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

 

		December 31, 2016
		Fair Value Measurements Using									Assets
(dollars in thousands)		Level 1			Level 2			Level 3			at Fair Value
Assets
U.S. Treasury securities		$	1,003		$	0		$	0		$	1,003
U.S. government sponsored agency securities			0			6,241			0			6,241
Mortgage-backed securities			0			351,568			0			351,568
State and municipal securities			0			144,709			670			145,379
Total Securities			1,003			502,518			670			504,191
Mortgage banking derivative			0			314			0			314
Interest rate swap derivative			0			2,645			0			2,645
Total assets		$	1,003		$	505,477		$	670		$	507,150
Liabilities
Mortgage banking derivative			0			14			0			14
Interest rate swap derivative			0			2,735			0			2,735
Total liabilities		$	0		$	2,749		$	0		$	2,749

		December 31, 2015
		Fair Value Measurements Using									Assets
(dollars in thousands)		Level 1			Level 2			Level 3			at Fair Value
Assets
U.S. Treasury securities		$	1,003		$	0		$	0		$	1,003
U.S. government sponsored agency securities			0			7,120			0			7,120
Mortgage-backed securities			0			360,672			0			360,672
State and municipal securities			0			108,725			551			109,276
Total Securities			1,003			476,517			551			478,071
Mortgage banking derivative			0			165			0			165
Interest rate swap derivative			0			1,732			0			1,732
Total assets		$	1,003		$	478,414		$	551		$	479,968
Liabilities
Mortgage banking derivative			0			1			0			1
Interest rate swap derivative			0			1,748			0			1,748
Total liabilities		$	0		$	1,749		$	0		$	1,749

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 years ended December 31, 2016 and 2015:

 

		State and Municipal Securities
(dollars in thousands)		2016			2015
Balance of recurring Level 3 assets at January 1		$	551		$	850
Transfers into Level 3			339			0
Changes in fair value of securities
included in other comprehensive income			(10)			(4)
Principal payments			(210)			(295)
Sales			0			0
Balance of recurring Level 3 assets at December 31		$	670		$	551

The state and municipal securities measured at fair value included below are nonrated 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)		12/31/2016			Valuation Technique		Unobservable Input		(Average)
State and municipal securities		$	670		Price to type, par, call		Discount to benchmark index			0-5	%
										(2.98)	%

Quantitative Information about Level 3 Fair Value Measurements
									Range of
		Fair Value at							Inputs
(dollars in thousands)		12/31/2015			Valuation Technique		Unobservable Input		(Average)
State and municipal securities		$	551		Price to type, par, call		Discount to benchmark index			0-5	%
										(2.82)	%

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

 

		December 31, 2016
		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		$	621		$	621
Non-working capital loans			0			0			3,889			3,889
Commercial real estate and multi-family
residential loans:
Owner occupied loans			0			0			1,195			1,195
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans			0			0			62			62
Total impaired loans		$	0		$	0		$	5,767		$	5,767
Other real estate owned			0			0			75			75
Total assets		$	0		$	0		$	5,842		$	5,842

 

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

 

		December 31, 2015
		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		$	753		$	753
Non-working capital loans			0			0			2,083			2,083
Commercial real estate and multi-family
residential loans:
Construction and land development loans			0			0			293			293
Owner occupied loans			0			0			717			717
Multifamily loans			0			0			227			227
Other commercial loans			0			0			7			7
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans			0			0			245			245
Open end and junior lien loans			0			0			226			226
Total impaired loans		$	0		$	0		$	4,551		$	4,551
Other real estate owned			0			0			75			75
Total assets		$	0		$	0		$	4,626		$	4,626

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, 2016:

 

(dollars in thousands)

Fair Value

Valuation Methodology

Unobservable Inputs

Average

Range of Inputs

Impaired loans:

Commercial and industrial

$

4,510

Collateral based

Discount to reflect

44

%

(22% - 100

%)

measurements

current market conditions

and ultimate collectability

Impaired loans:

Commercial real estate

1,195

Collateral based

Discount to reflect

30

%

(6% - 59

%)

measurements

current market conditions

and ultimate collectability

Impaired loans:

Consumer 1-4 family mortgage

62

Collateral based

Discount to reflect

15

%

measurements

current market conditions

and ultimate collectability

Other real estate owned

75

Appraisals

Discount to reflect

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, 2015:

The following table contains the estimated fair values and the related carrying values of the Company's financial instruments at December 31, 2016. Items which are not financial instruments are not included.

 

		December 31, 2016
		Carrying			Estimated Fair Value
(dollars in thousands)		Value			Level 1			Level 2			Level 3			Total
Financial Assets:
Cash and cash equivalents		$	167,280		$	165,385		$	1,899		$	0		$	167,284
Securities available for sale			504,191			1,003			502,518			670			504,191
Real estate mortgages held for sale			5,915			0			5,994			0			5,994
Loans, net			3,427,209			0			0			3,411,121			3,411,121
Federal Home Loan Bank stock			8,102			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			11,687			3			2,688			8,996			11,687
Financial Liabilities:
Certificates of deposit			(1,163,818)			0			(1,169,905)			0			(1,169,905)
All other deposits			(2,414,094)			(2,414,094)			0			0			(2,414,094)
Securities sold under agreements
to repurchase			(50,045)			0			(50,045)			0			(50,045)
Other short-term borrowings			(180,000)			0			(180,005)			0			(180,005)
Long-term borrowings			(32)			0			(34)			0			(34)
Subordinated debentures			(30,928)			0			0			(31,194)			(31,194)
Standby letters of credit			(323)			0			0			(323)			(323)
Accrued interest payable			(5,676)			(93)			(5,580)			(3)			(5,676)

 

The following table contains the estimated fair values and the related carrying values of the Company's financial instruments at December 31, 2015. Items which are not financial instruments are not included.

 

		December 31, 2015
		Carrying			Estimated Fair Value
(dollars in thousands)		Value			Level 1			Level 2			Level 3			Total
Financial Assets:
Cash and cash equivalents		$	80,674		$	79,074		$	1,602		$	0		$	80,676
Securities available for sale			478,071			1,003			476,517			551			478,071
Real estate mortgages held for sale			3,294			0			3,340			0			3,340
Loans, net			3,037,319			0			0			3,029,533			3,029,533
Federal Home Loan Bank stock			4,248			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			9,462			3			2,301			7,158			9,462
Financial Liabilities:
Certificates of deposit			(997,514)			0			(1,002,452)			0			(1,002,452)
All other deposits			(2,185,907)			(2,185,907)			0			0			(2,185,907)
Securities sold under agreements
to repurchase			(69,622)			0			(69,622)			0			(69,622)
Other short-term borrowings			(70,000)			0			(70,003)			0			(70,003)
Long-term borrowings			(34)			0			(37)			0			(37)
Subordinated debentures			(30,928)			0			0			(31,211)			(31,211)
Standby letters of credit			(381)			0			0			(381)			(381)
Accrued interest payable			(3,773)			(86)			(3,684)			(3)			(3,773)