Merchants Bancshares 10-Q 28 Apr 17 2017 Q1 Quarterly report Financial data

Document And Entity Information

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2017	Apr. 20, 2017
Document And Entity Information
Entity Registrant Name	MERCHANTS BANCSHARES INC
Trading Symbol	mbvt
Entity Central Index Key	726,517
Document Type	10-Q
Document Period End Date	Mar. 31, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		6,932,945
Document Fiscal Year Focus	2,017
Document Fiscal Period Focus	Q1

Consolidated Balance Sheets

Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
ASSETS
Cash and due from banks	$ 29,466	$ 26,116
Interest earning deposits with banks and other short-term investments	30,296	56,837
Total cash and cash equivalents	59,762	82,953
Investments:
Securities available for sale, at fair value (amortized cost of $288,881 and $334,846)	287,989	333,998
Securities held to maturity (fair value of $81,088 and $85,749)	80,991	85,694
Total investments	368,980	419,692
Loans	1,542,718	1,514,209
Less: Allowance for loan losses	13,187	12,659
Net loans	1,529,531	1,501,550
Federal Home Loan Bank stock	7,044	4,976
Bank premises and equipment, net	12,597	13,078
Investment in real estate limited partnerships	7,560	6,356
Bank owned life insurance	10,805	10,758
Core deposit intangible	1,113	1,156
Goodwill	7,011	7,011
Other assets	19,141	15,128
Total assets	2,023,544	2,062,658
Deposits:
Demand (noninterest bearing)	630,718	640,922
Savings, interest bearing checking and money market accounts	690,448	687,340
Time deposits	190,510	199,208
Total deposits	1,511,676	1,527,470
Short-term borrowings	75,000	40,000
Securities sold under agreement to repurchase, short-term	249,582	312,118
Other long-term debt	3,630	3,651
Junior subordinated debentures issued to unconsolidated subsidiary trust	20,619	20,619
Other liabilities	4,389	2,297
Total liabilities	1,864,896	1,906,155
STOCKHOLDERS' EQUITY
Authorized: 10,000,000 shares; Issued: 7,202,556 at March 31, 2017 and 7,184,922 at December 31, 2016; Outstanding: 6,916,443 at March 31, 2017 and 6,887,856 at December 31, 2016	72	72
Capital in excess of par value	56,563	55,806
Retained earnings	115,085	113,407
Treasury stock, at cost: 549,981 shares including 263,868 shares held by the Deferred Compensation Plans for Non-Employee Directors and Trustees at March 31, 2017 and 585,866 shares including 288,800 shares held by the Deferred Compensation Plans for Non-Employee Directors and Trustees at December 31, 2016	(13,486)	(13,670)
Deferred compensation arrangements: 263,868 shares at March 31, 2017 and 288,800 shares at December 31, 2016	6,071	6,670
Accumulated other comprehensive loss	(5,657)	(5,782)
Total stockholders' equity	158,648	156,503
Total liabilities and stockholders' equity	2,023,544	2,062,658
Preferred Class A non-voting
STOCKHOLDERS' EQUITY
Preferred stock
Preferred Class B voting
STOCKHOLDERS' EQUITY
Preferred stock

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Securities available for sale, amortized cost	$ 288,881	$ 334,846
Securities held to maturity, fair value	$ 81,088	$ 85,749
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	10,000,000	10,000,000
Common stock, shares issued	7,202,556	7,184,922
Common stock, shares outstanding	6,916,443	6,887,856
Treasury stock, shares	549,981	585,866
Deferred Compensation Arrangements
Common stock, shares outstanding	263,868	288,800
Preferred Class A non-voting
Preferred stock, shares authorized	200,000	200,000
Preferred stock, shares outstanding	0	0
Preferred Class B voting
Preferred stock, shares authorized	1,500,000	1,500,000
Preferred stock, shares outstanding	0	0

Consolidated Statements of Inco

Consolidated Statements of Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
INTEREST AND DIVIDEND INCOME
Interest and fees on loans	$ 13,507	$ 12,804
Investment income:
Interest and dividends on investment securities	1,836	1,997
Interest on interest earning deposits with banks and other short-term investments	82	81
Total interest and dividend income	15,425	14,882
INTEREST EXPENSE
Savings, interest bearing checking and money market accounts	471	440
Time deposits	265	391
Short-term borrowings	140
Securities sold under agreement to repurchase, short-term	152	109
Long-term debt	161	210
Total interest expense	1,189	1,150
Net interest income	14,236	13,732
Provision for credit losses	500	205
Net interest income after provision for credit losses	13,736	13,527
NONINTEREST INCOME
Trust division income	824	867
Net debit card income	760	649
Overdraft income	597	631
Service charges on deposits	423	415
Net gains on investment securities	255
Other	403	362
Total noninterest income	3,262	2,924
NONINTEREST EXPENSE
Compensation and benefits	5,823	6,308
Occupancy expense	1,101	1,139
Equipment expense	650	719
Telephone expense	171	198
Legal and professional fees	414	593
Mobile & internet banking	346	366
Core / Item processing	453	517
Marketing	120	192
State franchise taxes	399	398
FDIC insurance	217	254
Community Bank System, Inc. merger costs	1,302
NUVO Bank & Trust Company acquisition costs		133
Amortization of core deposit intangible	43	51
Other	914	1,051
Total noninterest expense	11,953	11,919
Income before provision for income taxes	5,045	4,532
Provision for income taxes	1,434	1,042
NET INCOME	$ 3,611	$ 3,490
Basic earnings per common share (in dollars per share)	$ 0.52	$ 0.51
Diluted earnings per common share (in dollars per share)	$ 0.52	$ 0.50

Consolidated Statements of Comp

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Consolidated Statements of Comprehensive Income
Net income	$ 3,611	$ 3,490
Other comprehensive income, net of tax:
Unrealized holding gain on securities available for sale, net of taxes of $57 and $1,411	106	2,624
Accretion of unrealized holding losses of securities transferred from available for sale to held to maturity, net of taxes of $61 and $68	113	127
Reclassification adjustments for net securities gains included in net income, net of taxes of $(89) and $0	(166)
Change in net unrealized loss on interest rate swaps, net of taxes of $0 and $19		35
Pension liability adjustment, net of taxes of $38 and $41	72	75
Other comprehensive income	125	2,861
Comprehensive income	$ 3,736	$ 6,351

Consolidated Statements of Com6

Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Consolidated Statements of Comprehensive Income
Unrealized holding (loss) gain on securities available for sale, tax	$ 57	$ 1,411
Accretion of unrealized holding losses of securities transferred from available for sale to held to maturity, tax	61	68
Change in net unrealized loss on interest rate swaps, tax	0	19
Pension liability adjustment, tax	38	41
Reclassification adjustments for net securities gains included in net income, tax	$ (89)	$ 0

Consolidated Statements of Cash

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 3,611	$ 3,490
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	500	215
Depreciation and amortization	481	542
Amortization of investment security premiums and accretion of discounts, net	306	298
Amortization of deferred loan costs	187	148
Amortization of core deposit intangible	43	51
Accretion of unfavorable lease liability	(17)	(17)
Stock based compensation	26	166
Net gains on sales of investment securities	(255)
Deferred gain on sale of premises	(129)	(129)
Equity in losses of real estate limited partnerships, net	378	393
Increase in cash surrender value of bank owned life insurance	(47)	(55)
Changes in assets and liabilities:
Net change in interest receivable	(363)	(511)
Net change in other assets	(3,656)	347
Net change in interest payable	13	(16)
Net change in other liabilities	2,557	861
Net cash provided by operating activities	3,635	5,783
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment securities available for sale	38,635
Proceeds from maturities of investment securities available for sale	7,356	8,487
Proceeds from maturities of investment securities held to maturity	4,801	4,412
Net purchases of Federal Home Loan Bank stock	(2,068)	(66)
Purchases of investment securities available for sale		(15,277)
Loan originations in excess of principal payments	(28,734)	(7,543)
Real estate limited partnership investments	(1,582)	(513)
Purchases of bank premises and equipment		(44)
Net cash provided by (used in) investing activities	18,408	(10,544)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits	(15,794)	(24,651)
Net increase in short-term borrowings	35,000
Net decrease in securities sold under agreement to repurchase	(62,536)	(37,636)
Principal payments on long-term debt	(21)	(522)
Cash dividends paid	(1,933)	(1,920)
Proceeds from the exercise of stock warrants	390
Increase (decrease) in deferred compensation arrangements	71	(53)
Cash payments to taxing authorities on employees' behalf from shares withheld from stock-based compensation	(411)
Net cash used in financing activities	(45,234)	(64,782)
Decrease in cash and cash equivalents	(23,191)	(69,543)
Cash and cash equivalents beginning of period	82,953	150,183
Cash and cash equivalents end of period	59,762	80,640
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Total interest payments	1,176	1,166
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Distribution of stock under deferred compensation arrangements	627	$ 559
Non-cash exercise of stock options and warrants	$ 348

FINANCIAL STATEMENT PRESENTATIO

FINANCIAL STATEMENT PRESENTATION	3 Months Ended
	Mar. 31, 2017
FINANCIAL STATEMENT PRESENTATION
FINANCIAL STATEMENT PRESENTATION	NOTE 1: FINANCIAL STATEMENT PRESENTATION Principles of Consolidation The accompanying consolidated financial statements include the accounts of Merchants Bancshares, Inc. (the “Company”), and its wholly-owned subsidiary Merchants Bank (the “Bank,” and collectively with the Company, “Merchants,” “we,” “us,” or “our”). All material intercompany accounts and transactions are eliminated in consolidation. We offer a full range of deposit, loan, cash management, and trust services to meet the financial needs of individual consumers, businesses and municipalities at 31 full-service banking offices throughout the state of Vermont and one full-service banking office in Massachusetts as of March 31, 2017. Basis of Presentation The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. All adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of our interim consolidated financial statements as of March 31, 2017 and December 31, 2016 and for the three months ended March 31, 2017 and 2016 have been included. The information was prepared from our unaudited financial statements and the unaudited financial statements of our subsidiaries, Merchants Bank and MBVT Statutory Trust I. Amounts reported for prior periods are reclassified, where necessary, to be consistent with the current period presentation. Management’s Use of Estimates in Preparation of Financial Statements The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting periods. The most significant estimates include those used in determining the allowance for credit losses, income taxes, interest income recognition on loans and investments and analysis of other-than-temporary impairment of our investment securities portfolio. Operating results in the future may vary from the amounts derived from Management's estimates and assumptions.

RECENT ACCOUNTING PRONOUNCEMENT

RECENT ACCOUNTING PRONOUNCEMENTS	3 Months Ended
	Mar. 31, 2017
RECENT ACCOUNTING PRONOUNCEMENTS
RECENT ACCOUNTING PRONOUNCEMENTS	NOTE 2: RECENT ACCOUNTING PRONOUNCEMENTS Accounting Standards Update (“ASU”) 2014-09 – Revenue from Contracts with Customers – In May 2014, the Financial Accounting Standards Board (“FASB”) amended existing guidance related to revenue from contracts with customers. This amendment supersedes and replaces nearly all existing revenue recognition guidance, including industry-specific guidance, establishes a new control-based revenue recognition model, changes the basis for deciding when revenue is recognized over time or at a point in time, provides new and more detailed guidance on specific topics and expands and improves disclosures about revenue. In addition, this amendment specifies the accounting for some costs to obtain or fulfill a contract with a customer. This amendment was originally effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. In July 2015, the FASB issued ASU 2015-14, which deferred the effective date to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is permitted as of the original effective date. The amendments should be applied retrospectively to all periods presented or retrospectively with the cumulative effect recognized at the date of initial application. We believe these new requirements do not impact our interest income, as our financial instruments are not within the scope of this standard. We continue to evaluate the impact on our fee based income. ASU 2016-02 – Leases – In February 2016, the FASB released this Update to increase the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. For lessees, all leases will be required to be recognized on the balance sheet by recording a right-of-use asset and a lease liability. The accounting applied by a lessor is largely unchanged from that applied under the existing guidance. The ASU requires additional qualitative and quantitative disclosures with the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The guidance is effective for fiscal years beginning after December 15, 2018, including the interim periods. The Company is currently evaluating the impact of this new requirement on the consolidated financial statements, but the expectation is that this new requirement will result in a significant increase to assets for the right-of-use asset recognition and a significant increase to total liabilities for the lease liability. ASU 2016-09 – Stock Compensation – In March 2016, the FASB issued this Update which includes multiple amendments intended to simplify aspects of share-based payment accounting, and was effective for us on January 1, 2017. The guidance simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification of excess tax benefits in the consolidated statements of cash flows. Excess tax benefits or deficiencies for stock-based compensation are now reflected in the Consolidated Statements of Income as a component of income tax expense, whereas previously they were recognized in equity. The adoption of ASU 2016-09 did not have a material impact on our consolidated financial statements. ASU 2016-13 – Credit Losses – In June 2016, the FASB released this Update to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this Update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments in this Update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact of this new requirement on the consolidated financial statements. ASU 2017-04 – Intangibles: Goodwill and Other – In January 2017, the FASB amended existing guidance to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Instead, an entity should perform its annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value (the “Goodwill Update”). The option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary is still available. A public business entity that is a SEC filer should adopt the amendments in this Goodwill Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates on or after January 1, 2017. The Company is evaluating the impact of these amendments on its consolidated financial statements, but it is not expected to have a significant impact. ASU 2017-06 – Plan Accounting: Defined Benefit Pension Plans – In March 2017, the FASB amended existing guidance to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost (the “Pension and Postretirement Benefit Cost Update”). This Pension and Postretirement Benefit Cost Update requires 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. Additionally, 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. This Pension and Postretirement Benefit Cost Update also allows only the service cost component to be eligible for capitalization when applicable. This Pension and Postretirement Benefit Cost Update is effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those annual periods. The Company is evaluating the impact of these amendments on its consolidated financial statements.

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS	3 Months Ended
	Mar. 31, 2017
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS	NOTE 3: GOODWILL AND INTANGIBLE ASSETS On December 4, 2015, the Company completed the acquisition of NUVO Bank & Trust Company (“NUVO”), Springfield, Massachusetts. NUVO's banking business operates as a division of Merchants Bank. The acquisition resulted in goodwill of $7.01 million and core deposit intangible (“CDI”) of $1.3 8 million. The goodwill and intangible balances presented below resulted from the Company’s acquisition of NUVO. Goodwill Goodwill is deemed to have an indefinite life and therefore is not amortized, but is instead subject to impairment tests. There was no impairment for the three months ended March 31, 2017 or December 31, 2016. March 31, December 31, (In thousands) 2017 2016 Beginning of period $ 7,011 $ 7,011 Acquired goodwill — — Impairment — — End of period $ 7,011 $ 7,011 Other Intangible Assets Acquired CDI were as follows: March 31, 2017 December 31, 2016 Gross Net Gross Net Carrying Accumulated Carrying Carrying Accumulated Carrying (In thousands) Amount Amortization Amount Amount Amortization Amount Amortized intangible assets: Core deposit intangible $ 1,377 $ (264) $ 1,113 $ 1,377 $ (221) $ 1,156 Total $ 1,377 $ (264) $ 1,113 $ 1,377 $ (221) $ 1,156 Aggregate amortization expense for the CDI was $ 43 thousand and $51 thousand for the three months ended March 31, 2017 and December 31, 2016, respectively. The estimated amortization expense for each of the next five years: (In thousands) Amount Remainder of 2017 $ 2018 2019 2020 2021 2022 Thereafter

INVESTMENT SECURITIES

INVESTMENT SECURITIES	3 Months Ended
	Mar. 31, 2017
INVESTMENT SECURITIES
INVESTMENT SECURITIES	NOTE 4: INVESTMENT SECURITIES Investments in securities are classified as available for sale or held to maturity as of March 31, 2017 and December 31, 2016. The amortized cost and fair values of the securities classified as available for sale and held to maturity as of March 31, 2017 were as follows: Gross Gross Amortized Unrealized Unrealized Fair (In thousands) Cost Gains Losses Value Available for Sale: U.S. Treasury Obligations $ 10,089 $ 75 $ — $ 10,164 U.S. Government Sponsored Enterprises ("U.S. GSEs") 83,916 127 (531) 83,512 Federal Home Loan Bank ("FHLB") Obligations 67,302 101 (353) 67,050 Residential Real Estate Mortgage-backed Securities ("Agency MBSs") 63,919 762 (404) 64,277 Agency Commercial Mortgage Backed Securities ("Agency CMBSs") 23,784 — (414) 23,370 Agency Collateralized Mortgage Obligations ("Agency CMOs") 39,871 32 (287) 39,616 Total Available for Sale $ 288,881 $ 1,097 $ (1,989) $ 287,989 Gross Gross Amortized Unrecognized Unrecognized Fair (In thousands) Cost Gains Losses Value Held to Maturity: U.S. Agency Obligations $ 16,864 $ 121 $ (6) $ 16,979 Agency MBSs 5,548 101 — 5,649 Agency CMOs 58,579 211 (330) 58,460 Total Held to Maturity $ 80,991 $ 433 $ (336) $ 81,088 The amortized cost and fair values of the securities classified as available for sale and held to maturity as of December 31, 2016 were as follows: Gross Gross Amortized Unrealized Unrealized Fair (In thousands) Cost Gains Losses Value Available for Sale: U.S. Treasury Obligations $ 25,079 $ 104 $ — $ 25,183 U.S. GSEs 93,883 106 (636) 93,353 FHLB Obligations 67,362 100 (456) 67,006 Agency MBSs 74,573 1,101 (465) 75,209 Agency CMBSs 23,972 — (364) 23,608 Agency CMOs 49,694 46 (407) 49,333 ABSs 283 23 — 306 Total Available for Sale $ 334,846 $ 1,480 $ (2,328) $ 333,998 Gross Gross Amortized Unrecognized Unrecognized Fair (In thousands) Cost Gains Losses Value Held to Maturity: U.S. Agency Obligations $ 17,849 $ 119 $ (33) $ 17,935 Agency MBSs 5,787 92 — 5,879 Agency CMOs 62,058 208 (331) 61,935 Total Held to Maturity $ 85,694 $ 419 $ (364) $ 85,749 The contractual final maturity distribution of the debt securities classified as available for sale as of March 31, 2017, were as follows: Securities After One After Five not due Within But Within But Within After Ten at a Single (In thousands) One Year Five Years Ten Years Years Maturity Total Available for Sale (at fair value): U.S. Treasury Obligations $ 100 $ 10,064 $ — $ — $ N/A $ 10,164 U.S. GSEs — 83,512 — — N/A 83,512 FHLB Obligations — 61,054 5,996 — N/A 67,050 Agency MBSs N/A N/A N/A N/A 64,277 64,277 Agency CMBSs N/A N/A N/A N/A 23,370 23,370 Agency CMOs N/A N/A N/A N/A 39,616 39,616 Total Available for Sale $ 100 $ 154,630 $ 5,996 $ — $ 127,263 $ 287,989 Available for Sale (at amortized cost): U.S. Treasury Obligations $ 100 $ 9,989 $ — $ — $ N/A $ 10,089 U.S. GSEs — 83,916 — — N/A 83,916 FHLB Obligations — 61,376 5,926 — N/A 67,302 Agency MBSs N/A N/A N/A N/A 63,919 63,919 Agency CMBSs N/A N/A N/A N/A 23,784 23,784 Agency CMOs N/A N/A N/A N/A 39,871 39,871 Total Available for Sale $ 100 $ 155,281 $ 5,926 $ — $ 127,574 $ 288,881 The contractual final maturity distribution of the debt securities classified as held to maturity as of March 31, 2017, were as follows: Securities After One After Five not due Within But Within But Within After Ten at a Single (In thousands) One Year Five Years Ten Years Years Maturity Total Held to Maturity (at fair value): U.S. Agency Obligations $ — $ — $ — $ 16,979 $ N/A $ 16,979 Agency MBSs N/A N/A N/A N/A 5,649 5,649 Agency CMOs N/A N/A N/A N/A 58,460 58,460 Total Held to Maturity $ — $ — $ — $ 16,979 $ 64,109 $ 81,088 Held to Maturity (at amortized cost): U.S. Agency Obligations $ — $ — $ — $ 16,864 $ N/A $ 16,864 Agency MBSs N/A N/A N/A N/A 5,548 5,548 Agency CMOs N/A N/A N/A N/A 58,579 58,579 Total Held to Maturity $ — $ — $ — $ 16,864 $ 64,127 $ 80,991 Actual maturities will differ from contractual maturities because borrowers may have rights to call or prepay obligations. The following table presents the proceeds, gross gains and gross losses on available for sale securities for the three months ended March 31, 2017 and 2016. Three Months Ended March 31, (In thousands) 2017 2016 Proceeds $ 38,635 $ — Gross gains 278 — Gross losses (23) — Net gains $ 255 $ — Securities with a carrying value of $328.27 million and $370.81 million at March 31, 2017 and December 31, 2016, respectively, were pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes required by law. Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in continuous unrealized loss position, at March 31, 2017, were as follows: Less Than 12 Months 12 Months or More Total Number Fair Number Fair Number Fair (In thousands) of Issues Value Loss of Issues Value Loss of Issues Value Loss Available for Sale: U.S. GSEs 7 $ 37,599 $ (531) — $ — $ — 7 $ 37,599 $ (531) FHLB Obligations 7 35,858 (353) — — — 7 35,858 (353) Agency MBSs 15 45,753 (404) — — — 15 45,753 (404) Agency CMBSs 6 23,370 (414) — — — 6 23,370 (414) Agency CMOs 13 28,433 (287) — — — 13 28,433 (287) Total Available for Sale 48 $ 171,013 $ (1,989) — $ — $ — 48 $ 171,013 $ (1,989) Held to Maturity: U.S. Agency Obligations 1 $ 6,856 $ (6) — $ — $ — 1 $ 6,856 $ (6) Agency CMOs 16 33,371 (215) 1 3,027 (115) 17 36,398 (330) Total Held to Maturity 17 $ 40,227 $ (221) 1 $ 3,027 $ (115) 18 $ 43,254 $ (336) Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in continuous unrealized loss position, at December 31, 2016, were as follows: Less Than 12 Months 12 Months or More Total Number Fair Number Fair Number Fair (In thousands) of Issues Value Loss of Issues Value Loss of Issues Value Loss Available for Sale: U.S. GSEs 8 $ 42,404 $ (636) — $ — $ — 8 $ 42,404 $ (636) FHLB Obligations 9 45,870 (456) — — — 9 45,870 (456) Agency MBSs 16 48,777 (465) — — — 16 48,777 (465) Agency CMBSs 6 23,608 (364) — — — 6 23,608 (364) Agency CMOs 15 33,935 (332) 2 2,227 (75) 17 36,162 (407) Total Available for Sale 54 $ 194,594 $ (2,253) 2 $ 2,227 $ (75) 56 $ 196,821 $ (2,328) Held to Maturity: U.S. Agency Obligations 1 $ 7,230 $ (33) — $ — $ — 1 $ 7,230 $ (33) Agency CMOs 13 26,480 (212) 1 3,162 (119) 14 29,642 (331) Total Held to Maturity 14 $ 33,710 $ (245) 1 $ 3,162 $ (119) 15 $ 36,872 $ (364) There were no securities classified as trading at March 31, 2017 or December 31, 2016. Unrealized losses on investment securities result from the cost basis of the security being higher than its current fair value. These differences generally occur because of changes in interest rates since the time of purchase, or because the credit quality of the issuer has deteriorated. We perform a quarterly analysis of each security in our portfolio to determine if impairment exists, and if it does, whether that impairment is other-than-temporary. At March 31, 2017, all of our MBSs and CMOs held were issued by U.S. government-sponsored entities and agencies, primarily the Federal National Mortgage Association (“FNMA”) and Federal Home Loan Mortgage Corporation (“FHLMC”), institutions which the government has affirmed its commitment to support. As the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because we do not have the intent to sell these securities and it is not likely that we will be required to sell the securities before their anticipated recovery, we do not consider these securities to be other-than-temporarily impaired at March 31, 2017. Agency MBSs and Agency CMOs consist of pools of residential mortgages which are guaranteed by FNMA, FHLMC, or Government National Mortgage Association (“GNMA”) with various origination dates and maturities. Agency CMBS consists of bonds backed by commercial real estate which are guaranteed by FNMA and GNMA. During 2014 and 2013, securities were transferred from available for sale to held to maturity. The amortization of the unamortized net holding loss reported in accumulated other comprehensive income offsets the effect on interest income of the discount for the transferred securities. The remaining unamortized balance of the net losses for the securities transferred from available for sale to held to maturity was $1.99 million or $1.30 million, net of tax, at March 31, 2017.

SECURITIES SOLD UNDER AGREEMENT

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE	3 Months Ended
	Mar. 31, 2017
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE.
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE	NOTE 5: SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE The following table presents the contractual maturity of our secured borrowings and class of collateral pledged at March 31, 2017: Remaining Contractual Maturity of the Agreements Overnight and Greater Than (In thousands) Continuous Up to 30 Days 30-90 Days 90 Days Total Repurchase Agreements Available for Sale: U.S. Treasury Obligations $ 10,064 $ — $ — $ — $ 10,064 U.S. GSEs 47,745 — — — 47,745 FHLB Obligations 58,519 — — — 58,519 Agency MBSs 33,553 — — — 33,553 Agency CMBSs 18,961 — — — 18,961 Agency CMOs 23,928 — — — 23,928 Total Available for Sale $ 192,770 $ — $ — $ — $ 192,770 (In thousands) Held to Maturity: U.S. Agency Obligations $ 14,714 $ — $ — $ — $ 14,714 Agency CMOs 42,098 — — — 42,098 Total Held to Maturity $ 56,812 $ — $ — $ — $ 56,812 The following table presents the contractual maturity of our secured borrowings and class of collateral pledged at December 31, 2016: Remaining Contractual Maturity of the Agreements Overnight and Greater Than (In thousands) Continuous Up to 30 Days 30-90 Days 90 Days Total Repurchase Agreements Available for Sale: U.S. Treasury Obligations $ 24,207 $ — $ — $ — $ 24,207 U.S. GSEs 51,847 — — — 51,847 FHLB Obligations 59,505 — — — 59,505 Agency MBSs 44,736 — — — 44,736 Agency CMBSs 21,662 — — — 21,662 Agency CMOs 40,007 — — — 40,007 Total Available for Sale $ 241,964 $ — $ — $ — $ 241,964 (In thousands) Held to Maturity: U.S. Agency Obligations $ 16,646 $ — $ — $ — $ 16,646 Agency CMOs 53,508 — — — 53,508 Total Held to Maturity $ 70,154 $ — $ — $ — $ 70,154 The fair value of securities pledged to secure repurchase agreements may decline. The Company manages this risk by having a policy to pledge securities valued greater than the gross outstanding balance of repurchase agreements. Securities sold under agreements to repurchase are secured by securities with a carrying value of $249.68 million at March 31, 2017 and $312.23 million at December 31, 2016.

LOANS AND THE ALLOWANCE FOR CRE

LOANS AND THE ALLOWANCE FOR CREDIT LOSSES	3 Months Ended
	Mar. 31, 2017
LOANS AND THE ALLOWANCE FOR CREDIT LOSSES
LOANS AND THE ALLOWANCE FOR CREDIT LOSSES	NOTE 6: LOANS AND THE ALLOWANCE FOR CREDIT LOSSES Loans The composition of our loan portfolio at March 31, 2017 and December 31, 2016 was as follows: (In thousands) March 31, 2017 December 31, 2016 Commercial, financial and agricultural $ 276,915 $ 257,078 Municipal loans 113,875 114,509 Real estate loans – residential 438,424 447,527 Real estate loans – commercial 672,712 636,755 Real estate loans – construction 35,964 52,533 Installment loans 4,813 5,790 All other loans 15 17 Total loans $ 1,542,718 $ 1,514,209 We primarily originate commercial, commercial real estate, municipal, and residential real estate loans to customers throughout the states of Vermont and Massachusetts. There are no significant industry concentrations in the loan portfolio. Total loans included $1.13 million and $1.19 million of net deferred loan origination costs at March 31, 2017 and December 31, 2016, respectively. The aggregate amount of overdrawn deposit balances classified as loan balances was $254 thousand and $297 thousand at March 31, 2017 and December 31, 2016, respectively. Additionally, residential and commercial loans serviced for others at March 31, 2017 and December 31, 2016 amounted to approximately $35.61 million and $34.63 million, respectively. The following table reflects our loan loss experience and activity in the allowance for loan losses for the three months ended March 31, 2017: Commercial, financial Real Real Real and estate- estate- estate- (In thousands) agricultural Municipal residential commercial construction Installment All other Totals Allowance for loan losses: Beginning balance $ 2,946 $ 593 $ 2,575 $ 5,922 $ 534 $ 89 $ — $ 12,659 Charge-offs (3) — — — — (69) — (72) Recoveries 2 — 9 — — 23 — 34 Provision (credit) 250 (19) (32) 434 (183) 116 — 566 Ending balance $ 3,195 $ 574 $ 2,552 $ 6,356 $ 351 $ 159 $ — $ 13,187 The following table reflects our loan loss experience and activity in the allowance for loan losses for the three months ended March 31, 2016: Commercial, financial Real Real Real and estate- estate- estate- (In thousands) agricultural Municipal residential commercial construction Installment All other Totals Allowance for loan losses: Beginning balance $ 2,696 $ 590 $ 2,882 $ 5,386 $ 420 $ 66 $ — $ 12,040 Charge-offs (3) — (73) — — (42) — (118) Recoveries 2 — 11 4 — 19 — 36 Provision (credit) 161 32 37 (109) 45 49 — 215 Ending balance $ 2,856 $ 622 $ 2,857 $ 5,281 $ 465 $ 92 $ — $ 12,173 In addition to the provision for loan losses included above, there was a provision (credit) for the reserve for undisbursed lines of $(66) thousand and $(10) thousand for the three months ended March 31, 2017 and March 31, 2016 included in the provision for credit losses in the consolidated statement of income. The following presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment based upon the impairment method at March 31, 2017: Commercial, financial and Real estate- Real estate- Real estate- (In thousands) agricultural Municipal residential commercial construction Installment All other Totals Allowance for loan losses: Ending balance individually evaluated for impairment $ — $ — $ 227 $ 18 $ — $ — $ — $ 245 Ending balance collectively evaluated for impairment 3,195 574 2,325 6,331 351 159 — 12,935 Ending balance acquired with deteriorated credit quality — — — 7 — — — 7 Totals $ 3,195 $ 574 $ 2,552 $ 6,356 $ 351 $ 159 $ — $ 13,187 Financing receivables: Ending balance individually evaluated for impairment $ 77 $ — $ 1,447 $ 2,066 $ — $ — $ — $ 3,590 Ending balance collectively evaluated for impairment 276,144 113,875 436,977 668,775 35,964 4,813 15 1,536,563 Ending balance acquired with deteriorated credit quality 694 — — 1,871 — — — 2,565 Totals $ 276,915 $ 113,875 $ 438,424 $ 672,712 $ 35,964 $ 4,813 $ 15 $ 1,542,718 The following presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment based upon impairment method at December 31, 2016: Commercial, financial and Real estate- Real estate- Real estate- (In thousands) agricultural Municipal residential commercial construction Installment All other Totals Allowance for loan losses: Ending balance individually evaluated for impairment $ — $ — $ 184 $ — $ — $ — $ — $ 184 Ending balance collectively evaluated for impairment 2,946 593 2,391 5,922 534 89 — 12,475 Ending balance acquired with deteriorated credit quality — — — — — — — — Totals $ 2,946 $ 593 $ 2,575 $ 5,922 $ 534 $ 89 $ — $ 12,659 Financing receivables: Ending balance individually evaluated for impairment $ 97 $ — $ 1,213 $ 1,634 $ — $ 12 $ — $ 2,956 Ending balance collectively evaluated for impairment 256,239 114,509 446,314 633,217 52,533 5,778 17 1,508,607 Ending balance acquired with deteriorated credit quality 742 — — 1,904 — — — 2,646 Totals $ 257,078 $ 114,509 $ 447,527 $ 636,755 $ 52,533 $ 5,790 $ 17 $ 1,514,209 The table below presents the recorded investment of loans segregated by class, with delinquency aging as of March 31, 2017: 31-60 61-90 91 Days Total Days Days or More Past (In thousands) Past Due Past Due Past Due Due Current Nonperforming Total Commercial, financial and agricultural $ 623 $ — $ — $ 623 $ 276,137 $ 155 $ 276,915 Municipal — — — — 113,875 — 113,875 Real estate-residential: First mortgage 121 — — 121 400,689 1,343 402,153 Second mortgage — — — — 36,271 — 36,271 Real estate-commercial: Owner occupied 501 — — 501 241,895 2,714 245,110 Non-owner occupied — — — — 427,602 — 427,602 Real estate-construction: Residential — — — — 2,388 — 2,388 Commercial — — — — 33,576 — 33,576 Installment 87 14 — 101 4,712 — 4,813 Other — — — — 15 — 15 Total $ 1,332 $ 14 $ — $ 1,346 $ 1,537,160 $ 4,212 $ 1,542,718 Of the total nonperforming loans in the aging table above, $4.08 million were past due of which $0 were restructured loans, $804 thousand were purchase credit impaired, and $0 were 91 days or more past due and accruing. The table below presents the recorded investment of loans segregated by class, with delinquency aging as of December 31, 2016: 31-60 61-90 91 Days Total Days Days or More Past (In thousands) Past Due Past Due Past Due Due Current Nonperforming Total Commercial, financial and agricultural $ — $ — $ — $ — $ 256,894 $ 184 $ 257,078 Municipal — — — — 114,509 — 114,509 Real estate-residential: First mortgage 164 71 — 235 408,597 1,104 409,936 Second mortgage 32 — — 32 37,559 — 37,591 Real estate-commercial: Owner occupied — — — — 224,691 1,882 226,573 Non-owner occupied — — — — 410,182 — 410,182 Real estate-construction: Residential — — — — 2,530 — 2,530 Commercial — — — — 50,003 — 50,003 Installment 123 — — 123 5,655 12 5,790 Other — — — — 17 — 17 Total $ 319 $ 71 $ — $ 390 $ 1,510,637 $ 3,182 $ 1,514,209 Of the total nonperforming loans in the aging table above, $1.75 million were past due of which $0 were restructured loans, $819 thousand were purchase credit impaired and $19 thous and were 91 days or more past due and accruing. Impaired loans by class at March 31, 2017 and for the three months ended March 31, 2017 are as follows: Period Ended Three Months Ended March 31, 2017 March 31, 2017 Unpaid Average Interest Recorded Principal Related Recorded Income (In thousands) Investment Balance Allowance Investment Recognized With no related allowance recorded Commercial, financial and agricultural $ 77 $ 77 $ — $ 78 $ 1 Residential: First mortgage 130 190 — 180 1 Second mortgage — — — — — Commercial Real Estate: Owner occupied 1,751 1,760 — 1,687 — Non-owner occupied — — — 134 2 Construction: Residential — — — — — Commercial — — — — — Installment — — — — — With related allowance recorded Commercial, financial and agricultural — — — — — Residential: First mortgage 1,317 1,330 227 1,114 — Second mortgage — — — — — Commercial Real Estate: Owner occupied 315 315 18 105 — Total Commercial, financial and agricultural 77 77 — 78 1 Residential 1,447 1,520 227 1,294 1 Commercial Real Estate 2,066 2,075 18 1,926 2 Construction — — — — — Installment — — — — — Total $ 3,590 $ 3,672 $ 245 $ 3,298 $ 4 Impaired loans by class at December 31, 2016 and for the three months ended March 31, 2016 are as follows: Period Ended Three Months Ended December 31, 2016 March 31, 2016 Unpaid Average Interest Recorded Principal Related Recorded Income (In thousands) Investment Balance Allowance Investment Recognized With no related allowance recorded Commercial, financial and agricultural $ 97 $ 97 $ — $ 390 $ 1 Residential: First mortgage 208 266 — 241 2 Second mortgage — — — 3 — Commercial Real Estate: Owner occupied 1,229 1,229 — 401 — Non-owner occupied 405 432 — 470 — Installment 12 12 — 8 — With related allowance recorded Commercial, financial and agricultural — — — 254 — Residential: First mortgage 1,005 1,026 184 425 — Second mortgage — — — — — Commercial Real Estate: Owner occupied — — — — — Installment — — — — — Total Commercial, financial and agricultural 97 97 — 644 1 Residential 1,213 1,292 184 669 2 Commercial Real Estate 1,634 1,661 — 871 — Installment 12 12 — 8 — Total $ 2,956 $ 3,062 $ 184 $ 2,192 $ 3 Nonperforming loans at March 31, 2017 and December 31, 2016 are as follows: (In thousands) March 31, 2017 December 31, 2016 Nonaccrual loans $ 4,212 $ 3,163 Loans greater than 90 days and accruing — 19 Troubled debt restructurings ("TDRs") — — Total nonperforming loans $ 4,212 $ 3,182 There were no loans restructured in the three months ended March 31, 2017. One commercial real estate loan with a balance of $464 thousand was restructured during the three months ended March 31, 2016 and was considered to be a TDR. TDRs represent balances where the existing loan was modified involving a concession in rate, term or payment amount due to the distressed financial condition of the borrower. There were three restructured residential mortgages at March 31, 2017 with balances totaling $104 thousand. There was one restructured commercial loan at March 31, 2017 with a balance of $77 thousand. All of the four TDRs at March 31, 2017 continue to pay as agreed according to the modified terms, are accruing, and are considered performing. At December 31, 2016, there were three restructured residential mortgages with balances totaling $110 thousand, one restructured commercial loans with a balance totaling $78 thousand, and one restructured commercial real estate loan with a balance of $405 thousand. At March 31, 2017, there were no commitments to lend additional funds to borrowers whose loans have been modified in a troubled debt restructuring. We had no commitments to lend additional funds to borrowers whose loans were in nonaccrual status or to borrowers whose loans were 91 days past due and still accruing at March 31, 2017. Interest income on restructured loans during the three months ended March 31, 2017 and 2016 was insignificant. Nonaccrual loans by class as of March 31, 2017 and December 31, 2016 are as follows: (In thousands) March 31, 2017 December 31, 2016 Commercial, financial and agricultural $ 155 $ 165 Real estate - residential: First mortgage 1,343 1,104 Second mortgage — — Real estate - commercial: Owner occupied 2,714 1,882 Non owner occupied — — Installment — 12 Total nonaccruing non-TDR loans $ 4,212 $ 3,163 Nonaccruing TDR’s Commercial, financial and agricultural — — Real estate – residential: First mortgage — — Real estate - commercial: Non owner occupied — — Total nonaccrual loans including TDRs $ 4,212 $ 3,163 Commercial Grading System We use risk rating definitions for our commercial loan portfolios and certain residential loans which are generally consistent with regulatory and banking industry norms. Loans are assigned a credit quality grade which is based upon management’s on-going assessment of risk based upon an evaluation of the quantitative and qualitative aspects of each credit. This assessment is a dynamic process and risk ratings are adjusted as each borrower’s financial situation changes. This process is designed to provide timely recognition of a borrower’s financial condition and appropriately focus management resources. Pass rated loans exhibit acceptable risk to the bank in terms of financial capacity to repay their loans as well as possessing acceptable fallback repayment sources, typically collateral and personal guarantees. Pass rated commercial loan relationships with a total exposure of $1 million or greater are subject to a formal annual review process; additionally, management reviews the risk rating at the time of any late payments, overdrafts or other sign of deterioration in the interim. Loans rated Pass-Watch require more than usual attention and monitoring by the account officer, though not to the extent that a formal remediation plan is warranted. Borrowers can be rated Pass-Watch based upon a weakened capital structure, marginally adequate cash flow and/or collateral coverage or early-stage declining trends in operations or financial condition. Loans rated Special Mention possess potential weakness that may expose the bank to some risk of loss in the future. These loans require more frequent monitoring and formal reporting to Management. Substandard loans reflect well-defined weaknesses in the current repayment capacity, collateral or net worth of the borrower with the possibility of some loss to the bank if these weaknesses are not corrected. Action plans are required for these loans to address the inherent weakness in the credit and are formally reviewed. Residential real estate and consumer loans We do not use a grading system for our performing residential real estate and consumer loans. Credit quality for these loans is based on performance and payment status. Below is a summary of loans by credit quality indicator as of March 31, 2017: Pass- Special Sub- (In thousands) Unrated Pass Watch Mention Standard Total Commercial, financial and agricultural $ 99 233,838 $ 25,422 $ 317 $ 17,239 $ 276,915 Municipal — 110,222 3,653 — — 113,875 Real estate – residential: First mortgage 393,208 7,060 542 — 1,343 402,153 Second mortgage 36,049 — 222 — — 36,271 Real estate – commercial: Owner occupied — 205,107 25,561 — 14,442 245,110 Non-owner occupied — 385,105 41,426 — 1,071 427,602 Real estate – construction: Residential 605 1,783 — — — 2,388 Commercial 116 31,948 1,512 — — 33,576 Installment 4,813 — — — — 4,813 All other loans 15 — — — — 15 Total $ 434,905 $ 975,063 $ 98,338 $ 317 $ 34,095 $ 1,542,718 Below is a summary of loans by credit quality indicator as of December 31, 2016: Pass- Special Sub- (In thousands) Unrated Pass Watch Mention Standard Total Commercial, financial and agricultural $ 102 $ 215,891 $ 24,215 $ 322 $ 16,548 $ 257,078 Municipal — 110,864 2,824 821 — 114,509 Real estate – residential: First mortgage 400,961 7,392 481 — 1,102 409,936 Second mortgage 37,367 — 224 — — 37,591 Real estate – commercial: Owner occupied — 186,494 25,492 — 14,587 226,573 Non-owner occupied — 369,566 38,706 — 1,910 410,182 Real estate – construction: Residential 412 2,118 — — — 2,530 Commercial 152 41,373 7,476 — 1,002 50,003 Installment 5,778 — — — 12 5,790 All other loans 17 — — — — 17 Total $ 444,789 $ 933,698 $ 99,418 $ 1,143 $ 35,161 $ 1,514,209 The carrying amount of loans purchased with evidence of credit deterioration accounted for under FASB Accounting Standards Codification (“ASC”) 310-30 acquired in the NUVO acquisition totaled $2.57 million and $2.65 million at March 31, 2017 and December 31, 2016, respectively.

FAIR VALUE OF FINANCIAL INSTRUM

FAIR VALUE OF FINANCIAL INSTRUMENTS	3 Months Ended
	Mar. 31, 2017
FAIR VALUE OF FINANCIAL INSTRUMENTS
FAIR VALUE OF FINANCIAL INSTRUMENTS	NOTE 7: FAIR VALUE OF FINANCIAL INSTRUMENTS We record certain assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are also utilized to determine the initial value of certain assets and liabilities, to perform impairment assessments, and for disclosure purposes. We use quoted market prices and observable inputs to the maximum extent possible when measuring fair value. In the absence of quoted market prices, various valuation techniques are utilized to measure fair value. When possible, observable market data for identical or similar financial instruments are used in the valuation. When market data is not available, fair value is determined using valuation models that incorporate Management’s estimates of the assumptions a market participant would use in pricing the asset or liability. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below: · Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. · Level 2 - Quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability. · Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little or no market activity). A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The types of instruments valued based on quoted market prices in active markets include most U.S. government and Agency securities, liquid mortgage products, active listed equities and most money market securities. Such instruments are generally classified within Level 1 or Level 2 of the fair value hierarchy. We do not adjust the quoted price for such instruments. The types of instruments valued based on quoted prices in markets that are not active, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency include most investment-grade and high-yield corporate bonds, less liquid mortgage products, less liquid Agency securities, less liquid listed equities, state, municipal and provincial obligations, and certain physical commodities. Such instruments are generally classified within Level 2 of the fair value hierarchy. Level 3 is for positions that are not traded in active markets or are subject to transfer restrictions; valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence. In the absence of such evidence, Management’s best estimate will be used. Management’s best estimate consists of both internal and external support on certain Level 3 investments. Subsequent to inception, Management only changes Level 3 inputs and assumptions when corroborated by evidence such as transactions in similar instruments, completed or pending third-party transactions in the underlying investment or comparable entities, subsequent rounds of financing, recapitalizations and other transactions across the capital structure, offerings in the equity or debt markets, and changes in financial ratios or cash flows. Financial instruments on a recurring basis The table below presents the balance of financial assets and liabilities at March 31, 2017 measured at fair value on a recurring basis: Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Significant Other Significant Identical Assets Observable Inputs Unobservable Inputs (In thousands) Total (Level 1) (Level 2) (Level 3) Assets U.S. Treasury Obligations $ 10,164 $ — $ 10,164 $ — U.S. GSEs 83,512 — 83,512 — FHLB Obligations 67,050 — 67,050 — Agency MBSs 64,277 — 64,277 — Agency CMBSs 23,370 — 23,370 — Agency CMOs 39,616 — 39,616 — Interest rate swap agreements 973 — 973 — Total assets $ 288,962 $ — $ 288,962 $ — Liabilities Interest rate swap agreements 774 — 774 — Total liabilities $ 774 $ — $ 774 $ — The table below presents the balance of financial assets and liabilities at December 31, 2016 measured at fair value on a recurring basis: Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Significant Other Significant Identical Assets Observable Inputs Unobservable Inputs (In thousands) Total (Level 1) (Level 2) (Level 3) Assets U.S. Treasury Obligations $ 25,183 $ — $ 25,183 $ — U.S. GSEs 93,353 — 93,353 — FHLB Obligations 67,006 — 67,006 — Agency MBSs 75,209 — 75,209 — Agency CMBSs 23,608 — 23,608 — Agency CMOs 49,333 — 49,333 — ABSs 306 — 306 — Interest rate swap agreements 422 — 422 — Total assets $ 334,420 $ — $ 334,420 $ — Liabilities Interest rate swap agreements 194 — 194 — Total liabilities $ 194 $ — $ 194 $ — Investment securities are reported at fair value utilizing Level 2 inputs. The prices for these instruments are obtained through an independent pricing service or dealer market participant with whom we have historically transacted both purchases and sales of investment securities. Prices obtained from these sources include market quotations and matrix pricing. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. More information regarding our investment securities can be found in Note 4 to these consolidated financial statements. The interest rate swaps are reported at their fair value utilizing Level 2 inputs from third parties. The fair value of our interest rate swaps are determined using prices obtained from a third party advisor. The fair value measurement of the interest rate swap is determined by netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on the expectation of future interest rates derived from observed market interest rate curves. There were no transfers between Level 1 and Level 2 for the three months ended March 31, 2017 or 2016. There were no Level 3 assets measured at fair value on a recurring basis at March 31, 2017 or December 31, 2016. Financial instruments on a non-recurring basis Certain financial assets are also measured at fair value on a non-recurring basis, however they were not material at March 31, 2017 or December 31, 2016. These financial assets include impaired loans and other real estate owned (“OREO”). Fair value of financial instruments The fair value of Merchants’ financial instruments as of March 31, 2017 are summarized in the table below: Carrying (In thousands) Amount Fair Value Level 1 Level 2 Level 3 Cash and cash equivalents $ 59,762 $ 59,762 $ 59,762 $ — $ — Securities available for sale 287,989 287,989 — 287,989 — Securities held to maturity 80,991 81,088 — 81,088 — FHLB stock 7,044 N/A N/A N/A N/A Loans, net of allowance for loan losses 1,529,531 1,511,073 — — 1,511,073 Interest rate swap agreement 973 973 — 973 — Accrued interest receivable 5,085 5,085 — 1,096 3,989 Total $ 1,971,375 $ 1,945,970 $ 59,762 $ 371,146 $ 1,515,062 Deposits $ 1,511,676 $ 1,510,694 $ 1,321,166 $ 189,528 $ — Short-term borrowings 75,000 75,000 — 75,000 — Securities sold under agreement to repurchase 249,582 249,651 — 249,651 — Other long-term debt 3,630 3,585 — 3,585 — Junior subordinated debentures issued to unconsolidated subsidiary trust 20,619 14,721 — 14,721 — Interest rate swap agreement 774 774 — 774 — Accrued interest payable 123 123 11 112 — Total $ 1,861,404 $ 1,854,548 $ 1,321,177 $ 533,371 $ — The fair value of Merchants’ financial instruments as of December 31, 2016 are summarized in the table below: Carrying (In thousands) Amount Fair Value Level 1 Level 2 Level 3 Cash and cash equivalents $ 82,953 $ 82,953 $ 82,953 $ — $ — Securities available for sale 333,998 333,998 — 333,998 — Securities held to maturity 85,694 85,749 — 85,749 — FHLB stock 4,976 N/A N/A N/A N/A Loans, net of allowance for loan losses 1,501,550 1,484,718 — — 1,484,718 Interest rate swap agreement 422 422 — 422 — Accrued interest receivable 4,722 4,722 — 1,232 3,490 Total $ 2,014,315 $ 1,992,562 $ 82,953 $ 421,401 $ 1,488,208 Deposits $ 1,527,470 $ 1,526,626 $ 1,328,262 $ 198,364 $ — Short-term borrowings 40,000 40,000 — 40,000 — Securities sold under agreement to repurchase 312,118 312,019 — 312,019 — Other long-term debt 3,651 3,600 — 3,600 — Junior subordinated debentures issued to unconsolidated subsidiary trust 20,619 14,775 — 14,775 — Interest rate swap agreement 194 194 — 194 — Accrued interest payable 110 110 11 99 — Total $ 1,904,162 $ 1,897,324 $ 1,328,273 $ 569,051 $ — The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accrued interest receivable and accrued interest payable approximate fair value. It is not practical to determine the fair value of FHLB stock due to restrictions placed on its transferability. The methodologies for other financial assets and financial liabilities are discussed below. Loans - The fair value for loans is estimated using discounted cash flow analyses, using interest rates and spreads currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price. Deposits - The fair value of deposits with no stated maturity, which includes demand, savings, interest bearing checking and money market accounts, is equal to the amount payable on demand resulting in a Level 1 classification. The fair value of variable rate, fixed term certificates of deposit also approximates the carrying amount reported in the consolidated balance sheets. The fair value of fixed rate and fixed term certificates of deposit is estimated using a discounted cash flow method which applies interest rates currently being offered for deposits of similar remaining maturities resulting in a Level 2 classification. Debt - The fair value of debt is estimated using current market rates for borrowings of similar remaining maturity resulting in a Level 2 classification. Commitments to Extend Credit and Standby Letters of Credit - The fair value of commitments to extend credit is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of financial standby letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counterparties. The fair value of commitments to extend credit and standby letters of credit is not material as of March 31, 2017 and December 31, 2016.

EMPLOYEE BENEFIT PLANS

EMPLOYEE BENEFIT PLANS	3 Months Ended
	Mar. 31, 2017
EMPLOYEE BENEFIT PLANS
EMPLOYEE BENEFIT PLANS	NOTE 8: EMPLOYEE BENEFIT PLANS Pension Plan Prior to January 1995, we maintained a noncontributory defined benefit plan (the “Pension Plan”) covering all eligible employees. During 1995, the Pension Plan was curtailed. Accordingly, all accrued benefits were fully vested and no additional years of service or age will be accrued. The following tables summarize the components of net periodic benefit cost and other changes in Pension Plan assets and benefit obligations recognized in other comprehensive income for the three months ended March 31, 2017 and 2016: Three Months Ended March 31, (In thousands) 2017 2016 Interest cost $ 113 $ 112 Expected return on plan assets (111) (242) Service costs 13 14 Net loss amortization 110 116 Net periodic pension benefit $ 125 $ — We have no minimum required contribution for 2017. Our Pension Investment Policy Statement sets forth the investment objectives and constraints of the Pension Plan. The purpose of the policy is to assist our Retirement Plan Committee in effectively supervising, monitoring, and evaluating the Pension Plan.

EARNINGS PER SHARE

EARNINGS PER SHARE	3 Months Ended
	Mar. 31, 2017
EARNINGS PER SHARE
EARNINGS PER SHARE	NOTE 9: EARNINGS PER SHARE The following table presents reconciliations of the calculations of basic and diluted earnings per share for the three months ended March 31, 2017 and 2016: Three Months Ended March 31, (In thousands except per share data) 2017 2016 Net income $ 3,611 $ 3,490 Weighted average common shares outstanding 6,904 6,856 Dilutive effect of common stock equivalents 25 110 Weighted average common and common equivalent shares outstanding 6,929 6,966 Basic earnings per common share $ 0.52 $ 0.51 Diluted earnings per common share $ 0.52 $ 0.50 Basic earnings per common share were computed by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share were computed by including potentially dilutive shares on the weighted average share count. Anti-dilutive average warrants totaling 34,370 shares have been excluded from the calculation of diluted EPS for the three months ended March 31, 2016.

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES	3 Months Ended
	Mar. 31, 2017
COMMITMENTS AND CONTINGENCIES.
COMMITMENTS AND CONTINGENCIES	NOTE 10: COMMITMENTS AND CONTINGENCIES Financial Instruments with Off-Balance Sheet Risk Merchants is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments primarily include commitments to extend credit and financial guarantees. Such instruments involve, to varying degrees, elements of credit and interest rate risk that are not recognized in the accompanying consolidated balance sheets. Exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and financial guarantees written is represented by the contractual amount of those instruments. We use the same credit policies in making commitments as we do for on-balance sheet instruments. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since a portion of the commitment is expected to expire without being drawn upon, the total commitment amount does not necessarily represent a future cash requirement. We evaluate each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained by us upon extension of credit is based on Management's credit evaluation of the counterparty, and an appropriate amount of real and/or personal property is typically obtained as collateral. Disclosures are required regarding liability-recognition for the fair value at issuance of certain guarantees. We do not issue any guarantees that would require liability-recognition or disclosure, other than our standby letters of credit. We have issued conditional commitments in the form of standby letters of credit to guarantee payment on behalf of a customer and guarantee the performance of a customer to a third party. Standby letters of credit generally arise in connection with lending relationships. The credit risk involved in issuing these instruments is essentially the same as that involved in extending loans to customers. Contingent obligations under standby letters of credit totaled approximately $ 6.77 million at March 31, 2017 and $ 5 .95 million at December 31, 2016, respectively, and represent the maximum potential future payments we could be required to make. Typically, these instruments have terms of 12 months or less and expire unused; therefore, the total amounts do not necessarily represent future cash requirements. Each customer is evaluated individually for creditworthiness under the same underwriting standards used for commitments to extend credit and on-balance sheet instruments. Our policies governing loan collateral apply to standby letters of credit at the time of credit extension. Loan-to-value ratios are generally consistent with loan-to-value requirements for other commercial loans secured by similar types of collateral. We may enter into commitments to sell loans, which involve market and interest rate risk. There were no such commitments at March 31, 2017 or December 31, 2016. Reserve Balances at the Federal Reserve Bank At March 31, 2017 and December 31, 2016, amounts at the Federal Reserve Bank included $ 26.62 million and $ 32.72 million, respectively, held to satisfy certain reserve requirements of the Federal Reserve Bank. Legal Proceedings We have been named as defendants in various legal proceedings arising from our normal business activities. Although the amount of any ultimate liability with respect to such proceedings cannot be determined, in the opinion of Management, based upon input from counsel on the anticipated outcome of such proceedings, any such liability will not have a material effect on our consolidated financial position.

ACCUMULATED OTHER COMPREHENSIVE

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)	3 Months Ended
	Mar. 31, 2017
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)	NOTE 11: ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The following table presents changes in accumulated other comprehensive income (loss) by component, net of tax for the three months ended March 31, 2017. Unrealized Unrealized Gains Gains (Losses) (Losses) on Securities on Securities Transferred From Accumulated Other Available-For- Available-For-Sale to Interest Rate Comprehensive (In thousands) Sale Held-To-Maturity Pension Plan Swaps Income (Loss) Beginning Balance December 31, 2016 $ (551) $ (1,408) $ (3,823) $ — $ (5,782) Other comprehensive income before reclassifications 106 — — — 106 Accretion of unrealized losses of securities transferred from available-for-sale to held-to-maturity recognized in other comprehensive income — 113 — — 113 Reclassification adjustments for (gains) losses reclassified into income (166) — 72 — (94) Net current period other comprehensive (loss) income (60) 113 72 — 125 Balance March 31, 2017 $ (611) $ (1,295) $ (3,751) $ — $ (5,657) The following table presents changes in accumulated other comprehensive income (loss) by component, net of tax for the three months ended March 31, 2016. Unrealized Unrealized Gains Gains (Losses) (Losses) on Securities on Securities Transferred From Accumulated Other Available-For- Available-For-Sale to Interest Rate Comprehensive (In thousands) Sale Held-To-Maturity Pension Plan Swaps Income (Loss) Beginning Balance December 31, 2015 $ 166 $ (2,297) $ (3,737) $ (155) $ (6,023) Other comprehensive income before reclassifications 2,624 — — 35 2,659 Accretion of unrealized losses of securities transferred from available-for-sale to held-to-maturity recognized in other comprehensive income — 127 — — 127 Reclassification adjustments for losses reclassified into income — — 75 — 75 Net current period other comprehensive income 2,624 127 75 35 2,861 Balance March 31, 2016 $ 2,790 $ (2,170) $ (3,662) $ (120) $ (3,162) Details of the reclassification adjustments in the above table for the three months ended March 31, 2017 and 2016 are presented below: Details about Accumulated Other Three Months Ended Three Months Ended Comprehensive Income Components March 31, March 31, Affected Line Item in the Statement (In thousands) 2017 2016 Where Net Income is Presented Realized gains on securities $ (255) $ - Net gains on investment securities (255) - Total before tax 89 - Provision for income taxes $ (166) $ - Net of tax, increase to net income Amortization of defined benefit pension plan $ $ Compensation and benefits expense Total before tax Provision for income taxes $ $ Net of tax, decrease to net income Total reclassification adjustments $ $ (Increase)/Decrease to net income

DERIVATIVE FINANCIAL INSTRUMENT

DERIVATIVE FINANCIAL INSTRUMENTS	3 Months Ended
	Mar. 31, 2017
DERIVATIVE FINANCIAL INSTRUMENTS
DERIVATIVE FINANCIAL INSTRUMENTS	NOTE 12: DERIVATIVE FINANCIAL INSTRUMENTS We have interest rate swaps with notional amounts with certain commercial customers totaling $ 40.23 million at March 31, 2017 and $40.73 million at December 31, 2016. In order to minimize our risk, these customer derivatives (pay floating/receive fixed swaps) have been offset with essentially matching interest rate swaps (pay fixed/receive floating swaps) with our counterparty totaling $40.23 million at March 31, 2017 and $40.73 million at December 31, 2016. At March 31, 2017, the weighted average receive rate of these interest rate swaps was 2.87%, the weighted average pay rate was 3.85% and the weighted average maturity was 7 .3 years. The fair values of $774 thousand and $ 774 thousand were reflected in other assets and other liabilities, respectively, in the accompanying consolidated balance sheets at March 31, 2017. At December 31, 2016, the weighted average receive rate of these interest rate swaps was 2.66%, the weighted average pay rate was 3.85% and the weighted average maturity was 7.5 years. The fair values of $194 thousand and $194 thousand were reflected in other assets and other liabilities, respectively, in the accompanying consolidated balance sheets at December 31, 2016. Hedge accounting has not been applied for these derivatives. Since the terms of the swaps with our customer and the other financial institution offset each other, with the only difference being counterparty credit risk, changes in the fair value of the underlying derivative contracts are not materially different and do not significantly impact our results of operations. We have interest rate swaps with notional amounts totaling $ 7.48 million at March 31, 2017 and $7.48 million at December 31, 2016, that were designated as fair value hedges of certain fixed rate loans with municipalities. At March 31, 2017, the weighted average receive rate of these interest rate swaps was 2.30%, the weighted average pay rate was 3.11% and the weighted average maturity was 16.3 years. The fair value of $199 thousand at March 31, 2017, was reflected as a reduction to loans and an increase to other assets. At December 31, 2016 the weighted average receive rate of these interest rate swaps was 2.09%, the weighted average pay rate was 3.11% and the weighted average maturity was 16.5 years. The fair value of $2 28 thousand at December 31, 2016, was reflected as a reduction to loans and an increase to other assets. The ineffective portion of the interest swaps was immaterial and as such, amounts are not recognized in earnings. We assessed our counterparty risk at March 31, 2017 and determined any credit risk inherent in our derivative contracts was insignificant. Information about the fair value of derivative financial instruments can be found in Note 7 to these consolidated financial statements.

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS	3 Months Ended
	Mar. 31, 2017
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS	NOTE 13: SUBSEQUENT EVENTS On April 26, 2017, the Company and Community Bank System, Inc. issued a joint press release announcing that they have received regulatory approvals from the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency for the proposed merger. The closing date for the merger is Friday, May 12, 2017, subject to the satisfaction of customary closing conditions.

SUMMARY OF SIGNIFICANT ACCOUNTI

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	3 Months Ended
	Mar. 31, 2017
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation	Principles of Consolidation The accompanying consolidated financial statements include the accounts of Merchants Bancshares, Inc. (the “Company”), and its wholly-owned subsidiary Merchants Bank (the “Bank,” and collectively with the Company, “Merchants,” “we,” “us,” or “our”). All material intercompany accounts and transactions are eliminated in consolidation. We offer a full range of deposit, loan, cash management, and trust services to meet the financial needs of individual consumers, businesses and municipalities at 31 full-service banking offices throughout the state of Vermont and one full-service banking office in Massachusetts as of March 31, 2017.
Basis of Presentation	Basis of Presentation The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. All adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of our interim consolidated financial statements as of March 31, 2017 and December 31, 2016 and for the three months ended March 31, 2017 and 2016 have been included. The information was prepared from our unaudited financial statements and the unaudited financial statements of our subsidiaries, Merchants Bank and MBVT Statutory Trust I. Amounts reported for prior periods are reclassified, where necessary, to be consistent with the current period presentation.
Management's Use of Estimates in Preparation of Financial Statements	Management’s Use of Estimates in Preparation of Financial Statements The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting periods. The most significant estimates include those used in determining the allowance for credit losses, income taxes, interest income recognition on loans and investments and analysis of other-than-temporary impairment of our investment securities portfolio. Operating results in the future may vary from the amounts derived from Management's estimates and assumptions.

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS (Tables)	3 Months Ended
	Mar. 31, 2017
GOODWILL AND INTANGIBLE ASSETS
Schedule of goodwill	March 31, December 31, (In thousands) 2017 2016 Beginning of period $ 7,011 $ 7,011 Acquired goodwill — — Impairment — — End of period $ 7,011 $ 7,011
Schedule of estimated amortization expense for each of the next five years	(In thousands) Amount Remainder of 2017 $ 2018 2019 2020 2021 2022 Thereafter
Schedule of other intangible assets	March 31, 2017 December 31, 2016 Gross Net Gross Net Carrying Accumulated Carrying Carrying Accumulated Carrying (In thousands) Amount Amortization Amount Amount Amortization Amount Amortized intangible assets: Core deposit intangible $ 1,377 $ (264) $ 1,113 $ 1,377 $ (221) $ 1,156 Total $ 1,377 $ (264) $ 1,113 $ 1,377 $ (221) $ 1,156

INVESTMENT SECURITIES (Tables)

INVESTMENT SECURITIES (Tables)	3 Months Ended
	Mar. 31, 2017
INVESTMENT SECURITIES
Schedule of amortized cost and fair values of securities classified as available for sale and held to maturity	The amortized cost and fair values of the securities classified as available for sale and held to maturity as of March 31, 2017 were as follows: Gross Gross Amortized Unrealized Unrealized Fair (In thousands) Cost Gains Losses Value Available for Sale: U.S. Treasury Obligations $ 10,089 $ 75 $ — $ 10,164 U.S. Government Sponsored Enterprises ("U.S. GSEs") 83,916 127 (531) 83,512 Federal Home Loan Bank ("FHLB") Obligations 67,302 101 (353) 67,050 Residential Real Estate Mortgage-backed Securities ("Agency MBSs") 63,919 762 (404) 64,277 Agency Commercial Mortgage Backed Securities ("Agency CMBSs") 23,784 — (414) 23,370 Agency Collateralized Mortgage Obligations ("Agency CMOs") 39,871 32 (287) 39,616 Total Available for Sale $ 288,881 $ 1,097 $ (1,989) $ 287,989 Gross Gross Amortized Unrecognized Unrecognized Fair (In thousands) Cost Gains Losses Value Held to Maturity: U.S. Agency Obligations $ 16,864 $ 121 $ (6) $ 16,979 Agency MBSs 5,548 101 — 5,649 Agency CMOs 58,579 211 (330) 58,460 Total Held to Maturity $ 80,991 $ 433 $ (336) $ 81,088 The amortized cost and fair values of the securities classified as available for sale and held to maturity as of December 31, 2016 were as follows: Gross Gross Amortized Unrealized Unrealized Fair (In thousands) Cost Gains Losses Value Available for Sale: U.S. Treasury Obligations $ 25,079 $ 104 $ — $ 25,183 U.S. GSEs 93,883 106 (636) 93,353 FHLB Obligations 67,362 100 (456) 67,006 Agency MBSs 74,573 1,101 (465) 75,209 Agency CMBSs 23,972 — (364) 23,608 Agency CMOs 49,694 46 (407) 49,333 ABSs 283 23 — 306 Total Available for Sale $ 334,846 $ 1,480 $ (2,328) $ 333,998 Gross Gross Amortized Unrecognized Unrecognized Fair (In thousands) Cost Gains Losses Value Held to Maturity: U.S. Agency Obligations $ 17,849 $ 119 $ (33) $ 17,935 Agency MBSs 5,787 92 — 5,879 Agency CMOs 62,058 208 (331) 61,935 Total Held to Maturity $ 85,694 $ 419 $ (364) $ 85,749
Schedule of contractual final maturity distribution of debt securities classified as available for sale or held to maturity	The contractual final maturity distribution of the debt securities classified as available for sale as of March 31, 2017, were as follows: Securities After One After Five not due Within But Within But Within After Ten at a Single (In thousands) One Year Five Years Ten Years Years Maturity Total Available for Sale (at fair value): U.S. Treasury Obligations $ 100 $ 10,064 $ — $ — $ N/A $ 10,164 U.S. GSEs — 83,512 — — N/A 83,512 FHLB Obligations — 61,054 5,996 — N/A 67,050 Agency MBSs N/A N/A N/A N/A 64,277 64,277 Agency CMBSs N/A N/A N/A N/A 23,370 23,370 Agency CMOs N/A N/A N/A N/A 39,616 39,616 Total Available for Sale $ 100 $ 154,630 $ 5,996 $ — $ 127,263 $ 287,989 Available for Sale (at amortized cost): U.S. Treasury Obligations $ 100 $ 9,989 $ — $ — $ N/A $ 10,089 U.S. GSEs — 83,916 — — N/A 83,916 FHLB Obligations — 61,376 5,926 — N/A 67,302 Agency MBSs N/A N/A N/A N/A 63,919 63,919 Agency CMBSs N/A N/A N/A N/A 23,784 23,784 Agency CMOs N/A N/A N/A N/A 39,871 39,871 Total Available for Sale $ 100 $ 155,281 $ 5,926 $ — $ 127,574 $ 288,881 The contractual final maturity distribution of the debt securities classified as held to maturity as of March 31, 2017, were as follows: Securities After One After Five not due Within But Within But Within After Ten at a Single (In thousands) One Year Five Years Ten Years Years Maturity Total Held to Maturity (at fair value): U.S. Agency Obligations $ — $ — $ — $ 16,979 $ N/A $ 16,979 Agency MBSs N/A N/A N/A N/A 5,649 5,649 Agency CMOs N/A N/A N/A N/A 58,460 58,460 Total Held to Maturity $ — $ — $ — $ 16,979 $ 64,109 $ 81,088 Held to Maturity (at amortized cost): U.S. Agency Obligations $ — $ — $ — $ 16,864 $ N/A $ 16,864 Agency MBSs N/A N/A N/A N/A 5,548 5,548 Agency CMOs N/A N/A N/A N/A 58,579 58,579 Total Held to Maturity $ — $ — $ — $ 16,864 $ 64,127 $ 80,991
Schedule of proceeds, gross gains and gross losses on available for sale securities	Three Months Ended March 31, (In thousands) 2017 2016 Proceeds $ 38,635 $ — Gross gains 278 — Gross losses (23) — Net gains $ 255 $ —
Schedule of gross unrealized losses on investment securities and fair value of related securities, aggregated by investment category and length of time that individual securities have been in continuous unrealized loss position	Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in continuous unrealized loss position, at March 31, 2017, were as follows: Less Than 12 Months 12 Months or More Total Number Fair Number Fair Number Fair (In thousands) of Issues Value Loss of Issues Value Loss of Issues Value Loss Available for Sale: U.S. GSEs 7 $ 37,599 $ (531) — $ — $ — 7 $ 37,599 $ (531) FHLB Obligations 7 35,858 (353) — — — 7 35,858 (353) Agency MBSs 15 45,753 (404) — — — 15 45,753 (404) Agency CMBSs 6 23,370 (414) — — — 6 23,370 (414) Agency CMOs 13 28,433 (287) — — — 13 28,433 (287) Total Available for Sale 48 $ 171,013 $ (1,989) — $ — $ — 48 $ 171,013 $ (1,989) Held to Maturity: U.S. Agency Obligations 1 $ 6,856 $ (6) — $ — $ — 1 $ 6,856 $ (6) Agency CMOs 16 33,371 (215) 1 3,027 (115) 17 36,398 (330) Total Held to Maturity 17 $ 40,227 $ (221) 1 $ 3,027 $ (115) 18 $ 43,254 $ (336) Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in continuous unrealized loss position, at December 31, 2016, were as follows: Less Than 12 Months 12 Months or More Total Number Fair Number Fair Number Fair (In thousands) of Issues Value Loss of Issues Value Loss of Issues Value Loss Available for Sale: U.S. GSEs 8 $ 42,404 $ (636) — $ — $ — 8 $ 42,404 $ (636) FHLB Obligations 9 45,870 (456) — — — 9 45,870 (456) Agency MBSs 16 48,777 (465) — — — 16 48,777 (465) Agency CMBSs 6 23,608 (364) — — — 6 23,608 (364) Agency CMOs 15 33,935 (332) 2 2,227 (75) 17 36,162 (407) Total Available for Sale 54 $ 194,594 $ (2,253) 2 $ 2,227 $ (75) 56 $ 196,821 $ (2,328) Held to Maturity: U.S. Agency Obligations 1 $ 7,230 $ (33) — $ — $ — 1 $ 7,230 $ (33) Agency CMOs 13 26,480 (212) 1 3,162 (119) 14 29,642 (331) Total Held to Maturity 14 $ 33,710 $ (245) 1 $ 3,162 $ (119) 15 $ 36,872 $ (364)

SECURITIES SOLD UNDER AGREEME24

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE (Tables)	3 Months Ended
	Mar. 31, 2017
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE.
Schedule of contractual maturity of secured borrowings and class of collateral pledged	The following table presents the contractual maturity of our secured borrowings and class of collateral pledged at March 31, 2017: Remaining Contractual Maturity of the Agreements Overnight and Greater Than (In thousands) Continuous Up to 30 Days 30-90 Days 90 Days Total Repurchase Agreements Available for Sale: U.S. Treasury Obligations $ 10,064 $ — $ — $ — $ 10,064 U.S. GSEs 47,745 — — — 47,745 FHLB Obligations 58,519 — — — 58,519 Agency MBSs 33,553 — — — 33,553 Agency CMBSs 18,961 — — — 18,961 Agency CMOs 23,928 — — — 23,928 Total Available for Sale $ 192,770 $ — $ — $ — $ 192,770 (In thousands) Held to Maturity: U.S. Agency Obligations $ 14,714 $ — $ — $ — $ 14,714 Agency CMOs 42,098 — — — 42,098 Total Held to Maturity $ 56,812 $ — $ — $ — $ 56,812 The following table presents the contractual maturity of our secured borrowings and class of collateral pledged at December 31, 2016: Remaining Contractual Maturity of the Agreements Overnight and Greater Than (In thousands) Continuous Up to 30 Days 30-90 Days 90 Days Total Repurchase Agreements Available for Sale: U.S. Treasury Obligations $ 24,207 $ — $ — $ — $ 24,207 U.S. GSEs 51,847 — — — 51,847 FHLB Obligations 59,505 — — — 59,505 Agency MBSs 44,736 — — — 44,736 Agency CMBSs 21,662 — — — 21,662 Agency CMOs 40,007 — — — 40,007 Total Available for Sale $ 241,964 $ — $ — $ — $ 241,964 (In thousands) Held to Maturity: U.S. Agency Obligations $ 16,646 $ — $ — $ — $ 16,646 Agency CMOs 53,508 — — — 53,508 Total Held to Maturity $ 70,154 $ — $ — $ — $ 70,154

LOANS AND THE ALLOWANCE FOR C25

LOANS AND THE ALLOWANCE FOR CREDIT LOSSES (Tables)	3 Months Ended
	Mar. 31, 2017
LOANS AND THE ALLOWANCE FOR CREDIT LOSSES
Schedule of composition of loan portfolio	(In thousands) March 31, 2017 December 31, 2016 Commercial, financial and agricultural $ 276,915 $ 257,078 Municipal loans 113,875 114,509 Real estate loans – residential 438,424 447,527 Real estate loans – commercial 672,712 636,755 Real estate loans – construction 35,964 52,533 Installment loans 4,813 5,790 All other loans 15 17 Total loans $ 1,542,718 $ 1,514,209
Schedule of loan loss experience and activity in allowance for loan losses	The following table reflects our loan loss experience and activity in the allowance for loan losses for the three months ended March 31, 2017: Commercial, financial Real Real Real and estate- estate- estate- (In thousands) agricultural Municipal residential commercial construction Installment All other Totals Allowance for loan losses: Beginning balance $ 2,946 $ 593 $ 2,575 $ 5,922 $ 534 $ 89 $ — $ 12,659 Charge-offs (3) — — — — (69) — (72) Recoveries 2 — 9 — — 23 — 34 Provision (credit) 250 (19) (32) 434 (183) 116 — 566 Ending balance $ 3,195 $ 574 $ 2,552 $ 6,356 $ 351 $ 159 $ — $ 13,187 The following table reflects our loan loss experience and activity in the allowance for loan losses for the three months ended March 31, 2016: Commercial, financial Real Real Real and estate- estate- estate- (In thousands) agricultural Municipal residential commercial construction Installment All other Totals Allowance for loan losses: Beginning balance $ 2,696 $ 590 $ 2,882 $ 5,386 $ 420 $ 66 $ — $ 12,040 Charge-offs (3) — (73) — — (42) — (118) Recoveries 2 — 11 4 — 19 — 36 Provision (credit) 161 32 37 (109) 45 49 — 215 Ending balance $ 2,856 $ 622 $ 2,857 $ 5,281 $ 465 $ 92 $ — $ 12,173
Schedule of balance in allowance for loan losses and recorded investment in loans by portfolio segment based upon impairment method	The following presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment based upon the impairment method at March 31, 2017: Commercial, financial and Real estate- Real estate- Real estate- (In thousands) agricultural Municipal residential commercial construction Installment All other Totals Allowance for loan losses: Ending balance individually evaluated for impairment $ — $ — $ 227 $ 18 $ — $ — $ — $ 245 Ending balance collectively evaluated for impairment 3,195 574 2,325 6,331 351 159 — 12,935 Ending balance acquired with deteriorated credit quality — — — 7 — — — 7 Totals $ 3,195 $ 574 $ 2,552 $ 6,356 $ 351 $ 159 $ — $ 13,187 Financing receivables: Ending balance individually evaluated for impairment $ 77 $ — $ 1,447 $ 2,066 $ — $ — $ — $ 3,590 Ending balance collectively evaluated for impairment 276,144 113,875 436,977 668,775 35,964 4,813 15 1,536,563 Ending balance acquired with deteriorated credit quality 694 — — 1,871 — — — 2,565 Totals $ 276,915 $ 113,875 $ 438,424 $ 672,712 $ 35,964 $ 4,813 $ 15 $ 1,542,718 The following presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment based upon impairment method at December 31, 2016: Commercial, financial and Real estate- Real estate- Real estate- (In thousands) agricultural Municipal residential commercial construction Installment All other Totals Allowance for loan losses: Ending balance individually evaluated for impairment $ — $ — $ 184 $ — $ — $ — $ — $ 184 Ending balance collectively evaluated for impairment 2,946 593 2,391 5,922 534 89 — 12,475 Ending balance acquired with deteriorated credit quality — — — — — — — — Totals $ 2,946 $ 593 $ 2,575 $ 5,922 $ 534 $ 89 $ — $ 12,659 Financing receivables: Ending balance individually evaluated for impairment $ 97 $ — $ 1,213 $ 1,634 $ — $ 12 $ — $ 2,956 Ending balance collectively evaluated for impairment 256,239 114,509 446,314 633,217 52,533 5,778 17 1,508,607 Ending balance acquired with deteriorated credit quality 742 — — 1,904 — — — 2,646 Totals $ 257,078 $ 114,509 $ 447,527 $ 636,755 $ 52,533 $ 5,790 $ 17 $ 1,514,209
Schedule of recorded investment of loans, including nonaccrual and restructured loans	The table below presents the recorded investment of loans segregated by class, with delinquency aging as of March 31, 2017: 31-60 61-90 91 Days Total Days Days or More Past (In thousands) Past Due Past Due Past Due Due Current Nonperforming Total Commercial, financial and agricultural $ 623 $ — $ — $ 623 $ 276,137 $ 155 $ 276,915 Municipal — — — — 113,875 — 113,875 Real estate-residential: First mortgage 121 — — 121 400,689 1,343 402,153 Second mortgage — — — — 36,271 — 36,271 Real estate-commercial: Owner occupied 501 — — 501 241,895 2,714 245,110 Non-owner occupied — — — — 427,602 — 427,602 Real estate-construction: Residential — — — — 2,388 — 2,388 Commercial — — — — 33,576 — 33,576 Installment 87 14 — 101 4,712 — 4,813 Other — — — — 15 — 15 Total $ 1,332 $ 14 $ — $ 1,346 $ 1,537,160 $ 4,212 $ 1,542,718 Of the total nonperforming loans in the aging table above, $4.08 million were past due of which $0 were restructured loans, $804 thousand were purchase credit impaired, and $0 were 91 days or more past due and accruing. The table below presents the recorded investment of loans segregated by class, with delinquency aging as of December 31, 2016: 31-60 61-90 91 Days Total Days Days or More Past (In thousands) Past Due Past Due Past Due Due Current Nonperforming Total Commercial, financial and agricultural $ — $ — $ — $ — $ 256,894 $ 184 $ 257,078 Municipal — — — — 114,509 — 114,509 Real estate-residential: First mortgage 164 71 — 235 408,597 1,104 409,936 Second mortgage 32 — — 32 37,559 — 37,591 Real estate-commercial: Owner occupied — — — — 224,691 1,882 226,573 Non-owner occupied — — — — 410,182 — 410,182 Real estate-construction: Residential — — — — 2,530 — 2,530 Commercial — — — — 50,003 — 50,003 Installment 123 — — 123 5,655 12 5,790 Other — — — — 17 — 17 Total $ 319 $ 71 $ — $ 390 $ 1,510,637 $ 3,182 $ 1,514,209 Of the total nonperforming loans in the aging table above, $1.75 million were past due of which $0 were restructured loans, $819 thousand were purchase credit impaired and $19 thous and were 91 days or more past due and accruing.
Schedule of impaired loans by class	Impaired loans by class at March 31, 2017 and for the three months ended March 31, 2017 are as follows: Period Ended Three Months Ended March 31, 2017 March 31, 2017 Unpaid Average Interest Recorded Principal Related Recorded Income (In thousands) Investment Balance Allowance Investment Recognized With no related allowance recorded Commercial, financial and agricultural $ 77 $ 77 $ — $ 78 $ 1 Residential: First mortgage 130 190 — 180 1 Second mortgage — — — — — Commercial Real Estate: Owner occupied 1,751 1,760 — 1,687 — Non-owner occupied — — — 134 2 Construction: Residential — — — — — Commercial — — — — — Installment — — — — — With related allowance recorded Commercial, financial and agricultural — — — — — Residential: First mortgage 1,317 1,330 227 1,114 — Second mortgage — — — — — Commercial Real Estate: Owner occupied 315 315 18 105 — Total Commercial, financial and agricultural 77 77 — 78 1 Residential 1,447 1,520 227 1,294 1 Commercial Real Estate 2,066 2,075 18 1,926 2 Construction — — — — — Installment — — — — — Total $ 3,590 $ 3,672 $ 245 $ 3,298 $ 4 Impaired loans by class at December 31, 2016 and for the three months ended March 31, 2016 are as follows: Period Ended Three Months Ended December 31, 2016 March 31, 2016 Unpaid Average Interest Recorded Principal Related Recorded Income (In thousands) Investment Balance Allowance Investment Recognized With no related allowance recorded Commercial, financial and agricultural $ 97 $ 97 $ — $ 390 $ 1 Residential: First mortgage 208 266 — 241 2 Second mortgage — — — 3 — Commercial Real Estate: Owner occupied 1,229 1,229 — 401 — Non-owner occupied 405 432 — 470 — Installment 12 12 — 8 — With related allowance recorded Commercial, financial and agricultural — — — 254 — Residential: First mortgage 1,005 1,026 184 425 — Second mortgage — — — — — Commercial Real Estate: Owner occupied — — — — — Installment — — — — — Total Commercial, financial and agricultural 97 97 — 644 1 Residential 1,213 1,292 184 669 2 Commercial Real Estate 1,634 1,661 — 871 — Installment 12 12 — 8 — Total $ 2,956 $ 3,062 $ 184 $ 2,192 $ 3
Schedule of nonperforming loans	(In thousands) March 31, 2017 December 31, 2016 Nonaccrual loans $ 4,212 $ 3,163 Loans greater than 90 days and accruing — 19 Troubled debt restructurings ("TDRs") — — Total nonperforming loans $ 4,212 $ 3,182
Schedule of nonaccrual loans by class	(In thousands) March 31, 2017 December 31, 2016 Commercial, financial and agricultural $ 155 $ 165 Real estate - residential: First mortgage 1,343 1,104 Second mortgage — — Real estate - commercial: Owner occupied 2,714 1,882 Non owner occupied — — Installment — 12 Total nonaccruing non-TDR loans $ 4,212 $ 3,163 Nonaccruing TDR’s Commercial, financial and agricultural — — Real estate – residential: First mortgage — — Real estate - commercial: Non owner occupied — — Total nonaccrual loans including TDRs $ 4,212 $ 3,163
Schedule of loans by credit quality indicator	Below is a summary of loans by credit quality indicator as of March 31, 2017: Pass- Special Sub- (In thousands) Unrated Pass Watch Mention Standard Total Commercial, financial and agricultural $ 99 233,838 $ 25,422 $ 317 $ 17,239 $ 276,915 Municipal — 110,222 3,653 — — 113,875 Real estate – residential: First mortgage 393,208 7,060 542 — 1,343 402,153 Second mortgage 36,049 — 222 — — 36,271 Real estate – commercial: Owner occupied — 205,107 25,561 — 14,442 245,110 Non-owner occupied — 385,105 41,426 — 1,071 427,602 Real estate – construction: Residential 605 1,783 — — — 2,388 Commercial 116 31,948 1,512 — — 33,576 Installment 4,813 — — — — 4,813 All other loans 15 — — — — 15 Total $ 434,905 $ 975,063 $ 98,338 $ 317 $ 34,095 $ 1,542,718 Below is a summary of loans by credit quality indicator as of December 31, 2016: Pass- Special Sub- (In thousands) Unrated Pass Watch Mention Standard Total Commercial, financial and agricultural $ 102 $ 215,891 $ 24,215 $ 322 $ 16,548 $ 257,078 Municipal — 110,864 2,824 821 — 114,509 Real estate – residential: First mortgage 400,961 7,392 481 — 1,102 409,936 Second mortgage 37,367 — 224 — — 37,591 Real estate – commercial: Owner occupied — 186,494 25,492 — 14,587 226,573 Non-owner occupied — 369,566 38,706 — 1,910 410,182 Real estate – construction: Residential 412 2,118 — — — 2,530 Commercial 152 41,373 7,476 — 1,002 50,003 Installment 5,778 — — — 12 5,790 All other loans 17 — — — — 17 Total $ 444,789 $ 933,698 $ 99,418 $ 1,143 $ 35,161 $ 1,514,209

FAIR VALUE OF FINANCIAL INSTR26

FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)	3 Months Ended
	Mar. 31, 2017
FAIR VALUE OF FINANCIAL INSTRUMENTS
Schedule of financial instruments on a recurring basis	The table below presents the balance of financial assets and liabilities at March 31, 2017 measured at fair value on a recurring basis: Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Significant Other Significant Identical Assets Observable Inputs Unobservable Inputs (In thousands) Total (Level 1) (Level 2) (Level 3) Assets U.S. Treasury Obligations $ 10,164 $ — $ 10,164 $ — U.S. GSEs 83,512 — 83,512 — FHLB Obligations 67,050 — 67,050 — Agency MBSs 64,277 — 64,277 — Agency CMBSs 23,370 — 23,370 — Agency CMOs 39,616 — 39,616 — Interest rate swap agreements 973 — 973 — Total assets $ 288,962 $ — $ 288,962 $ — Liabilities Interest rate swap agreements 774 — 774 — Total liabilities $ 774 $ — $ 774 $ — The table below presents the balance of financial assets and liabilities at December 31, 2016 measured at fair value on a recurring basis: Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Significant Other Significant Identical Assets Observable Inputs Unobservable Inputs (In thousands) Total (Level 1) (Level 2) (Level 3) Assets U.S. Treasury Obligations $ 25,183 $ — $ 25,183 $ — U.S. GSEs 93,353 — 93,353 — FHLB Obligations 67,006 — 67,006 — Agency MBSs 75,209 — 75,209 — Agency CMBSs 23,608 — 23,608 — Agency CMOs 49,333 — 49,333 — ABSs 306 — 306 — Interest rate swap agreements 422 — 422 — Total assets $ 334,420 $ — $ 334,420 $ — Liabilities Interest rate swap agreements 194 — 194 — Total liabilities $ 194 $ — $ 194 $ —
Schedule of fair value of financial instruments	The fair value of Merchants’ financial instruments as of March 31, 2017 are summarized in the table below: Carrying (In thousands) Amount Fair Value Level 1 Level 2 Level 3 Cash and cash equivalents $ 59,762 $ 59,762 $ 59,762 $ — $ — Securities available for sale 287,989 287,989 — 287,989 — Securities held to maturity 80,991 81,088 — 81,088 — FHLB stock 7,044 N/A N/A N/A N/A Loans, net of allowance for loan losses 1,529,531 1,511,073 — — 1,511,073 Interest rate swap agreement 973 973 — 973 — Accrued interest receivable 5,085 5,085 — 1,096 3,989 Total $ 1,971,375 $ 1,945,970 $ 59,762 $ 371,146 $ 1,515,062 Deposits $ 1,511,676 $ 1,510,694 $ 1,321,166 $ 189,528 $ — Short-term borrowings 75,000 75,000 — 75,000 — Securities sold under agreement to repurchase 249,582 249,651 — 249,651 — Other long-term debt 3,630 3,585 — 3,585 — Junior subordinated debentures issued to unconsolidated subsidiary trust 20,619 14,721 — 14,721 — Interest rate swap agreement 774 774 — 774 — Accrued interest payable 123 123 11 112 — Total $ 1,861,404 $ 1,854,548 $ 1,321,177 $ 533,371 $ — The fair value of Merchants’ financial instruments as of December 31, 2016 are summarized in the table below: Carrying (In thousands) Amount Fair Value Level 1 Level 2 Level 3 Cash and cash equivalents $ 82,953 $ 82,953 $ 82,953 $ — $ — Securities available for sale 333,998 333,998 — 333,998 — Securities held to maturity 85,694 85,749 — 85,749 — FHLB stock 4,976 N/A N/A N/A N/A Loans, net of allowance for loan losses 1,501,550 1,484,718 — — 1,484,718 Interest rate swap agreement 422 422 — 422 — Accrued interest receivable 4,722 4,722 — 1,232 3,490 Total $ 2,014,315 $ 1,992,562 $ 82,953 $ 421,401 $ 1,488,208 Deposits $ 1,527,470 $ 1,526,626 $ 1,328,262 $ 198,364 $ — Short-term borrowings 40,000 40,000 — 40,000 — Securities sold under agreement to repurchase 312,118 312,019 — 312,019 — Other long-term debt 3,651 3,600 — 3,600 — Junior subordinated debentures issued to unconsolidated subsidiary trust 20,619 14,775 — 14,775 — Interest rate swap agreement 194 194 — 194 — Accrued interest payable 110 110 11 99 — Total $ 1,904,162 $ 1,897,324 $ 1,328,273 $ 569,051 $ —

EMPLOYEE BENEFIT PLANS (Tables)

EMPLOYEE BENEFIT PLANS (Tables)	3 Months Ended
	Mar. 31, 2017
EMPLOYEE BENEFIT PLANS
Net periodic pension cost (benefit)	Three Months Ended March 31, (In thousands) 2017 2016 Interest cost $ 113 $ 112 Expected return on plan assets (111) (242) Service costs 13 14 Net loss amortization 110 116 Net periodic pension benefit $ 125 $ —

EARNINGS PER SHARE (Tables)

EARNINGS PER SHARE (Tables)	3 Months Ended
	Mar. 31, 2017
EARNINGS PER SHARE
Schedule of reconciliations of the calculations of basic and diluted earnings per share	Three Months Ended March 31, (In thousands except per share data) 2017 2016 Net income $ 3,611 $ 3,490 Weighted average common shares outstanding 6,904 6,856 Dilutive effect of common stock equivalents 25 110 Weighted average common and common equivalent shares outstanding 6,929 6,966 Basic earnings per common share $ 0.52 $ 0.51 Diluted earnings per common share $ 0.52 $ 0.50

ACCUMULATED OTHER COMPREHENSI29

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables)	3 Months Ended
	Mar. 31, 2017
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Schedule of changes in accumulated other comprehensive income (loss) by component, net of tax	The following table presents changes in accumulated other comprehensive income (loss) by component, net of tax for the three months ended March 31, 2017. Unrealized Unrealized Gains Gains (Losses) (Losses) on Securities on Securities Transferred From Accumulated Other Available-For- Available-For-Sale to Interest Rate Comprehensive (In thousands) Sale Held-To-Maturity Pension Plan Swaps Income (Loss) Beginning Balance December 31, 2016 $ (551) $ (1,408) $ (3,823) $ — $ (5,782) Other comprehensive income before reclassifications 106 — — — 106 Accretion of unrealized losses of securities transferred from available-for-sale to held-to-maturity recognized in other comprehensive income — 113 — — 113 Reclassification adjustments for (gains) losses reclassified into income (166) — 72 — (94) Net current period other comprehensive (loss) income (60) 113 72 — 125 Balance March 31, 2017 $ (611) $ (1,295) $ (3,751) $ — $ (5,657) The following table presents changes in accumulated other comprehensive income (loss) by component, net of tax for the three months ended March 31, 2016. Unrealized Unrealized Gains Gains (Losses) (Losses) on Securities on Securities Transferred From Accumulated Other Available-For- Available-For-Sale to Interest Rate Comprehensive (In thousands) Sale Held-To-Maturity Pension Plan Swaps Income (Loss) Beginning Balance December 31, 2015 $ 166 $ (2,297) $ (3,737) $ (155) $ (6,023) Other comprehensive income before reclassifications 2,624 — — 35 2,659 Accretion of unrealized losses of securities transferred from available-for-sale to held-to-maturity recognized in other comprehensive income — 127 — — 127 Reclassification adjustments for losses reclassified into income — — 75 — 75 Net current period other comprehensive income 2,624 127 75 35 2,861 Balance March 31, 2016 $ 2,790 $ (2,170) $ (3,662) $ (120) $ (3,162)
Schedule of details of the reclassification adjustments	Details about Accumulated Other Three Months Ended Three Months Ended Comprehensive Income Components March 31, March 31, Affected Line Item in the Statement (In thousands) 2017 2016 Where Net Income is Presented Realized gains on securities $ (255) $ - Net gains on investment securities (255) - Total before tax 89 - Provision for income taxes $ (166) $ - Net of tax, increase to net income Amortization of defined benefit pension plan $ $ Compensation and benefits expense Total before tax Provision for income taxes $ $ Net of tax, decrease to net income Total reclassification adjustments $ $ (Increase)/Decrease to net income

FINANCIAL STATEMENT PRESENTAT30

FINANCIAL STATEMENT PRESENTATION (Details)	3 Months Ended
	Mar. 31, 2017item
Vermont
Number of locations	31
Massachusetts
Number of locations	1

GOODWILL AND INTANGIBLE ASSET31

GOODWILL AND INTANGIBLE ASSETS - Goodwill Rollforward (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Goodwill Rollforward
Goodwill, Beginning Balance	$ 7,011
Impairment	0	$ 0
Goodwill, Ending Balance	$ 7,011	$ 7,011

GOODWILL AND INTANGIBLE ASSET32

GOODWILL AND INTANGIBLE ASSETS - Acquired Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Other Intangible Assets
Gross Carrying Amount	$ 1,377		$ 1,377
Accumulated Amortization	264		221
Net Carrying Amount	1,113		1,156
Amortization	43	$ 51
Core deposit intangible
Other Intangible Assets
Gross Carrying Amount	1,377		1,377
Accumulated Amortization	264		221
Net Carrying Amount	1,113		1,156
Amortization	$ 43		$ 51

GOODWILL AND INTANGIBLE ASSET33

GOODWILL AND INTANGIBLE ASSETS - Estimated Amortization Expense (Details) $ in Thousands	Mar. 31, 2017USD ($)
Estimated amortization expense
Remainder of 2017	$ 130
2,018	147
2,019	126
2,020	120
2,021	120
2,022	120
Thereafter	$ 350

INVESTMENT SECURITIES - Investm

INVESTMENT SECURITIES - Investments in Securities Classified as Available for Sale or Held To Maturity (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Available for Sale:
Amortized Cost	$ 288,881	$ 334,846
Gross Unrealized Gains	1,097	1,480
Gross Unrealized Losses	(1,989)	(2,328)
Fair Value	287,989	333,998
Held to Maturity:
Amortized Cost	80,991	85,694
Gross Unrealized Gains	433	419
Gross Unrealized Losses	(336)	(364)
Fair Value	81,088	85,749
Carrying Amount
Held to Maturity:
Fair Value	80,991	85,694
U.S. Treasury Obligations
Available for Sale:
Amortized Cost	10,089	25,079
Gross Unrealized Gains	75	104
Fair Value	10,164	25,183
U.S. Agency Obligations
Held to Maturity:
Amortized Cost	16,864	17,849
Gross Unrealized Gains	121	119
Gross Unrealized Losses	(6)	(33)
Fair Value	16,979	17,935
U.S. GSEs
Available for Sale:
Amortized Cost	83,916	93,883
Gross Unrealized Gains	127	106
Gross Unrealized Losses	(531)	(636)
Fair Value	83,512	93,353
FHLB Obligations
Available for Sale:
Amortized Cost	67,302	67,362
Gross Unrealized Gains	101	100
Gross Unrealized Losses	(353)	(456)
Fair Value	67,050	67,006
Agency MBSs
Available for Sale:
Amortized Cost	63,919	74,573
Gross Unrealized Gains	762	1,101
Gross Unrealized Losses	(404)	(465)
Fair Value	64,277	75,209
Held to Maturity:
Amortized Cost	5,548	5,787
Gross Unrealized Gains	101	92
Fair Value	5,649	5,879
Agency CMBSs
Available for Sale:
Amortized Cost	23,784	23,972
Gross Unrealized Losses	(414)	(364)
Fair Value	23,370	23,608
Agency CMOs
Available for Sale:
Amortized Cost	39,871	49,694
Gross Unrealized Gains	32	46
Gross Unrealized Losses	(287)	(407)
Fair Value	39,616	49,333
Held to Maturity:
Amortized Cost	58,579	62,058
Gross Unrealized Gains	211	208
Gross Unrealized Losses	(330)	(331)
Fair Value	$ 58,460	61,935
ABSs
Available for Sale:
Amortized Cost		283
Gross Unrealized Gains		23
Fair Value		$ 306

INVESTMENT SECURITIES - Contrac

INVESTMENT SECURITIES - Contractual Final Maturity Distribution of Debt Securities Classified as Available for Sale and Held to Maturity (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Available for Sale, Fair Value
Within One Year	$ 100
After One But Within Five Years	154,630
After Five But Within Ten Years	5,996
Securities not due at a Single Maturity	127,263
Total	287,989	$ 333,998
Available for Sale, Amortized Cost
Within One Year	100
After One But Within Five Years	155,281
After Five But Within Ten Years	5,926
Securities not due at a Single Maturity	127,574
Total	288,881	334,846
Held to Maturity, Fair Value
After Ten Years	16,979
Securities not due at a Single Maturity	64,109
Total	81,088	85,749
Held to Maturity, Amortized Cost
After Ten Years	16,864
Securities not due at a Single Maturity	64,127
Total	80,991	85,694
U.S. Treasury Obligations
Available for Sale, Fair Value
Within One Year	100
After One But Within Five Years	10,064
Total	10,164	25,183
Available for Sale, Amortized Cost
Within One Year	100
After One But Within Five Years	9,989
Total	10,089	25,079
U.S. Agency Obligations
Held to Maturity, Fair Value
After Ten Years	16,979
Total	16,979	17,935
Held to Maturity, Amortized Cost
After Ten Years	16,864
Total	16,864	17,849
U.S. GSEs
Available for Sale, Fair Value
After One But Within Five Years	83,512
Total	83,512	93,353
Available for Sale, Amortized Cost
After One But Within Five Years	83,916
Total	83,916	93,883
FHLB Obligations
Available for Sale, Fair Value
After One But Within Five Years	61,054
After Five But Within Ten Years	5,996
Total	67,050	67,006
Available for Sale, Amortized Cost
After One But Within Five Years	61,376
After Five But Within Ten Years	5,926
Total	67,302	67,362
Agency MBSs
Available for Sale, Fair Value
Securities not due at a Single Maturity	64,277
Total	64,277	75,209
Available for Sale, Amortized Cost
Securities not due at a Single Maturity	63,919
Total	63,919	74,573
Held to Maturity, Fair Value
Securities not due at a Single Maturity	5,649
Total	5,649	5,879
Held to Maturity, Amortized Cost
Securities not due at a Single Maturity	5,548
Total	5,548	5,787
Agency CMBSs
Available for Sale, Fair Value
Securities not due at a Single Maturity	23,370
Total	23,370	23,608
Available for Sale, Amortized Cost
Securities not due at a Single Maturity	23,784
Total	23,784	23,972
Agency CMOs
Available for Sale, Fair Value
Securities not due at a Single Maturity	39,616
Total	39,616	49,333
Available for Sale, Amortized Cost
Securities not due at a Single Maturity	39,871
Total	39,871	49,694
Held to Maturity, Fair Value
Securities not due at a Single Maturity	58,460
Total	58,460	61,935
Held to Maturity, Amortized Cost
Securities not due at a Single Maturity	58,579
Total	$ 58,579	62,058
ABSs
Available for Sale, Fair Value
Total		306
Available for Sale, Amortized Cost
Total		$ 283

INVESTMENT SECURITIES - Proceed

INVESTMENT SECURITIES - Proceeds and Gross Gains and Gross Losses on Available for Sale Securities (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2017USD ($)
Investments.
Proceeds	$ 38,635
Gross gains	278
Gross losses	(23)
Net gains (losses)	$ 255

INVESTMENT SECURITIES - Carryin

INVESTMENT SECURITIES - Carrying Value of Securities Pledged (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Investments.
Carrying value of securities pledged	$ 328,270	$ 370,810

INVESTMENT SECURITIES - Gross U

INVESTMENT SECURITIES - Gross Unrealized Losses on Investment Securities and Fair Value of Related Securities (Details)	3 Months Ended	12 Months Ended
	Mar. 31, 2017USD ($)item	Dec. 31, 2016USD ($)item
Available for Sale
Available-for-sale Securities, Less than 12 months Number of Issues | item	48	54
Available-for-sale Securities, 12 months or more, Number of Issues | item		2
Available-for-sale Securities, Continuous Unrealized Loss Position, Number of Issues | item	48	56
Available-for-sale Securities, Less than 12 months, Fair Value	$ 171,013,000	$ 194,594,000
Available-for-sale Securities, Less than 12 months, Loss	(1,989,000)	(2,253,000)
Available-for-sale Securities, 12 months or more, Fair Value		2,227,000
Available-for-sale Securities, 12 months or more, Loss		(75,000)
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value, Total	171,013,000	196,821,000
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses, Total	$ (1,989,000)	$ (2,328,000)
Held to Maturity
Held to Maturity Securities, Less Than 12 Months, Number of Issues | item	17	14
Held to Maturity Securities, 12 Months or More, Number of Issues	$ 1	$ 1
Held to Maturity Securities, Continuous Unrealized Loss Position, Number of Issues | item	18	15
Held to Maturity Securities, Less Than 12 Months, Fair Value	$ 40,227,000	$ 33,710,000
Held to Maturity Securities, Less Than 12 Months, Loss	(221,000)	(245,000)
Held to Maturity Securities, 12 Months or More, Fair Value	3,027,000	3,162,000
Held to Maturity Securities, 12 Months or More, Loss	(115,000)	(119,000)
Held to Maturity Securities, Continuous Unrealized Loss Position, Fair Value, Total	43,254,000	36,872,000
Held to Maturity Securities, Continuous Unrealized Loss Position, Aggregate Losses, Total	$ (336,000)	$ (364,000)
U.S. Agency Obligations
Available for Sale
Available-for-sale Securities, Less than 12 months Number of Issues | item		1
Available-for-sale Securities, Continuous Unrealized Loss Position, Number of Issues | item		1
Available-for-sale Securities, Less than 12 months, Fair Value		$ 7,230,000
Available-for-sale Securities, Less than 12 months, Loss		(33,000)
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value, Total		7,230,000
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses, Total		$ (33,000)
Held to Maturity
Held to Maturity Securities, Less Than 12 Months, Number of Issues | item	1
Held to Maturity Securities, Continuous Unrealized Loss Position, Number of Issues | item	1
Held to Maturity Securities, Less Than 12 Months, Fair Value	$ 6,856,000
Held to Maturity Securities, Less Than 12 Months, Loss	(6,000)
Held to Maturity Securities, Continuous Unrealized Loss Position, Fair Value, Total	6,856,000
Held to Maturity Securities, Continuous Unrealized Loss Position, Aggregate Losses, Total	$ (6,000)
U.S. GSEs
Available for Sale
Available-for-sale Securities, Less than 12 months Number of Issues | item	7	8
Available-for-sale Securities, Continuous Unrealized Loss Position, Number of Issues | item	7	8
Available-for-sale Securities, Less than 12 months, Fair Value	$ 37,599,000	$ 42,404,000
Available-for-sale Securities, Less than 12 months, Loss	(531,000)	(636,000)
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value, Total	37,599,000	42,404,000
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses, Total	$ (531,000)	$ (636,000)
FHLB Obligations
Available for Sale
Available-for-sale Securities, Less than 12 months Number of Issues | item	7	9
Available-for-sale Securities, Continuous Unrealized Loss Position, Number of Issues | item	7	9
Available-for-sale Securities, Less than 12 months, Fair Value	$ 35,858,000	$ 45,870,000
Available-for-sale Securities, Less than 12 months, Loss	(353,000)	(456,000)
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value, Total	35,858,000	45,870,000
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses, Total	$ (353,000)	$ (456,000)
Agency MBSs
Available for Sale
Available-for-sale Securities, Less than 12 months Number of Issues | item	15	16
Available-for-sale Securities, Continuous Unrealized Loss Position, Number of Issues | item	15	16
Available-for-sale Securities, Less than 12 months, Fair Value	$ 45,753,000	$ 48,777,000
Available-for-sale Securities, Less than 12 months, Loss	(404,000)	(465,000)
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value, Total	45,753,000	48,777,000
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses, Total	$ (404,000)	$ (465,000)
Agency CMBSs
Available for Sale
Available-for-sale Securities, Less than 12 months Number of Issues | item	6	6
Available-for-sale Securities, Continuous Unrealized Loss Position, Number of Issues | item	6	6
Available-for-sale Securities, Less than 12 months, Fair Value	$ 23,370,000	$ 23,608,000
Available-for-sale Securities, Less than 12 months, Loss	(414,000)	(364,000)
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value, Total	23,370,000	23,608,000
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses, Total	$ (414,000)	$ (364,000)
Agency CMOs
Available for Sale
Available-for-sale Securities, Less than 12 months Number of Issues | item	13	15
Available-for-sale Securities, 12 months or more, Number of Issues | item		2
Available-for-sale Securities, Continuous Unrealized Loss Position, Number of Issues | item	13	17
Available-for-sale Securities, Less than 12 months, Fair Value	$ 28,433,000	$ 33,935,000
Available-for-sale Securities, Less than 12 months, Loss	(287,000)	(332,000)
Available-for-sale Securities, 12 months or more, Fair Value		2,227,000
Available-for-sale Securities, 12 months or more, Loss		(75,000)
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value, Total	28,433,000	36,162,000
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses, Total	$ (287,000)	$ (407,000)
Held to Maturity
Held to Maturity Securities, Less Than 12 Months, Number of Issues | item	16	13
Held to Maturity Securities, 12 Months or More, Number of Issues	$ 1	$ 1
Held to Maturity Securities, Continuous Unrealized Loss Position, Number of Issues | item	17	14
Held to Maturity Securities, Less Than 12 Months, Fair Value	$ 33,371,000	$ 26,480,000
Held to Maturity Securities, Less Than 12 Months, Loss	(215,000)	(212,000)
Held to Maturity Securities, 12 Months or More, Fair Value	3,027,000	3,162,000
Held to Maturity Securities, 12 Months or More, Loss	(115,000)	(119,000)
Held to Maturity Securities, Continuous Unrealized Loss Position, Fair Value, Total	36,398,000	29,642,000
Held to Maturity Securities, Continuous Unrealized Loss Position, Aggregate Losses, Total	$ (330,000)	$ (331,000)

INVESTMENT SECURITIES - Securit

INVESTMENT SECURITIES - Securities Transferred between AFS and HTM (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Investment Securities
Securities classified as trading	$ 0	$ 0
Transferred From Available-For-Sale to Held-To-Maturity
Investment Securities
Securities transferred from available-for-sale to held-to-maturity category, remaining unamortized loss	1,990
Securities transferred from available-for-sale to held-to-maturity category, remaining unamortized loss, net of tax	$ 1,300

SECURITIES SOLD UNDER AGREEME40

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE - Contractual Maturity of Secured Borrowings and Class of Collateral Pledged (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Available-for-sale Securities Pledged as Collateral	$ 192,770	$ 241,964
Held-to-maturity Securities Pledged as Collateral	56,812	70,154
Overnight and Continuous
Available-for-sale Securities Pledged as Collateral	192,770	241,964
Held-to-maturity Securities Pledged as Collateral	56,812	70,154
U.S. Treasury Obligations
Available-for-sale Securities Pledged as Collateral	10,064	24,207
U.S. Treasury Obligations | Overnight and Continuous
Available-for-sale Securities Pledged as Collateral	10,064	24,207
U.S. Agency Obligations
Held-to-maturity Securities Pledged as Collateral	14,714	16,646
U.S. Agency Obligations | Overnight and Continuous
Held-to-maturity Securities Pledged as Collateral	14,714	16,646
U.S. GSEs
Available-for-sale Securities Pledged as Collateral	47,745	51,847
U.S. GSEs | Overnight and Continuous
Available-for-sale Securities Pledged as Collateral	47,745	51,847
FHLB Obligations
Available-for-sale Securities Pledged as Collateral	58,519	59,505
FHLB Obligations | Overnight and Continuous
Available-for-sale Securities Pledged as Collateral	58,519	59,505
Agency MBSs
Available-for-sale Securities Pledged as Collateral	33,553	44,736
Agency MBSs | Overnight and Continuous
Available-for-sale Securities Pledged as Collateral	33,553	44,736
Agency CMBSs
Available-for-sale Securities Pledged as Collateral	18,961	21,662
Held-to-maturity Securities Pledged as Collateral	42,098
Agency CMBSs | Overnight and Continuous
Available-for-sale Securities Pledged as Collateral	18,961	21,662
Held-to-maturity Securities Pledged as Collateral	42,098
Agency CMOs
Available-for-sale Securities Pledged as Collateral	23,928	40,007
Held-to-maturity Securities Pledged as Collateral		53,508
Agency CMOs | Overnight and Continuous
Available-for-sale Securities Pledged as Collateral	$ 23,928	40,007
Held-to-maturity Securities Pledged as Collateral		$ 53,508

SECURITIES SOLD UNDER AGREEME41

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE - Carrying Value of Pledged Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE.
Carrying value of pledged securities	$ 249,680	$ 312,230

LOANS AND THE ALLOWANCE FOR C42

LOANS AND THE ALLOWANCE FOR CREDIT LOSSES - Composition of Loan Portfolio (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016
Financing Receivable, Recorded Investment
Total Loans	$ 1,542,718	$ 1,514,209
Net deferred loan origination fees	1,130	1,190
Overdrawn deposit balances classified as loan balances	254	297
Provision (credit) for reserve for undisbursed lines	(66)		$ (10)
Commercial, financial and agricultural
Financing Receivable, Recorded Investment
Total Loans	276,915	257,078
Municipal
Financing Receivable, Recorded Investment
Total Loans	113,875	114,509
Real estate loans - residential
Financing Receivable, Recorded Investment
Total Loans	438,424	447,527
Real estate loans - commercial
Financing Receivable, Recorded Investment
Total Loans	672,712	636,755
Real estate loans - construction
Financing Receivable, Recorded Investment
Total Loans	35,964	52,533
Installment
Financing Receivable, Recorded Investment
Total Loans	4,813	5,790
All other loans
Financing Receivable, Recorded Investment
Total Loans	15	17
Residential and commercial loans serviced for others
Financing Receivable, Recorded Investment
Total Loans	$ 35,610	$ 34,630

LOANS AND THE ALLOWANCE FOR C43

LOANS AND THE ALLOWANCE FOR CREDIT LOSSES - Loan Loss Experience and Activity in Allowance for Credit Losses (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Loan loss experience and activity in allowance for loan losses
Beginning balance	$ 12,659	$ 12,040
Charge-offs	(72)	(118)
Recoveries	34	36
Provision (credit)	566	215
Ending balance	13,187	12,173
Commercial, financial and agricultural
Loan loss experience and activity in allowance for loan losses
Beginning balance	2,946	2,696
Charge-offs	(3)	(3)
Recoveries	2	2
Provision (credit)	250	161
Ending balance	3,195	2,856
Municipal
Loan loss experience and activity in allowance for loan losses
Beginning balance	593	590
Provision (credit)	(19)	32
Ending balance	574	622
Real estate loans - residential
Loan loss experience and activity in allowance for loan losses
Beginning balance	2,575	2,882
Charge-offs		(73)
Recoveries	9	11
Provision (credit)	(32)	37
Ending balance	2,552	2,857
Real estate loans - commercial
Loan loss experience and activity in allowance for loan losses
Beginning balance	5,922	5,386
Recoveries		4
Provision (credit)	434	(109)
Ending balance	6,356	5,281
Real estate loans - construction
Loan loss experience and activity in allowance for loan losses
Beginning balance	534	420
Provision (credit)	(183)	45
Ending balance	351	465
Installment
Loan loss experience and activity in allowance for loan losses
Beginning balance	89	66
Charge-offs	(69)	(42)
Recoveries	23	19
Provision (credit)	116	49
Ending balance	$ 159	$ 92

LOANS AND THE ALLOWANCE FOR C44

LOANS AND THE ALLOWANCE FOR CREDIT LOSSES - Allowance for Loan Losses and Recorded Investment in Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016	Dec. 31, 2015
Loan loss experience and activity in allowance for loan losses
Ending balance individually evaluated for impairment	$ 245	$ 184
Ending balance collectively evaluated for impairment	12,935	12,475
Total allowance for credit losses	13,187	12,659	$ 12,173	$ 12,040
Financing receivables, Ending balance individually evaluated for impairment	3,590	2,956
Financing receivables, Ending balance collectively evaluated for impairment	1,536,563	1,508,607
Total	1,542,718	1,514,209
Receivables acquired with deteriorated credit quality
Loan loss experience and activity in allowance for loan losses
Total allowance for credit losses	7
Total	2,565	2,646
Commercial, financial and agricultural
Loan loss experience and activity in allowance for loan losses
Ending balance collectively evaluated for impairment	3,195	2,946
Total allowance for credit losses	3,195	2,946	2,856	2,696
Financing receivables, Ending balance individually evaluated for impairment	77	97
Financing receivables, Ending balance collectively evaluated for impairment	276,144	256,239
Total	276,915	257,078
Commercial, financial and agricultural | Receivables acquired with deteriorated credit quality
Loan loss experience and activity in allowance for loan losses
Total	694	742
Municipal
Loan loss experience and activity in allowance for loan losses
Ending balance collectively evaluated for impairment	574	593
Total allowance for credit losses	574	593	622	590
Financing receivables, Ending balance collectively evaluated for impairment	113,875	114,509
Total	113,875	114,509
Real estate loans - residential
Loan loss experience and activity in allowance for loan losses
Ending balance individually evaluated for impairment	227	184
Ending balance collectively evaluated for impairment	2,325	2,391
Total allowance for credit losses	2,552	2,575	2,857	2,882
Financing receivables, Ending balance individually evaluated for impairment	1,447	1,213
Financing receivables, Ending balance collectively evaluated for impairment	436,977	446,314
Total	438,424	447,527
Real estate loans - commercial
Loan loss experience and activity in allowance for loan losses
Ending balance individually evaluated for impairment	18
Ending balance collectively evaluated for impairment	6,331	5,922
Total allowance for credit losses	6,356	5,922	5,281	5,386
Financing receivables, Ending balance individually evaluated for impairment	2,066	1,634
Financing receivables, Ending balance collectively evaluated for impairment	668,775	633,217
Total	672,712	636,755
Real estate loans - commercial | Receivables acquired with deteriorated credit quality
Loan loss experience and activity in allowance for loan losses
Total allowance for credit losses	7
Total	1,871	1,904
Real estate loans - construction
Loan loss experience and activity in allowance for loan losses
Ending balance collectively evaluated for impairment	351	534
Total allowance for credit losses	351	534	465	420
Financing receivables, Ending balance collectively evaluated for impairment	35,964	52,533
Total	35,964	52,533
Installment
Loan loss experience and activity in allowance for loan losses
Ending balance collectively evaluated for impairment	159	89
Total allowance for credit losses	159	89	$ 92	$ 66
Financing receivables, Ending balance individually evaluated for impairment		12
Financing receivables, Ending balance collectively evaluated for impairment	4,813	5,778
Total	4,813	5,790
All other loans
Loan loss experience and activity in allowance for loan losses
Financing receivables, Ending balance collectively evaluated for impairment	15	17
Total	$ 15	$ 17

LOANS AND THE ALLOWANCE FOR C45

LOANS AND THE ALLOWANCE FOR CREDIT LOSSES - Recorded Investment of Loans, Including Nonaccrual and Restructured Loans, by Class (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Past due loans
Total	$ 1,542,718	$ 1,514,209
Past due	1,346	390
Non-accrual loans
Past due loans
Past due	4,080	1,750
Restructured
Past due loans
Past due	0	0
Purchase credit impaired
Past due loans
Past due	804	819
Commercial, financial and agricultural
Past due loans
Total	276,915	257,078
Past due	623
Municipal
Past due loans
Total	113,875	114,509
Real estate loans - residential
Past due loans
Total	438,424	447,527
Real estate loans - commercial
Past due loans
Total	672,712	636,755
Real estate loans - construction
Past due loans
Total	35,964	52,533
First mortgage
Past due loans
Total		409,936
Past due		235
First mortgage | Real estate loans - residential
Past due loans
Total	402,153	409,936
Past due	121
Second mortgage
Past due loans
Total		37,591
Past due		32
Second mortgage | Real estate loans - residential
Past due loans
Total	36,271	37,591
Owner occupied
Past due loans
Total		226,573
Owner occupied | Real estate loans - commercial
Past due loans
Total	245,110	226,573
Past due	501
Non-owner occupied
Past due loans
Total		410,182
Non-owner occupied | Real estate loans - commercial
Past due loans
Total	427,602	410,182
Residential
Past due loans
Total		2,530
Residential | Real estate loans - construction
Past due loans
Total	2,388	2,530
Commercial
Past due loans
Total		50,003
Commercial | Real estate loans - construction
Past due loans
Total	33,576	50,003
Installment
Past due loans
Total	4,813	5,790
Past due		123
Installment | Real estate loans - construction
Past due loans
Total	4,813
Past due	101
All other loans
Past due loans
Total	15	17
All other loans | Real estate loans - construction
Past due loans
Total	15
31-60 Days Past Due
Past due loans
Past due	1,332	319
31-60 Days Past Due | Commercial, financial and agricultural
Past due loans
Past due	623
31-60 Days Past Due | First mortgage
Past due loans
Past due		164
31-60 Days Past Due | First mortgage | Real estate loans - residential
Past due loans
Past due	121
31-60 Days Past Due | Second mortgage
Past due loans
Past due		32
31-60 Days Past Due | Owner occupied | Real estate loans - commercial
Past due loans
Past due	501
31-60 Days Past Due | Installment
Past due loans
Past due		123
31-60 Days Past Due | Installment | Real estate loans - construction
Past due loans
Past due	87
61-90 Days Past Due
Past due loans
Past due	14	71
61-90 Days Past Due | First mortgage
Past due loans
Past due		71
61-90 Days Past Due | Installment | Real estate loans - construction
Past due loans
Past due	14
91 Days or More Past Due | Accruing loans
Past due loans
Past due	0	19
Current
Past due loans
Total	1,537,160	1,510,637
Current | Commercial, financial and agricultural
Past due loans
Total	276,137	256,894
Current | Municipal
Past due loans
Total	113,875	114,509
Current | First mortgage
Past due loans
Total		408,597
Current | First mortgage | Real estate loans - residential
Past due loans
Total	400,689
Current | Second mortgage
Past due loans
Total		37,559
Current | Second mortgage | Real estate loans - residential
Past due loans
Total	36,271
Current | Owner occupied
Past due loans
Total		224,691
Current | Owner occupied | Real estate loans - commercial
Past due loans
Total	241,895
Current | Non-owner occupied
Past due loans
Total		410,182
Current | Non-owner occupied | Real estate loans - commercial
Past due loans
Total	427,602
Current | Residential
Past due loans
Total		2,530
Current | Residential | Real estate loans - construction
Past due loans
Total	2,388
Current | Commercial
Past due loans
Total		50,003
Current | Commercial | Real estate loans - construction
Past due loans
Total	33,576
Current | Installment
Past due loans
Total		5,655
Current | Installment | Real estate loans - construction
Past due loans
Total	4,712
Current | All other loans
Past due loans
Total		17
Current | All other loans | Real estate loans - construction
Past due loans
Total	15
Nonperforming
Past due loans
Total	4,212	3,182
Nonperforming | Commercial, financial and agricultural
Past due loans
Total	155	184
Nonperforming | First mortgage
Past due loans
Total		1,104
Nonperforming | First mortgage | Real estate loans - residential
Past due loans
Total	1,343
Nonperforming | Owner occupied
Past due loans
Total		1,882
Nonperforming | Owner occupied | Real estate loans - commercial
Past due loans
Total	$ 2,714
Nonperforming | Installment
Past due loans
Total		$ 12

LOANS AND THE ALLOWANCE FOR C46

LOANS AND THE ALLOWANCE FOR CREDIT LOSSES - Impaired Loans by Class (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Financing Receivable, Impaired
Recorded Investment	$ 3,590		$ 2,956
Unpaid Principal Balance	3,672		3,062
Related allowance	245		184
Average Recorded Investment	3,298	$ 2,192
Interest Income Recognized	4	3
Installment
Financing Receivable, Impaired
Recorded Investment			12
Unpaid Principal Balance			12
Average Recorded Investment		8
Commercial, financial and agricultural
Financing Receivable, Impaired
Recorded Investment	77		97
Unpaid Principal Balance	77		97
Average Recorded Investment	78	644
Interest Income Recognized	1	1
Real estate loans - residential
Financing Receivable, Impaired
Recorded Investment	1,447		1,213
Unpaid Principal Balance	1,520		1,292
Related allowance	227		184
Average Recorded Investment	1,294	669
Interest Income Recognized	1	2
Real estate loans - commercial
Financing Receivable, Impaired
Recorded Investment	2,066		1,634
Unpaid Principal Balance	2,075		1,661
Related allowance	18
Average Recorded Investment	1,926	871
Interest Income Recognized	2
With no related allowance recorded | Commercial, financial and agricultural
Financing Receivable, Impaired
Recorded Investment	77		97
Unpaid Principal Balance	77		97
Average Recorded Investment	78	390
Interest Income Recognized	1	1
With no related allowance recorded | Real estate loans - residential | First mortgage
Financing Receivable, Impaired
Recorded Investment	130		208
Unpaid Principal Balance	190		266
Average Recorded Investment	180	241
Interest Income Recognized	1	2
With no related allowance recorded | Real estate loans - residential | Second mortgage
Financing Receivable, Impaired
Average Recorded Investment		3
With no related allowance recorded | Real estate loans - commercial | Owner occupied
Financing Receivable, Impaired
Recorded Investment	1,751		1,229
Unpaid Principal Balance	1,760		1,229
Average Recorded Investment	1,687	401
With no related allowance recorded | Real estate loans - commercial | Non-owner occupied
Financing Receivable, Impaired
Recorded Investment			405
Unpaid Principal Balance			432
Average Recorded Investment	134	470
Interest Income Recognized	2
With no related allowance recorded | Real estate loans - commercial | Installment
Financing Receivable, Impaired
Recorded Investment			12
Unpaid Principal Balance			12
Average Recorded Investment		8
With related allowance recorded | Commercial, financial and agricultural
Financing Receivable, Impaired
Average Recorded Investment		254
With related allowance recorded | Real estate loans - residential | First mortgage
Financing Receivable, Impaired
Recorded Investment	1,317		1,005
Unpaid Principal Balance	1,330		1,026
Related allowance	227		$ 184
Average Recorded Investment	1,114	$ 425
With related allowance recorded | Real estate loans - commercial | Owner occupied
Financing Receivable, Impaired
Recorded Investment	315
Unpaid Principal Balance	315
Related allowance	18
Average Recorded Investment	$ 105

LOANS AND THE ALLOWANCE FOR C47

LOANS AND THE ALLOWANCE FOR CREDIT LOSSES - Nonperforming Loans (Details) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017USD ($)loanitem	Dec. 31, 2016USD ($)loan	Mar. 31, 2016USD ($)
Nonaccrual loans	$ 4,212	$ 3,163
Loans past due greater than 90 days and accruing		19
Total nonperforming loans	$ 4,212	3,182
Number of TDRs agreed to pay | item	4
Commitments to lend additional funds to borrowers	$ 0
Non-accrual loans
Commitments to lend additional funds to borrowers	0
Residential mortgage | Restructured
Troubled debt restructurings ("TDRs")	$ 104	$ 110
Number of loans | loan	3	3
Troubled debt restructured loans ("TDRs")	$ 104	$ 110
Commercial | Restructured
Troubled debt restructurings ("TDRs")		$ 78
Number of loans | loan	1	1
Troubled debt restructured loans ("TDRs")		$ 78
Total troubled debt restructured loans ("TDRs")	$ 77
Real estate loans - commercial
Troubled debt restructurings ("TDRs")			$ 464
Troubled debt restructured loans ("TDRs")			$ 464
Real estate loans - commercial | Restructured
Troubled debt restructurings ("TDRs")		$ 405
Number of loans | loan		1
Troubled debt restructured loans ("TDRs")		$ 405

LOANS AND THE ALLOWANCE FOR C48

LOANS AND THE ALLOWANCE FOR CREDIT LOSSES - Nonaccrual Loans by Class (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Nonperforming loans
Total nonaccrual loans	$ 4,212	$ 3,163
Non accrual non-TDR loans	4,212	3,163
Exposure threshold for loans subject to formal review	1,000
Commercial, financial and agricultural
Nonperforming loans
Total nonaccrual loans	155	165
Real estate loans - residential | First mortgage
Nonperforming loans
Total nonaccrual loans	1,343	1,104
Real estate loans - commercial | Owner occupied
Nonperforming loans
Total nonaccrual loans	$ 2,714	1,882
Installment
Nonperforming loans
Total nonaccrual loans		$ 12

LOANS AND THE ALLOWANCE FOR C49

LOANS AND THE ALLOWANCE FOR CREDIT LOSSES - Summary of Loans by Credit Quality Indicator (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Financing Receivable, Recorded Investment
Loans	$ 1,542,718	$ 1,514,209
First mortgage
Financing Receivable, Recorded Investment
Loans		409,936
Second mortgage
Financing Receivable, Recorded Investment
Loans		37,591
Owner occupied
Financing Receivable, Recorded Investment
Loans		226,573
Non-owner occupied
Financing Receivable, Recorded Investment
Loans		410,182
Residential
Financing Receivable, Recorded Investment
Loans		2,530
Commercial
Financing Receivable, Recorded Investment
Loans		50,003
Installment
Financing Receivable, Recorded Investment
Loans	4,813	5,790
All other loans
Financing Receivable, Recorded Investment
Loans	15	17
Unrated
Financing Receivable, Recorded Investment
Loans	434,905	444,789
Unrated | Installment
Financing Receivable, Recorded Investment
Loans	4,813	5,778
Unrated | All other loans
Financing Receivable, Recorded Investment
Loans	15	17
Pass
Financing Receivable, Recorded Investment
Loans	975,063	933,698
Pass-Watch
Financing Receivable, Recorded Investment
Loans	98,338	99,418
Special Mention
Financing Receivable, Recorded Investment
Loans	317	1,143
Sub-standard
Financing Receivable, Recorded Investment
Loans	34,095	35,161
Sub-standard | Installment
Financing Receivable, Recorded Investment
Loans		12
Commercial, financial and agricultural
Financing Receivable, Recorded Investment
Loans	276,915	257,078
Commercial, financial and agricultural | Unrated
Financing Receivable, Recorded Investment
Loans	99	102
Commercial, financial and agricultural | Pass
Financing Receivable, Recorded Investment
Loans	233,838	215,891
Commercial, financial and agricultural | Pass-Watch
Financing Receivable, Recorded Investment
Loans	25,422	24,215
Commercial, financial and agricultural | Special Mention
Financing Receivable, Recorded Investment
Loans	317	322
Commercial, financial and agricultural | Sub-standard
Financing Receivable, Recorded Investment
Loans	17,239	16,548
Municipal
Financing Receivable, Recorded Investment
Loans	113,875	114,509
Municipal | Pass
Financing Receivable, Recorded Investment
Loans	110,222	110,864
Municipal | Pass-Watch
Financing Receivable, Recorded Investment
Loans	3,653	2,824
Municipal | Special Mention
Financing Receivable, Recorded Investment
Loans		821
Real estate loans - residential
Financing Receivable, Recorded Investment
Loans	438,424	447,527
Real estate loans - residential | First mortgage
Financing Receivable, Recorded Investment
Loans	402,153	409,936
Real estate loans - residential | Second mortgage
Financing Receivable, Recorded Investment
Loans	36,271	37,591
Real estate loans - residential | Unrated | First mortgage
Financing Receivable, Recorded Investment
Loans	393,208	400,961
Real estate loans - residential | Unrated | Second mortgage
Financing Receivable, Recorded Investment
Loans	36,049	37,367
Real estate loans - residential | Pass | First mortgage
Financing Receivable, Recorded Investment
Loans	7,060	7,392
Real estate loans - residential | Pass-Watch | First mortgage
Financing Receivable, Recorded Investment
Loans	542	481
Real estate loans - residential | Pass-Watch | Second mortgage
Financing Receivable, Recorded Investment
Loans	222	224
Real estate loans - residential | Sub-standard | First mortgage
Financing Receivable, Recorded Investment
Loans	1,343	1,102
Real estate loans - commercial
Financing Receivable, Recorded Investment
Loans	672,712	636,755
Real estate loans - commercial | Owner occupied
Financing Receivable, Recorded Investment
Loans	245,110	226,573
Real estate loans - commercial | Non-owner occupied
Financing Receivable, Recorded Investment
Loans	427,602	410,182
Real estate loans - commercial | Pass | Owner occupied
Financing Receivable, Recorded Investment
Loans	205,107	186,494
Real estate loans - commercial | Pass | Non-owner occupied
Financing Receivable, Recorded Investment
Loans	385,105	369,566
Real estate loans - commercial | Pass-Watch | Owner occupied
Financing Receivable, Recorded Investment
Loans	25,561	25,492
Real estate loans - commercial | Pass-Watch | Non-owner occupied
Financing Receivable, Recorded Investment
Loans	41,426	38,706
Real estate loans - commercial | Sub-standard | Owner occupied
Financing Receivable, Recorded Investment
Loans	14,442	14,587
Real estate loans - commercial | Sub-standard | Non-owner occupied
Financing Receivable, Recorded Investment
Loans	1,071	1,910
Real estate loans - construction
Financing Receivable, Recorded Investment
Loans	35,964	52,533
Real estate loans - construction | Residential
Financing Receivable, Recorded Investment
Loans	2,388	2,530
Real estate loans - construction | Commercial
Financing Receivable, Recorded Investment
Loans	33,576	50,003
Real estate loans - construction | Installment
Financing Receivable, Recorded Investment
Loans	4,813
Real estate loans - construction | All other loans
Financing Receivable, Recorded Investment
Loans	15
Real estate loans - construction | Unrated | Residential
Financing Receivable, Recorded Investment
Loans	605	412
Real estate loans - construction | Unrated | Commercial
Financing Receivable, Recorded Investment
Loans	116	152
Real estate loans - construction | Pass | Residential
Financing Receivable, Recorded Investment
Loans	1,783	2,118
Real estate loans - construction | Pass | Commercial
Financing Receivable, Recorded Investment
Loans	31,948	41,373
Real estate loans - construction | Pass-Watch | Commercial
Financing Receivable, Recorded Investment
Loans	$ 1,512	7,476
Real estate loans - construction | Sub-standard | Commercial
Financing Receivable, Recorded Investment
Loans		$ 1,002

LOANS AND THE ALLOWANCE FOR C50

LOANS AND THE ALLOWANCE FOR CREDIT LOSSES - Purchased Credit Impaired Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Accounted for under ASC 310-30 | NUVO Bank & Trust Company
Accounts, Notes, Loans and Financing Receivable
Carrying amount of loans purchased with evidence of credit deterioration accounted for under ASC 310-30	$ 2,570	$ 2,650

FAIR VALUE OF FINANCIAL INSTR51

FAIR VALUE OF FINANCIAL INSTRUMENTS - Financial Assets and Liabilities Measured At Fair Value, Recurring Basis (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	$ 288,962	$ 334,420
Liabilities	774	194
Transfers, Assets, level 1 to level 2	0		$ 0
Transfers, Assets, level 2 to level 1	0		0
Transfers, Liabilities, level 1 to level 2	0		0
Transfers, Liabilities, level 2 to level 1	0		$ 0
Fair value assets level 3 net transfers	0	0
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	288,962	334,420
Liabilities	774	194
U.S. Treasury Obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	10,164	25,183
U.S. Treasury Obligations | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	10,164	25,183
U.S. GSEs.
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	83,512	93,353
U.S. GSEs. | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	83,512	93,353
FHLB Obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	67,050	67,006
FHLB Obligations | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	67,050	67,006
Agency MBSs
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	64,277	75,209
Agency MBSs | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	64,277	75,209
Agency CMBSs
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	23,370	23,608
Agency CMBSs | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	23,370	23,608
Agency CMOs
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	39,616	49,333
Agency CMOs | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	39,616	49,333
ABSs
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets		306
ABSs | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets		306
Interest Rate Swap
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	973	422
Liabilities	774	194
Interest Rate Swap | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	973	422
Liabilities	$ 774	$ 194

FAIR VALUE OF FINANCIAL INSTR52

FAIR VALUE OF FINANCIAL INSTRUMENTS - Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016	Dec. 31, 2015
Assets:
Cash and cash equivalents	$ 59,762	$ 82,953	$ 80,640	$ 150,183
Securities held to maturity	80,991	85,694
Securities held to maturity	81,088	85,749
FHLB stock	7,044	4,976
Liabilities:
Short-term borrowings	75,000	40,000
Securities sold under agreement to repurchase	249,582	312,118
Other long-term debt	3,630	3,651
Level 1
Assets:
Cash and cash equivalents	59,762	82,953
Total assets	59,762	82,953
Liabilities:
Deposits	1,321,166	1,328,262
Accrued interest payable	11	11
Total liabilities	1,321,177	1,328,273
Level 2
Assets:
Securities available for sale	287,989	333,998
Securities held to maturity	81,088	85,749
Interest rate swap agreement	973	422
Accrued interest receivable	1,096	1,232
Total assets	371,146	421,401
Liabilities:
Deposits	189,528	198,364
Short-term borrowings	75,000	40,000
Securities sold under agreement to repurchase	249,651	312,019
Other long-term debt	3,585	3,600
Junior subordinated debentures issued to unconsolidated subsidiary trust	14,721	14,775
Interest rate swap agreement	774	194
Accrued interest payable	112	99
Total liabilities	533,371	569,051
Level 3
Assets:
Loans, net of allowance for loan losses	1,511,073	1,484,718
Accrued interest receivable	3,989	3,490
Total assets	1,515,062	1,488,208
Carrying Amount
Assets:
Cash and cash equivalents	59,762	82,953
Securities available for sale	287,989	333,998
Securities held to maturity	80,991	85,694
FHLB stock	7,044	4,976
Loans, net of allowance for loan losses	1,529,531	1,501,550
Interest rate swap agreement	973	422
Accrued interest receivable	5,085	4,722
Total assets	1,971,375	2,014,315
Liabilities:
Deposits	1,511,676	1,527,470
Short-term borrowings	75,000	40,000
Securities sold under agreement to repurchase	249,582	312,118
Other long-term debt	3,630	3,651
Junior subordinated debentures issued to unconsolidated subsidiary trust	20,619	20,619
Interest rate swap agreement	774	194
Accrued interest payable	123	110
Total liabilities	1,861,404	1,904,162
Fair Value
Assets:
Cash and cash equivalents	59,762	82,953
Securities available for sale	287,989	333,998
Securities held to maturity	81,088	85,749
Loans, net of allowance for loan losses	1,511,073	1,484,718
Interest rate swap agreement	973	422
Accrued interest receivable	5,085	4,722
Total assets	1,945,970	1,992,562
Liabilities:
Deposits	1,510,694	1,526,626
Short-term borrowings	75,000	40,000
Securities sold under agreement to repurchase	249,651	312,019
Other long-term debt	3,585	3,600
Junior subordinated debentures issued to unconsolidated subsidiary trust	14,721	14,775
Interest rate swap agreement	774	194
Accrued interest payable	123	110
Total liabilities	$ 1,854,548	$ 1,897,324

EMPLOYEE BENEFIT PLANS - (Detai

EMPLOYEE BENEFIT PLANS - (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Interest cost	$ 113	$ 112
Expected return on plan assets	(111)	(242)
Service costs	13	14
Net loss amortization	110	$ 116
Net periodic pension benefit	125
Minimum
Minimum required contribution	$ 0

EARNINGS PER SHARE (Details)

EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Net income	$ 3,611	$ 3,490
Weighted average common shares outstanding	6,904,000	6,856,000
Dilutive effect of common stock equivalents	25,000	110,000
Weighted average common and common equivalent shares outstanding	6,929,000	6,966,000
Basic earnings per common share	$ 0.52	$ 0.51
Diluted earnings per common share	$ 0.52	$ 0.50
Warrants
Earnings Per Share, Diluted, Other Disclosures
Warrants or shares which were not included in the calculation of diluted earnings per share		34,370

COMMITMENTS AND CONTINGENCIES (

COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
COMMITMENTS AND CONTINGENCIES.
Financial instruments whose contract amounts represent credit risk	$ 6,770	$ 5,950
Expiration term of contingent obligations, months	12 months
Balances at the Federal Reserve Bank	$ 26,620	$ 32,720

ACCUMULATED OTHER COMPREHENSI56

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - Changes in Accumulated Other Comprehensive Income (Loss) By Component (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
AOCI Attributable to Parent, Net of Tax
Balance	$ 156,503
Accretion of unrealized losses of securities transferred from available-for-sale to held-to-maturity recognized in other comprehensive income	113	$ 127
Other comprehensive income	125	2,861
Balance	158,648
Accumulated Other Comprehensive Income (Loss)
AOCI Attributable to Parent, Net of Tax
Balance	(5,782)	(6,023)
Other comprehensive income before reclassifications	106	2,659
Accretion of unrealized losses of securities transferred from available-for-sale to held-to-maturity recognized in other comprehensive income	113	127
Reclassification adjustments for (gains) losses reclassified into income	94	(75)
Net current periodic change, Accumulated other comprehensive income (loss)	125	2,861
Balance	(5,657)	(3,162)
Unrealized Gains (Losses) on Securities | Available-For-Sale
AOCI Attributable to Parent, Net of Tax
Balance	(551)	166
Other comprehensive income before reclassifications	106	2,624
Reclassification adjustments for (gains) losses reclassified into income	166
Net current periodic change, Accumulated other comprehensive income (loss)	(60)	2,624
Balance	(611)	2,790
Unrealized Gains (Losses) on Securities | Transferred From Available-For-Sale to Held-To-Maturity
AOCI Attributable to Parent, Net of Tax
Balance	(1,408)	(2,297)
Accretion of unrealized losses of securities transferred from available-for-sale to held-to-maturity recognized in other comprehensive income	113	127
Net current periodic change, Accumulated other comprehensive income (loss)	113	127
Balance	(1,295)	(2,170)
Pension Plan.
AOCI Attributable to Parent, Net of Tax
Balance	(3,823)	(3,737)
Reclassification adjustments for (gains) losses reclassified into income	(72)	(75)
Net current periodic change, Accumulated other comprehensive income (loss)	72	75
Balance	$ (3,751)	(3,662)
Interest Rate Swaps
AOCI Attributable to Parent, Net of Tax
Balance		(155)
Other comprehensive income before reclassifications		35
Net current periodic change, Accumulated other comprehensive income (loss)		35
Balance		$ (120)

ACCUMULATED OTHER COMPREHENSI57

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - Reclassification Adjustments (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Reclassification Adjustment out of Accumulated Other Comprehensive Income
Provision for income taxes	$ 1,434	$ 1,042
Pension Plan.
Reclassification Adjustment out of Accumulated Other Comprehensive Income
Net of tax, increase to net income	72	75
Reclassification adjustments
Reclassification Adjustment out of Accumulated Other Comprehensive Income
Total reclassification adjustments	(94)	75
Reclassification adjustments | Unrealized Gains (Losses) on Securities
Reclassification Adjustment out of Accumulated Other Comprehensive Income
Net losses (gains) on investment securities	(255)
Total before tax	(255)
Provision for income taxes	89
Net of tax, increase to net income	(166)
Reclassification adjustments | Pension Plan.
Reclassification Adjustment out of Accumulated Other Comprehensive Income
Compensation and benefits	110	116
Total before tax	110	116
Provision for income taxes	(38)	(41)
Net of tax, decrease to net income	$ 72	$ 75

DERIVATIVE FINANCIAL INSTRUME58

DERIVATIVE FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Derivative
Other Liabilities	$ 4,389	$ 2,297
Fair Value Hedge | Interest Rate Swap
Derivative
Interest rate swaps designated as cash flow hedges, notional amount	$ 7,480	$ 7,480
Average receive rate	2.30%	2.09%
Average pay rate	3.11%	3.11%
Weighted average maturity	16 years 3 months 18 days	16 years 6 months
Fair values of effective portion of hedges reflected in Other Comprehensive Income	$ 199	$ 228
Not designated as hedging instrument | Interest Rate Swap
Derivative
Average receive rate	2.87%	2.66%
Average pay rate	3.85%	3.85%
Weighted average maturity	7 years 3 months 18 days	7 years 6 months
Not designated as hedging instrument | Interest Rate Swap | Other Assets.
Derivative
Interest rate derivative assets, fair value	$ 774	$ 194
Not designated as hedging instrument | Interest Rate Swap | Other Liabilities.
Derivative
Interest rate derivative liabilities, fair value	774	194
Not designated as hedging instrument | Pay Floating Receive Fixed Interest Rate Swap
Derivative
Interest rate swaps designated as cash flow hedges, notional amount	40,230	40,730
Not designated as hedging instrument | Pay Fixed Receive Floating Interest Rate Swap
Derivative
Interest rate swaps designated as cash flow hedges, notional amount	$ 40,230	$ 40,730