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 September 30, 2018

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X]   No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [X]	Accelerated filer [ ]	Non-accelerated filer [  ]
Smaller reporting company [  ]	Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

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 October 31, 2018, there were 49,658,419 outstanding common shares of the registrant.

1

TABLE OF CONTENTS

FIRST MERCHANTS CORPORATION

		Page No.
Glossary of Defined Terms		3
Part I. Financial Information
Item 1.	Financial  Statements:
	Consolidated Condensed Balance Sheets	4
	Consolidated Condensed Statements of Income	5
	Consolidated Condensed Statements of Comprehensive Income	6
	Consolidated Condensed Statement of Stockholders' Equity	7
	Consolidated Condensed Statements of Cash Flows	8
	Notes to Consolidated Condensed Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	43
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	57
Item 4.	Controls and Procedures	58
Part II. Other Information
Item 1.	Legal Proceedings	59
Item 1A.	Risk Factors	59
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 3.	Defaults Upon Senior Securities	59
Item 4.	Mine Safety Disclosures	59
Item 5.	Other Information	59
Item 6.	Exhibits	60
Signatures		61

2

GLOSSARY OF DEFINED TERMS

FIRST MERCHANTS CORPORATION

Arlington Bank	The Arlington Bank, which was acquired by the Corporation on May 19, 2017.
ASC	Accounting Standards Codification
Bank	First Merchants Bank, a wholly-owned subsidiary of the Corporation
CET1	Common Equity Tier 1
CMT	Constant Maturity Treasury
Corporation	First Merchants Corporation
ESPP	Employee Stock Purchase Plan
FDIC	Federal Deposit Insurance Corporation
FHLB	Federal Home Loan Bank
FTE	Fully taxable equivalent
GAAP	Generally Accepted Accounting Principles
IAB	Independent Alliance Banks, Inc., which was acquired by the Corporation on July 14, 2017.
OREO	Other real estate owned
RSA	Restricted Stock Awards
TEFRA	Tax Equity and Fiscal Responsibility Act

3

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

CONSOLIDATED CONDENSED BALANCE SHEETS

	September 30, 2018			December 31, 2017
	(Unaudited)
ASSETS
Cash and cash equivalents	$	142,501		$	154,905
Interest-bearing time deposits	66,763			35,027
Investment securities available for sale	1,149,162			999,947
Investment securities held to maturity (fair value of $468,452 and $568,208)	476,089			560,655
Loans held for sale	3,022			7,216
Loans, net of allowance for loan losses of $78,406 and $75,032	7,009,665			6,676,167
Premises and equipment	93,728			95,852
Federal Home Loan Bank stock	24,588			23,825
Interest receivable	38,531			37,130
Goodwill	445,355			445,355
Other intangibles	26,054			31,148
Cash surrender value of life insurance	223,865			223,557
Other real estate owned	8,859			10,373
Tax asset, deferred and receivable	25,933			23,983
Other assets	53,167			42,338
TOTAL ASSETS	$	9,787,282		$	9,367,478
LIABILITIES
Deposits:
Noninterest-bearing	$	1,464,190		$	1,761,553
Interest-bearing	6,168,962			5,410,977
Total Deposits	7,633,152			7,172,530
Borrowings:
Federal funds purchased	90,000			144,038
Securities sold under repurchase agreements	118,824			136,623
Federal Home Loan Bank advances	385,458			414,377
Subordinated debentures and term loans	138,408			139,349
Total Borrowings	732,690			834,387
Interest payable	5,920			4,390
Other liabilities	54,094			52,708
Total Liabilities	8,425,856			8,064,015
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 - 100,000,000 shares
Issued and outstanding - 49,304,542 and 49,158,238 shares	6,163			6,145
Additional paid-in capital	837,996			834,870
Retained earnings	552,551			465,231
Accumulated other comprehensive loss	(35,409		)	(2,908		)
Total Stockholders' Equity	1,361,426			1,303,463
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	9,787,282		$	9,367,478

See NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.

4

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
INTEREST INCOME
Loans receivable:
Taxable	$	88,479	$	71,491	$	251,409	$	187,234
Tax exempt	3,761		2,851		10,989		7,676
Investment securities:
Taxable	5,514		4,524		16,044		13,012
Tax exempt	6,493		5,455		18,865		15,549
Deposits with financial institutions	270		284		1,034		442
Federal Home Loan Bank stock	283		242		950		635
Total Interest Income	104,800		84,847		299,291		224,548
INTEREST EXPENSE
Deposits	13,685		6,710		34,852		15,971
Federal funds purchased	229		175		670		506
Securities sold under repurchase agreements	174		133		519		331
Federal Home Loan Bank advances	2,137		1,464		6,141		3,619
Subordinated debentures and term loans	2,089		1,945		6,136		5,602
Total Interest Expense	18,314		10,427		48,318		26,029
NET INTEREST INCOME	86,486		74,420		250,973		198,519
Provision for loan losses	1,400		2,083		5,563		7,343
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	85,086		72,337		245,410		191,176
OTHER INCOME
Service charges on deposit accounts	5,619		5,044		15,434		13,656
Fiduciary and wealth management fees	3,673		3,783		11,064		10,556
Other customer fees	5,038		4,553		14,991		13,298
Increase in cash surrender value of life insurance	961		1,058		2,946		2,773
Gains on life insurance benefits	—		517		198		2,671
Net gains and fees on sales of loans	1,841		2,317		5,262		5,209
Net realized gains on sales of available for sale securities	1,285		332		4,016		1,497
Other income	1,110		1,064		3,368		2,288
Total Other Income	19,527		18,668		57,279		51,948
OTHER EXPENSES
Salaries and employee benefits	32,936		33,244		97,354		86,052
Net occupancy	4,586		4,371		13,604		12,552
Equipment	3,483		3,478		10,707		9,192
Marketing	1,216		1,021		3,574		2,378
Outside data processing fees	3,422		3,162		9,848		8,864
Printing and office supplies	334		366		992		905
Intangible asset amortization	1,650		1,698		5,094		3,592
FDIC assessments	856		704		2,286		1,853
Other real estate owned and foreclosure expenses	455		330		1,219		1,592
Professional and other outside services	1,844		5,843		5,174		10,843
Other expenses	4,240		4,491		12,361		11,300
Total Other Expenses	55,022		58,708		162,213		149,123
INCOME BEFORE INCOME TAX	49,591		32,297		140,476		94,001
Income tax expense	8,478		7,939		23,050		22,314
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	41,113	$	24,358	$	117,426	$	71,687
Per Share Data:
Basic Net Income Available to Common Stockholders	$	0.83	$	0.50	$	2.38	$	1.64
Diluted Net Income Available to Common Stockholders	$	0.83	$	0.50	$	2.37	$	1.63
Cash Dividends Paid	$	0.22	$	0.18	$	0.62	$	0.51
Average Diluted Shares Outstanding (in thousands)	49,492		48,644		49,458		44,063

See NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.

5

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Net income	$	41,113		$	24,358		$	117,426		$	71,687
Other comprehensive income (loss), net of tax:
Unrealized holding gain (loss) on securities available for sale arising during the period, net of tax of $2,596, $4,101, $7,470 and $4,374	(9,765		)	(7,617		)	(30,032		)	8,124
Unrealized gain (loss) on cash flow hedges arising during the period, net of tax of $44, $3, $212 and $134	166			(7		)	1,039			(246		)
Reclassification adjustment for net gains included in net income, net of tax of $250, $32, $766 and $258	(942		)	(60		)	(2,882		)	(480		)
Defined benefit pension plan amortization of prior service cost, net of tax of $31 and $94	—			(58		)	—			(175		)
Total other comprehensive income (loss), net of tax	(10,541		)	(7,742		)	(31,875		)	7,223
Comprehensive income	$	30,572		$	16,616		$	85,551		$	78,910

See NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.

6

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED CONDENSED 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 Loss			Total
Balances, December 31, 2017	125	$	125	49,158,238		$	6,145		$	834,870		$	465,231		$	(2,908	)	$	1,303,463
Comprehensive income:
Net income												117,426						117,426
Other comprehensive loss, net of tax															(31,875		)	(31,875		)
Cash dividends on common stock ($.62 per share)												(30,732		)				(30,732		)
Reclassification adjustment under ASU 2018-02												626			(626		)	—
Share-based compensation				106,833		13			2,533									2,546
Stock issued under employee benefit plans				13,448		2			513									515
Stock issued under dividend reinvestment and stock purchase plan				18,761		2			877									879
Stock options exercised				51,243		6			1,087									1,093
Stock redeemed				(43,981	)	(5		)	(1,884		)							(1,889		)
Balances, September 30, 2018	125	$	125	49,304,542		$	6,163		$	837,996		$	552,551		$	(35,409	)	$	1,361,426

See NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.

7

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended
	September 30, 2018			September 30, 2017
Cash Flow From Operating Activities:
Net income	$	117,426		$	71,687
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	5,563			7,343
Depreciation and amortization	6,630			5,696
Change in deferred taxes	3,750			3,542
Share-based compensation	2,546			1,884
Loans originated for sale	(277,312		)	(246,979		)
Proceeds from sales of loans held for sale	285,297			257,695
Gains on sales of loans held for sale	(3,791		)	(4,081		)
Gains on sales of securities available for sale	(4,016		)	(1,497		)
Increase in cash surrender of life insurance	(2,946		)	(2,773		)
Gains on life insurance benefits	(198		)	(2,671		)
Change in interest receivable	(1,401		)	(2,074		)
Change in interest payable	1,530			597
Other adjustments	3,077			(9,006		)
Net cash provided by operating activities	136,155			79,363
Cash Flows from Investing Activities:
Net change in interest-bearing deposits	(31,736		)	200,013
Purchases of:
Securities available for sale	(341,433		)	(307,220		)
Securities held to maturity				(30,220		)
Proceeds from sales of securities available for sale	126,136			54,513
Proceeds from maturities of:
Securities available for sale	56,533			52,176
Securities held to maturity	52,258			55,276
Change in Federal Home Loan Bank stock	(763		)	40
Net change in loans	(347,054		)	(401,977		)
Net cash and cash equivalents received in acquisition				54,536
Proceeds from the sale of other real estate owned	2,069			5,046
Proceeds from life insurance benefits	2,836			11,642
Other adjustments	2,708			(1,656		)
Net cash used in investing activities	(478,446		)	(307,831		)
Cash Flows from Financing Activities:
Net change in :
Demand and savings deposits	342,471			132,145
Certificates of deposit and other time deposits	118,151			107,322
Borrowings	1,451,467			894,674
Repayment of borrowings	(1,552,068		)	(866,231		)
Cash dividends on common stock	(30,732		)	(22,909		)
Stock issued under employee benefit plans	515			367
Stock issued under dividend reinvestment and stock purchase plans	879			714
Stock options exercised	1,093			2,323
Stock redeemed	(1,889		)	(1,257		)
Net cash provided by financing activities	329,887			247,148
Net Change in Cash and Cash Equivalents	(12,404		)	18,680
Cash and Cash Equivalents, January 1	154,905			127,927
Cash and Cash Equivalents, September 30	$	142,501		$	146,607
Additional cash flow information:
Interest paid	$	46,788		$	24,183
Income tax paid	13,719			18,000
Loans transferred to other real estate owned	405			8,210
Fixed assets transferred to other real estate owned	374
Non-cash investing activities using trade date accounting	828			3,798
Investments transferred from held to maturity to available for sale in accordance with ASU 2017-12	30,794
In conjunction with the acquisitions, liabilities were assumed as follows:
Fair value of assets acquired				$	1,531,397
Cash paid in acquisition				(12		)
Less: Common stock issued				321,431
Liabilities assumed	$	—		$	1,209,954

See NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.

8

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 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, 2017, 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, 2017 filed with the Securities and Exchange Commission. The results of operations for the three and nine months ended September 30, 2018, 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.

Recent Accounting Changes

ASU 2018-02 "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" ("ASU 2018-02") allows a reclassification from accumulated other comprehensive income (loss) to retained earnings for the stranded tax effects caused by the revaluation of deferred taxes resulting from the newly enacted corporate tax rate in the Tax Cuts and Jobs Act. The ASU is effective in years beginning after December 15, 2018, but permits early adoption in a period for which financial statements have not yet been issued. The Corporation elected to early adopt the ASU as of January 1, 2018. The adoption of the guidance resulted in an insignificant cumulative-effect adjustment that decreased accumulated other comprehensive income (loss) and increased retained earnings in 2018.

ASU 2017-12 - "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities" ("ASU 2017-12") is intended to improve and simplify accounting rules around hedge accounting. The ASU is effective for public companies in 2019 and private companies in 2020. Early adoption is permitted. The new standard refines and expands hedge accounting for both financial (e.g., interest rate) and commodity risks. Its provisions create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes, for investors and analysts. The new standard takes effect for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, for public companies and for fiscal years beginning after December 15, 2019 (and interim periods for fiscal years beginning after December 15, 2020), for private companies. Early adoption is permitted in any interim period or fiscal years before the effective date of the standard. ASU 2017-12 requires a modified retrospective transition method in which a cumulative effect of the change on the opening balance of each affected component of equity is recognized in the statement of financial position as of the date of adoption. The Corporation adopted this standard in the third quarter of 2018. As permitted by the ASU, the Corporation reclassified $30.8 million of state and municipal securities with unrealized gains of $450,000 from the held to maturity portfolio to the available for sale portfolio. Other than this reclassification of securities, adoption of the standard did not have a significant impact on the Corporation’s consolidated financial statements.

ASU 2017-07 "Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" ("ASU 2017-07") applies to all employers, including not-for-profit entities, that offer to their employees defined benefit pension plans, other postretirement benefit plans, or other types of benefits accounted for under Topic 715, Compensation - Retirement Benefits. The amendments require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. The amendments also allow only the service cost component to be eligible for capitalization when applicable (e.g., as a cost of internally manufactured inventory or a self-constructed asset). The amendments are effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those annual periods. For other entities, the amendments are effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. The Corporation adopted this ASU in 2018. Adoption of the standard did not have a significant impact on the Corporation’s consolidated financial statements.

ASU 2016-15 "Statement of Cash Flows (Topic 230)" ("ASU 2016-15") is intended to reduce the diversity in practice around how certain transactions are classified within the statement of cash flows. ASU 2016-15 became effective for the Corporation on January 1, 2018 and did not have a significant impact on the Corporation's financial statements.

9

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

ASU 2016-01 "Financial Instruments - Overall (Subtopic 825-10): Recognition of Financial Assets and Financial Liabilities" ("ASU 2016-01") makes targeted amendments to the guidance for recognition, measurement, presentation and disclosure of financial instruments. ASU 2016-01 requires equity investments, other than equity method investments, to be measured at fair value with changes in fair value recognized in net income. The ASU requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption to reclassify the cumulative change in fair value of equity securities previously recognized in accumulated other comprehensive income (loss). ASU 2016-01 became effective for the Corporation on January 1, 2018. The adoption of the guidance did not result in any cumulative effect adjustment in 2018. ASU 2016-01 also emphasizes the existing requirement to use exit prices to measure fair value for disclosure purposes and clarifies that entities should not make use of a practicability exception in determining the fair value of loans. Accordingly, the Corporation refined the calculation used to determine the disclosed fair value of loans held for investment as part of adopting this standard. The refined calculation did not have a significant impact on the fair value disclosures included in NOTE 9. DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES of these Notes to Consolidated Condensed Financial Statements.

ASU 2014-09 "Revenue from Contracts with Customers (Topic 606)" ("ASU 2014-09") 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. ASU 2014-09 establishes a five-step model which entities must follow to recognize revenue and removes inconsistencies and weaknesses in existing guidance. The guidance does not apply to revenue associated with financial instruments, including loans and investment securities that are accounted for under other GAAP, which comprises a significant portion of our revenue stream. ASU 2014-09 became effective for the Corporation on January 1, 2018. The adoption of ASU 2014-09 did not result in a change to the accounting for any of the in-scope revenue streams; as such, no cumulative effect adjustment was recorded. Additional information related to revenue generated from contracts with customers is detailed below.

Revenue Recognition

ASU 2014-09 establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The majority of the Corporation's revenue-generating transactions are not subject to ASU 2014-09, including revenue generated from financial instruments, such as loans, letters of credit, derivatives and investment securities, as well as revenue related to mortgage servicing activities, as these activities are subject to other GAAP discussed elsewhere within the disclosures. The Corporation has evaluated the nature of its contracts with customers and determined that further disaggregation of revenue from contracts with customers into more granular categories beyond what is presented in the Consolidated Condensed Statements of Income was not necessary. Descriptions of revenue-generating activities that are within the scope of ASU 2014-09, which are presented in our income statements are as follows:

Service charges on deposit accounts: The Corporation earns fees from its deposit customers for transaction-based, account maintenance and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering and ACH fees, are recognized at the time the transaction is executed, which is the point in time the Corporation fulfills the customer's request. Account maintenance fees, which relate primarily to monthly maintenance, are earned monthly, representing the period which the Corporation satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer's account balance.

Fiduciary activities: This represents monthly fees due from wealth management customers as consideration for managing the customers' assets. Wealth management and trust services include custody of assets, investment management, fees for trust services and similar fiduciary activities. These fees are primarily earned over time as the Corporation provides the contracted monthly or quarterly services and are generally assessed based on the market value of assets under management at month-end. Fees that are transaction-based are recognized at the point in time that the transaction is executed.

Investment Brokerage Fees: The Corporation earns fees from investment brokerage services provided to its customers by a third-party service provider. The Corporation receives commissions from the third-party provider on a monthly basis based upon customer activity for the month. The fees are paid to us by the third party on a monthly basis and are recognized when received.

Interchange income: The Corporation earns interchange fees from debit and credit cardholder transactions conducted through the Visa and MasterCard payment networks. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized concurrent with the transaction processing services provided to the cardholder.

Gains (Losses) on Sales of OREO: The Corporation records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Corporation finances the sale of OREO to the buyer, the Corporation assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Corporation adjusts the transaction price and related gain (loss) on sale if a significant financing component is present.

10

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

NOTE 2

ACQUISITIONS

Independent Alliance Banks, Inc.

On November 21, 2016, the Corporation purchased 495,112 shares, or 12.1 percent, of IAB's outstanding common stock from an IAB shareholder for $19.8 million, or $40.00 per share. On July 14, 2017, the Corporation acquired the remaining shares of IAB common stock. IAB, an Indiana Corporation, merged with and into the Corporation, whereupon the separate corporate existence of IAB ceased and the Corporation survived. Immediately following the merger, IAB's wholly-owned subsidiary, iAB Financial Bank, merged with and into the Bank, with the Bank continuing as the surviving bank.

IAB was headquartered in Fort Wayne, Indiana and had 16 banking centers serving the Fort Wayne market. Pursuant to the merger agreement, each IAB shareholder received 1.653 shares of the Corporation's common stock for each outstanding share of IAB common stock held. The Corporation issued approximately 6.0 million shares of common stock. The transaction value for the remaining shares of common stock, not owned by the Corporation, was approximately $238.8 million, resulting in a total purchase price of $258.6 million. The Corporation engaged in this transaction with the expectation that it would be accretive to income and add a new market area with a demographic profile consistent with many of the current Indiana markets served by the Bank. Goodwill resulted from this transaction due to the expected synergies and economies of scale.

In the third quarter of 2017, ASC 805-10 - Business Combinations, required the Corporation to remeasure the 12.1 percent equity interest in IAB's common stock and recognize the resulting gain or loss, if any, in earnings. The remeasurement was based upon the closing price of IAB's common stock immediately prior to the acquisition announcement, and prior to the Corporation obtaining control of IAB. The trading price of IAB's common stock subsequent to the acquisition announcement included a control or acquisition premium and was not indicative of the fair value of the Corporation's pre-existing equity interest immediately prior to the acquisition announcement. The fair value of the equity interest in IAB's common stock after the remeasurement was $19.8 million. The Corporation recorded a $50,000 loss in the third quarter of 2017 as a result of the remeasurement.

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 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 IAB acquisition is detailed in the following table.

	Fair Value
Cash and cash equivalents	$	6,016
Interest-bearing time deposits	248,212
Investment securities	4,078
Loans held for sale	594
Loans	725,382
Premises and equipment	10,107
Federal Home Loan Bank stock	4,810
Interest receivable	3,445
Cash surrender value of life insurance	26,964
Other assets	11,780
Deposits	(862,271		)
Securities sold under repurchase agreements	(17,915		)
Federal Home Loan Bank Advances	(47,575		)
Subordinated debentures	(10,583		)
Interest payable	(1,005		)
Other liabilities	(14,472		)
Net tangible assets acquired	87,567
Other Intangible assets	17,403
Goodwill	153,636
Purchase price	$	258,606

Of the total purchase price, $17,403,000 has been allocated to other intangible assets. Approximately $13.6 million was allocated to a core deposit intangible, which will be amortized over its estimated life of 10 years. Approximately $3.8 million was allocated to a non-compete intangible, which will be amortized over its estimated life of 2 years. The remaining purchase price was allocated to goodwill, which is not deductible for tax purposes.

11

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

Acquired loan data for IAB can be found in the table below:

	Fair Value of Acquired Loans at Acquisition Date		Gross Contractual Amounts Receivable at Acquisition Date		Best Estimate at Acquisition Date of Contractual Cash Flows Not Expected to be Collected
Acquired receivables subject to ASC 310-30	$	4,838	$	14,131	$	8,352
Acquired receivables not subject to ASC 310-30	$	720,544	$	864,613	$	9,786

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 difference. 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.

The Arlington Bank

On May 19, 2017, the Corporation acquired 100 percent of Arlington Bank. Arlington Bank, an Ohio savings bank, merged with and into the Bank, with the Bank continuing as the surviving bank. Arlington Bank was headquartered in Columbus, Ohio and had 3 banking centers serving the Columbus, Ohio market. Pursuant to the merger agreement, each Arlington Bank shareholder received 2.7245 shares of the Corporation's common stock for each outstanding share of Arlington Bank common stock held. The Corporation issued approximately 2.1 million shares of common stock, which was valued at approximately $82.6 million. The Corporation engaged in this transaction with the expectation that it would be accretive to income and expand the existing footprint in Columbus, Ohio. Goodwill resulted from this transaction due to the expected synergies and economies of scale.

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 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 Arlington Bank acquisition is detailed in the following table.

	Fair Value
Cash and cash equivalents	$	48,532
Interest-bearing time deposits	292
Loans held for sale	7,626
Loans	224,680
Premises and equipment	1,986
Federal Home Loan Bank stock	1,091
Interest receivable	653
Other assets	1,620
Deposits	(252,783		)
Interest payable	(244		)
Other liabilities	(3,106		)
Net tangible assets acquired	30,347
Core deposit intangible	4,526
Goodwill	47,719
Purchase price	$	82,592

Of the total purchase price, $4,526,000 has been allocated to a core deposit intangible that will be amortized over its estimated life of 10 years. The remaining purchase price was allocated to goodwill, which is not deductible for tax purposes.

Acquired loan data for Arlington Bank can be found in the table below:

	Fair Value of Acquired Loans at Acquisition Date		Gross Contractual Amounts Receivable at Acquisition Date		Best Estimate at Acquisition Date of Contractual Cash Flows Not Expected to be Collected
Acquired receivables subject to ASC 310-30	$	2,625	$	6,183	$	2,891
Acquired receivables not subject to ASC 310-30	$	222,055	$	308,857	$	2,741

12

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

Pro Forma Financial Information

The results of operations of Arlington Bank and IAB have been included in the Corporation's consolidated financial statements since the acquisition dates. The following schedule includes pro forma results for the year ended December 31, 2017, as if the Arlington Bank and IAB acquisitions occurred as of the beginning of the period presented.

	2017
Total revenue (net interest income plus other income)	$	380,324
Net income	$	95,009
Net income available to common shareholders
Earnings per share:
Basic	$	1.94
Diluted	$	1.93

The pro forma information includes adjustments for interest income on loans, interest expense on deposits and borrowings, premises expense for banking centers acquired and amortization of intangibles arising from the transactions and the related income tax effects. The pro forma information for the year ended December 31, 2017 includes operating revenue of $9.0 million and $21.4 million from the Arlington Bank and IAB acquisitions since the date of acquisition, respectively. Additionally, $15.4 million, net of tax, of expenses directly attributable to the Arlington Bank and IAB acquisitions were included in the year ended December 31, 2017 pro forma information. The pro forma information is presented for information purposes only and is not indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time, nor is it intended to be a projection of future results.

NOTE 3

INVESTMENT SECURITIES

The amortized cost, gross unrealized gains, gross unrealized losses and approximate market value of the Corporation's investment securities at the dates indicated were:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale at September 30, 2018
U.S. Government-sponsored agency securities	$	18,492			$	134	$	18,358
State and municipal	611,528		2,920		14,280		600,168
U.S. Government-sponsored mortgage-backed securities	547,223		71		16,689		530,605
Corporate obligations	31						31
Total available for sale	1,177,274		2,991		31,103		1,149,162
Held to maturity at September 30, 2018
U.S. Government-sponsored agency securities	22,618				833		21,785
State and municipal	192,124		1,161		1,748		191,537
U.S. Government-sponsored mortgage-backed securities	260,347		300		6,514		254,133
Foreign Investments	1,000				3		997
Total held to maturity	476,089		1,461		9,098		468,452
Total Investment Securities	$	1,653,363	$	4,452	$	40,201	$	1,617,614

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale at December 31, 2017
State and municipal	$	510,852	$	16,932	$	1,091	$	526,693
U.S. Government-sponsored mortgage-backed securities	473,325		964		3,423		470,866
Corporate obligations	31						31
Equity securities	2,357						2,357
Total available for sale	986,565		17,896		4,514		999,947
Held to maturity at December 31, 2017
U.S. Government-sponsored agency securities	22,618				435		22,183
State and municipal	235,594		6,295		244		241,645
U.S. Government-sponsored mortgage-backed securities	301,443		3,341		1,404		303,380
Foreign Investment	1,000						1,000
Total held to maturity	560,655		9,636		2,083		568,208
Total Investment Securities	$	1,547,220	$	27,532	$	6,597	$	1,568,155

13

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

The amortized cost and fair value of available for sale and held to maturity securities at September 30, 2018 and December 31, 2017, 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 September 30, 2018:
Due in one year or less	$	24,098	$	24,360	$	5,161	$	5,178
Due after one through five years	17,294		17,511		48,155		47,042
Due after five through ten years	75,416		75,498		57,950		58,212
Due after ten years	513,243		501,188		104,476		103,887
	630,051		618,557		215,742		214,319
U.S. Government-sponsored mortgage-backed securities	547,223		530,605		260,347		254,133
Total Investment Securities	$	1,177,274	$	1,149,162	$	476,089	$	468,452

	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Maturity Distribution at December 31, 2017
Due in one year or less	$	425	$	425	$	12,015	$	12,158
Due after one through five years	5,040		5,204		76,146		76,334
Due after five through ten years	74,921		78,806		54,441		55,679
Due after ten years	430,497		442,289		116,610		120,657
	510,883		526,724		259,212		264,828
U.S. Government-sponsored mortgage-backed securities	473,325		470,866		301,443		303,380
Equity securities	2,357		2,357
Total Investment Securities	$	986,565	$	999,947	$	560,655	$	568,208

The carrying value of securities pledged as collateral, to secure borrowings and for other purposes, was $426,200,000 at September 30, 2018, and $475,999,000 at December 31, 2017.

The book value of securities sold under agreements to repurchase amounted to $122,789,000 at September 30, 2018, and $136,639,000 at December 31, 2017.

Gross gains on the sales and redemptions of available for sale securities for the three and nine months ended September 30, 2018 and 2017 are shown below.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Sales and Redemptions of Available for Sale Securities:
Gross gains	$	1,285	$	382	$	4,016	$	1,547
Gross losses			50				50

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 gross unrealized losses and fair value, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position at September 30, 2018, and December 31, 2017:

	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 September 30, 2018
U.S. Government-sponsored agency securities	$	18,358	$	134					$	18,358	$	134
State and municipal	397,852		11,780		$	30,820	$	2,500	428,672		14,280
U.S. Government-sponsored mortgage-backed securities	386,632		9,603		134,602		7,086		521,234		16,689
Total Temporarily Impaired Available for Sale Securities	802,842		21,517		165,422		9,586		968,264		31,103
Temporarily Impaired Held to Maturity Securities at September 30, 2018
U.S. Government-sponsored agency securities	97		3		21,688		830		21,785		833
State and municipal	44,857		857		16,326		891		61,183		1,748
U.S. Government-sponsored mortgage-backed securities	168,488		3,473		61,139		3,041		229,627		6,514
Corporate Obligations	997		3						997		3
Total Temporarily Impaired Held to Maturity Securities	214,439		4,336		99,153		4,762		313,592		9,098
Total Temporarily Impaired Investment Securities	$	1,017,281	$	25,853	$	264,575	$	14,348	$	1,281,856	$	40,201

	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, 2017
State and municipal	$	13,296	$	198	$	35,324	$	893	$	48,620	$	1,091
U.S. Government-sponsored mortgage-backed securities	182,755		1,520		68,667		1,903		251,422		3,423
Total Temporarily Impaired Available for Sale Securities	196,051		1,718		103,991		2,796		300,042		4,514
Temporarily Impaired Held to Maturity Securities at December 31, 2017
U.S. Government-sponsored agency securities	9,988		131		12,196		304		22,184		435
State and municipal	2,430		36		15,805		208		18,235		244
U.S. Government-sponsored mortgage-backed securities	62,508		485		43,078		919		105,586		1,404
Total Temporarily Impaired Held to Maturity Securities	74,926		652		71,079		1,431		146,005		2,083
Total Temporarily Impaired Investment Securities	$	270,977	$	2,370	$	175,070	$	4,227	$	446,047	$	6,597

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.

	September 30, 2018			December 31, 2017
Investments reported at less than historical cost:
Historical cost	$	1,322,058		$	452,644
Fair value	$	1,281,856		$	446,047
Percent of the Corporation's investment portfolio	78.9		%	28.6		%

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 ("OTTI") is identified.

The Corporation’s management has evaluated all securities with unrealized losses for OTTI as of September 30, 2018. 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 classified 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 loss resulting from the sale of certain securities has proven the data to be accurate over time.   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.

15

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

State and Municipal and U.S. Government-Sponsored Agency Securities

The unrealized losses on the Corporation's investments in securities of state and political subdivisions and U.S. Government-Sponsored Agency securities were caused by interest rate increases. 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. Because the Corporation does not intend to sell the investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Corporation does not consider those investments to be other-than-temporarily impaired at September 30, 2018. The state and municipal securities portfolio contains unrealized losses of $14,280,000 on three hundred thirty-six securities and $1,748,000 on sixty-eight securities in the available for sale and held to maturity portfolios, respectively. The U.S. Government-Sponsored Agency securities portfolio contains unrealized losses of $134,000 on seven securities and $833,000 on five securities in the available for sale and held to maturity portfolios, respectively.

U.S. Government-Sponsored Mortgage-Backed Securities

The unrealized losses on the Corporation's investment in mortgage-backed securities were a result of interest rate changes. The Corporation expects to recover the amortized cost basis over the term of the securities. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Corporation does not intend to sell the investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Corporation does not consider those investments to be other-than-temporarily impaired at September 30, 2018. The mortgage-backed securities portfolio contains unrealized losses of $16,689,000 on one hundred twenty-five securities and $6,514,000 on one hundred securities in the available for sale and held to maturity portfolios, respectively. All these securities are issued by a U.S. government-sponsored entity.

NOTE 4  

LOANS AND ALLOWANCE

The Corporation’s primary lending focus is small business and middle market commercial, commercial real estate and residential real estate, which results in portfolio diversification. The following tables show the composition of the loan portfolio, the allowance for loan losses and credit quality characteristics by collateral classification, excluding loans held for sale. Loans held for sale as of September 30, 2018, and December 31, 2017, were $3,022,000 and $7,216,000, respectively.

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

	September 30, 2018			December 31, 2017
Commercial and industrial loans	$	1,655,569		$	1,493,493
Agricultural production financing and other loans to farmers	88,504			121,757
Real estate loans:
Construction	668,608			612,219
Commercial and farmland	2,699,629			2,562,691
Residential	965,893			962,765
Home equity	517,303			514,021
Individuals' loans for household and other personal expenditures	98,709			86,935
Lease financing receivables, net of unearned income	1,830			2,527
Other commercial loans	392,026			394,791
Loans	$	7,088,071		$	6,751,199
Allowance for loan losses	(78,406		)	(75,032		)
Net Loans	$	7,009,665		$	6,676,167

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 September 30, 2018. 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.

16

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

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 credit officers and in accordance with established policies. The Bank charges off a loan when a determination is made that all or a portion of the loan is uncollectable. 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 450 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, purchased loans 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 nine months ended September 30, 2018 and September 30, 2017:

	Three Months Ended September 30, 2018
	Commercial			Commercial Real Estate			Consumer			Residential			Finance Leases		Total
Allowance for loan losses:
Balances, June 30, 2018	$	31,465		$	27,731		$	3,921		$	14,424		$	2	$	77,543
Provision for losses	256			410			159			575					1,400
Recoveries on loans	658			306			46			165					1,175
Loans charged off	(313		)	(501		)	(194		)	(704		)			(1,712		)
Balances, September 30, 2018	$	32,066		$	27,946		$	3,932		$	14,460		$	2	$	78,406

	Nine Months Ended September 30, 2018
	Commercial			Commercial Real Estate			Consumer			Residential			Finance Leases		Total
Allowance for loan losses:
Balances, December 31, 2017	$	30,418		$	27,343		$	3,732		$	13,537		$	2	$	75,032
Provision for losses	1,567			1,448			493			2,055					5,563
Recoveries on loans	2,060			1,858			233			915					5,066
Loans charged off	(1,979		)	(2,703		)	(526		)	(2,047		)			(7,255		)
Balances, September 30, 2018	$	32,066		$	27,946		$	3,932		$	14,460		$	2	$	78,406

17

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

	Three Months Ended September 30, 2017
	Commercial			Commercial Real Estate			Consumer			Residential			Finance Leases		Total
Allowance for loan losses:
Balances, June 30, 2017	$	28,906		$	25,236		$	3,372		$	12,955		$	2	$	70,471
Provision for losses	921			374			342			446					2,083
Recoveries on loans	324			1,327			51			157					1,859
Loans charged off	(468		)	(190		)	(174		)	(227		)			(1,059		)
Balances, September 30, 2017	$	29,683		$	26,747		$	3,591		$	13,331		$	2	$	73,354

	Nine Months Ended September 30, 2017
	Commercial			Commercial Real Estate			Consumer			Residential			Finance Leases		Total
Allowance for loan losses:
Balances, December 31, 2016	$	27,696		$	23,661		$	2,923		$	11,755		$	2	$	66,037
Provision for losses	2,279			2,023			877			2,164					7,343
Recoveries on loans	987			2,066			253			547					3,853
Loans charged off	(1,279		)	(1,003		)	(462		)	(1,135		)			(3,879		)
Balances, September 30, 2017	$	29,683		$	26,747		$	3,591		$	13,331		$	2	$	73,354

The tables below show the Corporation’s allowance for loan losses and loan portfolio by loan segment as of the periods indicated. There was no related allowance for loan losses for loans acquired with deteriorated credit quality at September 30, 2018 or December 31, 2017.

	September 30, 2018
	Commercial		Commercial Real Estate		Consumer		Residential		Finance Leases		Total
Allowance Balances:
Individually evaluated for impairment							$	433			$	433
Collectively evaluated for impairment	$	32,066	$	27,946	$	3,932	14,027		$	2	77,973
Total Allowance for Loan Losses	$	32,066	$	27,946	$	3,932	$	14,460	$	2	$	78,406
Loan Balances:
Individually evaluated for impairment	$	1,614	$	12,158	$	8	$	2,219			$	15,999
Collectively evaluated for impairment	2,132,193		3,340,898		98,701		1,479,371		$	1,830	7,052,993
Loans acquired with deteriorated credit quality	2,292		15,181				1,606				19,079
Loans	$	2,136,099	$	3,368,237	$	98,709	$	1,483,196	$	1,830	$	7,088,071

	December 31, 2017
	Commercial		Commercial Real Estate		Consumer		Residential		Finance Leases		Total
Allowance Balances:
Individually evaluated for impairment	$	666	$	567			$	404			$	1,637
Collectively evaluated for impairment	29,752		26,776		$	3,732	13,133		$	2	73,395
Total Allowance for Loan Losses	$	30,418	$	27,343	$	3,732	$	13,537	$	2	$	75,032
Loan Balances:
Individually evaluated for impairment	$	3,345	$	17,432	$	5	$	2,429			$	23,211
Collectively evaluated for impairment	2,005,275		3,135,481		86,930		1,472,821		$	2,527	6,703,034
Loans acquired with deteriorated credit quality	1,421		21,997				1,536				24,954
Loans	$	2,010,041	$	3,174,910	$	86,935	$	1,476,786	$	2,527	$	6,751,199

Loans individually evaluated for impairment are comprised of commercial and consumer loans deemed impaired in accordance with ASC 310-10 and include loans acquired with deteriorated credit quality totaling $1,568,000 and $315,000 at September 30, 2018 and December 31, 2017, respectively.

18

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

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

Commercial

Commercial lending is 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 tangible assets being financed such as equipment or real estate or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee. Other loans may be unsecured, secured but under-collateralized or otherwise made on the basis of the enterprise value of an organization. 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.

Consumer and Residential

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 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 on loans secured by 1-4 family residences can be impacted by changes in property values. 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. When the interest accrual is discontinued, all unpaid accrued interest is reversed against earnings when considered uncollectable. 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:

	September 30, 2018		December 31, 2017
Commercial and industrial loans	$	2,287	$	3,275
Agriculture production financing and other loans to farmers	640		1,027
Real estate loans:
Construction	764		65
Commercial and farmland	10,406		12,951
Residential	5,140		9,444
Home equity	1,126		1,928
Individuals' loans for household and other personal expenditures	58		34
Total	$	20,421	$	28,724

Impaired loans include loans deemed impaired according to the guidance set forth in ASC 310-10. Commercial loans under $500,000 and consumer loans, with the exception of troubled debt restructures, are not individually evaluated for impairment.

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 for measuring the amount of impairment is utilized. This method requires obtaining a current independent appraisal of the collateral and applying a discount factor, which includes selling costs if applicable, 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.

19

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 composition of the Corporation’s impaired loans, related allowance and interest income recognized while impaired by loan class as of the periods indicated:

	September 30, 2018
	Unpaid Principal Balance		Recorded Investment		Related Allowance
Impaired loans with no related allowance:
Commercial and industrial loans	$	6,133	$	974
Agriculture production financing and other loans to farmers	660		640
Real estate Loans:
Construction	1,352		614
Commercial and farmland	13,717		11,544
Residential	81		62
Individuals' loans for household and other personal expenditures	8		8
Total	$	21,951	$	13,842
Impaired loans with related allowance:
Real estate Loans:
Residential	$	1,849	$	1,794	$	357
Home equity	382		363		76
Total	$	2,231	$	2,157	$	433
Total Impaired Loans	$	24,182	$	15,999	$	433

	December 31, 2017
	Unpaid Principal Balance		Recorded Investment		Related Allowance
Impaired loans with no related allowance:
Commercial and industrial loans	$	7,611	$	1,536
Agriculture production financing and other loans to farmers	732		700
Real estate Loans:
Commercial and farmland	16,758		15,162
Residential	833		519
Home equity	40		8
Individuals' loans for household and other personal expenditures	5		5
Total	$	25,979	$	17,930
Impaired loans with related allowance:
Commercial and industrial loans	$	812	$	782	$	552
Agriculture production financing and other loans to farmers	357		327		114
Real estate Loans:
Commercial and farmland	2,989		2,270		567
Residential	1,616		1,572		327
Home equity	349		330		77
Total	$	6,123	$	5,281	$	1,637
Total Impaired Loans	$	32,102	$	23,211	$	1,637

20

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

	Three Months Ended September 30, 2018				Nine Months Ended September 30, 2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Impaired loans with no related allowance:
Commercial and industrial loans	$	979			$	994
Agriculture production financing and other loans to farmers	640				640
Real estate Loans:
Construction	614				930
Commercial and farmland	12,098		$	40	12,733		$	128
Residential	62		1		63		2
Individuals' loans for household and other personal expenditures	9				10
Total	$	14,402	$	41	$	15,370	$	130
Impaired loans with related allowance:
Real estate Loans:
Residential	$	1,797	$	13	$	1,812	$	37
Home equity	364		3		367		8
Total	$	2,161	$	16	$	2,179	$	45
Total Impaired Loans	$	16,563	$	57	$	17,549	$	175

	Three Months Ended September 30, 2017				Nine Months Ended September 30, 2017
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Impaired loans with no related allowance:
Commercial and industrial loans	$	2,103			$	4,567
Agriculture production financing and other loans to farmers	945				945
Real estate Loans:
Commercial and farmland	14,129		$	89	15,483		$	267
Residential	588				673		2
Home equity	11				16
Individuals' loans for household and other personal expenditures	6				7
Total	$	17,782	$	89	$	21,691	$	269
Impaired loans with related allowance:
Commercial and industrial loans	$	1,796			$	1,796
Agriculture production financing and other loans to farmers	337				337
Real estate Loans:
Commercial and farmland	3,359				3,374
Residential	1,403		$	8	1,395		$	25
Home equity	331		2		334		6
Total	$	7,226	$	10	$	7,236	$	31
Total Impaired Loans	$	25,008	$	99	$	28,927	$	300

Impaired loans in the above tables do not include loans accounted for under ASC 310-30, or any other loan, unless deemed impaired in accordance with ASC 310-10.

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, (iv) covenant failures and (v) the general national and local economic conditions.

21

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

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 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 uncollectable 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.

22

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-days or more 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.

	September 30, 2018
	Commercial Pass		Commercial Special Mention		Commercial Substandard		Commercial Doubtful	Commercial Loss	Consumer Performing		Consumer Non-Performing		Total
Commercial and industrial loans	$	1,587,560	$	18,085	$	49,924							$	1,655,569
Agriculture production financing and other loans to farmers	68,556		7,144		12,804								88,504
Real estate Loans:
Construction	629,244		2,533		10,200				$	26,494	$	137	668,608
Commercial and farmland	2,551,541		67,043		78,694				2,350		1		2,699,629
Residential	175,315		5,119		2,377				778,086		4,996		965,893
Home equity	25,435		750		387				489,631		1,100		517,303
Individuals' loans for household and other personal expenditures									98,600		109		98,709
Lease financing receivables, net of unearned income	1,830												1,830
Other commercial loans	391,673				353								392,026
Loans	$	5,431,154	$	100,674	$	154,739			$	1,395,161	$	6,343	$	7,088,071

	December 31, 2017
	Commercial Pass		Commercial Special Mention		Commercial Substandard		Commercial Doubtful		Commercial Loss		Consumer Performing		Consumer Non-Performing		Total
Commercial and industrial loans	$	1,418,401	$	51,336	$	23,386	$	370							$	1,493,493
Agriculture production financing and other loans to farmers	73,800		27,502		20,018		387		$	50					121,757
Real estate Loans:
Construction	587,906		828		981						$	22,374	$	130	612,219
Commercial and farmland	2,408,329		70,074		79,769		1,536				2,980		3		2,562,691
Residential	185,725		4,376		4,209		114				759,900		8,441		962,765
Home equity	28,554		457		286						482,661		2,063		514,021
Individuals' loans for household and other personal expenditures											86,875		60		86,935
Lease financing receivables, net of unearned income	2,527														2,527
Other commercial loans	394,222				569										394,791
Loans	$	5,099,464	$	154,573	$	129,218	$	2,407	$	50	$	1,354,790	$	10,697	$	6,751,199

The tables below show a past due aging of the Corporation’s loan portfolio, by loan class, as of September 30, 2018, and December 31, 2017:

	September 30, 2018
	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Non-Accrual		Total Past Due & Non-Accrual		Total
Commercial and industrial loans	$	1,649,538	$	3,344	$	400			$	2,287	$	6,031	$	1,655,569
Agriculture production financing and other loans to farmers	87,864								640		640		88,504
Real estate loans:
Construction	667,142				702				764		1,466		668,608
Commercial and farmland	2,683,494		1,859		3,870				10,406		16,135		2,699,629
Residential	955,383		4,873		497				5,140		10,510		965,893
Home equity	513,936		1,506		735				1,126		3,367		517,303
Individuals' loans for household and other personal expenditures	98,044		394		163		$	50	58		665		98,709
Lease financing receivables, net of unearned income	1,830												1,830
Other commercial loans	392,026												392,026
Loans	$	7,049,257	$	11,976	$	6,367	$	50	$	20,421	$	38,814	$	7,088,071

23

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

	December 31, 2017
	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Non-Accrual		Total Past Due & Non-Accrual		Total
Commercial and industrial loans	$	1,487,221	$	2,967	$	30			$	3,275	$	6,272	$	1,493,493
Agriculture production financing and other loans to farmers	120,720		10						1,027		1,037		121,757
Real estate loans:
Construction	610,896		1,193				$	65	65		1,323		612,219
Commercial and farmland	2,542,048		6,923		166		603		12,951		20,643		2,562,691
Residential	948,947		4,010		308		56		9,444		13,818		962,765
Home equity	510,362		1,372		184		175		1,928		3,659		514,021
Individuals' loans for household and other personal expenditures	85,744		298		834		25		34		1,191		86,935
Lease financing receivables, net of unearned income	2,527												2,527
Other commercial loans	394,791												394,791
Loans	$	6,703,256	$	16,773	$	1,522	$	924	$	28,724	$	47,943	$	6,751,199

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 restructures in the Corporation's loan portfolio that occurred during the periods indicated:

	Three Months Ended September 30, 2018					Nine Months Ended September 30, 2018
	Pre-Modification Recorded Balance		Post-Modification Recorded Balance		Number of Loans	Pre-Modification Recorded Balance		Post-Modification Recorded Balance		Number of Loans
Real estate loans:
Residential	$	154	$	140	4	$	490	$	487	11
Home equity	65		65		1	81		81		3
Individuals' loans for household and other personal expenditures						7		8		1
Total	$	219	$	205	5	$	578	$	576	15

	Three Months Ended September 30, 2017					Nine Months Ended September 30, 2017
	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	$	6	$	6	1	$	400	$	176	2
Real estate loans:
Commercial and farmland						357		492		6
Residential	120		122		1	570		520		8
Home equity	68		73		2	190		73		2
Total	$	194	$	201	4	$	1,517	$	1,261	18

24

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 restructures as of September 30, 2018 and 2017, by modification type, that occurred during the periods indicated:

	Three Months Ended September 30, 2018
	Term Modification	Rate Modification		Combination		Total Modification
Real estate loans:
Residential		$	47	$	93	$	140
Home equity		65				65
Total		$	112	$	93	$	205

	Nine Months Ended September 30, 2018
	Term Modification		Rate Modification		Combination		Total Modification
Real estate loans:
Residential			$	208	$	239	$	447
Home Equity	$	77	76				153
Individuals' loans for household and other personal expenditures			6				6
Total	$	77	$	290	$	239	$	606

	Three Months Ended September 30, 2017
	Term Modification		Rate Modification		Combination	Total Modification
Commercial and industrial loans	$	5				$	5
Real estate loans:
Residential			$	122		122
Home equity			73			73
Total	$	5	$	195		$	200

	Nine Months Ended September 30, 2017
	Term Modification		Rate Modification		Combination		Total Modification
Commercial and industrial loans	$	5			$	168	$	173
Real estate loans:
Commercial and farmland	41		$	61	232		334
Residential			466		42		508
Home equity			73				73
Total	$	46	$	600	$	442	$	1,088

Loans secured by residential real estate made up 100 percent of the post-modification balance of troubled debt restructured loans made in the three months ended September 30, 2018. The same loan classification made up 99 percent of the post-modification balance of troubled debt restructured loans made in the nine months ended September 30, 2018.

The following tables summarize troubled debt restructures that occurred during the twelve months ended September 30, 2018 that subsequently defaulted during the period indicated and remained in default at period end. There were no troubled debt restructures that occurred during the twelve months ended September 30, 2017 that subsequently defaulted during the three and nine month periods ended September 30, 2017 and remained in default at September 30, 2017. A loan is considered in default if it is 30 or more days past due.

	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
	Number of Loans	Recorded Balance		Number of Loans	Recorded Balance
Real estate loans:
Commercial and farmland	1	$	262	1	$	262
Residential	2	83		4	152
Individuals' loans for household and other personal expenditures	1	11		1	11
Total	4	$	356	6	$	425

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 loan restructures are generally included in the general historical allowance for loan loss at the post modification balance. Consumer non-accrual and delinquent troubled debt loan restructures 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 $1,045,000 and$2,302,000 at September 30, 2018 and December 31, 2017, respectively.

25

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

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 troubled debt loan restructures 30 - 89 days delinquent are included in the calculation of the delinquency trend environmental allocation in the allowance for loan losses. With the exception of the acquired loans excluded from the allowance for loan losses, all commercial non-impaired loans, including non-accrual and 90-days or more delinquent, are included in the ASC 450 loss estimate.

NOTE 5

PURCHASED CREDIT IMPAIRED LOANS

Purchased Credit Impaired Loans 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, purchased loans 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 difference. 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.

The carrying amount of Purchased Credit Impaired Loans as of September 30, 2018 and December 31, 2017 was $20.6 million and $25.3 million, respectively; with no required allowance for loan losses. 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, are identified in the table below.

	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
Beginning balance	$	2,423		$	2,890
Additions
Accretion	(1,004		)	(2,441		)
Reclassification from nonaccretable	798			1,768
Disposals	(16		)	(16		)
Ending balance	$	2,201		$	2,201

	Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017
Beginning balance	$	2,607		$	3,951
Additions	941			1,608
Accretion	(686		)	(5,082		)
Reclassification from nonaccretable	449			3,501
Disposals				(667		)
Ending balance	$	3,311		$	3,311

The following table presents loans acquired, as of the respective acquisition date, during the nine months ended September 30, 2017, for which it was probable that all contractually required payments would not be collected. There were no loans acquired during the nine months ended September 30, 2018.

	IAB		Arlington Bank
Contractually required payments receivable at acquisition date	$	14,131	$	6,183
Nonaccretable difference	8,352		2,891
Expected cash flows at acquisition date	5,779		3,292
Accretable difference	941		667
Basis in loans at acquisition date	$	4,838	$	2,625

26

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 IAB acquisition on July, 14, 2017 resulted in $153,636,000 of goodwill. The Arlington Bank acquisition on May 19, 2017 resulted in $47,719,000 of goodwill, which includes a reduction of $469,000. This reduction was recorded in the third quarter of 2017 as a measurement period adjustment. Details regarding the IAB and Arlington Bank acquisitions are discussed in NOTE 2. ACQUISITIONS of these Notes to Consolidated Condensed Financial Statements. There have been no changes in goodwill since December 31, 2017, resulting in a goodwill balance of $445,355,000 as of September 30, 2018.

	2017
Balance, January 1	$	244,000
Goodwill acquired	201,824
Measurement period adjustment	(469		)
Balance, December 31	$	445,355

NOTE 7

OTHER INTANGIBLES

Core deposit intangibles and other intangibles are recorded on the acquisition date of an entity. During the measurement period, the Corporation may record subsequent adjustments to these intangibles for provisional amounts recorded at the acquisition date. The IAB acquisition on July 14, 2017 resulted in a core deposit intangible of $13,638,000 and other intangibles, consisting of non-compete intangibles, of $3,765,000. The Arlington Bank acquisition on May 19, 2017 resulted in a core deposit intangible of $4,526,000. Details regarding the IAB and Arlington Bank acquisitions are discussed in NOTE 2. ACQUISITIONS of these Notes to Consolidated Condensed Financial Statements.

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

	September 30, 2018			December 31, 2017
Gross carrying amount	$	85,869		$	63,940
Core deposit intangibles acquired				18,164
Other intangibles acquired				3,765
Accumulated amortization	(59,815		)	(54,721		)
Total other intangibles	$	26,054		$	31,148

The core deposit intangibles and other intangibles are being amortized primarily on an accelerated basis over their estimated useful lives, generally over a period of two to ten years. Estimated future amortization expense is summarized as follows:

	Amortization Expense
2018	$	1,625
2019	5,169
2020	3,632
2021	3,427
2022	3,325
After 2022	8,876
	$	26,054

27

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 September 30, 2018, the Corporation had four interest rate swaps with a notional amount of $46.0 million and one interest rate cap with a notional amount of $13.0 million that were designated as cash flow hedges. As of December 31, 2017, 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. A $10.0 million interest rate swap used to hedge the variable cash outflows associated with a Federal Home Loan Bank advance matured in the third quarter of 2018.

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 earnings in the period that the hedged forecasted transaction affects earnings.

During 2018, $26.0 million of the interest rate swaps and the $13.0 million interest rate cap were used to hedge the variable cash outflows (LIBOR-based) 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 $20.0 million of interest rate swaps were used to hedge the variable cash outflows (LIBOR-based) associated with two Federal Home Loan Bank advances. During the three and nine months ended September 30, 2018, and 2017, the Corporation did not recognize any ineffectiveness.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Corporation's variable-rate liabilities. During the next twelve months, the Corporation expects to reclassify $249,000 from accumulated other comprehensive income to interest expense.

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 September 30, 2018, the notional amount of customer-facing swaps was approximately $420,388,000.  This amount is offset with third party counterparties, as described above.

28

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 September 30, 2018, and December 31, 2017.

Asset Derivatives

Liability Derivatives

September 30, 2018

December 31, 2017

September 30, 2018

December 31, 2017

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

$

548

Other Assets

$

18

Other Liabilities

$

387

Other Liabilities

$

1,383

Derivatives not designated as hedging instruments:

Interest rate contracts

Other Assets

$

13,763

Other Assets

$

7,305

Other Liabilities

$

13,763

Other Liabilities

$

7,305

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					Nine Months Ended
	September 30, 2018		September 30, 2017			September 30, 2018		September 30, 2017
Interest Rate Products	$	210	$	(10	)	$	1,009	$	(380	)

Effect of Derivative Instruments on the Income Statement

The Corporation did not recognize any gains or losses from derivative financial instruments in the Consolidated Condensed Statements of Income for the three and nine months ended September 30, 2018 and 2017.

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 September 30, 2018			Three Months Ended September 30, 2017
Interest rate contracts	Interest Expense	$	(93	)	$	(240	)

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)
		Nine Months Ended September 30, 2018			Nine Months Ended September 30, 2017
Interest rate contracts	Interest Expense	$	(368	)	$	(759	)

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 Corporation’s control of such risk is through quarterly financial reviews, comparing mark-to-market values with policy limitations, credit ratings and collateral pledging.

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. Additionally, the Corporation 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, then the Corporation could also be declared in default on its derivative obligations. As of September 30, 2018, the termination value of derivatives in a net liability position related to these agreements was $394,000. As of September 30, 2018, the Corporation has minimum collateral posting thresholds with certain of its derivative counterparties and has posted collateral of $3,315,000. If the Corporation had breached any of these provisions at September 30, 2018, it could have been required to settle its obligations under the agreements at their termination value.

29

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

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

Assets and liabilities are considered to be measured at fair value on a recurring basis if fair value is measured regularly (i.e., daily, weekly, monthly or quarterly). Recurring valuation occurs at a minimum on the measurement date. Assets and liabilities are considered to be measured at fair value on a nonrecurring basis if the fair value measurement of the instrument does not necessarily result in a change in the amount recorded on the balance sheet. Generally, nonrecurring valuation is the result of the application of other accounting pronouncements which require assets or liabilities to be assessed for impairment or recorded at the lower of cost or fair value. The fair value of assets or liabilities transferred in or out of Level 3 is measured on the transfer date, with any additional changes in fair value subsequent to the transfer considered to be realized or unrealized gains or losses.

Following is a description of the valuation methodologies 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.

Investment Securities

Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. The Corporation currently has no securities classified within Level 1 of the hierarchy. Where significant observable inputs, other than Level 1 quoted prices, are available, securities are classified within Level 2 of the valuation hierarchy. Level 2 securities include government-sponsored agency and mortgage backs and state and municipal securities. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy and include state and municipal, government-sponsored mortgage backs and corporate obligations securities. Level 3 fair value for 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 (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.

30

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 of these Notes to Consolidated Condensed Financial Statements. The following table presents the fair value measurements of assets and liabilities recognized in the accompanying balance sheets measured at fair value on a recurring basis and the level within the ASC 820-10 fair value hierarchy in which the fair value measurements fall at September 30, 2018, and December 31, 2017.

			Fair Value Measurements Using:
September 30, 2018	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	$	18,358		$	18,358
State and municipal	600,168			596,888		$	3,280
U.S. Government-sponsored mortgage-backed securities	530,605			530,601		4
Corporate obligations	31					31
Interest rate swap asset	13,763			13,763
Interest rate cap	548			548
Interest rate swap liability	14,150			14,150

			Fair Value Measurements Using:
December 31, 2017	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:
State and municipal	$	526,693		$	522,750	$	3,943
U.S. Government-sponsored mortgage-backed securities	470,866			470,866
Corporate obligations	31					31
Equity securities	2,357			2,353		4
Interest rate swap asset	7,305			7,305
Interest rate cap	18			18
Interest rate swap liability	8,688			8,688

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 nine months ended September 30, 2018 and 2017.

	Available for Sale Securities
	Three Months Ended						Nine Months Ended
	September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
Balance at beginning of the period	$	3,970		$	3,330		$	3,978		$	5,169
Included in other comprehensive income	(35		)	(22		)	(59		)	38
Principal payments	(620		)	679			(604		)	(1,220		)
Ending balance	$	3,315		$	3,987		$	3,315		$	3,987

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 September 30, 2018 or December 31, 2017.

Transfers Between Levels

There were no transfers in or out of Level 3 for the three and nine months ended September 30, 2018 and 2017.

31

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

Nonrecurring Measurements

Following is a description of valuation methodologies used for instruments measured at fair value on a non-recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such instruments pursuant to the valuation hierarchy for September 30, 2018, and December 31, 2017.

			Fair Value Measurements Using
September 30, 2018	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)	$	5,344			$	5,344
Other real estate owned	937				937

			Fair Value Measurements Using
December 31, 2017	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)	$	9,576			$	9,576
Other real estate owned	859				859

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 2017 and 2018, 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 discounted 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 September 30, 2018 and December 31, 2017.

September 30, 2018	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted-Average)
State and municipal securities	$	3,280	Discounted cash flow	Maturity/Call date	1 month to 20 yrs
				US Muni BQ curve	A- to BBB-
				Discount rate	1% - 5%
Corporate obligations and U.S. Government-sponsored mortgage backed securities	$	35	Discounted cash flow	Risk free rate	3 month LIBOR
				plus premium for illiquidity	plus 200bps
Impaired loans (collateral dependent)	$	5,344	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability	0% - 10% (2%)
Other real estate owned	$	937	Appraisals	Discount to reflect current market conditions	0% - 24% (3%)

32

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

December 31, 2017	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted-Average)
State and municipal securities	$	3,943	Discounted cash flow	Maturity/Call date	1 month to 20 yrs
				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)	$	9,576	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability	0% - 10% (1%)
Other real estate owned	$	859	Appraisals	Discount to reflect current market conditions	0% - 10% (2%)

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, U.S. Government-sponsored Mortgage Backed Securities

The significant unobservable inputs used in the fair value measurement of the Corporation's state and municipal securities, corporate obligations and U.S. Government-sponsored mortgage backed 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. Generally, changes in either of those inputs will not affect the other input.

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 September 30, 2018, and December 31, 2017.

			September 30, 2018
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Carrying Amount		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	142,501	$	142,501
Interest-bearing time deposits	66,763		66,763
Investment securities available for sale	1,149,162				$	1,145,847	$	3,315
Investment securities held to maturity	476,089				458,087		10,365
Loans held for sale	3,022				3,022
Loans	7,009,665						6,793,227
Federal Home Loan Bank stock	24,588				24,588
Interest rate swap and cap asset	14,311				14,311
Interest receivable	38,531				38,531
Liabilities:
Deposits	$	7,633,152	$	6,083,491	$	1,522,591
Borrowings:
Federal funds purchased	90,000				90,000
Securities sold under repurchase agreements	118,824				118,696
Federal Home Loan Bank advances	385,458				379,309
Subordinated debentures and term loans	138,408				124,806
Interest rate swap liability	14,150				14,150
Interest payable	5,920				5,920

33

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

			December 31, 2017
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Carrying Amount		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	154,905	$	154,905
Interest-bearing time deposits	35,027		35,027
Investment securities available for sale	999,947				$	995,969	$	3,978
Investment securities held to maturity	560,655				556,305		11,903
Loans held for sale	7,216				7,216
Loans	6,676,167						6,534,877
Federal Home Loan Bank stock	23,825				23,825
Interest rate swap and cap asset	7,323				7,323
Interest receivable	37,130				37,130
Liabilities:
Deposits	$	7,172,530	$	5,741,019	$	1,406,526
Borrowings:
Federal funds purchased	144,038				144,038
Securities sold under repurchase agreements	136,623				136,562
Federal Home Loan Bank advances	414,377				361,085
Subordinated debentures and term loans	139,349				120,085
Interest rate swap liability	8,688				8,688
Interest payable	4,390				4,390

The methods utilized to estimate the fair value of financial instruments at December 31, 2017 did not necessarily represent an exit price. In accordance with the Corporation's adoption of ASU 2016-01 as of January 1, 2018, the methods utilized to measure the fair value of financial instruments at September 30, 2018 represent an approximation of exit price; however, an actual exit price may differ.

NOTE 10

TRANSFERS ACCOUNTED FOR AS SECURED BORROWINGS

The collateral pledged for all repurchase agreements that are accounted for as secured borrowings as of September 30, 2018 and December 31, 2017 were:

	September 30, 2018
	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	$	109,695		$	1,514	$	7,615	$	118,824

	December 31, 2017
	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	$	126,187	$	1,340	$	1,500	$	7,596	$	136,623

34

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 September 30, 2018 and 2017:

	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, 2017	$	8,970		$	(1,125	)	$	(10,753	)	$	(2,908	)
Other comprehensive income before reclassifications	(30,032		)	1,039						(28,993		)
Amounts reclassified from accumulated other comprehensive income	(3,173		)	291						(2,882		)
Period change	(33,205		)	1,330			—			(31,875		)
Reclassification adjustment under ASU 2018-02	1,932			(242		)	(2,316		)	(626		)
Balance at September 30, 2018	$	(22,303	)	$	(37	)	$	(13,069	)	$	(35,409	)
Balance at December 31, 2016	$	1,035		$	(1,774	)	$	(12,842	)	$	(13,581	)
Other comprehensive income before reclassifications	8,124			(246		)				7,878
Amounts reclassified from accumulated other comprehensive income	(973		)	493			(175		)	(655		)
Period change	7,151			247			(175		)	7,223
Balance at September 30, 2017	$	8,186		$	(1,527	)	$	(13,017	)	$	(6,358	)

The following tables present 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 nine months ended September 30, 2018 and 2017.

	Amount Reclassified from Accumulated Other Comprehensive Income (Loss) For the Three Months Ended September 30,
Details about Accumulated Other Comprehensive Income (Loss) Components	2018			2017			Affected Line Item in the Statements of Income
Unrealized gains (losses) on available for sale securities (1)
Realized securities gains reclassified into income	$	1,285		$	332		Other income - net realized gains on sales of available for sale securities
Related income tax expense	(270		)	(116		)	Income tax expense
	$	1,015		$	216
Unrealized gains (losses) on cash flow hedges (2)
Interest rate contracts	$	(93	)	$	(240	)	Interest expense - subordinated debentures and term loans
Related income tax benefit	20			84			Income tax expense
	$	(73	)	$	(156	)
Unrealized gains (losses) on defined benefit plans
Amortization of prior service costs				$	89		Other expenses - salaries and employee benefits
Related income tax expense				(31		)	Income tax expense
	$	—		$	58
Total reclassifications for the period, net of tax	$	942		$	118

35

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

	Amount Reclassified from Accumulated Other Comprehensive Income (Loss) For the Nine Months Ended September 30,
Details about Accumulated Other Comprehensive Income (Loss) Components	2018			2017			Affected Line Item in the Statements of Income
Unrealized gains (losses) on available for sale securities (1)
Realized securities gains reclassified into income	$	4,016		$	1,497		Other income - net realized gains on sales of available for sale securities
Related income tax expense	(843		)	(524		)	Income tax expense
	$	3,173		$	973
Unrealized gains (losses) on cash flow hedges (2)
Interest rate contracts	$	(368	)	$	(759	)	Interest expense - subordinated debentures and term loans
Related income tax benefit	77			266			Income tax expense
	$	(291	)	$	(493	)
Unrealized gains (losses) on defined benefit plans
Amortization of net loss and prior service costs				$	269		Other expenses - salaries and employee benefits
Related income tax expense				(94		)	Income tax expense
	$	—		$	175
Total reclassifications for the period, net of tax	$	2,882		$	655

⁽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 of these Notes to Consolidated Condensed Financial Statements.

⁽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 of these Notes to Consolidated Condensed Financial Statements.

NOTE 12 

SHARE-BASED COMPENSATION

Stock options and 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 based on time 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. The 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. The 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 ("DSU") 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 September 30, 2018, there were no outstanding DSUs.

The Corporation’s 2009 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 nine months ended September 30, 2018 was $894,000 and $2,546,000, respectively, compared to $823,000 and $1,884,000, respectively, for the three and nine months ended September 30, 2017. Share-based compensation has been recognized as a component of salaries and benefits expense in the accompanying Consolidated Condensed Statements of Income.

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 2.2 percent for the nine months ended September 30, 2018, based on historical experience.

36

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

The following table summarizes the components of the Corporation's share-based compensation awards recorded as expense and the income tax benefit of such awards.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Stock and ESPP Options
Pre-tax compensation expense	$	39		$	23		$	88		$	93
Income tax benefit	(15		)	(9		)	(153		)	(313		)
Stock and ESPP option expense, net of income taxes	$	24		$	14		$	(65	)	$	(220	)
Restricted Stock Awards
Pre-tax compensation expense	$	855		$	800		$	2,458		$	1,791
Income tax benefit	(205		)	(280		)	(952		)	(1,160		)
Restricted stock awards expense, net of income taxes	$	650		$	520		$	1,506		$	631
Total Share-Based Compensation
Pre-tax compensation expense	$	894		$	823		$	2,546		$	1,884
Income tax benefit	(220		)	(289		)	(1,105		)	(1,473		)
Total share-based compensation expense, net of income taxes	$	674		$	534		$	1,441		$	411

As of September 30, 2018, unrecognized compensation expense related to RSAs was $8,480,000 and is expected to be recognized over a weighted-average period of 1.68 years. The Corporation did not have any unrecognized compensation expense related to stock options as of September 30, 2018.

Stock option activity under the Corporation's stock option plans as of September 30, 2018 and changes during the nine months ended September 30, 2018, were as follows:

	Number of Shares		Weighted-Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value
Outstanding at January 1, 2018	152,652		$	16.71
Exercised	(51,243	)	$	21.33
Cancelled	(200	)	$	28.25
Outstanding September 30, 2018	101,209		$	14.34	2.41	$	3,101,835
Vested and Expected to Vest at September 30, 2018	101,209		$	14.34	2.41	$	3,101,835
Exercisable at September 30, 2018	101,209		$	14.34	2.41	$	3,101,835

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 nine months of 2018 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 September 30, 2018.  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 nine months ended September 30, 2018 and 2017 was $1,203,000 and $1,675,000, respectively. Cash receipts of stock options exercised during this same period were $1,093,000 and $2,323,000, respectively.

The following table summarizes information on unvested RSAs outstanding as of September 30, 2018:

	Number of Shares		Weighted-Average Grant Date Fair Value
Unvested RSAs at January 1, 2018	366,993		$	29.79
Granted	105,100		$	48.11
Vested	(106,797	)	$	23.74
Forfeited	(5,560	)	$	38.31
Unvested RSAs at September 30, 2018	359,736		$	36.82

The grant date fair value of ESPP options was estimated at the beginning of the July 1, 2018 quarterly offering period of approximately $39,424. The ESPP options vested during the three months ending September 30, 2018, leaving no unrecognized compensation expense related to unvested ESPP options at September 30, 2018.

37

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

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 nine months ended September 30, 2018 and 2017:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Reconciliation of Federal Statutory to Actual Tax Expense:
Federal statutory income tax at 21% for 2018 and 35% for 2017	$	10,414		$	11,304		$	29,500		$	32,900
Tax-exempt interest income	(2,118		)	(2,881		)	(6,178		)	(8,062		)
Share-based compensation	(38		)	(78		)	(570		)	(862		)
Tax-exempt earnings and gains on life insurance	(197		)	(551		)	(655		)	(1,905		)
Tax credits	(42		)	(61		)	(65		)	(249		)
Other	459			206			1,018			492
Actual Tax Expense	$	8,478		$	7,939		$	23,050		$	22,314
Effective Tax Rate	17.1		%	24.6		%	16.4		%	23.7		%

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 the weighted-average shares outstanding during the reporting period and all potentially dilutive common shares. Potentially dilutive common shares include stock options and RSAs issued under the Corporation's share-based compensation plans. Potentially dilutive common shares are excluded from the computation of diluted earnings per share in the periods where the effect would be antidilutive.

The following table reconciles basic and diluted net income per share for the three and nine months ended September 30, 2018 and 2017.

	Three Months Ended September 30,
	2018					2017
	Net Income		Weighted-Average Shares	Per Share Amount		Net Income		Weighted-Average Shares	Per Share Amount
Net income available to common stockholders	$	41,113	49,286,945	$	0.83	$	24,358	48,431,880	$	0.50
Effect of potentially dilutive stock options and restricted stock awards			205,074					211,894
Diluted net income per share	$	41,113	49,492,019	$	0.83	$	24,358	48,643,774	$	0.50

	Nine Months Ended September 30,
	2018					2017
	Net Income		Weighted-Average Shares	Per Share Amount		Net Income		Weighted-Average Shares	Per Share Amount
Net income available to common stockholders	$	117,426	49,244,403	$	2.38	$	71,687	43,845,675	$	1.64
Effect of potentially dilutive stock options and restricted stock awards			213,782					217,544
Diluted net income per share	$	117,426	49,458,185	$	2.37	$	71,687	44,063,219	$	1.63

For the three and nine months ended September 30, 2018 and 2017, there were no stock options with an option price greater than the average market price of the common shares.

38

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

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 Updates No. 2018-14 - Compensation - Retirement Benefits -Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans

Summary - The FASB has issued ASU No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans, that applies to all employers that sponsor defined benefit pension or other postretirement plans. The amendments modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.

Disclosure Requirements Deleted

*The amounts in AOCI expected to be recognized as components of net periodic benefit cost over the next fiscal year.

*The amount and timing of plan assets expected to be returned to the employer.

*Related party disclosures about the amount of future annual benefits covered by insurance and annuity contracts and significant transactions between the employer or related parties and the plan.

*For public entities, the effects of a one-percentage-point change in assumed health care cost trend rates on the (a) aggregate of the service and interest cost components of net periodic benefit costs and (b) benefit obligation for postretirement health care benefits.

Disclosure Requirements Added

*The weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates.

*An explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period.

The amendments also clarify the disclosure requirements in paragraph 715-20-50-3, which state that the following information for defined benefit pension plans should be disclosed:

*The projected benefit obligation (PBO) and fair value of plan assets for plans with PBOs in excess of plan assets.

*The accumulated benefit obligation (ABO) and fair value of plan assets for plans with ABOs in excess of plan assets.

ASU No. 2018-14 is effective for fiscal years ending after December 15, 2020, for public business entities and for fiscal years ending after December 15, 2021, for all other entities. Early adoption is permitted for all entities. The Corporation plans to adopt the standard in the first quarter of 2020, but adoption of the standard is not expected to have a significant impact on the Corporation’s disclosures.

FASB Accounting Standards Updates No. 2018-13 - Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement

Summary - The FASB has issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU No. 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820. Certain disclosure requirements related to transfers between Level 1 and Level 2 of the fair value hierarchy and Level 3 valuation processes were removed from Topic 820. Disclosures were also added to Topic 820 for changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.

In addition, the amendments eliminate at a minimum from the phrase “an entity shall disclose at a minimum” to promote the appropriate exercise of discretion by entities when considering fair value measurement disclosures and to clarify that materiality is an appropriate consideration of entities and their auditors when evaluating disclosure requirements.

The amendments in ASU No. 2018-13 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance of ASU No. 2018-13 and delay adoption of the additional disclosures until their effective date. The Corporation plans to adopt the standard in the first quarter of 2020, but adoption of the standard is not expected to have a significant impact on the Corporation’s disclosures.

39

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

FASB Accounting Standards Updates No. 2018-11 -Leases (Topic 842): Targeted Improvements

Summary - The FASB has issued Accounting Standards Update (ASU) No. 2018-11, Leases (Topic 842): Targeted Improvements. This ASU is intended to reduce costs and ease implementation of the leases standard for financial statement preparers. ASU 2018-11 provides a new transition method and a practical expedient for separating components of a contract.

The amendments ASU 2018-11 provide entities with an additional (and optional) transition method to adopt the new leases standard. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption consistent with preparers’ requests. Consequently, an entity’s reporting for the comparative periods presented in the financial statements in which it adopts the new leases standard will continue to be in accordance with current GAAP in Topic 840, Leases.

An entity that elects this additional (and optional) transition method must provide the required Topic 840 disclosures for all periods that continue to be in accordance with Topic 840. The amendments do not change the existing disclosure requirements in Topic 840 (for example, they do not create interim disclosure requirements that entities previously were not required to provide).

The amendments in ASU 2018-11 provide lessors with a practical expedient, by class of underlying asset, to not separate nonlease components from the associated lease component and, instead, to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue guidance (Topic 606) and both of the following are met:

*The timing and pattern of transfer of the nonlease component(s) and associated lease component are the same.

*The lease component, if accounted for separately, would be classified as an operating lease.

An entity electing this practical expedient (including an entity that accounts for the combined component entirely in Topic 606) is required to disclose certain information, by class of underlying asset, as specified in the ASU.

The amendments in ASU 2018-11 related to separating components of a contract affect the amendments in ASU No. 2016-02, which are not yet effective but can be early adopted. For entities that have not adopted Topic 842 before the issuance of this ASU, the effective date and transition requirements for the amendments in this update related to separating components of a contract are the same as the effective date and transition requirements in ASU 2016-02.

All entities, including early adopters, that elect the practical expedient related to separating components of a contract in this ASU must apply the expedient, by class of underlying asset, to all existing lease transactions that qualify for the expedient at the date elected. The Corporation plans to adopt this ASU in the first quarter of 2019 and is currently evaluating all practical expedient options.

FASB Accounting Standards Update No. 2018-07 - Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting

Summary - The FASB has issued an Accounting Standards Update (ASU) intended to reduce cost and complexity and to improve financial reporting for nonemployee share-based payments.

The ASU expands the scope of Topic 718, Compensation-Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. The ASU supersedes Subtopic 505-50, Equity-Equity-Based Payments to Non-Employees.

The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. For all other companies, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than a Corporation's adoption date of Topic 606, Revenue from Contracts with Customers. The Corporation plans to adopt the standard in the first quarter of 2019, but adoption of the standard is not expected to have a significant effect on the Corporation’s consolidated financial statements.

FASB Accounting Standards Update No. 2017-08 - Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities

Summary - The FASB has issued Accounting Standards Update (ASU) No. 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The ASU shortens the amortization period for certain callable debt securities held at a premium to the earliest call date.

40

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

Under current GAAP, entities normally amortize the premium as an adjustment of yield over the contractual life of the instrument. Stakeholders have expressed concerns with the current approach on the basis that current GAAP excludes certain callable debt securities from consideration of early repayment of principal even if the holder is certain that the call will be exercised. As a result, upon the exercise of a call on a callable debt security held at a premium, the unamortized premium is recorded as a loss in earnings. Further, there is diversity in practice (1) in the amortization period for premiums of callable debt securities, and (2) in how the potential for exercise of a call is factored into current impairment assessments. Another issue is that the practice in the United States is to quote, price, and trade callable debt securities assuming a model that incorporates consideration of calls (also referred to as “yield-to-worst” pricing).

The ASU shortens the amortization period for certain callable debt securities held at a premium and requires the premium to be amortized to the earliest call date. However, the amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity.

The amendments are effective for public business entities for annual periods beginning after December 15, 2018, including interim periods within those annual periods. For other entities, the amendments are effective for annual periods beginning after December 15, 2019, and interim periods within annual periods beginning after December 15, 2020. Early adoption is permitted.

Entities are required to apply the amendments on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The entity is required to provide disclosures about a change in accounting principle in the period of adoption. The Corporation plans to adopt ASU 2017-08 in the first quarter of 2019. Adoption of this ASU is not expected to have a significant effect on the Corporation’s consolidated 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. This new guidance was issued to address concerns that current generally accepted accounting principles (GAAP) restricts the ability to record credit losses that are expected, but do not yet meet the “probable” threshold by replacing the current “incurred loss” model for recognizing credit losses with an “expected life of loan loss” model referred to as the Current Expected Credit Loss (CECL) model.

Under the CECL model, certain financial assets carried at amortized cost, such as loans held for investment and held-to-maturity debt securities, are required to be presented at the net amount expected to be collected. The measurement of expected credit losses is to be based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This measurement will take place at the time the financial asset is first added to the balance sheet and periodically thereafter. This differs significantly from the “incurred loss” model required under current GAAP, which delays recognition until it is probable a loss has been incurred. The change could materially affect how the allowance for loan losses is determined and cause a charge to earnings through the provision for loan losses. Such would adversely affect the financial condition of the Corporation.

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). 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 plans to adopt this ASU in the first quarter of 2020.

The Corporation expects a one-time cumulative-effect adjustment to the allowance for loan losses will be recognized in retained earnings on the consolidated balance sheet as of the beginning of the first reporting period in which the new standard is effective, as is consistent with regulatory expectations set forth in interagency guidance issued at the end of 2016. The Corporation established an implementation team that meets on a regular basis to oversee activities and monitor progress. Third party software is being implemented and model development is in progress. The magnitude of any such adjustment or the overall impact of the new standard on the financial condition or results of operations cannot yet be determined.

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.

41

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

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). Nonpublic business entities should apply the amendments for fiscal years beginning after December 15, 2019 (i.e., January 1, 2020, for a calendar year entity), and interim periods within fiscal years beginning after December 15, 2020. 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 plans to adopt this ASU in the first quarter of 2019. The Corporation has an implementation team working through the provisions of ASU 2016-02, including a review of all leases (primarily operating leases related to banking centers and office space) to assess the impact on accounting, disclosures and the election of certain practical expedients. The Corporation has selected and is implementing a third party software solution to assist with the accounting under the new standard.  Based upon leases outstanding at September 30, 2018, the Corporation anticipates the balance sheet impact of implementation in the first quarter of 2019 to be a one-time increase to other assets and other liabilities of approximately $25 million, but does not expect the impact to the income statement or regulatory capital ratios to be material.  Decisions to enter into new leases and renew or modify existing leases prior to the implementation date could impact these estimates.

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.

NOTE 17

CONSUMMATION OF MERGER

MBT Financial Corp.

On October 9, 2018, the Corporation and MBT Financial Corp., a Michigan corporation ("MBT"), entered into an Agreement and Plan of Reorganization and Merger, pursuant to which MBT will, subject to the terms and conditions of the merger agreement, merge with and into the Corporation, whereupon the separate corporate existence of MBT will cease and the Corporation will survive. Immediately following the merger, MBT's wholly-owned subsidiary, Monroe Bank & Trust, shall be merged with and into the Bank, with the Bank continuing as the surviving bank. Based on the closing price of the Corporation's common stock on October 9, 2018 of $45.71 per share, the transaction value is estimated at approximately $290.9 million. The transaction is expected to be a tax-free exchange for MBT's shareholders who will be receiving the Corporation's common stock pursuant to the merger. Subject to MBT's shareholders' approval of the merger, regulatory approvals and other customary closing conditions, the parties anticipate completing the merger in the first half of 2019. MBT's total assets as of June 30, 2018 were $1.3 billion.

42

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, 2017. 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 nine months ended September 30, 2018, 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, 2017.

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 116 banking locations in thirty-one Indiana, two Illinois and two Ohio counties. In addition to its traditional branch network, the Corporation offers comprehensive electronic and mobile delivery channels to its customers. 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, savings and demand deposits; making consumer, commercial, agri-business and real estate mortgage loans; providing personal and corporate trust services; offering full-service brokerage and private wealth management; and providing letters of credit, repurchase agreements and other corporate services.

43

PART I: FINANCIAL INFORMATION

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

RECENT REGULATORY DEVELOPMENTS

On May 24, 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Economic Growth Act”) was signed into law, which, among other things, modified a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) that would have impacted us to the extent we continue to grow our balance sheet organically or through acquisitions. As required by the Dodd-Frank Act, the Federal Reserve and the FDIC adopted rules that required bank holding companies and banks with average total consolidated assets greater than $10 billion to conduct annual company-run stress tests of capital and consolidated earnings and losses. While neither the Corporation nor the Bank currently has $10 billion or more in total assets, based upon our strategy for expansion through acquisition and our historic organic growth, we had previously begun preparations to comply with the stress test requirements when and if they became applicable. However, as part of the Economic Growth Act, the total asset threshold discussed above was raised from $10 billion to $250 billion. As a result, neither the Corporation nor the Bank will be required to conduct the stress tests mandated by the Dodd-Frank Act upon reaching $10 billion in assets.

The Economic Growth Act also enacted several important changes related to residential and commercial real estate lending that we believe will help reduce our operating and regulatory compliance costs.

Despite the improvements that have resulted from the Economic Growth Act for financial institutions with average total consolidated assets at or near the $10 billion threshold (such as the Corporation), many provisions of the Dodd-Frank Act and its implementing regulations remain in place and will continue to result in additional operating and compliance costs for the Corporation. In addition, the Economic Growth Act requires the enactment of a number of implementing regulations, the details of which may have a material effect on the ultimate impact of the law.

RESULTS OF OPERATIONS

Executive Summary

The Corporation reported third quarter 2018 net income of $41.1 million, compared to $24.4 million during the third quarter of 2017. Diluted earnings per share for the period totaled $.83 per share, compared to $.50 per diluted share during the same period in 2017, an increase of 66.0 percent. Year-to-date net income totaled $117.4 million, compared to $71.7 million during the same period in 2017. Diluted earnings per share for the nine months ended September 30, 2018 totaled $2.37, an increase of $0.74 per share, or 45.4 percent, over the same period in 2017. The increase in net income was driven by several key factors including strong core banking performance, two acquisitions that were fully integrated during the second half of 2017 and the impact of tax reform.

As of September 30, 2018, total assets equaled $9.8 billion, an increase of $419.8 million from December 31, 2017.  The Corporation's total loan portfolio increased $332.7 million, or 6.6 percent annualized, from December 31, 2017. The largest loan segments that experienced increases were commercial and industrial, commercial and farmland, and construction. Additional details of the changes in the Corporation's loans and other earning assets are discussed within NOTE 4. LOANS AND ALLOWANCE, of the Notes to Consolidated Condensed Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q, and the "EARNING ASSETS" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations.

The Corporation’s allowance for loan losses totaled $78.4 million as of September 30, 2018 and equaled 1.11 percent of total loans.  The Corporation's provision expense and net charge offs for the three months ended September 30, 2018 were $1.4 million and $537,000, respectively, compared to provision expense and net recoveries of $2.1 million and $800,000 during the same period of 2017. For the nine months ended September 30, 2018, the Corporation's provision expense and net charge offs were $5.6 million and $2.2 million, respectively, compared to provision expense and net charge offs of $7.3 million and $26,000 during the same period of 2017. Credit metrics continued to improve, including a decline in non-accrual loans, which totaled $20.4 million as of September 30, 2018 compared to $28.7 million at December 31, 2017. Additional details are discussed within the “LOAN QUALITY/PROVISION FOR LOAN LOSSES” section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

As of September 30, 2018, total deposits equaled $7.6 billion, an increase of $460.6 million from December 31, 2017, or 8.6 percent annualized. As interest rates have risen, the Corporation experienced a decrease in non-interest bearing deposits, which were offset by increases in interest-bearing deposits. The largest deposit increases from December 31, 2017 were in savings, certificates of deposit and demand deposits of $218.3 million, $176.6 million and $124.2 million, respectively. Those increases were offset by a $58.4 million decrease in brokered deposits from December 31, 2017.

Total borrowings decreased $101.7 million as of September 30, 2018, compared to December 31, 2017. Liquidity from deposit growth was used to reduce Federal funds purchased, Federal Home Loan Bank advances and securities sold under repurchase agreements by $54.0 million, $28.9 million and $17.8 million, respectively, compared to December 31, 2017.

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 this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

44

PART I: FINANCIAL INFORMATION

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

NET INTEREST INCOME

Net interest income is the most significant component of our earnings, comprising 81 percent of revenues for the nine months ended September 30, 2018. 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 customer 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.

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 on an FTE basis in the table that follows to reflect what our tax-exempt assets would need to yield in order to achieve the same after-tax yield as a taxable asset. The federal statutory rates in effect of 21 percent and 35 percent were used for 2018 and 2017, respectively, adjusted for the TEFRA interest disallowance applicable to certain tax-exempt obligations. The lower effective income tax rates during the three and nine months ended September 30, 2018 when compared to the same periods in 2017 were primarily the result of the Tax Cuts and Jobs Act (TCJA) enacted on December 22, 2017. The FTE analysis portrays the income tax benefits associated with 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 period presented, the increase in net interest income was primarily driven by core organic loan growth and an increase in earning assets attributable to acquisitions of Arlington Bank in May 2017 and IAB in July 2017.

In the third quarter of 2018, asset yields increased 32 basis points FTE and interest costs increased 36 basis points, resulting in a 4 basis point FTE decrease in net interest spread as compared to the same period in 2017. Primarily as a result of organic loan growth and acquisitions, average earning assets increased $970,355,000 in the third quarter of 2018 compared to the third quarter of 2017. The Corporation recognized fair value accretion income on purchased loans, which is included in interest income, of $3,234,000 and $3,237,000, respectively, for the three months ended September 30, 2018 and 2017. Net interest margin, on a tax equivalent basis, increased to 4.05 percent for the third quarter of 2018 compared to 4.03 percent during the same period in 2017.

In the nine months ended September 30, 2018, asset yields increased 26 basis points FTE and interest costs increased 32 basis points, resulting in a 6 basis point FTE decrease in net interest spread as compared to the same period in 2017. Primarily as a result of organic loan growth and acquisitions, average earning assets increased $1,592,493,000 in the nine months ended September 30, 2018 compared to the same period in 2017. The Corporation recognized fair value accretion income on purchased loans, which is included in interest income, of $10,204,000 and $9,809,000, respectively, for the nine months ended September 30, 2018 and 2017. Net interest margin, on a tax equivalent basis, increased to 3.99 percent for the nine months ended September 30, 2018 compared to 3.98 percent during the same period in 2017.

Asset yields increased primarily as a result of the Federal Reserve's discount rate increases of 25 basis points at each of the Board's March, June and December 2017 meetings and the March, June and September 2018 meetings. Interest costs also increased as both core deposits and wholesale funding rates increased year-over-year.

Additional details of the Corporation's acquisitions, remaining loan fair value discount, accretable and nonaccretable yield, and tax rate change can be found in NOTE 2. ACQUISITIONS, NOTE 5. PURCHASED CREDIT IMPAIRED LOANS, and NOTE 13. INCOME TAX of the Notes to Consolidated Condensed Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.

45

PART I: FINANCIAL INFORMATION

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

The following tables 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 and nine months ended September 30, 2018, and 2017.

(Dollars in Thousands)	Three Months Ended
	September 30, 2018							September 30, 2017
	Average Balance			Interest  Income / Expense		Average Rate		Average Balance			Interest  Income / Expense		Average Rate
Assets:
Interest-bearing time deposits	$	52,027		$	270	2.08	%	$	139,905		$	284	0.81	%
Federal Home Loan Bank stock	24,588			283		4.60		23,146			242		4.18
Investment Securities: (1)
Taxable	857,507			5,514		2.57		718,965			4,524		2.52
Tax-Exempt (2)	776,942			8,219		4.23		645,577			8,392		5.20
Total Investment Securities	1,634,449			13,733		3.36		1,364,542			12,916		3.79
Loans held for sale	11,038			142		5.15		8,117			136		6.70
Loans: (3)
Commercial	5,226,284			71,223		5.45		4,556,653			55,266		4.85
Real Estate Mortgage	739,356			8,383		4.54		785,317			8,596		4.38
Installment	655,738			8,731		5.33		595,164			7,494		5.04
Tax-Exempt (2)	467,278			4,761		4.08		367,559			4,385		4.77
Total Loans	7,099,694			93,240		5.25		6,312,810			75,877		4.81
Total Earning Assets	8,810,758			107,526		4.88	%	7,840,403			89,319		4.56	%
Net unrealized gain (loss) on securities available for sale	(15,245		)					7,733
Allowance for loan losses	(77,763		)					(71,753		)
Cash and cash equivalents	128,557							129,058
Premises and equipment	94,422							101,979
Other assets	815,951							786,246
Total Assets	$	9,756,680						$	8,793,666
Liabilities:
Interest-bearing deposits:
Interest-bearing NOW deposits	$	2,399,477		$	4,909	0.82	%	$	1,834,965		$	1,706	0.37	%
Money market deposits	1,062,154			1,551		0.58		990,682			747		0.30
Savings deposits	1,081,369			1,500		0.55		887,201			203		0.09
Certificates and other time deposits	1,536,697			5,725		1.49		1,450,448			4,054		1.12
Total Interest-bearing Deposits	6,079,697			13,685		0.90		5,163,296			6,710		0.52
Borrowings	741,092			4,629		2.50		694,203			3,717		2.14
Total Interest-bearing Liabilities	6,820,789			18,314		1.07		5,857,499			10,427		0.71
Noninterest-bearing deposits	1,523,928							1,626,757
Other liabilities	53,059							64,938
Total Liabilities	8,397,776							7,549,194
Stockholders' Equity	1,358,904							1,244,472
Total Liabilities and Stockholders' Equity	$	9,756,680		18,314				$	8,793,666		10,427
Net Interest Income (FTE)				$	89,212						$	78,892
Net Interest Spread (FTE) (4)						3.81	%						3.85	%
Net Interest Margin (FTE):
Interest Income (FTE) / Average Earning Assets						4.88	%						4.56	%
Interest Expense / Average Earning Assets						0.83	%						0.53	%
Net Interest Margin (FTE) (5)						4.05	%						4.03	%
(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 21 percent and 35 percent for 2018 and 2017, respectively. These totals equal $2,726 and $4,472 for the three months ended September 30, 2018 and 2017, respectively.
(3) Non-accruing loans have been included in the average balances.
(4) Net Interest Spread (FTE) is interest income expressed as a percentage of average earning assets minus interest expense expressed as a percentage of average interest-bearing liabilities.
(5) Net Interest Margin (FTE) is interest income expressed as a percentage of average earning assets minus interest expense expressed as a percentage of average earning assets.

46

PART I: FINANCIAL INFORMATION

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

(Dollars in Thousands)	Nine Months Ended
	September 30, 2018							September 30, 2017
	Average Balance			Interest  Income / Expense		Average Rate		Average Balance			Interest  Income / Expense		Average Rate
Assets:
Interest-bearing time deposits	$	76,570		$	1,034	1.80	%	$	71,456		$	442	0.82	%
Federal Reserve and Federal Home Loan Bank stock	24,521			950		5.17		19,941			635		4.25
Investment Securities: (1)
Taxable	840,425			16,044		2.55		716,118			13,012		2.42
Tax-Exempt (2)	753,176			23,880		4.23		609,658			23,922		5.23
Total Investment Securities	1,593,601			39,924		3.34		1,325,776			36,934		3.71
Loans held for sale	9,520			363		5.08		4,875			245		6.70
Loans: (3)
Commercial	5,116,405			200,886		5.24		4,085,901			144,759		4.72
Real Estate Mortgage	732,469			25,174		4.58		660,435			21,946		4.43
Installment	637,140			24,986		5.23		558,106			20,284		4.85
Tax-Exempt (2)	466,926			13,910		3.97		338,169			11,809		4.66
Total Loans	6,962,460			265,319		5.08		5,647,486			199,043		4.70
Total Earning Assets	8,657,152			307,227		4.73	%	7,064,659			237,054		4.47	%
Net unrealized gain on securities available for sale	(11,616		)					4,437
Allowance for loan losses	(76,944		)					(69,269		)
Cash and cash equivalents	129,181							128,866
Premises and equipment	94,897							95,707
Other assets	817,549							642,243
Total Assets	$	9,610,219						$	7,866,643
Liabilities:
Interest-bearing deposits:
Interest-bearing NOW deposits	$	2,236,644		$	12,013	0.72	%	$	1,649,175		$	3,632	0.29	%
Money market deposits	1,077,792			4,270		0.53		894,450			1,688		0.25
Savings deposits	1,041,600			3,214		0.41		818,800			520		0.08
Certificates and other time deposits	1,504,851			15,355		1.36		1,299,932			10,131		1.04
Total Interest-bearing Deposits	5,860,887			34,852		0.79		4,662,357			15,971		0.46
Borrowings	754,054			13,466		2.38		659,260			10,058		2.03
Total Interest-bearing Liabilities	6,614,941			48,318		0.97		5,321,617			26,029		0.65
Noninterest-bearing deposits	1,605,300							1,445,685
Other liabilities	58,111							50,921
Total Liabilities	8,278,352							6,818,223
Stockholders' Equity	1,331,867							1,048,420
Total Liabilities and Stockholders' Equity	$	9,610,219		48,318				$	7,866,643		26,029
Net Interest Income (FTE)				$	258,909						$	211,025
Net Interest Spread (FTE) (4)						3.76	%						3.82	%
Net Interest Margin (FTE):
Interest Income (FTE) / Average Earning Assets						4.73	%						4.47	%
Interest Expense / Average Earning Assets						0.74	%						0.49	%
Net Interest Margin (FTE) (5)						3.99	%						3.98	%
(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 21 percent and 35 percent for 2018 and 2017, respectively. These totals equal $7,936 and $12,506 for the nine months ended September 30, 2018 and 2017, respectively.
(3) Non-accruing loans have been included in the average balances.
(4) Net Interest Spread (FTE) is interest income expressed as a percentage of average earning assets minus interest expense expressed as a percentage of average interest-bearing liabilities.
(5) Net Interest Margin (FTE) is interest income expressed as a percentage of average earning assets minus interest expense expressed as a percentage of average earning assets.

47

PART I: FINANCIAL INFORMATION

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

NON-INTEREST INCOME

Non-interest income increased $859,000, or 4.6 percent, in the third quarter of 2018, compared to the third quarter of 2017.  The larger customer base resulting from the Arlington Bank and IAB acquisitions, as well as organic growth, contributed to an increase in service charges on deposit accounts and other customer fees of $1.1 million. Details of the Corporation's 2017 acquisitions can be found in NOTE 2. ACQUISITIONS of the Notes to Consolidated Condensed Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q. Additionally, gains on the sale of securities increased $953,000 in the third quarter of 2018 when compared to the third quarter of 2017.

These increases were offset by a decrease of $993,000 in gains on life insurance benefits and net gains and fees on sales of loans when compared to the same period in 2017.

During the first nine months of 2018, non-interest income increased $5.3 million, or 10.3 percent, over the same period in 2017. The larger customer base resulting from the Arlington Bank and IAB acquisitions, as well as organic growth, contributed to an increase in service charges on deposit accounts, fiduciary and wealth management fees, other customer fees and net gains and fees on sales of loans of $4.0 million in the first nine months of 2018 when compared to the same period in 2017. Additionally, in the first nine months of 2018, gains on sales of available for sale securities and other income increased $2.5 million and $1.1 million, respectively, over the same period in 2017.

The increases were offset by a decrease of $2.5 million in gains on life insurance benefits when compared to the same period in 2017.

NON-INTEREST EXPENSE

Non-interest expenses decreased $3.7 million, or 6.3 percent, in the third quarter of 2018, compared to the third quarter of 2017.  The acquisitions of Arlington Bank and IAB in 2017 were the largest contributing factor to the decrease. In the third quarter of 2017, the Corporation recorded acquisition-related expenses, primarily consisting of $3.0 million of contract termination and conversion expenses, $1.6 million of employee severance and retention expenses and $1.0 million of other outside and professional expenses.

These decreases were offset by increases in net occupancy, marketing, outside data processing fees, FDIC assessments and other real estate and foreclosure expenses of $947,000 in the third quarter of 2018 when compared to the third quarter in 2017.

During the first nine months of 2018, non-interest expenses increased $13.1 million, or 8.8 percent, when compared to the first nine months of 2017. The Arlington Bank acquisition in May 2017 and the IAB acquisition in July 2017 resulted in a significantly larger franchise and customer base growth which caused increases in most non-interest expense categories for the first nine months of 2018 compared to the same period in 2017. The largest increase was in salaries and employee benefits of $11.3 million, or 13.1 percent, over the same period last year due to the addition of Arlington Bank and IAB personnel. Other categories experiencing increases in the first nine months of 2018 compared to the same period in 2017 were net occupancy, equipment, marketing, outside data processing fees, and other expenses, which increased $5.8 million. Additionally, intangible asset amortization increased $1.5 million due to amortization related to the Arlington Bank and IAB intangibles.

Partially offsetting the increases was a $5.7 million decrease in professional and other outside services primarily due to Arlington Bank and IAB acquisition-related expenses of $6.3 million recognized in the first nine months of 2017. Additionally, in the first nine months of 2018, the Corporation realized a decrease in other real estate owned and foreclosure expenses of $373,000 when compared to the same period of 2017.

INCOME TAXES

Income tax expense for the third quarter of 2018 was $8,478,000 on pre-tax net income of $49,591,000.  For the same period in 2017, income tax expense was $7,939,000 on pre-tax net income of $32,297,000. The effective income tax rates for the third quarter of 2018 and 2017 were 17.1 percent and 24.6 percent, respectively.

Income tax expense for the nine months ended September 30, 2018 was $23,050,000 on pre-tax net income of $140,476,000.  For the same period in 2017, income tax expense was $22,314,000 on pre-tax net income of $94,001,000. The effective income tax rates for the nine months ended September 30, 2018 and 2017 were 16.4 percent and 23.7 percent, respectively.

The lower effective income tax rates during the three and nine months ended September 30, 2018 when compared to the same periods in 2017 was primarily the result of the Tax Cuts and Jobs Act (TCJA) enacted on December 22, 2017. Effective January 1, 2018, the TCJA made widespread changes to the U.S. tax law, including but not limited to: (1) permanently reducing the federal corporate tax rate from 35 percent to 21 percent, (2) modifying bonus depreciation to allow for full expensing of qualified property, and (3) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized.

The detailed reconciliation of federal statutory to actual tax expense is shown in NOTE 13. INCOME TAX of the Notes to Consolidated Condensed Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.

48

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, CET1, 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 a minimum ratio of CET1 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 CET1 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, 2018, the Corporation was required to hold a capital conservation buffer of 1.875 percent, which amount increases by 0.625 percent in 2019, the final year of the phase-in. Under Basel III, the Corporation and Bank elected to opt-out of including accumulated other comprehensive income in regulatory capital.

As of September 30, 2018, 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 September 30, 2018 and December 31, 2017 were as follows:

					Prompt Corrective Action Thresholds
	Actual				Adequately Capitalized				Well Capitalized
September 30, 2018	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total risk-based capital to risk-weighted assets
First Merchants Corporation	$	1,140,433	14.25	%	$	640,095	8.00	%	N/A		N/A
First Merchants Bank	1,082,581		13.43		644,644		8.00		$	805,805	10.00	%
Tier 1 capital to risk-weighted assets
First Merchants Corporation	$	997,027	12.46	%	$	480,071	6.00	%	N/A		N/A
First Merchants Bank	1,004,175		12.46		483,483		6.00		$	644,644	8.00	%
CET1 capital to risk-weighted assets
First Merchants Corporation	$	930,941	11.64	%	$	360,054	4.50	%	N/A		N/A
First Merchants Bank	1,004,175		12.46		362,612		4.50		$	523,774	6.50	%
Tier 1 capital to average assets
First Merchants Corporation	$	997,027	10.73	%	$	371,636	4.00	%	N/A		N/A
First Merchants Bank	1,004,175		10.82		371,069		4.00		$	463,836	5.00	%

					Prompt Corrective Action Thresholds
	Actual				Adequately Capitalized				Well Capitalized
December 31, 2017	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total risk-based capital to risk-weighted assets
First Merchants Corporation	$	1,048,757	13.69	%	$	612,848	8.00	%	N/A		N/A
First Merchants Bank	1,016,355		13.17		617,477		8.00		$	771,847	10.00	%
Tier 1 capital to risk weighted assets
First Merchants Corporation	$	908,725	11.86	%	$	459,636	6.00	%	N/A		N/A
First Merchants Bank	941,323		12.20		463,108		6.00		$	617,477	8.00	%
CET1 capital to risk-weighted assets
First Merchants Corporation	$	842,806	11.00	%	$	344,727	4.50	%	N/A		N/A
First Merchants Bank	941,323		12.20		347,331		4.50		$	501,700	6.50	%
Tier 1 capital to average assets
First Merchants Corporation	$	908,725	10.43	%	$	348,407	4.00	%	N/A		N/A
First Merchants Bank	941,323		10.83		347,794		4.00		$	434,742	5.00	%

49

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 CET1. Because the Federal Reserve has long indicated that voting common shareholders' equity (essentially Tier 1 risk-based capital less preferred stock and non-controlling interest in subsidiaries) generally should be the dominant element in Tier 1 risk-based capital, this focus on CET1 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.

	September 30, 2018						December 31, 2017
	First Merchants Corporation			First Merchants Bank			First Merchants Corporation			First Merchants Bank
Total Risk-Based Capital
Total Stockholders' Equity (GAAP)	$	1,361,426		$	1,436,173		$	1,303,463		$	1,404,303
Adjust for Accumulated Other Comprehensive (Income) Loss (1)	35,409			33,302			3,534			763
Less: Preferred Stock	(125		)	(125		)	(125		)	(125		)
Add: Qualifying Capital Securities	66,086						65,919
Less: Disallowed Goodwill and Intangible Assets	(464,658		)	(464,210		)	(464,066		)	(463,618		)
Less: Disallowed Deferred Tax Assets	(1,111		)	(965		)
Total Tier 1 Capital (Regulatory)	997,027			1,004,175			908,725			941,323
Qualifying Subordinated Debentures	65,000						65,000
Allowance for Loan Losses Includible in Tier 2 Capital	78,406			78,406			75,032			75,032
Total Risk-Based Capital (Regulatory)	$	1,140,433		$	1,082,581		$	1,048,757		$	1,016,355
Net Risk-Weighted Assets (Regulatory)	$	8,001,191		$	8,058,054		$	7,660,604		$	7,718,467
Average Assets	$	9,290,911		$	9,276,719		$	8,710,171		$	8,694,838
Total Risk-Based Capital Ratio (Regulatory)	14.25		%	13.43		%	13.69		%	13.17		%
Tier 1 Capital to Risk-Weighted Assets	12.46		%	12.46		%	11.86		%	12.20		%
Tier 1 Capital to Average Assets	10.73		%	10.82		%	10.43		%	10.83		%
CET1 Capital Ratio
Total Tier 1 Capital (Regulatory)	$	997,027		$	1,004,175		$	908,725		$	941,323
Less: Qualified Capital Securities	(66,086		)				(65,919		)
CET1 Capital (Regulatory)	$	930,941		$	1,004,175		$	842,806		$	941,323
Net Risk-Weighted Assets (Regulatory)	$	8,001,191		$	8,058,054		$	7,660,604		$	7,718,467
CET1 Capital Ratio (Regulatory)	11.64		%	12.46		%	11.00		%	12.20		%

⁽¹⁾ Includes net unrealized gains or losses on available for sale securities, net gains or losses on cash flow hedges, and amounts resulting from the application of the applicable accounting guidance for defined benefit and other postretirement plans.

Additionally, management believes the following tables are also meaningful when considering performance measures of the Corporation. Non-GAAP financial measures such as 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 financial 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 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.

50

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 9.55 percent at September 30, 2018, and 9.30 percent at December 31, 2017.

	Tangible Common Equity to Tangible Assets (non-GAAP)
(Dollars in Thousands, Except Per Share Amounts)	September 30, 2018			December 31, 2017
Total Stockholders' Equity (GAAP)	$	1,361,426		$	1,303,463
Less: Cumulative preferred stock (GAAP)	(125		)	(125		)
Less: Intangible assets (GAAP)	(471,409		)	(476,503		)
Tangible common equity (non-GAAP)	$	889,892		$	826,835
Total assets (GAAP)	$	9,787,282		$	9,367,478
Less: Intangible assets (GAAP)	(471,409		)	(476,503		)
Tangible assets (non-GAAP)	$	9,315,873		$	8,890,975
Tangible common equity to tangible assets (non-GAAP)	9.55		%	9.30		%
Tangible common equity (non-GAAP)	$	889,892		$	826,835
Plus: Tax Benefit of intangibles (non-GAAP)	5,351			6,789
Tangible common equity, net of tax (non-GAAP)	$	895,243		$	833,624
Common Stock outstanding	49,305			49,158
December 31 - tangible book value - common (non-GAAP)	$	18.16		$	16.96

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 nine months ended September 30, 2018 and 2017.

	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in Thousands, Except Per Share Amounts)	2018			2017			2018			2017
Average goodwill (GAAP)	$	445,354		$	422,609		$	445,354		$	311,838
Average core deposit intangible (GAAP)	26,854			31,859			28,595			20,638
Average deferred tax on CDI (GAAP)	(5,515		)	(11,932		)	(5,873		)	(8,001		)
Intangible adjustment (non-GAAP)	$	466,693		$	442,536		$	468,076		$	324,475
Average stockholders' equity (GAAP)	$	1,358,904		$	1,244,472		$	1,331,867		$	1,048,420
Average cumulative preferred stock (GAAP)	(125		)	(125		)	(125		)	(125		)
Intangible adjustment (non-GAAP)	(466,693		)	(442,536		)	(468,076		)	(324,475		)
Average tangible capital (non-GAAP)	$	892,086		$	801,811		$	863,666		$	723,820
Average assets (GAAP)	$	9,756,680		$	8,793,666		$	9,610,219		$	7,866,643
Intangible adjustment (non-GAAP)	(466,693		)	(442,536		)	(468,076		)	(324,475		)
Average tangible assets (non-GAAP)	$	9,289,987		$	8,351,130		$	9,142,143		$	7,542,168
Net income available to common stockholders (GAAP)	$	41,113		$	24,358		$	117,426		$	71,687
CDI amortization, net of tax (GAAP)	1,303			1,103			4,025			2,334
Tangible net income available to common stockholders (non-GAAP)	$	42,416		$	25,461		$	121,451		$	74,021
Per Share Data:
Diluted net income available to common stockholders (GAAP)	$	0.83		$	0.50		$	2.37		$	1.63
Diluted tangible net income available to common stockholders (non-GAAP)	$	0.86		$	0.52		$	2.46		$	1.68
Ratios:
Return on average GAAP capital (ROE)	12.10		%	7.83		%	11.76		%	9.12		%
Return on average tangible capital	19.02		%	12.70		%	18.75		%	13.64		%
Return on average assets (ROA)	1.69		%	1.11		%	1.63		%	1.22		%
Return on average tangible assets	1.83		%	1.22		%	1.77		%	1.31		%

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.

51

PART I: FINANCIAL INFORMATION

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

LOAN QUALITY/PROVISION FOR LOAN LOSSES

The Corporation’s primary lending focus is small business and middle market commercial, commercial real estate and residential real estate, 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 internal management.

At September 30, 2018, non-performing loans totaled $21,389,000, a decrease of $8,348,000 from December 31, 2017 but an increase of $702,000 from June 30, 2018. Loans not accruing interest income totaled $20,421,000 at September 30, 2018, a decrease of $278,000 from June 30, 2018. The Corporation’s coverage ratio of allowance for loan losses to non-accrual loans increased from 261.2 percent at December 31, 2017 to 383.9 percent at September 30, 2018. This non-accrual coverage ratio at June 30, 2018 was 385.0 percent. Troubled debt restructures totaled $968,000 at September 30, 2018, an increase of $424,000 from June 30, 2018. See additional information regarding the allowance for loan losses in the “Provision for Loan Losses” section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Other real estate owned, totaling $8,859,000 at September 30, 2018, decreased $212,000 from June 30, 2018 and $1,514,000 from December 31, 2017. For other real estate owned, current appraisals are obtained to determine fair value as management continues to aggressively market these real estate assets.

Impaired loans include loans deemed impaired according to the guidance set forth in ASC 310-10. Commercial loans under $500,000 and consumer loans, with the exception of troubled debt restructures, are not individually evaluated for impairment. 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 September 30, 2018, impaired loans totaled $15,999,000, a decrease of $7,212,000 from the December 31, 2017 balance of $23,211,000. At September 30, 2018, a specific allowance for losses was not deemed necessary for impaired loans totaling $13,842,000 as there were no identified losses on these credits. An allowance of $433,000 was recorded for the remaining balance of these impaired loans totaling $2,157,000, and was included in the Corporation’s allowance for loan losses.

The Corporation's non-performing assets, which include non-accrual loans, renegotiated loans, and other real estate owned, plus accruing loans 90-days or more delinquent and impaired loans are presented in the table below.

(Dollars in Thousands)	September 30, 2018		December 31, 2017
Non-Performing Assets:
Non-accrual loans	$	20,421	$	28,724
Renegotiated loans	968		1,013
Non-performing loans (NPL)	21,389		29,737
Other real estate owned	8,859		10,373
Non-performing assets (NPA)	30,248		40,110
90+ days delinquent and still accruing	50		924
NPAs and 90+ days delinquent	$	30,298	$	41,034
Impaired Loans	$	15,999	$	23,211

The non-accrual balances in the table above include troubled debt loan restructures totaling $1,798,000 and $3,630,000 as of September 30, 2018 and December 31, 2017, respectively.

52

PART I: FINANCIAL INFORMATION

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

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

(Dollars in Thousands)	September 30, 2018		December 31, 2017
Non-performing assets and 90+ days delinquent:
Commercial and industrial loans	$	2,287	$	3,278
Agricultural production financing and other loans to farmers	640		1,027
Real estate loans:
Construction	2,608		2,980
Commercial and farmland	16,887		20,382
Residential	6,455		11,051
Home equity	1,295		2,239
Individuals' loans for household and other personal expenditures	126		77
Non-performing assets plus 90+ days delinquent	$	30,298	$	41,034

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.

Provision and Allowance for Loan Losses

The allowance for loan losses is maintained through the provision for loan losses, which is a charge against earnings. Based on management’s judgment as to the appropriate level of the allowance for loan losses, the amount provided in any period may be greater or less than net loan losses for the same period. The determination of the provision amount and the adequacy of the allowance in any period is based on management’s continuing review and evaluation of the loan portfolio, including an internally administered loan "watch" list and independent loan reviews. The evaluation also takes into consideration identified credit problems, portfolio growth, management's judgment as to the impact of current economic conditions on the portfolio and the possibility of losses inherent in the loan portfolio that are not specifically identified.

In conformance with ASC 805 and ASC 820, purchased loans 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. An allowance may also be necessary if the historical loss and environmental factor analysis indicates losses inherent in a purchased portfolio exceed the fair value adjustment on the portion of the purchased portfolio not deemed impaired.

At September 30, 2018, the allowance for loan losses was $78,406,000, an increase of $3,374,000 from December 31, 2017. As a percent of loans, the allowance was 1.11 percent at September 30, 2018 and at December 31, 2017. The provision for loan losses for the three months and nine months ended September 30, 2018 was $1,400,000 and $5,563,000, respectively, and was primarily a result of organic loan growth during the nine month period. Comparatively, the provision for loan losses for the three and nine months ended September 30, 2017 was $2,083,000 and $7,343,000, respectively. The year-over-year decrease in the provision for loan losses was primarily the result of continued credit metric improvement, including a $8,303,000 decline in non-accrual loans during the nine month period ending September 30, 2018. Specific reserves on impaired loans decreased $1,204,000 from $1,637,000 at December 31, 2017, to $433,000 at September 30, 2018.

Net charge-offs totaling $537,000 were recognized for the three months ended September 30, 2018. Comparatively, the same period in 2017 had net recoveries of $800,000. For the three months ended September 30, 2018, there were no individual charge-offs or recoveries greater than $500,000. During the nine months ended September 30, 2018, two individual charge-offs totaling $1,300,000 and one recovery totaling $809,000 were greater than $500,000. For the nine months ended September 30, 2017, two individual recoveries totaling $1,700,000 but no charge-offs were greater than $500,000. The distribution of the net charge-offs (recoveries) for the three and nine months ended Septmber 30, 2018 and 2017 are reflected in the following table:

	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in Thousands)	2018			2017			2018			2017
Net charge-offs (Recoveries):
Commercial and industrial loans	$	(341	)	$	144		$	(121	)	$	350
Agricultural production financing and other loans to farmers	(4		)				40			(58		)
Real estate loans:
Construction	(2		)	(1		)	736			(28		)
Commercial and farmland	197			(1,136		)	109			(1,035		)
Residential	431			60			582			154
Home equity	108			10			550			434
Individuals' loans for household and other personal expenditures	148			123			293			209
Total net charge-offs	$	537		$	(800	)	$	2,189		$	26

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.

53

PART I: FINANCIAL INFORMATION

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

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 $1,149,162,000 at September 30, 2018, an increase of $149,215,000, or 14.9 percent, from December 31, 2017.  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 $5,161,000 at September 30, 2018. 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, FHLB advances are utilized as funding sources.  At September 30, 2018, total borrowings from the FHLB were $385,458,000. The Bank has pledged certain mortgage loans and investments to the FHLB. The total available remaining borrowing capacity from the FHLB at September 30, 2018 was $517,823,000.

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 letters of credit. Summarized credit-related financial instruments at September 30, 2018 are as follows:

(Dollars in Thousands)	September 30, 2018
Amounts of commitments:
Loan commitments to extend credit	$	2,829,121
Standby and commercial letters of credit	34,326
	$	2,863,447

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 September 30, 2018 are as follows:

(Dollars in Thousands)	Remaining 2018		2019		2020		2021		2022		2023		2024 and after		ASC 805 fair value adjustments at acquisition			Total
Operating leases	$	821	$	3,689	$	3,567	$	3,283	$	3,150	$	2,622	$	12,608				$	29,740
Federal funds purchased	90,000																	90,000
Securities sold under repurchase agreements	118,824																	118,824
Federal Home Loan Bank advances	62,472		121,713		41,273		55,000		45,000		35,000		25,000					385,458
Subordinated debentures and term loans													142,322		(3,914		)	138,408
Total	$	272,117	$	125,402	$	44,840	$	58,283	$	48,150	$	37,622	$	179,930	$	(3,914	)	$	762,430

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.

54

PART I: FINANCIAL INFORMATION

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

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 management 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. Management believes that the Corporation's liquidity and interest sensitivity position at September 30, 2018, remained adequate to meet the Corporation’s primary goal of achieving optimum interest margins while avoiding undue interest rate risk.

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 twelve-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, interest-bearing and demand deposits, reflect management's best estimate of expected future behavior. Historical retention rate assumptions are applied to non-maturity deposits for modeling purposes.

The comparative rising 200 basis points and falling 100 basis points scenarios below, as of September 30, 2018, 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:

	September 30, 2018
	RISING	FALLING
Driver Rates	(200 Basis Points)	(100 Basis Points)
Prime	200	(100	)
Federal funds	200	(100	)
One-year CMT	200	(100	)
Three-year CMT	200	(100	)
Five-year CMT	200	(100	)
CD's	200	(24	)
FHLB advances	200	(100	)

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 September 30, 2018. The net interest income shown represents cumulative net interest income over a twelve-month time horizon. Balance sheet assumptions used for the base scenario are the same for the rising and falling simulations.

	September 30, 2018
			RISING			FALLING
(Dollars in Thousands)	Base		(200 Basis Points)			(100 Basis Points)
Net interest income	$	334,737	$	360,060		$	319,574
Variance from base			$	25,323		$	(15,163	)
Percent of change from base			7.57		%	(4.53		)%

The comparative rising 200 basis points and falling 100 basis points scenarios below, as of December 31, 2017, 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, 2017
	RISING	FALLING
Driver Rates	(200 Basis Points)	(100 Basis Points)
Prime	200	(100	)
Federal funds	200	(100	)
One-year CMT	200	(100	)
Three-year CMT	200	(100	)
Five-year CMT	200	(100	)
CD's	200	(24	)
FHLB advances	200	(100	)

55

PART I: FINANCIAL INFORMATION

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

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 December 31, 2017.The net interest income shown represents cumulative net interest income over a twelve-month time horizon. Balance sheet assumptions used for the base scenario are the same for the rising and falling simulations.

	December 31, 2017
			RISING			FALLING
(Dollars in Thousands)	Base		(200 Basis Points)			(100 Basis Points)
Net interest income	$	311,466	$	336,970		$	286,477
Variance from base			$	25,504		$	(24,989	)
Percent of change from base			8.19		%	(8.02		)%

EARNING ASSETS

The following table presents the earning asset mix as of September 30, 2018 and December 31, 2017. Earning assets increased by $429,826,000 during the nine months ended September 30, 2018.  

Loans and loans held for sale increased $332,678,000 from December 31, 2017. The largest loan segments that experienced increases were commercial and industrial, commercial and farmland and construction. The largest loan segments that experienced decreases were agricultural production financing and other loans to farmers and other commercial loans. Additional details of the changes in the Corporation's loan portfolio are discussed within NOTE 4. LOANS AND ALLOWANCE of the Notes to Consolidated Condensed Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.

Interest-bearing time deposits and investment securities increased $31,736,000 and $64,649,000, respectively, since December 31, 2017.

(Dollars in Thousands)	September 30, 2018		December 31, 2017
Interest-bearing time deposits	$	66,763	$	35,027
Investment securities available for sale	1,149,162		999,947
Investment securities held to maturity	476,089		560,655
Loans held for sale	3,022		7,216
Loans	7,088,071		6,751,199
Federal Home Loan Bank stock	24,588		23,825
Total	$	8,807,695	$	8,377,869

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).

56

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”.

57

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.

58

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, 2017,

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 September 30, 2018.

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
July, 2018
August, 2018	1,662	$47.21
September, 2018

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

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4.  MINE SAFETY DISCLOSURES

Not Applicable

ITEM 5.  OTHER INFORMATION

a. None

b. None

59

PART II: OTHER INFORMATION

ITEM 6. EXHIBITS

ITEM 6.  EXHIBITS

Exhibit No:	Description of Exhibits:
2.1	Agreement and Plan of Reorganization and Merger between First Merchants Corporation and MBT Financial Corp., dated October 9, 2018 (Incorporated by reference to registrant's Form 8-K filed on October 10, 2018) (SEC No. 000-17071)
2.2	Voting Agreement, dated October 9, 2018, among First Merchants Corporation, each member of the Board of Directors of MBT Financial Corp., Patriot Financial Partners and Castle Creek Capital Partners (Incorporated by reference to registrant's Form 8-K filed on October 10, 2018) (SEC No. 000-17071)
3.1	First Merchants Corporation Articles of Incorporation, as amended (Incorporated by reference to registrant’s Form 8-K filed on May 2, 2017) (SEC No. 000-17071)
3.2	Bylaws of First Merchants Corporation dated August 11, 2016 (Incorporated by reference to registrant’s Form 10-K filed on March 1, 2017) (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.
4.7	Description of Assumed Junior Subordinated Debt Securities of Independent Alliance Banks, Inc. and Agreement to Furnish Copies of Related Instruments and Documents (Incorporated by reference to registrant's Form 10-Q filed on November 9, 2017) (SEC No. 000-17071)
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 Linkbase Document (2)
	(1) Filed herewith.
	(2) Furnished herewith.

60

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: November 9, 2018	By: /s/ Michael C. Rechin
	Michael C. Rechin
	President and Chief Executive Officer
	(Principal Executive Officer)
Date: November 9, 2018	By: /s/ Mark K. Hardwick
	Mark K. Hardwick
	Executive Vice President,
	Chief Financial Officer and Chief Operating Officer
	(Principal Financial and Accounting Officer)

61

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: November 9, 2018

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: November 9, 2018

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 September 30, 2018, 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: November 9, 2018

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 September 30, 2018, 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: November 9, 2018

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	9 Months Ended
	Sep. 30, 2018	Oct. 31, 2018
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	Sep. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
Trading Symbol	FRME
Amendment Flag	false
Entity Emerging Growth Company	false
Entity Small Business	false
Entity Common Stock, Shares Outstanding		49,658,419

XML

CONSOLIDATED CONDENSED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
ASSETS
Cash and cash equivalents	$ 142,501	$ 154,905
Interest-bearing time deposits	66,763	35,027
Investment securities available for sale	1,149,162	999,947
Investment securities held to maturity (fair value of $468,452 and $568,208)	476,089	560,655
Loans held for sale	3,022	7,216
Loans, net of allowance for loan losses of $78,406 and $75,032	7,009,665	6,676,167
Premises and equipment	93,728	95,852
Federal Home Loan Bank stock	24,588	23,825
Interest receivable	38,531	37,130
Goodwill	445,355	445,355
Other intangibles	26,054	31,148
Cash surrender value of life insurance	223,865	223,557
Other real estate owned	8,859	10,373
Tax asset, deferred and receivable	25,933	23,983
Other assets	53,167	42,338
TOTAL ASSETS	9,787,282	9,367,478
Deposits:
Noninterest-bearing	1,464,190	1,761,553
Interest-bearing	6,168,962	5,410,977
Total Deposits	7,633,152	7,172,530
Borrowings:
Federal funds purchased	90,000	144,038
Securities sold under repurchase agreements	118,824	136,623
Federal Home Loan Bank advances	385,458	414,377
Subordinated debentures and term loans	138,408	139,349
Total Borrowings	732,690	834,387
Interest payable	5,920	4,390
Other liabilities	54,094	52,708
Total Liabilities	8,425,856	8,064,015
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 - 49,280,188 and 49,158,238 shares	6,163	6,145
Additional paid-in capital	837,996	834,870
Retained earnings	552,551	465,231
Accumulated other comprehensive loss	(35,409)	(2,908)
Total Stockholders' Equity	1,361,426	1,303,463
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 9,787,282	$ 9,367,478

XML

CONSOLIDATED CONDENSED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Investment securities held to maturity - fair value	$ 468,452	$ 568,208
Loans - allowance for loan losses	$ 78,406	$ 75,032
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)	100,000,000	100,000,000
Common Stock, issued (in shares)	49,304,542	49,158,238
Common Stock, outstanding (in shares)	49,304,542	49,158,238

XML

CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Loans receivable:
Taxable	$ 88,479	$ 71,491	$ 251,409	$ 187,234
Tax exempt	3,761	2,851	10,989	7,676
Investment securities:
Taxable	5,514	4,524	16,044	13,012
Tax exempt	6,493	5,455	18,865	15,549
Deposits with financial institutions	270	284	1,034	442
Federal Home Loan Bank stock	283	242	950	635
Total Interest Income	104,800	84,847	299,291	224,548
INTEREST EXPENSE
Deposits	13,685	6,710	34,852	15,971
Federal funds purchased	229	175	670	506
Securities sold under repurchase agreements	174	133	519	331
Federal Home Loan Bank advances	2,137	1,464	6,141	3,619
Subordinated debentures and term loans	2,089	1,945	6,136	5,602
Total Interest Expense	18,314	10,427	48,318	26,029
NET INTEREST INCOME	86,486	74,420	250,973	198,519
Provision for loan losses	1,400	2,083	5,563	7,343
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	85,086	72,337	245,410	191,176
OTHER INCOME
Increase in cash surrender value of life insurance	961	1,058	2,946	2,773
Gains on life insurance benefits	0	517	198	2,671
Net gains and fees on sales of loans	1,841	2,317	5,262	5,209
Net realized gains on sales of available for sale securities	1,285	332	4,016	1,497
Other income	1,110	1,064	3,368	2,288
Total Other Income	19,527	18,668	57,279	51,948
OTHER EXPENSES
Salaries and employee benefits	32,936	33,244	97,354	86,052
Net occupancy	4,586	4,371	13,604	12,552
Equipment	3,483	3,478	10,707	9,192
Marketing	1,216	1,021	3,574	2,378
Outside data processing fees	3,422	3,162	9,848	8,864
Printing and office supplies	334	366	992	905
Intangible asset amortization	1,650	1,698	5,094	3,592
FDIC assessments	856	704	2,286	1,853
Other real estate owned and foreclosure expenses	455	330	1,219	1,592
Professional and other outside services	1,844	5,843	5,174	10,843
Other expenses	4,240	4,491	12,361	11,300
Total Other Expenses	55,022	58,708	162,213	149,123
INCOME BEFORE INCOME TAX	49,591	32,297	140,476	94,001
Income tax expense	8,478	7,939	23,050	22,314
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$ 41,113	$ 24,358	$ 117,426	$ 71,687
Per Share Data:
Basic Net Income Available to Common Stockholders (in dollars per share)	$ 0.83	$ 0.50	$ 2.38	$ 1.64
Diluted Net Income Available to Common Stockholders (in dollars per share)	0.83	0.50	2.37	1.63
Cash Dividends Paid (in dollars per share)	$ 0.22	$ 0.18	$ 0.62	$ 0.51
Average Diluted Shares Outstanding (in shares)	49,492,019	48,643,774	49,458,185	44,063,219
Service charges on deposit accounts
OTHER INCOME
Other income	$ 5,619	$ 5,044	$ 15,434	$ 13,656
Fiduciary and wealth management fees
OTHER INCOME
Other income	3,673	3,783	11,064	10,556
Other customer fees
OTHER INCOME
Other income	$ 5,038	$ 4,553	$ 14,991	$ 13,298

XML

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Statement of Comprehensive Income [Abstract]
Net income	$ 41,113	$ 24,358	$ 117,426	$ 71,687
Other comprehensive income (loss), net of tax:
Unrealized holding gain (loss) on securities available for sale arising during the period, net of tax of $2,596, $4,101, $7,470 and $4,374	(9,765)	(7,617)	(30,032)	8,124
Unrealized gain (loss) on cash flow hedges arising during the period, net of tax of $44, $3, $212 and $134	166	(7)	1,039	(246)
Reclassification adjustment for net gains included in net income, net of tax of $250, $32, $766 and $258	(942)	(60)	(2,882)	(480)
Defined benefit pension plan amortization of prior service cost, net of tax of $31 and $94	0	(58)	0	(175)
Total other comprehensive income (loss), net of tax	(10,541)	(7,742)	(31,875)	7,223
Comprehensive income	$ 30,572	$ 16,616	$ 85,551	$ 78,910

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CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Statement of Comprehensive Income [Abstract]
Unrealized holding gain (loss) on securities available for sale arising during the period, tax	$ (2,596)	$ (4,101)	$ (7,470)	$ 4,374
Unrealized gain (loss) on cash flow hedges arising during the period, tax	44	(3)	212	(134)
Reclassification adjustment for net losses (gains) included in net income, tax	250	32	766	258
Defined benefit pension plan amortization of prior service cost, tax		$ 31		$ 94

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CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($) $ in Thousands	Total	Preferred	Common Stock	Additional Paid in Capital	Retained Earnings	Accumulated Other Comprehensive Income
Beginning balance at Dec. 31, 2016						$ (13,581)
Comprehensive income:
Net income	$ 71,687
Other comprehensive loss, net of tax	7,223
Ending balance at Sep. 30, 2017						(6,358)
Beginning balance (in shares) at Dec. 31, 2017		125	49,158,238
Beginning balance at Dec. 31, 2017	1,303,463	$ 125	$ 6,145	$ 834,870	$ 465,231	(2,908)
Comprehensive income:
Net income	117,426				117,426
Other comprehensive loss, net of tax	(31,875)					(31,875)
Cash dividends on common stock ($.62 per share)	(30,732)				(30,732)
Reclassification adjustment under ASU 2018-02	0				626	(626)
Share-based compensation (in shares)			106,833
Share-based compensation	2,546		$ 13	2,533
Stock issued under employee benefit plans (in shares)			13,448
Stock issued under employee benefit plans	515		$ 2	513
Stock issued under dividend reinvestment and stock purchase plan (in shares)			18,761
Stock issued under dividend reinvestment and stock purchase plan	$ 879		$ 2	877
Stock options exercised (in shares)	51,243		51,243
Stock options exercised	$ 1,093		$ 6	1,087
Stock redeemed (in shares)			(43,981)
Stock redeemed	(1,889)		$ (5)	(1,884)
Ending balance (in shares) at Sep. 30, 2018		125	49,304,542
Ending balance at Sep. 30, 2018	$ 1,361,426	$ 125	$ 6,163	$ 837,996	$ 552,551	$ (35,409)

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CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) (Parenthetical) - $ / shares	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Statement of Stockholders' Equity [Abstract]
Cash dividends on common stock (in dollars per share)	$ 0.22	$ 0.18	$ 0.62	$ 0.51

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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Cash Flow From Operating Activities:
Net income	$ 117,426	$ 71,687
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	5,563	7,343
Depreciation and amortization	6,630	5,696
Change in deferred taxes	3,750	3,542
Share-based compensation	2,546	1,884
Loans originated for sale	(277,312)	(246,979)
Proceeds from sales of loans held for sale	285,297	257,695
Gains on sales of loans held for sale	(3,791)	(4,081)
Gains on sales of securities available for sale	(4,016)	(1,497)
Increase in cash surrender of life insurance	(2,946)	(2,773)
Gains on life insurance benefits	(198)	(2,671)
Change in interest receivable	(1,401)	(2,074)
Change in interest payable	1,530	597
Other adjustments	3,077	(9,006)
Net cash provided by operating activities	136,155	79,363
Cash Flows from Investing Activities:
Net change in interest-bearing deposits	(31,736)	200,013
Purchases of:
Securities available for sale	(341,433)	(307,220)
Securities held to maturity		(30,220)
Proceeds from sales of securities available for sale	126,136	54,513
Proceeds from maturities of:
Securities available for sale	56,533	52,176
Securities held to maturity	52,258	55,276
Change in Federal Home Loan Bank stock	(763)	40
Net change in loans	(347,054)	(401,977)
Net cash and cash equivalents received in acquisition		54,536
Proceeds from the sale of other real estate owned	2,069	5,046
Proceeds from life insurance benefits	2,836	11,642
Other adjustments	2,708	(1,656)
Net cash used in investing activities	(478,446)	(307,831)
Net change in :
Demand and savings deposits	342,471	132,145
Certificates of deposit and other time deposits	118,151	107,322
Borrowings	1,451,467	894,674
Repayment of borrowings	(1,552,068)	(866,231)
Cash dividends on common stock	(30,732)	(22,909)
Stock issued under employee benefit plans	515	367
Stock issued under dividend reinvestment and stock purchase plans	879	714
Stock options exercised	1,093	2,323
Stock redeemed	(1,889)	(1,257)
Net cash provided by financing activities	329,887	247,148
Net Change in Cash and Cash Equivalents	(12,404)	18,680
Cash and Cash Equivalents, January 1	154,905	127,927
Cash and Cash Equivalents, September 30	142,501	146,607
Additional cash flow information:
Interest paid	46,788	24,183
Income tax paid	13,719	18,000
Loans transferred to other real estate owned	405	8,210
Fixed assets transferred to other real estate owned	374
Non-cash investing activities using trade date accounting	828	3,798
Investments transferred from held to maturity to available for sale in accordance with ASU 2017-12	30,794
In conjunction with the acquisitions, liabilities were assumed as follows:
Fair value of assets acquired		1,531,397
Cash paid in acquisition		(12)
Less: Common stock issued		321,431
Liabilities assumed	$ 0	$ 1,209,954

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General

9 Months Ended

Sep. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

General

GENERAL

Financial Statement Preparation

The significant accounting policies followed by 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, 2017, 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, 2017 filed with the Securities and Exchange Commission. The results of operations for the three and nine months ended September 30, 2018, 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.

Recent Accounting Changes

ASU 2018-02 "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" ("ASU 2018-02") allows a reclassification from accumulated other comprehensive income (loss) to retained earnings for the stranded tax effects caused by the revaluation of deferred taxes resulting from the newly enacted corporate tax rate in the Tax Cuts and Jobs Act. The ASU is effective in years beginning after December 15, 2018, but permits early adoption in a period for which financial statements have not yet been issued. The Corporation elected to early adopt the ASU as of January 1, 2018. The adoption of the guidance resulted in an insignificant cumulative-effect adjustment that decreased accumulated other comprehensive income (loss) and increased retained earnings in 2018.

ASU 2017-12 - "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities" ("ASU 2017-12") is intended to improve and simplify accounting rules around hedge accounting. The ASU is effective for public companies in 2019 and private companies in 2020. Early adoption is permitted. The new standard refines and expands hedge accounting for both financial (e.g., interest rate) and commodity risks. Its provisions create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes, for investors and analysts. The new standard takes effect for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, for public companies and for fiscal years beginning after December 15, 2019 (and interim periods for fiscal years beginning after December 15, 2020), for private companies. Early adoption is permitted in any interim period or fiscal years before the effective date of the standard. ASU 2017-12 requires a modified retrospective transition method in which a cumulative effect of the change on the opening balance of each affected component of equity is recognized in the statement of financial position as of the date of adoption. The Corporation adopted this standard in the third quarter of 2018. As permitted by the ASU, the Corporation reclassified $30.8 million of state and municipal securities with unrealized gains of $450,000 from the held to maturity portfolio to the available for sale portfolio. Other than this reclassification of securities, adoption of the standard did not have a significant impact on the Corporation’s consolidated financial statements.

ASU 2017-07 "Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" ("ASU 2017-07") applies to all employers, including not-for-profit entities, that offer to their employees defined benefit pension plans, other postretirement benefit plans, or other types of benefits accounted for under Topic 715, Compensation - Retirement Benefits. The amendments require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. The amendments also allow only the service cost component to be eligible for capitalization when applicable (e.g., as a cost of internally manufactured inventory or a self-constructed asset). The amendments are effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those annual periods. For other entities, the amendments are effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. The Corporation adopted this ASU in 2018. Adoption of the standard did not have a significant impact on the Corporation’s consolidated financial statements.

ASU 2016-15 "Statement of Cash Flows (Topic 230)" ("ASU 2016-15") is intended to reduce the diversity in practice around how certain transactions are classified within the statement of cash flows. ASU 2016-15 became effective for the Corporation on January 1, 2018 and did not have a significant impact on the Corporation's financial statements.

ASU 2016-01 "Financial Instruments - Overall (Subtopic 825-10): Recognition of Financial Assets and Financial Liabilities" ("ASU 2016-01") makes targeted amendments to the guidance for recognition, measurement, presentation and disclosure of financial instruments. ASU 2016-01 requires equity investments, other than equity method investments, to be measured at fair value with changes in fair value recognized in net income. The ASU requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption to reclassify the cumulative change in fair value of equity securities previously recognized in accumulated other comprehensive income (loss). ASU 2016-01 became effective for the Corporation on January 1, 2018. The adoption of the guidance did not result in any cumulative effect adjustment in 2018. ASU 2016-01 also emphasizes the existing requirement to use exit prices to measure fair value for disclosure purposes and clarifies that entities should not make use of a practicability exception in determining the fair value of loans. Accordingly, the Corporation refined the calculation used to determine the disclosed fair value of loans held for investment as part of adopting this standard. The refined calculation did not have a significant impact on the fair value disclosures included in NOTE 9. DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES of these Notes to Consolidated Condensed Financial Statements.

ASU 2014-09 "Revenue from Contracts with Customers (Topic 606)" ("ASU 2014-09") 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. ASU 2014-09 establishes a five-step model which entities must follow to recognize revenue and removes inconsistencies and weaknesses in existing guidance. The guidance does not apply to revenue associated with financial instruments, including loans and investment securities that are accounted for under other GAAP, which comprises a significant portion of our revenue stream. ASU 2014-09 became effective for the Corporation on January 1, 2018. The adoption of ASU 2014-09 did not result in a change to the accounting for any of the in-scope revenue streams; as such, no cumulative effect adjustment was recorded. Additional information related to revenue generated from contracts with customers is detailed below.

Revenue Recognition

ASU 2014-09 establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The majority of the Corporation's revenue-generating transactions are not subject to ASU 2014-09, including revenue generated from financial instruments, such as loans, letters of credit, derivatives and investment securities, as well as revenue related to mortgage servicing activities, as these activities are subject to other GAAP discussed elsewhere within the disclosures. The Corporation has evaluated the nature of its contracts with customers and determined that further disaggregation of revenue from contracts with customers into more granular categories beyond what is presented in the Consolidated Condensed Statements of Income was not necessary. Descriptions of revenue-generating activities that are within the scope of ASU 2014-09, which are presented in our income statements are as follows:

Service charges on deposit accounts: The Corporation earns fees from its deposit customers for transaction-based, account maintenance and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering and ACH fees, are recognized at the time the transaction is executed, which is the point in time the Corporation fulfills the customer's request. Account maintenance fees, which relate primarily to monthly maintenance, are earned monthly, representing the period which the Corporation satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer's account balance.

Fiduciary activities: This represents monthly fees due from wealth management customers as consideration for managing the customers' assets. Wealth management and trust services include custody of assets, investment management, fees for trust services and similar fiduciary activities. These fees are primarily earned over time as the Corporation provides the contracted monthly or quarterly services and are generally assessed based on the market value of assets under management at month-end. Fees that are transaction-based are recognized at the point in time that the transaction is executed.

Investment Brokerage Fees: The Corporation earns fees from investment brokerage services provided to its customers by a third-party service provider. The Corporation receives commissions from the third-party provider on a monthly basis based upon customer activity for the month. The fees are paid to us by the third party on a monthly basis and are recognized when received.

Interchange income: The Corporation earns interchange fees from debit and credit cardholder transactions conducted through the Visa and MasterCard payment networks. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized concurrent with the transaction processing services provided to the cardholder.

Gains (Losses) on Sales of OREO: The Corporation records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Corporation finances the sale of OREO to the buyer, the Corporation assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Corporation adjusts the transaction price and related gain (loss) on sale if a significant financing component is present.

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Acquisitions

9 Months Ended

Sep. 30, 2018

Business Combinations [Abstract]

Acquisitions

ACQUISITIONS

Independent Alliance Banks, Inc.

On November 21, 2016, the Corporation purchased 495,112 shares, or 12.1 percent, of IAB's outstanding common stock from an IAB shareholder for $19.8 million, or $40.00 per share. On July 14, 2017, the Corporation acquired the remaining shares of IAB common stock. IAB, an Indiana Corporation, merged with and into the Corporation, whereupon the separate corporate existence of IAB ceased and the Corporation survived. Immediately following the merger, IAB's wholly-owned subsidiary, iAB Financial Bank, merged with and into the Bank, with the Bank continuing as the surviving bank.

IAB was headquartered in Fort Wayne, Indiana and had 16 banking centers serving the Fort Wayne market. Pursuant to the merger agreement, each IAB shareholder received 1.653 shares of the Corporation's common stock for each outstanding share of IAB common stock held. The Corporation issued approximately 6.0 million shares of common stock. The transaction value for the remaining shares of common stock, not owned by the Corporation, was approximately $238.8 million, resulting in a total purchase price of $258.6 million. The Corporation engaged in this transaction with the expectation that it would be accretive to income and add a new market area with a demographic profile consistent with many of the current Indiana markets served by the Bank. Goodwill resulted from this transaction due to the expected synergies and economies of scale.

In the third quarter of 2017, ASC 805-10 - Business Combinations, required the Corporation to remeasure the 12.1 percent equity interest in IAB's common stock and recognize the resulting gain or loss, if any, in earnings. The remeasurement was based upon the closing price of IAB's common stock immediately prior to the acquisition announcement, and prior to the Corporation obtaining control of IAB. The trading price of IAB's common stock subsequent to the acquisition announcement included a control or acquisition premium and was not indicative of the fair value of the Corporation's pre-existing equity interest immediately prior to the acquisition announcement. The fair value of the equity interest in IAB's common stock after the remeasurement was $19.8 million. The Corporation recorded a $50,000 loss in the third quarter of 2017 as a result of the remeasurement.

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 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 IAB acquisition is detailed in the following table.

	Fair Value
Cash and cash equivalents	$	6,016
Interest-bearing time deposits	248,212
Investment securities	4,078
Loans held for sale	594
Loans	725,382
Premises and equipment	10,107
Federal Home Loan Bank stock	4,810
Interest receivable	3,445
Cash surrender value of life insurance	26,964
Other assets	11,780
Deposits	(862,271		)
Securities sold under repurchase agreements	(17,915		)
Federal Home Loan Bank Advances	(47,575		)
Subordinated debentures	(10,583		)
Interest payable	(1,005		)
Other liabilities	(14,472		)
Net tangible assets acquired	87,567
Other Intangible assets	17,403
Goodwill	153,636
Purchase price	$	258,606

Of the total purchase price, $17,403,000 has been allocated to other intangible assets. Approximately $13.6 million was allocated to a core deposit intangible, which will be amortized over its estimated life of 10 years. Approximately $3.8 million was allocated to a non-compete intangible, which will be amortized over its estimated life of 2 years. The remaining purchase price was allocated to goodwill, which is not deductible for tax purposes.

Acquired loan data for IAB can be found in the table below:

	Fair Value of Acquired Loans at Acquisition Date		Gross Contractual Amounts Receivable at Acquisition Date		Best Estimate at Acquisition Date of Contractual Cash Flows Not Expected to be Collected
Acquired receivables subject to ASC 310-30	$	4,838	$	14,131	$	8,352
Acquired receivables not subject to ASC 310-30	$	720,544	$	864,613	$	9,786

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 difference. 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.

The Arlington Bank

On May 19, 2017, the Corporation acquired 100 percent of Arlington Bank. Arlington Bank, an Ohio savings bank, merged with and into the Bank, with the Bank continuing as the surviving bank. Arlington Bank was headquartered in Columbus, Ohio and had 3 banking centers serving the Columbus, Ohio market. Pursuant to the merger agreement, each Arlington Bank shareholder received 2.7245 shares of the Corporation's common stock for each outstanding share of Arlington Bank common stock held. The Corporation issued approximately 2.1 million shares of common stock, which was valued at approximately $82.6 million. The Corporation engaged in this transaction with the expectation that it would be accretive to income and expand the existing footprint in Columbus, Ohio. Goodwill resulted from this transaction due to the expected synergies and economies of scale.

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 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 Arlington Bank acquisition is detailed in the following table.

	Fair Value
Cash and cash equivalents	$	48,532
Interest-bearing time deposits	292
Loans held for sale	7,626
Loans	224,680
Premises and equipment	1,986
Federal Home Loan Bank stock	1,091
Interest receivable	653
Other assets	1,620
Deposits	(252,783		)
Interest payable	(244		)
Other liabilities	(3,106		)
Net tangible assets acquired	30,347
Core deposit intangible	4,526
Goodwill	47,719
Purchase price	$	82,592

Of the total purchase price, $4,526,000 has been allocated to a core deposit intangible that will be amortized over its estimated life of 10 years. The remaining purchase price was allocated to goodwill, which is not deductible for tax purposes.

Acquired loan data for Arlington Bank can be found in the table below:

	Fair Value of Acquired Loans at Acquisition Date		Gross Contractual Amounts Receivable at Acquisition Date		Best Estimate at Acquisition Date of Contractual Cash Flows Not Expected to be Collected
Acquired receivables subject to ASC 310-30	$	2,625	$	6,183	$	2,891
Acquired receivables not subject to ASC 310-30	$	222,055	$	308,857	$	2,741

Pro Forma Financial Information

The results of operations of Arlington Bank and IAB have been included in the Corporation's consolidated financial statements since the acquisition dates. The following schedule includes pro forma results for the year ended December 31, 2017, as if the Arlington Bank and IAB acquisitions occurred as of the beginning of the period presented.

	2017
Total revenue (net interest income plus other income)	$	380,324
Net income	$	95,009
Net income available to common shareholders
Earnings per share:
Basic	$	1.94
Diluted	$	1.93

The pro forma information includes adjustments for interest income on loans, interest expense on deposits and borrowings, premises expense for banking centers acquired and amortization of intangibles arising from the transactions and the related income tax effects. The pro forma information for the year ended December 31, 2017 includes operating revenue of $9.0 million and $21.4 million from the Arlington Bank and IAB acquisitions since the date of acquisition, respectively. Additionally, $15.4 million, net of tax, of expenses directly attributable to the Arlington Bank and IAB acquisitions were included in the year ended December 31, 2017 pro forma information. The pro forma information is presented for information purposes only and is not indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time, nor is it intended to be a projection of future results.

CONSUMMATION OF MERGER

MBT Financial Corp.

On October 9, 2018, the Corporation and MBT Financial Corp., a Michigan corporation ("MBT"), entered into an Agreement and Plan of Reorganization and Merger, pursuant to which MBT will, subject to the terms and conditions of the merger agreement, merge with and into the Corporation, whereupon the separate corporate existence of MBT will cease and the Corporation will survive. Immediately following the merger, MBT's wholly-owned subsidiary, Monroe Bank & Trust, shall be merged with and into the Bank, with the Bank continuing as the surviving bank. Based on the closing price of the Corporation's common stock on October 9, 2018 of $45.71 per share, the transaction value is estimated at approximately $290.9 million. The transaction is expected to be a tax-free exchange for MBT's shareholders who will be receiving the Corporation's common stock pursuant to the merger. Subject to MBT's shareholders' approval of the merger, regulatory approvals and other customary closing conditions, the parties anticipate completing the merger in the first half of 2019. MBT's total assets as of June 30, 2018 were $1.3 billion.

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Investment Securities

9 Months Ended

Sep. 30, 2018

Investments, Debt and Equity Securities [Abstract]

Investment Securities

INVESTMENT SECURITIES

The amortized cost, gross unrealized gains, gross unrealized losses and approximate market value of the Corporation's investment securities at the dates indicated were:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale at September 30, 2018
U.S. Government-sponsored agency securities	$	18,492			$	134	$	18,358
State and municipal	611,528		2,920		14,280		600,168
U.S. Government-sponsored mortgage-backed securities	547,223		71		16,689		530,605
Corporate obligations	31						31
Total available for sale	1,177,274		2,991		31,103		1,149,162
Held to maturity at September 30, 2018
U.S. Government-sponsored agency securities	22,618				833		21,785
State and municipal	192,124		1,161		1,748		191,537
U.S. Government-sponsored mortgage-backed securities	260,347		300		6,514		254,133
Foreign Investments	1,000				3		997
Total held to maturity	476,089		1,461		9,098		468,452
Total Investment Securities	$	1,653,363	$	4,452	$	40,201	$	1,617,614

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale at December 31, 2017
State and municipal	$	510,852	$	16,932	$	1,091	$	526,693
U.S. Government-sponsored mortgage-backed securities	473,325		964		3,423		470,866
Corporate obligations	31						31
Equity securities	2,357						2,357
Total available for sale	986,565		17,896		4,514		999,947
Held to maturity at December 31, 2017
U.S. Government-sponsored agency securities	22,618				435		22,183
State and municipal	235,594		6,295		244		241,645
U.S. Government-sponsored mortgage-backed securities	301,443		3,341		1,404		303,380
Foreign Investment	1,000						1,000
Total held to maturity	560,655		9,636		2,083		568,208
Total Investment Securities	$	1,547,220	$	27,532	$	6,597	$	1,568,155

The amortized cost and fair value of available for sale and held to maturity securities at September 30, 2018 and December 31, 2017, 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 September 30, 2018:
Due in one year or less	$	24,098	$	24,360	$	5,161	$	5,178
Due after one through five years	17,294		17,511		48,155		47,042
Due after five through ten years	75,416		75,498		57,950		58,212
Due after ten years	513,243		501,188		104,476		103,887
	630,051		618,557		215,742		214,319
U.S. Government-sponsored mortgage-backed securities	547,223		530,605		260,347		254,133
Total Investment Securities	$	1,177,274	$	1,149,162	$	476,089	$	468,452

	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Maturity Distribution at December 31, 2017
Due in one year or less	$	425	$	425	$	12,015	$	12,158
Due after one through five years	5,040		5,204		76,146		76,334
Due after five through ten years	74,921		78,806		54,441		55,679
Due after ten years	430,497		442,289		116,610		120,657
	510,883		526,724		259,212		264,828
U.S. Government-sponsored mortgage-backed securities	473,325		470,866		301,443		303,380
Equity securities	2,357		2,357
Total Investment Securities	$	986,565	$	999,947	$	560,655	$	568,208

The carrying value of securities pledged as collateral, to secure borrowings and for other purposes, was $426,200,000 at September 30, 2018, and $475,999,000 at December 31, 2017.

The book value of securities sold under agreements to repurchase amounted to $122,789,000 at September 30, 2018, and $136,639,000 at December 31, 2017.

Gross gains on the sales and redemptions of available for sale securities for the three and nine months ended September 30, 2018 and 2017 are shown below.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Sales and Redemptions of Available for Sale Securities:
Gross gains	$	1,285	$	382	$	4,016	$	1,547
Gross losses			50				50

The following tables show the Corporation’s gross unrealized losses and fair value, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position at September 30, 2018, and December 31, 2017:

	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 September 30, 2018
U.S. Government-sponsored agency securities	$	18,358	$	134					$	18,358	$	134
State and municipal	397,852		11,780		$	30,820	$	2,500	428,672		14,280
U.S. Government-sponsored mortgage-backed securities	386,632		9,603		134,602		7,086		521,234		16,689
Total Temporarily Impaired Available for Sale Securities	802,842		21,517		165,422		9,586		968,264		31,103
Temporarily Impaired Held to Maturity Securities at September 30, 2018
U.S. Government-sponsored agency securities	97		3		21,688		830		21,785		833
State and municipal	44,857		857		16,326		891		61,183		1,748
U.S. Government-sponsored mortgage-backed securities	168,488		3,473		61,139		3,041		229,627		6,514
Corporate Obligations	997		3						997		3
Total Temporarily Impaired Held to Maturity Securities	214,439		4,336		99,153		4,762		313,592		9,098
Total Temporarily Impaired Investment Securities	$	1,017,281	$	25,853	$	264,575	$	14,348	$	1,281,856	$	40,201

	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, 2017
State and municipal	$	13,296	$	198	$	35,324	$	893	$	48,620	$	1,091
U.S. Government-sponsored mortgage-backed securities	182,755		1,520		68,667		1,903		251,422		3,423
Total Temporarily Impaired Available for Sale Securities	196,051		1,718		103,991		2,796		300,042		4,514
Temporarily Impaired Held to Maturity Securities at December 31, 2017
U.S. Government-sponsored agency securities	9,988		131		12,196		304		22,184		435
State and municipal	2,430		36		15,805		208		18,235		244
U.S. Government-sponsored mortgage-backed securities	62,508		485		43,078		919		105,586		1,404
Total Temporarily Impaired Held to Maturity Securities	74,926		652		71,079		1,431		146,005		2,083
Total Temporarily Impaired Investment Securities	$	270,977	$	2,370	$	175,070	$	4,227	$	446,047	$	6,597

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.

	September 30, 2018			December 31, 2017
Investments reported at less than historical cost:
Historical cost	$	1,322,058		$	452,644
Fair value	$	1,281,856		$	446,047
Percent of the Corporation's investment portfolio	78.9		%	28.6		%

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 ("OTTI") is identified.

The Corporation’s management has evaluated all securities with unrealized losses for OTTI as of September 30, 2018. 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 classified 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 loss resulting from the sale of certain securities has proven the data to be accurate over time.   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.

State and Municipal and U.S. Government-Sponsored Agency Securities

The unrealized losses on the Corporation's investments in securities of state and political subdivisions and U.S. Government-Sponsored Agency securities were caused by interest rate increases. 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. Because the Corporation does not intend to sell the investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Corporation does not consider those investments to be other-than-temporarily impaired at September 30, 2018. The state and municipal securities portfolio contains unrealized losses of $14,280,000 on three hundred thirty-six securities and $1,748,000 on sixty-eight securities in the available for sale and held to maturity portfolios, respectively. The U.S. Government-Sponsored Agency securities portfolio contains unrealized losses of $134,000 on seven securities and $833,000 on five securities in the available for sale and held to maturity portfolios, respectively.

U.S. Government-Sponsored Mortgage-Backed Securities

The unrealized losses on the Corporation's investment in mortgage-backed securities were a result of interest rate changes. The Corporation expects to recover the amortized cost basis over the term of the securities. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Corporation does not intend to sell the investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Corporation does not consider those investments to be other-than-temporarily impaired at September 30, 2018. The mortgage-backed securities portfolio contains unrealized losses of $16,689,000 on one hundred twenty-five securities and $6,514,000 on one hundred securities in the available for sale and held to maturity portfolios, respectively. All these securities are issued by a U.S. government-sponsored entity.

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Loans and Allowance

9 Months Ended

Sep. 30, 2018

Receivables [Abstract]

Loans and Allowance

LOANS AND ALLOWANCE

The Corporation’s primary lending focus is small business and middle market commercial, commercial real estate and residential real estate, which results in portfolio diversification. The following tables show the composition of the loan portfolio, the allowance for loan losses and credit quality characteristics by collateral classification, excluding loans held for sale. Loans held for sale as of September 30, 2018, and December 31, 2017, were $3,022,000 and $7,216,000, respectively.

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

	September 30, 2018			December 31, 2017
Commercial and industrial loans	$	1,655,569		$	1,493,493
Agricultural production financing and other loans to farmers	88,504			121,757
Real estate loans:
Construction	668,608			612,219
Commercial and farmland	2,699,629			2,562,691
Residential	965,893			962,765
Home equity	517,303			514,021
Individuals' loans for household and other personal expenditures	98,709			86,935
Lease financing receivables, net of unearned income	1,830			2,527
Other commercial loans	392,026			394,791
Loans	$	7,088,071		$	6,751,199
Allowance for loan losses	(78,406		)	(75,032		)
Net Loans	$	7,009,665		$	6,676,167

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 September 30, 2018. 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 credit officers and in accordance with established policies. The Bank charges off a loan when a determination is made that all or a portion of the loan is uncollectable. 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 450 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, purchased loans 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 nine months ended September 30, 2018 and September 30, 2017:

	Three Months Ended September 30, 2018
	Commercial			Commercial Real Estate			Consumer			Residential			Finance Leases		Total
Allowance for loan losses:
Balances, June 30, 2018	$	31,465		$	27,731		$	3,921		$	14,424		$	2	$	77,543
Provision for losses	256			410			159			575					1,400
Recoveries on loans	658			306			46			165					1,175
Loans charged off	(313		)	(501		)	(194		)	(704		)			(1,712		)
Balances, September 30, 2018	$	32,066		$	27,946		$	3,932		$	14,460		$	2	$	78,406

	Nine Months Ended September 30, 2018
	Commercial			Commercial Real Estate			Consumer			Residential			Finance Leases		Total
Allowance for loan losses:
Balances, December 31, 2017	$	30,418		$	27,343		$	3,732		$	13,537		$	2	$	75,032
Provision for losses	1,567			1,448			493			2,055					5,563
Recoveries on loans	2,060			1,858			233			915					5,066
Loans charged off	(1,979		)	(2,703		)	(526		)	(2,047		)			(7,255		)
Balances, September 30, 2018	$	32,066		$	27,946		$	3,932		$	14,460		$	2	$	78,406

	Three Months Ended September 30, 2017
	Commercial			Commercial Real Estate			Consumer			Residential			Finance Leases		Total
Allowance for loan losses:
Balances, June 30, 2017	$	28,906		$	25,236		$	3,372		$	12,955		$	2	$	70,471
Provision for losses	921			374			342			446					2,083
Recoveries on loans	324			1,327			51			157					1,859
Loans charged off	(468		)	(190		)	(174		)	(227		)			(1,059		)
Balances, September 30, 2017	$	29,683		$	26,747		$	3,591		$	13,331		$	2	$	73,354

	Nine Months Ended September 30, 2017
	Commercial			Commercial Real Estate			Consumer			Residential			Finance Leases		Total
Allowance for loan losses:
Balances, December 31, 2016	$	27,696		$	23,661		$	2,923		$	11,755		$	2	$	66,037
Provision for losses	2,279			2,023			877			2,164					7,343
Recoveries on loans	987			2,066			253			547					3,853
Loans charged off	(1,279		)	(1,003		)	(462		)	(1,135		)			(3,879		)
Balances, September 30, 2017	$	29,683		$	26,747		$	3,591		$	13,331		$	2	$	73,354

The tables below show the Corporation’s allowance for loan losses and loan portfolio by loan segment as of the periods indicated. There was no related allowance for loan losses for loans acquired with deteriorated credit quality at September 30, 2018 or December 31, 2017.

	September 30, 2018
	Commercial		Commercial Real Estate		Consumer		Residential		Finance Leases		Total
Allowance Balances:
Individually evaluated for impairment							$	433			$	433
Collectively evaluated for impairment	$	32,066	$	27,946	$	3,932	14,027		$	2	77,973
Total Allowance for Loan Losses	$	32,066	$	27,946	$	3,932	$	14,460	$	2	$	78,406
Loan Balances:
Individually evaluated for impairment	$	1,614	$	12,158	$	8	$	2,219			$	15,999
Collectively evaluated for impairment	2,132,193		3,340,898		98,701		1,479,371		$	1,830	7,052,993
Loans acquired with deteriorated credit quality	2,292		15,181				1,606				19,079
Loans	$	2,136,099	$	3,368,237	$	98,709	$	1,483,196	$	1,830	$	7,088,071

	December 31, 2017
	Commercial		Commercial Real Estate		Consumer		Residential		Finance Leases		Total
Allowance Balances:
Individually evaluated for impairment	$	666	$	567			$	404			$	1,637
Collectively evaluated for impairment	29,752		26,776		$	3,732	13,133		$	2	73,395
Total Allowance for Loan Losses	$	30,418	$	27,343	$	3,732	$	13,537	$	2	$	75,032
Loan Balances:
Individually evaluated for impairment	$	3,345	$	17,432	$	5	$	2,429			$	23,211
Collectively evaluated for impairment	2,005,275		3,135,481		86,930		1,472,821		$	2,527	6,703,034
Loans acquired with deteriorated credit quality	1,421		21,997				1,536				24,954
Loans	$	2,010,041	$	3,174,910	$	86,935	$	1,476,786	$	2,527	$	6,751,199

Loans individually evaluated for impairment are comprised of commercial and consumer loans deemed impaired in accordance with ASC 310-10 and include loans acquired with deteriorated credit quality totaling $1,568,000 and $315,000 at September 30, 2018 and December 31, 2017, respectively.

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

Commercial

Commercial lending is 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 tangible assets being financed such as equipment or real estate or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee. Other loans may be unsecured, secured but under-collateralized or otherwise made on the basis of the enterprise value of an organization. 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.

Consumer and Residential

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 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 on loans secured by 1-4 family residences can be impacted by changes in property values. 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. When the interest accrual is discontinued, all unpaid accrued interest is reversed against earnings when considered uncollectable. 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:

	September 30, 2018		December 31, 2017
Commercial and industrial loans	$	2,287	$	3,275
Agriculture production financing and other loans to farmers	640		1,027
Real estate loans:
Construction	764		65
Commercial and farmland	10,406		12,951
Residential	5,140		9,444
Home equity	1,126		1,928
Individuals' loans for household and other personal expenditures	58		34
Total	$	20,421	$	28,724

Impaired loans include loans deemed impaired according to the guidance set forth in ASC 310-10. Commercial loans under $500,000 and consumer loans, with the exception of troubled debt restructures, are not individually evaluated for impairment.

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 for measuring the amount of impairment is utilized. This method requires obtaining a current independent appraisal of the collateral and applying a discount factor, which includes selling costs if applicable, 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 impaired loans, related allowance and interest income recognized while impaired by loan class as of the periods indicated:

	September 30, 2018
	Unpaid Principal Balance		Recorded Investment		Related Allowance
Impaired loans with no related allowance:
Commercial and industrial loans	$	6,133	$	974
Agriculture production financing and other loans to farmers	660		640
Real estate Loans:
Construction	1,352		614
Commercial and farmland	13,717		11,544
Residential	81		62
Individuals' loans for household and other personal expenditures	8		8
Total	$	21,951	$	13,842
Impaired loans with related allowance:
Real estate Loans:
Residential	$	1,849	$	1,794	$	357
Home equity	382		363		76
Total	$	2,231	$	2,157	$	433
Total Impaired Loans	$	24,182	$	15,999	$	433

	December 31, 2017
	Unpaid Principal Balance		Recorded Investment		Related Allowance
Impaired loans with no related allowance:
Commercial and industrial loans	$	7,611	$	1,536
Agriculture production financing and other loans to farmers	732		700
Real estate Loans:
Commercial and farmland	16,758		15,162
Residential	833		519
Home equity	40		8
Individuals' loans for household and other personal expenditures	5		5
Total	$	25,979	$	17,930
Impaired loans with related allowance:
Commercial and industrial loans	$	812	$	782	$	552
Agriculture production financing and other loans to farmers	357		327		114
Real estate Loans:
Commercial and farmland	2,989		2,270		567
Residential	1,616		1,572		327
Home equity	349		330		77
Total	$	6,123	$	5,281	$	1,637
Total Impaired Loans	$	32,102	$	23,211	$	1,637

	Three Months Ended September 30, 2018				Nine Months Ended September 30, 2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Impaired loans with no related allowance:
Commercial and industrial loans	$	979			$	994
Agriculture production financing and other loans to farmers	640				640
Real estate Loans:
Construction	614				930
Commercial and farmland	12,098		$	40	12,733		$	128
Residential	62		1		63		2
Individuals' loans for household and other personal expenditures	9				10
Total	$	14,402	$	41	$	15,370	$	130
Impaired loans with related allowance:
Real estate Loans:
Residential	$	1,797	$	13	$	1,812	$	37
Home equity	364		3		367		8
Total	$	2,161	$	16	$	2,179	$	45
Total Impaired Loans	$	16,563	$	57	$	17,549	$	175

	Three Months Ended September 30, 2017				Nine Months Ended September 30, 2017
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Impaired loans with no related allowance:
Commercial and industrial loans	$	2,103			$	4,567
Agriculture production financing and other loans to farmers	945				945
Real estate Loans:
Commercial and farmland	14,129		$	89	15,483		$	267
Residential	588				673		2
Home equity	11				16
Individuals' loans for household and other personal expenditures	6				7
Total	$	17,782	$	89	$	21,691	$	269
Impaired loans with related allowance:
Commercial and industrial loans	$	1,796			$	1,796
Agriculture production financing and other loans to farmers	337				337
Real estate Loans:
Commercial and farmland	3,359				3,374
Residential	1,403		$	8	1,395		$	25
Home equity	331		2		334		6
Total	$	7,226	$	10	$	7,236	$	31
Total Impaired Loans	$	25,008	$	99	$	28,927	$	300

Impaired loans in the above tables do not include loans accounted for under ASC 310-30, or any other loan, unless deemed impaired in accordance with ASC 310-10.

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, (iv) covenant failures and (v) 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 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 uncollectable 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-days or more 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.

	September 30, 2018
	Commercial Pass		Commercial Special Mention		Commercial Substandard		Commercial Doubtful	Commercial Loss	Consumer Performing		Consumer Non-Performing		Total
Commercial and industrial loans	$	1,587,560	$	18,085	$	49,924							$	1,655,569
Agriculture production financing and other loans to farmers	68,556		7,144		12,804								88,504
Real estate Loans:
Construction	629,244		2,533		10,200				$	26,494	$	137	668,608
Commercial and farmland	2,551,541		67,043		78,694				2,350		1		2,699,629
Residential	175,315		5,119		2,377				778,086		4,996		965,893
Home equity	25,435		750		387				489,631		1,100		517,303
Individuals' loans for household and other personal expenditures									98,600		109		98,709
Lease financing receivables, net of unearned income	1,830												1,830
Other commercial loans	391,673				353								392,026
Loans	$	5,431,154	$	100,674	$	154,739			$	1,395,161	$	6,343	$	7,088,071

	December 31, 2017
	Commercial Pass		Commercial Special Mention		Commercial Substandard		Commercial Doubtful		Commercial Loss		Consumer Performing		Consumer Non-Performing		Total
Commercial and industrial loans	$	1,418,401	$	51,336	$	23,386	$	370							$	1,493,493
Agriculture production financing and other loans to farmers	73,800		27,502		20,018		387		$	50					121,757
Real estate Loans:
Construction	587,906		828		981						$	22,374	$	130	612,219
Commercial and farmland	2,408,329		70,074		79,769		1,536				2,980		3		2,562,691
Residential	185,725		4,376		4,209		114				759,900		8,441		962,765
Home equity	28,554		457		286						482,661		2,063		514,021
Individuals' loans for household and other personal expenditures											86,875		60		86,935
Lease financing receivables, net of unearned income	2,527														2,527
Other commercial loans	394,222				569										394,791
Loans	$	5,099,464	$	154,573	$	129,218	$	2,407	$	50	$	1,354,790	$	10,697	$	6,751,199

The tables below show a past due aging of the Corporation’s loan portfolio, by loan class, as of September 30, 2018, and December 31, 2017:

	September 30, 2018
	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Non-Accrual		Total Past Due & Non-Accrual		Total
Commercial and industrial loans	$	1,649,538	$	3,344	$	400			$	2,287	$	6,031	$	1,655,569
Agriculture production financing and other loans to farmers	87,864								640		640		88,504
Real estate loans:
Construction	667,142				702				764		1,466		668,608
Commercial and farmland	2,683,494		1,859		3,870				10,406		16,135		2,699,629
Residential	955,383		4,873		497				5,140		10,510		965,893
Home equity	513,936		1,506		735				1,126		3,367		517,303
Individuals' loans for household and other personal expenditures	98,044		394		163		$	50	58		665		98,709
Lease financing receivables, net of unearned income	1,830												1,830
Other commercial loans	392,026												392,026
Loans	$	7,049,257	$	11,976	$	6,367	$	50	$	20,421	$	38,814	$	7,088,071

	December 31, 2017
	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Non-Accrual		Total Past Due & Non-Accrual		Total
Commercial and industrial loans	$	1,487,221	$	2,967	$	30			$	3,275	$	6,272	$	1,493,493
Agriculture production financing and other loans to farmers	120,720		10						1,027		1,037		121,757
Real estate loans:
Construction	610,896		1,193				$	65	65		1,323		612,219
Commercial and farmland	2,542,048		6,923		166		603		12,951		20,643		2,562,691
Residential	948,947		4,010		308		56		9,444		13,818		962,765
Home equity	510,362		1,372		184		175		1,928		3,659		514,021
Individuals' loans for household and other personal expenditures	85,744		298		834		25		34		1,191		86,935
Lease financing receivables, net of unearned income	2,527												2,527
Other commercial loans	394,791												394,791
Loans	$	6,703,256	$	16,773	$	1,522	$	924	$	28,724	$	47,943	$	6,751,199

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 restructures in the Corporation's loan portfolio that occurred during the periods indicated:

	Three Months Ended September 30, 2018					Nine Months Ended September 30, 2018
	Pre-Modification Recorded Balance		Post-Modification Recorded Balance		Number of Loans	Pre-Modification Recorded Balance		Post-Modification Recorded Balance		Number of Loans
Real estate loans:
Residential	$	154	$	140	4	$	490	$	487	11
Home equity	65		65		1	81		81		3
Individuals' loans for household and other personal expenditures						7		8		1
Total	$	219	$	205	5	$	578	$	576	15

	Three Months Ended September 30, 2017					Nine Months Ended September 30, 2017
	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	$	6	$	6	1	$	400	$	176	2
Real estate loans:
Commercial and farmland						357		492		6
Residential	120		122		1	570		520		8
Home equity	68		73		2	190		73		2
Total	$	194	$	201	4	$	1,517	$	1,261	18

The following tables summarize the recorded investment of troubled debt restructures as of September 30, 2018 and 2017, by modification type, that occurred during the periods indicated:

	Three Months Ended September 30, 2018
	Term Modification	Rate Modification		Combination		Total Modification
Real estate loans:
Residential		$	47	$	93	$	140
Home equity		65				65
Total		$	112	$	93	$	205

	Nine Months Ended September 30, 2018
	Term Modification		Rate Modification		Combination		Total Modification
Real estate loans:
Residential			$	208	$	239	$	447
Home Equity	$	77	76				153
Individuals' loans for household and other personal expenditures			6				6
Total	$	77	$	290	$	239	$	606

	Three Months Ended September 30, 2017
	Term Modification		Rate Modification		Combination	Total Modification
Commercial and industrial loans	$	5				$	5
Real estate loans:
Residential			$	122		122
Home equity			73			73
Total	$	5	$	195		$	200

	Nine Months Ended September 30, 2017
	Term Modification		Rate Modification		Combination		Total Modification
Commercial and industrial loans	$	5			$	168	$	173
Real estate loans:
Commercial and farmland	41		$	61	232		334
Residential			466		42		508
Home equity			73				73
Total	$	46	$	600	$	442	$	1,088

Loans secured by residential real estate made up 100 percent of the post-modification balance of troubled debt restructured loans made in the three months ended September 30, 2018. The same loan classification made up 99 percent of the post-modification balance of troubled debt restructured loans made in the nine months ended September 30, 2018.

The following tables summarize troubled debt restructures that occurred during the twelve months ended September 30, 2018 that subsequently defaulted during the period indicated and remained in default at period end. There were no troubled debt restructures that occurred during the twelve months ended September 30, 2017 that subsequently defaulted during the three and nine month periods ended September 30, 2017 and remained in default at September 30, 2017. A loan is considered in default if it is 30 or more days past due.

	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
	Number of Loans	Recorded Balance		Number of Loans	Recorded Balance
Real estate loans:
Commercial and farmland	1	$	262	1	$	262
Residential	2	83		4	152
Individuals' loans for household and other personal expenditures	1	11		1	11
Total	4	$	356	6	$	425

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 loan restructures are generally included in the general historical allowance for loan loss at the post modification balance. Consumer non-accrual and delinquent troubled debt loan restructures 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 $1,045,000 and$2,302,000 at September 30, 2018 and December 31, 2017, 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 troubled debt loan restructures 30 - 89 days delinquent are included in the calculation of the delinquency trend environmental allocation in the allowance for loan losses. With the exception of the acquired loans excluded from the allowance for loan losses, all commercial non-impaired loans, including non-accrual and 90-days or more delinquent, are included in the ASC 450 loss estimate.

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Purchased Credit Impaired Loans

9 Months Ended

Sep. 30, 2018

Receivables [Abstract]

Purchased Credit Impaired Loans

PURCHASED CREDIT IMPAIRED LOANS

Purchased Credit Impaired Loans 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, purchased loans 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 difference. 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.

The carrying amount of Purchased Credit Impaired Loans as of September 30, 2018 and December 31, 2017 was $20.6 million and $25.3 million, respectively; with no required allowance for loan losses. 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, are identified in the table below.

	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
Beginning balance	$	2,423		$	2,890
Additions
Accretion	(1,004		)	(2,441		)
Reclassification from nonaccretable	798			1,768
Disposals	(16		)	(16		)
Ending balance	$	2,201		$	2,201

	Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017
Beginning balance	$	2,607		$	3,951
Additions	941			1,608
Accretion	(686		)	(5,082		)
Reclassification from nonaccretable	449			3,501
Disposals				(667		)
Ending balance	$	3,311		$	3,311

The following table presents loans acquired, as of the respective acquisition date, during the nine months ended September 30, 2017, for which it was probable that all contractually required payments would not be collected. There were no loans acquired during the nine months ended September 30, 2018.

	IAB		Arlington Bank
Contractually required payments receivable at acquisition date	$	14,131	$	6,183
Nonaccretable difference	8,352		2,891
Expected cash flows at acquisition date	5,779		3,292
Accretable difference	941		667
Basis in loans at acquisition date	$	4,838	$	2,625

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Goodwill

9 Months Ended

Sep. 30, 2018

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 IAB acquisition on July, 14, 2017 resulted in $153,636,000 of goodwill. The Arlington Bank acquisition on May 19, 2017 resulted in $47,719,000 of goodwill, which includes a reduction of $469,000. This reduction was recorded in the third quarter of 2017 as a measurement period adjustment. Details regarding the IAB and Arlington Bank acquisitions are discussed in NOTE 2. ACQUISITIONS of these Notes to Consolidated Condensed Financial Statements. There have been no changes in goodwill since December 31, 2017, resulting in a goodwill balance of $445,355,000 as of September 30, 2018.

	2017
Balance, January 1	$	244,000
Goodwill acquired	201,824
Measurement period adjustment	(469		)
Balance, December 31	$	445,355

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Other Intangibles

9 Months Ended

Sep. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Other Intangibles

OTHER INTANGIBLES

Core deposit intangibles and other intangibles are recorded on the acquisition date of an entity. During the measurement period, the Corporation may record subsequent adjustments to these intangibles for provisional amounts recorded at the acquisition date. The IAB acquisition on July 14, 2017 resulted in a core deposit intangible of $13,638,000 and other intangibles, consisting of non-compete intangibles, of $3,765,000. The Arlington Bank acquisition on May 19, 2017 resulted in a core deposit intangible of $4,526,000. Details regarding the IAB and Arlington Bank acquisitions are discussed in NOTE 2. ACQUISITIONS of these Notes to Consolidated Condensed Financial Statements.

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

	September 30, 2018			December 31, 2017
Gross carrying amount	$	85,869		$	63,940
Core deposit intangibles acquired				18,164
Other intangibles acquired				3,765
Accumulated amortization	(59,815		)	(54,721		)
Total other intangibles	$	26,054		$	31,148

The core deposit intangibles and other intangibles are being amortized primarily on an accelerated basis over their estimated useful lives, generally over a period of two to ten years. Estimated future amortization expense is summarized as follows:

	Amortization Expense
2018	$	1,625
2019	5,169
2020	3,632
2021	3,427
2022	3,325
After 2022	8,876
	$	26,054

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Derivative Financial Instruments

9 Months Ended

Sep. 30, 2018

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 September 30, 2018, the Corporation had four interest rate swaps with a notional amount of $46.0 million and one interest rate cap with a notional amount of $13.0 million that were designated as cash flow hedges. As of December 31, 2017, 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. A $10.0 million interest rate swap used to hedge the variable cash outflows associated with a Federal Home Loan Bank advance matured in the third quarter of 2018.

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 earnings in the period that the hedged forecasted transaction affects earnings.

During 2018, $26.0 million of the interest rate swaps and the $13.0 million interest rate cap were used to hedge the variable cash outflows (LIBOR-based) 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 $20.0 million of interest rate swaps were used to hedge the variable cash outflows (LIBOR-based) associated with two Federal Home Loan Bank advances. During the three and nine months ended September 30, 2018, and 2017, the Corporation did not recognize any ineffectiveness.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Corporation's variable-rate liabilities. During the next twelve months, the Corporation expects to reclassify $249,000 from accumulated other comprehensive income to interest expense.

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 September 30, 2018, the notional amount of customer-facing swaps was approximately $420,388,000.  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 September 30, 2018, and December 31, 2017.

Asset Derivatives

Liability Derivatives

September 30, 2018

December 31, 2017

September 30, 2018

December 31, 2017

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

$

548

Other Assets

$

18

Other Liabilities

$

387

Other Liabilities

$

1,383

Derivatives not designated as hedging instruments:

Interest rate contracts

Other Assets

$

13,763

Other Assets

$

7,305

Other Liabilities

$

13,763

Other Liabilities

$

7,305

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					Nine Months Ended
	September 30, 2018		September 30, 2017			September 30, 2018		September 30, 2017
Interest Rate Products	$	210	$	(10	)	$	1,009	$	(380	)

Effect of Derivative Instruments on the Income Statement

The Corporation did not recognize any gains or losses from derivative financial instruments in the Consolidated Condensed Statements of Income for the three and nine months ended September 30, 2018 and 2017.

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 September 30, 2018			Three Months Ended September 30, 2017
Interest rate contracts	Interest Expense	$	(93	)	$	(240	)

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)
		Nine Months Ended September 30, 2018			Nine Months Ended September 30, 2017
Interest rate contracts	Interest Expense	$	(368	)	$	(759	)

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 Corporation’s control of such risk is through quarterly financial reviews, comparing mark-to-market values with policy limitations, credit ratings and collateral pledging.

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. Additionally, the Corporation 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, then the Corporation could also be declared in default on its derivative obligations. As of September 30, 2018, the termination value of derivatives in a net liability position related to these agreements was $394,000. As of September 30, 2018, the Corporation has minimum collateral posting thresholds with certain of its derivative counterparties and has posted collateral of $3,315,000. If the Corporation had breached any of these provisions at September 30, 2018, 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

9 Months Ended

Sep. 30, 2018

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

Assets and liabilities are considered to be measured at fair value on a recurring basis if fair value is measured regularly (i.e., daily, weekly, monthly or quarterly). Recurring valuation occurs at a minimum on the measurement date. Assets and liabilities are considered to be measured at fair value on a nonrecurring basis if the fair value measurement of the instrument does not necessarily result in a change in the amount recorded on the balance sheet. Generally, nonrecurring valuation is the result of the application of other accounting pronouncements which require assets or liabilities to be assessed for impairment or recorded at the lower of cost or fair value. The fair value of assets or liabilities transferred in or out of Level 3 is measured on the transfer date, with any additional changes in fair value subsequent to the transfer considered to be realized or unrealized gains or losses.

Following is a description of the valuation methodologies 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.

Investment Securities

Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. The Corporation currently has no securities classified within Level 1 of the hierarchy. Where significant observable inputs, other than Level 1 quoted prices, are available, securities are classified within Level 2 of the valuation hierarchy. Level 2 securities include government-sponsored agency and mortgage backs and state and municipal securities. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy and include state and municipal, government-sponsored mortgage backs and corporate obligations securities. Level 3 fair value for 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 (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 of these Notes to Consolidated Condensed Financial Statements. The following table presents the fair value measurements of assets and liabilities recognized in the accompanying balance sheets measured at fair value on a recurring basis and the level within the ASC 820-10 fair value hierarchy in which the fair value measurements fall at September 30, 2018, and December 31, 2017.

			Fair Value Measurements Using:
September 30, 2018	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	$	18,358		$	18,358
State and municipal	600,168			596,888		$	3,280
U.S. Government-sponsored mortgage-backed securities	530,605			530,601		4
Corporate obligations	31					31
Interest rate swap asset	13,763			13,763
Interest rate cap	548			548
Interest rate swap liability	14,150			14,150

			Fair Value Measurements Using:
December 31, 2017	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:
State and municipal	$	526,693		$	522,750	$	3,943
U.S. Government-sponsored mortgage-backed securities	470,866			470,866
Corporate obligations	31					31
Equity securities	2,357			2,353		4
Interest rate swap asset	7,305			7,305
Interest rate cap	18			18
Interest rate swap liability	8,688			8,688

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 nine months ended September 30, 2018 and 2017.

	Available for Sale Securities
	Three Months Ended						Nine Months Ended
	September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
Balance at beginning of the period	$	3,970		$	3,330		$	3,978		$	5,169
Included in other comprehensive income	(35		)	(22		)	(59		)	38
Principal payments	(620		)	679			(604		)	(1,220		)
Ending balance	$	3,315		$	3,987		$	3,315		$	3,987

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 September 30, 2018 or December 31, 2017.

Transfers Between Levels

There were no transfers in or out of Level 3 for the three and nine months ended September 30, 2018 and 2017.

Nonrecurring Measurements

Following is a description of valuation methodologies used for instruments measured at fair value on a non-recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such instruments pursuant to the valuation hierarchy for September 30, 2018, and December 31, 2017.

			Fair Value Measurements Using
September 30, 2018	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)	$	5,344			$	5,344
Other real estate owned	937				937

			Fair Value Measurements Using
December 31, 2017	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)	$	9,576			$	9,576
Other real estate owned	859				859

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 2017 and 2018, 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 discounted 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 September 30, 2018 and December 31, 2017.

September 30, 2018	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted-Average)
State and municipal securities	$	3,280	Discounted cash flow	Maturity/Call date	1 month to 20 yrs
				US Muni BQ curve	A- to BBB-
				Discount rate	1% - 5%
Corporate obligations and U.S. Government-sponsored mortgage backed securities	$	35	Discounted cash flow	Risk free rate	3 month LIBOR
				plus premium for illiquidity	plus 200bps
Impaired loans (collateral dependent)	$	5,344	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability	0% - 10% (2%)
Other real estate owned	$	937	Appraisals	Discount to reflect current market conditions	0% - 24% (3%)

December 31, 2017	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted-Average)
State and municipal securities	$	3,943	Discounted cash flow	Maturity/Call date	1 month to 20 yrs
				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)	$	9,576	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability	0% - 10% (1%)
Other real estate owned	$	859	Appraisals	Discount to reflect current market conditions	0% - 10% (2%)

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, U.S. Government-sponsored Mortgage Backed Securities

The significant unobservable inputs used in the fair value measurement of the Corporation's state and municipal securities, corporate obligations and U.S. Government-sponsored mortgage backed 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. Generally, changes in either of those inputs will not affect the other input.

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 September 30, 2018, and December 31, 2017.

			September 30, 2018
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Carrying Amount		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	142,501	$	142,501
Interest-bearing time deposits	66,763		66,763
Investment securities available for sale	1,149,162				$	1,145,847	$	3,315
Investment securities held to maturity	476,089				458,087		10,365
Loans held for sale	3,022				3,022
Loans	7,009,665						6,793,227
Federal Home Loan Bank stock	24,588				24,588
Interest rate swap and cap asset	14,311				14,311
Interest receivable	38,531				38,531
Liabilities:
Deposits	$	7,633,152	$	6,083,491	$	1,522,591
Borrowings:
Federal funds purchased	90,000				90,000
Securities sold under repurchase agreements	118,824				118,696
Federal Home Loan Bank advances	385,458				379,309
Subordinated debentures and term loans	138,408				124,806
Interest rate swap liability	14,150				14,150
Interest payable	5,920				5,920

			December 31, 2017
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Carrying Amount		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	154,905	$	154,905
Interest-bearing time deposits	35,027		35,027
Investment securities available for sale	999,947				$	995,969	$	3,978
Investment securities held to maturity	560,655				556,305		11,903
Loans held for sale	7,216				7,216
Loans	6,676,167						6,534,877
Federal Home Loan Bank stock	23,825				23,825
Interest rate swap and cap asset	7,323				7,323
Interest receivable	37,130				37,130
Liabilities:
Deposits	$	7,172,530	$	5,741,019	$	1,406,526
Borrowings:
Federal funds purchased	144,038				144,038
Securities sold under repurchase agreements	136,623				136,562
Federal Home Loan Bank advances	414,377				361,085
Subordinated debentures and term loans	139,349				120,085
Interest rate swap liability	8,688				8,688
Interest payable	4,390				4,390

The methods utilized to estimate the fair value of financial instruments at December 31, 2017 did not necessarily represent an exit price. In accordance with the Corporation's adoption of ASU 2016-01 as of January 1, 2018, the methods utilized to measure the fair value of financial instruments at September 30, 2018 represent an approximation of exit price; however, an actual exit price may differ.

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Transfers Accounted for as Secured Borrowings

9 Months Ended

Sep. 30, 2018

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 September 30, 2018 and December 31, 2017 were:

	September 30, 2018
	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	$	109,695		$	1,514	$	7,615	$	118,824

	December 31, 2017
	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	$	126,187	$	1,340	$	1,500	$	7,596	$	136,623

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Accumulated Other Comprehensive Income (Loss)

9 Months Ended

Sep. 30, 2018

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 September 30, 2018 and 2017:

	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, 2017	$	8,970		$	(1,125	)	$	(10,753	)	$	(2,908	)
Other comprehensive income before reclassifications	(30,032		)	1,039						(28,993		)
Amounts reclassified from accumulated other comprehensive income	(3,173		)	291						(2,882		)
Period change	(33,205		)	1,330			—			(31,875		)
Reclassification adjustment under ASU 2018-02	1,932			(242		)	(2,316		)	(626		)
Balance at September 30, 2018	$	(22,303	)	$	(37	)	$	(13,069	)	$	(35,409	)
Balance at December 31, 2016	$	1,035		$	(1,774	)	$	(12,842	)	$	(13,581	)
Other comprehensive income before reclassifications	8,124			(246		)				7,878
Amounts reclassified from accumulated other comprehensive income	(973		)	493			(175		)	(655		)
Period change	7,151			247			(175		)	7,223
Balance at September 30, 2017	$	8,186		$	(1,527	)	$	(13,017	)	$	(6,358	)

The following tables present 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 nine months ended September 30, 2018 and 2017.

	Amount Reclassified from Accumulated Other Comprehensive Income (Loss) For the Three Months Ended September 30,
Details about Accumulated Other Comprehensive Income (Loss) Components	2018			2017			Affected Line Item in the Statements of Income
Unrealized gains (losses) on available for sale securities (1)
Realized securities gains reclassified into income	$	1,285		$	332		Other income - net realized gains on sales of available for sale securities
Related income tax expense	(270		)	(116		)	Income tax expense
	$	1,015		$	216
Unrealized gains (losses) on cash flow hedges (2)
Interest rate contracts	$	(93	)	$	(240	)	Interest expense - subordinated debentures and term loans
Related income tax benefit	20			84			Income tax expense
	$	(73	)	$	(156	)
Unrealized gains (losses) on defined benefit plans
Amortization of prior service costs				$	89		Other expenses - salaries and employee benefits
Related income tax expense				(31		)	Income tax expense
	$	—		$	58
Total reclassifications for the period, net of tax	$	942		$	118

	Amount Reclassified from Accumulated Other Comprehensive Income (Loss) For the Nine Months Ended September 30,
Details about Accumulated Other Comprehensive Income (Loss) Components	2018			2017			Affected Line Item in the Statements of Income
Unrealized gains (losses) on available for sale securities (1)
Realized securities gains reclassified into income	$	4,016		$	1,497		Other income - net realized gains on sales of available for sale securities
Related income tax expense	(843		)	(524		)	Income tax expense
	$	3,173		$	973
Unrealized gains (losses) on cash flow hedges (2)
Interest rate contracts	$	(368	)	$	(759	)	Interest expense - subordinated debentures and term loans
Related income tax benefit	77			266			Income tax expense
	$	(291	)	$	(493	)
Unrealized gains (losses) on defined benefit plans
Amortization of net loss and prior service costs				$	269		Other expenses - salaries and employee benefits
Related income tax expense				(94		)	Income tax expense
	$	—		$	175
Total reclassifications for the period, net of tax	$	2,882		$	655

⁽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 of these Notes to Consolidated Condensed Financial Statements.

⁽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 of these Notes to Consolidated Condensed Financial Statements.

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Share-Based Compensation

9 Months Ended

Sep. 30, 2018

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

Share-Based Compensation

SHARE-BASED COMPENSATION

Stock options and 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 based on time 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. The 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. The 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 ("DSU") 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 September 30, 2018, there were no outstanding DSUs.

The Corporation’s 2009 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 nine months ended September 30, 2018 was $894,000 and $2,546,000, respectively, compared to $823,000 and $1,884,000, respectively, for the three and nine months ended September 30, 2017. Share-based compensation has been recognized as a component of salaries and benefits expense in the accompanying Consolidated Condensed Statements of Income.

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 2.2 percent for the nine months ended September 30, 2018, based on historical experience.

The following table summarizes the components of the Corporation's share-based compensation awards recorded as expense and the income tax benefit of such awards.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Stock and ESPP Options
Pre-tax compensation expense	$	39		$	23		$	88		$	93
Income tax benefit	(15		)	(9		)	(153		)	(313		)
Stock and ESPP option expense, net of income taxes	$	24		$	14		$	(65	)	$	(220	)
Restricted Stock Awards
Pre-tax compensation expense	$	855		$	800		$	2,458		$	1,791
Income tax benefit	(205		)	(280		)	(952		)	(1,160		)
Restricted stock awards expense, net of income taxes	$	650		$	520		$	1,506		$	631
Total Share-Based Compensation
Pre-tax compensation expense	$	894		$	823		$	2,546		$	1,884
Income tax benefit	(220		)	(289		)	(1,105		)	(1,473		)
Total share-based compensation expense, net of income taxes	$	674		$	534		$	1,441		$	411

As of September 30, 2018, unrecognized compensation expense related to RSAs was $8,480,000 and is expected to be recognized over a weighted-average period of 1.68 years. The Corporation did not have any unrecognized compensation expense related to stock options as of September 30, 2018.

Stock option activity under the Corporation's stock option plans as of September 30, 2018 and changes during the nine months ended September 30, 2018, were as follows:

	Number of Shares		Weighted-Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value
Outstanding at January 1, 2018	152,652		$	16.71
Exercised	(51,243	)	$	21.33
Cancelled	(200	)	$	28.25
Outstanding September 30, 2018	101,209		$	14.34	2.41	$	3,101,835
Vested and Expected to Vest at September 30, 2018	101,209		$	14.34	2.41	$	3,101,835
Exercisable at September 30, 2018	101,209		$	14.34	2.41	$	3,101,835

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 nine months of 2018 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 September 30, 2018.  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 nine months ended September 30, 2018 and 2017 was $1,203,000 and $1,675,000, respectively. Cash receipts of stock options exercised during this same period were $1,093,000 and $2,323,000, respectively.

The following table summarizes information on unvested RSAs outstanding as of September 30, 2018:

	Number of Shares		Weighted-Average Grant Date Fair Value
Unvested RSAs at January 1, 2018	366,993		$	29.79
Granted	105,100		$	48.11
Vested	(106,797	)	$	23.74
Forfeited	(5,560	)	$	38.31
Unvested RSAs at September 30, 2018	359,736		$	36.82

The grant date fair value of ESPP options was estimated at the beginning of the July 1, 2018 quarterly offering period of approximately $39,424. The ESPP options vested during the three months ending September 30, 2018, leaving no unrecognized compensation expense related to unvested ESPP options at September 30, 2018.

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Income Tax

9 Months Ended

Sep. 30, 2018

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 nine months ended September 30, 2018 and 2017:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Reconciliation of Federal Statutory to Actual Tax Expense:
Federal statutory income tax at 21% for 2018 and 35% for 2017	$	10,414		$	11,304		$	29,500		$	32,900
Tax-exempt interest income	(2,118		)	(2,881		)	(6,178		)	(8,062		)
Share-based compensation	(38		)	(78		)	(570		)	(862		)
Tax-exempt earnings and gains on life insurance	(197		)	(551		)	(655		)	(1,905		)
Tax credits	(42		)	(61		)	(65		)	(249		)
Other	459			206			1,018			492
Actual Tax Expense	$	8,478		$	7,939		$	23,050		$	22,314
Effective Tax Rate	17.1		%	24.6		%	16.4		%	23.7		%

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Net Income Per Share

9 Months Ended

Sep. 30, 2018

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 the weighted-average shares outstanding during the reporting period and all potentially dilutive common shares. Potentially dilutive common shares include stock options and RSAs issued under the Corporation's share-based compensation plans. Potentially dilutive common shares are excluded from the computation of diluted earnings per share in the periods where the effect would be antidilutive.

The following table reconciles basic and diluted net income per share for the three and nine months ended September 30, 2018 and 2017.

	Three Months Ended September 30,
	2018					2017
	Net Income		Weighted-Average Shares	Per Share Amount		Net Income		Weighted-Average Shares	Per Share Amount
Net income available to common stockholders	$	41,113	49,286,945	$	0.83	$	24,358	48,431,880	$	0.50
Effect of potentially dilutive stock options and restricted stock awards			205,074					211,894
Diluted net income per share	$	41,113	49,492,019	$	0.83	$	24,358	48,643,774	$	0.50

	Nine Months Ended September 30,
	2018					2017
	Net Income		Weighted-Average Shares	Per Share Amount		Net Income		Weighted-Average Shares	Per Share Amount
Net income available to common stockholders	$	117,426	49,244,403	$	2.38	$	71,687	43,845,675	$	1.64
Effect of potentially dilutive stock options and restricted stock awards			213,782					217,544
Diluted net income per share	$	117,426	49,458,185	$	2.37	$	71,687	44,063,219	$	1.63

For the three and nine months ended September 30, 2018 and 2017, there were no stock options with an option price greater than the average market price of the common shares.

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Impact of Accounting Changes

9 Months Ended

Sep. 30, 2018

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 Updates No. 2018-14 - Compensation - Retirement Benefits -Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans

Summary - The FASB has issued ASU No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans, that applies to all employers that sponsor defined benefit pension or other postretirement plans. The amendments modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.

Disclosure Requirements Deleted

*The amounts in AOCI expected to be recognized as components of net periodic benefit cost over the next fiscal year.

*The amount and timing of plan assets expected to be returned to the employer.

*Related party disclosures about the amount of future annual benefits covered by insurance and annuity contracts and significant transactions between the employer or related parties and the plan.

*For public entities, the effects of a one-percentage-point change in assumed health care cost trend rates on the (a) aggregate of the service and interest cost components of net periodic benefit costs and (b) benefit obligation for postretirement health care benefits.

Disclosure Requirements Added

*The weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates.

*An explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period.

The amendments also clarify the disclosure requirements in paragraph 715-20-50-3, which state that the following information for defined benefit pension plans should be disclosed:

*The projected benefit obligation (PBO) and fair value of plan assets for plans with PBOs in excess of plan assets.

*The accumulated benefit obligation (ABO) and fair value of plan assets for plans with ABOs in excess of plan assets.

ASU No. 2018-14 is effective for fiscal years ending after December 15, 2020, for public business entities and for fiscal years ending after December 15, 2021, for all other entities. Early adoption is permitted for all entities. The Corporation plans to adopt the standard in the first quarter of 2020, but adoption of the standard is not expected to have a significant impact on the Corporation’s disclosures.

FASB Accounting Standards Updates No. 2018-13 - Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement

Summary - The FASB has issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU No. 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820. Certain disclosure requirements related to transfers between Level 1 and Level 2 of the fair value hierarchy and Level 3 valuation processes were removed from Topic 820. Disclosures were also added to Topic 820 for changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.

In addition, the amendments eliminate at a minimum from the phrase “an entity shall disclose at a minimum” to promote the appropriate exercise of discretion by entities when considering fair value measurement disclosures and to clarify that materiality is an appropriate consideration of entities and their auditors when evaluating disclosure requirements.

The amendments in ASU No. 2018-13 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance of ASU No. 2018-13 and delay adoption of the additional disclosures until their effective date. The Corporation plans to adopt the standard in the first quarter of 2020, but adoption of the standard is not expected to have a significant impact on the Corporation’s disclosures.

FASB Accounting Standards Updates No. 2018-11 -Leases (Topic 842): Targeted Improvements

Summary - The FASB has issued Accounting Standards Update (ASU) No. 2018-11, Leases (Topic 842): Targeted Improvements. This ASU is intended to reduce costs and ease implementation of the leases standard for financial statement preparers. ASU 2018-11 provides a new transition method and a practical expedient for separating components of a contract.

The amendments ASU 2018-11 provide entities with an additional (and optional) transition method to adopt the new leases standard. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption consistent with preparers’ requests. Consequently, an entity’s reporting for the comparative periods presented in the financial statements in which it adopts the new leases standard will continue to be in accordance with current GAAP in Topic 840, Leases.

An entity that elects this additional (and optional) transition method must provide the required Topic 840 disclosures for all periods that continue to be in accordance with Topic 840. The amendments do not change the existing disclosure requirements in Topic 840 (for example, they do not create interim disclosure requirements that entities previously were not required to provide).

The amendments in ASU 2018-11 provide lessors with a practical expedient, by class of underlying asset, to not separate nonlease components from the associated lease component and, instead, to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue guidance (Topic 606) and both of the following are met:

*The timing and pattern of transfer of the nonlease component(s) and associated lease component are the same.

*The lease component, if accounted for separately, would be classified as an operating lease.

An entity electing this practical expedient (including an entity that accounts for the combined component entirely in Topic 606) is required to disclose certain information, by class of underlying asset, as specified in the ASU.

The amendments in ASU 2018-11 related to separating components of a contract affect the amendments in ASU No. 2016-02, which are not yet effective but can be early adopted. For entities that have not adopted Topic 842 before the issuance of this ASU, the effective date and transition requirements for the amendments in this update related to separating components of a contract are the same as the effective date and transition requirements in ASU 2016-02.

All entities, including early adopters, that elect the practical expedient related to separating components of a contract in this ASU must apply the expedient, by class of underlying asset, to all existing lease transactions that qualify for the expedient at the date elected. The Corporation plans to adopt this ASU in the first quarter of 2019 and is currently evaluating all practical expedient options.

FASB Accounting Standards Update No. 2018-07 - Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting

Summary - The FASB has issued an Accounting Standards Update (ASU) intended to reduce cost and complexity and to improve financial reporting for nonemployee share-based payments.

The ASU expands the scope of Topic 718, Compensation-Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. The ASU supersedes Subtopic 505-50, Equity-Equity-Based Payments to Non-Employees.

The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. For all other companies, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than a Corporation's adoption date of Topic 606, Revenue from Contracts with Customers. The Corporation plans to adopt the standard in the first quarter of 2019, but adoption of the standard is not expected to have a significant effect on the Corporation’s consolidated financial statements.

FASB Accounting Standards Update No. 2017-08 - Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities

Summary - The FASB has issued Accounting Standards Update (ASU) No. 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The ASU shortens the amortization period for certain callable debt securities held at a premium to the earliest call date.

Under current GAAP, entities normally amortize the premium as an adjustment of yield over the contractual life of the instrument. Stakeholders have expressed concerns with the current approach on the basis that current GAAP excludes certain callable debt securities from consideration of early repayment of principal even if the holder is certain that the call will be exercised. As a result, upon the exercise of a call on a callable debt security held at a premium, the unamortized premium is recorded as a loss in earnings. Further, there is diversity in practice (1) in the amortization period for premiums of callable debt securities, and (2) in how the potential for exercise of a call is factored into current impairment assessments. Another issue is that the practice in the United States is to quote, price, and trade callable debt securities assuming a model that incorporates consideration of calls (also referred to as “yield-to-worst” pricing).

The ASU shortens the amortization period for certain callable debt securities held at a premium and requires the premium to be amortized to the earliest call date. However, the amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity.

The amendments are effective for public business entities for annual periods beginning after December 15, 2018, including interim periods within those annual periods. For other entities, the amendments are effective for annual periods beginning after December 15, 2019, and interim periods within annual periods beginning after December 15, 2020. Early adoption is permitted.

Entities are required to apply the amendments on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The entity is required to provide disclosures about a change in accounting principle in the period of adoption. The Corporation plans to adopt ASU 2017-08 in the first quarter of 2019. Adoption of this ASU is not expected to have a significant effect on the Corporation’s consolidated 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. This new guidance was issued to address concerns that current generally accepted accounting principles (GAAP) restricts the ability to record credit losses that are expected, but do not yet meet the “probable” threshold by replacing the current “incurred loss” model for recognizing credit losses with an “expected life of loan loss” model referred to as the Current Expected Credit Loss (CECL) model.

Under the CECL model, certain financial assets carried at amortized cost, such as loans held for investment and held-to-maturity debt securities, are required to be presented at the net amount expected to be collected. The measurement of expected credit losses is to be based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This measurement will take place at the time the financial asset is first added to the balance sheet and periodically thereafter. This differs significantly from the “incurred loss” model required under current GAAP, which delays recognition until it is probable a loss has been incurred. The change could materially affect how the allowance for loan losses is determined and cause a charge to earnings through the provision for loan losses. Such would adversely affect the financial condition of the Corporation.

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). 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 plans to adopt this ASU in the first quarter of 2020.

The Corporation expects a one-time cumulative-effect adjustment to the allowance for loan losses will be recognized in retained earnings on the consolidated balance sheet as of the beginning of the first reporting period in which the new standard is effective, as is consistent with regulatory expectations set forth in interagency guidance issued at the end of 2016. The Corporation established an implementation team that meets on a regular basis to oversee activities and monitor progress. Third party software is being implemented and model development is in progress. The magnitude of any such adjustment or the overall impact of the new standard on the financial condition or results of operations cannot yet be determined.

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). Nonpublic business entities should apply the amendments for fiscal years beginning after December 15, 2019 (i.e., January 1, 2020, for a calendar year entity), and interim periods within fiscal years beginning after December 15, 2020. 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 plans to adopt this ASU in the first quarter of 2019. The Corporation has an implementation team working through the provisions of ASU 2016-02, including a review of all leases (primarily operating leases related to banking centers and office space) to assess the impact on accounting, disclosures and the election of certain practical expedients. The Corporation has selected and is implementing a third party software solution to assist with the accounting under the new standard.  Based upon leases outstanding at September 30, 2018, the Corporation anticipates the balance sheet impact of implementation in the first quarter of 2019 to be a one-time increase to other assets and other liabilities of approximately $25 million, but does not expect the impact to the income statement or regulatory capital ratios to be material.  Decisions to enter into new leases and renew or modify existing leases prior to the implementation date could impact these estimates.

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General Litigation and Regulatory Examinations

9 Months Ended

Sep. 30, 2018

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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Consummation of Merger

9 Months Ended

Sep. 30, 2018

Business Combinations [Abstract]

Consummation of Merger

ACQUISITIONS

Independent Alliance Banks, Inc.

On November 21, 2016, the Corporation purchased 495,112 shares, or 12.1 percent, of IAB's outstanding common stock from an IAB shareholder for $19.8 million, or $40.00 per share. On July 14, 2017, the Corporation acquired the remaining shares of IAB common stock. IAB, an Indiana Corporation, merged with and into the Corporation, whereupon the separate corporate existence of IAB ceased and the Corporation survived. Immediately following the merger, IAB's wholly-owned subsidiary, iAB Financial Bank, merged with and into the Bank, with the Bank continuing as the surviving bank.

IAB was headquartered in Fort Wayne, Indiana and had 16 banking centers serving the Fort Wayne market. Pursuant to the merger agreement, each IAB shareholder received 1.653 shares of the Corporation's common stock for each outstanding share of IAB common stock held. The Corporation issued approximately 6.0 million shares of common stock. The transaction value for the remaining shares of common stock, not owned by the Corporation, was approximately $238.8 million, resulting in a total purchase price of $258.6 million. The Corporation engaged in this transaction with the expectation that it would be accretive to income and add a new market area with a demographic profile consistent with many of the current Indiana markets served by the Bank. Goodwill resulted from this transaction due to the expected synergies and economies of scale.

In the third quarter of 2017, ASC 805-10 - Business Combinations, required the Corporation to remeasure the 12.1 percent equity interest in IAB's common stock and recognize the resulting gain or loss, if any, in earnings. The remeasurement was based upon the closing price of IAB's common stock immediately prior to the acquisition announcement, and prior to the Corporation obtaining control of IAB. The trading price of IAB's common stock subsequent to the acquisition announcement included a control or acquisition premium and was not indicative of the fair value of the Corporation's pre-existing equity interest immediately prior to the acquisition announcement. The fair value of the equity interest in IAB's common stock after the remeasurement was $19.8 million. The Corporation recorded a $50,000 loss in the third quarter of 2017 as a result of the remeasurement.

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 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 IAB acquisition is detailed in the following table.

	Fair Value
Cash and cash equivalents	$	6,016
Interest-bearing time deposits	248,212
Investment securities	4,078
Loans held for sale	594
Loans	725,382
Premises and equipment	10,107
Federal Home Loan Bank stock	4,810
Interest receivable	3,445
Cash surrender value of life insurance	26,964
Other assets	11,780
Deposits	(862,271		)
Securities sold under repurchase agreements	(17,915		)
Federal Home Loan Bank Advances	(47,575		)
Subordinated debentures	(10,583		)
Interest payable	(1,005		)
Other liabilities	(14,472		)
Net tangible assets acquired	87,567
Other Intangible assets	17,403
Goodwill	153,636
Purchase price	$	258,606

Of the total purchase price, $17,403,000 has been allocated to other intangible assets. Approximately $13.6 million was allocated to a core deposit intangible, which will be amortized over its estimated life of 10 years. Approximately $3.8 million was allocated to a non-compete intangible, which will be amortized over its estimated life of 2 years. The remaining purchase price was allocated to goodwill, which is not deductible for tax purposes.

Acquired loan data for IAB can be found in the table below:

	Fair Value of Acquired Loans at Acquisition Date		Gross Contractual Amounts Receivable at Acquisition Date		Best Estimate at Acquisition Date of Contractual Cash Flows Not Expected to be Collected
Acquired receivables subject to ASC 310-30	$	4,838	$	14,131	$	8,352
Acquired receivables not subject to ASC 310-30	$	720,544	$	864,613	$	9,786

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 difference. 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.

The Arlington Bank

On May 19, 2017, the Corporation acquired 100 percent of Arlington Bank. Arlington Bank, an Ohio savings bank, merged with and into the Bank, with the Bank continuing as the surviving bank. Arlington Bank was headquartered in Columbus, Ohio and had 3 banking centers serving the Columbus, Ohio market. Pursuant to the merger agreement, each Arlington Bank shareholder received 2.7245 shares of the Corporation's common stock for each outstanding share of Arlington Bank common stock held. The Corporation issued approximately 2.1 million shares of common stock, which was valued at approximately $82.6 million. The Corporation engaged in this transaction with the expectation that it would be accretive to income and expand the existing footprint in Columbus, Ohio. Goodwill resulted from this transaction due to the expected synergies and economies of scale.

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 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 Arlington Bank acquisition is detailed in the following table.

	Fair Value
Cash and cash equivalents	$	48,532
Interest-bearing time deposits	292
Loans held for sale	7,626
Loans	224,680
Premises and equipment	1,986
Federal Home Loan Bank stock	1,091
Interest receivable	653
Other assets	1,620
Deposits	(252,783		)
Interest payable	(244		)
Other liabilities	(3,106		)
Net tangible assets acquired	30,347
Core deposit intangible	4,526
Goodwill	47,719
Purchase price	$	82,592

Of the total purchase price, $4,526,000 has been allocated to a core deposit intangible that will be amortized over its estimated life of 10 years. The remaining purchase price was allocated to goodwill, which is not deductible for tax purposes.

Acquired loan data for Arlington Bank can be found in the table below:

	Fair Value of Acquired Loans at Acquisition Date		Gross Contractual Amounts Receivable at Acquisition Date		Best Estimate at Acquisition Date of Contractual Cash Flows Not Expected to be Collected
Acquired receivables subject to ASC 310-30	$	2,625	$	6,183	$	2,891
Acquired receivables not subject to ASC 310-30	$	222,055	$	308,857	$	2,741

Pro Forma Financial Information

The results of operations of Arlington Bank and IAB have been included in the Corporation's consolidated financial statements since the acquisition dates. The following schedule includes pro forma results for the year ended December 31, 2017, as if the Arlington Bank and IAB acquisitions occurred as of the beginning of the period presented.

	2017
Total revenue (net interest income plus other income)	$	380,324
Net income	$	95,009
Net income available to common shareholders
Earnings per share:
Basic	$	1.94
Diluted	$	1.93

The pro forma information includes adjustments for interest income on loans, interest expense on deposits and borrowings, premises expense for banking centers acquired and amortization of intangibles arising from the transactions and the related income tax effects. The pro forma information for the year ended December 31, 2017 includes operating revenue of $9.0 million and $21.4 million from the Arlington Bank and IAB acquisitions since the date of acquisition, respectively. Additionally, $15.4 million, net of tax, of expenses directly attributable to the Arlington Bank and IAB acquisitions were included in the year ended December 31, 2017 pro forma information. The pro forma information is presented for information purposes only and is not indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time, nor is it intended to be a projection of future results.

CONSUMMATION OF MERGER

MBT Financial Corp.

On October 9, 2018, the Corporation and MBT Financial Corp., a Michigan corporation ("MBT"), entered into an Agreement and Plan of Reorganization and Merger, pursuant to which MBT will, subject to the terms and conditions of the merger agreement, merge with and into the Corporation, whereupon the separate corporate existence of MBT will cease and the Corporation will survive. Immediately following the merger, MBT's wholly-owned subsidiary, Monroe Bank & Trust, shall be merged with and into the Bank, with the Bank continuing as the surviving bank. Based on the closing price of the Corporation's common stock on October 9, 2018 of $45.71 per share, the transaction value is estimated at approximately $290.9 million. The transaction is expected to be a tax-free exchange for MBT's shareholders who will be receiving the Corporation's common stock pursuant to the merger. Subject to MBT's shareholders' approval of the merger, regulatory approvals and other customary closing conditions, the parties anticipate completing the merger in the first half of 2019. MBT's total assets as of June 30, 2018 were $1.3 billion.

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Acquisitions (Tables)

9 Months Ended

Sep. 30, 2018

Business Combinations [Abstract]

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

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 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 IAB acquisition is detailed in the following table.

	Fair Value
Cash and cash equivalents	$	6,016
Interest-bearing time deposits	248,212
Investment securities	4,078
Loans held for sale	594
Loans	725,382
Premises and equipment	10,107
Federal Home Loan Bank stock	4,810
Interest receivable	3,445
Cash surrender value of life insurance	26,964
Other assets	11,780
Deposits	(862,271		)
Securities sold under repurchase agreements	(17,915		)
Federal Home Loan Bank Advances	(47,575		)
Subordinated debentures	(10,583		)
Interest payable	(1,005		)
Other liabilities	(14,472		)
Net tangible assets acquired	87,567
Other Intangible assets	17,403
Goodwill	153,636
Purchase price	$	258,606

Based on 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 Arlington Bank acquisition is detailed in the following table.

	Fair Value
Cash and cash equivalents	$	48,532
Interest-bearing time deposits	292
Loans held for sale	7,626
Loans	224,680
Premises and equipment	1,986
Federal Home Loan Bank stock	1,091
Interest receivable	653
Other assets	1,620
Deposits	(252,783		)
Interest payable	(244		)
Other liabilities	(3,106		)
Net tangible assets acquired	30,347
Core deposit intangible	4,526
Goodwill	47,719
Purchase price	$	82,592

Schedule of acquired loan data

Acquired loan data for IAB can be found in the table below:

	Fair Value of Acquired Loans at Acquisition Date		Gross Contractual Amounts Receivable at Acquisition Date		Best Estimate at Acquisition Date of Contractual Cash Flows Not Expected to be Collected
Acquired receivables subject to ASC 310-30	$	4,838	$	14,131	$	8,352
Acquired receivables not subject to ASC 310-30	$	720,544	$	864,613	$	9,786

Acquired loan data for Arlington Bank can be found in the table below:

	Fair Value of Acquired Loans at Acquisition Date		Gross Contractual Amounts Receivable at Acquisition Date		Best Estimate at Acquisition Date of Contractual Cash Flows Not Expected to be Collected
Acquired receivables subject to ASC 310-30	$	2,625	$	6,183	$	2,891
Acquired receivables not subject to ASC 310-30	$	222,055	$	308,857	$	2,741

Schedule of pro forma financial information

The results of operations of Arlington Bank and IAB have been included in the Corporation's consolidated financial statements since the acquisition dates. The following schedule includes pro forma results for the year ended December 31, 2017, as if the Arlington Bank and IAB acquisitions occurred as of the beginning of the period presented.

	2017
Total revenue (net interest income plus other income)	$	380,324
Net income	$	95,009
Net income available to common shareholders
Earnings per share:
Basic	$	1.94
Diluted	$	1.93

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Investment Securities (Tables)

9 Months Ended

Sep. 30, 2018

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, gross unrealized losses and approximate market value of the Corporation's investment securities at the dates indicated were:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale at September 30, 2018
U.S. Government-sponsored agency securities	$	18,492			$	134	$	18,358
State and municipal	611,528		2,920		14,280		600,168
U.S. Government-sponsored mortgage-backed securities	547,223		71		16,689		530,605
Corporate obligations	31						31
Total available for sale	1,177,274		2,991		31,103		1,149,162
Held to maturity at September 30, 2018
U.S. Government-sponsored agency securities	22,618				833		21,785
State and municipal	192,124		1,161		1,748		191,537
U.S. Government-sponsored mortgage-backed securities	260,347		300		6,514		254,133
Foreign Investments	1,000				3		997
Total held to maturity	476,089		1,461		9,098		468,452
Total Investment Securities	$	1,653,363	$	4,452	$	40,201	$	1,617,614

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale at December 31, 2017
State and municipal	$	510,852	$	16,932	$	1,091	$	526,693
U.S. Government-sponsored mortgage-backed securities	473,325		964		3,423		470,866
Corporate obligations	31						31
Equity securities	2,357						2,357
Total available for sale	986,565		17,896		4,514		999,947
Held to maturity at December 31, 2017
U.S. Government-sponsored agency securities	22,618				435		22,183
State and municipal	235,594		6,295		244		241,645
U.S. Government-sponsored mortgage-backed securities	301,443		3,341		1,404		303,380
Foreign Investment	1,000						1,000
Total held to maturity	560,655		9,636		2,083		568,208
Total Investment Securities	$	1,547,220	$	27,532	$	6,597	$	1,568,155

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 September 30, 2018 and December 31, 2017, 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 September 30, 2018:
Due in one year or less	$	24,098	$	24,360	$	5,161	$	5,178
Due after one through five years	17,294		17,511		48,155		47,042
Due after five through ten years	75,416		75,498		57,950		58,212
Due after ten years	513,243		501,188		104,476		103,887
	630,051		618,557		215,742		214,319
U.S. Government-sponsored mortgage-backed securities	547,223		530,605		260,347		254,133
Total Investment Securities	$	1,177,274	$	1,149,162	$	476,089	$	468,452

	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Maturity Distribution at December 31, 2017
Due in one year or less	$	425	$	425	$	12,015	$	12,158
Due after one through five years	5,040		5,204		76,146		76,334
Due after five through ten years	74,921		78,806		54,441		55,679
Due after ten years	430,497		442,289		116,610		120,657
	510,883		526,724		259,212		264,828
U.S. Government-sponsored mortgage-backed securities	473,325		470,866		301,443		303,380
Equity securities	2,357		2,357
Total Investment Securities	$	986,565	$	999,947	$	560,655	$	568,208

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 nine months ended September 30, 2018 and 2017 are shown below.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Sales and Redemptions of Available for Sale Securities:
Gross gains	$	1,285	$	382	$	4,016	$	1,547
Gross losses			50				50

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 tables show the Corporation’s gross unrealized losses and fair value, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position at September 30, 2018, and December 31, 2017:

	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 September 30, 2018
U.S. Government-sponsored agency securities	$	18,358	$	134					$	18,358	$	134
State and municipal	397,852		11,780		$	30,820	$	2,500	428,672		14,280
U.S. Government-sponsored mortgage-backed securities	386,632		9,603		134,602		7,086		521,234		16,689
Total Temporarily Impaired Available for Sale Securities	802,842		21,517		165,422		9,586		968,264		31,103
Temporarily Impaired Held to Maturity Securities at September 30, 2018
U.S. Government-sponsored agency securities	97		3		21,688		830		21,785		833
State and municipal	44,857		857		16,326		891		61,183		1,748
U.S. Government-sponsored mortgage-backed securities	168,488		3,473		61,139		3,041		229,627		6,514
Corporate Obligations	997		3						997		3
Total Temporarily Impaired Held to Maturity Securities	214,439		4,336		99,153		4,762		313,592		9,098
Total Temporarily Impaired Investment Securities	$	1,017,281	$	25,853	$	264,575	$	14,348	$	1,281,856	$	40,201

	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, 2017
State and municipal	$	13,296	$	198	$	35,324	$	893	$	48,620	$	1,091
U.S. Government-sponsored mortgage-backed securities	182,755		1,520		68,667		1,903		251,422		3,423
Total Temporarily Impaired Available for Sale Securities	196,051		1,718		103,991		2,796		300,042		4,514
Temporarily Impaired Held to Maturity Securities at December 31, 2017
U.S. Government-sponsored agency securities	9,988		131		12,196		304		22,184		435
State and municipal	2,430		36		15,805		208		18,235		244
U.S. Government-sponsored mortgage-backed securities	62,508		485		43,078		919		105,586		1,404
Total Temporarily Impaired Held to Maturity Securities	74,926		652		71,079		1,431		146,005		2,083
Total Temporarily Impaired Investment Securities	$	270,977	$	2,370	$	175,070	$	4,227	$	446,047	$	6,597

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.

	September 30, 2018			December 31, 2017
Investments reported at less than historical cost:
Historical cost	$	1,322,058		$	452,644
Fair value	$	1,281,856		$	446,047
Percent of the Corporation's investment portfolio	78.9		%	28.6		%

XML

Loans and Allowance (Tables)

9 Months Ended

Sep. 30, 2018

Receivables [Abstract]

Composition of loan portfolio by loan class

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

	September 30, 2018			December 31, 2017
Commercial and industrial loans	$	1,655,569		$	1,493,493
Agricultural production financing and other loans to farmers	88,504			121,757
Real estate loans:
Construction	668,608			612,219
Commercial and farmland	2,699,629			2,562,691
Residential	965,893			962,765
Home equity	517,303			514,021
Individuals' loans for household and other personal expenditures	98,709			86,935
Lease financing receivables, net of unearned income	1,830			2,527
Other commercial loans	392,026			394,791
Loans	$	7,088,071		$	6,751,199
Allowance for loan losses	(78,406		)	(75,032		)
Net Loans	$	7,009,665		$	6,676,167

Changes in allowance for loan losses

The following tables summarize changes in the allowance for loan losses by loan segment for the three and nine months ended September 30, 2018 and September 30, 2017:

	Three Months Ended September 30, 2018
	Commercial			Commercial Real Estate			Consumer			Residential			Finance Leases		Total
Allowance for loan losses:
Balances, June 30, 2018	$	31,465		$	27,731		$	3,921		$	14,424		$	2	$	77,543
Provision for losses	256			410			159			575					1,400
Recoveries on loans	658			306			46			165					1,175
Loans charged off	(313		)	(501		)	(194		)	(704		)			(1,712		)
Balances, September 30, 2018	$	32,066		$	27,946		$	3,932		$	14,460		$	2	$	78,406

	Nine Months Ended September 30, 2018
	Commercial			Commercial Real Estate			Consumer			Residential			Finance Leases		Total
Allowance for loan losses:
Balances, December 31, 2017	$	30,418		$	27,343		$	3,732		$	13,537		$	2	$	75,032
Provision for losses	1,567			1,448			493			2,055					5,563
Recoveries on loans	2,060			1,858			233			915					5,066
Loans charged off	(1,979		)	(2,703		)	(526		)	(2,047		)			(7,255		)
Balances, September 30, 2018	$	32,066		$	27,946		$	3,932		$	14,460		$	2	$	78,406

	Three Months Ended September 30, 2017
	Commercial			Commercial Real Estate			Consumer			Residential			Finance Leases		Total
Allowance for loan losses:
Balances, June 30, 2017	$	28,906		$	25,236		$	3,372		$	12,955		$	2	$	70,471
Provision for losses	921			374			342			446					2,083
Recoveries on loans	324			1,327			51			157					1,859
Loans charged off	(468		)	(190		)	(174		)	(227		)			(1,059		)
Balances, September 30, 2017	$	29,683		$	26,747		$	3,591		$	13,331		$	2	$	73,354

	Nine Months Ended September 30, 2017
	Commercial			Commercial Real Estate			Consumer			Residential			Finance Leases		Total
Allowance for loan losses:
Balances, December 31, 2016	$	27,696		$	23,661		$	2,923		$	11,755		$	2	$	66,037
Provision for losses	2,279			2,023			877			2,164					7,343
Recoveries on loans	987			2,066			253			547					3,853
Loans charged off	(1,279		)	(1,003		)	(462		)	(1,135		)			(3,879		)
Balances, September 30, 2017	$	29,683		$	26,747		$	3,591		$	13,331		$	2	$	73,354

Allowance for credit losses and loan portfolio by loan segment

The tables below show the Corporation’s allowance for loan losses and loan portfolio by loan segment as of the periods indicated. There was no related allowance for loan losses for loans acquired with deteriorated credit quality at September 30, 2018 or December 31, 2017.

	September 30, 2018
	Commercial		Commercial Real Estate		Consumer		Residential		Finance Leases		Total
Allowance Balances:
Individually evaluated for impairment							$	433			$	433
Collectively evaluated for impairment	$	32,066	$	27,946	$	3,932	14,027		$	2	77,973
Total Allowance for Loan Losses	$	32,066	$	27,946	$	3,932	$	14,460	$	2	$	78,406
Loan Balances:
Individually evaluated for impairment	$	1,614	$	12,158	$	8	$	2,219			$	15,999
Collectively evaluated for impairment	2,132,193		3,340,898		98,701		1,479,371		$	1,830	7,052,993
Loans acquired with deteriorated credit quality	2,292		15,181				1,606				19,079
Loans	$	2,136,099	$	3,368,237	$	98,709	$	1,483,196	$	1,830	$	7,088,071

	December 31, 2017
	Commercial		Commercial Real Estate		Consumer		Residential		Finance Leases		Total
Allowance Balances:
Individually evaluated for impairment	$	666	$	567			$	404			$	1,637
Collectively evaluated for impairment	29,752		26,776		$	3,732	13,133		$	2	73,395
Total Allowance for Loan Losses	$	30,418	$	27,343	$	3,732	$	13,537	$	2	$	75,032
Loan Balances:
Individually evaluated for impairment	$	3,345	$	17,432	$	5	$	2,429			$	23,211
Collectively evaluated for impairment	2,005,275		3,135,481		86,930		1,472,821		$	2,527	6,703,034
Loans acquired with deteriorated credit quality	1,421		21,997				1,536				24,954
Loans	$	2,010,041	$	3,174,910	$	86,935	$	1,476,786	$	2,527	$	6,751,199

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:

	September 30, 2018		December 31, 2017
Commercial and industrial loans	$	2,287	$	3,275
Agriculture production financing and other loans to farmers	640		1,027
Real estate loans:
Construction	764		65
Commercial and farmland	10,406		12,951
Residential	5,140		9,444
Home equity	1,126		1,928
Individuals' loans for household and other personal expenditures	58		34
Total	$	20,421	$	28,724

Composition of impaired loans by loan class

The following tables show the composition of the Corporation’s impaired loans, related allowance and interest income recognized while impaired by loan class as of the periods indicated:

	September 30, 2018
	Unpaid Principal Balance		Recorded Investment		Related Allowance
Impaired loans with no related allowance:
Commercial and industrial loans	$	6,133	$	974
Agriculture production financing and other loans to farmers	660		640
Real estate Loans:
Construction	1,352		614
Commercial and farmland	13,717		11,544
Residential	81		62
Individuals' loans for household and other personal expenditures	8		8
Total	$	21,951	$	13,842
Impaired loans with related allowance:
Real estate Loans:
Residential	$	1,849	$	1,794	$	357
Home equity	382		363		76
Total	$	2,231	$	2,157	$	433
Total Impaired Loans	$	24,182	$	15,999	$	433

	December 31, 2017
	Unpaid Principal Balance		Recorded Investment		Related Allowance
Impaired loans with no related allowance:
Commercial and industrial loans	$	7,611	$	1,536
Agriculture production financing and other loans to farmers	732		700
Real estate Loans:
Commercial and farmland	16,758		15,162
Residential	833		519
Home equity	40		8
Individuals' loans for household and other personal expenditures	5		5
Total	$	25,979	$	17,930
Impaired loans with related allowance:
Commercial and industrial loans	$	812	$	782	$	552
Agriculture production financing and other loans to farmers	357		327		114
Real estate Loans:
Commercial and farmland	2,989		2,270		567
Residential	1,616		1,572		327
Home equity	349		330		77
Total	$	6,123	$	5,281	$	1,637
Total Impaired Loans	$	32,102	$	23,211	$	1,637

	Three Months Ended September 30, 2018				Nine Months Ended September 30, 2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Impaired loans with no related allowance:
Commercial and industrial loans	$	979			$	994
Agriculture production financing and other loans to farmers	640				640
Real estate Loans:
Construction	614				930
Commercial and farmland	12,098		$	40	12,733		$	128
Residential	62		1		63		2
Individuals' loans for household and other personal expenditures	9				10
Total	$	14,402	$	41	$	15,370	$	130
Impaired loans with related allowance:
Real estate Loans:
Residential	$	1,797	$	13	$	1,812	$	37
Home equity	364		3		367		8
Total	$	2,161	$	16	$	2,179	$	45
Total Impaired Loans	$	16,563	$	57	$	17,549	$	175

	Three Months Ended September 30, 2017				Nine Months Ended September 30, 2017
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Impaired loans with no related allowance:
Commercial and industrial loans	$	2,103			$	4,567
Agriculture production financing and other loans to farmers	945				945
Real estate Loans:
Commercial and farmland	14,129		$	89	15,483		$	267
Residential	588				673		2
Home equity	11				16
Individuals' loans for household and other personal expenditures	6				7
Total	$	17,782	$	89	$	21,691	$	269
Impaired loans with related allowance:
Commercial and industrial loans	$	1,796			$	1,796
Agriculture production financing and other loans to farmers	337				337
Real estate Loans:
Commercial and farmland	3,359				3,374
Residential	1,403		$	8	1,395		$	25
Home equity	331		2		334		6
Total	$	7,226	$	10	$	7,236	$	31
Total Impaired Loans	$	25,008	$	99	$	28,927	$	300

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-days or more 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.

	September 30, 2018
	Commercial Pass		Commercial Special Mention		Commercial Substandard		Commercial Doubtful	Commercial Loss	Consumer Performing		Consumer Non-Performing		Total
Commercial and industrial loans	$	1,587,560	$	18,085	$	49,924							$	1,655,569
Agriculture production financing and other loans to farmers	68,556		7,144		12,804								88,504
Real estate Loans:
Construction	629,244		2,533		10,200				$	26,494	$	137	668,608
Commercial and farmland	2,551,541		67,043		78,694				2,350		1		2,699,629
Residential	175,315		5,119		2,377				778,086		4,996		965,893
Home equity	25,435		750		387				489,631		1,100		517,303
Individuals' loans for household and other personal expenditures									98,600		109		98,709
Lease financing receivables, net of unearned income	1,830												1,830
Other commercial loans	391,673				353								392,026
Loans	$	5,431,154	$	100,674	$	154,739			$	1,395,161	$	6,343	$	7,088,071

	December 31, 2017
	Commercial Pass		Commercial Special Mention		Commercial Substandard		Commercial Doubtful		Commercial Loss		Consumer Performing		Consumer Non-Performing		Total
Commercial and industrial loans	$	1,418,401	$	51,336	$	23,386	$	370							$	1,493,493
Agriculture production financing and other loans to farmers	73,800		27,502		20,018		387		$	50					121,757
Real estate Loans:
Construction	587,906		828		981						$	22,374	$	130	612,219
Commercial and farmland	2,408,329		70,074		79,769		1,536				2,980		3		2,562,691
Residential	185,725		4,376		4,209		114				759,900		8,441		962,765
Home equity	28,554		457		286						482,661		2,063		514,021
Individuals' loans for household and other personal expenditures											86,875		60		86,935
Lease financing receivables, net of unearned income	2,527														2,527
Other commercial loans	394,222				569										394,791
Loans	$	5,099,464	$	154,573	$	129,218	$	2,407	$	50	$	1,354,790	$	10,697	$	6,751,199

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 September 30, 2018, and December 31, 2017:

	September 30, 2018
	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Non-Accrual		Total Past Due & Non-Accrual		Total
Commercial and industrial loans	$	1,649,538	$	3,344	$	400			$	2,287	$	6,031	$	1,655,569
Agriculture production financing and other loans to farmers	87,864								640		640		88,504
Real estate loans:
Construction	667,142				702				764		1,466		668,608
Commercial and farmland	2,683,494		1,859		3,870				10,406		16,135		2,699,629
Residential	955,383		4,873		497				5,140		10,510		965,893
Home equity	513,936		1,506		735				1,126		3,367		517,303
Individuals' loans for household and other personal expenditures	98,044		394		163		$	50	58		665		98,709
Lease financing receivables, net of unearned income	1,830												1,830
Other commercial loans	392,026												392,026
Loans	$	7,049,257	$	11,976	$	6,367	$	50	$	20,421	$	38,814	$	7,088,071

	December 31, 2017
	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Non-Accrual		Total Past Due & Non-Accrual		Total
Commercial and industrial loans	$	1,487,221	$	2,967	$	30			$	3,275	$	6,272	$	1,493,493
Agriculture production financing and other loans to farmers	120,720		10						1,027		1,037		121,757
Real estate loans:
Construction	610,896		1,193				$	65	65		1,323		612,219
Commercial and farmland	2,542,048		6,923		166		603		12,951		20,643		2,562,691
Residential	948,947		4,010		308		56		9,444		13,818		962,765
Home equity	510,362		1,372		184		175		1,928		3,659		514,021
Individuals' loans for household and other personal expenditures	85,744		298		834		25		34		1,191		86,935
Lease financing receivables, net of unearned income	2,527												2,527
Other commercial loans	394,791												394,791
Loans	$	6,703,256	$	16,773	$	1,522	$	924	$	28,724	$	47,943	$	6,751,199

Schedules of troubled debt restructurings

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

	Three Months Ended September 30, 2018					Nine Months Ended September 30, 2018
	Pre-Modification Recorded Balance		Post-Modification Recorded Balance		Number of Loans	Pre-Modification Recorded Balance		Post-Modification Recorded Balance		Number of Loans
Real estate loans:
Residential	$	154	$	140	4	$	490	$	487	11
Home equity	65		65		1	81		81		3
Individuals' loans for household and other personal expenditures						7		8		1
Total	$	219	$	205	5	$	578	$	576	15

	Three Months Ended September 30, 2017					Nine Months Ended September 30, 2017
	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	$	6	$	6	1	$	400	$	176	2
Real estate loans:
Commercial and farmland						357		492		6
Residential	120		122		1	570		520		8
Home equity	68		73		2	190		73		2
Total	$	194	$	201	4	$	1,517	$	1,261	18

The following tables summarize the recorded investment of troubled debt restructures as of September 30, 2018 and 2017, by modification type, that occurred during the periods indicated:

	Three Months Ended September 30, 2018
	Term Modification	Rate Modification		Combination		Total Modification
Real estate loans:
Residential		$	47	$	93	$	140
Home equity		65				65
Total		$	112	$	93	$	205

	Nine Months Ended September 30, 2018
	Term Modification		Rate Modification		Combination		Total Modification
Real estate loans:
Residential			$	208	$	239	$	447
Home Equity	$	77	76				153
Individuals' loans for household and other personal expenditures			6				6
Total	$	77	$	290	$	239	$	606

	Three Months Ended September 30, 2017
	Term Modification		Rate Modification		Combination	Total Modification
Commercial and industrial loans	$	5				$	5
Real estate loans:
Residential			$	122		122
Home equity			73			73
Total	$	5	$	195		$	200

	Nine Months Ended September 30, 2017
	Term Modification		Rate Modification		Combination		Total Modification
Commercial and industrial loans	$	5			$	168	$	173
Real estate loans:
Commercial and farmland	41		$	61	232		334
Residential			466		42		508
Home equity			73				73
Total	$	46	$	600	$	442	$	1,088

Troubled debt restructurings that subsequently defaulted

A loan is considered in default if it is 30 or more days past due.

	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
	Number of Loans	Recorded Balance		Number of Loans	Recorded Balance
Real estate loans:
Commercial and farmland	1	$	262	1	$	262
Residential	2	83		4	152
Individuals' loans for household and other personal expenditures	1	11		1	11
Total	4	$	356	6	$	425

XML

Purchased Credit Impaired Loans (Tables)

9 Months Ended

Sep. 30, 2018

Receivables [Abstract]

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, are identified in the table below.

	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
Beginning balance	$	2,423		$	2,890
Additions
Accretion	(1,004		)	(2,441		)
Reclassification from nonaccretable	798			1,768
Disposals	(16		)	(16		)
Ending balance	$	2,201		$	2,201

	Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017
Beginning balance	$	2,607		$	3,951
Additions	941			1,608
Accretion	(686		)	(5,082		)
Reclassification from nonaccretable	449			3,501
Disposals				(667		)
Ending balance	$	3,311		$	3,311

Schedule of loans for which contractually required payments are uncertain

The following table presents loans acquired, as of the respective acquisition date, during the nine months ended September 30, 2017, for which it was probable that all contractually required payments would not be collected. There were no loans acquired during the nine months ended September 30, 2018.

	IAB		Arlington Bank
Contractually required payments receivable at acquisition date	$	14,131	$	6,183
Nonaccretable difference	8,352		2,891
Expected cash flows at acquisition date	5,779		3,292
Accretable difference	941		667
Basis in loans at acquisition date	$	4,838	$	2,625

XML

Goodwill (Tables)

9 Months Ended

Sep. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of goodwill

	2017
Balance, January 1	$	244,000
Goodwill acquired	201,824
Measurement period adjustment	(469		)
Balance, December 31	$	445,355

XML

Other Intangibles (Tables)

9 Months Ended

Sep. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of core deposit

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

	September 30, 2018			December 31, 2017
Gross carrying amount	$	85,869		$	63,940
Core deposit intangibles acquired				18,164
Other intangibles acquired				3,765
Accumulated amortization	(59,815		)	(54,721		)
Total other intangibles	$	26,054		$	31,148

Schedule of estimated future amortization expense

Estimated future amortization expense is summarized as follows:

	Amortization Expense
2018	$	1,625
2019	5,169
2020	3,632
2021	3,427
2022	3,325
After 2022	8,876
	$	26,054

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Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2018

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 September 30, 2018, and December 31, 2017.

Asset Derivatives

Liability Derivatives

September 30, 2018

December 31, 2017

September 30, 2018

December 31, 2017

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

$

548

Other Assets

$

18

Other Liabilities

$

387

Other Liabilities

$

1,383

Derivatives not designated as hedging instruments:

Interest rate contracts

Other Assets

$

13,763

Other Assets

$

7,305

Other Liabilities

$

13,763

Other Liabilities

$

7,305

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					Nine Months Ended
	September 30, 2018		September 30, 2017			September 30, 2018		September 30, 2017
Interest Rate Products	$	210	$	(10	)	$	1,009	$	(380	)

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

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 September 30, 2018			Three Months Ended September 30, 2017
Interest rate contracts	Interest Expense	$	(93	)	$	(240	)

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)
		Nine Months Ended September 30, 2018			Nine Months Ended September 30, 2017
Interest rate contracts	Interest Expense	$	(368	)	$	(759	)

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Disclosures About Fair Value of Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2018

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 accompanying balance sheets measured at fair value on a recurring basis and the level within the ASC 820-10 fair value hierarchy in which the fair value measurements fall at September 30, 2018, and December 31, 2017.

			Fair Value Measurements Using:
September 30, 2018	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	$	18,358		$	18,358
State and municipal	600,168			596,888		$	3,280
U.S. Government-sponsored mortgage-backed securities	530,605			530,601		4
Corporate obligations	31					31
Interest rate swap asset	13,763			13,763
Interest rate cap	548			548
Interest rate swap liability	14,150			14,150

			Fair Value Measurements Using:
December 31, 2017	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:
State and municipal	$	526,693		$	522,750	$	3,943
U.S. Government-sponsored mortgage-backed securities	470,866			470,866
Corporate obligations	31					31
Equity securities	2,357			2,353		4
Interest rate swap asset	7,305			7,305
Interest rate cap	18			18
Interest rate swap liability	8,688			8,688

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 nine months ended September 30, 2018 and 2017.

	Available for Sale Securities
	Three Months Ended						Nine Months Ended
	September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
Balance at beginning of the period	$	3,970		$	3,330		$	3,978		$	5,169
Included in other comprehensive income	(35		)	(22		)	(59		)	38
Principal payments	(620		)	679			(604		)	(1,220		)
Ending balance	$	3,315		$	3,987		$	3,315		$	3,987

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

Following is a description of valuation methodologies used for instruments measured at fair value on a non-recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such instruments pursuant to the valuation hierarchy for September 30, 2018, and December 31, 2017.

			Fair Value Measurements Using
September 30, 2018	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)	$	5,344			$	5,344
Other real estate owned	937				937

			Fair Value Measurements Using
December 31, 2017	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)	$	9,576			$	9,576
Other real estate owned	859				859

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 September 30, 2018 and December 31, 2017.

September 30, 2018	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted-Average)
State and municipal securities	$	3,280	Discounted cash flow	Maturity/Call date	1 month to 20 yrs
				US Muni BQ curve	A- to BBB-
				Discount rate	1% - 5%
Corporate obligations and U.S. Government-sponsored mortgage backed securities	$	35	Discounted cash flow	Risk free rate	3 month LIBOR
				plus premium for illiquidity	plus 200bps
Impaired loans (collateral dependent)	$	5,344	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability	0% - 10% (2%)
Other real estate owned	$	937	Appraisals	Discount to reflect current market conditions	0% - 24% (3%)

December 31, 2017	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted-Average)
State and municipal securities	$	3,943	Discounted cash flow	Maturity/Call date	1 month to 20 yrs
				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)	$	9,576	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability	0% - 10% (1%)
Other real estate owned	$	859	Appraisals	Discount to reflect current market conditions	0% - 10% (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 September 30, 2018, and December 31, 2017.

			September 30, 2018
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Carrying Amount		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	142,501	$	142,501
Interest-bearing time deposits	66,763		66,763
Investment securities available for sale	1,149,162				$	1,145,847	$	3,315
Investment securities held to maturity	476,089				458,087		10,365
Loans held for sale	3,022				3,022
Loans	7,009,665						6,793,227
Federal Home Loan Bank stock	24,588				24,588
Interest rate swap and cap asset	14,311				14,311
Interest receivable	38,531				38,531
Liabilities:
Deposits	$	7,633,152	$	6,083,491	$	1,522,591
Borrowings:
Federal funds purchased	90,000				90,000
Securities sold under repurchase agreements	118,824				118,696
Federal Home Loan Bank advances	385,458				379,309
Subordinated debentures and term loans	138,408				124,806
Interest rate swap liability	14,150				14,150
Interest payable	5,920				5,920

			December 31, 2017
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Carrying Amount		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	154,905	$	154,905
Interest-bearing time deposits	35,027		35,027
Investment securities available for sale	999,947				$	995,969	$	3,978
Investment securities held to maturity	560,655				556,305		11,903
Loans held for sale	7,216				7,216
Loans	6,676,167						6,534,877
Federal Home Loan Bank stock	23,825				23,825
Interest rate swap and cap asset	7,323				7,323
Interest receivable	37,130				37,130
Liabilities:
Deposits	$	7,172,530	$	5,741,019	$	1,406,526
Borrowings:
Federal funds purchased	144,038				144,038
Securities sold under repurchase agreements	136,623				136,562
Federal Home Loan Bank advances	414,377				361,085
Subordinated debentures and term loans	139,349				120,085
Interest rate swap liability	8,688				8,688
Interest payable	4,390				4,390

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Transfers Accounted for as Secured Borrowings (Tables)

9 Months Ended

Sep. 30, 2018

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 September 30, 2018 and December 31, 2017 were:

	September 30, 2018
	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	$	109,695		$	1,514	$	7,615	$	118,824

	December 31, 2017
	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	$	126,187	$	1,340	$	1,500	$	7,596	$	136,623

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Accumulated Other Comprehensive Income (Loss) (Tables)

9 Months Ended

Sep. 30, 2018

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 September 30, 2018 and 2017:

	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, 2017	$	8,970		$	(1,125	)	$	(10,753	)	$	(2,908	)
Other comprehensive income before reclassifications	(30,032		)	1,039						(28,993		)
Amounts reclassified from accumulated other comprehensive income	(3,173		)	291						(2,882		)
Period change	(33,205		)	1,330			—			(31,875		)
Reclassification adjustment under ASU 2018-02	1,932			(242		)	(2,316		)	(626		)
Balance at September 30, 2018	$	(22,303	)	$	(37	)	$	(13,069	)	$	(35,409	)
Balance at December 31, 2016	$	1,035		$	(1,774	)	$	(12,842	)	$	(13,581	)
Other comprehensive income before reclassifications	8,124			(246		)				7,878
Amounts reclassified from accumulated other comprehensive income	(973		)	493			(175		)	(655		)
Period change	7,151			247			(175		)	7,223
Balance at September 30, 2017	$	8,186		$	(1,527	)	$	(13,017	)	$	(6,358	)

Reclassification out of accumulated other comprehensive income (loss)

The following tables present 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 nine months ended September 30, 2018 and 2017.

	Amount Reclassified from Accumulated Other Comprehensive Income (Loss) For the Three Months Ended September 30,
Details about Accumulated Other Comprehensive Income (Loss) Components	2018			2017			Affected Line Item in the Statements of Income
Unrealized gains (losses) on available for sale securities (1)
Realized securities gains reclassified into income	$	1,285		$	332		Other income - net realized gains on sales of available for sale securities
Related income tax expense	(270		)	(116		)	Income tax expense
	$	1,015		$	216
Unrealized gains (losses) on cash flow hedges (2)
Interest rate contracts	$	(93	)	$	(240	)	Interest expense - subordinated debentures and term loans
Related income tax benefit	20			84			Income tax expense
	$	(73	)	$	(156	)
Unrealized gains (losses) on defined benefit plans
Amortization of prior service costs				$	89		Other expenses - salaries and employee benefits
Related income tax expense				(31		)	Income tax expense
	$	—		$	58
Total reclassifications for the period, net of tax	$	942		$	118

	Amount Reclassified from Accumulated Other Comprehensive Income (Loss) For the Nine Months Ended September 30,
Details about Accumulated Other Comprehensive Income (Loss) Components	2018			2017			Affected Line Item in the Statements of Income
Unrealized gains (losses) on available for sale securities (1)
Realized securities gains reclassified into income	$	4,016		$	1,497		Other income - net realized gains on sales of available for sale securities
Related income tax expense	(843		)	(524		)	Income tax expense
	$	3,173		$	973
Unrealized gains (losses) on cash flow hedges (2)
Interest rate contracts	$	(368	)	$	(759	)	Interest expense - subordinated debentures and term loans
Related income tax benefit	77			266			Income tax expense
	$	(291	)	$	(493	)
Unrealized gains (losses) on defined benefit plans
Amortization of net loss and prior service costs				$	269		Other expenses - salaries and employee benefits
Related income tax expense				(94		)	Income tax expense
	$	—		$	175
Total reclassifications for the period, net of tax	$	2,882		$	655

⁽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 of these Notes to Consolidated Condensed Financial Statements.

⁽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 of these Notes to Consolidated Condensed Financial Statements.

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Share-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2018

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 and the income tax benefit of such awards.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Stock and ESPP Options
Pre-tax compensation expense	$	39		$	23		$	88		$	93
Income tax benefit	(15		)	(9		)	(153		)	(313		)
Stock and ESPP option expense, net of income taxes	$	24		$	14		$	(65	)	$	(220	)
Restricted Stock Awards
Pre-tax compensation expense	$	855		$	800		$	2,458		$	1,791
Income tax benefit	(205		)	(280		)	(952		)	(1,160		)
Restricted stock awards expense, net of income taxes	$	650		$	520		$	1,506		$	631
Total Share-Based Compensation
Pre-tax compensation expense	$	894		$	823		$	2,546		$	1,884
Income tax benefit	(220		)	(289		)	(1,105		)	(1,473		)
Total share-based compensation expense, net of income taxes	$	674		$	534		$	1,441		$	411

Stock option activity under stock option plans

Stock option activity under the Corporation's stock option plans as of September 30, 2018 and changes during the nine months ended September 30, 2018, were as follows:

	Number of Shares		Weighted-Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value
Outstanding at January 1, 2018	152,652		$	16.71
Exercised	(51,243	)	$	21.33
Cancelled	(200	)	$	28.25
Outstanding September 30, 2018	101,209		$	14.34	2.41	$	3,101,835
Vested and Expected to Vest at September 30, 2018	101,209		$	14.34	2.41	$	3,101,835
Exercisable at September 30, 2018	101,209		$	14.34	2.41	$	3,101,835

Unvested RSAs outstanding

The following table summarizes information on unvested RSAs outstanding as of September 30, 2018:

	Number of Shares		Weighted-Average Grant Date Fair Value
Unvested RSAs at January 1, 2018	366,993		$	29.79
Granted	105,100		$	48.11
Vested	(106,797	)	$	23.74
Forfeited	(5,560	)	$	38.31
Unvested RSAs at September 30, 2018	359,736		$	36.82

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Income Tax (Tables)

9 Months Ended

Sep. 30, 2018

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 nine months ended September 30, 2018 and 2017:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Reconciliation of Federal Statutory to Actual Tax Expense:
Federal statutory income tax at 21% for 2018 and 35% for 2017	$	10,414		$	11,304		$	29,500		$	32,900
Tax-exempt interest income	(2,118		)	(2,881		)	(6,178		)	(8,062		)
Share-based compensation	(38		)	(78		)	(570		)	(862		)
Tax-exempt earnings and gains on life insurance	(197		)	(551		)	(655		)	(1,905		)
Tax credits	(42		)	(61		)	(65		)	(249		)
Other	459			206			1,018			492
Actual Tax Expense	$	8,478		$	7,939		$	23,050		$	22,314
Effective Tax Rate	17.1		%	24.6		%	16.4		%	23.7		%

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Net Income Per Share (Tables)

9 Months Ended

Sep. 30, 2018

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 nine months ended September 30, 2018 and 2017.

	Three Months Ended September 30,
	2018					2017
	Net Income		Weighted-Average Shares	Per Share Amount		Net Income		Weighted-Average Shares	Per Share Amount
Net income available to common stockholders	$	41,113	49,286,945	$	0.83	$	24,358	48,431,880	$	0.50
Effect of potentially dilutive stock options and restricted stock awards			205,074					211,894
Diluted net income per share	$	41,113	49,492,019	$	0.83	$	24,358	48,643,774	$	0.50

	Nine Months Ended September 30,
	2018					2017
	Net Income		Weighted-Average Shares	Per Share Amount		Net Income		Weighted-Average Shares	Per Share Amount
Net income available to common stockholders	$	117,426	49,244,403	$	2.38	$	71,687	43,845,675	$	1.64
Effect of potentially dilutive stock options and restricted stock awards			213,782					217,544
Diluted net income per share	$	117,426	49,458,185	$	2.37	$	71,687	44,063,219	$	1.63

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General (Details)	9 Months Ended
	Sep. 30, 2018 USD ($)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Reclassificaton of investment securities held to maturity	$ 30,794,000
State and municipal securities | ASU 2017-12
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Reclassificaton of investment securities held to maturity	(30,800,000)
Reclassification of held to maturity, gross unrealized gains	$ (450,000)

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Acquisitions - Narrative (Details) $ / shares in Units, $ in Thousands				3 Months Ended	9 Months Ended		12 Months Ended
	Jul. 14, 2017 USD ($) bank_branch shares	May 19, 2017 USD ($) bank_branch shares	Nov. 21, 2016 USD ($) $ / shares shares	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Dec. 31, 2017 USD ($)
Business Acquisition [Line Items]
Less: Common stock issued						$ 321,431
IAB
Business Acquisition [Line Items]
Shares purchased (in shares) | shares			495,112
Percentage of interest acquired			12.10%	12.10%		12.10%
Value of acquired shares			$ 19,800
Purchase price per share (usd per share) | $ / shares			$ 40.00
Number of banking centers acquired | bank_branch	16
Stock issued as a part of acquisition (in shares) | shares	6,000,000
Less: Common stock issued	$ 238,800
Total purchase price	258,600
Fair value of equity interest after adjustment				$ 19,800
Remeasurement loss				$ 50
Other intangible assets	17,403
Operating revenue							$ 21,400
IAB | Core deposit intangibles acquired
Business Acquisition [Line Items]
Other intangible assets	$ 13,638
Acquired intangible asset, expected useful life	10 years
IAB | Other intangibles acquired
Business Acquisition [Line Items]
Other intangible assets	$ 3,765
Acquired intangible asset, expected useful life	2 years
IAB | Common Stock
Business Acquisition [Line Items]
Number of shares of common stock	1.653
Arlington Bank
Business Acquisition [Line Items]
Percentage of interest acquired		100.00%
Number of banking centers acquired | bank_branch		3
Stock issued as a part of acquisition (in shares) | shares		2,100,000
Less: Common stock issued		$ 82,600
Other intangible assets		4,526
Operating revenue							9,000
Arlington Bank | Core deposit intangibles acquired
Business Acquisition [Line Items]
Other intangible assets		$ 4,526
Acquired intangible asset, expected useful life		10 years
Arlington Bank | Common Stock
Business Acquisition [Line Items]
Number of shares of common stock		2.7245
Arlington Bank and IAB | Expenses directly attributable to acquisitions
Business Acquisition [Line Items]
Non-recurring expenses							$ 15,400

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Acquisitions - Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017	Jul. 14, 2017	May 19, 2017	Dec. 31, 2016
Business Acquisition [Line Items]
Goodwill	$ 445,355	$ 445,355			$ 244,000
IAB
Business Acquisition [Line Items]
Cash and cash equivalents			$ 6,016
Interest-bearing time deposits			248,212
Investment securities			4,078
Loans held for sale			594
Loans			725,382
Premises and equipment			10,107
Federal Home Loan Bank stock			4,810
Interest receivable			3,445
Cash surrender value of life insurance			26,964
Other assets			11,780
Deposits			(862,271)
Securities sold under repurchase agreements			(17,915)
Federal Home Loan Bank Advances			(47,575)
Subordinated debentures			(10,583)
Interest payable			(1,005)
Other liabilities			(14,472)
Net tangible assets acquired			87,567
Core deposit intangible			17,403
Goodwill			153,636
Purchase price			$ 258,606
Arlington Bank
Business Acquisition [Line Items]
Cash and cash equivalents				$ 48,532
Interest-bearing time deposits				292
Loans held for sale				7,626
Loans				224,680
Premises and equipment				1,986
Federal Home Loan Bank stock				1,091
Interest receivable				653
Other assets				1,620
Deposits				(252,783)
Interest payable				(244)
Other liabilities				(3,106)
Net tangible assets acquired				30,347
Core deposit intangible				4,526
Goodwill				47,719
Purchase price				$ 82,592

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Acquisitions - Schedule of Acquired Loan Data (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Jul. 14, 2017	May 19, 2017
IAB
Business Acquisition [Line Items]
Fair Value of Acquired Loans at Acquisition Date, Acquired receivables subject to ASC 310-30	$ 4,838	$ 4,838
Gross Contractual Amounts Receivable at Acquisition Date, Acquired receivables subject to ASC 310-30	14,131	14,131
Best Estimate at Acquisition Date of Contractual Cash Flows Not Expected to be Collected, Acquired receivables subject to ASC 310-30		8,352
Fair Value of Acquired Loans at Acquisition Date, Acquired receivables not subject to ASC 310-30		720,544
Gross Contractual Amounts Receivable at Acquisition Date, Acquired receivables not subject to ASC 310-30		864,613
Best Estimate at Acquisition Date of Contractual Cash Flows Not Expected to be Collected, Acquired receivables not subject to ASC 310-30		$ 9,786
Arlington Bank
Business Acquisition [Line Items]
Fair Value of Acquired Loans at Acquisition Date, Acquired receivables subject to ASC 310-30	2,625		$ 2,625
Gross Contractual Amounts Receivable at Acquisition Date, Acquired receivables subject to ASC 310-30	$ 6,183		6,183
Best Estimate at Acquisition Date of Contractual Cash Flows Not Expected to be Collected, Acquired receivables subject to ASC 310-30			2,891
Fair Value of Acquired Loans at Acquisition Date, Acquired receivables not subject to ASC 310-30			222,055
Gross Contractual Amounts Receivable at Acquisition Date, Acquired receivables not subject to ASC 310-30			308,857
Best Estimate at Acquisition Date of Contractual Cash Flows Not Expected to be Collected, Acquired receivables not subject to ASC 310-30			$ 2,741

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Acquisitions - Pro Forma Financial Information (Details) - Arlington Bank and IAB $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($) $ / shares
Business Acquisition [Line Items]
Total revenue (net interest income plus other income) | $	$ 380,324
Net income | $	$ 95,009
Basic (in dollars per share) | $ / shares	$ 1.94
Diluted (in dollars per share) | $ / shares	$ 1.93

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Investment Securities - Amortized Cost and Approximate Fair Value of Securities (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Available for sale securities
Total Investment Securities	$ 1,177,274	$ 986,565
Gross Unrealized Gains	2,991	17,896
Gross Unrealized Losses	31,103	4,514
Investment securities available for sale	1,149,162	999,947
Held to maturity securities
Total Investment Securities	476,089	560,655
Gross Unrealized Gains	1,461	9,636
Gross Unrealized Losses	9,098	2,083
Fair Value	468,452	568,208
Amortized Cost	1,653,363	1,547,220
Gross Unrealized Gains	4,452	27,532
Gross Unrealized Losses	40,201	6,597
Fair Value	1,617,614	1,568,155
U.S. Government-sponsored agency securities
Available for sale securities
Total Investment Securities	18,492
Gross Unrealized Gains
Gross Unrealized Losses	134
Investment securities available for sale	18,358
Held to maturity securities
Total Investment Securities	22,618	22,618
Gross Unrealized Gains
Gross Unrealized Losses	833	435
Fair Value	21,785	22,183
State and municipal
Available for sale securities
Total Investment Securities	611,528	510,852
Gross Unrealized Gains	2,920	16,932
Gross Unrealized Losses	14,280	1,091
Investment securities available for sale	600,168	526,693
Held to maturity securities
Total Investment Securities	192,124	235,594
Gross Unrealized Gains	1,161	6,295
Gross Unrealized Losses	1,748	244
Fair Value	191,537	241,645
U.S. Government-sponsored mortgage-backed securities
Available for sale securities
Total Investment Securities	547,223	473,325
Gross Unrealized Gains	71	964
Gross Unrealized Losses	16,689	3,423
Investment securities available for sale	530,605	470,866
Held to maturity securities
Total Investment Securities	260,347	301,443
Gross Unrealized Gains	300	3,341
Gross Unrealized Losses	6,514	1,404
Fair Value	254,133	303,380
Corporate obligations
Available for sale securities
Total Investment Securities	31	31
Gross Unrealized Gains
Gross Unrealized Losses
Investment securities available for sale	31	31
Equity securities
Available for sale securities
Total Investment Securities		2,357
Gross Unrealized Gains
Gross Unrealized Losses
Investment securities available for sale		2,357
Foreign Investments
Held to maturity securities
Total Investment Securities	1,000	1,000
Gross Unrealized Losses	3
Fair Value	$ 997	$ 1,000

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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	Sep. 30, 2018	Dec. 31, 2017
Amortized Cost
Due in one year or less	$ 24,098	$ 425
Due after one through five years	17,294	5,040
Due after five through ten years	75,416	74,921
Due after ten years	513,243	430,497
Total debt securities with a single maturity date	630,051	510,883
Total Investment Securities	1,177,274	986,565
Fair Value
Due in one year or less	24,360	425
Due after one through five years	17,511	5,204
Due after five through ten years	75,498	78,806
Due after ten years	501,188	442,289
Total debt securities with a single maturity date	618,557	526,724
Total Investment Securities	1,149,162	999,947
Amortized Cost
Due in one year or less	5,161	12,015
Due after one through five years	48,155	76,146
Due after five through ten years	57,950	54,441
Due after ten years	104,476	116,610
Total debt securities with a single maturity date	215,742	259,212
Total Investment Securities	476,089	560,655
Fair Value
Due in one year or less	5,178	12,158
Due after one through five years	47,042	76,334
Due after five through ten years	58,212	55,679
Due after ten years	103,887	120,657
Total debt securities with a single maturity date	214,319	264,828
Investment securities held to maturity	468,452	568,208
U.S. Government-sponsored mortgage-backed securities
Amortized Cost
U.S. Government-sponsored mortgage-backed securities	547,223	473,325
Fair Value
Without single maturity date	530,605	470,866
Amortized Cost
Without single maturity date	260,347	301,443
Fair Value
Without single maturity date	$ 254,133	303,380
Equity securities
Amortized Cost
U.S. Government-sponsored mortgage-backed securities		2,357
Fair Value
Without single maturity date		2,357
Amortized Cost
Without single maturity date
Fair Value
Without single maturity date

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Investment Securities - Narrative (Details) $ in Thousands	Sep. 30, 2018 USD ($) security	Dec. 31, 2017 USD ($)
Investments, Debt and Equity Securities [Abstract]
Carrying value of securities pledged as collateral	$ 426,200	$ 475,999
Book value of securities sold under agreements to repurchase	122,789	136,639
Schedule of Available for sale Securities and Held to maturity Securities [Line Items]
Gross Unrealized Losses	31,103	4,514
Held-to-maturity unrealized losses	9,098	$ 2,083
State and municipal
Schedule of Available for sale Securities and Held to maturity Securities [Line Items]
Gross Unrealized Losses	$ 14,280
Number of securities in unrealized loss positions | security	336
Held-to-maturity unrealized losses	$ 1,748
Held-to-maturity, number of securities in unrealized loss positions | security	68
U.S. Government-sponsored agency securities
Schedule of Available for sale Securities and Held to maturity Securities [Line Items]
Gross Unrealized Losses	$ 134
Number of securities in unrealized loss positions | security	7
Held-to-maturity unrealized losses	$ 833
Held-to-maturity, number of securities in unrealized loss positions | security	5
U.S. Government-sponsored mortgage-backed securities
Schedule of Available for sale Securities and Held to maturity Securities [Line Items]
Gross Unrealized Losses	$ 16,689
Number of securities in unrealized loss positions | security	125
Held-to-maturity unrealized losses	$ 6,514
Held-to-maturity, number of securities in unrealized loss positions | security	100

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Investment Securities - Gross Gains on Sales and Redemptions of Available for Sale Securities (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Sales and Redemptions of Available for Sale Securities:
Gross gains	$ 1,285	$ 382	$ 4,016	$ 1,547
Gross losses		$ 50		$ 50

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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	Sep. 30, 2018	Dec. 31, 2017
Fair Value
Less than 12 Months	$ 802,842	$ 196,051
12 Months or Longer	165,422	103,991
Total	968,264	300,042
Gross Unrealized Losses
Less than 12 Months	21,517	1,718
12 Months or Longer	9,586	2,796
Total	31,103	4,514
Fair Value
Less than 12 Months	214,439	74,926
12 Months or Longer	99,153	71,079
Total	313,592	146,005
Gross Unrealized Losses
Less than 12 Months	4,336	652
12 Months or Longer	4,762	1,431
Total	9,098	2,083
Less than 12 Months, Fair Value	1,017,281	270,977
12 Months or Longer, Fair Value	264,575	175,070
Total, Fair Value	1,281,856	446,047
Less than 12 Months, Gross Unrealized Losses	25,853	2,370
12 Months or Longer, Gross Unrealized Losses	14,348	4,227
Total, Gross Unrealized Losses	40,201	6,597
U.S. Government-sponsored agency securities
Fair Value
Less than 12 Months	18,358
Total	18,358
Gross Unrealized Losses
Less than 12 Months	134
Total	134
Fair Value
Less than 12 Months	97	9,988
12 Months or Longer	21,688	12,196
Total	21,785	22,184
Gross Unrealized Losses
Less than 12 Months	3	131
12 Months or Longer	830	304
Total	833	435
State and municipal
Fair Value
Less than 12 Months	397,852	13,296
12 Months or Longer	30,820	35,324
Total	428,672	48,620
Gross Unrealized Losses
Less than 12 Months	11,780	198
12 Months or Longer	2,500	893
Total	14,280	1,091
Fair Value
Less than 12 Months	44,857	2,430
12 Months or Longer	16,326	15,805
Total	61,183	18,235
Gross Unrealized Losses
Less than 12 Months	857	36
12 Months or Longer	891	208
Total	1,748	244
U.S. Government-sponsored mortgage-backed securities
Fair Value
Less than 12 Months	386,632	182,755
12 Months or Longer	134,602	68,667
Total	521,234	251,422
Gross Unrealized Losses
Less than 12 Months	9,603	1,520
12 Months or Longer	7,086	1,903
Total	16,689	3,423
Fair Value
Less than 12 Months	168,488	62,508
12 Months or Longer	61,139	43,078
Total	229,627	105,586
Gross Unrealized Losses
Less than 12 Months	3,473	485
12 Months or Longer	3,041	919
Total	6,514	$ 1,404
Corporate obligations
Fair Value
Less than 12 Months	997
Total	997
Gross Unrealized Losses
Less than 12 Months	3
Total	$ 3

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Investment Securities - Investments in Debt and Equity Securities Reported Less than Historical Cost (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Schedule of Investments [Line Items]
Fair value	$ 1,281,856	$ 446,047
Investments reported at less than historical cost
Schedule of Investments [Line Items]
Historical cost	1,322,058	452,644
Fair value	$ 1,281,856	$ 446,047
Percent of the Corporation's investment portfolio	78.90%	28.60%

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Loans and Allowance - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Receivables [Abstract]
Loans held for sale	$ 3,022	$ 7,216
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 7,088,071	6,751,199
Residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Percentage of troubled debt restructured loans	100.00%
Mortgage loans with formal foreclosure proceedings	$ 1,045	2,302
Loans	1,483,196	1,476,786
Loans acquired with deteriorated credit quality
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	19,079	24,954
Loans acquired with deteriorated credit quality | Commercial and consumer loan
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	1,568	315
Loans acquired with deteriorated credit quality | Residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 1,606	$ 1,536

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Loans and Allowance - Composition of Loan Portfolio by Loan Class (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Jun. 30, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Dec. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 7,088,071		$ 6,751,199
Allowance for loan losses	(78,406)	$ (77,543)	(75,032)	$ (73,354)	$ (70,471)	$ (66,037)
Net Loans	7,009,665		6,676,167
Commercial and industrial loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	1,655,569		1,493,493
Agricultural production financing and other loans to farmers
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	88,504		121,757
Construction
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	668,608		612,219
Commercial and farmland
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	2,699,629		2,562,691
Residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	965,893		962,765
Allowance for loan losses	(14,460)	(14,424)	(13,537)	(13,331)	(12,955)	(11,755)
Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	517,303		514,021
Individuals' loans for household and other personal expenditures
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	98,709		86,935
Allowance for loan losses	(3,932)	(3,921)	(3,732)	(3,591)	(3,372)	(2,923)
Lease financing receivables, net of unearned income
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	1,830		2,527
Allowance for loan losses	(2)	$ (2)	(2)	$ (2)	$ (2)	$ (2)
Other commercial loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 392,026		$ 394,791

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Loans and Allowance - Changes in Allowance for Loan Losses by Loan Segment (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Allowance for loan losses:
Beginning balance	$ 77,543	$ 70,471	$ 75,032	$ 66,037
Provision for losses	1,400	2,083	5,563	7,343
Recoveries on loans	1,175	1,859	5,066	3,853
Loans charged off	(1,712)	(1,059)	(7,255)	(3,879)
Ending balance	78,406	73,354	78,406	73,354
Commercial
Allowance for loan losses:
Beginning balance	31,465	28,906	30,418	27,696
Provision for losses	256	921	1,567	2,279
Recoveries on loans	658	324	2,060	987
Loans charged off	(313)	(468)	(1,979)	(1,279)
Ending balance	32,066	29,683	32,066	29,683
Commercial Real Estate
Allowance for loan losses:
Beginning balance	27,731	25,236	27,343	23,661
Provision for losses	410	374	1,448	2,023
Recoveries on loans	306	1,327	1,858	2,066
Loans charged off	(501)	(190)	(2,703)	(1,003)
Ending balance	27,946	26,747	27,946	26,747
Consumer
Allowance for loan losses:
Beginning balance	3,921	3,372	3,732	2,923
Provision for losses	159	342	493	877
Recoveries on loans	46	51	233	253
Loans charged off	(194)	(174)	(526)	(462)
Ending balance	3,932	3,591	3,932	3,591
Residential
Allowance for loan losses:
Beginning balance	14,424	12,955	13,537	11,755
Provision for losses	575	446	2,055	2,164
Recoveries on loans	165	157	915	547
Loans charged off	(704)	(227)	(2,047)	(1,135)
Ending balance	14,460	13,331	14,460	13,331
Finance Leases
Allowance for loan losses:
Beginning balance	2	2	2	2
Provision for losses
Recoveries on loans
Loans charged off
Ending balance	$ 2	$ 2	$ 2	$ 2

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Loans and Allowance - Allowance for Credit Losses and Loan Portfolio by Loan Segment (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Jun. 30, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Dec. 31, 2016
Allowance Balances:
Individually evaluated for impairment	$ 433		$ 1,637
Collectively evaluated for impairment	77,973		73,395
Total Allowance for Loan Losses	78,406	$ 77,543	75,032	$ 73,354	$ 70,471	$ 66,037
Loan Balance [Abstract]
Individually evaluated for impairment	15,999		23,211
Collectively evaluated for impairment	7,052,993		6,703,034
Loans	7,088,071		6,751,199
Loans acquired with deteriorated credit quality
Loan Balance [Abstract]
Loans	19,079		24,954
Commercial
Allowance Balances:
Individually evaluated for impairment			666
Collectively evaluated for impairment	32,066		29,752
Total Allowance for Loan Losses	32,066	31,465	30,418	29,683	28,906	27,696
Loan Balance [Abstract]
Individually evaluated for impairment	1,614		3,345
Collectively evaluated for impairment	2,132,193		2,005,275
Loans	2,136,099		2,010,041
Commercial | Loans acquired with deteriorated credit quality
Loan Balance [Abstract]
Loans	2,292		1,421
Commercial Real Estate
Allowance Balances:
Individually evaluated for impairment			567
Collectively evaluated for impairment	27,946		26,776
Total Allowance for Loan Losses	27,946	27,731	27,343	26,747	25,236	23,661
Loan Balance [Abstract]
Individually evaluated for impairment	12,158		17,432
Collectively evaluated for impairment	3,340,898		3,135,481
Loans	3,368,237		3,174,910
Commercial Real Estate | Loans acquired with deteriorated credit quality
Loan Balance [Abstract]
Loans	15,181		21,997
Consumer
Allowance Balances:
Individually evaluated for impairment
Collectively evaluated for impairment	3,932		3,732
Total Allowance for Loan Losses	3,932	3,921	3,732	3,591	3,372	2,923
Loan Balance [Abstract]
Individually evaluated for impairment	8		5
Collectively evaluated for impairment	98,701		86,930
Loans	98,709		86,935
Consumer | Loans acquired with deteriorated credit quality
Loan Balance [Abstract]
Loans
Residential
Allowance Balances:
Individually evaluated for impairment	433		404
Collectively evaluated for impairment	14,027		13,133
Total Allowance for Loan Losses	14,460	14,424	13,537	13,331	12,955	11,755
Loan Balance [Abstract]
Individually evaluated for impairment	2,219		2,429
Collectively evaluated for impairment	1,479,371		1,472,821
Loans	1,483,196		1,476,786
Residential | Loans acquired with deteriorated credit quality
Loan Balance [Abstract]
Loans	1,606		1,536
Lease financing receivables, net of unearned income
Allowance Balances:
Individually evaluated for impairment
Collectively evaluated for impairment	2		2
Total Allowance for Loan Losses	2	$ 2	2	$ 2	$ 2	$ 2
Loan Balance [Abstract]
Individually evaluated for impairment
Collectively evaluated for impairment	1,830		2,527
Loans	1,830		2,527
Lease financing receivables, net of unearned income | Loans acquired with deteriorated credit quality
Loan Balance [Abstract]
Loans

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Loans and Allowance - Summary of Non-Accrual Loans by Loan Class (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	$ 20,421	$ 28,724
Commercial and industrial loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	2,287	3,275
Agricultural production financing and other loans to farmers
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	640	1,027
Construction
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	764	65
Commercial and farmland
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	10,406	12,951
Residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	5,140	9,444
Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	1,126	1,928
Individuals' loans for household and other personal expenditures
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	$ 58	$ 34

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Loans and Allowance - Composition of Impaired Loans by Loan Class (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Unpaid Principal Balance
Impaired loans with no related allowance	$ 21,951		$ 21,951		$ 25,979
Impaired loans with related allowance	2,231		2,231		6,123
Total Impaired Loans	24,182		24,182		32,102
Recorded Investment
Impaired loans with no related allowance	13,842		13,842		17,930
Impaired loans with related allowance	2,157		2,157		5,281
Total Impaired Loans	15,999		15,999		23,211
Related Allowance	433		433		1,637
Average Recorded Investment
Impaired loans with no related allowance	14,402	$ 17,782	15,370	$ 21,691
Impaired loans with related allowance	2,161	7,226	2,179	7,236
Total Impaired Loans	16,563	25,008	17,549	28,927
Interest Income Recognized
Impaired loans with no related allowance	41	89	130	269
Impaired loans with related allowance	16	10	45	31
Total Impaired Loans	57	99	175	300
Commercial and industrial loans
Unpaid Principal Balance
Impaired loans with no related allowance	6,133		6,133		7,611
Impaired loans with related allowance					812
Recorded Investment
Impaired loans with no related allowance	974		974		1,536
Impaired loans with related allowance					782
Related Allowance					552
Average Recorded Investment
Impaired loans with no related allowance	979	2,103	994	4,567
Impaired loans with related allowance		1,796		1,796
Interest Income Recognized
Impaired loans with no related allowance
Impaired loans with related allowance
Agricultural production financing and other loans to farmers
Unpaid Principal Balance
Impaired loans with no related allowance	660		660		732
Impaired loans with related allowance					357
Recorded Investment
Impaired loans with no related allowance	640		640		700
Impaired loans with related allowance					327
Related Allowance					114
Average Recorded Investment
Impaired loans with no related allowance	640	945	640	945
Impaired loans with related allowance		337		337
Interest Income Recognized
Impaired loans with no related allowance
Impaired loans with related allowance
Construction
Unpaid Principal Balance
Impaired loans with no related allowance	1,352		1,352
Recorded Investment
Impaired loans with no related allowance	614		614
Average Recorded Investment
Impaired loans with no related allowance	614		930
Interest Income Recognized
Impaired loans with no related allowance
Commercial and farmland
Unpaid Principal Balance
Impaired loans with no related allowance	13,717		13,717		16,758
Impaired loans with related allowance					2,989
Recorded Investment
Impaired loans with no related allowance	11,544		11,544		15,162
Impaired loans with related allowance					2,270
Related Allowance					567
Average Recorded Investment
Impaired loans with no related allowance	12,098	14,129	12,733	15,483
Impaired loans with related allowance		3,359		3,374
Interest Income Recognized
Impaired loans with no related allowance	40	89	128	267
Impaired loans with related allowance
Residential
Unpaid Principal Balance
Impaired loans with no related allowance	81		81		833
Impaired loans with related allowance	1,849		1,849		1,616
Recorded Investment
Impaired loans with no related allowance	62		62		519
Impaired loans with related allowance	1,794		1,794		1,572
Related Allowance	357		357		327
Average Recorded Investment
Impaired loans with no related allowance	62	588	63	673
Impaired loans with related allowance	1,797	1,403	1,812	1,395
Interest Income Recognized
Impaired loans with no related allowance	1		2	2
Impaired loans with related allowance	13	8	37	25
Home equity
Unpaid Principal Balance
Impaired loans with no related allowance					40
Recorded Investment
Impaired loans with no related allowance					8
Average Recorded Investment
Impaired loans with no related allowance		11		16
Impaired loans with related allowance	364	331	367	334
Interest Income Recognized
Impaired loans with no related allowance
Impaired loans with related allowance	3	2	8	6
Individuals' loans for household and other personal expenditures
Unpaid Principal Balance
Impaired loans with no related allowance	8		8		5
Recorded Investment
Impaired loans with no related allowance	8		8		5
Average Recorded Investment
Impaired loans with no related allowance	9	6	10	$ 7
Interest Income Recognized
Impaired loans with no related allowance
Home equity
Unpaid Principal Balance
Impaired loans with related allowance	382		382		349
Recorded Investment
Impaired loans with related allowance	363		363		330
Related Allowance	$ 76		$ 76		$ 77

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Loans and Allowance - Credit Quality of Loan Portfolio by Loan Class (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Financing Receivable, Recorded Investment [Line Items]
Loans	$ 7,088,071	$ 6,751,199
Commercial and industrial loans
Financing Receivable, Recorded Investment [Line Items]
Loans	1,655,569	1,493,493
Agricultural production financing and other loans to farmers
Financing Receivable, Recorded Investment [Line Items]
Loans	88,504	121,757
Construction
Financing Receivable, Recorded Investment [Line Items]
Loans	668,608	612,219
Commercial and farmland
Financing Receivable, Recorded Investment [Line Items]
Loans	2,699,629	2,562,691
Residential
Financing Receivable, Recorded Investment [Line Items]
Loans	965,893	962,765
Home equity
Financing Receivable, Recorded Investment [Line Items]
Loans	517,303	514,021
Individuals' loans for household and other personal expenditures
Financing Receivable, Recorded Investment [Line Items]
Loans	98,709	86,935
Lease financing receivables, net of unearned income
Financing Receivable, Recorded Investment [Line Items]
Loans	1,830	2,527
Other commercial loans
Financing Receivable, Recorded Investment [Line Items]
Loans	392,026	394,791
Commercial Pass
Financing Receivable, Recorded Investment [Line Items]
Loans	5,431,154	5,099,464
Commercial Pass | Commercial and industrial loans
Financing Receivable, Recorded Investment [Line Items]
Loans	1,587,560	1,418,401
Commercial Pass | Agricultural production financing and other loans to farmers
Financing Receivable, Recorded Investment [Line Items]
Loans	68,556	73,800
Commercial Pass | Construction
Financing Receivable, Recorded Investment [Line Items]
Loans	629,244	587,906
Commercial Pass | Commercial and farmland
Financing Receivable, Recorded Investment [Line Items]
Loans	2,551,541	2,408,329
Commercial Pass | Residential
Financing Receivable, Recorded Investment [Line Items]
Loans	175,315	185,725
Commercial Pass | Home equity
Financing Receivable, Recorded Investment [Line Items]
Loans	25,435	28,554
Commercial Pass | Lease financing receivables, net of unearned income
Financing Receivable, Recorded Investment [Line Items]
Loans	1,830	2,527
Commercial Pass | Other commercial loans
Financing Receivable, Recorded Investment [Line Items]
Loans	391,673	394,222
Commercial Special Mention
Financing Receivable, Recorded Investment [Line Items]
Loans	100,674	154,573
Commercial Special Mention | Commercial and industrial loans
Financing Receivable, Recorded Investment [Line Items]
Loans	18,085	51,336
Commercial Special Mention | Agricultural production financing and other loans to farmers
Financing Receivable, Recorded Investment [Line Items]
Loans	7,144	27,502
Commercial Special Mention | Construction
Financing Receivable, Recorded Investment [Line Items]
Loans	2,533	828
Commercial Special Mention | Commercial and farmland
Financing Receivable, Recorded Investment [Line Items]
Loans	67,043	70,074
Commercial Special Mention | Residential
Financing Receivable, Recorded Investment [Line Items]
Loans	5,119	4,376
Commercial Special Mention | Home equity
Financing Receivable, Recorded Investment [Line Items]
Loans	750	457
Commercial Special Mention | Lease financing receivables, net of unearned income
Financing Receivable, Recorded Investment [Line Items]
Loans
Commercial Substandard
Financing Receivable, Recorded Investment [Line Items]
Loans	154,739	129,218
Commercial Substandard | Commercial and industrial loans
Financing Receivable, Recorded Investment [Line Items]
Loans	49,924	23,386
Commercial Substandard | Agricultural production financing and other loans to farmers
Financing Receivable, Recorded Investment [Line Items]
Loans	12,804	20,018
Commercial Substandard | Construction
Financing Receivable, Recorded Investment [Line Items]
Loans	10,200	981
Commercial Substandard | Commercial and farmland
Financing Receivable, Recorded Investment [Line Items]
Loans	78,694	79,769
Commercial Substandard | Residential
Financing Receivable, Recorded Investment [Line Items]
Loans	2,377	4,209
Commercial Substandard | Home equity
Financing Receivable, Recorded Investment [Line Items]
Loans	387	286
Commercial Substandard | Lease financing receivables, net of unearned income
Financing Receivable, Recorded Investment [Line Items]
Loans
Commercial Substandard | Other commercial loans
Financing Receivable, Recorded Investment [Line Items]
Loans	353	569
Commercial Doubtful
Financing Receivable, Recorded Investment [Line Items]
Loans		2,407
Commercial Doubtful | Commercial and industrial loans
Financing Receivable, Recorded Investment [Line Items]
Loans		370
Commercial Doubtful | Agricultural production financing and other loans to farmers
Financing Receivable, Recorded Investment [Line Items]
Loans		387
Commercial Doubtful | Commercial and farmland
Financing Receivable, Recorded Investment [Line Items]
Loans		1,536
Commercial Doubtful | Residential
Financing Receivable, Recorded Investment [Line Items]
Loans		114
Commercial Doubtful | Home equity
Financing Receivable, Recorded Investment [Line Items]
Loans
Commercial Loss
Financing Receivable, Recorded Investment [Line Items]
Loans		50
Commercial Loss | Agricultural production financing and other loans to farmers
Financing Receivable, Recorded Investment [Line Items]
Loans		50
Commercial Loss | Commercial and farmland
Financing Receivable, Recorded Investment [Line Items]
Loans
Consumer Performing
Financing Receivable, Recorded Investment [Line Items]
Loans	1,395,161	1,354,790
Consumer Performing | Agricultural production financing and other loans to farmers
Financing Receivable, Recorded Investment [Line Items]
Loans
Consumer Performing | Construction
Financing Receivable, Recorded Investment [Line Items]
Loans	26,494	22,374
Consumer Performing | Commercial and farmland
Financing Receivable, Recorded Investment [Line Items]
Loans	2,350	2,980
Consumer Performing | Residential
Financing Receivable, Recorded Investment [Line Items]
Loans	778,086	759,900
Consumer Performing | Home equity
Financing Receivable, Recorded Investment [Line Items]
Loans	489,631	482,661
Consumer Performing | Individuals' loans for household and other personal expenditures
Financing Receivable, Recorded Investment [Line Items]
Loans	98,600	86,875
Consumer Non-Performing
Financing Receivable, Recorded Investment [Line Items]
Loans	6,343	10,697
Consumer Non-Performing | Construction
Financing Receivable, Recorded Investment [Line Items]
Loans	137	130
Consumer Non-Performing | Commercial and farmland
Financing Receivable, Recorded Investment [Line Items]
Loans	1	3
Consumer Non-Performing | Residential
Financing Receivable, Recorded Investment [Line Items]
Loans	4,996	8,441
Consumer Non-Performing | Home equity
Financing Receivable, Recorded Investment [Line Items]
Loans	1,100	2,063
Consumer Non-Performing | Individuals' loans for household and other personal expenditures
Financing Receivable, Recorded Investment [Line Items]
Loans	$ 109	$ 60

XML

Loans and Allowance - Past Due Aging of Loan Portfolio by Loan Class (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	$ 7,049,257	$ 6,703,256
Non-Accrual	20,421	28,724
Total Past Due & Non-Accrual	38,814	47,943
Total	7,088,071	6,751,199
Commercial and industrial loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	1,649,538	1,487,221
Non-Accrual	2,287	3,275
Total Past Due & Non-Accrual	6,031	6,272
Total	1,655,569	1,493,493
Agricultural production financing and other loans to farmers
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	87,864	120,720
Non-Accrual	640	1,027
Total Past Due & Non-Accrual	640	1,037
Total	88,504	121,757
Construction
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	667,142	610,896
Non-Accrual	764	65
Total Past Due & Non-Accrual	1,466	1,323
Total	668,608	612,219
Commercial and farmland
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	2,683,494	2,542,048
Non-Accrual	10,406	12,951
Total Past Due & Non-Accrual	16,135	20,643
Total	2,699,629	2,562,691
Residential
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	955,383	948,947
Non-Accrual	5,140	9,444
Total Past Due & Non-Accrual	10,510	13,818
Total	965,893	962,765
Home equity
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	513,936	510,362
Non-Accrual	1,126	1,928
Total Past Due & Non-Accrual	3,367	3,659
Total	517,303	514,021
Individuals' loans for household and other personal expenditures
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	98,044	85,744
Non-Accrual	58	34
Total Past Due & Non-Accrual	665	1,191
Total	98,709	86,935
Finance Leases
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	1,830	2,527
Total	1,830	2,527
Other commercial loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	392,026	394,791
Total Past Due & Non-Accrual
Total	392,026	394,791
30-59 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	11,976	16,773
30-59 Days Past Due | Commercial and industrial loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	3,344	2,967
30-59 Days Past Due | Agricultural production financing and other loans to farmers
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due		10
30-59 Days Past Due | Construction
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due		1,193
30-59 Days Past Due | Commercial and farmland
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	1,859	6,923
30-59 Days Past Due | Residential
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	4,873	4,010
30-59 Days Past Due | Home equity
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	1,506	1,372
30-59 Days Past Due | Individuals' loans for household and other personal expenditures
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	394	298
60-89 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	6,367	1,522
60-89 Days Past Due | Commercial and industrial loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	400	30
60-89 Days Past Due | Agricultural production financing and other loans to farmers
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due
60-89 Days Past Due | Construction
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	702
60-89 Days Past Due | Commercial and farmland
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	3,870	166
60-89 Days Past Due | Residential
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	497	308
60-89 Days Past Due | Home equity
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	735	184
60-89 Days Past Due | Individuals' loans for household and other personal expenditures
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	163	834
60-89 Days Past Due | Other commercial loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due
90 Days or More Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	50	924
90 Days or More Past Due | Commercial and industrial loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due
90 Days or More Past Due | Agricultural production financing and other loans to farmers
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due
90 Days or More Past Due | Construction
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due		65
90 Days or More Past Due | Commercial and farmland
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due		603
90 Days or More Past Due | Residential
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due		56
90 Days or More Past Due | Home equity
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due		175
90 Days or More Past Due | Individuals' loans for household and other personal expenditures
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	$ 50	$ 25

XML

Loans and Allowance - Summary of Troubled Debt Restructurings (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018 USD ($) loan	Sep. 30, 2017 USD ($) loan	Sep. 30, 2018 USD ($) loan	Sep. 30, 2017 USD ($) loan
Financing Receivable, Modifications [Line Items]
Pre-Modification Recorded Balance	$ 219	$ 194	$ 578	$ 1,517
Post-Modification Recorded Balance	$ 205	$ 201	$ 576	$ 1,261
Number of Loans | loan	5	4	15	18
Commercial and industrial loans
Financing Receivable, Modifications [Line Items]
Pre-Modification Recorded Balance		$ 6		$ 400
Post-Modification Recorded Balance		$ 6		$ 176
Number of Loans | loan		1		2
Commercial and farmland
Financing Receivable, Modifications [Line Items]
Pre-Modification Recorded Balance				$ 357
Post-Modification Recorded Balance				$ 492
Number of Loans | loan				6
Residential
Financing Receivable, Modifications [Line Items]
Pre-Modification Recorded Balance	$ 154	$ 120	$ 490	$ 570
Post-Modification Recorded Balance	$ 140	$ 122	$ 487	$ 520
Number of Loans | loan	4	1	11	8
Home equity
Financing Receivable, Modifications [Line Items]
Pre-Modification Recorded Balance	$ 65	$ 68	$ 81	$ 190
Post-Modification Recorded Balance	$ 65	$ 73	$ 81	$ 73
Number of Loans | loan	1	2	3	2
Individuals' loans for household and other personal expenditures
Financing Receivable, Modifications [Line Items]
Pre-Modification Recorded Balance			$ 7
Post-Modification Recorded Balance			$ 8
Number of Loans | loan			1

XML

Loans and Allowance - Summary of Troubled Debt Restructurings by Modification Type (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Financing Receivable, Modifications [Line Items]
Modification	$ 205	$ 200	$ 606	$ 1,088
Term Modification
Financing Receivable, Modifications [Line Items]
Modification		5	77	46
Rate Modification
Financing Receivable, Modifications [Line Items]
Modification	112	195	290	600
Combination
Financing Receivable, Modifications [Line Items]
Modification	93		239	442
Commercial and industrial loans
Financing Receivable, Modifications [Line Items]
Modification		5		173
Commercial and industrial loans | Term Modification
Financing Receivable, Modifications [Line Items]
Modification		5		5
Commercial and industrial loans | Rate Modification
Financing Receivable, Modifications [Line Items]
Modification
Commercial and industrial loans | Combination
Financing Receivable, Modifications [Line Items]
Modification				168
Commercial and farmland
Financing Receivable, Modifications [Line Items]
Modification				334
Commercial and farmland | Term Modification
Financing Receivable, Modifications [Line Items]
Modification				41
Commercial and farmland | Rate Modification
Financing Receivable, Modifications [Line Items]
Modification				61
Commercial and farmland | Combination
Financing Receivable, Modifications [Line Items]
Modification				232
Residential
Financing Receivable, Modifications [Line Items]
Modification	140	122	447	508
Residential | Term Modification
Financing Receivable, Modifications [Line Items]
Modification
Residential | Rate Modification
Financing Receivable, Modifications [Line Items]
Modification	47	122	208	466
Residential | Combination
Financing Receivable, Modifications [Line Items]
Modification	93		239	42
Home equity
Financing Receivable, Modifications [Line Items]
Modification	65	73	153	73
Home equity | Term Modification
Financing Receivable, Modifications [Line Items]
Modification			77
Home equity | Rate Modification
Financing Receivable, Modifications [Line Items]
Modification	65	73	76	73
Home equity | Combination
Financing Receivable, Modifications [Line Items]
Modification
Individuals' loans for household and other personal expenditures
Financing Receivable, Modifications [Line Items]
Modification			6
Individuals' loans for household and other personal expenditures | Rate Modification
Financing Receivable, Modifications [Line Items]
Modification			6
Individuals' loans for household and other personal expenditures | Combination
Financing Receivable, Modifications [Line Items]
Modification

XML

Loans and Allowance - Subsequent Default (Details) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2018 USD ($) loan	Sep. 30, 2018 USD ($) loan
Financing Receivable, Modifications [Line Items]
Number of Loans | loan	4	6
Recorded Balance | $	$ 356	$ 425
Commercial and farmland
Financing Receivable, Modifications [Line Items]
Number of Loans | loan	1	1
Recorded Balance | $	$ 262	$ 262
Residential
Financing Receivable, Modifications [Line Items]
Number of Loans | loan	2	4
Recorded Balance | $	$ 83	$ 152
Individuals' loans for household and other personal expenditures
Financing Receivable, Modifications [Line Items]
Number of Loans | loan	1	1
Recorded Balance | $	$ 11	$ 11

XML

Purchased Credit Impaired Loans - Accretable Yield or Income Expected to be Collected (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Accretable Yield Movement Schedule [Roll Forward]
Beginning balance	$ 2,423	$ 2,607	$ 2,890	$ 3,951
Additions		941		1,608
Accretion	(1,004)	(686)	(2,441)	(5,082)
Reclassification from nonaccretable	798	449	1,768	3,501
Disposals	(16)		(16)	(667)
Ending balance	2,201	$ 3,311	2,201	$ 3,311
Loans acquired with deteriorated credit quality
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans acquired and accounted for under ASC 310-30, carrying amount	$ 20,600		$ 20,600		$ 25,300

XML

Purchased Credit Impaired Loans - Loans Acquired for Which Contractually Required Payments Would not be Collected (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Jul. 14, 2017	May 19, 2017
IAB
Accounts, Notes, Loans and Financing Receivable [Line Items]
Contractually required payments receivable at acquisition date	$ 14,131	$ 14,131
Nonaccretable difference	8,352
Expected cash flows at acquisition date	5,779
Accretable difference	941
Basis in loans at acquisition date	4,838	$ 4,838
Arlington Bank
Accounts, Notes, Loans and Financing Receivable [Line Items]
Contractually required payments receivable at acquisition date	6,183		$ 6,183
Nonaccretable difference	2,891
Expected cash flows at acquisition date	3,292
Accretable difference	667
Basis in loans at acquisition date	$ 2,625		$ 2,625

XML

Goodwill - Narrative (Details) - USD ($) $ in Thousands		12 Months Ended
	May 19, 2017	Dec. 31, 2017	Sep. 30, 2018	Jul. 14, 2017	Dec. 31, 2016
Goodwill [Line Items]
Goodwill		$ 445,355	$ 445,355		$ 244,000
Goodwill, measurement period adjustment		$ (469)
IAB
Goodwill [Line Items]
Goodwill				$ 153,636
Arlington Bank
Goodwill [Line Items]
Goodwill	$ 47,719
Goodwill, measurement period adjustment	$ 469

XML

Goodwill - Schedule of Goodwill (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($)
Goodwill [Roll Forward]
Balance, January 1	$ 244,000
Goodwill acquired	201,824
Measurement period adjustment	(469)
Balance, December 31	$ 445,355

XML

Other Intangibles - Narrative (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Jul. 14, 2017	May 19, 2017
Minimum
Finite-Lived Intangible Assets [Line Items]
Useful life of core deposit intangibles and other intangibles	2 years
Maximum
Finite-Lived Intangible Assets [Line Items]
Useful life of core deposit intangibles and other intangibles	10 years
IAB
Finite-Lived Intangible Assets [Line Items]
Core deposit intangible		$ 17,403
IAB | Core deposit intangibles acquired
Finite-Lived Intangible Assets [Line Items]
Core deposit intangible		13,638
IAB | Other intangibles acquired
Finite-Lived Intangible Assets [Line Items]
Core deposit intangible		$ 3,765
Arlington Bank
Finite-Lived Intangible Assets [Line Items]
Core deposit intangible			$ 4,526
Arlington Bank | Core deposit intangibles acquired
Finite-Lived Intangible Assets [Line Items]
Core deposit intangible			$ 4,526

XML

Other Intangibles - Schedule of Core Deposit and Other Intangibles (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Acquired Finite-Lived Intangible Assets [Line Items]
Gross carrying amount	$ 85,869	$ 63,940
Accumulated amortization	(59,815)	(54,721)
Total other intangibles	26,054	31,148
Core deposit intangibles acquired
Acquired Finite-Lived Intangible Assets [Line Items]
Intangibles acquired		18,164
Other intangibles
Acquired Finite-Lived Intangible Assets [Line Items]
Intangibles acquired		$ 3,765

XML

Other Intangibles - Estimated Future Amortization Expense (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Amortization Expense
2018	$ 1,625
2019	5,169
2020	3,632
2021	3,427
2022	3,325
After 2022	8,876
Total other intangibles	$ 26,054	$ 31,148

XML

Derivative Financial Instruments - Narrative (Details) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2018 USD ($) interest_rate_swap interest_rate_cap instrument	Sep. 30, 2018 USD ($) interest_rate_swap interest_rate_cap instrument	Dec. 31, 2017 USD ($) interest_rate_swap interest_rate_cap
Derivative [Line Items]
Estimated amount to be transferred from accumulated other comprehensive income to earnings		$ 249
Termination value of derivatives in a net liability position	$ 394	394
Derivative collateral posted	3,315	3,315
Not Designated as Hedging Instrument
Derivative [Line Items]
Notional amount of interest rate derivatives	$ 420,388	$ 420,388
Federal Home Loan Bank Advances
Derivative [Line Items]
Number of debt instruments held | instrument	2	2
Cash Flow Hedging | Interest Rate Swap
Derivative [Line Items]
Number of interest rate derivatives held | interest_rate_swap	4	4	5
Notional amount of interest rate derivatives	$ 46,000	$ 46,000	$ 56,000
Notional amount matured	10,000
Cash Flow Hedging | Interest Rate Swap | Trust Preferred Debt
Derivative [Line Items]
Notional amount of interest rate derivatives	26,000	26,000
Cash Flow Hedging | Interest Rate Swap | Federal Home Loan Bank Advances
Derivative [Line Items]
Notional amount of interest rate derivatives	$ 20,000	$ 20,000
Cash Flow Hedging | Interest Rate Cap
Derivative [Line Items]
Number of interest rate derivatives held | interest_rate_cap	1	1	1
Notional amount of interest rate derivatives	$ 13,000	$ 13,000	$ 13,000
Cash Flow Hedging | Interest Rate Cap | Trust Preferred Debt
Derivative [Line Items]
Notional amount of interest rate derivatives	$ 13,000	$ 13,000

XML

Derivative Financial Instruments - Fair Value of Derivative Financial Instruments and Their Classification on Balance Sheet (Details) - Interest rate contracts - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Derivatives designated as hedging instruments | Other Assets
Derivatives, Fair Value [Line Items]
Asset Derivatives	$ 548	$ 18
Derivatives designated as hedging instruments | Other Liabilities
Derivatives, Fair Value [Line Items]
Liability Derivatives	387	1,383
Derivatives not designated as hedging instruments | Other Assets
Derivatives, Fair Value [Line Items]
Asset Derivatives	13,763	7,305
Derivatives not designated as hedging instruments | Other Liabilities
Derivatives, Fair Value [Line Items]
Liability Derivatives	$ 13,763	$ 7,305

XML

Derivative Financial Instruments - Effect of Derivative Financial Instruments on Other Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
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)	$ 210	$ (10)	$ 1,009	$ (380)

XML

Derivative Financial Instruments - Effect of Derivative Financial Instruments on Income Statement (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Interest rate contracts | Derivatives designated as hedging instruments | Interest Expense
Derivative [Line Items]
Amount of Gain (Loss) Reclassified from Other Comprehensive Income into Income (Effective Portion)	$ (93)	$ (240)	$ (368)	$ (759)

XML

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	Sep. 30, 2018	Dec. 31, 2017
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment securities available for sale	$ 1,149,162	$ 999,947
Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment securities available for sale
Significant Other Observable Inputs (Level 2)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment securities available for sale	1,145,847	995,969
Significant Unobservable Inputs (Level 3)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment securities available for sale	3,315	3,978
Fair Value, Measurements, Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Equity securities
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Equity securities		2,353
Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Equity securities		4
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	14,150	8,688
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]
Investment securities available for sale	18,358
Fair Value, Measurements, Recurring | State and municipal | Significant Other Observable Inputs (Level 2)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment securities available for sale	596,888	522,750
Fair Value, Measurements, Recurring | State and municipal | Significant Unobservable Inputs (Level 3)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment securities available for sale	3,280	3,943
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]
Investment securities available for sale	530,601	470,866
Fair Value, Measurements, Recurring | U.S. Government-sponsored mortgage-backed securities | Significant Unobservable Inputs (Level 3)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment securities available for sale	4
Fair Value, Measurements, Recurring | Corporate obligations | Significant Unobservable Inputs (Level 3)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment securities available for sale	31	31
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	13,763	7,305
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	548	18
Fair Value, Measurements, Recurring | Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Equity securities		2,357
Fair Value, Measurements, Recurring | Fair Value | Interest rate swap liability
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate swap liability	14,150	8,688
Fair Value, Measurements, Recurring | Fair Value | U.S. Government-sponsored agency securities
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment securities available for sale	18,358
Fair Value, Measurements, Recurring | Fair Value | State and municipal
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment securities available for sale	600,168	526,693
Fair Value, Measurements, Recurring | Fair Value | U.S. Government-sponsored mortgage-backed securities
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment securities available for sale	530,605	470,866
Fair Value, Measurements, Recurring | Fair Value | Corporate obligations
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment securities available for sale	31	31
Fair Value, Measurements, Recurring | Fair Value | Interest rate swap asset
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate derivatives	13,763	7,305
Fair Value, Measurements, Recurring | Fair Value | Interest rate cap
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate derivatives	$ 548	$ 18

XML

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		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Available for Sale Securities
Balance at beginning of the period	$ 3,970	$ 3,330	$ 3,978	$ 5,169
Included in other comprehensive income	(35)	(22)	(59)	38
Principal payments	(620)	679	(604)	(1,220)
Ending balance	$ 3,315	$ 3,987	$ 3,315	$ 3,987

XML

Disclosures About Fair Value of Assets and Liabilities - Transfers Between Levels (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Fair Value Disclosures [Abstract]
Transfers in or out of Level 3	$ 0	$ 0	$ 0	$ 0

XML

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	Sep. 30, 2018	Dec. 31, 2017
Impaired loans (collateral dependent)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 5,344	$ 9,576
Impaired loans (collateral dependent) | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	5,344	9,576
Other real estate owned
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	937	859
Other real estate owned | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 937	$ 859

XML

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) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2018 USD ($)	Dec. 31, 2017 USD ($)
State and municipal securities | Discounted cash flow
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Fair Value	$ 3,280	$ 3,943
State and municipal securities | Discounted cash flow | Minimum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Maturity/Call date	1 month	1 month
US Muni BQ curve	A-	A-
State and municipal securities | Discounted cash flow | Maximum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Maturity/Call date	20 years	20 years
US Muni BQ curve	BBB-	BBB-
Corporate obligations and U.S. Government-sponsored mortgage backed securities | Discounted cash flow
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Fair Value	$ 35
Corporate obligations and equity securities | Discounted cash flow
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Fair Value		$ 35
Impaired loans (collateral dependent) | Collateral based measurements
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Fair Value	5,344	9,576
Other real estate owned | Appraisals
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Fair Value	$ 937	$ 859
Discount rate | State and municipal securities | Discounted cash flow | Minimum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Debt Securities, Available-for-sale, Measurement Input	0.01	0.0069
Discount rate | State and municipal securities | Discounted cash flow | Maximum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Debt Securities, Available-for-sale, Measurement Input	0.05	0.05
Risk free rate | Corporate obligations and U.S. Government-sponsored mortgage backed securities | Discounted cash flow
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Rate basis	3 month LIBOR
Risk free rate | Corporate obligations and equity securities | Discounted cash flow
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Rate basis		3 month LIBOR
Discount to reflect current market conditions | Corporate obligations and U.S. Government-sponsored mortgage backed securities | Discounted cash flow
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Debt Securities, Available-for-sale, Measurement Input	0.0200
Discount to reflect current market conditions | Corporate obligations and equity securities | Discounted cash flow
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Debt Securities, Available-for-sale, Measurement Input		0.0200
Discount to reflect current market conditions | Impaired loans (collateral dependent) | Collateral based measurements | Minimum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Debt Securities, Available-for-sale, Measurement Input	0.00	0.00
Discount to reflect current market conditions | Impaired loans (collateral dependent) | Collateral based measurements | Maximum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Debt Securities, Available-for-sale, Measurement Input	0.10	0.10
Discount to reflect current market conditions | Impaired loans (collateral dependent) | Collateral based measurements | Weighted Average
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Debt Securities, Available-for-sale, Measurement Input	0.02	0.01
Discount to reflect current market conditions | Other real estate owned | Appraisals | Minimum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Other real estate owned	0.00	0.00
Discount to reflect current market conditions | Other real estate owned | Appraisals | Maximum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Other real estate owned	0.24	0.10
Discount to reflect current market conditions | Other real estate owned | Appraisals | Weighted Average
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Other real estate owned	0.03	0.02

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Disclosures About Fair Value of Assets and Liabilities - Estimated Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Assets:
Investment securities available for sale	$ 1,149,162	$ 999,947
Investment securities held to maturity	468,452	568,208
Loans held for sale	3,022	7,216
Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets:
Cash and cash equivalents	142,501	154,905
Interest-bearing time deposits	66,763	35,027
Investment securities available for sale
Liabilities:
Deposits	6,083,491	5,741,019
Significant Other Observable Inputs (Level 2)
Borrowings:
Federal funds purchased	90,000	144,038
Securities sold under repurchase agreements	118,696	136,562
Federal Home Loan Bank advances	379,309	361,085
Subordinated debentures and term loans	124,806	120,085
Assets:
Investment securities available for sale	1,145,847	995,969
Investment securities held to maturity	458,087	556,305
Loans held for sale	3,022	7,216
Federal Home Loan Bank stock	24,588	23,825
Interest rate swap and cap asset	14,311	7,323
Interest receivable	38,531	37,130
Liabilities:
Deposits	1,522,591	1,406,526
Interest rate swap liability	14,150	8,688
Interest payable	5,920	4,390
Significant Unobservable Inputs (Level 3)
Assets:
Investment securities available for sale	3,315	3,978
Investment securities held to maturity	10,365	11,903
Loans	6,793,227	6,534,877
Carrying Amount
Borrowings:
Federal funds purchased	90,000	144,038
Securities sold under repurchase agreements	118,824	136,623
Federal Home Loan Bank advances	385,458	414,377
Subordinated debentures and term loans	138,408	139,349
Assets:
Cash and cash equivalents	142,501	154,905
Interest-bearing time deposits	66,763	35,027
Investment securities available for sale	1,149,162	999,947
Investment securities held to maturity	476,089	560,655
Loans held for sale	3,022	7,216
Loans	7,009,665	6,676,167
Federal Home Loan Bank stock	24,588	23,825
Interest rate swap and cap asset	14,311	7,323
Interest receivable	38,531	37,130
Liabilities:
Deposits	7,633,152	7,172,530
Interest rate swap liability	14,150	8,688
Interest payable	$ 5,920	$ 4,390

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Transfers Accounted for as Secured Borrowings (Details) - U.S. Government-sponsored mortgage-backed securities - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Assets Sold under Agreements to Repurchase [Line Items]
Collateral pledged for all repurchase agreements accounted for as secured borrowings	$ 118,824	$ 136,623
Overnight and Continuous
Assets Sold under Agreements to Repurchase [Line Items]
Collateral pledged for all repurchase agreements accounted for as secured borrowings	109,695	126,187
Up to 30 Days
Assets Sold under Agreements to Repurchase [Line Items]
Collateral pledged for all repurchase agreements accounted for as secured borrowings		1,340
30-90 Days
Assets Sold under Agreements to Repurchase [Line Items]
Collateral pledged for all repurchase agreements accounted for as secured borrowings	1,514	1,500
Greater Than 90 Days
Assets Sold under Agreements to Repurchase [Line Items]
Collateral pledged for all repurchase agreements accounted for as secured borrowings	$ 7,615	$ 7,596

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Accumulated Other Comprehensive Income (Loss) - Changes in Balances of Each Component (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Accumulated Other Comprehensive Income (Loss)
Beginning balance			$ 1,303,463
Other comprehensive income before reclassifications			(28,993)	$ 7,878
Amounts reclassified from accumulated other comprehensive income	$ (942)	$ (118)	(2,882)	(655)
Total other comprehensive income (loss), net of tax	(10,541)	(7,742)	(31,875)	7,223
Reclassification adjustment under ASU 2018-02			(626)
Ending balance	1,361,426		1,361,426
Total
Accumulated Other Comprehensive Income (Loss)
Beginning balance			(2,908)	(13,581)
Total other comprehensive income (loss), net of tax			(31,875)
Ending balance	(35,409)	(6,358)	(35,409)	(6,358)
Unrealized Gains (Losses) on Securities Available for Sale
Accumulated Other Comprehensive Income (Loss)
Beginning balance			8,970	1,035
Other comprehensive income before reclassifications			(30,032)	8,124
Amounts reclassified from accumulated other comprehensive income	(1,015)	(216)	(3,173)	(973)
Total other comprehensive income (loss), net of tax			(33,205)	7,151
Reclassification adjustment under ASU 2018-02			1,932
Ending balance	(22,303)	8,186	(22,303)	8,186
Unrealized Gains (Losses) on Cash Flow Hedges
Accumulated Other Comprehensive Income (Loss)
Beginning balance			(1,125)	(1,774)
Other comprehensive income before reclassifications			1,039	(246)
Amounts reclassified from accumulated other comprehensive income	73	156	291	493
Total other comprehensive income (loss), net of tax			1,330	247
Reclassification adjustment under ASU 2018-02			(242)
Ending balance	(37)	(1,527)	(37)	(1,527)
Unrealized Gains (Losses) on Defined Benefit Plans
Accumulated Other Comprehensive Income (Loss)
Beginning balance			(10,753)	(12,842)
Other comprehensive income before reclassifications
Amounts reclassified from accumulated other comprehensive income				(175)
Total other comprehensive income (loss), net of tax			0	(175)
Reclassification adjustment under ASU 2018-02			(2,316)
Ending balance	$ (13,069)	$ (13,017)	$ (13,069)	$ (13,017)

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Accumulated Other Comprehensive Income (Loss) - Reclassifications (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Reclassification Adjustments out of Accumulated Other Comprehensive Income [Line Items]
Net realized gains on sales of available for sale securities	$ 1,285	$ 332	$ 4,016	$ 1,497
Interest expense - subordinated debentures and term loans	2,089	1,945	6,136	5,602
Amortization of prior service costs	32,936	33,244	97,354	86,052
Income tax expense	(8,478)	(7,939)	(23,050)	(22,314)
Total reclassifications for the period, net of tax	942	118	2,882	655
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	1,015	216	3,173	973
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	(73)	(156)	(291)	(493)
Unrealized Gains (Losses) on Defined Benefit Plans
Reclassification Adjustments out of Accumulated Other Comprehensive Income [Line Items]
Total reclassifications for the period, net of tax				175
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]
Net realized gains on sales of available for sale securities	1,285	332	4,016	1,497
Income tax expense	(270)	(116)	(843)	(524)
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]
Income tax expense	20	84	77	266
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	(93)	(240)	(368)	(759)
Amount Reclassified from Accumulated Other Comprehensive Income (Loss) for the Period | Unrealized Gains (Losses) on Defined Benefit Plans
Reclassification Adjustments out of Accumulated Other Comprehensive Income [Line Items]
Amortization of prior service costs		89		269
Income tax expense		(31)		(94)
Total reclassifications for the period, net of tax	$ 0	$ 58	$ 0	$ 175

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Share-Based Compensation - Narrative (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
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	$ 894,000	$ 823,000	$ 2,546,000	$ 1,884,000
Forfeiture rate			2.20%
Unrecognized compensation expense related to stock options	$ 0		$ 0
Aggregate intrinsic value of stock options exercised			1,203,000	1,675,000
Cash receipts of stock options exercised			$ 1,093,000	$ 2,323,000
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)	359,736		359,736		366,993
Unrecognized compensation expense related to RSAs	$ 8,480,000		$ 8,480,000
Unrecognized compensation expense expected recognition period			1 year 8 months 4 days
DSUs | Non-employee Director
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding DSUs (in shares)	0		0
ESPP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense related to stock options	$ 0		$ 0
Grant date fair value of ESPP options	$ 39,424

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Share-Based Compensation - Components of Share-Based Compensation Awards (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Pre-tax compensation expense	$ 894	$ 823	$ 2,546	$ 1,884
Income tax benefit	(220)	(289)	(1,105)	(1,473)
Total share-based compensation expense, net of income taxes	674	534	1,441	411
Stock and ESPP Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Pre-tax compensation expense	39	23	88	93
Income tax benefit	(15)	(9)	(153)	(313)
Total share-based compensation expense, net of income taxes	24	14	(65)	(220)
Restricted Stock Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Pre-tax compensation expense	855	800	2,458	1,791
Income tax benefit	(205)	(280)	(952)	(1,160)
Total share-based compensation expense, net of income taxes	$ 650	$ 520	$ 1,506	$ 631

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Share-Based Compensation - Stock Option Activity under Stock Option Plans (Details)	9 Months Ended
	Sep. 30, 2018 USD ($) $ / shares shares
Number of Shares
Beginning balance (in shares) | shares	152,652
Exercised (in shares) | shares	(51,243)
Cancelled (in shares) | shares	(200)
Ending balance (in shares) | shares	101,209
Vested and Expected to Vest (in shares) | shares	101,209
Exercisable (in shares) | shares	101,209
Weighted-Average Exercise Price
Beginning balance (in dollars per share) | $ / shares	$ 16.71
Exercised (in dollars per share) | $ / shares	21.33
Cancelled (in dollars per share) | $ / shares	28.25
Ending balance (in dollars per share) | $ / shares	14.34
Vested and Expected to Vest (in dollars per share) | $ / shares	14.34
Exercisable (in dollars per share) | $ / shares	$ 14.34
Weighted Average Remaining Contractual Term (in Years)
Outstanding (term)	2 years 4 months 28 days
Vested and Expected to Vest (term)	2 years 4 months 28 days
Exercisable (term)	2 years 4 months 28 days
Aggregate Intrinsic Value
Outstanding | $	$ 3,101,835
Vested and Expected to Vest | $	3,101,835
Exercisable | $	$ 3,101,835

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Share-Based Compensation - Unvested RSAs Outstanding (Details) - RSAs	9 Months Ended
	Sep. 30, 2018 $ / shares shares
Number of Shares
Unvested RSAs, Beginning Balance (in shares) | shares	366,993
Granted (in shares) | shares	105,100
Vested (in shares) | shares	(106,797)
Forfeited (in shares) | shares	(5,560)
Unvested RSAs, Ending Balance (in shares) | shares	359,736
Weighted-Average Grant Date Fair Value
Unvested RSAs, Beginning Balance (in dollars per share) | $ / shares	$ 29.79
Granted (in dollars per share) | $ / shares	48.11
Vested (in dollars per share) | $ / shares	23.74
Forfeited (in dollars per share) | $ / shares	38.31
Unvested RSAs, Ending Balance (in dollars per share) | $ / shares	$ 36.82

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Income Tax (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Reconciliation of Federal Statutory to Actual Tax Expense:
Federal statutory income tax at 21% for 2018 and 35% for 2017	$ 10,414	$ 11,304	$ 29,500	$ 32,900
Tax-exempt interest income	(2,118)	(2,881)	(6,178)	(8,062)
Share-based compensation	(38)	(78)	(570)	(862)
Tax-exempt earnings and gains on life insurance	(197)	(551)	(655)	(1,905)
Tax credits	(42)	(61)	(65)	(249)
Other	459	206	1,018	492
Actual Tax Expense	$ 8,478	$ 7,939	$ 23,050	$ 22,314
Federal statutory income tax rate	21.00%	35.00%	21.00%	35.00%
Effective Tax Rate	17.10%	24.60%	16.40%	23.70%

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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		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Net Income
Net income available to common stockholders	$ 41,113	$ 24,358	$ 117,426	$ 71,687
Diluted net income per share	$ 41,113	$ 24,358	$ 117,426	$ 71,687
Weighted-Average Shares
Net income available to common stockholders (in shares)	49,286,945	48,431,880	49,244,403	43,845,675
Effect of potentially dilutive stock options and restricted stock awards (in shares)	205,074	211,894	213,782	217,544
Diluted net income per share (in shares)	49,492,019	48,643,774	49,458,185	44,063,219
Per Share Amount
Net income available to common stockholders (in dollars per share)	$ 0.83	$ 0.50	$ 2.38	$ 1.64
Diluted net income per share (in dollars per share)	$ 0.83	$ 0.50	$ 2.37	$ 1.63

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Net Income Per Share - Narrative (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
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)	0	0	0	0

XML

Impact of Accounting Changes (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Other assets	$ 53,167	$ 42,338
Other liabilities	54,094	$ 52,708
Anticipated impact | ASU 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Other assets	25,000
Other liabilities	$ 25,000

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Consummation of Merger (Details) - USD ($) $ / shares in Units, $ in Thousands	Oct. 09, 2018	Sep. 30, 2018	Jun. 30, 2018	Dec. 31, 2017
Business Acquisition [Line Items]
Assets		$ 9,787,282		$ 9,367,478
MBT
Business Acquisition [Line Items]
Assets			$ 1,300,000
Subsequent event
Business Acquisition [Line Items]
Share price	$ 45.71
Subsequent event | MBT
Business Acquisition [Line Items]
Total purchase price	$ 290,900