FAIR VALUE DISCLOSURES (Tables)

6 Months Ended

Jun. 30, 2014

Schedule of assets measured at fair value on a recurring basis

The table below presents the balances of assets measured at fair value on a recurring basis:

	June 30, 2014
	Fair Value Measurements Using						Assets
(dollars in thousands)	Level 1		Level 2		Level 3		at Fair Value
Assets
U.S. Treasury securities	$	1,006	$	0	$	0	$	1,006
Mortgage-backed securities		0		374,578		0		374,578
State and municipal securities		0		99,364		914		100,278
Total Securities		1,006		473,942		914		475,862
Mortgage banking derivative		0		183		0		183
Interest rate swap derivative		0		916		0		916
Total assets	$	1,006	$	475,041	$	914	$	476,961

Liabilities
Mortgage banking derivative		0		30		0		30
Interest rate swap derivative		0		930		0		930
Total liabilities	$	0	$	960	$	0	$	960

	December 31, 2013
	Fair Value Measurements Using						Assets
(dollars in thousands)	Level 1		Level 2		Level 3		at Fair Value
Assets
U.S. Treasury securities	$	1,017	$	0	$	0	$	1,017
Mortgage-backed securities		0		371,977		0		371,977
State and municipal securities		0		94,998		975		95,973
Total securities		1,017		466,975		975		468,967
Mortgage banking derivative		0		142		0		142
Interest rate swap derivative		0		627		0		627
Total assets	$	1,017	$	467,744	$	975	$	469,736

Liabilities
Mortgage banking derivative		0		2		0		2
Interest rate swap derivative		0		592		0		592
Total liabilities	$	0	$	594	$	0	$	594

Schedule of reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six months ended June 30, 2014 and 2013:

	Non-Agency Residential
	Mortgage-Backed Securities				State and Municipal Securities
(dollars in thousands)	2014		2013		2014		2013
Balance of recurring Level 3 assets at January 1	$	0	$	2,859	$	975	$	988
Transfers into Level 3		0		3,334		0		0
Changes in fair value of securities included in other comprehensive income		0		(52)		24		(9)
Principal payments		0		(749)		(85)		0
Balance of recurring Level 3 assets at June 30	$	0	$	5,392	$	914	$	979

Fair Value Measurements, Recurring, Valuation Techniques

The state and municipal securities measured at fair value included below are non-rated Indiana municipal revenue bonds and are not actively traded.

Quantitative Information about Level 3 Fair Value Measurements
					Range of
	Fair Value at				Inputs
(dollars in thousands)	6/30/2014		Valuation Technique	Unobservable Input	(Average)

State and municipal securities	$	914	Price to type, par, call	Discount to benchmark index		0-7	%
						(2.72)	%

Quantitative Information about Level 3 Fair Value Measurements
					Range of
	Fair Value at				Inputs
(dollars in thousands)	12/31/2013		Valuation Technique	Unobservable Input	(Average)

State and municipal securities	$	975	Price to type, par, call	Discount to benchmark index		0-6	%
						(2.21)	%

Schedule of assets measured at fair value on a nonrecurring basis

The table below presents the balances of assets measured at fair value on a nonrecurring basis:

	June 30, 2014
	Fair Value Measurements Using						Assets
(dollars in thousands)	Level 1		Level 2		Level 3		at Fair Value
Assets
Impaired loans:
Commercial and industrial loans:
Working capital lines of credit loans	$	0	$	0	$	1,021	$	1,021
Non-working capital loans		0		0		2,846		2,846
Commercial real estate and multi-family residential loans:
Construction and land development loans		0		0		2,021		2,021
Owner occupied loans		0		0		1,451		1,451
Nonowner occupied loans		0		0		3,941		3,941
Agri-business and agricultural loans:
Loans secured by farmland		0		0		462		462
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans		0		0		565		565
Open end and junior lien loans		0		0		48		48
Other consumer loans		0		0		37		37
Total impaired loans	$	0	$	0	$	12,392	$	12,392
Other real estate owned		0		0		263		263
Total assets	$	0	$	0	$	12,655	$	12,655

	December 31, 2013
	Fair Value Measurements Using						Assets
(dollars in thousands)	Level 1		Level 2		Level 3		at Fair Value
Assets
Impaired loans:
Commercial and industrial loans:
Working capital lines of credit loans	$	0	$	0	$	920	$	920
Non-working capital loans		0		0		3,097		3,097
Commercial real estate and multi-family residential loans:
Construction and land development loans		0		0		2,210		2,210
Owner occupied loans		0		0		3,958		3,958
Nonowner occupied loans		0		0		8,938		8,938
Agri-business and agricultural loans:
Loans secured by farmland		0		0		472		472
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans		0		0		409		409
Open end and junior lien loans		0		0		174		174
Other consumer loans		0		0		50		50
Total impaired loans	$	0	$	0	$	20,228	$	20,228
Other real estate owned		0		0		75		75
Total assets	$	0	$	0	$	20,303	$	20,303

Fair Value Measured On Nonrecurring Basis Valuation Techniques

The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a non-recurring basis at June 30, 2014:

(dollars in thousands)

Fair Value

Valuation Methodology

Unobservable Inputs

Average

Range of Inputs

Impaired loans:

Commercial and industrial

3,867

Collateral based

Discount to reflect

(2% - 58%)

measurements

current market conditions

and ultimate collectability

Impaired loans:

Commercial real estate

7,413

Collateral based

Discount to reflect

(2% - 63%)

measurements

current market conditions

and ultimate collectability

Impaired loans:

Agri-business and agricultural

462

Collateral based

Discount to reflect

(2% - 10%)

measurements

current market conditions

and ultimate collectability

Impaired loans:

Consumer 1-4 family mortgage

613

Collateral based

Discount to reflect

(5% - 77%)

measurements

current market conditions

and ultimate collectability

Impaired loans:

Other consumer

Collateral based

Discount to reflect

(31% - 46%)

measurements

current market conditions

and ultimate collectability

Other real estate owned

263

Appraisals

Discount to reflect

(18% - 49%)

current market conditions

The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a non-recurring basis at December 31, 2013:

(dollars in thousands)

Fair Value

Valuation Methodology

Unobservable Inputs

Average

Range of Inputs

Impaired loans:

Commercial and industrial

4,017

Collateral based

Discount to reflect

(3% - 93%)

measurements

current market conditions

and ultimate collectability

Impaired loans:

Commercial real estate

15,106

Collateral based

Discount to reflect

(3% - 45%)

measurements

current market conditions

and ultimate collectability

Impaired loans:

Agri-business and agricultural

472

Collateral based

Discount to reflect

(4% - 12%)

measurements

current market conditions

and ultimate collectability

Impaired loans:

Consumer 1-4 family mortgage

583

Collateral based

Discount to reflect

(6% - 77%)

measurements

current market conditions

and ultimate collectability

Impaired loans:

Other consumer

Collateral based

Discount to reflect

(28% - 98%)

measurements

current market conditions

and ultimate collectability

Other real estate owned

Appraisals

Discount to reflect

current market conditions

and ultimate collectability

Schedule of fair values and the related carrying values of financial instruments

The following table contains the estimated fair values and the related carrying values of the Company’s financial instruments. Items which are not financial instruments are not included.

	June 30, 2014
	Carrying		Estimated Fair Value
(dollars in thousands)	Value		Level 1		Level 2		Level 3		Total
Financial Assets:
Cash and cash equivalents	$	160,402	$	160,402	$	0	$	0	$	160,402
Securities available for sale		475,862		1,006		473,942		914		475,862
Real estate mortgages held for sale		1,069		0		1,108		0		1,108
Loans, net		2,627,722		0		0		2,614,925		2,614,925
Federal Home Loan Bank stock		7,312		N/A		N/A		N/A		N/A
Federal Reserve Bank stock		3,420		N/A		N/A		N/A		N/A
Accrued interest receivable		8,970		6		2,255		6,709		8,970
Financial Liabilities:
Certificates of deposit		(879,489)		0		(886,194)		0		(886,194)
All other deposits		(1,948,256)		(1,948,256)		0		0		(1,948,256)
Securities sold under agreements to repurchase		(92,961)		0		(92,961)		0		(92,961)
Federal funds purchased		0		0		0		0		0
Other short-term borrowings		(110,000)		0		(109,997)		0		(109,997)
Long-term borrowings		(35)		0		(41)		0		(41)
Subordinated debentures		(30,928)		0		0		(31,227)		(31,227)
Standby letters of credit		(286)		0		0		(286)		(286)
Accrued interest payable		(2,996)		(109)		(2,884)		(3)		(2,996)

	December 31, 2013
	Carrying		Estimated Fair Value
(dollars in thousands)	Value		Level 1		Level 2		Level 3		Total
Financial Assets:
Cash and cash equivalents	$	63,105	$	63,105	$	0	$	0	$	63,105
Securities available for sale		468,967		1,017		466,975		975		468,967
Real estate mortgages held for sale		1,778		0		1,800		0		1,800
Loans, net		2,486,301		0		0		2,490,593		2,490,593
Federal Home Loan Bank stock		7,312		N/A		N/A		N/A		N/A
Federal Reserve Bank stock		3,420		N/A		N/A		N/A		N/A
Accrued interest receivable		8,577		0		2,297		6,280		8,577
Financial Liabilities:
Certificates of deposit		(727,809)		0		(736,088)		0		(736,088)
All other deposits		(1,818,259)		(1,818,259)		0		0		(1,818,259)
Securities sold under agreements to repurchase		(104,876)		0		(104,876)		0		(104,876)
Federal funds purchased		(11,000)		0		(11,000)		0		(11,000)
Other short-term borrowings		(146,000)		0		(146,002)		0		(146,002)
Long-term borrowings		(37)		0		(43)		0		(43)
Subordinated debentures		(30,928)		0		0		(31,217)		(31,217)
Standby letters of credit		(312)		0		0		(312)		(312)
Accrued interest payable		(2,918)		(125)		(2,790)		(3)		(2,918)

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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