Financing Receivable, Recorded Investment [Line Items]
Loans	37,114	77,884
Commercial Pass | Real estate loans - Construction
Financing Receivable, Recorded Investment [Line Items]
Loans	328,366	345,449
Commercial Pass | Real estate loans - Commercial and farmland
Financing Receivable, Recorded Investment [Line Items]
Loans	1,733,503	1,679,141
Commercial Pass | Real estate loans - Residential
Financing Receivable, Recorded Investment [Line Items]
Loans	157,186	171,576
Commercial Pass | Real estate loans - Home equity
Financing Receivable, Recorded Investment [Line Items]
Loans	7,377	8,218
Commercial Pass | Lease financing receivables, net of unearned income
Financing Receivable, Recorded Investment [Line Items]
Loans	300	495
Commercial Pass | Other commercial loans
Financing Receivable, Recorded Investment [Line Items]
Loans	180,103	159,388
Commercial Special Mention
Financing Receivable, Recorded Investment [Line Items]
Loans	126,767	105,965
Commercial Special Mention | Commercial and industrial loans
Financing Receivable, Recorded Investment [Line Items]
Loans	29,117	48,432
Commercial Special Mention | Agricultural production financing and other loans to farmers
Financing Receivable, Recorded Investment [Line Items]
Loans	32,784	6,665
Commercial Special Mention | Real estate loans - Construction
Financing Receivable, Recorded Investment [Line Items]
Loans	5,023	1,271
Commercial Special Mention | Real estate loans - Commercial and farmland
Financing Receivable, Recorded Investment [Line Items]
Loans	51,793	46,442
Commercial Special Mention | Real estate loans - Residential
Financing Receivable, Recorded Investment [Line Items]
Loans	7,953	3,107
Commercial Special Mention | Real estate loans - Home equity
Financing Receivable, Recorded Investment [Line Items]
Loans	97	48
Commercial Substandard
Financing Receivable, Recorded Investment [Line Items]
Loans	151,695	149,395
Commercial Substandard | Commercial and industrial loans
Financing Receivable, Recorded Investment [Line Items]
Loans	33,266	45,984
Commercial Substandard | Agricultural production financing and other loans to farmers
Financing Receivable, Recorded Investment [Line Items]
Loans	25,233	13,162
Commercial Substandard | Real estate loans - Construction
Financing Receivable, Recorded Investment [Line Items]
Loans	1,606	1,790
Commercial Substandard | Real estate loans - Commercial and farmland
Financing Receivable, Recorded Investment [Line Items]
Loans	84,407	77,338
Commercial Substandard | Real estate loans - Residential
Financing Receivable, Recorded Investment [Line Items]
Loans	6,352	10,428
Commercial Substandard | Real estate loans - Home equity
Financing Receivable, Recorded Investment [Line Items]
Loans	743	600
Commercial Substandard | Lease financing receivables, net of unearned income
Financing Receivable, Recorded Investment [Line Items]
Loans	88	93
Commercial Doubtful
Financing Receivable, Recorded Investment [Line Items]
Loans		319
Commercial Doubtful | Commercial and industrial loans
Financing Receivable, Recorded Investment [Line Items]
Loans		319
Commercial Loss
Financing Receivable, Recorded Investment [Line Items]
Loans
Consumer Performing
Financing Receivable, Recorded Investment [Line Items]
Loans	1,036,013	1,023,856
Consumer Performing | Real estate loans - Construction
Financing Receivable, Recorded Investment [Line Items]
Loans	17,908	18,114
Consumer Performing | Real estate loans - Residential
Financing Receivable, Recorded Investment [Line Items]
Loans	579,403	593,533
Consumer Performing | Real estate loans - Home equity
Financing Receivable, Recorded Investment [Line Items]
Loans	363,618	337,718
Consumer Performing | Individuals' loans for household and other personal expenditures
Financing Receivable, Recorded Investment [Line Items]
Loans	75,084	74,491
Consumer Non-Performing
Financing Receivable, Recorded Investment [Line Items]
Loans	10,498	9,796
Consumer Non-Performing | Real estate loans - Construction
Financing Receivable, Recorded Investment [Line Items]
Loans	77	80
Consumer Non-Performing | Real estate loans - Residential
Financing Receivable, Recorded Investment [Line Items]
Loans	7,976	7,461
Consumer Non-Performing | Real estate loans - Home equity
Financing Receivable, Recorded Investment [Line Items]
Loans	2,324	2,029
Consumer Non-Performing | Individuals' loans for household and other personal expenditures
Financing Receivable, Recorded Investment [Line Items]
Loans	$ 121	$ 226

XML

Loans and Allowance - Past Due Aging of Loan Portfolio by Loan Class (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	$ 4,744,980	$ 4,641,215
Non-Accrual	33,565	31,389
Total Past Due & Non-Accrual	46,449	52,607
Total	4,791,429	4,693,822
Commercial and industrial loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	1,080,184	1,052,275
Non-Accrual	3,413	4,634
Total Past Due & Non-Accrual	4,706	4,800
Total	1,084,890	1,057,075
Agricultural production financing and other loans to farmers
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	92,979	96,884
Non-Accrual	1,471	827
Total Past Due & Non-Accrual	2,152	827
Total	95,131	97,711
Real estate loans - Construction
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	351,147	362,084
Non-Accrual	721	736
Total Past Due & Non-Accrual	1,833	4,620
Total	352,980	366,704
Real estate loans - Commercial and farmland
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	1,850,882	1,786,092
Non-Accrual	15,541	11,277
Total Past Due & Non-Accrual	18,821	16,829
Total	1,869,703	1,802,921
Real estate loans - Residential
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	743,951	765,634
Non-Accrual	9,952	11,818
Total Past Due & Non-Accrual	14,919	20,471
Total	758,870	786,105
Real estate loans - Home equity
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	370,602	344,344
Non-Accrual	2,345	1,952
Total Past Due & Non-Accrual	3,557	4,269
Total	374,159	348,613
Individuals' loans for household and other personal expenditures
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	74,744	73,990
Non-Accrual	122	145
Total Past Due & Non-Accrual	461	727
Total	75,205	74,717
Lease financing receivables, net of unearned income
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	388	588
Total	388	588
Other commercial loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	180,103	159,324
Total Past Due & Non-Accrual		64
Total	180,103	159,388
30-59 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	8,404	17,570
30-59 Days Past Due | Commercial and industrial loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	998	166
30-59 Days Past Due | Agricultural production financing and other loans to farmers
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	250
30-59 Days Past Due | Real estate loans - Construction
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due		3,884
30-59 Days Past Due | Real estate loans - Commercial and farmland
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	2,384	5,552
30-59 Days Past Due | Real estate loans - Residential
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	3,847	6,090
30-59 Days Past Due | Real estate loans - Home equity
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	628	1,433
30-59 Days Past Due | Individuals' loans for household and other personal expenditures
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	297	445
60-89 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	4,118	2,741
60-89 Days Past Due | Commercial and industrial loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	282
60-89 Days Past Due | Agricultural production financing and other loans to farmers
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	431
60-89 Days Past Due | Real estate loans - Construction
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	1,112
60-89 Days Past Due | Real estate loans - Commercial and farmland
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	896
60-89 Days Past Due | Real estate loans - Residential
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	888	2,061
60-89 Days Past Due | Real estate loans - Home equity
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	467	560
60-89 Days Past Due | Individuals' loans for household and other personal expenditures
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	42	56
60-89 Days Past Due | Other commercial loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due		64
Loans 90 Days And Accruing
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	362	907
Loans 90 Days And Accruing | Commercial and industrial loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	13
Loans 90 Days And Accruing | Real estate loans - Residential
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	232	502
Loans 90 Days And Accruing | Real estate loans - Home equity
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	$ 117	324
Loans 90 Days And Accruing | Individuals' loans for household and other personal expenditures
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due		$ 81

XML

Loans and Allowance - Summary of Troubled Debt Restructurings (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016 USD ($) loan	Jun. 30, 2015 USD ($) loan	Jun. 30, 2016 USD ($) loan	Jun. 30, 2015 USD ($) loan
Financing Receivable, Modifications [Line Items]
Pre-Modification Recorded Balance	$ 4,854	$ 1,943	$ 6,044	$ 4,408
Post-Modification Recorded Balance	$ 4,795	$ 1,944	$ 5,871	$ 5,152
Number of Loans | loan	9	4	18	11
Commercial and industrial loans
Financing Receivable, Modifications [Line Items]
Pre-Modification Recorded Balance		$ 1,386	$ 260	$ 3,748
Post-Modification Recorded Balance		$ 536	$ 260	$ 1,897
Number of Loans | loan		1	3	5
Agricultural production financing and other loans to farmers
Financing Receivable, Modifications [Line Items]
Pre-Modification Recorded Balance	$ 1,141		$ 1,606
Post-Modification Recorded Balance	$ 1,141		$ 1,472
Number of Loans | loan	3		5
Real estate loans - Construction
Financing Receivable, Modifications [Line Items]
Pre-Modification Recorded Balance				$ 79
Post-Modification Recorded Balance				$ 80
Number of Loans | loan				1
Real estate loans - Commercial and farmland
Financing Receivable, Modifications [Line Items]
Pre-Modification Recorded Balance	$ 3,539	$ 537	$ 3,891	$ 537
Post-Modification Recorded Balance	$ 3,508	$ 537	$ 3,860	$ 2,280
Number of Loans | loan	5	1	6	2
Real estate loans - Residential
Financing Receivable, Modifications [Line Items]
Pre-Modification Recorded Balance		$ 20	$ 113	$ 44
Post-Modification Recorded Balance		$ 871	$ 133	$ 895
Number of Loans | loan		2	3	3
Real estate loans - Home Equity
Financing Receivable, Modifications [Line Items]
Pre-Modification Recorded Balance	$ 174		$ 174
Post-Modification Recorded Balance	$ 146		$ 146
Number of Loans | loan	1		1

XML

Loans and Allowance - Summary of Troubled Debt Restructurings by Modification Type (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Financing Receivable, Modifications [Line Items]
Modification	$ 4,788	$ 1,603	$ 5,494	$ 5,042
Term Modification
Financing Receivable, Modifications [Line Items]
Modification	1,559	1,342	1,559	3,725
Rate Modification
Financing Receivable, Modifications [Line Items]
Modification	143	21	304	47
Combination
Financing Receivable, Modifications [Line Items]
Modification	3,086	240	3,631	1,270
Commercial and industrial loans
Financing Receivable, Modifications [Line Items]
Modification		492	198	2,264
Commercial and industrial loans | Term Modification
Financing Receivable, Modifications [Line Items]
Modification		492		1,234
Commercial and industrial loans | Rate Modification
Financing Receivable, Modifications [Line Items]
Modification
Commercial and industrial loans | Combination
Financing Receivable, Modifications [Line Items]
Modification			198	1,030
Agricultural production financing and other loans to farmers
Financing Receivable, Modifications [Line Items]
Modification	1,141		1,190
Agricultural production financing and other loans to farmers | Term Modification
Financing Receivable, Modifications [Line Items]
Modification	1,141		1,141
Agricultural production financing and other loans to farmers | Rate Modification
Financing Receivable, Modifications [Line Items]
Modification			49
Agricultural production financing and other loans to farmers | Combination
Financing Receivable, Modifications [Line Items]
Modification
Real estate loans - Construction
Financing Receivable, Modifications [Line Items]
Modification				199
Real estate loans - Construction | Term Modification
Financing Receivable, Modifications [Line Items]
Modification				199
Real estate loans - Construction | Rate Modification
Financing Receivable, Modifications [Line Items]
Modification
Real estate loans - Construction | Combination
Financing Receivable, Modifications [Line Items]
Modification
Real estate loans - Commercial and farmland
Financing Receivable, Modifications [Line Items]
Modification	3,504	240	3,851	1,682
Real estate loans - Commercial and farmland | Term Modification
Financing Receivable, Modifications [Line Items]
Modification	418		418	1,442
Real estate loans - Commercial and farmland | Rate Modification
Financing Receivable, Modifications [Line Items]
Modification
Real estate loans - Commercial and farmland | Combination
Financing Receivable, Modifications [Line Items]
Modification	3,086	240	3,433	240
Real estate loans - Residential
Financing Receivable, Modifications [Line Items]
Modification		871	112	897
Real estate loans - Residential | Term Modification
Financing Receivable, Modifications [Line Items]
Modification		850		850
Real estate loans - Residential | Rate Modification
Financing Receivable, Modifications [Line Items]
Modification		21	112	47
Real estate loans - Residential | Combination
Financing Receivable, Modifications [Line Items]
Modification
Real estate loans - Home Equity
Financing Receivable, Modifications [Line Items]
Modification	143		143
Real estate loans - Home Equity | Term Modification
Financing Receivable, Modifications [Line Items]
Modification
Real estate loans - Home Equity | Rate Modification
Financing Receivable, Modifications [Line Items]
Modification	143		143
Real estate loans - Home Equity | Combination
Financing Receivable, Modifications [Line Items]
Modification

XML

Loans and Allowance - Subsequent Default (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2016 USD ($) loan	Jun. 30, 2016 USD ($) loan
Financing Receivable, Modifications [Line Items]
Number of Loans | loan	2	5
Recorded Balance | $	$ 127	$ 324
Commercial and industrial loans
Financing Receivable, Modifications [Line Items]
Number of Loans | loan	1	4
Recorded Balance | $	$ 72	$ 269
Real estate loans - Residential
Financing Receivable, Modifications [Line Items]
Number of Loans | loan	1	1
Recorded Balance | $	$ 55	$ 55

XML

Accounting for Certain Loans Acquired in a Purchase - Carrying Amount of Loans Included in Balance Sheet (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	$ 860,185	$ 961,382
Carrying Amount	821,158	917,589
Allowance	202	153
Carrying Amount Net of Allowance	820,956	917,436
Loans acquired and accounted for under ASC 310-30, outstanding balance	76,600	95,800
Loans acquired and accounted for under ASC 310-30, carrying amount	55,800	69,600
Commercial and industrial loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	80,739	85,441
Agricultural production financing and other loans to farmers
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	3,874	3,049
Real estate loans - Construction
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	47,178	40,991
Real estate loans - Commercial and farmland
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	366,642	425,014
Real estate loans - Residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	286,823	325,141
Real estate loans - Home Equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	71,343	77,053
Individuals' loans for household and other personal expenditures
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	1,677	2,693
Other commercial loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	1,909	2,000
Ameriana
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	302,961	330,918
Carrying Amount	290,946	319,664
Carrying Amount Net of Allowance	290,946	319,664
Ameriana | Commercial and industrial loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	21,544	21,888
Ameriana | Real estate loans - Construction
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	32,597	23,365
Ameriana | Real estate loans - Commercial and farmland
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	120,330	144,514
Ameriana | Real estate loans - Residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	112,520	123,231
Ameriana | Real estate loans - Home Equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	13,029	14,261
Ameriana | Individuals' loans for household and other personal expenditures
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	1,101	1,731
Ameriana | Other commercial loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	1,840	1,928
C Financial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	87,586	99,166
Carrying Amount	85,505	96,829
Allowance	180
Carrying Amount Net of Allowance	85,325	96,829
C Financial | Commercial and industrial loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	95	104
C Financial | Real estate loans - Construction
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	5,034	6,214
C Financial | Real estate loans - Commercial and farmland
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	25,024	27,838
C Financial | Real estate loans - Residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	48,782	55,856
C Financial | Real estate loans - Home Equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	8,646	9,144
C Financial | Individuals' loans for household and other personal expenditures
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	5	10
Community
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	82,740	99,541
Carrying Amount	77,933	93,355
Allowance	22	4
Carrying Amount Net of Allowance	77,911	93,351
Community | Commercial and industrial loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	5,613	6,769
Community | Agricultural production financing and other loans to farmers
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	2,802	1,761
Community | Real estate loans - Construction
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	8,923	10,436
Community | Real estate loans - Commercial and farmland
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	45,281	49,997
Community | Real estate loans - Residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	12,159	21,886
Community | Real estate loans - Home Equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	7,724	8,231
Community | Individuals' loans for household and other personal expenditures
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	238	461
CFS
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	352,193	393,014
Carrying Amount	336,031	373,649
Allowance		149
Carrying Amount Net of Allowance	336,031	373,500
CFS | Commercial and industrial loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	49,079	52,060
CFS | Agricultural production financing and other loans to farmers
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	25
CFS | Real estate loans - Construction
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	624	976
CFS | Real estate loans - Commercial and farmland
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	164,742	189,372
CFS | Real estate loans - Residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	107,895	118,105
CFS | Real estate loans - Home Equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	29,464	31,986
CFS | Individuals' loans for household and other personal expenditures
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	295	443
CFS | Other commercial loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	69	72
SCB
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	34,705	38,743
Carrying Amount	30,743	34,092
Carrying Amount Net of Allowance	30,743	34,092
SCB | Commercial and industrial loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	4,408	4,620
SCB | Agricultural production financing and other loans to farmers
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	1,047	1,288
SCB | Real estate loans - Commercial and farmland
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	11,265	13,293
SCB | Real estate loans - Residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	5,467	6,063
SCB | Real estate loans - Home Equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	12,480	13,431
SCB | Individuals' loans for household and other personal expenditures
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	$ 38	$ 48

XML

Accounting for Certain Loans Acquired in a Purchase - Accretable Yield or Income Expected to be Collected (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Accretable Yield Movement Schedule [Roll Forward]
Beginning balance	$ 5,299	$ 4,817	$ 5,612	$ 5,390
Additions		145		145
Accretion	(2,115)	(1,247)	(3,611)	(2,952)
Reclassification from nonaccretable	1,686	734	2,869	1,866
Disposals	(243)	(8)	(243)	(8)
Ending balance	4,627	4,441	4,627	4,441
Ameriana
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Accretable Yield Movement Schedule [Roll Forward]
Beginning balance	2,120		2,160
Accretion	(47)		(87)
Reclassification from nonaccretable	5		5
Disposals	(232)		(232)
Ending balance	1,846		1,846
C Financial
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Accretable Yield Movement Schedule [Roll Forward]
Beginning balance	100		114
Additions		145		145
Accretion	(71)	(12)	(86)	(12)
Reclassification from nonaccretable	52		53
Ending balance	81	133	81	133
Community
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Accretable Yield Movement Schedule [Roll Forward]
Beginning balance	1,456	1,990	1,508	2,122
Accretion	(849)	(353)	(912)	(532)
Reclassification from nonaccretable	738	181	749	228
Ending balance	1,345	1,818	1,345	1,818
CFS
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Accretable Yield Movement Schedule [Roll Forward]
Beginning balance	1,033	2,009	1,188	2,400
Accretion	(855)	(578)	(2,145)	(1,919)
Reclassification from nonaccretable	737	309	1,872	1,259
Disposals	(11)	(8)	(11)	(8)
Ending balance	904	1,732	904	1,732
SCB
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Accretable Yield Movement Schedule [Roll Forward]
Beginning balance	590	818	642	868
Accretion	(293)	(304)	(381)	(489)
Reclassification from nonaccretable	154	244	190	379
Ending balance	$ 451	$ 758	$ 451	$ 758

XML

Goodwill - Narrative (Details) - USD ($) $ in Thousands		3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 12, 2015	Mar. 31, 2016	Jun. 30, 2016	Dec. 31, 2015	Apr. 17, 2015	Dec. 31, 2014
Goodwill [Line Items]
Goodwill			$ 244,000	$ 243,129		$ 202,724
Goodwill, measurement period adjustment			$ 871
Goodwill reduction				8,474
FMIG
Goodwill [Line Items]
Goodwill reduction	$ 8,474
Ameriana
Goodwill [Line Items]
Goodwill				$ 38,624
Goodwill, measurement period adjustment		$ 871
C Financial
Goodwill [Line Items]
Goodwill					$ 11,126

XML

Goodwill - Schedule of Goodwill (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Goodwill [Roll Forward]
Goodwill, beginning balance	$ 243,129	$ 202,724
Measurement period adjustment	871
Goodwill acquired		48,879
Goodwill reduction		(8,474)
Goodwill, ending balance	$ 244,000	$ 243,129

XML

Core Deposit and Other Intangibles - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended	12 Months Ended
	Mar. 31, 2016	Jun. 30, 2016	Dec. 31, 2015	Jun. 12, 2015	Apr. 17, 2015
Finite-Lived Intangible Assets [Line Items]
Measurement period adjustment		$ 2,142
FMIG
Finite-Lived Intangible Assets [Line Items]
Other intangible reduction				$ 742
Ameriana
Finite-Lived Intangible Assets [Line Items]
Core deposit intangible			$ 5,342
Measurement period adjustment	$ 2,142
C Financial
Finite-Lived Intangible Assets [Line Items]
Core deposit intangible					$ 981

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Core Deposit and Other Intangibles - Schedule of Core Deposit and Other Intangibles (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Goodwill and Intangible Assets Disclosure [Abstract]
Gross carrying amount	$ 61,798	$ 58,360
Core deposit and other intangibles acquired		4,181
Accumulated amortization	(47,119)	(45,164)
Measurement period adjustment	2,142
Core deposit and other intangibles reduction		(742)
Core deposit and other intangibles	$ 16,821	$ 16,635

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Core Deposit and Other Intangibles - Estimated Future Amortization Expense (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Amortization Expense
2016	$ 1,955
2017	3,614
2018	2,299
2019	1,914
2020	1,733
After 2020	5,306
Core deposit and other intangibles	$ 16,821	$ 16,635

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Derivative Financial Instruments - Additional Information (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2016 USD ($) interest_rate_swap interest_rate_cap instrument	Dec. 31, 2015 USD ($) interest_rate_swap interest_rate_cap
Derivative [Line Items]
Estimated amount to be transferred from accumulated other comprehensive income to earnings	$ 1,274
Termination value of derivatives in a net liability position	18,063
Derivative collateral posted	18,011
Not Designated as Hedging Instrument
Derivative [Line Items]
Notional amount of interest rate derivatives	$ 205,884
Federal Home Loan Bank Advances
Derivative [Line Items]
Number of debt instruments held | instrument	3
Cash Flow Hedging | Interest Rate Swap
Derivative [Line Items]
Number of interest rate derivatives held | interest_rate_swap	5	5
Notional amount of interest rate derivatives	$ 56,000	$ 56,000
Cash Flow Hedging | Interest Rate Swap | Trust Preferred Debt
Derivative [Line Items]
Notional amount of interest rate derivatives	26,000
Cash Flow Hedging | Interest Rate Swap | Federal Home Loan Bank Advances
Derivative [Line Items]
Notional amount of interest rate derivatives	$ 30,000
Cash Flow Hedging | Interest Rate Cap
Derivative [Line Items]
Number of interest rate derivatives held | interest_rate_cap	1	1
Notional amount of interest rate derivatives	$ 13,000	$ 13,000
Cash Flow Hedging | Interest Rate Cap | Trust Preferred Debt
Derivative [Line Items]
Notional amount of interest rate derivatives	$ 13,000

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Derivative Financial Instruments - Fair Value of Derivative Financial Instruments and Their Classification on Balance Sheet (Details) - Interest rate contracts - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Derivatives designated as hedging instruments | Other Assets
Derivatives, Fair Value [Line Items]
Asset Derivatives	$ 5	$ 36
Derivatives designated as hedging instruments | Other Liabilities
Derivatives, Fair Value [Line Items]
Liability Derivatives	5,092	2,921
Derivatives not designated as hedging instruments | Other Assets
Derivatives, Fair Value [Line Items]
Asset Derivatives	11,971	4,938
Derivatives not designated as hedging instruments | Other Liabilities
Derivatives, Fair Value [Line Items]
Liability Derivatives	$ 12,669	$ 5,149

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Derivative Financial Instruments - Effect of Derivative Financial Instruments on Other Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Designated as Hedging Instrument | Cash Flow Hedging | Interest Rate Products
Derivative [Line Items]
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative (Effective Portion)	$ (813)	$ 807	$ (2,767)	$ (469)

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Derivative Financial Instruments - Effect of Derivative Financial Instruments on Income Statement (Details) - Interest rate contracts - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Not Designated as Hedging Instrument | Other income
Derivative [Line Items]
Amount of Gain (Loss) Recognized in Income on Derivative	$ (242)	$ 156	$ (488)	$ 55
Designated as Hedging Instrument | Interest Expense
Derivative [Line Items]
Amount of Gain (Loss) Reclassified from Other Comprehensive Income into Income (Effective Portion)	$ (318)	$ (358)	$ (642)	$ (712)

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Disclosures About Fair Value of Assets and Liabilities - Fair Value Measurements of Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale securities	$ 658,829	$ 658,400
Significant Other Observable Inputs (Level 2)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale securities	653,265	652,468
Significant Unobservable Inputs (Level 3)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale securities	5,564	5,932
Fair Value, Measurements, Recurring | Interest rate swap liability | Significant Other Observable Inputs (Level 2)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate swap liability	17,761	8,070
Fair Value, Measurements, Recurring | Interest rate swap liability | Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate swap liability	17,761	8,070
Fair Value, Measurements, Recurring | U.S. Government-sponsored agency securities | Significant Other Observable Inputs (Level 2)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale securities	102	104
Fair Value, Measurements, Recurring | U.S. Government-sponsored agency securities | Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale securities	102	104
Fair Value, Measurements, Recurring | State and municipal | Significant Other Observable Inputs (Level 2)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale securities	347,951	300,014
Fair Value, Measurements, Recurring | State and municipal | Significant Unobservable Inputs (Level 3)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale securities	5,529	5,897
Fair Value, Measurements, Recurring | State and municipal | Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale securities	353,480	305,911
Fair Value, Measurements, Recurring | U.S. Government-sponsored mortgage-backed securities | Significant Other Observable Inputs (Level 2)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale securities	301,271	346,266
Fair Value, Measurements, Recurring | U.S. Government-sponsored mortgage-backed securities | Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale securities	301,271	346,266
Fair Value, Measurements, Recurring | Certificates of deposit | Significant Other Observable Inputs (Level 2)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale securities		2,176
Fair Value, Measurements, Recurring | Certificates of deposit | Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale securities		2,176
Fair Value, Measurements, Recurring | Corporate obligations | Significant Unobservable Inputs (Level 3)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale securities	31	31
Fair Value, Measurements, Recurring | Corporate obligations | Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale securities	31	31
Fair Value, Measurements, Recurring | Equity securities | Significant Other Observable Inputs (Level 2)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale securities	3,941	3,908
Fair Value, Measurements, Recurring | Equity securities | Significant Unobservable Inputs (Level 3)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale securities	4	4
Fair Value, Measurements, Recurring | Equity securities | Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale securities	3,945	3,912
Fair Value, Measurements, Recurring | Interest rate swap asset | Significant Other Observable Inputs (Level 2)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate derivatives	11,971	4,938
Fair Value, Measurements, Recurring | Interest rate swap asset | Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate derivatives	11,971	4,938
Fair Value, Measurements, Recurring | Interest rate cap | Significant Other Observable Inputs (Level 2)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate derivatives	5	36
Fair Value, Measurements, Recurring | Interest rate cap | Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate derivatives	$ 5	$ 36

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Disclosures About Fair Value of Assets and Liabilities - Reconciliation of Beginning and Ending Balances of Recurring Fair Value Measurements using Significant Unobservable Level 3 Inputs (Details) - Fair Value, Measurements, Recurring - Available for Sale Securities - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at beginning of the period	$ 5,504	$ 6,198	$ 5,932	$ 6,646
Total realized and unrealized gains and losses:
Included in other comprehensive income	59	50	96	141
Principal payments	1	(220)	(464)	(759)
Ending balance	$ 5,564	$ 6,028	$ 5,564	$ 6,028

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Disclosures About Fair Value of Assets and Liabilities - Transfers Between Levels (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Fair Value Disclosures [Abstract]
Transfers in or out of Level 3	$ 0	$ 0	$ 0	$ 0

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Disclosures About Fair Value of Assets and Liabilities - Valuation Methodologies Used for Instruments Measured at Fair Value on Non-Recurring Basis (Details) - Fair Value, Measurements, Nonrecurring - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Impaired loans (collateral dependent)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 11,013	$ 7,066
Impaired loans (collateral dependent) | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	11,013	7,066
Other real estate owned
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	2,256	5,529
Other real estate owned | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 2,256	$ 5,529

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Disclosures About Fair Value of Assets and Liabilities - Unobservable Inputs Used in Recurring and Nonrecurring Level 3 Fair Value Measurements Other Than Goodwill (Details) - Significant Unobservable Inputs (Level 3) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
State and municipal securities | Discounted cash flow
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value	$ 5,529	$ 5,897
State and municipal securities | Discounted cash flow | Minimum
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Maturity/Call date	1 month	1 month
Blend of US Muni BQ curve	A-	A-
Discount rate	0.69%	0.80%
State and municipal securities | Discounted cash flow | Maximum
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Maturity/Call date	20 years	15 years
Blend of US Muni BQ curve	BBB-	BBB-
Discount rate	5.00%	5.00%
Corporate obligations and Equity securities | Discounted cash flow
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value	$ 35	$ 35
Risk free rate	3 month LIBOR	3 month LIBOR
Discount to reflect current market conditions	2.00%	2.00%
Impaired loans (collateral dependent) | Collateral based measurements
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value	$ 11,013	$ 7,066
Impaired loans (collateral dependent) | Collateral based measurements | Minimum
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Discount to reflect current market conditions and ultimate collectability	0.00%	0.00%
Impaired loans (collateral dependent) | Collateral based measurements | Maximum
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Discount to reflect current market conditions and ultimate collectability	10.00%	50.00%
Impaired loans (collateral dependent) | Collateral based measurements | Weighted Average
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Discount to reflect current market conditions and ultimate collectability	1.00%	2.00%
Other real estate owned | Appraisals
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value	$ 2,256	$ 5,529
Other real estate owned | Appraisals | Minimum
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Discount to reflect current market conditions	0.00%	0.00%
Other real estate owned | Appraisals | Maximum
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Discount to reflect current market conditions	10.00%	20.00%
Other real estate owned | Appraisals | Weighted Average
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Discount to reflect current market conditions	4.00%	2.00%

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Disclosures About Fair Value of Assets and Liabilities - Estimated Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Assets:
Investment securities available for sale	$ 658,829	$ 658,400
Investment securities held to maturity	665,066	632,380
Loans held for sale	18,854	9,894
Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets:
Cash and cash equivalents	120,471	102,170
Interest-bearing time deposits	62,533	32,315
Liabilities:
Deposits	4,268,709	4,095,004
Significant Other Observable Inputs (Level 2)
Assets:
Investment securities available for sale	653,265	652,468
Investment securities held to maturity	648,705	598,082
Loans held for sale	18,854	9,894
Federal Reserve Bank and Federal Home Loan Bank stock	18,096	37,633
Interest rate swap and cap asset	11,976	4,974
Interest receivable	23,351	24,415
Liabilities:
Deposits	1,129,241	1,177,142
Borrowings:
Federal funds purchased	20,000	49,721
Securities sold under repurchase agreements	140,763	155,325
Federal Home Loan Bank advances	268,150	236,375
Subordinated debentures and term loans	103,155	103,643
Interest rate swap liability	17,761	8,070
Interest payable	3,051	3,092
Significant Unobservable Inputs (Level 3)
Assets:
Investment securities available for sale	5,564	5,932
Investment securities held to maturity	16,361	34,298
Loans	4,710,073	4,539,940
Carrying Amount
Assets:
Cash and cash equivalents	120,471	102,170
Interest-bearing time deposits	62,533	32,315
Investment securities available for sale	658,829	658,400
Investment securities held to maturity	638,972	618,599
Loans held for sale	18,854	9,894
Loans	4,729,243	4,631,369
Federal Reserve Bank and Federal Home Loan Bank stock	18,096	37,633
Interest rate swap and cap asset	11,976	4,974
Interest receivable	23,351	24,415
Liabilities:
Deposits	5,407,554	5,289,647
Borrowings:
Federal funds purchased	20,000	49,721
Securities sold under repurchase agreements	140,777	155,325
Federal Home Loan Bank advances	268,579	235,652
Subordinated debentures and term loans	127,678	127,846
Interest rate swap liability	17,761	8,070
Interest payable	$ 3,051	$ 3,092

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Transfers Accounted for as Secured Borrowings (Details) - U.S. Government-sponsored mortgage-backed securities - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Assets Sold under Agreements to Repurchase [Line Items]
Collateral pledged for all repurchase agreements accounted for as secured borrowings	$ 140,777	$ 155,325
Overnight and Continuous
Assets Sold under Agreements to Repurchase [Line Items]
Collateral pledged for all repurchase agreements accounted for as secured borrowings	119,935	131,537
Up to 30 Days
Assets Sold under Agreements to Repurchase [Line Items]
Collateral pledged for all repurchase agreements accounted for as secured borrowings	1,335	5,680
30-90 Days
Assets Sold under Agreements to Repurchase [Line Items]
Collateral pledged for all repurchase agreements accounted for as secured borrowings	2,672	8,892
Greater Than 90 Days
Assets Sold under Agreements to Repurchase [Line Items]
Collateral pledged for all repurchase agreements accounted for as secured borrowings	$ 16,835	$ 9,216

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Accumulated Other Comprehensive Income (Loss) - Changes in Balances of Each Component (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Accumulated Other Comprehensive Income (Loss)
Beginning balance			$ 850,509
Amounts reclassified from accumulated other comprehensive income	$ (252)	$ 293	(690)	$ (143)
Period change	4,969	(4,575)	8,397	(4,860)
Ending balance	887,550		887,550
Total
Accumulated Other Comprehensive Income (Loss)
Beginning balance			(1,362)	(1,630)
Other comprehensive income before reclassifications			9,087	(4,717)
Amounts reclassified from accumulated other comprehensive income			(690)	(143)
Period change			8,397	(4,860)
Ending balance	7,035	(6,490)	7,035	(6,490)
Unrealized Gains (Losses) on Securities Available for Sale
Accumulated Other Comprehensive Income (Loss)
Beginning balance			12,325	14,098
Other comprehensive income before reclassifications			10,885	(4,413)
Amounts reclassified from accumulated other comprehensive income			(1,107)	(606)
Period change			9,778	(5,019)
Ending balance	22,103	9,079	22,103	9,079
Unrealized Gains (Losses) on Cash Flow Hedges
Accumulated Other Comprehensive Income (Loss)
Beginning balance			(2,347)	(2,182)
Other comprehensive income before reclassifications			(1,798)	(304)
Amounts reclassified from accumulated other comprehensive income			417	463
Period change			(1,381)	159
Ending balance	(3,728)	(2,023)	(3,728)	(2,023)
Unrealized Gains (Losses) on Defined Benefit Plans
Accumulated Other Comprehensive Income (Loss)
Beginning balance			(11,340)	(13,546)
Other comprehensive income before reclassifications
Amounts reclassified from accumulated other comprehensive income
Period change			0	0
Ending balance	$ (11,340)	$ (13,546)	$ (11,340)	$ (13,546)

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Accumulated Other Comprehensive Income (Loss) - Reclassifications (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Reclassification Adjustments out of Accumulated Other Comprehensive Income [Line Items]
Other income - net realized gains on sales of available for sale securities	$ 706	$ (93)	$ 1,703	$ 932
Interest expense - subordinated debentures and term loans	(1,786)	(1,670)	(3,571)	(3,330)
Income tax expense	(6,716)	(8,856)	(12,290)	(14,690)
Net income	20,006	17,968	37,699	34,140
Total reclassifications for the period, net of tax	252	(293)	690	143
Unrealized gains (losses) on available for sale securities
Reclassification Adjustments out of Accumulated Other Comprehensive Income [Line Items]
Total reclassifications for the period, net of tax			1,107	606
Unrealized gains (losses) on cash flow hedges
Reclassification Adjustments out of Accumulated Other Comprehensive Income [Line Items]
Total reclassifications for the period, net of tax			(417)	(463)
Amount Reclassified from Accumulated Other Comprehensive Income (Loss) for the Period | Unrealized gains (losses) on available for sale securities
Reclassification Adjustments out of Accumulated Other Comprehensive Income [Line Items]
Other income - net realized gains on sales of available for sale securities	706	(93)	1,703	932
Income tax expense	(247)	33	(596)	(326)
Net income	459	(60)	1,107	606
Amount Reclassified from Accumulated Other Comprehensive Income (Loss) for the Period | Unrealized gains (losses) on cash flow hedges
Reclassification Adjustments out of Accumulated Other Comprehensive Income [Line Items]
Interest expense - subordinated debentures and term loans			(642)	(712)
Income tax expense	111	125	225	249
Net income	(207)	(233)	$ (417)	$ (463)
Amount Reclassified from Accumulated Other Comprehensive Income (Loss) for the Period | Unrealized gains (losses) on cash flow hedges | Interest rate contracts
Reclassification Adjustments out of Accumulated Other Comprehensive Income [Line Items]
Interest expense - subordinated debentures and term loans	$ (318)	$ (358)

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Share-Based Compensation - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended		18 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of average closing price to be paid by employees			85.00%
Maximum common stock purchases through advance payroll deductions in a calendar year			$ 25,000
Share-based compensation	$ 641,000	$ 614,000	$ 1,235,000	$ 1,130,000
Options granted (in shares)			0	0	0
Forfeiture rate			3.80%
Unrecognized compensation expense related to stock options	$ 0		$ 0		$ 0
Aggregate intrinsic value of stock options exercised			116,000	$ 356,000
Cash receipts of stock options exercised			$ 211,000	$ 619,000
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock option term			10 years
Stock options vesting percentage			100.00%
Stock Options | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vested period			6 months
Stock Options | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vested period			2 years
RSAs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vested period			3 years
Outstanding DSUs (in shares)	359,404		359,404		359,404	354,504
Unrecognized compensation expense related to RSAs	$ 4,688,000		$ 4,688,000		$ 4,688,000
Unrecognized compensation expense expected recognition period			1 year 8 months 20 days
DSUs | Non-employee Director
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding DSUs (in shares)	0		0		0
ESPP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense related to stock options	$ 0		$ 0		$ 0
Grant date fair value of ESPP options	$ 21,000

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Share-Based Compensation - Components of Share-Based Compensation Awards (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Pre-tax compensation expense	$ 641	$ 614	$ 1,235	$ 1,130
Income tax expense (benefit)	(207)	(198)	(410)	(367)
Total share-based compensation expense, net of income taxes	434	416	825	763
Stock and ESPP Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Pre-tax compensation expense	21	28	36	54
Income tax expense (benefit)	10		10	(1)
Total share-based compensation expense, net of income taxes	31	28	46	53
Restricted Stock Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Pre-tax compensation expense	620	586	1,199	1,076
Income tax expense (benefit)	(217)	(198)	(420)	(366)
Total share-based compensation expense, net of income taxes	$ 403	$ 388	$ 779	$ 710

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Share-Based Compensation - Stock Option Activity under Stock Option Plans (Details) - USD ($)	6 Months Ended		18 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016
Number of Shares
Beginning balance (in shares)	442,012
Granted (in shares)	0	0	0
Exercised (in shares)	(13,828)
Cancelled (in shares)	(49,482)
Ending balance (in shares)	378,702		378,702
Vested and Expected to Vest (in shares)	378,702		378,702
Exercisable (in shares)	378,702		378,702
Weighted-Average Exercise Price
Beginning balance (in dollars per share)	$ 19.99
Granted (in dollars per share)
Exercised (in dollars per share)	15.94
Cancelled (in dollars per share)	25.14
Ending balance (in dollars per share)	19.47		$ 19.47
Vested and Expected to Vest (in dollars per share)	19.47		19.47
Exercisable (in dollars per share)	$ 19.47		$ 19.47
Weighted Average Remaining Contractual Term (in Years)
Outstanding	3 years 20 days
Vested and Expected to Vest	3 years 8 days
Exercisable	3 years 20 days
Aggregate Intrinsic Value
Outstanding	$ 2,313,252		$ 2,313,252
Vested and Expected to Vest	2,313,252		2,313,252
Exercisable	$ 2,313,252		$ 2,313,252

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Share-Based Compensation - Unvested RSAs Outstanding (Details) - RSAs	6 Months Ended
	Jun. 30, 2016 $ / shares shares
Number of Shares
Unvested RSAs, Beginning Balance (in shares) | shares	354,504
Granted (in shares) | shares	116,133
Vested (in shares) | shares	(106,290)
Forfeited (in shares) | shares	(4,943)
Unvested RSAs, Ending Balance (in shares) | shares	359,404
Weighted-Average Grant Date Fair Value
Unvested RSAs, Beginning Balance (in dollars per share) | $ / shares	$ 19.65
Granted (in dollars per share) | $ / shares	23.48
Vested (in dollars per share) | $ / shares	15.39
Forfeited (in dollars per share) | $ / shares	22.28
Unvested RSAs, Ending Balance (in dollars per share) | $ / shares	$ 22.42

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Income Tax (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Reconciliation of Federal Statutory to Actual Tax Expense:
Federal statutory income tax rate	35.00%	35.00%	35.00%	35.00%
Federal statutory income tax at 35%	$ 9,353	$ 9,389	$ 17,496	$ 17,091
Tax-exempt interest income	(2,104)	(1,738)	(4,130)	(3,167)
Basis difference on sale of insurance subsidiary		2,252		2,252
Stock compensation	8	10	13	18
Earnings on life insurance	(453)	(223)	(970)	(485)
Tax credits	(129)	(148)	(258)	(292)
Other	41	(686)	139	(727)
Actual Tax Expense	$ 6,716	$ 8,856	$ 12,290	$ 14,690
Effective Tax Rate	25.10%	33.00%	24.60%	30.10%

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Net Income Per Share - Reconciliation of Basic and Diluted Net Income Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Net Income
Net income available to common stockholders	$ 20,006	$ 17,968	$ 37,699	$ 34,140
Diluted net income per share	$ 20,006	$ 17,968	$ 37,699	$ 34,140
Weighted-Average Shares
Net income available to common stockholders (in shares)	40,751,720	37,793,448	40,721,147	37,751,896
Effect of dilutive stock options and warrants (in shares)	217,391	249,911	220,338	270,036
Diluted net income per share (in shares)	40,969,111	38,043,359	40,941,485	38,021,932
Per Share Amount
Net income available to common stockholders (in dollars per share)	$ 0.50	$ 0.47	$ 0.93	$ 0.90
Diluted net income per share (in dollars per share)	$ 0.49	$ 0.47	$ 0.92	$ 0.90

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Net Income Per Share - Additional Information (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Stock Options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock options not included in the earnings per share calculation (in shares)	111,750	367,525	142,259	367,550