10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10‑Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2014.

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________.
 

COMMISSION FILE NUMBER 0-14703

NBT BANCORP INC.

(Exact Name of Registrant as Specified in its Charter)

DELAWARE	16-1268674
(State of Incorporation)	(I.R.S. Employer Identification No.)

52 SOUTH BROAD STREET, NORWICH, NEW YORK 13815

(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, Including Area Code: (607) 337-2265

None

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x No o

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

Large accelerated filer x Accelerated filer o Non-accelerated filer o Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

As of July 31, 2014, there were 43,704,282 shares outstanding of the Registrant's common stock, $0.01 par value per share.

NBT BANCORP INC.

FORM 10-Q--Quarter Ended June 30, 2014

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION
Item 1	Financial Statements
	Consolidated Balance Sheets at June 30, 2014 and December 31, 2013	3
	Consolidated Statements of Income for the three and six month periods ended June 30, 2014 and 2013	4
	Consolidated Statements of Comprehensive Income for the three and six month periods ended June 30, 2014 and 2013	5
	Consolidated Statements of Stockholders’ Equity for the six month periods ended June 30, 2014 and 2013	6
	Consolidated Statements of Cash Flows for the six month periods ended June 30, 2014 and 2013	7
	Notes to Unaudited Interim Consolidated Financial Statements	9
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	42
Item 3	Quantitative and Qualitative Disclosures about Market Risk	60
Item 4	Controls and Procedures	60
PART II	OTHER INFORMATION
Item 1	Legal Proceedings	61
Item 1A	Risk Factors	61
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	61
Item 3	Defaults Upon Senior Securities	61
Item 4	Mine Safety Disclosures	61
Item 5	Other Information	61
Item 6	Exhibits	62
SIGNATURES		63
INDEX TO EXHIBITS		64

2

PART I FINANCIAL INFORMATION

Item 1 – FINANCIAL STATEMENTS

NBT Bancorp Inc. and Subsidiaries

Consolidated Balance Sheets (unaudited)

	June 30,			December 31,
(In thousands, except share and per share data)	2014			2013
Assets
Cash and due from banks	$	178,539		$	157,625
Short-term interest bearing accounts		4,798			1,301
Securities available for sale, at fair value		1,378,799			1,364,881
Securities held to maturity (fair value $123,376 and $113,276, respectively)		125,965			117,283
Trading securities		7,355			5,779
Federal Reserve and Federal Home Loan Bank stock		49,093			46,864
Loans		5,574,488			5,406,795
Less allowance for loan losses		69,534			69,434
Net loans		5,504,954			5,337,361
Premises and equipment, net		87,972			88,327
Goodwill		263,634			264,997
Intangible assets, net		22,819			25,557
Bank owned life insurance		116,007			114,966
Other assets		129,577			127,234
Total assets	$	7,869,512		$	7,652,175
Liabilities
Demand (noninterest bearing)	$	1,676,246		$	1,645,641
Savings, NOW, and money market		3,363,911			3,223,441
Time		1,002,431			1,021,142
Total deposits		6,042,588			5,890,224
Short-term borrowings		534,478			456,042
Long-term debt		251,125			308,823
Junior subordinated debt		101,196			101,196
Other liabilities		82,984			79,321
Total liabilities		7,012,371			6,835,606
Stockholders’ equity
Preferred stock, $0.01 par value. Authorized 2,500,000 shares at June 30, 2014 and December 31, 2013		-			-
Common stock, $0.01 par value. Authorized 100,000,000 shares at June 30, 2014 and December 31, 2013; issued 49,651,494 at June 30, 2014 and December 31, 2013		497			497
Additional paid-in-capital		574,002			574,152
Retained earnings		413,011			385,787
Accumulated other comprehensive loss		(6,555	)		(16,765	)
Common stock in treasury, at cost, 5,952,696 and 6,138,444 shares at June 30, 2014 and December 31, 2013, respectively		(123,814	)		(127,102	)
Total stockholders’ equity		857,141			816,569
Total liabilities and stockholders’ equity	$	7,869,512		$	7,652,175

See accompanying notes to unaudited interim consolidated financial statements.

3

NBT Bancorp Inc. and Subsidiaries	Three months ended June 30,					Six months ended June 30,
Consolidated Statements of Income (unaudited)	2014		2013			2014		2013
(In thousands, except per share data)
Interest, fee, and dividend income
Interest and fees on loans	$	60,559	$	62,031		$	120,574	$	115,726
Securities available for sale		6,612		6,537			13,369		12,283
Securities held to maturity		783		548			1,551		1,073
Other		502		488			1,039		891
Total interest, fee, and dividend income		68,456		69,604			136,533		129,973
Interest expense
Deposits		3,000		4,296			6,284		8,446
Short-term borrowings		209		67			440		109
Long-term debt		2,135		3,026			4,642		6,635
Junior subordinated debt		538		560			1,076		988
Total interest expense		5,882		7,949			12,442		16,178
Net interest income		62,574		61,655			124,091		113,795
Provision for loan losses		4,166		6,402			7,762		12,060
Net interest income after provision for loan losses		58,408		55,253			116,329		101,735
Noninterest income
Insurance and other financial services revenue		5,594		5,755			12,331		12,648
Service charges on deposit accounts		4,397		4,933			8,766		9,256
ATM and debit card fees		4,357		4,044			8,429		7,286
Retirement plan administration fees		2,977		2,957			5,895		5,639
Trust		4,953		4,699			9,399		7,612
Bank owned life insurance		978		886			2,360		1,735
Net securities gains (losses)		14		(61	)		21		1,084
Gain on the sale of equity investment		19,401		-			19,401		-
Other		3,356		2,324			5,702		5,506
Total noninterest income		46,027		25,537			72,304		50,766
Noninterest expense
Salaries and employee benefits		31,142		29,160			60,676		56,207
Occupancy		5,435		5,219			11,661		10,196
Data processing and communications		4,015		3,854			8,016		7,309
Professional fees and outside services		3,752		3,237			7,167		6,138
Equipment		3,132		2,910			6,248		5,492
Office supplies and postage		1,803		1,656			3,488		3,246
FDIC expenses		1,229		1,273			2,507		2,403
Advertising		726		1,000			1,465		1,723
Amortization of intangible assets		1,236		1,351			2,546		2,202
Loan collection and other real estate owned		801		421			1,841		1,139
Merger expenses		-		1,269			-		11,950
Prepayment penalties on long-term debt		4,554		-			4,554		-
Other		4,911		5,100			10,084		9,150
Total noninterest expense		62,736		56,450			120,253		117,155
Income before income tax expense		41,699		24,340			68,380		35,346
Income tax expense		14,059		7,424			22,731		10,781
Net income	$	27,640	$	16,916		$	45,649	$	24,565
Earnings per share
Basic	$	0.63	$	0.39		$	1.04	$	0.61
Diluted	$	0.62	$	0.38		$	1.03	$	0.61

See accompanying notes to unaudited interim consolidated financial statements.

4

NBT Bancorp Inc. and Subsidiaries	Three months ended June 30,						Six months ended June 30,
Consolidated Statements of Comprehensive Income (unaudited)	2014			2013			2014			2013
(In thousands)
Net income	$	27,640		$	16,916		$	45,649		$	24,565
Other comprehensive income (loss), net of tax
Unrealized net holding gains (losses) arising during the period (pre-tax amounts of $8,267, ($24,712), $16,892 and ($26,464))		4,992			(14,923	)		10,200			(15,978	)
Reclassification adjustment for net gains related to securities available for sale included in net income (pre-tax amounts of $14, ($61), $21 and $1,084)		(8	)		37			(13	)		(650	)
Pension and other benefits:
Amortization of prior service cost and actuarial gains (pre-tax amounts of $19, $710, $38 and $1,536)		11			426			23			922
Total other comprehensive income (loss)		4,995			(14,460	)		10,210			(15,706	)
Comprehensive income	$	32,635		$	2,456		$	55,859		$	8,859

See accompanying notes to unaudited interim consolidated financial statements

5

NBT Bancorp Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity (unaudited)

									Accumulated
			Additional						Other			Common
	Common		Paid-in-			Retained			Comprehensive			Stock
	Stock		Capital			Earnings			Income (Loss)			in Treasury			Total
(in thousands, except share and per share data)
Balance at December 31, 2012	$	393	$	346,692		$	357,558		$	(5,880	)	$	(116,490	)	$	582,273
Net income		-		-			24,565			-			-			24,565
Cash dividends - $0.40 per share		-		-			(15,568	)		-			-			(15,568	)
Purchase of 267,425 treasury shares		-		-			-			-			(5,460	)		(5,460	)
Issuance of 10,346,363 shares, net of 408,957treasury shares, for acquisition		104		225,447			-			-			(5,779	)		219,772
Net issuance of 89,338 shares to employee benefit plans and other stock plans, including tax benefit		-		(2,506	)		-			-			1,479			(1,027	)
Stock-based compensation		-		2,726			-			-			-			2,726
Other comprehensive loss		-		-			-			(15,706	)		-			(15,706	)
Balance at June 30, 2013	$	497	$	572,359		$	366,555		$	(21,586	)	$	(126,250	)	$	791,575
Balance at December 31, 2013	$	497	$	574,152		$	385,787		$	(16,765	)	$	(127,102	)	$	816,569
Net income		-		-			45,649			-			-			45,649
Cash dividends - $0.42 per share		-		-			(18,425	)		-			-			(18,425	)
Purchase of 3,288 treasury shares		-		-			-			-			(72	)		(72	)
Net issuance of 189,036 shares to employee benefit plans and other stock plans, including tax benefit		-		(2,232	)		-			-			3,360			1,128
Stock-based compensation		-		2,082			-			-			-			2,082
Other comprehensive income		-		-			-			10,210			-			10,210
Balance at  June 30, 2014	$	497	$	574,002		$	413,011		$	(6,555	)	$	(123,814	)	$	857,141

See accompanying notes to unaudited interim consolidated financial statements.

6

NBT Bancorp Inc. and Subsidiaries	Six Months Ended June 30,
Consolidated Statements of Cash Flows (unaudited)	2014			2013
(In thousands, except per share data)
Operating activities
Net income	$	45,649		$	24,565
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses		7,762			12,060
Depreciation and amortization of premises and equipment		4,105			3,828
Net accretion on securities		1,883			2,811
Amortization of intangible assets		2,546			2,202
Stock based compensation		2,082			2,726
Increase in surrender value of bank owned life insurance		(1,392	)		(1,735	)
Purchases of trading securities		(1,485	)		(949	)
Unrealized (gains) losses in trading securities		(91	)		(225	)
Deferred income tax benefit		(1,654	)		(519	)
Proceeds from sales of loans held for sale		1,922			39,060
Originations and purchases of loans held for sale		(3,701	)		(40,233	)
Net gains on sales of loans held for sale		(3	)		(817	)
Net security gains		(21	)		(1,084	)
Net gain on sales of other real estate owned		(212	)		(571	)
Gains on bank owned life insurance settlement		(414	)		-
Gain on sale of equity investment		(19,401	)		-
Prepayment penalties on long-term debt		4,554			-
Net decrease in other assets		9,261			9,144
Net decrease in other liabilities		(8,421	)		(8,333	)
Net cash provided by operating activities		42,969			41,930
Investing activities
Net cash used in acquisitions		-			80,909
Securities available for sale:
Proceeds from maturities, calls, and principal paydowns		119,680			234,543
Proceeds from sales		-			26,236
Purchases		(116,594	)		(219,000	)
Securities held to maturity:
Proceeds from maturities, calls, and principal paydowns		14,835			16,822
Purchases		(17,363	)		(71,988	)
Proceeds from FHLB stock redemption		37,179			-
Purchases of Federal Reserve and FHLB stock		(39,408	)		(5,584	)
Net increase in loans		(174,358	)		(119,872	)
Proceeds from settlement of bank owned life insurance		765			-
Purchases of premises and equipment		(3,498	)		(2,272	)
Proceeds from sales of other real estate owned		1,919			2,122
Proceeds from the sale of equity investment		19,639			-
Net cash used in investing activities		(157,204	)		(58,084	)
Financing activities
Net increase (decrease) in deposits		152,364			(19,593	)
Net increase in short-term borrowings		78,436			201,066
Issuance of long-term debt		120,000			-
Repayments of long-term debt		(194,785	)		(163,307	)
Proceeds from the issuance of shares to employee benefit plans and other stock plans		1,128			(965	)
Purchase of treasury stock		(72	)		(5,460	)
Cash dividends and payment for fractional shares		(18,425	)		(15,568	)
Net cash provided by (used in) financing activities		138,646			(3,827	)
Net increase (decrease) in cash and cash equivalents		24,411			(19,981	)
Cash and cash equivalents at beginning of period		158,926			163,668
Cash and cash equivalents at end of period	$	183,337		$	143,687

See accompanying notes to unaudited interim consolidated financial statements.

7

Supplemental disclosure of cash flow information	Six Months Ended June 30,
Cash paid during the period for:	2014		2013
Interest	$	13,405	$	16,853
Income taxes paid		19,496		4,525
Noncash investing activities:
Loans transferred to other real estate owned	$	785	$	3,031
Acquisitions:
Fair value of assets acquired	$	-	$	1,503,810
Fair value of liabilities assumed		-		1,284,038

See accompanying notes to unaudited interim consolidated financial statements.

8

NBT BANCORP INC. and Subsidiaries

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

Note 1. Description of Business

NBT Bancorp Inc. (the “Registrant” or the “Company”) is a registered financial holding company incorporated in the state of Delaware in 1986, with its principal headquarters located in Norwich, New York.  The principal assets of the Registrant consist of all of the outstanding shares of common stock of its subsidiaries, including:  NBT Bank, National Association (the “Bank”), NBT Financial Services, Inc. (“NBT Financial”), NBT Holdings, Inc. (“NBT Holdings”), Hathaway Agency, Inc., and CNBF Capital Trust I, NBT Statutory Trust I and NBT Statutory Trust II (collectively, the “Trusts”).  The Company’s principal sources of revenue are the management fees and dividends it receives from the Bank, NBT Financial and NBT Holdings.

The Company’s business, primarily conducted through the Bank but also through its other subsidiaries, consists of providing commercial banking and financial services to customers in its market area, which includes central and upstate New York, northeastern Pennsylvania, southern New Hampshire, western Massachusetts and the greater Burlington, Vermont area.  The Company has been, and intends to continue to be, a community-oriented financial institution offering a variety of financial services.  The Company’s business philosophy is to operate as a community bank with local decision-making, principally in non-metropolitan markets, providing a broad array of banking and financial services to retail, commercial, and municipal customers. 

Note 2. Basis of Presentation

The accompanying unaudited interim consolidated financial statements include the accounts of the Registrant and its wholly owned subsidiaries, the Bank, NBT Financial and NBT Holdings.  Collectively, the Registrant and its subsidiaries are referred to herein as “the Company.”  The interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods in accordance with generally accepted accounting principles (“GAAP”).  These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2013 Annual Report on Form 10-K. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period.  All intercompany transactions have been eliminated in consolidation. Amounts in the prior period financial statements are reclassified whenever necessary to conform to current period presentation.  The Company has evaluated subsequent events for potential recognition and/or disclosure and there were none identified.

9

Note 3. Securities

The amortized cost, estimated fair value, and unrealized gains and losses of securities available for sale are as follows:

(In thousands)	Amortized cost		Unrealized gains		Unrealized losses		Estimated fair value
June 30, 2014
U.S. Treasury	$	33,129	$	195	$	-	$	33,324
Federal Agency		310,181		478		3,518		307,141
State & municipal		103,253		2,267		172		105,348
Mortgage-backed:
Government-sponsored enterprises		368,988		8,473		428		377,033
U.S. government agency securities		19,527		921		94		20,354
Collateralized mortgage obligations:
Government-sponsored enterprises		480,694		2,315		11,816		471,193
U.S. government agency securities		48,065		610		59		48,616
Other securities		12,962		3,025		197		15,790
Total securities available for sale	$	1,376,799	$	18,284	$	16,284	$	1,378,799
December 31, 2013
U.S. Treasury	$	43,279	$	337	$	-	$	43,616
Federal Agency		285,880		343		7,308		278,915
State & municipal		113,435		1,842		1,612		113,665
Mortgage-backed:
Government-sponsored enterprises		337,666		5,788		2,131		341,323
U.S. government agency securities		21,924		1,002		85		22,841
Collateralized mortgage obligations:
Government-sponsored enterprises		521,257		1,777		18,141		504,893
U.S. government agency securities		43,943		794		102		44,635
Other securities		12,367		2,854		228		14,993
Total securities available for sale	$	1,379,751	$	14,737	$	29,607	$	1,364,881

Other securities primarily represent marketable equity securities.

There were no sales of securities available for sale during the six months ended June 30, 2014.  Proceeds from the sales of securities available for sale were $26.2 million during the six months ended June 30, 2013, and gains on the sales were $1.1 million.

Securities with amortized costs totaling $1.4 billion at June 30, 2014 and $1.4 billion at December 31, 2013 were pledged to secure public deposits and for other purposes required or permitted by law.  At June 30, 2014 and December 31, 2013, securities with an amortized cost of $225.9 million and $218.4 million, respectively, were pledged as collateral for securities sold under repurchase agreements.

10

The amortized cost, estimated fair value, and unrealized gains and losses of securities held to maturity are as follows:

	Amortized		Unrealized		Unrealized		Estimated
(In thousands)	cost		gains		losses		fair value
June 30, 2014
Mortgage-backed	$	853	$	125	$	-	$	978
Collateralized mortgage obligations		59,792		-		3,139		56,653
State & municipal		65,320		425		-		65,745
Total securities held to maturity	$	125,965	$	550	$	3,139	$	123,376
December 31, 2013
Mortgage-backed	$	953	$	128	$	-	$	1,081
Collateralized mortgage obligations		62,025		-		4,569		57,456
State & municipal		54,305		442		8		54,739
Total securities held to maturity	$	117,283	$	570	$	4,577	$	113,276

11

The following table sets forth information with regard to investment securities with unrealized losses at June 30, 2014 and December 31, 2013:

	Less than 12 months							12 months or longer							Total
Security Type:	Fair Value		Unrealized losses			Number of Positions		Fair Value		Unrealized losses			Number of Positions		Fair Value		Unrealized losses			Number of Positions
June 30, 2014
Investment securities available for sale:
Federal agency	$	14,584		(17	)		2	$	227,183	$	(3,501	)		19	$	241,767	$	(3,518	)		21
State & municipal		8,256		(22	)		28		20,416		(150	)		70		28,672		(172	)		98
Mortgage-backed		1,523		(6	)		12		49,695		(516	)		36		51,218		(522	)		48
Collateralized mortgage obligations		89,915		(542	)		12		269,579		(11,333	)		23		359,494		(11,875	)		35
Other securities		2,553		(34	)		1		3,191		(163	)		2		5,744		(197	)		3
Total securities with unrealized losses	$	116,831	$	(621	)		55	$	570,064	$	(15,663	)		150	$	686,895	$	(16,284	)		205
June 30, 2014
Investment securities held to maturity:
Collateralized mortgage obligations		56,653		(3,139	)		5		-		-			-	$	56,653		(3,139	)		5
December 31, 2013
Investment securities available for sale:
Federal agency	$	233,935	$	(6,927	)		20	$	9,619	$	(381	)		1	$	243,554	$	(7,308	)		21
State & municipal		50,328		(1,612	)		177		-		-			-		50,328		(1,612	)		177
Mortgage-backed		143,080		(2,216	)		79		-		-			-		143,080		(2,216	)		79
Collateralized mortgage obligations		379,273		(18,243	)		36		-		-			-		379,273		(18,243	)		36
Other securities		5,490		(203	)		2		223		(25	)		1		5,713		(228	)		3
Total securities with unrealized losses	$	812,106	$	(29,201	)		314	$	9,842	$	(406	)		2	$	821,948	$	(29,607	)		316
December 31, 2013
Investment securities held to maturity:
Collateralized mortgage obligations	$	57,456	$	(4,569	)		5	$	-	$	-			-	$	57,456	$	(4,569	)		5
State & municipal		1,012		(8	)		1		-		-			-		1,012		(8	)		1
Total securities with unrealized losses	$	58,468	$	(4,577	)		6	$	-	$	-			-	$	58,468	$	(4,577	)		6

12

Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses or in other comprehensive income, depending on whether the Company intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss.  If the Company intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the other-than-temporary impairment shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date.  If the Company does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the other-than-temporary impairment shall be separated into (a) the amount representing the credit loss and (b) the amount related to all other factors.  The amount of the total other-than-temporary impairment related to the credit loss shall be recognized in earnings. The amount of the total other-than-temporary impairment related to other factors shall be recognized in other comprehensive income, net of applicable taxes.

In estimating other-than-temporary impairment losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the historical and implied volatility of the fair value of the security.

Management has the intent to hold the securities classified as held to maturity until they mature, at which time it is believed the Company will receive full value for the securities. Furthermore, as of June 30, 2014, management also had the intent to hold, and will not be required to sell, the securities classified as available for sale for a period of time sufficient for a recovery of cost, which may be until maturity.  The unrealized losses are due to increases in market interest rates over the yields available at the time the underlying securities were purchased. When necessary, the Company has performed a discounted cash flow analysis to determine whether or not it will receive the contractual principal and interest on certain securities.  The fair value is expected to recover as the bonds approach their maturity date or repricing date or if market yields for such investments decline.  As of June 30, 2014, management believes the impairments detailed in the table above are temporary and no other-than-temporary impairment losses have been realized in the Company’s consolidated statements of income.

The following tables set forth information with regard to contractual maturities of debt securities at June 30, 2014:

(In thousands)	Amortized cost		Estimated fair value
Debt securities classified as available for sale
Within one year	$	29,964	$	30,109
From one to five years		359,226		358,895
From five to ten years		215,602		220,020
After ten years		759,045		753,985
	$	1,363,837	$	1,363,009
Debt securities classified as held to maturity
Within one year	$	30,983	$	31,083
From one to five years		17,462		17,651
From five to ten years		15,636		15,772
After ten years		61,884		58,870
	$	125,965	$	123,376

Maturities of mortgage-backed, collateralized mortgage obligations and asset-backed securities are stated based on their estimated average lives.  Actual maturities may differ from estimated average lives or contractual maturities because, in certain cases, borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

13

Except for U.S. Government securities, there were no holdings, when taken in the aggregate, of any single issuer that exceeded 10% of consolidated stockholders’ equity at June 30, 2014.

Note  4. Allowance for Loan Losses and Credit Quality of Loans

Allowance for Loan Losses

The allowance for loan losses is maintained at a level estimated by management to provide adequately for risk of probable losses inherent in the current loan portfolio. The adequacy of the allowance for loan losses is continuously monitored.  It is assessed for adequacy using a methodology designed to ensure the level of the allowance reasonably reflects the loan portfolio’s risk profile. It is evaluated to ensure that it is sufficient to absorb all reasonably estimable credit losses inherent in the current loan portfolio.

To develop and document a systematic methodology for determining the allowance for loan losses, the Company has divided the loan portfolio into three segments, each with different risk characteristics and methodologies for assessing risk.  Those segments are further segregated between our loans accounted for under the amortized cost method (referred to as “originated” loans) and loans acquired in a business combination (referred to as “acquired” loans).  Each portfolio segment is broken down into class segments where appropriate.  Class segments contain unique measurement attributes, risk characteristics and methods for monitoring and assessing risk that are necessary to develop the allowance for loan losses.  Unique characteristics such as borrower type, loan type, collateral type, and risk characteristics define each class segment.  The following table illustrates the portfolio and class segments for the Company’s loan portfolio:

Portfolio	Class
Commercial Loans	Commercial
	Commercial Real Estate
	Agricultural
	Agricultural Real Estate
	Business Banking
Consumer Loans	Indirect
	Home Equity
	Direct
Residential Real Estate Mortgages

Commercial Loans

The Company offers a variety of commercial loan products including commercial (non-real estate), commercial real estate, agricultural, agricultural real estate, and business banking loans.  The Company’s underwriting analysis for commercial loans typically includes credit verification, independent appraisals, a review of the borrower’s financial condition, and a detailed analysis of the borrower’s underlying cash flows.

Commercial – The Company offers a variety of loan options to meet the specific needs of our commercial customers including term loans, time notes and lines of credit.  Such loans are made available to businesses for working capital needs such as inventory and receivables, business expansion and equipment purchases. Generally, a collateral lien is placed on equipment or other assets owned by the borrower.  These loans carry a higher risk than commercial real estate loans due to the nature of the underlying collateral, which can be business assets such as equipment and accounts receivable. To reduce the risk, management also attempts to secure real estate as collateral and obtain personal guarantees of the borrowers.

14

Commercial Real Estate – The Company offers commercial real estate loans to finance real estate purchases, refinancings, expansions and improvements to commercial properties.  Commercial real estate loans are made to finance the purchases of real estate, generally with completed structures. These commercial real estate loans are secured by first liens on the real estate, which may include apartments, commercial structures, housing businesses, healthcare facilities, and other non owner-occupied facilities.  These loans are typically less risky than commercial loans, since they are secured by real estate and buildings, and are generally originated in amounts of no more than 80% of the appraised value of the property.

Agricultural – The Company offers a variety of agricultural loans to meet the needs of our agricultural customers including term loans, time notes, and lines of credit.  These loans are made to purchase livestock, purchase and modernize equipment, and finance seasonal crop expenses.  Generally, a collateral lien is placed on the livestock, equipment, produce inventories, and/or receivables owned by the borrower.  These loans may carry a higher risk than commercial and agricultural real estate loans due to the industry price volatility, and in some cases, the perishable nature of the underlying collateral.  To reduce these risks, management may attempt to secure these loans with additional real estate collateral, obtain personal guarantees of the borrowers, or obtain government loan guarantees to provide further support.

Agricultural Real Estate – The Company offers real estate loans to our agricultural customers to finance farm related real estate purchases, refinancings, expansions, and improvements to agricultural properties such as barns, production facilities, and land.  The agricultural real estate loans are secured by first liens on the farm real estate.  Because they are secured by land and buildings, these loans may be less risky than agricultural loans.  These loans are typically originated in amounts of no more than 75% of the appraised value of the property.  Government loan guarantees may be obtained to provide further support.

Business Banking - The Company offers a variety of loan options to meet the specific needs of our business banking customers including term loans, business banking mortgages and lines of credit.  Such loans are generally less than $0.5 million and are made available to businesses for working capital such as inventory and receivables, business expansion, equipment purchases, and agricultural needs.  Generally, a collateral lien is placed on equipment or other assets owned by the borrower such as inventory and/or receivables.  These loans carry a higher risk than commercial loans due to the smaller size of the borrower and lower levels of capital.  To reduce the risk, the Company obtains personal guarantees of the owners for a majority of the loans.

Consumer Loans

The Company offers a variety of consumer loan products including indirect, home equity, and direct loans.

Indirect – The Company maintains relationships with many dealers primarily in the communities that we serve.  Through these relationships, the company primarily finances the purchases of automobiles and recreational vehicles (such as campers, boats, etc.) indirectly through dealer relationships.  Approximately 75% of the indirect relationships represent automobile financing.  Most of these loans carry a fixed rate of interest with principal repayment terms typically ranging from three to six years, based upon the nature of the collateral and the size of the loan. The majority of indirect consumer loans are underwritten on a secured basis using the underlying collateral being financed.

Home Equity –The Company offers fixed home equity loans as well as home equity lines of credit to consumers to finance home improvements, debt consolidation, education and other uses.  Consumers are able to borrow up to 85% of the equity in their homes.  The Company originates home equity lines of credit and second mortgage loans (loans secured by a second junior lien position on one-to-four-family residential real estate).  These loans carry a higher risk than first mortgage residential loans as they are in a second position with respect to collateral.  Risk is reduced through underwriting criteria, which include credit verification, appraisals, a review of the borrower's financial condition, and personal cash flows.  A security interest, with title insurance when necessary, is taken in the underlying real estate.

15

Direct – The Company offers a variety of consumer installment loans to finance vehicle purchases, mobile home purchases and personal expenditures.  Most of these loans carry a fixed rate of interest with principal repayment terms typically ranging from one to ten years, based upon the nature of the collateral and the size of the loan. The majority of consumer loans are underwritten on a secured basis using the underlying collateral being financed or a customer's deposit account. In addition to installment loans, the Company also offers personal lines of credit and overdraft protection.  A minimal amount of loans are unsecured, which carry a higher risk of loss.

Residential Real Estate Mortgages

Residential real estate loans consist primarily of loans secured by first or second deeds of trust on primary residences.  We originate adjustable-rate and fixed-rate, one-to-four-family residential real estate loans for the construction, purchase or refinancing of a mortgage.  These loans are collateralized by owner-occupied properties located in the Company’s market area.  Loans on one-to-four-family residential real estate are generally originated in amounts of no more than 85% of the purchase price or appraised value (whichever is lower), or have private mortgage insurance.  The Company’s underwriting analysis for residential mortgage loans typically includes credit verification, independent appraisals, and a review of the borrower’s financial condition.  Mortgage title insurance and hazard insurance are normally required. Construction loans have a unique risk, because they are secured by an incomplete dwelling. This risk is reduced through periodic site inspections, including one at each loan draw period.

For purposes of evaluating the adequacy of the allowance, the Company considers a number of significant factors that affect the collectability of the portfolio.  For individually analyzed loans, these include estimates of loss exposure, which reflect the facts and circumstances that affect the likelihood of repayment of such loans as of the evaluation date. For homogeneous pools of loans, estimates of the Company’s exposure to credit loss reflect a current assessment of a number of factors, which could affect collectability.  These factors include:  past loss experience;  size, trend, composition, and nature of loans;  changes in lending policies and procedures, including underwriting standards and collection,  charge-offs  and  recoveries; trends experienced in nonperforming and delinquent loans; current economic conditions in the Company’s market;  portfolio concentrations that may affect loss experienced across one or more components of the portfolio; the effect of external factors such as competition, legal and regulatory requirements; and the experience, ability, and depth of lending management and staff. In addition, various regulatory agencies, as an integral component of their examination process, periodically review the Company’s allowance for loan losses.  Such agencies may require the Company to make loan grade changes as well as recognize additions to the allowance based on their examinations.

After a thorough consideration of the factors discussed above, any required additions or reductions to the allowance for loan losses are made periodically by charges or credits to the provision for loan losses. These charges or credits are necessary to maintain the allowance at a level which management believes is reasonably reflective of overall inherent risk of probable loss in the portfolio. While management uses available information to recognize losses on loans, additions and reductions of the allowance may fluctuate from one reporting period to another.  These fluctuations are reflective of changes in risk associated with portfolio content and/or changes in management’s assessment of any or all of the determining factors discussed above.

16

The following tables illustrate the changes in the allowance for loan losses by our portfolio segments for the three and six months ended June 30, 2014 and 2013:

							Residential
Three months ended June 30	Commercial			Consumer			Real Estate
	Loans			Loans			Mortgages			Unallocated			Total
Balance as of March 31, 2014	$	34,437		$	28,436		$	6,225		$	336		$	69,434
Charge-offs		(1,427	)		(3,648	)		(165	)		-			(5,240	)
Recoveries		314			714			146			-			1,174
Provision		1,799			2,471			(1	)		(103	)		4,166
Ending Balance as of June 30, 2014	$	35,123		$	27,973		$	6,205		$	233		$	69,534
Balance as of March 31, 2013	$	35,358		$	26,285		$	6,708		$	383		$	68,734
Charge-offs		(1,198	)		(3,653	)		(302	)		-			(5,153	)
Recoveries		416			696			89			-			1,201
Provision		3,128			3,128			311			(165	)		6,402
Ending Balance as of June 30, 2013	$	37,704		$	26,456		$	6,806		$	218		$	71,184

							Residential
Six months ended June 30,	Commercial			Consumer			Real Estate
	Loans			Loans			Mortgages			Unallocated			Total
Balance as of December 31, 2013	$	35,090		$	27,694		$	6,520		$	130		$	69,434
Charge-offs		(1,906	)		(7,680	)		(484	)		-			(10,070	)
Recoveries		713			1,455			240			-			2,408
Provision		1,226			6,504			(71	)		103			7,762
Ending Balance as of June 30, 2014	$	35,123		$	27,973		$	6,205		$	233		$	69,534
Balance as of December 31, 2012	$	35,624		$	27,162		$	6,252		$	296		$	69,334
Charge-offs		(4,520	)		(7,376	)		(973	)		-			(12,869	)
Recoveries		883			1,673			103			-			2,659
Provision		5,717			4,997			1,424			(78	)		12,060
Ending Balance as of June 30, 2013	$	37,704		$	26,456		$	6,806		$	218		$	71,184

For acquired loans, to the extent that we experience deterioration in borrower credit quality resulting in a decrease in our expected cash flows subsequent to acquisition of the loans, an allowance for loan losses would be established based on our estimate of future credit losses over the remaining life of the loans.  As of June 30, 2014, included in the above tables, there was $1.5 million in the allowance for loan losses related to an acquired commercial loan.  There was no allowance as of June 30, 2013 related to acquired loans.  Net charge-offs related to acquired loans totaled approximately $0.1 million and $0.2 million during the three months ended June 30, 2014 and 2013, respectively, and are included in the table above.  Net charge-offs related to acquired loans totaled approximately $0.2 million and $0.4 million during the six months ended June 30, 2014 and 2013, respectively, and are included in the table above.

17

The following tables illustrate the allowance for loan losses and the recorded investment by portfolio segments as of June 30, 2014 and December 31, 2013:

Allowance for Loan Losses and Recorded Investment in Loans

(in thousands)

					Residential
	Commercial		Consumer		Real Estate
	Loans		Loans		Mortgages		Unallocated		Total
As of June 30, 2014
Allowance for loan losses	$	35,123	$	27,973	$	6,205	$	233	$	69,534
Allowance for loans individually evaluated for impairment		2,100		-		-				2,100
Allowance for loans collectively evaluated for impairment	$	33,023	$	27,973	$	6,205	$	233	$	67,434
Ending balance of loans	$	2,476,246	$	2,025,035	$	1,073,207			$	5,574,488
Ending balance of originated loans individually evaluated for impairment		13,874		5,600		2,738				22,212
Ending balance of acquired loans individually evaluated for impairment		9,672		-		-				9,672
Ending balance of acquired loans collectively evaluated for impairment		367,818		179,253		289,405				836,476
Ending balance of originated loans collectively evaluated for impairment	$	2,084,882	$	1,840,182	$	781,064			$	4,706,128
As of December 31, 2013
Allowance for loan losses	$	35,090	$	27,694	$	6,520	$	130	$	69,434
Allowance for loans individually evaluated for impairment		715		-		-				715
Allowance for loans collectively evaluated for impairment	$	34,375	$	27,694	$	6,520	$	130	$	68,719
Ending balance of loans	$	2,392,621	$	1,972,537	$	1,041,637			$	5,406,795
Ending balance of originated loans individually evaluated for impairment		16,120		3,248		2,012				21,380
Ending balance of acquired loans individually evaluated for impairment		10,060		-		-				10,060
Ending balance of acquired loans collectively evaluated for impairment		392,329		219,587		308,416				920,332
Ending balance of originated loans collectively evaluated for impairment	$	1,974,112	$	1,749,702	$	731,209			$	4,455,023

18

Credit Quality of Loans

Loans are placed on nonaccrual status when timely collection of principal and interest in accordance with contractual terms is doubtful. Loans are transferred to nonaccrual status generally when principal or interest payments become ninety days delinquent, unless the loan is well secured and in the process of collection, or sooner when management concludes or circumstances indicate that borrowers may be unable to meet contractual principal or interest payments.  When a loan is transferred to a nonaccrual status, all interest previously accrued in the current period but not collected is reversed against interest income in that period. Interest accrued in a prior period and not collected is charged-off against the allowance for loan losses.  The Company’s nonaccrual policies are the same for all classes of financing receivable.

If ultimate repayment of a nonaccrual loan is expected, any payments received are applied in accordance with contractual terms. If ultimate repayment of principal is not expected, any payment received on a nonaccrual loan is applied to principal until ultimate repayment becomes expected.  Nonaccrual loans are returned to accrual status when they become current as to principal and interest and demonstrate a period of performance under the contractual terms and, in the opinion of management, are fully collectible as to principal and interest.  When in the opinion of management the collection of principal appears unlikely, the loan balance is charged-off in total or in part.  For loans in all portfolios, the principal amount is charged off in full or in part as soon as management determines, based on available facts, that the collection of principal in full is improbable.  For commercial loans, management considers specific facts and circumstances relative to individual credits in making such a determination.  For consumer and residential loan classes, management uses specific guidance and thresholds from the Federal Financial Institutions Examination Council’s Uniform Retail Credit Classification and Account Management Policy.

19

The following table illustrates the Company’s nonaccrual loans by loan class:

Loans on Nonaccrual Status as of:

(In thousands)	June 30, 2014		December 31, 2013
ORIGINATED
Commercial Loans
Commercial	$	3,885	$	3,669
Commercial Real Estate		6,616		7,834
Agricultural		1,343		1,135
Agricultural Real Estate		1,590		961
Business Banking		6,008		5,701
		19,442		19,300
Consumer Loans
Indirect		1,359		1,461
Home Equity		7,772		5,931
Direct		67		86
		9,198		7,478
Residential Real Estate Mortgages		7,711		7,105
	$	36,351	$	33,883
ACQUIRED
Commercial Loans
Commercial	$	6,339	$	6,599
Commercial Real Estate		3,429		3,559
Business Banking		954		1,340
		10,722		11,498
Consumer Loans
Indirect		118		93
Home Equity		514		570
Direct		31		49
		663		712
Residential Real Estate Mortgages		3,498		3,872
	$	14,883	$	16,082
TOTAL NONACCRUAL LOANS	$	51,234	$	49,965

20

The following tables set forth information with regard to past due and nonperforming loans by loan class as of June 30, 2014 and December 31, 2013:

Age Analysis of Past Due Financing Receivables

As of June 30, 2014

(in thousands)

					Greater Than
	31-60 Days		61-90 Days		90 Days		Total						Recorded
	Past Due		Past Due		Past Due		Past Due						Total
	Accruing		Accruing		Accruing		Accruing		Non-Accrual		Current		Loans
ORIGINATED
Commercial Loans
Commercial	$	53	$	-	$	-	$	53	$	3,885	$	653,268	$	657,206
Commercial Real Estate		-		-		-		-		6,616		994,773		1,001,389
Agricultural		170		-		-		170		1,343		55,572		57,085
Agricultural Real Estate		4		-		-		4		1,590		40,768		42,362
Business Banking		869		451		-		1,320		6,008		333,386		340,714
		1,096		451		-		1,547		19,442		2,077,767		2,098,756
Consumer Loans
Indirect		12,444		2,015		1,100		15,559		1,359		1,265,140		1,282,058
Home Equity		4,470		995		839		6,304		7,772		494,123		508,199
Direct		529		138		27		694		67		54,764		55,525
		17,443		3,148		1,966		22,557		9,198		1,814,027		1,845,782
Residential Real Estate Mortgages		3,082		594		119		3,795		7,711		772,296		783,802
	$	21,621	$	4,193	$	2,085	$	27,899	$	36,351	$	4,664,090	$	4,728,340
ACQUIRED
Commercial Loans
Commercial	$	14	$	-	$	-	$	14	$	6,339		92,335	$	98,688
Commercial Real Estate		582		-		-		582		3,429		210,204		214,215
Business Banking		441		-		-		441		954		63,192		64,587
		1,037		-		-		1,037		10,722		365,731		377,490
Consumer Loans
Indirect		481		114		54		649		118		91,212		91,979
Home Equity		370		204		36		610		514		80,068		81,192
Direct		73		6		11		90		31		5,961		6,082
		924		324		101		1,349		663		177,241		179,253
Residential Real Estate Mortgages		1,317		-		-		1,317		3,498		284,590		289,405
	$	3,278	$	324	$	101	$	3,703	$	14,883	$	827,562	$	846,148
Total Loans	$	24,899	$	4,517	$	2,186	$	31,602	$	51,234	$	5,491,652	$	5,574,488

21

Age Analysis of Past Due Financing Receivables

As of December 31, 2013

(in thousands)

					Greater Than
	31-60 Days		61-90 Days		90 Days		Total						Recorded
	Past Due		Past Due		Past Due		Past Due						Total
	Accruing		Accruing		Accruing		Accruing		Non-Accrual		Current		Loans
ORIGINATED
Commercial Loans
Commercial	$	105	$	247	$	-	$	352	$	3,669	$	612,402	$	616,423
Commercial Real Estate		1,366		-		-		1,366		7,834		925,116		934,316
Agricultural		150		21		-		171		1,135		63,856		65,162
Agricultural Real Estate		519		-		-		519		961		35,172		36,652
Business Banking		1,228		122		105		1,455		5,701		330,523		337,679
		3,368		390		105		3,863		19,300		1,967,069		1,990,232
Consumer Loans
Indirect		14,093		2,878		1,583		18,554		1,461		1,141,829		1,161,844
Home Equity		6,033		1,888		1,115		9,036		5,931		517,856		532,823
Direct		679		125		46		850		86		57,347		58,283
		20,805		4,891		2,744		28,440		7,478		1,717,032		1,752,950
Residential Real Estate Mortgages		3,951		379		808		5,138		7,105		720,978		733,221
	$	28,124	$	5,660	$	3,657	$	37,441	$	33,883	$	4,405,079	$	4,476,403
ACQUIRED
Commercial Loans
Commercial	$	24	$	-	$	-	$	24	$	6,599	$	96,603	$	103,226
Commercial Real Estate		-		-		-		-		3,559		225,455		229,014
Business Banking		320		2		-		322		1,340		68,487		70,149
		344		2		-		346		11,498		390,545		402,389
Consumer Loans
Indirect		939		113		71		1,123		93		123,870		125,086
Home Equity		753		63		-		816		570		85,690		87,076
Direct		76		56		9		141		49		7,235		7,425
		1,768		232		80		2,080		712		216,795		219,587
Residential Real Estate Mortgages		1,725		-		-		1,725		3,872		302,819		308,416
	$	3,837	$	234	$	80	$	4,151	$	16,082	$	910,159	$	930,392
Total Loans	$	31,961	$	5,894	$	3,737	$	41,592	$	49,965	$	5,315,238	$	5,406,795

There were no material commitments to extend further credit to borrowers with nonperforming loans.

22

Impaired Loans

The methodology used to establish the allowance for loan losses on impaired loans incorporates specific allocations on loans analyzed individually.  Classified and nonperforming loans with outstanding balances of $0.5 million or more and all troubled debt restructured loans (“TDR”) are evaluated for impairment through the Company’s quarterly status review process.  In determining that we will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreements, we consider factors such as payment history and changes in the financial condition of individual borrowers, local economic conditions, historical loss experience and the conditions of the various markets in which the collateral may be liquidated.  For loans that are impaired as defined by accounting standards, impairment is measured by one of three methods: 1) the fair value of collateral less cost to sell, 2) present value of expected future cash flows or 3) the loan’s observable market price.  All impaired loans are reviewed on a quarterly basis for changes in the measurement of impairment.  Any change to the previously recognized impairment loss is recognized as a change to the allowance account and recorded in the consolidated statement of income as a component of the provision for loan losses.

23

The following table provides information on loans specifically evaluated for impairment as of June 30, 2014 and December 31, 2013:

	June 30, 2014						December 31, 2013
	Recorded		Unpaid				Recorded		Unpaid
	Investment		Principal				Investment		Principal
	Balance		Balance		Related		Balance		Balance		Related
(in thousands)	(Book)		(Legal)		Allowance		(Book)		(Legal)		Allowance
ORIGINATED
With no related allowance recorded:
Commercial Loans
Commercial	$	2,000	$	2,096			$	4,721	$	4,777
Commercial Real Estate		6,854		7,823				4,613		5,164
Agricultural		119		189				125		195
Agricultural Real Estate		1,406		1,697				1,431		1,708
Business Banking		702		1,094				210		602
Total Commercial Loans		11,081		12,899				11,100		12,446
Consumer Loans
Home Equity		5,600		6,031				3,248		3,472
Residential Real Estate Mortgages		2,738		3,073				2,012		2,255
Total		19,419		22,003				16,360		18,173
With an allowance recorded:
Commercial Loans
Commercial Real Estate		2,793		4,649		600		5,020		6,877		715
ACQUIRED
With no related allowance recorded:
Commercial Loans
Commercial		-		-				6,501		6,538
Commercial Real Estate		3,430		3,836				3,559		3,842
Total Commercial Loans		3,430		3,836				10,060		10,380
With an allowance recorded:
Commercial Loans
Commercial		6,242		6,496		1,500		-		-		-
Total:	$	31,884	$	36,984	$	2,100	$	31,440	$	35,430	$	715

24

The following tables summarize the average recorded investments on impaired loans specifically evaluated for impairment and the interest income recognized for the three months ended June 30, 2014 and 2013:

	For the three months ended
	June 30, 2014				June 30, 2013
	Average				Average
	Recorded		Interest Income		Recorded		Interest Income
(in thousands)	Investment		Recognized		Investment		Recognized
ORIGINATED
Commercial Loans
Commercial	$	2,013	$	-	$	3,354	$	29
Commercial Real Estate		10,062		42		11,222		(51	)
Agricultural		123		-		201		(3	)
Agricultural Real Estate		1,412		12		896		12
Business Banking		548		11		78		3
Consumer Loans
Home Equity		5,289		60		2,967		29
Residential Real Estate Mortgage		2,803		26		1,998		17
Total Originated	$	22,250	$	151	$	20,716	$	36
ACQUIRED
Commercial Loans
Commercial		6,315		-		-		-
Commercial Real Estate		3,462		-		-		-
Total Acquired	$	9,777	$	-	$	-	$	-
Total Loans	$	32,027	$	151	$	20,716	$	36

	For the six months ended
	June 30, 2014				June 30, 2013
	Average				Average
	Recorded		Interest Income		Recorded		Interest Income
(in thousands)	Investment		Recognized		Investment		Recognized
ORIGINATED
Commercial Loans
Commercial	$	2,025	$	-	$	4,331	$	58
Commercial Real Estate		10,739		84		11,361		21
Agricultural		124		1		270		1
Agricultural Real Estate		1,418		23		898		24
Business Banking		429		23		79		3
Consumer Loans
Home Equity		4,959		103		2,944		58
Residential Real Estate Mortgage		2,778		50		2,028		28
Total Originated		22,472		284		21,911		193
ACQUIRED
Commercial Loans
Commercial		6,375		-		-		-
Commercial Real Estate		3,493		-		-		-
Total Acquired	$	9,868	$	-	$	-	$	-
Total Loans	$	32,340	$	284	$	21,911	$	193

25

Credit Quality Indicators

The Company has developed an internal loan grading system to evaluate and quantify the Company’s loan portfolio with respect to quality and risk.  The system focuses on, among other things, financial strength of borrowers, experience and depth of borrower’s management, primary and secondary sources of repayment, payment history, nature of the business, and outlook on particular industries.  The internal grading system enables the Company to monitor the quality of the entire loan portfolio on a consistent basis and provide management with an early warning system, enabling recognition and response to problem loans and potential problem loans.

Commercial Grading System

For commercial and agricultural loans, the Company uses a grading system that relies on quantifiable and measurable characteristics when available.  This would include comparison of financial strength to available industry averages, comparison of transaction factors (loan terms and conditions) to loan policy, and comparison of credit history to stated repayment terms and industry averages. Some grading factors are necessarily more subjective such as economic and industry factors, regulatory environment, and management.  Classified commercial loans consist of loans graded substandard and below.  The grading system for commercial and agricultural loans is as follows:

· Doubtful

A doubtful loan has a high probability of total or substantial loss, but because of specific pending events that may strengthen the asset, its classification as a loss is deferred. Doubtful borrowers are usually in default, lack adequate liquidity or capital, and lack the resources necessary to remain an operating entity. Pending events can include mergers, acquisitions, liquidations, capital injections, the perfection of liens on additional collateral, the valuation of collateral, and refinancing. Generally, pending events should be resolved within a relatively short period and the ratings will be adjusted based on the new information. Nonaccrual treatment is required for doubtful assets because of the high probability of loss.

· Substandard

Substandard loans have a high probability of payment default, or they have other well-defined weaknesses. They require more intensive supervision by bank management. Substandard loans are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity, or marginal capitalization. Repayment may depend on collateral or other credit risk mitigants. For some Substandard loans, the likelihood of full collection of interest and principal may be in doubt and those loans should be placed on nonaccrual. Although Substandard assets in the aggregate will have a distinct potential for loss, an individual asset’s loss potential does not have to be distinct for the asset to be rated Substandard.

· Special Mention

Special Mention loans have potential weaknesses that may, if not checked or corrected, weaken the asset or inadequately protect the Company’s position at some future date. These loans pose elevated risk, but their weakness does not yet justify a Substandard classification. Borrowers may be experiencing adverse operating trends (declining revenues or margins) or may be struggling with an ill-proportioned balance sheet (e.g., increasing inventory without an increase in sales, high leverage, tight liquidity). Adverse economic or market conditions, such as interest rate increases or the entry of a new competitor, may also support a Special Mention rating. Although a Special Mention loan has a higher probability of default than a pass asset, its default is not imminent.

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· Pass

Loans graded as Pass encompass all loans not graded as Doubtful, Substandard, or Special Mention.  Pass loans are in compliance with loan covenants, and payments are generally made as agreed.  Pass loans range from superior quality to fair quality.

Business Banking Grading System

Business banking loans are graded as either Classified or Non-classified:

· Classified

Classified loans are inadequately protected by the current worth and paying capacity of the obligor or, if applicable, the collateral pledged.   These loans have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt, or in some cases make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.   Classified loans have a high probability of payment default, or a high probability of total or substantial loss.  These loans require more intensive supervision by management and are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity, or marginal capitalization.  Repayment may depend on collateral or other credit risk mitigants.  When the likelihood of full collection of interest and principal may be in doubt; classified loans are considered to have a nonaccrual status.   In some cases, Classified loans are considered uncollectible and of such little value that their continuance as assets is not warranted.

· Non-classified

Loans graded as Non-classified encompass all loans not graded as Classified.  Non-classified loans are in compliance with loan covenants, and payments are generally made as agreed.

Consumer and Residential Mortgage Grading System

Consumer and Residential Mortgage loans are graded as either Performing or Nonperforming.   Nonperforming loans are loans that are 1) over 90 days past due and interest is still accruing, 2) on nonaccrual status or 3) restructured.  All loans not meeting any of these three criteria are considered Performing.

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The following tables illustrate the Company’s credit quality by loan class as of June 30, 2014 and December 31, 2013:

Credit Quality Indicators

As of June 30, 2014

ORIGINATED
Commercial Credit Exposure			Commercial				Agricultural
By Internally Assigned Grade:	Commercial		Real Estate		Agricultural		Real Estate		Total
Pass	$	606,388	$	946,883	$	52,603	$	38,503	$	1,644,377
Special Mention		11,782		19,949		354		7		32,092
Substandard		39,036		34,557		4,052		3,852		81,497
Doubtful		-		-		76		-		76
Total	$	657,206	$	1,001,389	$	57,085	$	42,362	$	1,758,042
Business Banking Credit Exposure
By Internally Assigned Grade:	Business Banking								Total
Non-classified	$	323,200							$	323,200
Classified		17,514								17,514
Total	$	340,714							$	340,714
Consumer Credit Exposure
By Payment Activity:	Indirect		Home Equity		Direct				Total
Performing	$	1,279,599	$	499,588	$	55,431			$	1,834,618
Nonperforming		2,459		8,611		94				11,164
Total	$	1,282,058	$	508,199	$	55,525			$	1,845,782
Residential Mortgage Credit Exposure	Residential
By Payment Activity:	Mortgage								Total
Performing	$	775,972							$	775,972
Nonperforming		7,830								7,830
Total	$	783,802							$	783,802

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Credit Quality Indicators

As of June 30, 2014

ACQUIRED
Commercial Credit Exposure			Commercial
By Internally Assigned Grade:	Commercial		Real Estate		Agricultural		Total
Pass	$	84,842	$	197,499	$	-	$	282,341
Special Mention		4,339		2,478		-		6,817
Substandard		9,507		14,238		-		23,745
Total	$	98,688	$	214,215	$	-	$	312,903
Business Banking Credit Exposure
By Internally Assigned Grade:	Business Banking						Total
Non-classified	$	59,227					$	59,227
Classified		5,360						5,360
Total	$	64,587					$	64,587
Consumer Credit Exposure
By Payment Activity:	Indirect		Home Equity		Direct		Total
Performing	$	91,807	$	80,642	$	6,040	$	178,489
Nonperforming		172		550		42		764
Total	$	91,979	$	81,192	$	6,082	$	179,253
Residential Mortgage Credit Exposure	Residential
By Payment Activity:	Mortgage						Total
Performing	$	285,907					$	285,907
Nonperforming		3,498						3,498
Total	$	289,405					$	289,405

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Credit Quality Indicators

As of December 31, 2013

ORIGINATED
Commercial Credit Exposure			Commercial				Agricultural
By Internally Assigned Grade:	Commercial		Real Estate		Agricultural		Real Estate		Total
Pass	$	576,079	$	878,411	$	60,043	$	33,136	$	1,547,669
Special Mention		16,836		22,777		381		43		40,037
Substandard		23,508		33,128		4,726		3,473		64,835
Doubtful		-		-		12		-		12
Total	$	616,423	$	934,316	$	65,162	$	36,652	$	1,652,553
Business Banking Credit Exposure
By Internally Assigned Grade:	Business Banking								Total
Non-classified	$	319,578							$	319,578
Classified		18,101								18,101
Total	$	337,679							$	337,679
Consumer Credit Exposure
By Payment Activity:	Indirect		Home Equity		Direct				Total
Performing	$	1,158,800	$	525,777	$	58,151			$	1,742,728
Nonperforming		3,044		7,046		132				10,222
Total	$	1,161,844	$	532,823	$	58,283			$	1,752,950
Residential Mortgage Credit Exposure	Residential
By Payment Activity:	Mortgage								Total
Performing	$	725,308							$	725,308
Nonperforming		7,913								7,913
Total	$	733,221							$	733,221

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Credit Quality Indicators

As of December 31, 2013

ACQUIRED
Commercial Credit Exposure			Commercial
By Internally Assigned Grade:	Commercial		Real Estate		Agricultural		Total
Pass	$	85,692	$	205,010	$	-	$	290,702
Special Mention		2,230		6,183		-		8,413
Substandard		15,304		17,821		-		33,125
Total	$	103,226	$	229,014	$	-	$	332,240
Business Banking Credit Exposure
By Internally Assigned Grade:	Business Banking						Total
Non-classified	$	65,437					$	65,437
Classified		4,712						4,712
Total	$	70,149					$	70,149
Consumer Credit Exposure
By Payment Activity:	Indirect		Home Equity		Direct		Total
Performing	$	124,922	$	86,506	$	7,367	$	218,795
Nonperforming		164		570		58		792
Total	$	125,086	$	87,076	$	7,425	$	219,587
Residential Mortgage Credit Exposure	Residential
By Payment Activity:	Mortgage						Total
Performing	$	304,544					$	304,544
Nonperforming		3,872						3,872
Total	$	308,416					$	308,416

Troubled Debt Restructured Loans

The Company’s loan portfolio includes certain loans that have been modified where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties.  These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions.  Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months.  Substantially all of these modifications included one or a combination of the following: an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; temporary reduction in the interest rate; or change in scheduled payment amount.

When the Company modifies a loan, management evaluates any possible impairment based on the present value of the expected future cash flows, discounted at the contractual interest rate of the original loan agreement, except when the sole (remaining) source of repayment for the loan is the operation or liquidation of the collateral.  In these cases, management uses the current fair value of the collateral, less selling costs, instead of discounted cash flows.  If management determines that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized by segment or class of loan as applicable, through an allowance estimate or a charge-off to the allowance.  Segment and class status is determined by the loan’s classification at origination.

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TDRs that occurred during the three month period ending June 30, 2014 consisted of 3 home equity loans totaling $0.4 million, 5 direct consumer loans totaling $0.3 million, and 2 residential real estate mortgages totaling $0.2 million.  For all such modifications, the pre and post outstanding recorded investment amount remained unchanged. During the three month period ending June 30, 2014 there were 2 defaults on home equity loan TDRs totaling $0.3 million and one default on a direct consumer loan TDR totaling $34,000.

TDRs that occurred during the six month period ending June 30, 2014 consisted of 5 home equity loans totaling $0.4 million, 25 direct consumer loans totaling $1.3 million, and 15 residential real estate mortgages totaling $1.2 million.  For all such modifications, the pre and post outstanding recorded investment amount remained unchanged. During the six month period ending June 30, 2014 there were 2 defaults on home equity loan TDRs totaling $0.3 million, five defaults on direct consumer loan TDRs totaling $0.2 million, and one default on a residential real estate mortgage TDR totaling $0.1 million.

TDRs that occurred during the three month period ending June 30, 2013 consisted of one commercial real estate loan totaling $0.9 million, 10 home equity loans totaling $0.5 million, and one residential real estate mortgage totaling $0.1 million.  For all such modifications, the pre and post outstanding recorded investment amount remained unchanged. During the three month period ending June 30, 2013 there were three defaults on home equity loan TDRs totaling $0.2 million.

TDRs that occurred during the six month period ending June 30, 2013 consisted of one commercial real estate loan totaling $0.9 million, 14 home equity loans totaling $0.6 million, and one residential real estate mortgage totaling $0.1 million.  For all such modifications, the pre and post outstanding recorded investment amount remained unchanged. During the six month period ending June 30, 2013 there were three defaults on home equity loan TDRs totaling $0.2 million.

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Note 5. Long-Term Debt

As part of a debt restructuring strategy during the second quarter of 2014, the Company repaid $165.0 million in long-term borrowings, resulting in $17.1 million in prepayment penalties.  Prepayment penalties of $4.6 million were recognized as expense in the second quarter of 2014 and related to the $45.0 million of the long-term debt strategy that was completed during the quarter.  The remaining prepayment penalties of approximately $13 million will be recognized in the third quarter of 2014 upon completion of the restructure strategy.

Note 6. Defined Benefit Postretirement Plans

The Company has a qualified, noncontributory, defined benefit pension plan (“the Plan”) covering substantially all of its employees at June 30, 2014.  Benefits paid from the plan are based on age, years of service, compensation and social security benefits, and are determined in accordance with defined formulas. The Company’s policy is to fund the pension plan in accordance with Employee Retirement Income Security Act of 1974 (“ERISA”) standards. Assets of the plan are invested in publicly traded stocks and bonds.  The Company is not required to make contributions to the Plan in 2014, and did not do so during the six months ended June 30, 2014.

The Company assumed a noncontributory, defined benefit pension plan in the Alliance Financial Corporation (“Alliance”) acquisition.  This plan covers certain Alliance full-time employees who met eligibility requirements on October 6, 2006, at which time all benefits were frozen.  Under the plan, retirement benefits are primarily a function of both the years of service and the level of compensation.  Effective May 1, 2013, this plan was merged into the Plan.

Market conditions can result in an unusually high degree of volatility and increase the risks and short term liquidity associated with certain investments held by the Plan which could impact the value of these investments.

In addition to the Plan, the Company also provides supplemental employee retirement plans to certain current and former executives.  These supplemental employee retirement plans and the Plan are collectively referred to herein as “Pension Benefits.”

Also, the Company provides certain health care benefits for retired employees.  Benefits are accrued over the employees’ active service period. Only employees that were employed by the Company on or before January 1, 2000 are eligible to receive postretirement health care benefits.  This health care benefits plan is contributory for participating retirees, requiring participants to absorb certain deductibles and coinsurance amounts with contributions adjusted annually to reflect cost sharing provisions and benefit limitations called for in the plan.  Eligibility is contingent upon the direct transition from active employment status to retirement without any break in employment from the Company.  Employees also must be participants in the Company’s medical plan prior to their retirement.  The Company funds the cost of postretirement health care as benefits are paid. The Company elected to recognize the transition obligation on a delayed basis over twenty years.  In addition, the Company assumed post-retirement medical life insurance benefits for certain Alliance employees, retirees and their spouses, if applicable, in the Alliance acquisition.  These postretirement benefits are referred to herein as “Other Benefits.”  The components of expense for Pension Benefits and Other Benefits are set forth below (in thousands):

33

	Pension Benefits						Other Benefits
	Three months ended June 30,						Three months ended June 30,
Components of net periodic benefit cost:	2014			2013			2014			2013
Service cost	$	587		$	604		$	4		$	6
Interest cost		1,040			830			90			75
Expected return on plan assets		(2,175	)		(1,929	)		-			-
Net amortization		25			711			(6	)		(1	)
Total cost (benefit)	$	(523	)	$	216		$	88		$	80

	Pension Benefits						Other Benefits
	Six months ended June 30,						Six months ended June 30,
Components of net periodic benefit cost:	2014			2013			2014			2013
Service cost	$	1,174		$	1,209		$	8		$	12
Interest cost		2,080			1,659			180			150
Expected return on plan assets		(4,350	)		(3,858	)		-			-
Net amortization		50			1,314			(12	)		222
Total cost (benefit)	$	(1,046	)	$	324		$	176		$	384

34

Note 7. Earnings Per Share

Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity (such as the Company’s dilutive stock options and restricted stock units).

The following is a reconciliation of basic and diluted earnings per share for the periods presented in the consolidated statements of income.

Three months ended June 30,	2014		2013
(in thousands, except per share data)
Basic EPS:
Weighted average common shares outstanding		43,865		43,923
Net income available to common shareholders		27,640		16,916
Basic EPS	$	0.63	$	0.39
Diluted EPS:
Weighted average common shares outstanding		43,865		43,923
Dilutive effect of common stock options and restricted stock		498		393
Weighted average common shares and common share equivalents		44,363		44,316
Net income available to common shareholders		27,640		16,916
Diluted EPS	$	0.62	$	0.38

Six months ended June 30,	2014		2013
(in thousands, except per share data)
Basic EPS:
Weighted average common shares outstanding		43,829		40,187
Net income available to common shareholders		45,649		24,565
Basic EPS	$	1.04	$	0.61
Diluted EPS:
Weighted average common shares outstanding		43,829		40,187
Dilutive effect of common stock options and restricted stock		500		388
Weighted average common shares and common share equivalents		44,329		40,575
Net income available to common shareholders		45,649		24,565
Diluted EPS	$	1.03	$	0.61

There were 503,058 stock options for the quarter ended June 30, 2014 and 1,231,395 stock options for the quarter ended June 30, 2013 that were not considered in the calculation of diluted earnings per share since the stock options’ exercise price was greater than the average market price during these periods.

There were 500,541 stock options for the six months ended June 30, 2014 and 1,203,046 stock options for the six months ended June 30, 2013 that were not considered in the calculation of diluted earnings per share since the stock options’ exercise price was greater than the average market price during these periods.

35

Note 8. Reclassification Adjustments Out of Other Comprehensive Income (Loss)

The following table summarizes the reclassification adjustments out of accumulated other comprehensive income (loss) (in thousands):

Detail About Accumulated Other Comprehensive Income (Loss) Components	Amount reclassified from accumulated other comprehensive income (loss)						Affected line item in the consolidated statement of comprehensive income (loss)
	Three months ended
	June 30, 2014			June 30, 2013
Available for sale securities:
(Gains) losses on available for sale securities	$	(14	)	$	61		Net securities (gains) losses
Tax expense (benefit)		6			(24	)	Income tax expense
Net of tax	$	(8	)	$	37
Pension and other benefits:
Amortization of net gains	$	74		$	765		Salaries and employee benefits
Amortization of prior service costs		(55	)		(55	)	Salaries and employee benefits
Tax benefit		8			284		Income tax expense
Net of tax	$	11		$	426
Total reclassifications during the period, net of tax	$	3		$	463

Detail About Accumulated Other Comprehensive Income (Loss) Components	Amount reclassified from accumulated other comprehensive income (loss)						Affected line item in the consolidated statement of comprehensive income (loss)
	Six months ended
	June 30, 2014			June 30, 2013
Available for sale securities:
Gains on available for sale securities	$	(21	)	$	(1,084	)	Net securities gains
Tax expense		8			434		Income tax expense
Net of tax	$	(13	)	$	(650	)
Pension and other benefits:
Amortization of net gains	$	148		$	1,647		Salaries and employee benefits
Amortization of prior service costs		(110	)		(111	)	Salaries and employee benefits
Tax benefit		15			614		Income tax expense
Net of tax	$	23		$	922
Total reclassifications during the period, net of tax	$	10		$	272

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Note  9. Fair Value Measurements and Fair Value of Financial Instruments

U.S. GAAP states that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.  Fair value measurements are not adjusted for transaction costs.  A fair value hierarchy exists within U.S. GAAP that 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 measurements) 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, many other sovereign government obligations, 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.  The Company does 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.

For the six month period ending June 30, 2014, the Company has made no transfers of assets between Level 1 and Level 2, and has had no Level 3 activity.

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The following tables set forth the Company’s financial assets and liabilities measured on a recurring basis that were accounted for at fair value.  Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement (in thousands):

June 30, 2014:

	Quoted Prices in		Significant		Significant
	Active Markets for		Other		Unobservable		Balance
	Identical Assets		Observable Inputs		Inputs		as of
	(Level 1)		(Level 2)		(Level 3)		June 30, 2014
Assets:
Securities Available for Sale:
U.S. Treasury	$	33,324	$	-	$	-	$	33,324
Federal Agency		-		307,141		-		307,141
State & municipal		-		105,348		-		105,348
Mortgage-backed		-		397,387		-		397,387
Collateralized mortgage obligations		-		519,809		-		519,809
Other securities		7,511		8,279		-		15,790
Total Securities Available for Sale	$	40,835	$	1,337,964	$	-	$	1,378,799
Trading Securities		7,355		-		-		7,355
Interest Rate Swaps		-		2,799		-		2,799
Total	$	48,190	$	1,340,763	$	-	$	1,388,953
Liabilities:
Interest Rate Swaps	$	-	$	2,799	$	-	$	2,799
Total	$	-	$	2,799	$	-	$	2,799

December 31, 2013:

	Quoted Prices in		Significant		Significant
	Active Markets for		Other		Unobservable		Balance
	Identical Assets		Observable Inputs		Inputs		as of
	(Level 1)		(Level 2)		(Level 3)		December 31, 2013
Assets:
Securities Available for Sale:
U.S. Treasury	$	43,616	$	-	$	-	$	43,616
Federal Agency		-		278,915		-		278,915
State & municipal		-		113,665		-		113,665
Mortgage-backed		-		364,164		-		364,164
Collateralized mortgage obligations		-		549,528		-		549,528
Other securities		6,796		8,197		-		14,993
Total Securities Available for Sale	$	50,412	$	1,314,469	$	-	$	1,364,881
Trading Securities		5,779		-		-		5,779
Interest Rate Swaps		-		281		-		281
Total	$	56,191	$	1,314,750	$	-	$	1,370,941
Liabilities:
Interest Rate Swaps	$	-	$	281	$	-	$	281
Total	$	-	$	281	$	-	$	281

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Certain common equity securities are reported at fair value utilizing Level 1 inputs (exchange quoted prices).  The majority of the other 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 participants with whom the Company has historically transacted both purchases and sales of investment securities.  Prices obtained from these sources include prices derived from 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.  Management reviews the methodologies used in pricing the securities by its third party providers.

U.S. GAAP requires disclosure of assets and liabilities measured and recorded at fair value on a nonrecurring basis such as goodwill, loans held for sale, other real estate owned, collateral-dependent impaired loans, mortgage servicing rights, and held-to-maturity securities.  The only nonrecurring fair value measurement recorded during the six month period ended June 30, 2014 was related to impaired loans.  During the six month period ending June 30, 2014, the Company recorded $9.0 million of loans at fair value resulting in a loss of $1.7 million.  The Company uses the fair value of underlying collateral, less costs to sell, to estimate the specific reserves for collateral dependent impaired loans.  The appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses ranging from 10% to 35%.  Based on the valuation techniques used, the fair value measurements for collateral dependent impaired loans are classified as Level 3.

The following table sets forth information with regard to estimated fair values of financial instruments at June 30, 2014 and December 31, 2013.  This table excludes financial instruments for which the carrying amount approximates fair value.  Financial instruments for which the fair value approximates carrying value include cash and cash equivalents, securities available for sale, trading securities, accrued interest receivable, non-maturity deposits, short-term borrowings, accrued interest payable, and interest rate swaps.

			June 30, 2014				December 31, 2013
(In thousands)	Fair Value Hierarchy		Carrying amount		Estimated fair value		Carrying amount		Estimated fair value
Financial assets
Securities held to maturity		2	$	125,965	$	123,376	$	117,283	$	113,276
Net loans		3		5,504,954		5,552,074		5,337,361		5,386,520
Financial liabilities
Time deposits		2	$	1,002,431	$	999,513	$	1,021,142	$	1,023,982
Long-term debt		2		251,125		254,321		308,823		325,195
Junior subordinated debt		2		101,196		108,079		101,196		105,121

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

39

Fair value estimates are based on existing on and off balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. For example, the Company has a substantial trust and investment management operation that contributes net fee income annually. The trust and investment management operation is not considered a financial instrument, and its value has not been incorporated into the fair value estimates. Other significant assets and liabilities include the benefits resulting from the low-cost funding of deposit liabilities as compared to the cost of borrowing funds in the market, and premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimate of fair value.

Securities Held to Maturity

The fair value of the Company’s investment securities held to maturity is primarily measured using information from a third party pricing service.  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.

Net Loans

The fair value of the Company’s loans was estimated by discounting the expected future cash flows using the current interest rates at which similar loans would be made for the same remaining maturities.  Loans were first segregated by type, and then further segmented into fixed and variable rate and loan quality categories.  Expected future cash flows were projected based on contractual cash flows, adjusted for estimated prepayments.

Time Deposits

The fair value of time deposits was estimated using a discounted cash flow approach that applies prevailing market interest rates for similar maturity instruments.  The fair values of the Company’s time deposit liabilities do not take into consideration the value of the Company’s long-term relationships with depositors, which may have significant value.

Long-Term Debt

The fair value of long-term debt was estimated using a discounted cash flow approach that applies prevailing market interest rates for similar maturity instruments.

Junior Subordinated Debt

The fair value of junior subordinated debt has been estimated using a discounted cash flow analysis.

Note 10. Commitments and Contingencies

The Company is a party to financial instruments in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuating interest rates. These financial instruments include commitments to extend credit, unused lines of credit, and standby letters of credit. Exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to make loans and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit origination guidelines, portfolio maintenance and management procedures as other credit and off-balance sheet products.  Commitments to extend credit and unused lines of credit totaled $1.1 billion at June 30, 2014 and December 31, 2013.  Since commitments to extend credit and unused lines of credit may expire without being fully drawn upon, this amount does not necessarily represent future cash commitments. Collateral obtained upon exercise of the commitment is determined using management’s credit evaluation of the borrower and may include accounts receivable, inventory, property, land and other items.

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The Company guarantees the obligations or performance of customers by issuing standby letters of credit to third parties. These standby letters of credit are frequently issued in support of third party debt, such as corporate debt issuances, industrial revenue bonds and municipal securities. The credit risk involved in issuing standby letters of credit is essentially the same as the credit risk involved in extending loan facilities to customers, and they are subject to the same credit origination guidelines, portfolio maintenance and management procedures as other credit and off-balance sheet products. Typically, these instruments have terms of five years or less and expire unused; therefore, the total amounts do not necessarily represent future cash commitments. Standby letters of credit totaled $38.5 million at June 30, 2014 and $36.8 million at December 31, 2013.  As of June 30, 2014, the fair value of standby letters of credit was not significant to the Company’s consolidated financial statements.

The Company has also entered into commercial letter of credit agreements on behalf of its customers.  Under these agreements, the Company, on the request of its customer, opens the letter of credit and makes a commitment to honor draws made under the agreement, whereby the beneficiary is normally the provider of goods and/or services and the Company essentially replaces the customer as the payee.  The credit risk involved in issuing commercial letters of credit is essentially the same as the credit risk involved in extending loan facilities to customers, and they are subject to the same credit origination guidelines, portfolio maintenance and management procedures as other credit and off-balance sheet products.  Typically, these agreements vary in terms and the total amounts do not necessarily represent future cash commitments.  Commercial letters of credit totaled $39.2 million at June 30, 2014 and $41.3 million at December 31, 2013.  As of June 30, 2014, the fair value of commercial letters of credit was not significant to the Company’s consolidated financial statements.

Note  11. Sale of Equity Investment

On April 17, 2014, NBT Capital Corp., a wholly-owned subsidiary of NBT, sold to LendingClub Corporation, its 20% ownership interest in Springstone Financial, LLC, which NBT originally acquired in exchange for a $3 million investment, as part of LendingClub’s acquisition of all of the outstanding equity in Springstone.  In total, LendingClub paid the group of selling equityholders a purchase price equal to $140 million in cash and preferred stock.  As a result of this sale, the Company recognized a gain of $19.4 million during the second quarter of 2014.

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Item 2 ‑‑ MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The purpose of this discussion and analysis is to provide a concise description of the financial condition and results of operations of NBT Bancorp Inc. and its wholly owned consolidated subsidiaries, NBT Bank, N.A. (the “Bank”), NBT Financial Services, Inc. (“NBT Financial”), and NBT Holdings, Inc. (“NBT Holdings”) (collectively referred to herein as the “Company”). This discussion will focus on results of operations, financial condition, capital resources and asset/liability management. Reference should be made to the Company's consolidated financial statements and footnotes thereto included in this Form 10‑Q as well as to the Company's Annual Report on Form 10‑K for the year ended December 31, 2013 for an understanding of the following discussion and analysis.  Operating results for the six-month period ending June 30, 2014 are not necessarily indicative of the results of the full year ending December 31, 2014 or any future period.

Forward-looking Statements

Certain statements in this filing and future filings by the Company with the SEC, in the Company’s press releases or other public or shareholder communications, or in oral statements made with the approval of an authorized executive officer, contain forward-looking statements, as defined in the Private Securities Litigation Reform Act. These statements may be identified by the use of phrases such as “anticipate,” “believe,” “expect,” “forecasts,”  “projects,”  “will,”  “can,” “would,” “should,” “could,” “may,” or other similar terms. There are a number of factors, many of which are beyond the Company’s control that could cause actual results to differ materially from those contemplated by the forward looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: (1) local, regional, national and international economic conditions and the impact they may have on the Company and its customers and the Company’s assessment of that impact; (2) changes in the level of non-performing assets and charge-offs; (3) changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (4) the effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board; (5) inflation, interest rate, securities market and monetary fluctuations; (6) political instability; (7) acts of war or terrorism; (8) the timely development and acceptance of new products and services and perceived overall value of these products and services by users; (9) changes in consumer spending, borrowings and savings habits; (10) changes in the financial performance and/or condition of the Company’s borrowers; (11) technological changes; (12) acquisitions and integration of acquired businesses; (13) the ability to increase market share and control expenses; (14) changes in the competitive environment among financial holding companies; (15) the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which the Company and its subsidiaries must comply including those under the Dodd-Frank Act; (16) the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters; (17) changes in the Company’s organization, compensation and benefit plans; (18) the costs and effects of legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews; (19) greater than expected costs or difficulties related to the integration of new products and lines of business; and (20) the Company’s success at managing the risks involved in the foregoing items.

The Company cautions readers not to place undue reliance on any forward-looking statements, which speak only as of the date made, and advises readers that various factors, including those described above and other factors discussed in the Company’s annual and quarterly reports previously filed with the Securities and Exchange Commission, could affect the Company’s financial performance and could cause the Company’s actual results or circumstances for future periods to differ materially from those anticipated or projected.

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Unless required by law, the Company does not undertake, and specifically disclaims any obligations to publicly release any revisions to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

Non-GAAP Measures

This Quarterly Report on Form 10-Q contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (GAAP).  These measures adjust GAAP measures to exclude the effects of sales of securities and certain non-recurring and merger-related expenses.  Where non-GAAP disclosures are used in this Quarterly Report on Form 10-Q, the comparable GAAP measure, as well as a reconciliation to the comparable GAAP measure, is provided in the accompanying tables.  Management believes that these non-GAAP measures provide useful information that is important to an understanding of the operating results of the Company’s core business due to the non-recurring nature of the excluded items.  Non-GAAP measures should not be considered substitutes for financial measures determined in accordance with GAAP and investors should consider the Company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company.

Critical Accounting Policies

The Company has identified policies as being critical because they require management to make particularly difficult, subjective and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. These policies relate to the allowance for loan losses, pension accounting, other-than-temporary impairment, provision for income taxes and intangible assets.

Management  of  the  Company  considers  the  accounting  policy relating to the allowance for loan losses to be a critical accounting policy given the uncertainty  in  evaluating  the level of the allowance required to cover credit losses inherent in the loan portfolio and the material effect that such judgments can have on the results of operations. While management’s current evaluation of the allowance for loan losses indicates that the allowance is adequate, under adversely different conditions or assumptions, the allowance may need to be increased. For example, if historical loan loss experience significantly worsened or if current economic conditions significantly deteriorated, additional provision for loan losses would be required to increase the allowance. In addition, the assumptions and estimates used in the internal reviews of the Company’s nonperforming loans and potential problem loans have a significant impact on the overall analysis of the adequacy of the allowance for loan losses. While management has concluded that the current evaluation of collateral values is reasonable under the circumstances, if collateral values were significantly lower, the Company’s allowance for loan loss policy would also require additional provision for loan losses.

Management is required to make various assumptions in valuing the Company’s pension assets and liabilities. These assumptions include the expected rate of return on plan assets, the discount rate, and the rate of increase in future compensation levels. Changes to these assumptions could impact earnings in future periods. The Company takes into account the plan asset mix, funding obligations, and expert opinions in determining the various rates used to estimate pension expense. The Company also considers the Citigroup Pension Liability Index, market interest rates and discounted cash flows in setting the appropriate discount rate. In addition, the Company reviews expected inflationary and merit increases to compensation in determining the rate of increase in future compensation levels.

Management of the Company considers the accounting policy relating to other-than-temporary impairment to be a critical accounting policy.  Management systematically evaluates certain assets for other-than-temporary declines in fair value, primarily investment securities.  Management considers historical values and current market conditions as a part of the assessment.  The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings and the amount of the total other-than-temporary impairment related to other factors is generally recognized in other comprehensive income, net of applicable taxes.

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The Company is subject to examinations from various taxing authorities.  Such examinations may result in challenges to the tax return treatment applied by the Company to specific transactions.  Management believes that the assumptions and judgments used to record tax-related assets or liabilities have been appropriate.  Should tax laws change or the taxing authorities determine that management’s assumptions were inappropriate, an adjustment may be required which could have a material adverse effect on the Company’s results of operations.

Another critical accounting policy is the policy for acquired loans. Acquired loans are initially recorded at their acquisition date fair values.  The carryover of allowance for loan losses is prohibited as any credit losses in the loans are included in the determination of the fair value of the loans at the acquisition date.  Fair values for acquired loans are based on a discounted cash flow methodology that involves assumptions and judgments as to credit risk, prepayment risk, liquidity risk, default rates, loss severity, payment speeds, collateral values and discount rate.  Subsequent to the acquisition of acquired impaired loans, applicable accounting guidance requires the continued estimation of expected cash flows to be received.  This estimation involves the use of key assumptions and estimates, similar to those used in the initial estimate of fair value.  Changes in expected cash flows could result in the recognition of impairment through provision for credit losses.   Subsequent to the purchase date, the methods utilized to estimate the required allowance for loan losses for the non-impaired acquired loans is similar to originated loans.

As a result of acquisitions, the Company has acquired goodwill and identifiable intangible assets.  Goodwill represents the cost of acquired companies in excess of the fair value of net assets at the acquisition date.  Goodwill is evaluated at least annually or when business conditions suggest that an impairment may have occurred.  Goodwill will be reduced to its carrying value through a charge to earnings if impairment exists.  Core deposits and other identifiable intangible assets are amortized to expense over their estimated useful lives.  The determination of whether or not impairment exists is based upon discounted cash flow modeling techniques that require management to make estimates regarding the amount and timing of expected future cash flows.  It also requires them to select a discount rate that reflects the current return requirements of the market in relation to present risk-free interest rates, required equity market premiums and Company-specific risk indicators, all of which are susceptible to change based on changes in economic conditions and other factors.  Future events or changes in the estimates used to determine the carrying value of goodwill and identifiable intangible assets could have a material impact on the Company’s results of operations.

The Company’s policies on the allowance for loan losses, pension accounting, acquired loans, provision for income taxes and intangible assets are disclosed in Note 1 to the consolidated financial statements presented in our 2013 Annual Report on Form 10-K.  All accounting policies are important, and as such, the Company encourages the reader to review each of the policies included in Note 1 to obtain a better understanding of how the Company’s financial performance is reported.

Overview

Significant factors management reviews to evaluate the Company’s operating results and financial condition include, but are not limited to:  net income and earnings per share, return on average assets, equity and tangible common equity, net interest margin, noninterest income, operating expenses, certain core results, asset quality indicators, loan and deposit growth, capital management, liquidity and interest rate sensitivity, enhancements to customer products and services, technology advancements, market share and peer comparisons.  The following information should be considered in connection with the Company's results for the first six months of 2014:

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· Strong organic loan growth continued in the second quarter of 2014 annualized at 6.8%.

· Past due loans to total loans was 0.57% for the second quarter of 2014, consistent with the previous quarter, and down from 0.77% at the end of 2013.

· Sold 20% ownership interest in Springstone LLC (“Springstone”) recognizing a $19.4 million gain (non-core) during the quarter.

· Restructured $165 million in long-term borrowings, resulting in $4.6 million in prepayment penalties (non-core) recognized in the second quarter of 2014 and expecting to recognize additional prepayment penalties (non-core) in the third quarter of 2014 upon completion of the restructure strategy.  The fully executed strategy is expected to lower the cost of the restructured long-term debt by approximately 200 basis points and improve our interest rate risk profile.

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The following table depicts several annualized measurements of performance using core and GAAP net income that management reviews in analyzing the Company’s performance. Returns on average assets and average equity measure how effectively an entity utilizes its total resources and capital, respectively.

(Dollars in thousands)	For the three months ended June 30,						For the six months ended June 30,
	2014			2013			2014			2013
Reconciliation of Non-GAAP Financial Measures:
Reported net income (GAAP)	$	27,640		$	16,916		$	45,649		$	24,565
Adj: (Gain) / Loss on sale of securities, net (net of tax)		(8	)		37			(14	)		(650	)
Adj: Other adjustments (net of tax) (1)		(315	)		-			115			-
Adj: Gain on sale of Springstone (net of tax and related incentive compensation)		(11,168	)		-			(11,168	)		-
Adj: Prepayment penalties related to debt restructuring (net of tax)		2,925			-			2,925			-
Plus: Merger related expenses (net of tax)		-			882			-			8,202
Total Adjustments		(8,566	)		919			(8,142	)		7,552
Core net income	$	19,074		$	17,835		$	37,507		$	32,117
Performance measures:
Core Return on Average Assets (2)		0.99	%		0.95	%		0.98	%		0.93	%
Return on Average Assets (2)		1.43	%		0.90	%		1.20	%		0.71	%
Core Return on Average Equity (2)		9.06	%		8.88	%		9.04	%		8.93	%
Return on Average Equity (2)		13.12	%		8.42	%		11.00	%		6.83	%
Core Return on Average Tangible Common Equity (2)(3)		14.27	%		14.57	%		14.38	%		14.11	%
Return on Average Tangible Common Equity (2)(3)		20.43	%		13.85	%		17.37	%		10.93	%

(1) Primarily net gain on settlement of litigation and reorganization expenses for 2014 and reorganization expenses for 2013

(2) Annualized

(3) Excludes amortization of intangible assets (net of tax) from net income and average tangible common equity is calculated as follows:

	For the three months ended June 30,				For the six months ended June 30,
	2014		2013		2014		2013
Average stockholders' equity	$	844,707	$	806,200	$	836,692	$	724,898
Less: average goodwill and other intangibles		287,366		292,775		288,685		247,031
Average tangible common equity	$	557,341	$	513,425	$	548,007	$	477,867

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Results of Operations

Net income for the three months ended June 30, 2014 was $27.6 million, up from $18.0 million for the previous quarter, and up from $16.9 million for the same period last year.  Reported net income included an $11.2 million net gain (after taxes and related incentive compensation) on the sale of our ownership interest in Springstone, partially offset by $2.9 million in prepayment penalties, net of tax, related to our long-term debt restructure strategy.  Reported earnings per diluted share for the three months ended June 30, 2014 was $0.62 as compared to $0.41 for the previous quarter and $0.38 for the same period in 2013.

Core net income for the three months ended June 30, 2014 was $19.1 million, up 3.5% from $18.4 million for the previous quarter and up 6.9% from $17.8 million for the same period in 2013.  Core diluted earnings per share for the three months ended June 30, 2014 was $0.43, up from $0.42 for the previous quarter and up from $0.40 for the same period in 2013.

Reported net income for the six months ended June 30, 2014 was $45.6 million, up from $24.6 million for the same period last year, which included the aforementioned net Springstone gain and long-term prepayment penalties in 2014 and approximately $12.0 million in merger-related expenses in 2013.  Reported earnings per diluted share for the six months ended June 30, 2014 was $1.03 as compared to $0.61 for the same period in 2013.

Core net income for the six months ended June 30, 2014 was $37.5 million, up 16.8% from $32.1 million for the same period in 2013.  Core diluted earnings per share for the six months ended June 30, 2014 was $0.85, up from $0.79 for the same period in 2013.

Net Interest Income

Net interest income is the difference between interest income on earning assets, primarily loans and securities, and interest expense on interest bearing liabilities, primarily deposits and borrowings.  Net interest income is affected by the interest rate spread, the difference between the yield on earning assets and cost of interest bearing liabilities, as well as the volumes of such assets and liabilities. Net interest income is one of the key determining factors in a financial institution’s performance as it is the principal source of earnings.

Net interest income was $62.6 million for the second quarter of 2014, up 1.7% from the previous quarter, and up 1.5% from the same period last year.  Fully taxable equivalent (“FTE”) net interest margin was 3.60% for the three months ended June 30, 2014, down from 3.63% from the prior quarter, and down from 3.69% for the second quarter of 2013.  Average interest earning assets were up $90.9 million, or 1.3%, for the second quarter of 2014 as compared to the prior quarter, driven primarily by organic loan production.  Slight rate compression on earning assets continued to negatively impact net interest margin in the second quarter of 2014 as evidenced by decreasing loan yields from 4.50% for the first quarter of 2014 to 4.42% for the second quarter of 2014.  Average interest bearing liabilities increased $37.1 million, or 0.7%, from the first quarter of 2014 to the second quarter of 2014.  The rates paid on interest bearing liabilities decreased by 7 basis points from the first quarter of 2014 to the second quarter of 2014.  This decrease was primarily driven by a decrease of 4 basis points in rates paid on deposits as well as a 34 basis point decrease in the rate paid on long-term debt resulting from the aforementioned debt restructuring in the second quarter of 2014.

Net interest income was $124.1 million for the six months ended June 30, 2014, up 9.0% from the same period in 2013.  FTE net interest margin was 3.62% for the six months ended June 30, 2014, down from 3.68% from the six months ended June 30, 2013.  Average interest earning assets were up $683.5 million, or 10.8%, for the six months ended June 30, 2014 as compared to the same period in 2013.  This increase was driven primarily by the acquisition of Alliance in March 2013 as well as organic loan production during the past several quarters.  The yield on earning assets for the six months ended June 30, 2014 was down 22 basis points from the same period in 2013, driven primarily by the decrease in loan yields from 4.81% for the first six months of 2013 to 4.46% for the first six months of 2014.  Average interest bearing liabilities increased $396.4 million, or 8.3%, for the first six months of 2014 as compared to the same period in 2013.  This increase was due primarily to an increase in deposits resulting from organic deposit growth as well as the aforementioned acquisition of Alliance.  The rates paid on interest bearing liabilities for the first half of 2014 decreased by 19 basis points from the first six months of 2013.  This decrease was primarily driven by a decrease of 12 basis points in rates paid on deposits as well as a 51 basis point decrease in the rate paid on long-term debt due primarily to maturity of long-term debt in the prior year, as well as the aforementioned debt restructuring in the second quarter of 2014.

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Average Balances and Net Interest Income

The following tables include the condensed consolidated average balance sheet, an analysis of interest income/expense and average yield/rate for each major category of earning assets and interest bearing liabilities on a taxable equivalent basis. Interest income for tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory Federal income tax rate of 35%.

Three Months ended June 30,
			2014							2013
	Average				Yield/			Average				Yield/
(dollars in thousands)	Balance		Interest		Rates			Balance		Interest		Rates
ASSETS
Short-term interest bearing accounts	$	3,915	$	7		0.76	%	$	41,313	$	59		0.57	%
Securities available for sale (1)(2)		1,376,314		7,027		2.05	%		1,428,864		7,033		1.97	%
Securities held to maturity (1)		121,042		1,037		3.43	%		62,463		815		5.23	%
Investment in FRB and FHLB Banks		42,965		496		4.63	%		35,497		430		4.85	%
Loans (3)		5,517,315		60,770		4.42	%		5,243,534		62,268		4.76	%
Total interest earning assets	$	7,061,551	$	69,337		3.94	%	$	6,811,671	$	70,605		4.16	%
Other assets		680,059							705,869
Total assets	$	7,741,610						$	7,517,540
LIABILITIES AND STOCKHOLDERS' EQUITY
Money market deposit accounts	$	1,441,284	$	539		0.15	%	$	1,402,429	$	524		0.15	%
NOW deposit accounts		960,698		132		0.06	%		927,037		443		0.19	%
Savings deposits		1,040,528		186		0.07	%		983,413		209		0.09	%
Time deposits		971,595		2,143		0.88	%		1,136,511		3,120		1.10	%
Total interest bearing deposits	$	4,414,105	$	3,000		0.27	%	$	4,449,390	$	4,296		0.39	%
Short-term borrowings		383,480		209		0.22	%		229,906		67		0.12	%
Junior subordinated debt		101,196		538		2.13	%		101,196		560		2.22	%
Long-term debt		290,791		2,135		2.95	%		355,702		3,026		3.41	%
Total interest bearing liabilities	$	5,189,572	$	5,882		0.45	%	$	5,136,194	$	7,949		0.62	%
Demand deposits		1,620,488							1,496,486
Other liabilities		86,843							78,660
Stockholders' equity		844,707							806,200
Total liabilities and stockholders' equity	$	7,741,610						$	7,517,540
Net interest income (FTE)				63,455							62,656
Interest rate spread						3.49	%						3.54	%
Net interest margin						3.60	%						3.69	%
Taxable equivalent adjustment				881							1,001
Net interest income			$	62,574						$	61,655

(1) Securities are shown at average amortized cost

(2) Excluding unrealized gains or losses

(3) For purposes of these computations, nonaccrual loans are included in the average loan balances outstanding

48

Six Months ended June 30,
			2014							2013
	Average				Yield/			Average				Yield/
(dollars in thousands)	Balance		Interest		Rates			Balance		Interest		Rates
ASSETS
Short-term interest bearing accounts	$	3,328	$	14		0.87	%	$	58,118	$	98		0.34	%
Securities available for sale (1)(2)		1,379,014		14,212		2.08	%		1,313,691		13,212		2.03	%
Securities held to maturity (1)		118,840		2,048		3.48	%		57,710		1,605		5.61	%
Investment in FRB and FHLB Banks		43,279		1,028		4.79	%		33,416		796		4.80	%
Loans (3)		5,471,879		121,002		4.46	%		4,869,896		116,171		4.81	%
Total interest earning assets	$	7,016,340	$	138,304		3.98	%	$	6,332,831	$	131,882		4.20	%
Other assets		679,654							630,532
Total assets	$	7,695,994						$	6,963,363
LIABILITIES AND STOCKHOLDERS' EQUITY
Money market deposit accounts	$	1,426,446	$	1,066		0.15	%	$	1,297,077	$	934		0.15	%
NOW deposit accounts		946,691		256		0.05	%		863,481		889		0.21	%
Savings deposits		1,020,391		369		0.07	%		877,574		354		0.08	%
Time deposits		985,510		4,593		0.94	%		1,076,445		6,269		1.17	%
Total interest bearing deposits	$	4,379,038	$	6,284		0.29	%	$	4,114,577	$	8,446		0.41	%
Short-term borrowings		391,173		440		0.23	%		199,513		109		0.11	%
Junior subordinated debt		101,196		1,076		2.14	%		91,798		988		2.17	%
Long-term debt		299,726		4,642		3.12	%		368,867		6,635		3.63	%
Total interest bearing liabilities	$	5,171,133	$	12,442		0.49	%	$	4,774,755	$	16,178		0.68	%
Demand deposits		1,605,261							1,390,700
Other liabilities		82,908							73,010
Stockholders' equity		836,692							724,898
Total liabilities and stockholders' equity	$	7,695,994						$	6,963,363
Net interest income (FTE)				125,862							115,704
Interest rate spread						3.49	%						3.52	%
Net interest margin						3.62	%						3.68	%
Taxable equivalent adjustment				1,771							1,909
Net interest income			$	124,091						$	113,795

(1) Securities are shown at average amortized cost

(2) Excluding unrealized gains or losses

(3) For purposes of these computations, nonaccrual loans are included in the average loan balances outstanding

49

The following table presents changes in interest income and interest expense attributable to changes in volume (change in average balance multiplied by prior year rate), changes in rate (change in rate multiplied by prior year volume), and the net change in net interest income. The net change attributable to the combined impact of volume and rate has been allocated to each in proportion to the absolute dollar amounts of change.

Three months ended June 30,
	Increase (Decrease)
	2014 over 2013
(in thousands)	Volume			Rate			Total
Short-term interest bearing accounts	$	(64	)	$	12		$	(52	)
Securities available for sale		(263	)		257			(6	)
Securities held to maturity		572			(350	)		222
Investment in FRB and FHLB Banks		87			(21	)		66
Loans and leases		3,153			(4,651	)		(1,498	)
Total interest income		3,485			(4,753	)		(1,268	)
Money market deposit accounts		15			-			15
NOW deposit accounts		16			(327	)		(311	)
Savings deposits		12			(35	)		(23	)
Time deposits		(415	)		(562	)		(977	)
Short-term borrowings		62			80			142
Junior subordinated debt		-			(22	)		(22	)
Long-term debt		(509	)		(382	)		(891	)
Total interest expense		(819	)		(1,248	)		(2,067	)
Change in FTE net interest income	$	4,304		$	(3,505	)	$	799

Six months ended June 30,
	Increase (Decrease)
	2014 over 2013
(in thousands)	Volume			Rate			Total
Short-term interest bearing accounts	$	(146	)	$	62		$	(84	)
Securities available for sale		668			332			1,000
Securities held to maturity		1,224			(781	)		443
Investment in FRB and FHLB Banks		234			(2	)		232
Loans and leases		13,701			(8,870	)		4,831
Total interest income		15,681			(9,259	)		6,422
Money market deposit accounts		96			36			132
NOW deposit accounts		78			(711	)		(633	)
Savings deposits		54			(39	)		15
Time deposits		(498	)		(1,178	)		(1,676	)
Short-term borrowings		157			174			331
Junior subordinated debt		100			(12	)		88
Long-term debt		(1,144	)		(849	)		(1,993	)
Total interest expense		(1,157	)		(2,579	)		(3,736	)
Change in FTE net interest income	$	16,838		$	(6,680	)	$	10,158

50

Noninterest Income

Noninterest income is a significant source of revenue for the Company and an important factor in the Company’s results of operations.  The following table sets forth information by category of noninterest income for the periods indicated:

	Three months ended June 30,					Six months ended June 30,
	2014		2013			2014		2013
(in thousands)
Insurance and other financial services revenue	$	5,594	$	5,755		$	12,331	$	12,648
Service charges on deposit accounts		4,397		4,933			8,766		9,256
ATM and debit card fees		4,357		4,044			8,429		7,286
Retirement plan administration fees		2,977		2,957			5,895		5,639
Trust		4,953		4,699			9,399		7,612
Bank owned life insurance		978		886			2,360		1,735
Net securities gains		14		(61	)		21		1,084
Gain on the sale of Springstone investment		19,401		-			19,401		-
Other		3,356		2,324			5,702		5,506
Total noninterest income	$	46,027	$	25,537		$	72,304	$	50,766

Noninterest income for the three months ended June 30, 2014 was $46.0 million, up $19.8 million from the previous quarter, and up $20.5 million from the same period in 2013.  The increase from the prior quarter and 2013 was primarily driven by a $19.4 million gain from the previously disclosed sale of our ownership interest in Springstone.  Excluding this gain, noninterest income for the three months ended June 30, 2014 was $26.6 million, up $0.3 million, or 1.3%, from the previous quarter, and up $1.1 million, or 4.3%, from the same period in 2013.

Noninterest income for the six months ended June 30, 2014 was $72.3 million, up $21.5 million, or 42.4%, from the same period in 2013.  The increase from 2013 was primarily driven by the aforementioned $19.4 million gain recorded in the second quarter of 2014.  Excluding this gain, noninterest income for the six months ended June 30, 2014 was $52.9 million, up $2.1 million, or 4.2%, from the same period in 2013.  This increase from 2013 was due primarily to increases in trust and ATM and debit card fees, due in large part to the full impact from Alliance in 2014.   These increases were partially offset by decreases in service charges on deposit accounts and net securities gains for the first six months of 2014 as compared with the same period in 2013.  The decrease in service charges on deposit accounts from the prior year was due primarily to lower nonsufficient funds fees recorded during the first six months of 2014.

Noninterest Expense

Noninterest expenses are also an important factor in the Company’s results of operations.  The following table sets forth the major components of noninterest expense for the periods indicated:

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	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014		2013
(in thousands)
Salaries and employee benefits	$	31,142	$	29,160	$	60,676	$	56,207
Occupancy		5,435		5,219		11,661		10,196
Data processing and communications		4,015		3,854		8,016		7,309
Professional fees and outside services		3,752		3,237		7,167		6,138
Equipment		3,132		2,910		6,248		5,492
Office supplies and postage		1,803		1,656		3,488		3,246
FDIC expenses		1,229		1,273		2,507		2,403
Advertising		726		1,000		1,465		1,723
Amortization of intangible assets		1,236		1,351		2,546		2,202
Loan collection and other real estate owned		801		421		1,841		1,139
Merger		-		1,269		-		11,950
Prepayment penalty on long term debt		4,554		-		4,554		-
Other		4,911		5,100		10,084		9,150
Total noninterest expense	$	62,736	$	56,450	$	120,253	$	117,155

Noninterest expense for the three months ended June 30, 2014 was $62.7 million, up $5.2 million from the previous quarter, and up $6.3 million from the same period in 2013.  This increase from the prior quarter and 2013 was due primarily to $4.6 million of prepayment penalties from the aforementioned strategic long-term debt restructuring in the second quarter of 2014.  Excluding these prepayment penalties, noninterest expense for the three months ended June 30, 2014 was $58.2 million, up $0.7 million, or 1.2% from the previous quarter, and up $1.7 million, or 3.1%, from the same period in 2013.  This increase from the prior year was due primarily to a $2.0 million increase in salaries and employee benefits driven by an increase in incentive compensation related to the Springstone transaction.

Noninterest expense for the six months ended June 30, 2014 was $120.3 million, up $3.1 million from the same period in 2013.  Excluding the aforementioned $4.6 million prepayment penalties in 2014 and the merger related expenses totaling $12.0 million in the first six months of 2013, noninterest expense for the six months ended June 30, 2014 was $115.7 million, up $10.5 million, or 10.0% from the same period in 2013.  This increase from the six months ended June 30, 2013 was due primarily to 2014 including the full six months of Alliance expenses including occupancy, salaries and employee benefits, data processing, professional fees, and equipment.  In addition, the increase in salaries and benefits included incremental incentive compensation related to the Springstone transaction, partially offset by lower retirement plan expenses due mainly to plan asset performance and a previous plan amendment.

Income Taxes

The effective tax rate was 33.7% for the second quarter of 2014, 32.5% for the first quarter of 2014, and 30.5% for the second quarter of 2013.    The effective tax rate was 33.2% for the six months ended June 30, 2014, as compared to 30.5% for the first six months of 2013.  The increases in the effective tax rate for the three and six month periods ending June 30, 2014 were primarily due to a higher level of taxable income as a percentage of total income as compared to the same periods in 2013.

ANALYSIS OF FINANCIAL CONDITION

Securities

Total securities increased $24.2 million, or 1.6%, from December 31, 2013 to June 30, 2014.  Held to maturity securities increased $8.7 million, or 7.4%, over the same period as cash flows from maturing available for sale securities have been reinvested into held to maturity securities.  The securities portfolio represents 19.2% of total assets as of June 30, 2014 as compared to 19.4% as of December 31, 2013.

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The following table details the composition of securities available for sale, securities held to maturity and regulatory investments for the periods indicated:

	June 30, 2014			December 31, 2013
Mortgage-backed securities:
With maturities 15 years or less		25	%		23	%
With maturities greater than 15 years		1	%		1	%
Collateral mortgage obligations		37	%		40	%
Municipal securities		11	%		11	%
US agency notes		22	%		21	%
Other		4	%		4	%
Total		100	%		100	%

The Company’s mortgage backed securities, U.S. agency notes, and collateralized mortgage obligations are all “prime/conforming” and are guaranteed by Fannie Mae, Freddie Mac, Federal Home Loan Bank, Federal Farm Credit Banks, or Ginnie Mae (“GNMA”).  GNMA securities are considered equivalent to U.S. Treasury securities, as they are backed by the full faith and credit of the U.S. government.  Currently, there are no subprime mortgages in our investment portfolio.

Loans

A summary of loans, net of deferred fees and origination costs, by category for the periods indicated follows:

(In thousands)	June 30, 2014		December 31, 2013
Residential real estate mortgages	$	1,073,207	$	1,041,637
Commercial		895,128		859,026
Commercial real estate mortgages		1,378,065		1,328,313
Real estate construction and development		94,019		93,247
Agricultural and agricultural real estate mortgages		109,035		112,035
Consumer		1,435,643		1,352,638
Home equity		589,391		619,899
Total loans	$	5,574,488	$	5,406,795

Total loans increased by $167.7 million, or 3.1%, at June 30, 2014 from December 31, 2013, or 6.3% annualized during the six months ended June 30, 2014.  The increase is due to organic loan growth within the Bank’s footprint through both legacy and newer markets.  Loans represent approximately 70.9% of assets as of June 30, 2014, as compared to 70.7% as of December 31, 2013.  Growth in commercial and commercial real estate loans for the first six months of 2014 totaled $85.9 million and growth in consumer loans totaled $83.0 million for the first six months of 2014 and is attributed primarily to growth in the indirect consumer loan portfolio.

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Allowance for Loan Losses, Provision for Loan Losses, and Nonperforming Assets

The allowance for loan losses is maintained at a level estimated by management to provide adequately for risk of probable losses inherent in the current loan portfolio.  The adequacy of the allowance for loan losses is continuously monitored using a methodology designed to ensure that the level of the allowance reasonably reflects the loan portfolio’s risk profile. It is evaluated to ensure that it is sufficient to absorb all reasonably estimable credit losses inherent in the current loan portfolio.

Management considers the accounting policy relating to the allowance for loan losses to be a critical accounting policy given the degree of judgment exercised in evaluating the level of the allowance required to cover credit losses in the portfolio and the material effect that such judgments can have on the consolidated results of operations.

For purposes of evaluating the adequacy of the allowance, the Company considers a number of significant factors that affect the collectability of the portfolio.  For individually analyzed loans, these factors include estimates of loss exposure, which reflect the facts and circumstances that affect the likelihood of repayment of such loans as of the evaluation date.  For homogeneous pools of loans, estimates of the Company’s exposure to credit loss reflect a thorough current assessment of a number of factors, which could affect collectability. These factors include: past loss experience; the size, trend, composition, and nature of the loans; changes in lending policies and procedures, including underwriting  standards and collection, charge-off and recovery practices;  trends experienced in nonperforming and delinquent loans; current economic conditions in the Company’s market; portfolio concentrations that may affect loss experienced across one or more components of the portfolio; the effect of external factors such as competition, legal and regulatory requirements; and the experience, ability, and depth of lending management and staff.  In addition, various regulatory agencies, as an integral component of their examination process, periodically review the Company’s allowance for loan losses.  Such agencies may require the Company to recognize additions to the allowance based on their judgment about information available to them at the time of their examination, which may not be currently available to management.

After a thorough consideration and validation of the factors discussed above, required additions or reductions to the allowance for loan losses are made periodically by charges or credits to the provision for loan losses.  These charges are necessary to maintain the allowance at a level which management believes is reasonably reflective of the overall inherent risk of probable loss in the portfolio.  While management uses available information to recognize losses on loans, additions or reductions to the allowance may fluctuate from one reporting period to another.  These fluctuations are reflective of changes in risk associated with portfolio content and/or changes in management’s assessment of any or all of the determining factors discussed above.  Management considers the allowance for loan losses to be adequate based on evaluation and analysis of the loan portfolio.

The following table reflects changes to the allowance for loan losses for the periods presented. The allowance is increased by provisions for losses charged to operations and is reduced by net charge-offs. Charge-offs are made when the ability to collect loan principal within a reasonable time becomes unlikely. Any recoveries of previously charged-off loans are credited directly to the allowance for loan losses.

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Allowance For Loan Losses
	Three months ended
(dollars in thousands)	June 30, 2014					June 30, 2013
Balance, beginning of period	$	69,434				$	68,734
Recoveries		1,174					1,201
Chargeoffs		(5,240	)				(5,153	)
Net chargeoffs		(4,066	)				(3,952	)
Provision for loan losses		4,166					6,402
Balance, end of period	$	69,534				$	71,184
Composition of Net Chargeoffs
Commercial and agricultural	$	(1,113	)	27	%	$	(782	)	20	%
Real estate mortgage		(19	)	0	%		(213	)	5	%
Consumer		(2,934	)	73	%		(2,957	)	75	%
Net chargeoffs	$	(4,066	)	100	%	$	(3,952	)	100	%
Annualized net chargeoffs to average loans		0.30	%				0.30	%

	Six months ended
(dollars in thousands)	June 30, 2014					June 30, 2013
Balance, beginning of period	$	69,434				$	69,334
Recoveries		2,408					2,659
Chargeoffs		(10,070	)				(12,869	)
Net chargeoffs		(7,662	)				(10,210	)
Provision for loan losses		7,762					12,060
Balance, end of period	$	69,534				$	71,184
Composition of Net Chargeoffs
Commercial and agricultural	$	(1,193	)	16	%	$	(3,637	)	36	%
Real estate mortgage		(244	)	3	%		(870	)	9	%
Consumer		(6,225	)	81	%		(5,703	)	55	%
Net chargeoffs	$	(7,662	)	100	%	$	(10,210	)	100	%
Annualized net chargeoffs to average loans		0.28	%				0.42	%

Net charge-offs were $4.1 million for the second quarter of 2014, up from $3.6 million for the first quarter of 2014, and up slightly from $4.0 million for the second quarter of 2013.  Net charge-offs to average loans for the second quarter of 2014 was 0.30%, compared to 0.27% for the first quarter of 2014 and 0.30% for the same period in 2013.  NBT recorded a provision for loan losses of $4.2 million for the three months ended June 30, 2014, compared with $3.6 million for the previous quarter, and $6.4 million for the same period in 2013.

Nonperforming loans to total loans was 0.96% at June 30, 2014, down from 0.99% at March 31, 2014 and December 31, 2013.  Past due loans as a percentage of total loans was 0.57% for the second quarter of 2014, which was equivalent to the first quarter of 2014, and down from 0.77% as of December 31, 2013.

The allowance for loan losses totaled $69.5 million at June 30, 2014, up slightly from $69.4 million at December 31, 2013.  The allowance for loan losses as a percentage of loans was 1.25% (1.44% excluding acquired loans) at June 30, 2014, compared to 1.27% (1.51% excluding acquired loans with no related allowance recorded) at March 31, 2014 and 1.28% (1.55% excluding acquired loans with no related allowance recorded) at December 31, 2013.

55

Nonperforming assets consist of nonaccrual loans, loans 90 days or more past due and still accruing, restructured loans, OREO, and nonperforming securities. Loans are generally placed on nonaccrual when principal or interest payments become ninety days past due, unless the loan is well secured and in the process of collection. Loans may also be placed on nonaccrual when circumstances indicate that the borrower may be unable to meet the contractual principal or interest payments. OREO represents property acquired through foreclosure and is valued at the lower of the carrying amount or fair value, less any estimated disposal costs.  Nonperforming securities, which include securities which management believes are other-than-temporarily impaired, are carried at their estimated fair value and are not accruing interest.

Nonperforming Assets
	June 30,						December 31,
(Dollars in thousands)	2014						2013
Nonaccrual loans	Amount			%			Amount			%
Commercial and agricultural loans and real estate	$	26,273			52	%	$	27,033			54	%
Real estate mortgages		10,450			20	%		10,296			21	%
Consumer		7,613			15	%		7,213			14	%
Troubled debt restructured loans		6,898			13	%		5,423			11	%
Total nonaccrual loans		51,234			100	%		49,965			100	%
Loans 90 days or more past due and still accruing
Commercial and agricultural loans and  real estate		-			-	%		105			3	%
Real estate mortgages		119			5	%		808			22	%
Consumer		2,067			95	%		2,824			75	%
Total loans 90 days or more past due and still accruing		2,186			100	%		3,737			100	%
Total nonperforming loans		53,420						53,702
Other real estate owned (OREO)		1,953						2,904
Total nonperforming assets		55,373						56,606
Total nonperforming loans to total loans		0.96	%					0.99	%
Total nonperforming assets to total assets		0.70	%					0.74	%
Allowance for loan losses to total nonperforming loans		130.16	%					129.29	%

Past due loans as a percentage of total loans was 0.57% at June 30, 2014, down from 0.77% at December 31, 2013.  In addition to nonperforming loans, the Company has also identified approximately $97.0 million in potential problem loans at June 30, 2014 as compared to $89.9 million at December 31, 2013.  The increase was due to a downgrade of one large commercial loan during the first quarter of 2014.  At June 30, 2014, potential problem loans primarily consisted of commercial real estate and commercial and agricultural loans.  Potential problem loans are loans that are currently performing, but known information about possible credit problems of the borrowers causes management to have serious doubts as to the ability of such borrowers to comply with the present loan repayment terms and which may result in classification of such loans as nonperforming at some time in the future.  Potential problem loans are typically defined as loans that are performing but are classified by the Company’s loan rating system as “substandard.”  Management cannot predict the extent to which economic conditions may worsen or other factors which may impact borrowers and the potential problem loans.  Accordingly, there can be no assurance that other loans will not become 90 days or more past due, be placed on nonaccrual, become restructured, or require increased allowance coverage and provision for loan losses.

56

Deposits

Total deposits were $6.0 billion at June 30, 2014, up $152.4 million, or 2.6%, from December 31, 2013, due primarily to growth in NOW and money market accounts.  Total average deposits for the six months ended June 30, 2014 increased $479.0 million, or 8.7%, from the same period in 2013, due primarily to the acquisition of Alliance.

Borrowed Funds

The Company's borrowed funds consist of short-term borrowings and long-term debt. Short-term borrowings totaled $534.5 million at June 30, 2014 compared to $456.0 million at December 31, 2013.  Long-term debt was $251.1 million at June 30, 2014, as compared to $308.8 million at December 31, 2013.  As part of a debt restructuring strategy during the second quarter of 2014, the Company repaid $165.0 million in long-term borrowings, resulting in $17.1 million in prepayment penalties.  Prepayment penalties of $4.6 million (non-core) was recognized as expense in the second quarter of 2014 and related to the $45.0 million of the long-term debt strategy that was completed during the quarter.  The remaining prepayment penalties of approximately $13 million (non-core) will be recognized in the third quarter of 2014 upon completion of the restructure strategy. The fully executed strategy is expected to lower the cost of the restructured long-term debt by approximately 200 basis points and is expected to improve our interest rate risk profile.

For more information about the Company’s borrowing capacity and liquidity position, see “Liquidity Risk” below.

Capital Resources

Stockholders' equity of $857.1 million represented 10.89% of total assets at June 30, 2014, compared with $816.6 million, or 10.67% as of December 31, 2013.  Net income of $45.6 million and a $10.2 million increase in other comprehensive income due to a decrease in unrealized losses on securities were partially offset by dividends paid of $18.4 million.

The Company purchased 3,288 shares of its common stock during the six months ended June 30, 2014 at an average price of $22.02 per share under a previously announced plan.  As of June 30, 2014, there were 996,712 shares available for repurchase under this plan, which expires on December 31, 2014.

The Board of Directors considers the Company's earnings position and earnings potential when making dividend decisions.  The Board of Directors declared a 2014 third-quarter cash dividend of $0.21 per share at a meeting held on July 28, 2014.  The dividend will be paid on September 15, 2014 to shareholders of record as of September 1, 2014.  The Company does not have a target dividend pay-out ratio.

As the capital ratios in the following table indicate, the Company remained “well capitalized” at June 30, 2014 under applicable bank regulatory requirements.  Capital measurements are well in excess of regulatory minimum guidelines and meet the requirements to be considered well capitalized for all periods presented. Tier 1 leverage, Tier 1 capital and Total risk-based capital ratios have regulatory minimum guidelines of 3%, 4% and 8% respectively, with requirements to be considered well capitalized of 5%, 6% and 10%, respectively.

Capital Measurements	June 30, 2014			December 31, 2013
Tier 1 leverage ratio		9.23	%		8.93	%
Tier 1 capital ratio		11.95	%		11.74	%
Total risk-based capital ratio		13.18	%		12.99	%
Cash dividends as a percentage of net income		40.36	%		54.28	%
Per common share:
Book value	$	19.61		$	18.77
Tangible book value (1)	$	13.06		$	12.09

(1) Stockholders' equity less goodwill and intangible assets divided by common shares outstanding

57

Liquidity and Interest Rate Sensitivity Management

Market Risk

Interest rate risk is the primary market risk affecting the Company.  Other types of market risk, such as foreign currency exchange rate risk and commodity price risk, do not arise in the normal course of the Company’s business activities.  Interest rate risk is defined as an exposure to a movement in interest rates that could have an adverse effect on the Company’s net interest income.  Net interest income is susceptible to interest rate risk to the degree that interest bearing liabilities mature or reprice on a different basis than earning assets.  When interest bearing liabilities mature or reprice more quickly than earning assets in a given period, a significant increase in market rates of interest could adversely affect net interest income.  Similarly, when earning assets mature or reprice more quickly than interest bearing liabilities, falling interest rates could result in a decrease in net interest income.

In an attempt to manage the Company's exposure to changes in interest rates, management monitors the Company’s interest rate risk.  Management’s Asset Liability Committee (“ALCO”) meets monthly to review the Company’s interest rate risk position and profitability and to recommend strategies for consideration by the Board of Directors.  Management also reviews loan and deposit pricing and the Company’s securities portfolio, formulates investment and funding strategies, and oversees the timing and implementation of transactions to assure attainment of the Board’s objectives in the most effective manner. Notwithstanding the Company’s interest rate risk management activities, the potential effect of changing interest rates is an uncertainty that can have an adverse effect on net income.

In adjusting the Company’s asset/liability position, the Board and management attempt to manage the Company’s interest rate risk while minimizing net interest margin compression.  At times, depending on the level of general interest rates, the relationship between long- and short-term interest rates, market conditions and competitive factors, the Board and management may determine to increase the Company’s interest rate risk position somewhat in order to increase its net interest margin.  The Company’s results of operations and net portfolio values remain vulnerable to changes in interest rates and fluctuations in the difference between long- and short-term interest rates.  Assuming interest rates remain at or near current historical lows, net interest margin will continue to experience compression.  Additional rate reductions on deposits are becoming more difficult as deposit rates are at or near their floors, and with asset yields continuing to reprice at lower rates, this could result in additional margin pressure as well as a decrease in net interest income.

The primary tool utilized by ALCO to manage interest rate risk is a balance sheet/income statement simulation model (interest rate sensitivity analysis).  Information such as principal balance, interest rate, maturity date, cash flows, next repricing date (if needed), and current rates is uploaded into the model to create an ending balance sheet.  In addition, ALCO makes certain assumptions regarding prepayment speeds for loans and mortgage related investment securities along with any optionality within the deposits and borrowings.

58

The model is first run under an assumption of a flat rate scenario (i.e. no change in current interest rates) with a static balance sheet over a 12-month period.  Two additional models are run with static balance sheets: (1) a gradual increase of 200 bp, and (2) a gradual decrease of 100 bp taking place over a 12-month period. Under these scenarios, assets subject to prepayments are adjusted to account for faster or slower prepayment assumptions.  Any investment securities or borrowings that have callable options embedded into them are handled accordingly based on the interest rate scenario. The resulting changes in net interest income are then measured against the flat rate scenario.

In the declining rate scenario, net interest income is projected to decrease when compared to the forecasted net interest income in the flat rate scenario through the simulation period. The decrease in net interest income is a result of earning assets repricing downward at a faster rate than interest bearing liabilities. The inability to effectively lower deposit rates will likely reduce or eliminate the benefit of lower interest rates. In the rising rate scenarios, net interest income is projected to experience a decline from the flat rate scenario. Net interest income is projected to remain at lower levels than in a flat rate scenario through the simulation period primarily due to a lag in assets repricing while funding costs increase. The potential impact on earnings is dependent on the ability to lag deposit repricing. If short-term rates continue to increase, the Company expects competitive pressures will likely lead to core deposit pricing increases, which will likely continue compression of the net interest margin.

Net interest income for the next 12 months in the + 200/- 100 bp scenarios, as described above, is within the internal policy risk limits of not more than a 7.5% change in net interest income. The following table summarizes the percentage change in net interest income in the rising and declining rate scenarios over a 12-month period from the forecasted net interest income in the flat rate scenario using the June 30, 2014 balance sheet position:

Interest Rate Sensitivity Analysis
Change in interest rates	Percent change in
(in bp points)	net interest income
+200	(3.06%)
-100	(1.55%)

Liquidity Risk

Liquidity involves the ability to meet the cash flow requirements of customers who may be depositors wanting to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs. The ALCO is responsible for liquidity management and has developed guidelines which cover all assets and liabilities, as well as off balance sheet items that are potential sources or uses of liquidity.  Liquidity policies must also provide the flexibility to implement appropriate strategies and tactical actions. Requirements change as loans grow, deposits and securities mature, and payments on borrowings are made. Liquidity management includes a focus on interest rate sensitivity management with a goal of avoiding widely fluctuating net interest margins through periods of changing economic conditions.

The primary liquidity measurement the Company utilizes is called the Basic Surplus, which captures the adequacy of its access to reliable sources of cash relative to the stability of its funding mix of average liabilities.  Basic Surplus is calculated by subtracting short-term liabilities from liquid assets.  This approach recognizes the importance of balancing levels of cash flow liquidity from short- and long-term securities with the availability of dependable borrowing sources which can be accessed when necessary.  At June 30, 2014, the Company’s Basic Surplus measurement was 8.5% of total assets or approximately $669 million as compared to the December 31, 2013 Basic Surplus of 9.7% or $734 million, and was above the Company’s minimum of 5% or $393 million set forth in its liquidity policies.

59

This Basic Surplus approach enables the Company to adequately manage liquidity from both operational and contingency perspectives. By tempering the need for cash flow liquidity with reliable borrowing facilities, the Company is able to operate with a more fully invested and, therefore, higher interest income generating securities portfolio. The makeup and term structure of the securities portfolio is, in part, impacted by the overall interest rate sensitivity of the balance sheet. Investment decisions and deposit pricing strategies are impacted by the liquidity position.

The Company’s primary source of funds is the Bank. Certain restrictions exist regarding the ability of the Bank to transfer funds to the Company in the form of cash dividends. The approval of the Office of Comptroller of the Currency (OCC) is required to pay dividends when a bank fails to meet certain minimum regulatory capital standards or when such dividends are in excess of a subsidiary bank’s earnings retained in the current year plus retained net profits for the preceding two years (as defined in the regulations). At June 30, 2014, approximately $76.4 million of the total stockholders’ equity of the Bank was available for payment of dividends to the Company without approval by the OCC.  The Bank’s ability to pay dividends is also subject to the Bank being in compliance with regulatory capital requirements. The Bank is currently in compliance with these requirements. Under the General Corporation Law of the State of Delaware, the Company may declare and pay dividends either out of its surplus or, in case there is no surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year.

At June 30, 2014 and December 31, 2013, FHLB advances outstanding totaled approximately $709 million and $515 million, respectively.  The Bank is a member of the FHLB system and had additional borrowing capacity from the FHLB of approximately $502 million at June 30, 2014 and $497 million at December 31, 2013.  In addition, unpledged securities could have been used to increase borrowing capacity at the FHLB by an additional $489 million at June 30, 2014, or used to collateralize other borrowings, such as repurchase agreements.  At June 30, 2014 the Bank also had additional borrowing capacity from unused collateral at the Federal Reserve of $791 million.

Recent Accounting Pronouncements

In January 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-01 —Investments (Topic 323), Accounting for Investments in Qualified Affordable Housing Projects.  The amendments in this ASU provide guidance on accounting for investments by a reporting entity in flow-through limited liability entities that manage or invest in affordable housing projects that qualify for the low-income housing tax credit. The amendments permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit). The amendments in this ASU are effective for the Company for annual periods beginning January 1, 2015 and should be applied retrospectively to all periods presented. A reporting entity that uses the effective yield method to account for its investments in qualified affordable housing projects before the date of adoption may continue to apply the effective yield method for those preexisting investments.  The Company does not expect the adoption to have a material impact on the financial statements.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information called for by Item 3 is contained in the Liquidity and Interest Rate Sensitivity Management section of the Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 4. CONTROLS AND PROCEDURES

The  Company's  management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of  the  Company's  disclosure  controls  and  procedures  (as  defined  in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2014, the Company's disclosure controls and procedures were effective.

There  were  no changes made in the Company's internal control over financial  reporting  that  occurred  during  the  Company's  most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II.  OTHER INFORMATION

Item 1 – LEGAL PROCEEDINGS

There are no material legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or of which any of their property is subject, except as described in the Company’s 2013 Annual Report on Form 10-K.

Item 1A – RISK FACTORS

There are no material changes to the risk factors as previously discussed in Part I, Item 1A of our 2013 Annual Report on Form 10-K.

Item 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) Not applicable

(b) Not applicable

(c) The table below sets forth the information with respect to purchases made by the Company or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934) of our common stock during the quarter ended June 30, 2014:

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans		Maximum Number of Shares That May Yet be Purchased Under The Plans (1)
4/1/14 - 4/30/14		-	$	-		-		1,000,000
5/1/14 - 5/31/14		3,288		22.02		3,288		996,712
6/1/14 - 6/30/14		-		-		-		996,712
Total		3,288	$	22.02		3,288		996,712

(1) On July 22, 2013, the NBT Board of Directors authorized a repurchase program for NBT to repurchase up to an additional 1,000,000 shares of its outstanding common stock.  The Company purchased 3,288 shares of its common stock during the six months ended June 30, 2014 at an average price of $22.02 per share under this plan.  As of June 30, 2014, there were 996,712 shares available for repurchase under this plan, which expires on December 31, 2014.

Item 3 – DEFAULTS UPON SENIOR SECURITIES

None

Item 4 – MINE SAFETY DISCLOSURES

None

Item 5 – OTHER INFORMATION

None

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Item 6 – EXHIBITS

3.1   Certificate of Incorporation of NBT Bancorp Inc. as amended through May 2, 2012 (filed as Exhibit 3.1 to the Registrant's Form 10-Q for the quarter ended September 30, 2012, filed on November 9, 2012 and incorporated herein by reference).

3.2   Amended and Restated By-laws of NBT Bancorp Inc., effective May 7, 2013 (filed as Exhibit 3.1 to the Registrant's Form 8-K, filed on May 7, 2013 and incorporated herein by reference).

3.3   Certificate of Designation of the Series A Junior Participating Preferred Stock (filed as Exhibit A to Exhibit 4.1 of the Registrant’s Form 8-K, filed on November 18, 2004, and incorporated herein by reference).

4.1   Specimen common stock certificate for NBT's common stock (filed as exhibit 4.3 to the Registrant's Amendment No. 1 to Registration Statement on Form S-4 filed on December 27, 2005 and incorporated herein by reference).

4.2   Rights Agreement, dated as of November 15, 2004, between NBT Bancorp Inc. and Registrar and Transfer Company, as Rights Agent (filed as Exhibit 4.1 to the Registrant's Form 8-K, file number 0-14703, filed on November 18, 2004, and incorporated by reference herein).

31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Written Statement of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Written Statement of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS  XBRL Instance Document.

101.SCH  XBRL Taxonomy Extension Schema Document.

101.CAL  XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF  XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB  XBRL Taxonomy Extension Label Linkbase Document.

101.PRE  XBRL Taxonomy Extension Presentation Linkbase Document.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, this 11th day of August 2014.

	NBT BANCORP INC.
By:	/s/ Michael J. Chewens
	Michael J. Chewens, CPA
	Senior Executive Vice President
	Chief Financial Officer

63

EXHIBIT INDEX

3.1   Certificate of Incorporation of NBT Bancorp Inc. as amended through May 2, 2012 (filed as Exhibit 3.1 to the Registrant's Form 10-Q for the quarter ended September 30, 2012, filed on November 9, 2012 and incorporated herein by reference).

3.2   Amended and Restated By-laws of NBT Bancorp Inc., effective May 7, 2013 (filed as Exhibit 3.1 to the Registrant's Form 8-K, filed on May 7, 2013 and incorporated herein by reference).

3.3   Certificate of Designation of the Series A Junior Participating Preferred Stock (filed as Exhibit A to Exhibit 4.1 of the Registrant’s Form 8-K, filed on November 18, 2004, and incorporated herein by reference).

4.1   Specimen common stock certificate for NBT's common stock (filed as exhibit 4.3 to the Registrant's Amendment No. 1 to Registration Statement on Form S-4 filed on December 27, 2005 and incorporated herein by reference).

4.2   Rights Agreement, dated as of November 15, 2004, between NBT Bancorp Inc. and Registrar and Transfer Company, as Rights Agent (filed as Exhibit 4.1 to the Registrant's Form 8-K, file number 0-14703, filed on November 18, 2004, and incorporated by reference herein).

31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Written Statement of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Written Statement of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS  XBRL Instance Document.

101.SCH  XBRL Taxonomy Extension Schema Document.

101.CAL  XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF  XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB  XBRL Taxonomy Extension Label Linkbase Document.

101.PRE  XBRL Taxonomy Extension Presentation Linkbase Document.

64

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Martin A. Dietrich, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of NBT Bancorp Inc.

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

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

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

financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

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

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

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

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

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

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

Date:  August 11, 2014

By:	/s/ Martin A. Dietrich
	Martin A. Dietrich
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael J. Chewens, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of NBT Bancorp Inc.

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

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

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

financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

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

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

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

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

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

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

Date:  August 11, 2014

By:	/s/ Michael J. Chewens
	Michael J. Chewens
	Senior Executive Vice President and
	Chief Financial Officer

EX-32.1

EXHIBIT 32.1

Written Statement of the Chief Executive Officer Pursuant to Section 906 of the SARBANES-OXLEY ACT OF 2002

The undersigned, the Chief Executive Officer of NBT Bancorp Inc. (the "Company"), hereby certifies that to his knowledge on the date hereof:

(a)  the Form 10-Q of the Company for the Quarterly Period Ended June 30, 2014, filed on the date hereof with the Securities and Exchange Commission (the "Report"), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

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

/s/ Martin A. Dietrich

Martin A. Dietrich

Chief Executive Officer

August 11, 2014

A  signed  original  of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears  in  typed  form within the electronic version of this written statement required  by  Section  906,  has  been  provided to NBT Bancorp Inc. and will be retained  by  NBT  Bancorp  Inc. and furnished  to the Securities and Exchange Commission  or  its  staff  upon  request.

EX-32.2

EXHIBIT 32.2

Written Statement of the Chief Financial Officer Pursuant to Section 906 of the SARBANES-OXLEY ACT OF 2002

The undersigned, the Chief Financial Officer of NBT Bancorp Inc. (the "Company"), hereby certifies that to his knowledge on the date hereof:

(a)  the  Form 10-Q of the Company for the Quarterly Period Ended June 30, 2014,  filed  on  the  date  hereof  with  the Securities and Exchange Commission  (the  "Report"),  fully  complies  with the requirements of Section  13(a) or 15(d) of the Securities Exchange Act of 1934; and

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

/s/ Michael  J.  Chewens

Michael  J.  Chewens

Senior Executive Vice President and

Chief Financial Officer

August 11, 2014

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to NBT Bancorp Inc. and will be retained by NBT Bancorp Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Long-Term Debt (Details) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2014	Jun. 30, 2013
Long-Term Debt [Abstract]
Long-term borrowings repaid	$ 165,000,000
Prepayment penalties incurred	17,100,000
Prepayment penalties recognized as expense	4,554,000	4,554,000	0
Long-term debt strategy	45,000,000	45,000,000
Prepayment penalties recognized as expense in third quarter	$ 13,000,000

XML

Allowance for Loan Losses and Credit Quality of Loans (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2014 Segment
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan portfolio segments	3
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Real estate loan amount, percentage of appraised value or purchase price of the property, maximum (in hundredths)	80.00%
Agricultural Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Real estate loan amount, percentage of appraised value or purchase price of the property, maximum (in hundredths)	75.00%
Business Banking [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Business banking loans, maximum amount	$ 0.5
Indirect [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Percentage of automobile financing to indirect relationships with dealers (in hundredths)	75.00%
Principal repayment term of loan, minimum	3 years
Principal repayment term of loan, maximum	6 years
Home Equity [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Home equity loan amount, percentage of equity in home, maximum (in hundredths)	85.00%
Direct [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Principal repayment term of loan, minimum	1 year
Principal repayment term of loan, maximum	10 years
Residential Real Estate Mortgages [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Real estate loan amount, percentage of appraised value or purchase price of the property, maximum (in hundredths)	85.00%

XML

Fair Values Measurements and Fair Value of Financial Instruments (Policies)

6 Months Ended

Jun. 30, 2014

Fair Value Measurements and Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments, Policy

U.S. GAAP states that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.  Fair value measurements are not adjusted for transaction costs.  A fair value hierarchy exists within U.S. GAAP that 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 measurements) 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, many other sovereign government obligations, 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.  The Company does 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.

Certain common equity securities are reported at fair value utilizing Level 1 inputs (exchange quoted prices).  The majority of the other 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 participants with whom the Company has historically transacted both purchases and sales of investment securities.  Prices obtained from these sources include prices derived from 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.  Management reviews the methodologies used in pricing the securities by its third party providers.

U.S. GAAP requires disclosure of assets and liabilities measured and recorded at fair value on a nonrecurring basis such as goodwill, loans held for sale, other real estate owned, collateral-dependent impaired loans, mortgage servicing rights, and held-to-maturity securities.  The only nonrecurring fair value measurement recorded during the six month period ended June 30, 2014 was related to impaired loans.  During the six month period ending June 30, 2014, the Company recorded $9.0 million of loans at fair value resulting in a loss of $1.7 million.  The Company uses the fair value of underlying collateral, less costs to sell, to estimate the specific reserves for collateral dependent impaired loans.  The appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses ranging from 10% to 35%.  Based on the valuation techniques used, the fair value measurements for collateral dependent impaired loans are classified as Level 3.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on and off balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. For example, the Company has a substantial trust and investment management operation that contributes net fee income annually. The trust and investment management operation is not considered a financial instrument, and its value has not been incorporated into the fair value estimates. Other significant assets and liabilities include the benefits resulting from the low-cost funding of deposit liabilities as compared to the cost of borrowing funds in the market, and premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimate of fair value.

Securities Held to Maturity

The fair value of the Company’s investment securities held to maturity is primarily measured using information from a third party pricing service.  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.

Net Loans

The fair value of the Company’s loans was estimated by discounting the expected future cash flows using the current interest rates at which similar loans would be made for the same remaining maturities.  Loans were first segregated by type, and then further segmented into fixed and variable rate and loan quality categories.  Expected future cash flows were projected based on contractual cash flows, adjusted for estimated prepayments.

Time Deposits

The fair value of time deposits was estimated using a discounted cash flow approach that applies prevailing market interest rates for similar maturity instruments.  The fair values of the Company’s time deposit liabilities do not take into consideration the value of the Company’s long-term relationships with depositors, which may have significant value.

Long-Term Debt

The fair value of long-term debt was estimated using a discounted cash flow approach that applies prevailing market interest rates for similar maturity instruments.

Junior Subordinated Debt

The fair value of junior subordinated debt has been estimated using a discounted cash flow analysis.

XML

Reclassification Adjustments Out of Other Comprehensive (Loss) Income (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net securities gains (losses)	$ 14	$ (61)	$ 21	$ 1,084
Salaries and employee benefits	31,142	29,160	60,676	56,207
Tax benefit	14,059	7,424	22,731	10,781
Net Income	27,640	16,916	45,649	24,565
Total reclassification during the period, net of tax	3	463	10	272
Accumulated Net Unrealized Investment Gain (Loss) [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net securities gains (losses)	(14)	61	(21)	(1,084)
Tax benefit	6	(24)	8	434
Net Income	(8)	37	(13)	(650)
Accumulated Defined Benefit Plans Adjustment [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Salaries and employee benefits			(110)	(111)
Tax benefit	8	284	15	614
Net Income	11	426	23	922
Accumulated Defined Benefit Plans Adjustment [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member] | Amortization of net gains [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Salaries and employee benefits	74	765
Accumulated Defined Benefit Plans Adjustment [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member] | Amortization of prior service costs [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Salaries and employee benefits	$ (55)	$ (55)	$ 148	$ 1,647

XML

Allowance for Loan Losses and Credit Quality of Loans, Credit Quality by Loan Class (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Commercial Credit Exposure [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	$ 312,903	$ 332,240
Commercial Credit Exposure [Member] | Pass [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	282,341	290,702
Commercial Credit Exposure [Member] | Special Mention [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	6,817	8,413
Commercial Credit Exposure [Member] | Substandard [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	23,745	33,125
Commercial Credit Exposure [Member] | Commercial Loans [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	1,758,042	1,652,553
Commercial Credit Exposure [Member] | Commercial Loans [Member] | Pass [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	1,644,377	1,547,669
Commercial Credit Exposure [Member] | Commercial Loans [Member] | Special Mention [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	32,092	40,037
Commercial Credit Exposure [Member] | Commercial Loans [Member] | Substandard [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	81,497	64,835
Commercial Credit Exposure [Member] | Commercial Loans [Member] | Doubtful [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	76	12
Commercial Credit Exposure [Member] | Commercial [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	98,688	103,226
Commercial Credit Exposure [Member] | Commercial [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	657,206	616,423
Commercial Credit Exposure [Member] | Commercial [Member] | Pass [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	84,842	85,692
Commercial Credit Exposure [Member] | Commercial [Member] | Pass [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	606,388	576,079
Commercial Credit Exposure [Member] | Commercial [Member] | Special Mention [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	4,339	2,230
Commercial Credit Exposure [Member] | Commercial [Member] | Special Mention [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	11,782	16,836
Commercial Credit Exposure [Member] | Commercial [Member] | Substandard [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	9,507	15,304
Commercial Credit Exposure [Member] | Commercial [Member] | Substandard [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	39,036	23,508
Commercial Credit Exposure [Member] | Commercial [Member] | Doubtful [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	0	0
Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	214,215	229,014
Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	1,001,389	934,316
Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Pass [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	197,499	205,010
Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Pass [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	946,883	878,411
Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Special Mention [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	2,478	6,183
Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Special Mention [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	19,949	22,777
Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Substandard [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	14,238	17,821
Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Substandard [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	34,557	33,128
Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Doubtful [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	0	0
Commercial Credit Exposure [Member] | Agricultural [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	0	0
Commercial Credit Exposure [Member] | Agricultural [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	57,085	65,162
Commercial Credit Exposure [Member] | Agricultural [Member] | Pass [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	0	0
Commercial Credit Exposure [Member] | Agricultural [Member] | Pass [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	52,603	60,043
Commercial Credit Exposure [Member] | Agricultural [Member] | Special Mention [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	0	0
Commercial Credit Exposure [Member] | Agricultural [Member] | Special Mention [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	354	381
Commercial Credit Exposure [Member] | Agricultural [Member] | Substandard [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	0	0
Commercial Credit Exposure [Member] | Agricultural [Member] | Substandard [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	4,052	4,726
Commercial Credit Exposure [Member] | Agricultural [Member] | Doubtful [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	76	12
Commercial Credit Exposure [Member] | Agricultural Real Estate [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	42,362	36,652
Commercial Credit Exposure [Member] | Agricultural Real Estate [Member] | Pass [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	38,503	33,136
Commercial Credit Exposure [Member] | Agricultural Real Estate [Member] | Special Mention [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	7	43
Commercial Credit Exposure [Member] | Agricultural Real Estate [Member] | Substandard [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	3,852	3,473
Commercial Credit Exposure [Member] | Agricultural Real Estate [Member] | Doubtful [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	0	0
Consumer Credit Exposure [Member] | Consumer Loans [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	179,253	219,587
Consumer Credit Exposure [Member] | Consumer Loans [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	1,845,782	1,752,950
Consumer Credit Exposure [Member] | Consumer Loans [Member] | Nonperforming [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	764	792
Consumer Credit Exposure [Member] | Consumer Loans [Member] | Nonperforming [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	11,164	10,222
Consumer Credit Exposure [Member] | Consumer Loans [Member] | Performing [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	178,489	218,795
Consumer Credit Exposure [Member] | Consumer Loans [Member] | Performing [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	1,834,618	1,742,728
Consumer Credit Exposure [Member] | Indirect [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	91,979	125,086
Consumer Credit Exposure [Member] | Indirect [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	1,282,058	1,161,844
Consumer Credit Exposure [Member] | Indirect [Member] | Nonperforming [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	172	164
Consumer Credit Exposure [Member] | Indirect [Member] | Nonperforming [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	2,459	3,044
Consumer Credit Exposure [Member] | Indirect [Member] | Performing [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	91,807	124,922
Consumer Credit Exposure [Member] | Indirect [Member] | Performing [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	1,279,599	1,158,800
Consumer Credit Exposure [Member] | Home Equity Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	81,192	87,076
Consumer Credit Exposure [Member] | Home Equity Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	508,199	532,823
Consumer Credit Exposure [Member] | Home Equity Member] | Nonperforming [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	550	570
Consumer Credit Exposure [Member] | Home Equity Member] | Nonperforming [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	8,611	7,046
Consumer Credit Exposure [Member] | Home Equity Member] | Performing [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	80,642	86,506
Consumer Credit Exposure [Member] | Home Equity Member] | Performing [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	499,588	525,777
Consumer Credit Exposure [Member] | Direct [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	6,082	7,425
Consumer Credit Exposure [Member] | Direct [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	55,525	58,283
Consumer Credit Exposure [Member] | Direct [Member] | Nonperforming [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	42	58
Consumer Credit Exposure [Member] | Direct [Member] | Nonperforming [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	94	132
Consumer Credit Exposure [Member] | Direct [Member] | Performing [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	6,040	7,367
Consumer Credit Exposure [Member] | Direct [Member] | Performing [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	55,431	58,151
Residential Mortgage Credit Exposure [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	289,405	308,416
Residential Mortgage Credit Exposure [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	783,802	733,221
Residential Mortgage Credit Exposure [Member] | Nonperforming [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	3,498	3,872
Residential Mortgage Credit Exposure [Member] | Nonperforming [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	7,830	7,913
Residential Mortgage Credit Exposure [Member] | Performing [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	285,907	304,544
Residential Mortgage Credit Exposure [Member] | Performing [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	775,972	725,308
Residential Mortgage Credit Exposure [Member] | Residential Mortgage [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	289,405	308,416
Residential Mortgage Credit Exposure [Member] | Residential Mortgage [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	783,802	733,221
Residential Mortgage Credit Exposure [Member] | Residential Mortgage [Member] | Nonperforming [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	3,498	3,872
Residential Mortgage Credit Exposure [Member] | Residential Mortgage [Member] | Nonperforming [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	7,830	7,913
Residential Mortgage Credit Exposure [Member] | Residential Mortgage [Member] | Performing [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	285,907	304,544
Residential Mortgage Credit Exposure [Member] | Residential Mortgage [Member] | Performing [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	775,972	725,308
Business Banking Credit Exposure [Member] | Commercial Loans [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	64,587	70,149
Business Banking Credit Exposure [Member] | Commercial Loans [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	340,714	337,679
Business Banking Credit Exposure [Member] | Commercial Loans [Member] | Non-classified [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	59,227	65,437
Business Banking Credit Exposure [Member] | Commercial Loans [Member] | Non-classified [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	323,200	319,578
Business Banking Credit Exposure [Member] | Commercial Loans [Member] | Classified [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	5,360	4,712
Business Banking Credit Exposure [Member] | Commercial Loans [Member] | Classified [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	17,514	18,101
Business Banking Credit Exposure [Member] | Business Banking [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	64,587	70,149
Business Banking Credit Exposure [Member] | Business Banking [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	340,714	337,679
Business Banking Credit Exposure [Member] | Business Banking [Member] | Non-classified [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	59,227	65,437
Business Banking Credit Exposure [Member] | Business Banking [Member] | Non-classified [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	323,200	319,578
Business Banking Credit Exposure [Member] | Business Banking [Member] | Classified [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	5,360	4,712
Business Banking Credit Exposure [Member] | Business Banking [Member] | Classified [Member] | ORIGINATED [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable	$ 17,514	$ 18,101

XML

Consolidated Statements of Cash Flows (unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Operating activities
Net income	$ 45,649	$ 24,565
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan and lease losses	7,762	12,060
Depreciation and amortization of premises and equipment	4,105	3,828
Net accretion on securities	1,883	2,811
Amortization of intangible assets	2,546	2,202
Stock based compensation	2,082	2,726
Increase in surrender value of bank owned life insurance	(1,392)	(1,735)
Purchases of trading securities	(1,485)	(949)
Unrealized (gains) losses in trading securities	(91)	(225)
Deferred income tax benefit	(1,654)	(519)
Proceeds from sale of loans held for sale	1,922	39,060
Originations and purchases of loans held for sale	(3,701)	(40,233)
Net gains on sales of loans held for sale	(3)	(817)
Net security gains	(21)	(1,084)
Net gains on sales of other real estate owned	(212)	(571)
Gains on bank owned life insurance settlement	(414)	0
Gain on the sale of equity investment	(19,401)	0
Prepayment penalties on long-term debt	4,554	0
Net decrease in other assets	9,261	9,144
Net decrease in other liabilities	(8,421)	(8,333)
Net cash provided by operating activities	42,969	41,930
Investing activities
Net cash used in acquisitions	0	80,909
Securities available for sale:
Proceeds from maturities, calls, and principal paydowns	119,680	234,543
Proceeds from sales	0	26,236
Purchases	(116,594)	(219,000)
Securities held to maturity:
Proceeds from maturities, calls, and principal paydowns	14,835	16,822
Purchases	(17,363)	(71,988)
Proceeds from FHLB stock redemption	37,179	0
Purchases of Federal Reserve and FHLB stock	(39,408)	(5,584)
Net increase in loans	(174,358)	(119,872)
Proceeds from settlement of bank owned life insurance	765	0
Purchases of premises and equipment	(3,498)	(2,272)
Proceeds from sales of other real estate owned	19,639	0
Proceeds from the sale of equity investment	1,919	2,122
Net cash used in investing activities	(157,204)	(58,084)
Financing activities
Net increase (decrease) in deposits	152,364	(19,593)
Net increase in short-term borrowings	78,436	201,066
Issuance of long-term debt	120,000	0
Repayments of long-term debt	(194,785)	(163,307)
Proceeds from the issuance of shares to employee benefit plans and other stock plans	1,128	(965)
Purchase of treasury stock	(72)	(5,460)
Cash dividends and payment for fractional shares	(18,425)	(15,568)
Net cash provided by (used in) financing activities	138,646	(3,827)
Net increase (decrease) in cash and cash equivalents	24,411	(19,981)
Cash and cash equivalents at beginning of period	158,926	163,668
Cash and cash equivalents at end of period	183,337	143,687
Cash paid during the period for:
Interest	13,405	16,853
Income taxes paid	19,496	4,525
Noncash investing activities:
Loans transferred to other real estate owned	785	3,031
Acquisitions:
Fair value of assets acquired	0	1,503,810
Fair value of liabilities assumed	$ 0	$ 1,284,038

XML

Fair Values Measurements and Fair Value of Financial Instruments (Details) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Securities Available for Sale [Abstract]
Total Securities Available for Sale	$ 1,378,799,000	$ 1,364,881,000
Trading Securities	7,355,000	5,779,000
Liabilities [Abstract]
Collateral dependent impaired financing receivable with specific reserves	9,000,000
Allowance for loan and lease losses collateral dependent impaired loans with specific reserves	1,700,000
Liquidation expense ratio on impaired collateral minimum (in hundredths)	10.00%
Liquidation expense ratio on impaired collateral maximum (in hundredths)	35.00%
Financial assets [Abstract]
Securities held to maturity	123,376,000	113,276,000
Financial liabilities [Abstract]
Time deposits	1,002,431,000	1,021,142,000
Long-term debt	251,125,000	308,823,000
Junior subordinated debt	101,196,000	101,196,000
Significant Other Observable Inputs (Level 2) [Member] | Carrying Amount [Member]
Financial assets [Abstract]
Securities held to maturity	125,965,000	117,283,000
Financial liabilities [Abstract]
Time deposits	1,002,431,000	1,021,142,000
Long-term debt	251,125,000	308,823,000
Junior subordinated debt	101,196,000	101,196,000
Significant Other Observable Inputs (Level 2) [Member] | Estimated Fair Value [Member]
Financial assets [Abstract]
Securities held to maturity	123,376,000	113,276,000
Financial liabilities [Abstract]
Time deposits	999,513,000	1,023,982,000
Long-term debt	254,321,000	325,195,000
Junior subordinated debt	108,079,000	105,121,000
Significant Unobservable Inputs (Level 3) [Member] | Carrying Amount [Member]
Financial assets [Abstract]
Net Loans	5,504,954,000	5,337,361,000
Significant Unobservable Inputs (Level 3) [Member] | Estimated Fair Value [Member]
Financial assets [Abstract]
Net Loans	5,552,074,000	5,386,520,000
Recurring Basis [Member]
Securities Available for Sale [Abstract]
U.S. Treasury	33,324,000	43,616,000
Federal Agency	307,141,000	278,915,000
State & municipal	105,348,000	113,665,000
Mortgage-backed	397,387,000	364,164,000
Collateralized mortgage obligations	519,809,000	549,528,000
Other securities	15,790,000	14,993,000
Total Securities Available for Sale	1,378,799,000	1,364,881,000
Trading Securities	7,355,000	5,779,000
Interest Rate Swaps	2,799,000	281,000
Total	1,388,953,000	1,370,941,000
Liabilities [Abstract]
Interest Rate Swaps	2,799,000	281,000
Total	2,799,000	281,000
Recurring Basis [Member] | Quoted Prices in Active Market for Identical Assets (Level I) [Member]
Securities Available for Sale [Abstract]
U.S. Treasury	33,324,000	43,616,000
Federal Agency	0	0
State & municipal	0	0
Mortgage-backed	0	0
Collateralized mortgage obligations	0	0
Other securities	7,511,000	6,796,000
Total Securities Available for Sale	40,835,000	50,412,000
Trading Securities	7,355,000	5,779,000
Interest Rate Swaps	0	0
Total	48,190,000	56,191,000
Liabilities [Abstract]
Interest Rate Swaps	0	0
Total	0	0
Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member]
Securities Available for Sale [Abstract]
U.S. Treasury	0	0
Federal Agency	307,141,000	278,915,000
State & municipal	105,348,000	113,665,000
Mortgage-backed	397,387,000	364,164,000
Collateralized mortgage obligations	519,809,000	549,528,000
Other securities	8,279,000	8,197,000
Total Securities Available for Sale	1,337,964,000	1,314,469,000
Trading Securities	0	0
Interest Rate Swaps	2,799,000	281,000
Total	1,340,763,000	1,314,750,000
Liabilities [Abstract]
Interest Rate Swaps	2,799,000	281,000
Total	2,799,000	281,000
Recurring Basis [Member] | Significant Unobservable Inputs (Level 3) [Member]
Securities Available for Sale [Abstract]
U.S. Treasury	0	0
Federal Agency	0	0
State & municipal	0	0
Mortgage-backed	0	0
Collateralized mortgage obligations	0	0
Other securities	0	0
Total Securities Available for Sale	0	0
Trading Securities	0	0
Interest Rate Swaps	0	0
Total	0	0
Liabilities [Abstract]
Interest Rate Swaps	0	0
Total	$ 0	$ 0

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Reconciliation of basic and diluted earnings per share

The following is a reconciliation of basic and diluted earnings per share for the periods presented in the consolidated statements of income.

Three months ended June 30,	2014		2013
(in thousands, except per share data)
Basic EPS:
Weighted average common shares outstanding		43,865		43,923
Net income available to common shareholders		27,640		16,916
Basic EPS	$	0.63	$	0.39
Diluted EPS:
Weighted average common shares outstanding		43,865		43,923
Dilutive effect of common stock options and restricted stock		498		393
Weighted average common shares and common share equivalents		44,363		44,316
Net income available to common shareholders		27,640		16,916
Diluted EPS	$	0.62	$	0.38

Six months ended June 30,	2014		2013
(in thousands, except per share data)
Basic EPS:
Weighted average common shares outstanding		43,829		40,187
Net income available to common shareholders		45,649		24,565
Basic EPS	$	1.04	$	0.61
Diluted EPS:
Weighted average common shares outstanding		43,829		40,187
Dilutive effect of common stock options and restricted stock		500		388
Weighted average common shares and common share equivalents		44,329		40,575
Net income available to common shareholders		45,649		24,565
Diluted EPS	$	1.03	$	0.61

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Defined Benefit Postretirement Plans (Tables)

6 Months Ended

Jun. 30, 2014

Defined Benefit Postretirement Plans [Abstract]

Components of Net Periodic Pension Benefits and Other Benefit Costs

The components of expense for Pension Benefits and Other Benefits are set forth below (in thousands):

	Pension Benefits						Other Benefits
	Three months ended June 30,						Three months ended June 30,
Components of net periodic benefit cost:	2014			2013			2014			2013
Service cost	$	587		$	604		$	4		$	6
Interest cost		1,040			830			90			75
Expected return on plan assets		(2,175	)		(1,929	)		-			-
Net amortization		25			711			(6	)		(1	)
Total cost (benefit)	$	(523	)	$	216		$	88		$	80

	Pension Benefits						Other Benefits
	Six months ended June 30,						Six months ended June 30,
Components of net periodic benefit cost:	2014			2013			2014			2013
Service cost	$	1,174		$	1,209		$	8		$	12
Interest cost		2,080			1,659			180			150
Expected return on plan assets		(4,350	)		(3,858	)		-			-
Net amortization		50			1,314			(12	)		222
Total cost (benefit)	$	(1,046	)	$	324		$	176		$	384

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Commitments and Contingencies (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Commitment to Extend Credits and Unused Lines of Credit [Member]
Guarantor Obligations [Line Items]
Commitments - maximum potential obligation	$ 1,100.0	$ 1,100.0
Standby Letters of Credit [Member]
Guarantor Obligations [Line Items]
Commitments - maximum potential obligation	38.5	36.8
Obligation instrument term	5 years
Commercial Letters of Credit [Member]
Guarantor Obligations [Line Items]
Commitments - maximum potential obligation	$ 39.2	$ 41.3

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Reclassification Adjustments Out of Other Comprehensive (Loss) Income (Tables)

6 Months Ended

Jun. 30, 2014

Reclassification Adjustments Out of Other Comprehensive (Loss) income [Abstract]

Reclassification out of Accumulated Other Comprehensive Income

The following table summarizes the reclassification adjustments out of accumulated other comprehensive income (loss) (in thousands):

Detail About Accumulated Other Comprehensive Income (Loss) Components	Amount reclassified from accumulated other comprehensive income (loss)						Affected line item in the consolidated statement of comprehensive income (loss)
	Three months ended
	June 30, 2014			June 30, 2013
Available for sale securities:
(Gains) losses on available for sale securities	$	(14	)	$	61		Net securities (gains) losses
Tax expense (benefit)		6			(24	)	Income tax expense
Net of tax	$	(8	)	$	37
Pension and other benefits:
Amortization of net gains	$	74		$	765		Salaries and employee benefits
Amortization of prior service costs		(55	)		(55	)	Salaries and employee benefits
Tax benefit		8			284		Income tax expense
Net of tax	$	11		$	426
Total reclassifications during the period, net of tax	$	3		$	463

Detail About Accumulated Other Comprehensive Income (Loss) Components	Amount reclassified from accumulated other comprehensive income (loss)						Affected line item in the consolidated statement of comprehensive income (loss)
	Six months ended
	June 30, 2014			June 30, 2013
Available for sale securities:
Gains on available for sale securities	$	(21	)	$	(1,084	)	Net securities gains
Tax expense		8			434		Income tax expense
Net of tax	$	(13	)	$	(650	)
Pension and other benefits:
Amortization of net gains	$	148		$	1,647		Salaries and employee benefits
Amortization of prior service costs		(110	)		(111	)	Salaries and employee benefits
Tax benefit		15			614		Income tax expense
Net of tax	$	23		$	922
Total reclassifications during the period, net of tax	$	10		$	272

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Fair Values Measurements and Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2014

Fair Value Measurements and Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis

The following tables set forth the Company’s financial assets and liabilities measured on a recurring basis that were accounted for at fair value.  Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement (in thousands):

June 30, 2014:

	Quoted Prices in		Significant		Significant
	Active Markets for		Other		Unobservable		Balance
	Identical Assets		Observable Inputs		Inputs		as of
	(Level 1)		(Level 2)		(Level 3)		June 30, 2014
Assets:
Securities Available for Sale:
U.S. Treasury	$	33,324	$	-	$	-	$	33,324
Federal Agency		-		307,141		-		307,141
State & municipal		-		105,348		-		105,348
Mortgage-backed		-		397,387		-		397,387
Collateralized mortgage obligations		-		519,809		-		519,809
Other securities		7,511		8,279		-		15,790
Total Securities Available for Sale	$	40,835	$	1,337,964	$	-	$	1,378,799
Trading Securities		7,355		-		-		7,355
Interest Rate Swaps		-		2,799		-		2,799
Total	$	48,190	$	1,340,763	$	-	$	1,388,953
Liabilities:
Interest Rate Swaps	$	-	$	2,799	$	-	$	2,799
Total	$	-	$	2,799	$	-	$	2,799

December 31, 2013:

	Quoted Prices in		Significant		Significant
	Active Markets for		Other		Unobservable		Balance
	Identical Assets		Observable Inputs		Inputs		as of
	(Level 1)		(Level 2)		(Level 3)		December 31, 2013
Assets:
Securities Available for Sale:
U.S. Treasury	$	43,616	$	-	$	-	$	43,616
Federal Agency		-		278,915		-		278,915
State & municipal		-		113,665		-		113,665
Mortgage-backed		-		364,164		-		364,164
Collateralized mortgage obligations		-		549,528		-		549,528
Other securities		6,796		8,197		-		14,993
Total Securities Available for Sale	$	50,412	$	1,314,469	$	-	$	1,364,881
Trading Securities		5,779		-		-		5,779
Interest Rate Swaps		-		281		-		281
Total	$	56,191	$	1,314,750	$	-	$	1,370,941
Liabilities:
Interest Rate Swaps	$	-	$	281	$	-	$	281
Total	$	-	$	281	$	-	$	281

Fair Value of Financial Instruments By Balance Sheet Grouping

The following table sets forth information with regard to estimated fair values of financial instruments at June 30, 2014 and December 31, 2013.  This table excludes financial instruments for which the carrying amount approximates fair value.  Financial instruments for which the fair value approximates carrying value include cash and cash equivalents, securities available for sale, trading securities, accrued interest receivable, non-maturity deposits, short-term borrowings, accrued interest payable, and interest rate swaps.

			June 30, 2014				December 31, 2013
(In thousands)	Fair Value Hierarchy		Carrying amount		Estimated fair value		Carrying amount		Estimated fair value
Financial assets
Securities held to maturity		2	$	125,965	$	123,376	$	117,283	$	113,276
Net loans		3		5,504,954		5,552,074		5,337,361		5,386,520
Financial liabilities
Time deposits		2	$	1,002,431	$	999,513	$	1,021,142	$	1,023,982
Long-term debt		2		251,125		254,321		308,823		325,195
Junior subordinated debt		2		101,196		108,079		101,196		105,121

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Consolidated Statements of Stockholders' Equity (unaudited) (Parenthetical) (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Consolidated Statements of Stockholders' Equity (unaudited) [Abstract]
Cash dividends - per share (in dollars per share)	$ 0.42	$ 0.40
Purchase of treasury shares (in shares)	3,288	267,425
Net issuance of shares for acquisition (in shares)		10,346,363
Treasury stock reissued in acquisition (in shares)		408,957
Net issuance of shares to employee benefit plans and other stock plans, including tax benefit (in shares)	189,036	89,338

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Securities (Details) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2014 Position	Dec. 31, 2013 Position
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	$ 1,376,799,000	$ 1,379,751,000
Unrealized gains	18,284,000	14,737,000
Unrealized losses	16,284,000	29,607,000
Estimated fair value	1,378,799,000	1,364,881,000
Sales transactions of securities available for sale [Abstract]
Proceeds from sales	26,200,000
Gross realized gains	1,100,000
Amortized costs of securities available for sale pledged to secure public deposits	1,400,000,000	1,400,000,000
Amortized costs of securities available for sale pledged as collateral for repurchase agreements	225,900,000	218,400,000
Unrealized Loss Position, Fair Value [Abstract]
Less Than 12 Months, Fair Value	116,831,000	812,106,000
12 Months or Longer, Fair Value	570,064,000	9,842,000
Total, Fair Value	686,895,000	821,948,000
Unrealized Loss Position, Unrealized Losses [Abstract]
Less than 12 months Unrealized Losses	(621,000)	(29,201,000)
12 months or longer Unrealized Losses	(15,663,000)	(406,000)
Total Unrealized Losses	(16,284,000)	(29,607,000)
Unrealized Loss Position, Number of Positions [Abstract]
Less Than 12 Months, Number of Positions	55	314
12 Months or Longer, Number of Positions	150	2
Total, Number of Positions	205	316
Schedule of Held-to-maturity Securities [Line Items]
Amortized cost	125,965,000	117,283,000
Unrealized gains	550,000	570,000
Unrealized losses	3,139,000	4,577,000
Estimated fair value	123,376,000	113,276,000
Unrealized Loss Position, Fair Value [Abstract]
Less Than 12 Months, Fair Value		58,468,000
12 Months or Longer, Fair Value		0
Total, Fair Value		58,468,000
Unrealized Loss Position, Unrealized Losses [Abstract]
Less Than 12 Months, Unrealized Losses		(4,577,000)
12 Months or Longer, Unrealized Losses		0
Total, Unrealized Losses		(4,577,000)
Unrealized Loss Position, Number of Positions [Abstract]
Less Than 12 Months, Number of Positions		6
12 Months or Longer, Number of Positions		0
Total, Number of Positions		6
Consolidated stockholders' equity threshold percentage that no single issuer of securities exceeded except for U.S. Government securities. (in hundredths)	10.00%
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis [Abstract]
Within one year	29,964,000
From one to five years	359,226,000
From five to ten years	215,602,000
After ten years	759,045,000
Total, Amortized Cost	1,363,837,000
Available-for-sale Securities, Debt Maturities, Fair Value [Abstract]
Within one year	30,109,000
From one to five years	358,895,000
From five to ten years	220,020,000
After ten years	753,985,000
Total, Fair Value	1,363,009,000
Held-to-maturity Securities, Debt Maturities, Net Carrying Amount [Abstract]
Within one year	30,983,000
From one to five years	17,462,000
From five to ten years	15,636,000
After ten years	61,884,000
Amortized cost	125,965,000	117,283,000
Held-to-maturity Securities, Debt Maturities, Fair Value [Abstract]
Within one year	31,083,000
From one to five years	17,651,000
From five to ten years	15,772,000
After ten years	58,870,000
Total, Fair Value	123,376,000	113,276,000
State & Municipal [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized cost	65,320,000	54,305,000
Unrealized gains	425,000	442,000
Unrealized losses	0	8,000
Estimated fair value	65,745,000	54,739,000
Unrealized Loss Position, Fair Value [Abstract]
Less Than 12 Months, Fair Value		1,012,000
12 Months or Longer, Fair Value		0
Total, Fair Value		1,012,000
Unrealized Loss Position, Unrealized Losses [Abstract]
Less Than 12 Months, Unrealized Losses		(8,000)
12 Months or Longer, Unrealized Losses		0
Total, Unrealized Losses		(8,000)
Unrealized Loss Position, Number of Positions [Abstract]
Less Than 12 Months, Number of Positions		1
12 Months or Longer, Number of Positions		0
Total, Number of Positions		1
Held-to-maturity Securities, Debt Maturities, Net Carrying Amount [Abstract]
Amortized cost	65,320,000	54,305,000
Held-to-maturity Securities, Debt Maturities, Fair Value [Abstract]
Total, Fair Value	65,745,000	54,739,000
Mortgage backed [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized cost	853,000	953,000
Unrealized gains	125,000	128,000
Unrealized losses	0	0
Estimated fair value	978,000	1,081,000
Held-to-maturity Securities, Debt Maturities, Net Carrying Amount [Abstract]
Amortized cost	853,000	953,000
Held-to-maturity Securities, Debt Maturities, Fair Value [Abstract]
Total, Fair Value	978,000	1,081,000
Collateralized Mortgage Obligations [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized cost	59,792,000	62,025,000
Unrealized gains	0	0
Unrealized losses	3,139,000	4,569,000
Estimated fair value	56,653,000	57,456,000
Unrealized Loss Position, Fair Value [Abstract]
Less Than 12 Months, Fair Value	56,653,000	57,456,000
12 Months or Longer, Fair Value	0	0
Total, Fair Value	56,653,000	57,456,000
Unrealized Loss Position, Unrealized Losses [Abstract]
Less Than 12 Months, Unrealized Losses	(3,139,000)	(4,569,000)
12 Months or Longer, Unrealized Losses	0	0
Total, Unrealized Losses	(3,139,000)	(4,569,000)
Unrealized Loss Position, Number of Positions [Abstract]
Less Than 12 Months, Number of Positions	5	5
12 Months or Longer, Number of Positions	0	0
Total, Number of Positions	5	5
Held-to-maturity Securities, Debt Maturities, Net Carrying Amount [Abstract]
Amortized cost	59,792,000	62,025,000
Held-to-maturity Securities, Debt Maturities, Fair Value [Abstract]
Total, Fair Value	56,653,000	57,456,000
US Treasury [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	33,129,000	43,279,000
Unrealized gains	195,000	337,000
Unrealized losses	0	0
Estimated fair value	33,324,000	43,616,000
Federal Agency [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	310,181,000	285,880,000
Unrealized gains	478,000	343,000
Unrealized losses	3,518,000	7,308,000
Estimated fair value	307,141,000	278,915,000
Unrealized Loss Position, Fair Value [Abstract]
Less Than 12 Months, Fair Value	14,584,000	233,935,000
12 Months or Longer, Fair Value	227,183,000	9,619,000
Total, Fair Value	241,767,000	243,554,000
Unrealized Loss Position, Unrealized Losses [Abstract]
Less than 12 months Unrealized Losses	(17,000)	(6,927,000)
12 months or longer Unrealized Losses	(3,501,000)	(381,000)
Total Unrealized Losses	(3,518,000)	(7,308,000)
Unrealized Loss Position, Number of Positions [Abstract]
Less Than 12 Months, Number of Positions	2	20
12 Months or Longer, Number of Positions	19	1
Total, Number of Positions	21	21
Mortgage-Backed [Member]
Unrealized Loss Position, Fair Value [Abstract]
Less Than 12 Months, Fair Value	1,523,000	143,080,000
12 Months or Longer, Fair Value	49,695,000	0
Total, Fair Value	51,218,000	143,080,000
Unrealized Loss Position, Unrealized Losses [Abstract]
Less than 12 months Unrealized Losses	(6,000)	(2,216,000)
12 months or longer Unrealized Losses	(516,000)	0
Total Unrealized Losses	(522,000)	(2,216,000)
Unrealized Loss Position, Number of Positions [Abstract]
Less Than 12 Months, Number of Positions	12	79
12 Months or Longer, Number of Positions	36	0
Total, Number of Positions	48	79
Mortgage-Backed [Member] | Government-sponsored enterprises [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	368,988,000	337,666,000
Unrealized gains	8,473,000	5,788,000
Unrealized losses	428,000	2,131,000
Estimated fair value	377,033,000	341,323,000
Mortgage-Backed [Member] | U.S. government agency securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	19,527,000	21,924,000
Unrealized gains	921,000	1,002,000
Unrealized losses	94,000	85,000
Estimated fair value	20,354,000	22,841,000
State & Municipal [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	103,253,000	113,435,000
Unrealized gains	2,267,000	1,842,000
Unrealized losses	172,000	1,612,000
Estimated fair value	105,348,000	113,665,000
Unrealized Loss Position, Fair Value [Abstract]
Less Than 12 Months, Fair Value	8,256,000	50,328,000
12 Months or Longer, Fair Value	20,416,000	0
Total, Fair Value	28,672,000	50,328,000
Unrealized Loss Position, Unrealized Losses [Abstract]
Less than 12 months Unrealized Losses	(22,000)	(1,612,000)
12 months or longer Unrealized Losses	(150,000)	0
Total Unrealized Losses	(172,000)	(1,612,000)
Unrealized Loss Position, Number of Positions [Abstract]
Less Than 12 Months, Number of Positions	28	177
12 Months or Longer, Number of Positions	70	0
Total, Number of Positions	98	177
Collateralized Mortgage Obligations [Member]
Unrealized Loss Position, Fair Value [Abstract]
Less Than 12 Months, Fair Value	89,915,000	379,273,000
12 Months or Longer, Fair Value	269,579,000	0
Total, Fair Value	359,494,000	379,273,000
Unrealized Loss Position, Unrealized Losses [Abstract]
Less than 12 months Unrealized Losses	(542,000)	(18,243,000)
12 months or longer Unrealized Losses	(11,333,000)	0
Total Unrealized Losses	(11,875,000)	(18,243,000)
Unrealized Loss Position, Number of Positions [Abstract]
Less Than 12 Months, Number of Positions	12	36
12 Months or Longer, Number of Positions	23	0
Total, Number of Positions	35	36
Collateralized Mortgage Obligations [Member] | Government-sponsored enterprises [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	480,694,000	521,257,000
Unrealized gains	2,315,000	1,777,000
Unrealized losses	11,816,000	18,141,000
Estimated fair value	471,193,000	504,893,000
Collateralized Mortgage Obligations [Member] | U.S. government agency securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	48,065,000	43,943,000
Unrealized gains	610,000	794,000
Unrealized losses	59,000	102,000
Estimated fair value	48,616,000	44,635,000
Other Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	12,962,000	12,367,000
Unrealized gains	3,025,000	2,854,000
Unrealized losses	197,000	228,000
Estimated fair value	15,790,000	14,993,000
Unrealized Loss Position, Fair Value [Abstract]
Less Than 12 Months, Fair Value	2,553,000	5,490,000
12 Months or Longer, Fair Value	3,191,000	223,000
Total, Fair Value	5,744,000	5,713,000
Unrealized Loss Position, Unrealized Losses [Abstract]
Less than 12 months Unrealized Losses	(34,000)	(203,000)
12 months or longer Unrealized Losses	(163,000)	(25,000)
Total Unrealized Losses	$ (197,000)	$ (228,000)
Unrealized Loss Position, Number of Positions [Abstract]
Less Than 12 Months, Number of Positions	1	2
12 Months or Longer, Number of Positions	2	1
Total, Number of Positions	3	3

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Defined Benefit Postretirement Plans (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Defined Benefit Plan Disclosure [Line Items]
Transition obligation period of recognition			20 years
Pension Benefits [Member]
Components of net periodic benefit cost [Abstract]
Service cost	$ 587	$ 604	$ 1,174	$ 1,209
Interest cost	1,040	830	2,080	1,659
Expected return on plan assets	(2,175)	(1,929)	(4,350)	(3,858)
Net amortization	25	711	50	1,314
Total cost (benefit)	(523)	216	(1,046)	324
Other Benefits [Member]
Components of net periodic benefit cost [Abstract]
Service cost	4	6	8	12
Interest cost	90	75	180	150
Expected return on plan assets	0	0	0	0
Net amortization	(6)	(1)	(12)	222
Total cost (benefit)	$ 88	$ 80	$ 176	$ 384

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Consolidated Balance Sheets (unaudited) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Assets
Cash and due from banks	$ 178,539	$ 157,625
Short-term interest bearing accounts	4,798	1,301
Securities available for sale, at fair value	1,378,799	1,364,881
Securities held to maturity (fair value $123,376 and $113,276, respectively)	125,965	117,283
Trading securities	7,355	5,779
Federal Reserve and Federal Home Loan Bank stock	49,093	46,864
Loans	5,574,488	5,406,795
Less allowance for loan losses	69,534	69,434
Net loans and leases	5,504,954	5,337,361
Premises and equipment, net	87,972	88,327
Goodwill	263,634	264,997
Intangible assets, net	22,819	25,557
Bank owned life insurance	116,007	114,966
Other assets	129,577	127,234
Total assets	7,869,512	7,652,175
Liabilities
Demand (noninterest bearing)	1,676,246	1,645,641
Savings, NOW, and money market	3,363,911	3,223,441
Time	1,002,431	1,021,142
Total deposits	6,042,588	5,890,224
Short-term borrowings	534,478	456,042
Long-term debt	251,125	308,823
Junior subordinated debt	101,196	101,196
Other liabilities	82,984	79,321
Total liabilities	7,012,371	6,835,606
Stockholders' equity
Preferred stock, $0.01 par value. Authorized 2,500,000 shares at June 30, 2014 and December 31, 2013	0	0
Common stock, $0.01 par value. Authorized 100,000,000 shares at June 30, 2014 and December 31, 2013; issued 49,651,494 at June 30, 2014 and December 31, 2013	497	497
Additional paid-in-capital	574,002	574,152
Retained earnings	413,011	385,787
Accumulated other comprehensive loss	(6,555)	(16,765)
Common stock in treasury, at cost, 5,952,696 and 6,138,444 shares at June 30, 2014 and December 31, 2013, respectively	(123,814)	(127,102)
Total stockholders' equity	857,141	816,569
Total liabilities and stockholders' equity	$ 7,869,512	$ 7,652,175

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Sale of Equity Investment (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Sale of Equity Investment [Abstract]
Date of disposal			Apr. 17, 2014
Percentage of ownership interest sold (in hundredths)	20.00%		20.00%
Book value	$ 3,000,000		$ 3,000,000
Total sale price of investment	140,000,000		140,000,000
Gain on sale of equity investments	$ 19,401,000	$ 0	$ 19,401,000	$ 0

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Consolidated Statements of Comprehensive Income (unaudited) (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Other comprehensive (loss) income, before tax
Unrealized net holding (losses) gains arising during the period, pre-tax amounts	$ 8,267	$ (24,712)	$ 16,892	$ (26,464)
Reclassification adjustment for net gains related to securities available for sale included in net income, pre-tax amounts	14	(61)	21	1,084
Amortization of prior service cost and actuarial gains, pre-tax amounts	$ 19	$ 710	$ 38	$ 1,536

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Allowance for Loan Losses and Credit Quality of Loans, Past Due Loans (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment, Aging [Abstract]
Minimum number of days past due for nonaccrual loan status	90 days
Financing Receivable, Recorded Investment, Past Due [Abstract]
31 - 60 Days Past Due Accruing	$ 24,899	$ 31,961
61 - 90 Days Past Due Accruing	4,517	5,894
Greater Than 90 Days Past Due Accruing	2,186	3,737
Total Past Due Accruing	31,602	41,592
Non-Accrual	51,234	49,965
Current	5,491,652	5,315,238
Ending balance of loans	5,574,488	5,406,795
Originated Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Abstract]
31 - 60 Days Past Due Accruing	21,621	28,124
61 - 90 Days Past Due Accruing	4,193	5,660
Greater Than 90 Days Past Due Accruing	2,085	3,657
Total Past Due Accruing	27,899	37,441
Non-Accrual	36,351	33,883
Current	4,664,090	4,405,079
Ending balance of loans	4,728,340	4,476,403
ACQUIRED [Member]
Financing Receivable, Recorded Investment, Past Due [Abstract]
31 - 60 Days Past Due Accruing	3,278	3,837
61 - 90 Days Past Due Accruing	324	234
Greater Than 90 Days Past Due Accruing	101	80
Total Past Due Accruing	3,703	4,151
Non-Accrual	14,883	16,082
Current	827,562	910,159
Ending balance of loans	846,148	930,392
Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Abstract]
Ending balance of loans	2,476,246	2,392,621
Commercial Loans [Member] | Originated Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Abstract]
31 - 60 Days Past Due Accruing	1,096	3,368
61 - 90 Days Past Due Accruing	451	390
Greater Than 90 Days Past Due Accruing	0	105
Total Past Due Accruing	1,547	3,863
Non-Accrual	19,442	19,300
Current	2,077,767	1,967,069
Ending balance of loans	2,098,756	1,990,232
Commercial Loans [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment, Past Due [Abstract]
31 - 60 Days Past Due Accruing	1,037	344
61 - 90 Days Past Due Accruing	0	2
Greater Than 90 Days Past Due Accruing	0	0
Total Past Due Accruing	1,037	346
Non-Accrual	10,722	11,498
Current	365,731	390,545
Ending balance of loans	377,490	402,389
Commercial [Member] | Originated Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Abstract]
31 - 60 Days Past Due Accruing	53	105
61 - 90 Days Past Due Accruing	0	247
Greater Than 90 Days Past Due Accruing	0	0
Total Past Due Accruing	53	352
Non-Accrual	3,885	3,669
Current	653,268	612,402
Ending balance of loans	657,206	616,423
Commercial [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment, Past Due [Abstract]
31 - 60 Days Past Due Accruing	14	24
61 - 90 Days Past Due Accruing	0	0
Greater Than 90 Days Past Due Accruing	0	0
Total Past Due Accruing	14	24
Non-Accrual	6,339	6,599
Current	92,335	96,603
Ending balance of loans	98,688	103,226
Commercial Real Estate [Member] | Originated Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Abstract]
31 - 60 Days Past Due Accruing	0	1,366
61 - 90 Days Past Due Accruing	0	0
Greater Than 90 Days Past Due Accruing	0	0
Total Past Due Accruing	0	1,366
Non-Accrual	6,616	7,834
Current	994,773	925,116
Ending balance of loans	1,001,389	934,316
Commercial Real Estate [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment, Past Due [Abstract]
31 - 60 Days Past Due Accruing	582	0
61 - 90 Days Past Due Accruing	0	0
Greater Than 90 Days Past Due Accruing	0	0
Total Past Due Accruing	582	0
Non-Accrual	3,429	3,559
Current	210,204	225,455
Ending balance of loans	214,215	229,014
Agricultural [Member] | Originated Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Abstract]
31 - 60 Days Past Due Accruing	170	150
61 - 90 Days Past Due Accruing	0	21
Greater Than 90 Days Past Due Accruing	0	0
Total Past Due Accruing	170	171
Non-Accrual	1,343	1,135
Current	55,572	63,856
Ending balance of loans	57,085	65,162
Agricultural Real Estate [Member] | Originated Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Abstract]
31 - 60 Days Past Due Accruing	4	519
61 - 90 Days Past Due Accruing	0	0
Greater Than 90 Days Past Due Accruing	0	0
Total Past Due Accruing	4	519
Non-Accrual	1,590	961
Current	40,768	35,172
Ending balance of loans	42,362	36,652
Business Banking [Member] | Originated Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Abstract]
31 - 60 Days Past Due Accruing	869	1,228
61 - 90 Days Past Due Accruing	451	122
Greater Than 90 Days Past Due Accruing	0	105
Total Past Due Accruing	1,320	1,455
Non-Accrual	6,008	5,701
Current	333,386	330,523
Ending balance of loans	340,714	337,679
Business Banking [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment, Past Due [Abstract]
31 - 60 Days Past Due Accruing	441	320
61 - 90 Days Past Due Accruing	0	2
Greater Than 90 Days Past Due Accruing	0	0
Total Past Due Accruing	441	322
Non-Accrual	954	1,340
Current	63,192	68,487
Ending balance of loans	64,587	70,149
Consumer Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Abstract]
Ending balance of loans	2,025,035	1,972,537
Consumer Loans [Member] | Originated Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Abstract]
31 - 60 Days Past Due Accruing	17,443	20,805
61 - 90 Days Past Due Accruing	3,148	4,891
Greater Than 90 Days Past Due Accruing	1,966	2,744
Total Past Due Accruing	22,557	28,440
Non-Accrual	9,198	7,478
Current	1,814,027	1,717,032
Ending balance of loans	1,845,782	1,752,950
Consumer Loans [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment, Past Due [Abstract]
31 - 60 Days Past Due Accruing	924	1,768
61 - 90 Days Past Due Accruing	324	232
Greater Than 90 Days Past Due Accruing	101	80
Total Past Due Accruing	1,349	2,080
Non-Accrual	663	712
Current	177,241	216,795
Ending balance of loans	179,253	219,587
Indirect [Member] | Originated Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Abstract]
31 - 60 Days Past Due Accruing	12,444	14,093
61 - 90 Days Past Due Accruing	2,015	2,878
Greater Than 90 Days Past Due Accruing	1,100	1,583
Total Past Due Accruing	15,559	18,554
Non-Accrual	1,359	1,461
Current	1,265,140	1,141,829
Ending balance of loans	1,282,058	1,161,844
Indirect [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment, Past Due [Abstract]
31 - 60 Days Past Due Accruing	481	939
61 - 90 Days Past Due Accruing	114	113
Greater Than 90 Days Past Due Accruing	54	71
Total Past Due Accruing	649	1,123
Non-Accrual	118	93
Current	91,212	123,870
Ending balance of loans	91,979	125,086
Home Equity Member] | Originated Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Abstract]
31 - 60 Days Past Due Accruing	4,470	6,033
61 - 90 Days Past Due Accruing	995	1,888
Greater Than 90 Days Past Due Accruing	839	1,115
Total Past Due Accruing	6,304	9,036
Non-Accrual	7,772	5,931
Current	494,123	517,856
Ending balance of loans	508,199	532,823
Home Equity Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment, Past Due [Abstract]
31 - 60 Days Past Due Accruing	370	753
61 - 90 Days Past Due Accruing	204	63
Greater Than 90 Days Past Due Accruing	36	0
Total Past Due Accruing	610	816
Non-Accrual	514	570
Current	80,068	85,690
Ending balance of loans	81,192	87,076
Direct [Member] | Originated Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Abstract]
31 - 60 Days Past Due Accruing	529	679
61 - 90 Days Past Due Accruing	138	125
Greater Than 90 Days Past Due Accruing	27	46
Total Past Due Accruing	694	850
Non-Accrual	67	86
Current	54,764	57,347
Ending balance of loans	55,525	58,283
Direct [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment, Past Due [Abstract]
31 - 60 Days Past Due Accruing	73	76
61 - 90 Days Past Due Accruing	6	56
Greater Than 90 Days Past Due Accruing	11	9
Total Past Due Accruing	90	141
Non-Accrual	31	49
Current	5,961	7,235
Ending balance of loans	6,082	7,425
Residential Real Estate Mortgages [Member]
Financing Receivable, Recorded Investment, Past Due [Abstract]
Ending balance of loans	1,073,207	1,041,637
Residential Real Estate Mortgages [Member] | Originated Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Abstract]
31 - 60 Days Past Due Accruing	3,082	3,951
61 - 90 Days Past Due Accruing	594	379
Greater Than 90 Days Past Due Accruing	119	808
Total Past Due Accruing	3,795	5,138
Non-Accrual	7,711	7,105
Current	772,296	720,978
Ending balance of loans	783,802	733,221
Residential Real Estate Mortgages [Member] | ACQUIRED [Member]
Financing Receivable, Recorded Investment, Past Due [Abstract]
31 - 60 Days Past Due Accruing	1,317	1,725
61 - 90 Days Past Due Accruing	0	0
Greater Than 90 Days Past Due Accruing	0	0
Total Past Due Accruing	1,317	1,725
Non-Accrual	3,498	3,872
Current	284,590	302,819
Ending balance of loans	$ 289,405	$ 308,416

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Securities (Policies)

6 Months Ended

Jun. 30, 2014

Securities [Abstract]

Investment, Policy

Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses or in other comprehensive income, depending on whether the Company intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss.  If the Company intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the other-than-temporary impairment shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date.  If the Company does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the other-than-temporary impairment shall be separated into (a) the amount representing the credit loss and (b) the amount related to all other factors.  The amount of the total other-than-temporary impairment related to the credit loss shall be recognized in earnings. The amount of the total other-than-temporary impairment related to other factors shall be recognized in other comprehensive income, net of applicable taxes.

In estimating other-than-temporary impairment losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the historical and implied volatility of the fair value of the security.

Management has the intent to hold the securities classified as held to maturity until they mature, at which time it is believed the Company will receive full value for the securities. Furthermore, as of June 30, 2014, management also had the intent to hold, and will not be required to sell, the securities classified as available for sale for a period of time sufficient for a recovery of cost, which may be until maturity.  The unrealized losses are due to increases in market interest rates over the yields available at the time the underlying securities were purchased. When necessary, the Company has performed a discounted cash flow analysis to determine whether or not it will receive the contractual principal and interest on certain securities.  The fair value is expected to recover as the bonds approach their maturity date or repricing date or if market yields for such investments decline.  As of June 30, 2014, management believes the impairments detailed in the table above are temporary and no other-than-temporary impairment losses have been realized in the Company’s consolidated statements of income.

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Allowance for Loan Losses and Credit Quality of Loans, Impaired Loans (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Allowance for Loan Losses and Credit Quality of Loans [Abstract]
Minimum balance for classified loans to be evaluated individually for impairment	$ 500,000		$ 500,000
Financing Receivable, Impaired [Line Items]
Recorded Investment Balance (Book)	31,884,000		31,884,000		31,440,000
Unpaid Principal Balance (Legal)	36,984,000		36,984,000		35,430,000
Related Allowance	2,100,000		2,100,000		715,000
Average Recorded Investment	32,027,000	20,716,000	32,339,000	21,911,000
Interest Income Recognized	151,000	36,000	284,000	193,000
Originated Loans [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	22,250,000	20,176,000	22,472,000	21,911,000
Interest Income Recognized	151,000	36,000	284,000	193,000
Originated Loans [Member] | Commercial [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	2,013,000	3,354,000	2,025,000	4,331,000
Interest Income Recognized	0	29,000	0	58,000
Originated Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	10,062,000	11,222,000	10,739,000	11,361,000
Interest Income Recognized	42,000	(51,000)	84,000	21,000
Originated Loans [Member] | Agricultural [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	123,000	201,000	124,000	270,000
Interest Income Recognized	0	(3,000)	1,000	1,000
Originated Loans [Member] | Agricultural Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	1,412,000	896,000	1,418,000	898,000
Interest Income Recognized	12,000	12,000	23,000	24,000
Originated Loans [Member] | Business Banking [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	548,000	78,000	429,000	79,000
Interest Income Recognized	11,000	3,000	23,000	3,000
Originated Loans [Member] | Home Equity [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	5,289,000	2,967,000	4,959,000	2,944,000
Interest Income Recognized	60,000	29,000	103,000	58,000
Originated Loans [Member] | Residential Real Estate Mortgages [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	2,803,000	1,998,000	2,778,000	2,028,000
Interest Income Recognized	26,000	17,000	50,000	28,000
Acquired Loans [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	9,777,000	0	9,868,000	0
Interest Income Recognized	0	0	0	0
Acquired Loans [Member] | Commercial [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	6,315,000	0	6,375,000	0
Interest Income Recognized	0	0	0	0
Acquired Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	3,462,000	0	3,493,000	0
Interest Income Recognized	0	0	0	0
With No Allowance Recorded [Member] | Originated Loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment Balance (Book)	19,419,000		19,419,000		16,360,000
Unpaid Principal Balance (Legal)	22,003,000		22,003,000		18,173,000
With No Allowance Recorded [Member] | Originated Loans [Member] | Commercial Loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment Balance (Book)	11,081,000		11,081,000		11,100,000
Unpaid Principal Balance (Legal)	12,899,000		12,899,000		12,446,000
With No Allowance Recorded [Member] | Originated Loans [Member] | Commercial [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment Balance (Book)	2,000,000		2,000,000		4,721,000
Unpaid Principal Balance (Legal)	2,096,000		2,096,000		4,777,000
With No Allowance Recorded [Member] | Originated Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment Balance (Book)	6,854,000		6,854,000		4,613,000
Unpaid Principal Balance (Legal)	7,823,000		7,823,000		5,164,000
With No Allowance Recorded [Member] | Originated Loans [Member] | Agricultural [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment Balance (Book)	119,000		119,000		125,000
Unpaid Principal Balance (Legal)	189,000		189,000		195,000
With No Allowance Recorded [Member] | Originated Loans [Member] | Agricultural Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment Balance (Book)	1,406,000		1,406,000		1,431,000
Unpaid Principal Balance (Legal)	1,697,000		1,697,000		1,708,000
With No Allowance Recorded [Member] | Originated Loans [Member] | Business Banking [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment Balance (Book)	702,000		702,000		210,000
Unpaid Principal Balance (Legal)	1,094,000		1,094,000		602,000
With No Allowance Recorded [Member] | Originated Loans [Member] | Home Equity [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment Balance (Book)	5,600,000		5,600,000		3,248,000
Unpaid Principal Balance (Legal)	6,031,000		6,031,000		3,472,000
With No Allowance Recorded [Member] | Originated Loans [Member] | Residential Real Estate Mortgages [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment Balance (Book)	2,738,000		2,738,000		2,012,000
Unpaid Principal Balance (Legal)	3,073,000		3,073,000		2,255,000
With No Allowance Recorded [Member] | Acquired Loans [Member] | Commercial Loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment Balance (Book)	3,430,000		3,430,000		10,060,000
Unpaid Principal Balance (Legal)	3,836,000		3,836,000		10,380,000
With No Allowance Recorded [Member] | Acquired Loans [Member] | Commercial [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment Balance (Book)	0		0		6,501,000
Unpaid Principal Balance (Legal)	0		0		6,538,000
With No Allowance Recorded [Member] | Acquired Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment Balance (Book)	3,430,000		3,430,000		3,559,000
Unpaid Principal Balance (Legal)	3,836,000		3,836,000		3,842,000
With An Allowance Recorded [Member] | Originated Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment Balance (Book)	2,793,000		2,793,000		5,020,000
Unpaid Principal Balance (Legal)	4,649,000		4,649,000		6,877,000
Related Allowance	600,000		600,000		715,000
With An Allowance Recorded [Member] | Acquired Loans [Member] | Commercial [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment Balance (Book)	6,242,000		6,242,000		0
Unpaid Principal Balance (Legal)	6,496,000		6,496,000		0
Related Allowance	$ 1,500,000		$ 1,500,000		$ 0

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Defined Benefit Postretirement Plans (Policies)

6 Months Ended

Jun. 30, 2014

Defined Benefit Postretirement Plans [Abstract]

Postemployment Benefit Plans, Policy

The Company has a qualified, noncontributory, defined benefit pension plan (“the Plan”) covering substantially all of its employees at June 30, 2014.  Benefits paid from the plan are based on age, years of service, compensation and social security benefits, and are determined in accordance with defined formulas. The Company’s policy is to fund the pension plan in accordance with Employee Retirement Income Security Act of 1974 (“ERISA”) standards. Assets of the plan are invested in publicly traded stocks and bonds.  The Company is not required to make contributions to the Plan in 2014, and did not do so during the six months ended June 30, 2014.

The Company assumed a noncontributory, defined benefit pension plan in the Alliance Financial Corporation (“Alliance”) acquisition.  This plan covers certain Alliance full-time employees who met eligibility requirements on October 6, 2006, at which time all benefits were frozen.  Under the plan, retirement benefits are primarily a function of both the years of service and the level of compensation.  Effective May 1, 2013, this plan was merged into the Plan.

Market conditions can result in an unusually high degree of volatility and increase the risks and short term liquidity associated with certain investments held by the Plan which could impact the value of these investments.

In addition to the Plan, the Company also provides supplemental employee retirement plans to certain current and former executives.  These supplemental employee retirement plans and the Plan are collectively referred to herein as “Pension Benefits.”

Also, the Company provides certain health care benefits for retired employees.  Benefits are accrued over the employees’ active service period. Only employees that were employed by the Company on or before January 1, 2000 are eligible to receive postretirement health care benefits.  This health care benefits plan is contributory for participating retirees, requiring participants to absorb certain deductibles and coinsurance amounts with contributions adjusted annually to reflect cost sharing provisions and benefit limitations called for in the plan.  Eligibility is contingent upon the direct transition from active employment status to retirement without any break in employment from the Company.  Employees also must be participants in the Company’s medical plan prior to their retirement.  The Company funds the cost of postretirement health care as benefits are paid. The Company elected to recognize the transition obligation on a delayed basis over twenty years.  In addition, the Company assumed post-retirement medical life insurance benefits for certain Alliance employees, retirees and their spouses, if applicable, in the Alliance acquisition.  These postretirement benefits are referred to herein as “Other Benefits.”  The components of expense for Pension Benefits and Other Benefits are set forth below (in thousands):

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Consolidated Statements of Stockholders' Equity (unaudited) (USD $) In Thousands	Common Stock [Member]	Additional Paid-in-Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Common Stock in Treasury [Member]	Total
Beginning Balance at Dec. 31, 2012	$ 393	$ 346,692	$ 357,558	$ (5,880)	$ (116,490)	$ 582,273
Net income	0	0	24,565	0	0	24,565
Cash dividends	0	0	(15,568)	0	0	(15,568)
Purchases of treasury shares	0	0	0	0	(5,460)	(5,460)
Issuance of shares, net of treasury shares, for acquisition	104	225,447	0	0	(5,779)	219,772
Net issuance of shares to employee benefit plans and other stock plans, including tax benefit	0	(2,506)	0	0	1,479	(1,027)
Stock-based compensation	0	2,726	0	0	0	2,726
Other comprehensive (loss) income	0	0	0	(15,706)	0	(15,706)
Ending Balance at Jun. 30, 2013	497	572,359	366,555	(21,586)	(126,250)	791,575
Beginning Balance at Dec. 31, 2013	497	574,152	385,787	(16,765)	(127,102)	816,569
Net income	0	0	45,649	0	0	45,649
Cash dividends	0	0	(18,425)	0	0	(18,425)
Purchases of treasury shares	0	0	0	0	(72)	(72)
Net issuance of shares to employee benefit plans and other stock plans, including tax benefit	0	(2,232)	0	0	3,360	1,128
Stock-based compensation	0	2,082	0	0	0	2,082
Other comprehensive (loss) income	0	0	0	10,210	0	10,210
Ending Balance at Jun. 30, 2014	$ 497	$ 574,002	$ 413,011	$ (6,555)	$ (123,814)	$ 857,141

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Consolidated Balance Sheets (unaudited) (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Assets
Securities held to maturity fair value	$ 123,376	$ 113,276
Stockholders' equity
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	2,500,000	2,500,000
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	100,000,000	100,000,000
Common stock, shares issued (in shares)	49,651,494	49,651,494
Common stock in treasury, at cost (in shares)	5,952,696	6,138,444

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Reclassification Adjustments Out of Other Comprehensive (Loss) Income

6 Months Ended

Jun. 30, 2014

Reclassification Adjustments Out of Other Comprehensive (Loss) income [Abstract]

Reclassification Adjustments Out of Other Comprehensive (Loss) Income

Note 8. Reclassification Adjustments Out of Other Comprehensive Income (Loss)

The following table summarizes the reclassification adjustments out of accumulated other comprehensive income (loss) (in thousands):

Detail About Accumulated Other Comprehensive Income (Loss) Components	Amount reclassified from accumulated other comprehensive income (loss)						Affected line item in the consolidated statement of comprehensive income (loss)
	Three months ended
	June 30, 2014			June 30, 2013
Available for sale securities:
(Gains) losses on available for sale securities	$	(14	)	$	61		Net securities (gains) losses
Tax expense (benefit)		6			(24	)	Income tax expense
Net of tax	$	(8	)	$	37
Pension and other benefits:
Amortization of net gains	$	74		$	765		Salaries and employee benefits
Amortization of prior service costs		(55	)		(55	)	Salaries and employee benefits
Tax benefit		8			284		Income tax expense
Net of tax	$	11		$	426
Total reclassifications during the period, net of tax	$	3		$	463

Detail About Accumulated Other Comprehensive Income (Loss) Components	Amount reclassified from accumulated other comprehensive income (loss)						Affected line item in the consolidated statement of comprehensive income (loss)
	Six months ended
	June 30, 2014			June 30, 2013
Available for sale securities:
Gains on available for sale securities	$	(21	)	$	(1,084	)	Net securities gains
Tax expense		8			434		Income tax expense
Net of tax	$	(13	)	$	(650	)
Pension and other benefits:
Amortization of net gains	$	148		$	1,647		Salaries and employee benefits
Amortization of prior service costs		(110	)		(111	)	Salaries and employee benefits
Tax benefit		15			614		Income tax expense
Net of tax	$	23		$	922
Total reclassifications during the period, net of tax	$	10		$	272

XML

Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Jul. 31, 2014
Document And Entity Information [Abstract]
Entity Registrant Name	NBT BANCORP INC
Entity Central Index Key	0000790359
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		43,704,282
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2014

XML

Fair Values Measurements and Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2014

Fair Value Measurements and Fair Value of Financial Instruments [Abstract]

Fair Value Measurements and Fair Value of Financial Instruments

Note  9. Fair Value Measurements and Fair Value of Financial Instruments

U.S. GAAP states that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.  Fair value measurements are not adjusted for transaction costs.  A fair value hierarchy exists within U.S. GAAP that 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 measurements) 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, many other sovereign government obligations, 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.  The Company does 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.

For the six month period ending June 30, 2014, the Company has made no transfers of assets between Level 1 and Level 2, and has had no Level 3 activity.

The following tables set forth the Company’s financial assets and liabilities measured on a recurring basis that were accounted for at fair value.  Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement (in thousands):

June 30, 2014:

	Quoted Prices in		Significant		Significant
	Active Markets for		Other		Unobservable		Balance
	Identical Assets		Observable Inputs		Inputs		as of
	(Level 1)		(Level 2)		(Level 3)		June 30, 2014
Assets:
Securities Available for Sale:
U.S. Treasury	$	33,324	$	-	$	-	$	33,324
Federal Agency		-		307,141		-		307,141
State & municipal		-		105,348		-		105,348
Mortgage-backed		-		397,387		-		397,387
Collateralized mortgage obligations		-		519,809		-		519,809
Other securities		7,511		8,279		-		15,790
Total Securities Available for Sale	$	40,835	$	1,337,964	$	-	$	1,378,799
Trading Securities		7,355		-		-		7,355
Interest Rate Swaps		-		2,799		-		2,799
Total	$	48,190	$	1,340,763	$	-	$	1,388,953
Liabilities:
Interest Rate Swaps	$	-	$	2,799	$	-	$	2,799
Total	$	-	$	2,799	$	-	$	2,799

December 31, 2013:

	Quoted Prices in		Significant		Significant
	Active Markets for		Other		Unobservable		Balance
	Identical Assets		Observable Inputs		Inputs		as of
	(Level 1)		(Level 2)		(Level 3)		December 31, 2013
Assets:
Securities Available for Sale:
U.S. Treasury	$	43,616	$	-	$	-	$	43,616
Federal Agency		-		278,915		-		278,915
State & municipal		-		113,665		-		113,665
Mortgage-backed		-		364,164		-		364,164
Collateralized mortgage obligations		-		549,528		-		549,528
Other securities		6,796		8,197		-		14,993
Total Securities Available for Sale	$	50,412	$	1,314,469	$	-	$	1,364,881
Trading Securities		5,779		-		-		5,779
Interest Rate Swaps		-		281		-		281
Total	$	56,191	$	1,314,750	$	-	$	1,370,941
Liabilities:
Interest Rate Swaps	$	-	$	281	$	-	$	281
Total	$	-	$	281	$	-	$	281

Certain common equity securities are reported at fair value utilizing Level 1 inputs (exchange quoted prices).  The majority of the other 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 participants with whom the Company has historically transacted both purchases and sales of investment securities.  Prices obtained from these sources include prices derived from 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.  Management reviews the methodologies used in pricing the securities by its third party providers.

U.S. GAAP requires disclosure of assets and liabilities measured and recorded at fair value on a nonrecurring basis such as goodwill, loans held for sale, other real estate owned, collateral-dependent impaired loans, mortgage servicing rights, and held-to-maturity securities.  The only nonrecurring fair value measurement recorded during the six month period ended June 30, 2014 was related to impaired loans.  During the six month period ending June 30, 2014, the Company recorded $9.0 million of loans at fair value resulting in a loss of $1.7 million.  The Company uses the fair value of underlying collateral, less costs to sell, to estimate the specific reserves for collateral dependent impaired loans.  The appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses ranging from 10% to 35%.  Based on the valuation techniques used, the fair value measurements for collateral dependent impaired loans are classified as Level 3.

The following table sets forth information with regard to estimated fair values of financial instruments at June 30, 2014 and December 31, 2013.  This table excludes financial instruments for which the carrying amount approximates fair value.  Financial instruments for which the fair value approximates carrying value include cash and cash equivalents, securities available for sale, trading securities, accrued interest receivable, non-maturity deposits, short-term borrowings, accrued interest payable, and interest rate swaps.

			June 30, 2014				December 31, 2013
(In thousands)	Fair Value Hierarchy		Carrying amount		Estimated fair value		Carrying amount		Estimated fair value
Financial assets
Securities held to maturity		2	$	125,965	$	123,376	$	117,283	$	113,276
Net loans		3		5,504,954		5,552,074		5,337,361		5,386,520
Financial liabilities
Time deposits		2	$	1,002,431	$	999,513	$	1,021,142	$	1,023,982
Long-term debt		2		251,125		254,321		308,823		325,195
Junior subordinated debt		2		101,196		108,079		101,196		105,121

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on and off balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. For example, the Company has a substantial trust and investment management operation that contributes net fee income annually. The trust and investment management operation is not considered a financial instrument, and its value has not been incorporated into the fair value estimates. Other significant assets and liabilities include the benefits resulting from the low-cost funding of deposit liabilities as compared to the cost of borrowing funds in the market, and premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimate of fair value.

Securities Held to Maturity

The fair value of the Company’s investment securities held to maturity is primarily measured using information from a third party pricing service.  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.

Net Loans

The fair value of the Company’s loans was estimated by discounting the expected future cash flows using the current interest rates at which similar loans would be made for the same remaining maturities.  Loans were first segregated by type, and then further segmented into fixed and variable rate and loan quality categories.  Expected future cash flows were projected based on contractual cash flows, adjusted for estimated prepayments.

Time Deposits

The fair value of time deposits was estimated using a discounted cash flow approach that applies prevailing market interest rates for similar maturity instruments.  The fair values of the Company’s time deposit liabilities do not take into consideration the value of the Company’s long-term relationships with depositors, which may have significant value.

Long-Term Debt

The fair value of long-term debt was estimated using a discounted cash flow approach that applies prevailing market interest rates for similar maturity instruments.

Junior Subordinated Debt

The fair value of junior subordinated debt has been estimated using a discounted cash flow analysis.

XML

Consolidated Statements of Income (unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Interest, fee, and dividend income
Interest and fees on loans	$ 60,559	$ 62,031	$ 120,574	$ 115,726
Securities available for sale	6,612	6,537	13,369	12,283
Securities held to maturity	783	548	1,551	1,073
Other	502	488	1,039	891
Total interest, fee, and dividend income	68,456	69,604	136,533	129,973
Interest expense
Deposits	3,000	4,296	6,284	8,446
Short-term borrowings	209	67	440	109
Long-term debt	2,135	3,026	4,642	6,635
Junior subordinated debt	538	560	1,076	988
Total interest expense	5,882	7,949	12,442	16,178
Net interest income	62,574	61,655	124,091	113,795
Provision for loan and lease losses	4,166	6,402	7,762	12,060
Net interest income after provision for loan losses	58,408	55,253	116,329	101,735
Noninterest income
Insurance and other financial services revenue	5,594	5,755	12,331	12,648
Service charges on deposit accounts	4,397	4,933	8,766	9,256
ATM and debit card fees	4,357	4,044	8,429	7,286
Retirement plan administration fees	2,977	2,957	5,895	5,639
Trust	4,953	4,699	9,399	7,612
Bank owned life insurance	978	886	2,360	1,735
Net securities gains (losses)	14	(61)	21	1,084
Gain on the sale of equity investment	19,401	0	19,401	0
Other	3,356	2,324	5,702	5,506
Total noninterest income	46,027	25,537	72,304	50,766
Noninterest expense
Salaries and employee benefits	31,142	29,160	60,676	56,207
Occupancy	5,435	5,219	11,661	10,196
Data processing and communications	4,015	3,854	8,016	7,309
Professional fees and outside services	3,752	3,237	7,167	6,138
Equipment	3,132	2,910	6,248	5,492
Office supplies and postage	1,803	1,656	3,488	3,246
FDIC expenses	1,229	1,273	2,507	2,403
Advertising	726	1,000	1,465	1,723
Amortization of intangible assets	1,236	1,351	2,546	2,202
Loan collection and other real estate owned	801	421	1,841	1,139
Merger expenses	0	1,269	0	11,950
Prepayment penalties on long-term debt	4,554	0	4,554	0
Other	4,911	5,100	10,084	9,150
Total noninterest expense	62,736	56,450	120,253	117,155
Income before income tax expense	41,699	24,340	68,380	35,346
Income tax expense	14,059	7,424	22,731	10,781
Net income	$ 27,640	$ 16,916	$ 45,649	$ 24,565
Earnings per share
Basic (in dollars per share)	$ 0.63	$ 0.39	$ 1.04	$ 0.61
Diluted (in dollars per share)	$ 0.62	$ 0.38	$ 1.03	$ 0.61

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Securities

6 Months Ended

Jun. 30, 2014

Securities [Abstract]

Securities

Note 3. Securities

The amortized cost, estimated fair value, and unrealized gains and losses of securities available for sale are as follows:

(In thousands)	Amortized cost		Unrealized gains		Unrealized losses		Estimated fair value
June 30, 2014
U.S. Treasury	$	33,129	$	195	$	-	$	33,324
Federal Agency		310,181		478		3,518		307,141
State & municipal		103,253		2,267		172		105,348
Mortgage-backed:
Government-sponsored enterprises		368,988		8,473		428		377,033
U.S. government agency securities		19,527		921		94		20,354
Collateralized mortgage obligations:
Government-sponsored enterprises		480,694		2,315		11,816		471,193
U.S. government agency securities		48,065		610		59		48,616
Other securities		12,962		3,025		197		15,790
Total securities available for sale	$	1,376,799	$	18,284	$	16,284	$	1,378,799
December 31, 2013
U.S. Treasury	$	43,279	$	337	$	-	$	43,616
Federal Agency		285,880		343		7,308		278,915
State & municipal		113,435		1,842		1,612		113,665
Mortgage-backed:
Government-sponsored enterprises		337,666		5,788		2,131		341,323
U.S. government agency securities		21,924		1,002		85		22,841
Collateralized mortgage obligations:
Government-sponsored enterprises		521,257		1,777		18,141		504,893
U.S. government agency securities		43,943		794		102		44,635
Other securities		12,367		2,854		228		14,993
Total securities available for sale	$	1,379,751	$	14,737	$	29,607	$	1,364,881

Other securities primarily represent marketable equity securities.

There were no sales of securities available for sale during the six months ended June 30, 2014.  Proceeds from the sales of securities available for sale were $26.2 million during the six months ended June 30, 2013, and gains on the sales were $1.1 million.

Securities with amortized costs totaling $1.4 billion at June 30, 2014 and $1.4 billion at December 31, 2013 were pledged to secure public deposits and for other purposes required or permitted by law.  At June 30, 2014 and December 31, 2013, securities with an amortized cost of $225.9 million and $218.4 million, respectively, were pledged as collateral for securities sold under repurchase agreements.

The amortized cost, estimated fair value, and unrealized gains and losses of securities held to maturity are as follows:

	Amortized		Unrealized		Unrealized		Estimated
(In thousands)	cost		gains		losses		fair value
June 30, 2014
Mortgage-backed	$	853	$	125	$	-	$	978
Collateralized mortgage obligations		59,792		-		3,139		56,653
State & municipal		65,320		425		-		65,745
Total securities held to maturity	$	125,965	$	550	$	3,139	$	123,376
December 31, 2013
Mortgage-backed	$	953	$	128	$	-	$	1,081
Collateralized mortgage obligations		62,025		-		4,569		57,456
State & municipal		54,305		442		8		54,739
Total securities held to maturity	$	117,283	$	570	$	4,577	$	113,276

The following table sets forth information with regard to investment securities with unrealized losses at June 30, 2014 and December 31, 2013:

	Less than 12 months							12 months or longer							Total
Security Type:	Fair Value		Unrealized losses			Number of Positions		Fair Value		Unrealized losses			Number of Positions		Fair Value		Unrealized losses			Number of Positions
June 30, 2014
Investment securities available for sale:
Federal agency	$	14,584		(17	)		2	$	227,183	$	(3,501	)		19	$	241,767	$	(3,518	)		21
State & municipal		8,256		(22	)		28		20,416		(150	)		70		28,672		(172	)		98
Mortgage-backed		1,523		(6	)		12		49,695		(516	)		36		51,218		(522	)		48
Collateralized mortgage obligations		89,915		(542	)		12		269,579		(11,333	)		23		359,494		(11,875	)		35
Other securities		2,553		(34	)		1		3,191		(163	)		2		5,744		(197	)		3
Total securities with unrealized losses	$	116,831	$	(621	)		55	$	570,064	$	(15,663	)		150	$	686,895	$	(16,284	)		205
June 30, 2014
Investment securities held to maturity:
Collateralized mortgage obligations		56,653		(3,139	)		5		-		-			-	$	56,653		(3,139	)		5
December 31, 2013
Investment securities available for sale:
Federal agency	$	233,935	$	(6,927	)		20	$	9,619	$	(381	)		1	$	243,554	$	(7,308	)		21
State & municipal		50,328		(1,612	)		177		-		-			-		50,328		(1,612	)		177
Mortgage-backed		143,080		(2,216	)		79		-		-			-		143,080		(2,216	)		79
Collateralized mortgage obligations		379,273		(18,243	)		36		-		-			-		379,273		(18,243	)		36
Other securities		5,490		(203	)		2		223		(25	)		1		5,713		(228	)		3
Total securities with unrealized losses	$	812,106	$	(29,201	)		314	$	9,842	$	(406	)		2	$	821,948	$	(29,607	)		316
December 31, 2013
Investment securities held to maturity:
Collateralized mortgage obligations	$	57,456	$	(4,569	)		5	$	-	$	-			-	$	57,456	$	(4,569	)		5
State & municipal		1,012		(8	)		1		-		-			-		1,012		(8	)		1
Total securities with unrealized losses	$	58,468	$	(4,577	)		6	$	-	$	-			-	$	58,468	$	(4,577	)		6

Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses or in other comprehensive income, depending on whether the Company intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss.  If the Company intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the other-than-temporary impairment shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date.  If the Company does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the other-than-temporary impairment shall be separated into (a) the amount representing the credit loss and (b) the amount related to all other factors.  The amount of the total other-than-temporary impairment related to the credit loss shall be recognized in earnings. The amount of the total other-than-temporary impairment related to other factors shall be recognized in other comprehensive income, net of applicable taxes.

In estimating other-than-temporary impairment losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the historical and implied volatility of the fair value of the security.

Management has the intent to hold the securities classified as held to maturity until they mature, at which time it is believed the Company will receive full value for the securities. Furthermore, as of June 30, 2014, management also had the intent to hold, and will not be required to sell, the securities classified as available for sale for a period of time sufficient for a recovery of cost, which may be until maturity.  The unrealized losses are due to increases in market interest rates over the yields available at the time the underlying securities were purchased. When necessary, the Company has performed a discounted cash flow analysis to determine whether or not it will receive the contractual principal and interest on certain securities.  The fair value is expected to recover as the bonds approach their maturity date or repricing date or if market yields for such investments decline.  As of June 30, 2014, management believes the impairments detailed in the table above are temporary and no other-than-temporary impairment losses have been realized in the Company’s consolidated statements of income.

The following tables set forth information with regard to contractual maturities of debt securities at June 30, 2014:

(In thousands)	Amortized cost		Estimated fair value
Debt securities classified as available for sale
Within one year	$	29,964	$	30,109
From one to five years		359,226		358,895
From five to ten years		215,602		220,020
After ten years		759,045		753,985
	$	1,363,837	$	1,363,009
Debt securities classified as held to maturity
Within one year	$	30,983	$	31,083
From one to five years		17,462		17,651
From five to ten years		15,636		15,772
After ten years		61,884		58,870
	$	125,965	$	123,376

Maturities of mortgage-backed, collateralized mortgage obligations and asset-backed securities are stated based on their estimated average lives.  Actual maturities may differ from estimated average lives or contractual maturities because, in certain cases, borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

Except for U.S. Government securities, there were no holdings, when taken in the aggregate, of any single issuer that exceeded 10% of consolidated stockholders’ equity at June 30, 2014.

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Basis of Presentation

6 Months Ended

Jun. 30, 2014

Basis of Presentation [Abstract]

Basis of Presentation

Note 2. Basis of Presentation

The accompanying unaudited interim consolidated financial statements include the accounts of the Registrant and its wholly owned subsidiaries, the Bank, NBT Financial and NBT Holdings.  Collectively, the Registrant and its subsidiaries are referred to herein as “the Company.”  The interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods in accordance with generally accepted accounting principles (“GAAP”).  These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2013 Annual Report on Form 10-K. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period.  All intercompany transactions have been eliminated in consolidation. Amounts in the prior period financial statements are reclassified whenever necessary to conform to current period presentation.  The Company has evaluated subsequent events for potential recognition and/or disclosure and there were none identified.

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Allowance for Loan Losses and Credit Quality of Loans (Policies)

6 Months Ended

Jun. 30, 2014

Allowance for Loan Losses and Credit Quality of Loans [Abstract]

Allowance for Loan Losses

The allowance for loan losses is maintained at a level estimated by management to provide adequately for risk of probable losses inherent in the current loan portfolio. The adequacy of the allowance for loan losses is continuously monitored.  It is assessed for adequacy using a methodology designed to ensure the level of the allowance reasonably reflects the loan portfolio’s risk profile. It is evaluated to ensure that it is sufficient to absorb all reasonably estimable credit losses inherent in the current loan portfolio.

To develop and document a systematic methodology for determining the allowance for loan losses, the Company has divided the loan portfolio into three segments, each with different risk characteristics and methodologies for assessing risk.  Those segments are further segregated between our loans accounted for under the amortized cost method (referred to as “originated” loans) and loans acquired in a business combination (referred to as “acquired” loans).  Each portfolio segment is broken down into class segments where appropriate.  Class segments contain unique measurement attributes, risk characteristics and methods for monitoring and assessing risk that are necessary to develop the allowance for loan losses.  Unique characteristics such as borrower type, loan type, collateral type, and risk characteristics define each class segment.  The following table illustrates the portfolio and class segments for the Company’s loan portfolio:

Portfolio	Class
Commercial Loans	Commercial
	Commercial Real Estate
	Agricultural
	Agricultural Real Estate
	Business Banking
Consumer Loans	Indirect
	Home Equity
	Direct
Residential Real Estate Mortgages

Commercial Loans

The Company offers a variety of commercial loan products including commercial (non-real estate), commercial real estate, agricultural, agricultural real estate, and business banking loans.  The Company’s underwriting analysis for commercial loans typically includes credit verification, independent appraisals, a review of the borrower’s financial condition, and a detailed analysis of the borrower’s underlying cash flows.

Commercial – The Company offers a variety of loan options to meet the specific needs of our commercial customers including term loans, time notes and lines of credit.  Such loans are made available to businesses for working capital needs such as inventory and receivables, business expansion and equipment purchases. Generally, a collateral lien is placed on equipment or other assets owned by the borrower.  These loans carry a higher risk than commercial real estate loans due to the nature of the underlying collateral, which can be business assets such as equipment and accounts receivable. To reduce the risk, management also attempts to secure real estate as collateral and obtain personal guarantees of the borrowers.

Commercial Real Estate – The Company offers commercial real estate loans to finance real estate purchases, refinancings, expansions and improvements to commercial properties.  Commercial real estate loans are made to finance the purchases of real estate, generally with completed structures. These commercial real estate loans are secured by first liens on the real estate, which may include apartments, commercial structures, housing businesses, healthcare facilities, and other non owner-occupied facilities.  These loans are typically less risky than commercial loans, since they are secured by real estate and buildings, and are generally originated in amounts of no more than 80% of the appraised value of the property.

Agricultural – The Company offers a variety of agricultural loans to meet the needs of our agricultural customers including term loans, time notes, and lines of credit.  These loans are made to purchase livestock, purchase and modernize equipment, and finance seasonal crop expenses.  Generally, a collateral lien is placed on the livestock, equipment, produce inventories, and/or receivables owned by the borrower.  These loans may carry a higher risk than commercial and agricultural real estate loans due to the industry price volatility, and in some cases, the perishable nature of the underlying collateral.  To reduce these risks, management may attempt to secure these loans with additional real estate collateral, obtain personal guarantees of the borrowers, or obtain government loan guarantees to provide further support.

Agricultural Real Estate – The Company offers real estate loans to our agricultural customers to finance farm related real estate purchases, refinancings, expansions, and improvements to agricultural properties such as barns, production facilities, and land.  The agricultural real estate loans are secured by first liens on the farm real estate.  Because they are secured by land and buildings, these loans may be less risky than agricultural loans.  These loans are typically originated in amounts of no more than 75% of the appraised value of the property.  Government loan guarantees may be obtained to provide further support.

Business Banking - The Company offers a variety of loan options to meet the specific needs of our business banking customers including term loans, business banking mortgages and lines of credit.  Such loans are generally less than $0.5 million and are made available to businesses for working capital such as inventory and receivables, business expansion, equipment purchases, and agricultural needs.  Generally, a collateral lien is placed on equipment or other assets owned by the borrower such as inventory and/or receivables.  These loans carry a higher risk than commercial loans due to the smaller size of the borrower and lower levels of capital.  To reduce the risk, the Company obtains personal guarantees of the owners for a majority of the loans.

Consumer Loans

The Company offers a variety of consumer loan products including indirect, home equity, and direct loans.

Indirect – The Company maintains relationships with many dealers primarily in the communities that we serve.  Through these relationships, the company primarily finances the purchases of automobiles and recreational vehicles (such as campers, boats, etc.) indirectly through dealer relationships.  Approximately 75% of the indirect relationships represent automobile financing.  Most of these loans carry a fixed rate of interest with principal repayment terms typically ranging from three to six years, based upon the nature of the collateral and the size of the loan. The majority of indirect consumer loans are underwritten on a secured basis using the underlying collateral being financed.

Home Equity –The Company offers fixed home equity loans as well as home equity lines of credit to consumers to finance home improvements, debt consolidation, education and other uses.  Consumers are able to borrow up to 85% of the equity in their homes.  The Company originates home equity lines of credit and second mortgage loans (loans secured by a second junior lien position on one-to-four-family residential real estate).  These loans carry a higher risk than first mortgage residential loans as they are in a second position with respect to collateral.  Risk is reduced through underwriting criteria, which include credit verification, appraisals, a review of the borrower's financial condition, and personal cash flows.  A security interest, with title insurance when necessary, is taken in the underlying real estate.

Direct – The Company offers a variety of consumer installment loans to finance vehicle purchases, mobile home purchases and personal expenditures.  Most of these loans carry a fixed rate of interest with principal repayment terms typically ranging from one to ten years, based upon the nature of the collateral and the size of the loan. The majority of consumer loans are underwritten on a secured basis using the underlying collateral being financed or a customer's deposit account. In addition to installment loans, the Company also offers personal lines of credit and overdraft protection.  A minimal amount of loans are unsecured, which carry a higher risk of loss.

Residential Real Estate Mortgages

Residential real estate loans consist primarily of loans secured by first or second deeds of trust on primary residences.  We originate adjustable-rate and fixed-rate, one-to-four-family residential real estate loans for the construction, purchase or refinancing of a mortgage.  These loans are collateralized by owner-occupied properties located in the Company’s market area.  Loans on one-to-four-family residential real estate are generally originated in amounts of no more than 85% of the purchase price or appraised value (whichever is lower), or have private mortgage insurance.  The Company’s underwriting analysis for residential mortgage loans typically includes credit verification, independent appraisals, and a review of the borrower’s financial condition.  Mortgage title insurance and hazard insurance are normally required. Construction loans have a unique risk, because they are secured by an incomplete dwelling. This risk is reduced through periodic site inspections, including one at each loan draw period.

For purposes of evaluating the adequacy of the allowance, the Company considers a number of significant factors that affect the collectability of the portfolio.  For individually analyzed loans, these include estimates of loss exposure, which reflect the facts and circumstances that affect the likelihood of repayment of such loans as of the evaluation date. For homogeneous pools of loans, estimates of the Company’s exposure to credit loss reflect a current assessment of a number of factors, which could affect collectability.  These factors include:  past loss experience;  size, trend, composition, and nature of loans;  changes in lending policies and procedures, including underwriting standards and collection,  charge-offs  and  recoveries; trends experienced in nonperforming and delinquent loans; current economic conditions in the Company’s market;  portfolio concentrations that may affect loss experienced across one or more components of the portfolio; the effect of external factors such as competition, legal and regulatory requirements; and the experience, ability, and depth of lending management and staff. In addition, various regulatory agencies, as an integral component of their examination process, periodically review the Company’s allowance for loan losses.  Such agencies may require the Company to make loan grade changes as well as recognize additions to the allowance based on their examinations.

After a thorough consideration of the factors discussed above, any required additions or reductions to the allowance for loan losses are made periodically by charges or credits to the provision for loan losses. These charges or credits are necessary to maintain the allowance at a level which management believes is reasonably reflective of overall inherent risk of probable loss in the portfolio. While management uses available information to recognize losses on loans, additions and reductions of the allowance may fluctuate from one reporting period to another.  These fluctuations are reflective of changes in risk associated with portfolio content and/or changes in management’s assessment of any or all of the determining factors discussed above.

Credit Quality Indicators

Credit Quality Indicators

The Company has developed an internal loan grading system to evaluate and quantify the Company’s loan portfolio with respect to quality and risk.  The system focuses on, among other things, financial strength of borrowers, experience and depth of borrower’s management, primary and secondary sources of repayment, payment history, nature of the business, and outlook on particular industries.  The internal grading system enables the Company to monitor the quality of the entire loan portfolio on a consistent basis and provide management with an early warning system, enabling recognition and response to problem loans and potential problem loans.

Commercial Grading System

For commercial and agricultural loans, the Company uses a grading system that relies on quantifiable and measurable characteristics when available.  This would include comparison of financial strength to available industry averages, comparison of transaction factors (loan terms and conditions) to loan policy, and comparison of credit history to stated repayment terms and industry averages. Some grading factors are necessarily more subjective such as economic and industry factors, regulatory environment, and management.  Classified commercial loans consist of loans graded substandard and below.  The grading system for commercial and agricultural loans is as follows:

· Doubtful

A doubtful loan has a high probability of total or substantial loss, but because of specific pending events that may strengthen the asset, its classification as a loss is deferred. Doubtful borrowers are usually in default, lack adequate liquidity or capital, and lack the resources necessary to remain an operating entity. Pending events can include mergers, acquisitions, liquidations, capital injections, the perfection of liens on additional collateral, the valuation of collateral, and refinancing. Generally, pending events should be resolved within a relatively short period and the ratings will be adjusted based on the new information. Nonaccrual treatment is required for doubtful assets because of the high probability of loss.

· Substandard

Substandard loans have a high probability of payment default, or they have other well-defined weaknesses. They require more intensive supervision by bank management. Substandard loans are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity, or marginal capitalization. Repayment may depend on collateral or other credit risk mitigants. For some Substandard loans, the likelihood of full collection of interest and principal may be in doubt and those loans should be placed on nonaccrual. Although Substandard assets in the aggregate will have a distinct potential for loss, an individual asset’s loss potential does not have to be distinct for the asset to be rated Substandard.

· Special Mention

Special Mention loans have potential weaknesses that may, if not checked or corrected, weaken the asset or inadequately protect the Company’s position at some future date. These loans pose elevated risk, but their weakness does not yet justify a Substandard classification. Borrowers may be experiencing adverse operating trends (declining revenues or margins) or may be struggling with an ill-proportioned balance sheet (e.g., increasing inventory without an increase in sales, high leverage, tight liquidity). Adverse economic or market conditions, such as interest rate increases or the entry of a new competitor, may also support a Special Mention rating. Although a Special Mention loan has a higher probability of default than a pass asset, its default is not imminent.

· Pass

Loans graded as Pass encompass all loans not graded as Doubtful, Substandard, or Special Mention.  Pass loans are in compliance with loan covenants, and payments are generally made as agreed.  Pass loans range from superior quality to fair quality.

Business Banking Grading System

Business banking loans are graded as either Classified or Non-classified:

· Classified

Classified loans are inadequately protected by the current worth and paying capacity of the obligor or, if applicable, the collateral pledged.   These loans have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt, or in some cases make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.   Classified loans have a high probability of payment default, or a high probability of total or substantial loss.  These loans require more intensive supervision by management and are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity, or marginal capitalization.  Repayment may depend on collateral or other credit risk mitigants.  When the likelihood of full collection of interest and principal may be in doubt; classified loans are considered to have a nonaccrual status.   In some cases, Classified loans are considered uncollectible and of such little value that their continuance as assets is not warranted.

· Non-classified

Loans graded as Non-classified encompass all loans not graded as Classified.  Non-classified loans are in compliance with loan covenants, and payments are generally made as agreed.

Consumer and Residential Mortgage Grading System

Consumer and Residential Mortgage loans are graded as either Performing or Nonperforming.   Nonperforming loans are loans that are 1) over 90 days past due and interest is still accruing, 2) on nonaccrual status or 3) restructured.  All loans not meeting any of these three criteria are considered Performing.

Troubled Debt Restructured Loans

Troubled Debt Restructured Loans

The Company’s loan portfolio includes certain loans that have been modified where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties.  These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions.  Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months.  Substantially all of these modifications included one or a combination of the following: an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; temporary reduction in the interest rate; or change in scheduled payment amount.

When the Company modifies a loan, management evaluates any possible impairment based on the present value of the expected future cash flows, discounted at the contractual interest rate of the original loan agreement, except when the sole (remaining) source of repayment for the loan is the operation or liquidation of the collateral.  In these cases, management uses the current fair value of the collateral, less selling costs, instead of discounted cash flows.  If management determines that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized by segment or class of loan as applicable, through an allowance estimate or a charge-off to the allowance.  Segment and class status is determined by the loan’s classification at origination.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2014

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 10. Commitments and Contingencies

The Company is a party to financial instruments in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuating interest rates. These financial instruments include commitments to extend credit, unused lines of credit, and standby letters of credit. Exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to make loans and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit origination guidelines, portfolio maintenance and management procedures as other credit and off-balance sheet products.  Commitments to extend credit and unused lines of credit totaled $1.1 billion at June 30, 2014 and December 31, 2013.  Since commitments to extend credit and unused lines of credit may expire without being fully drawn upon, this amount does not necessarily represent future cash commitments. Collateral obtained upon exercise of the commitment is determined using management’s credit evaluation of the borrower and may include accounts receivable, inventory, property, land and other items.

The Company guarantees the obligations or performance of customers by issuing standby letters of credit to third parties. These standby letters of credit are frequently issued in support of third party debt, such as corporate debt issuances, industrial revenue bonds and municipal securities. The credit risk involved in issuing standby letters of credit is essentially the same as the credit risk involved in extending loan facilities to customers, and they are subject to the same credit origination guidelines, portfolio maintenance and management procedures as other credit and off-balance sheet products. Typically, these instruments have terms of five years or less and expire unused; therefore, the total amounts do not necessarily represent future cash commitments. Standby letters of credit totaled $38.5 million at June 30, 2014 and $36.8 million at December 31, 2013.  As of June 30, 2014, the fair value of standby letters of credit was not significant to the Company’s consolidated financial statements.

The Company has also entered into commercial letter of credit agreements on behalf of its customers.  Under these agreements, the Company, on the request of its customer, opens the letter of credit and makes a commitment to honor draws made under the agreement, whereby the beneficiary is normally the provider of goods and/or services and the Company essentially replaces the customer as the payee.  The credit risk involved in issuing commercial letters of credit is essentially the same as the credit risk involved in extending loan facilities to customers, and they are subject to the same credit origination guidelines, portfolio maintenance and management procedures as other credit and off-balance sheet products.  Typically, these agreements vary in terms and the total amounts do not necessarily represent future cash commitments.  Commercial letters of credit totaled $39.2 million at June 30, 2014 and $41.3 million at December 31, 2013.  As of June 30, 2014, the fair value of commercial letters of credit was not significant to the Company’s consolidated financial statements.

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Defined Benefit Postretirement Plans

6 Months Ended

Jun. 30, 2014

Defined Benefit Postretirement Plans [Abstract]

Defined Benefit Postretirement Plans

Note 6. Defined Benefit Postretirement Plans

The Company has a qualified, noncontributory, defined benefit pension plan (“the Plan”) covering substantially all of its employees at June 30, 2014.  Benefits paid from the plan are based on age, years of service, compensation and social security benefits, and are determined in accordance with defined formulas. The Company’s policy is to fund the pension plan in accordance with Employee Retirement Income Security Act of 1974 (“ERISA”) standards. Assets of the plan are invested in publicly traded stocks and bonds.  The Company is not required to make contributions to the Plan in 2014, and did not do so during the six months ended June 30, 2014.

The Company assumed a noncontributory, defined benefit pension plan in the Alliance Financial Corporation (“Alliance”) acquisition.  This plan covers certain Alliance full-time employees who met eligibility requirements on October 6, 2006, at which time all benefits were frozen.  Under the plan, retirement benefits are primarily a function of both the years of service and the level of compensation.  Effective May 1, 2013, this plan was merged into the Plan.

Market conditions can result in an unusually high degree of volatility and increase the risks and short term liquidity associated with certain investments held by the Plan which could impact the value of these investments.

In addition to the Plan, the Company also provides supplemental employee retirement plans to certain current and former executives.  These supplemental employee retirement plans and the Plan are collectively referred to herein as “Pension Benefits.”

Also, the Company provides certain health care benefits for retired employees.  Benefits are accrued over the employees’ active service period. Only employees that were employed by the Company on or before January 1, 2000 are eligible to receive postretirement health care benefits.  This health care benefits plan is contributory for participating retirees, requiring participants to absorb certain deductibles and coinsurance amounts with contributions adjusted annually to reflect cost sharing provisions and benefit limitations called for in the plan.  Eligibility is contingent upon the direct transition from active employment status to retirement without any break in employment from the Company.  Employees also must be participants in the Company’s medical plan prior to their retirement.  The Company funds the cost of postretirement health care as benefits are paid. The Company elected to recognize the transition obligation on a delayed basis over twenty years.  In addition, the Company assumed post-retirement medical life insurance benefits for certain Alliance employees, retirees and their spouses, if applicable, in the Alliance acquisition.  These postretirement benefits are referred to herein as “Other Benefits.”  The components of expense for Pension Benefits and Other Benefits are set forth below (in thousands):

	Pension Benefits						Other Benefits
	Three months ended June 30,						Three months ended June 30,
Components of net periodic benefit cost:	2014			2013			2014			2013
Service cost	$	587		$	604		$	4		$	6
Interest cost		1,040			830			90			75
Expected return on plan assets		(2,175	)		(1,929	)		-			-
Net amortization		25			711			(6	)		(1	)
Total cost (benefit)	$	(523	)	$	216		$	88		$	80

	Pension Benefits						Other Benefits
	Six months ended June 30,						Six months ended June 30,
Components of net periodic benefit cost:	2014			2013			2014			2013
Service cost	$	1,174		$	1,209		$	8		$	12
Interest cost		2,080			1,659			180			150
Expected return on plan assets		(4,350	)		(3,858	)		-			-
Net amortization		50			1,314			(12	)		222
Total cost (benefit)	$	(1,046	)	$	324		$	176		$	384

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Allowance for Loan Losses and Credit Quality of Loans

6 Months Ended

Jun. 30, 2014

Allowance for Loan Losses and Credit Quality of Loans [Abstract]

Allowance for Loan Losses and Credit Quality of Loans

Note  4. Allowance for Loan Losses and Credit Quality of Loans

Allowance for Loan Losses

The allowance for loan losses is maintained at a level estimated by management to provide adequately for risk of probable losses inherent in the current loan portfolio. The adequacy of the allowance for loan losses is continuously monitored.  It is assessed for adequacy using a methodology designed to ensure the level of the allowance reasonably reflects the loan portfolio’s risk profile. It is evaluated to ensure that it is sufficient to absorb all reasonably estimable credit losses inherent in the current loan portfolio.

To develop and document a systematic methodology for determining the allowance for loan losses, the Company has divided the loan portfolio into three segments, each with different risk characteristics and methodologies for assessing risk.  Those segments are further segregated between our loans accounted for under the amortized cost method (referred to as “originated” loans) and loans acquired in a business combination (referred to as “acquired” loans).  Each portfolio segment is broken down into class segments where appropriate.  Class segments contain unique measurement attributes, risk characteristics and methods for monitoring and assessing risk that are necessary to develop the allowance for loan losses.  Unique characteristics such as borrower type, loan type, collateral type, and risk characteristics define each class segment.  The following table illustrates the portfolio and class segments for the Company’s loan portfolio:

Portfolio	Class
Commercial Loans	Commercial
	Commercial Real Estate
	Agricultural
	Agricultural Real Estate
	Business Banking
Consumer Loans	Indirect
	Home Equity
	Direct
Residential Real Estate Mortgages

Commercial Loans

The Company offers a variety of commercial loan products including commercial (non-real estate), commercial real estate, agricultural, agricultural real estate, and business banking loans.  The Company’s underwriting analysis for commercial loans typically includes credit verification, independent appraisals, a review of the borrower’s financial condition, and a detailed analysis of the borrower’s underlying cash flows.

Commercial – The Company offers a variety of loan options to meet the specific needs of our commercial customers including term loans, time notes and lines of credit.  Such loans are made available to businesses for working capital needs such as inventory and receivables, business expansion and equipment purchases. Generally, a collateral lien is placed on equipment or other assets owned by the borrower.  These loans carry a higher risk than commercial real estate loans due to the nature of the underlying collateral, which can be business assets such as equipment and accounts receivable. To reduce the risk, management also attempts to secure real estate as collateral and obtain personal guarantees of the borrowers.

Commercial Real Estate – The Company offers commercial real estate loans to finance real estate purchases, refinancings, expansions and improvements to commercial properties.  Commercial real estate loans are made to finance the purchases of real estate, generally with completed structures. These commercial real estate loans are secured by first liens on the real estate, which may include apartments, commercial structures, housing businesses, healthcare facilities, and other non owner-occupied facilities.  These loans are typically less risky than commercial loans, since they are secured by real estate and buildings, and are generally originated in amounts of no more than 80% of the appraised value of the property.

Agricultural – The Company offers a variety of agricultural loans to meet the needs of our agricultural customers including term loans, time notes, and lines of credit.  These loans are made to purchase livestock, purchase and modernize equipment, and finance seasonal crop expenses.  Generally, a collateral lien is placed on the livestock, equipment, produce inventories, and/or receivables owned by the borrower.  These loans may carry a higher risk than commercial and agricultural real estate loans due to the industry price volatility, and in some cases, the perishable nature of the underlying collateral.  To reduce these risks, management may attempt to secure these loans with additional real estate collateral, obtain personal guarantees of the borrowers, or obtain government loan guarantees to provide further support.

Agricultural Real Estate – The Company offers real estate loans to our agricultural customers to finance farm related real estate purchases, refinancings, expansions, and improvements to agricultural properties such as barns, production facilities, and land.  The agricultural real estate loans are secured by first liens on the farm real estate.  Because they are secured by land and buildings, these loans may be less risky than agricultural loans.  These loans are typically originated in amounts of no more than 75% of the appraised value of the property.  Government loan guarantees may be obtained to provide further support.

Business Banking - The Company offers a variety of loan options to meet the specific needs of our business banking customers including term loans, business banking mortgages and lines of credit.  Such loans are generally less than $0.5 million and are made available to businesses for working capital such as inventory and receivables, business expansion, equipment purchases, and agricultural needs.  Generally, a collateral lien is placed on equipment or other assets owned by the borrower such as inventory and/or receivables.  These loans carry a higher risk than commercial loans due to the smaller size of the borrower and lower levels of capital.  To reduce the risk, the Company obtains personal guarantees of the owners for a majority of the loans.

Consumer Loans

The Company offers a variety of consumer loan products including indirect, home equity, and direct loans.

Indirect – The Company maintains relationships with many dealers primarily in the communities that we serve.  Through these relationships, the company primarily finances the purchases of automobiles and recreational vehicles (such as campers, boats, etc.) indirectly through dealer relationships.  Approximately 75% of the indirect relationships represent automobile financing.  Most of these loans carry a fixed rate of interest with principal repayment terms typically ranging from three to six years, based upon the nature of the collateral and the size of the loan. The majority of indirect consumer loans are underwritten on a secured basis using the underlying collateral being financed.

Home Equity –The Company offers fixed home equity loans as well as home equity lines of credit to consumers to finance home improvements, debt consolidation, education and other uses.  Consumers are able to borrow up to 85% of the equity in their homes.  The Company originates home equity lines of credit and second mortgage loans (loans secured by a second junior lien position on one-to-four-family residential real estate).  These loans carry a higher risk than first mortgage residential loans as they are in a second position with respect to collateral.  Risk is reduced through underwriting criteria, which include credit verification, appraisals, a review of the borrower's financial condition, and personal cash flows.  A security interest, with title insurance when necessary, is taken in the underlying real estate.

Direct – The Company offers a variety of consumer installment loans to finance vehicle purchases, mobile home purchases and personal expenditures.  Most of these loans carry a fixed rate of interest with principal repayment terms typically ranging from one to ten years, based upon the nature of the collateral and the size of the loan. The majority of consumer loans are underwritten on a secured basis using the underlying collateral being financed or a customer's deposit account. In addition to installment loans, the Company also offers personal lines of credit and overdraft protection.  A minimal amount of loans are unsecured, which carry a higher risk of loss.

Residential Real Estate Mortgages

Residential real estate loans consist primarily of loans secured by first or second deeds of trust on primary residences.  We originate adjustable-rate and fixed-rate, one-to-four-family residential real estate loans for the construction, purchase or refinancing of a mortgage.  These loans are collateralized by owner-occupied properties located in the Company’s market area.  Loans on one-to-four-family residential real estate are generally originated in amounts of no more than 85% of the purchase price or appraised value (whichever is lower), or have private mortgage insurance.  The Company’s underwriting analysis for residential mortgage loans typically includes credit verification, independent appraisals, and a review of the borrower’s financial condition.  Mortgage title insurance and hazard insurance are normally required. Construction loans have a unique risk, because they are secured by an incomplete dwelling. This risk is reduced through periodic site inspections, including one at each loan draw period.

For purposes of evaluating the adequacy of the allowance, the Company considers a number of significant factors that affect the collectability of the portfolio.  For individually analyzed loans, these include estimates of loss exposure, which reflect the facts and circumstances that affect the likelihood of repayment of such loans as of the evaluation date. For homogeneous pools of loans, estimates of the Company’s exposure to credit loss reflect a current assessment of a number of factors, which could affect collectability.  These factors include:  past loss experience;  size, trend, composition, and nature of loans;  changes in lending policies and procedures, including underwriting standards and collection,  charge-offs  and  recoveries; trends experienced in nonperforming and delinquent loans; current economic conditions in the Company’s market;  portfolio concentrations that may affect loss experienced across one or more components of the portfolio; the effect of external factors such as competition, legal and regulatory requirements; and the experience, ability, and depth of lending management and staff. In addition, various regulatory agencies, as an integral component of their examination process, periodically review the Company’s allowance for loan losses.  Such agencies may require the Company to make loan grade changes as well as recognize additions to the allowance based on their examinations.

After a thorough consideration of the factors discussed above, any required additions or reductions to the allowance for loan losses are made periodically by charges or credits to the provision for loan losses. These charges or credits are necessary to maintain the allowance at a level which management believes is reasonably reflective of overall inherent risk of probable loss in the portfolio. While management uses available information to recognize losses on loans, additions and reductions of the allowance may fluctuate from one reporting period to another.  These fluctuations are reflective of changes in risk associated with portfolio content and/or changes in management’s assessment of any or all of the determining factors discussed above.

The following tables illustrate the changes in the allowance for loan losses by our portfolio segments for the three and six months ended June 30, 2014 and 2013:

							Residential
Three months ended June 30	Commercial			Consumer			Real Estate
	Loans			Loans			Mortgages			Unallocated			Total
Balance as of March 31, 2014	$	34,437		$	28,436		$	6,225		$	336		$	69,434
Charge-offs		(1,427	)		(3,648	)		(165	)		-			(5,240	)
Recoveries		314			714			146			-			1,174
Provision		1,799			2,471			(1	)		(103	)		4,166
Ending Balance as of June 30, 2014	$	35,123		$	27,973		$	6,205		$	233		$	69,534
Balance as of March 31, 2013	$	35,358		$	26,285		$	6,708		$	383		$	68,734
Charge-offs		(1,198	)		(3,653	)		(302	)		-			(5,153	)
Recoveries		416			696			89			-			1,201
Provision		3,128			3,128			311			(165	)		6,402
Ending Balance as of June 30, 2013	$	37,704		$	26,456		$	6,806		$	218		$	71,184

							Residential
Six months ended June 30,	Commercial			Consumer			Real Estate
	Loans			Loans			Mortgages			Unallocated			Total
Balance as of December 31, 2013	$	35,090		$	27,694		$	6,520		$	130		$	69,434
Charge-offs		(1,906	)		(7,680	)		(484	)		-			(10,070	)
Recoveries		713			1,455			240			-			2,408
Provision		1,226			6,504			(71	)		103			7,762
Ending Balance as of June 30, 2014	$	35,123		$	27,973		$	6,205		$	233		$	69,534
Balance as of December 31, 2012	$	35,624		$	27,162		$	6,252		$	296		$	69,334
Charge-offs		(4,520	)		(7,376	)		(973	)		-			(12,869	)
Recoveries		883			1,673			103			-			2,659
Provision		5,717			4,997			1,424			(78	)		12,060
Ending Balance as of June 30, 2013	$	37,704		$	26,456		$	6,806		$	218		$	71,184

For acquired loans, to the extent that we experience deterioration in borrower credit quality resulting in a decrease in our expected cash flows subsequent to acquisition of the loans, an allowance for loan losses would be established based on our estimate of future credit losses over the remaining life of the loans.  As of June 30, 2014, included in the above tables, there was $1.5 million in the allowance for loan losses related to an acquired commercial loan.  There was no allowance as of June 30, 2013 related to acquired loans.  Net charge-offs related to acquired loans totaled approximately $0.1 million and $0.2 million during the three months ended June 30, 2014 and 2013, respectively, and are included in the table above.  Net charge-offs related to acquired loans totaled approximately $0.2 million and $0.4 million during the six months ended June 30, 2014 and 2013, respectively, and are included in the table above.

The following tables illustrate the allowance for loan losses and the recorded investment by portfolio segments as of June 30, 2014 and December 31, 2013:

Allowance for Loan Losses and Recorded Investment in Loans

(in thousands)

					Residential
	Commercial		Consumer		Real Estate
	Loans		Loans		Mortgages		Unallocated		Total
As of June 30, 2014
Allowance for loan losses	$	35,123	$	27,973	$	6,205	$	233	$	69,534
Allowance for loans individually evaluated for impairment		2,100		-		-				2,100
Allowance for loans collectively evaluated for impairment	$	33,023	$	27,973	$	6,205	$	233	$	67,434
Ending balance of loans	$	2,476,246	$	2,025,035	$	1,073,207			$	5,574,488
Ending balance of originated loans individually evaluated for impairment		13,874		5,600		2,738				22,212
Ending balance of acquired loans individually evaluated for impairment		9,672		-		-				9,672
Ending balance of acquired loans collectively evaluated for impairment		367,818		179,253		289,405				836,476
Ending balance of originated loans collectively evaluated for impairment	$	2,084,882	$	1,840,182	$	781,064			$	4,706,128
As of December 31, 2013
Allowance for loan losses	$	35,090	$	27,694	$	6,520	$	130	$	69,434
Allowance for loans individually evaluated for impairment		715		-		-				715
Allowance for loans collectively evaluated for impairment	$	34,375	$	27,694	$	6,520	$	130	$	68,719
Ending balance of loans	$	2,392,621	$	1,972,537	$	1,041,637			$	5,406,795
Ending balance of originated loans individually evaluated for impairment		16,120		3,248		2,012				21,380
Ending balance of acquired loans individually evaluated for impairment		10,060		-		-				10,060
Ending balance of acquired loans collectively evaluated for impairment		392,329		219,587		308,416				920,332
Ending balance of originated loans collectively evaluated for impairment	$	1,974,112	$	1,749,702	$	731,209			$	4,455,023

Credit Quality of Loans

Loans are placed on nonaccrual status when timely collection of principal and interest in accordance with contractual terms is doubtful. Loans are transferred to nonaccrual status generally when principal or interest payments become ninety days delinquent, unless the loan is well secured and in the process of collection, or sooner when management concludes or circumstances indicate that borrowers may be unable to meet contractual principal or interest payments.  When a loan is transferred to a nonaccrual status, all interest previously accrued in the current period but not collected is reversed against interest income in that period. Interest accrued in a prior period and not collected is charged-off against the allowance for loan losses.  The Company’s nonaccrual policies are the same for all classes of financing receivable.

If ultimate repayment of a nonaccrual loan is expected, any payments received are applied in accordance with contractual terms. If ultimate repayment of principal is not expected, any payment received on a nonaccrual loan is applied to principal until ultimate repayment becomes expected.  Nonaccrual loans are returned to accrual status when they become current as to principal and interest and demonstrate a period of performance under the contractual terms and, in the opinion of management, are fully collectible as to principal and interest.  When in the opinion of management the collection of principal appears unlikely, the loan balance is charged-off in total or in part.  For loans in all portfolios, the principal amount is charged off in full or in part as soon as management determines, based on available facts, that the collection of principal in full is improbable.  For commercial loans, management considers specific facts and circumstances relative to individual credits in making such a determination.  For consumer and residential loan classes, management uses specific guidance and thresholds from the Federal Financial Institutions Examination Council’s Uniform Retail Credit Classification and Account Management Policy.

The following table illustrates the Company’s nonaccrual loans by loan class:

Loans on Nonaccrual Status as of:

(In thousands)	June 30, 2014		December 31, 2013
ORIGINATED
Commercial Loans
Commercial	$	3,885	$	3,669
Commercial Real Estate		6,616		7,834
Agricultural		1,343		1,135
Agricultural Real Estate		1,590		961
Business Banking		6,008		5,701
		19,442		19,300
Consumer Loans
Indirect		1,359		1,461
Home Equity		7,772		5,931
Direct		67		86
		9,198		7,478
Residential Real Estate Mortgages		7,711		7,105
	$	36,351	$	33,883
ACQUIRED
Commercial Loans
Commercial	$	6,339	$	6,599
Commercial Real Estate		3,429		3,559
Business Banking		954		1,340
		10,722		11,498
Consumer Loans
Indirect		118		93
Home Equity		514		570
Direct		31		49
		663		712
Residential Real Estate Mortgages		3,498		3,872
	$	14,883	$	16,082
TOTAL NONACCRUAL LOANS	$	51,234	$	49,965

The following tables set forth information with regard to past due and nonperforming loans by loan class as of June 30, 2014 and December 31, 2013:

Age Analysis of Past Due Financing Receivables

As of June 30, 2014

(in thousands)

					Greater Than
	31-60 Days		61-90 Days		90 Days		Total						Recorded
	Past Due		Past Due		Past Due		Past Due						Total
	Accruing		Accruing		Accruing		Accruing		Non-Accrual		Current		Loans
ORIGINATED
Commercial Loans
Commercial	$	53	$	-	$	-	$	53	$	3,885	$	653,268	$	657,206
Commercial Real Estate		-		-		-		-		6,616		994,773		1,001,389
Agricultural		170		-		-		170		1,343		55,572		57,085
Agricultural Real Estate		4		-		-		4		1,590		40,768		42,362
Business Banking		869		451		-		1,320		6,008		333,386		340,714
		1,096		451		-		1,547		19,442		2,077,767		2,098,756
Consumer Loans
Indirect		12,444		2,015		1,100		15,559		1,359		1,265,140		1,282,058
Home Equity		4,470		995		839		6,304		7,772		494,123		508,199
Direct		529		138		27		694		67		54,764		55,525
		17,443		3,148		1,966		22,557		9,198		1,814,027		1,845,782
Residential Real Estate Mortgages		3,082		594		119		3,795		7,711		772,296		783,802
	$	21,621	$	4,193	$	2,085	$	27,899	$	36,351	$	4,664,090	$	4,728,340
ACQUIRED
Commercial Loans
Commercial	$	14	$	-	$	-	$	14	$	6,339		92,335	$	98,688
Commercial Real Estate		582		-		-		582		3,429		210,204		214,215
Business Banking		441		-		-		441		954		63,192		64,587
		1,037		-		-		1,037		10,722		365,731		377,490
Consumer Loans
Indirect		481		114		54		649		118		91,212		91,979
Home Equity		370		204		36		610		514		80,068		81,192
Direct		73		6		11		90		31		5,961		6,082
		924		324		101		1,349		663		177,241		179,253
Residential Real Estate Mortgages		1,317		-		-		1,317		3,498		284,590		289,405
	$	3,278	$	324	$	101	$	3,703	$	14,883	$	827,562	$	846,148
Total Loans	$	24,899	$	4,517	$	2,186	$	31,602	$	51,234	$	5,491,652	$	5,574,488

Age Analysis of Past Due Financing Receivables

As of December 31, 2013

(in thousands)

					Greater Than
	31-60 Days		61-90 Days		90 Days		Total						Recorded
	Past Due		Past Due		Past Due		Past Due						Total
	Accruing		Accruing		Accruing		Accruing		Non-Accrual		Current		Loans
ORIGINATED
Commercial Loans
Commercial	$	105	$	247	$	-	$	352	$	3,669	$	612,402	$	616,423
Commercial Real Estate		1,366		-		-		1,366		7,834		925,116		934,316
Agricultural		150		21		-		171		1,135		63,856		65,162
Agricultural Real Estate		519		-		-		519		961		35,172		36,652
Business Banking		1,228		122		105		1,455		5,701		330,523		337,679
		3,368		390		105		3,863		19,300		1,967,069		1,990,232
Consumer Loans
Indirect		14,093		2,878		1,583		18,554		1,461		1,141,829		1,161,844
Home Equity		6,033		1,888		1,115		9,036		5,931		517,856		532,823
Direct		679		125		46		850		86		57,347		58,283
		20,805		4,891		2,744		28,440		7,478		1,717,032		1,752,950
Residential Real Estate Mortgages		3,951		379		808		5,138		7,105		720,978		733,221
	$	28,124	$	5,660	$	3,657	$	37,441	$	33,883	$	4,405,079	$	4,476,403
ACQUIRED
Commercial Loans
Commercial	$	24	$	-	$	-	$	24	$	6,599	$	96,603	$	103,226
Commercial Real Estate		-		-		-		-		3,559		225,455		229,014
Business Banking		320		2		-		322		1,340		68,487		70,149
		344		2		-		346		11,498		390,545		402,389
Consumer Loans
Indirect		939		113		71		1,123		93		123,870		125,086
Home Equity		753		63		-		816		570		85,690		87,076
Direct		76		56		9		141		49		7,235		7,425
		1,768		232		80		2,080		712		216,795		219,587
Residential Real Estate Mortgages		1,725		-		-		1,725		3,872		302,819		308,416
	$	3,837	$	234	$	80	$	4,151	$	16,082	$	910,159	$	930,392
Total Loans	$	31,961	$	5,894	$	3,737	$	41,592	$	49,965	$	5,315,238	$	5,406,795

There were no material commitments to extend further credit to borrowers with nonperforming loans.

Impaired Loans

The methodology used to establish the allowance for loan losses on impaired loans incorporates specific allocations on loans analyzed individually.  Classified and nonperforming loans with outstanding balances of $0.5 million or more and all troubled debt restructured loans (“TDR”) are evaluated for impairment through the Company’s quarterly status review process.  In determining that we will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreements, we consider factors such as payment history and changes in the financial condition of individual borrowers, local economic conditions, historical loss experience and the conditions of the various markets in which the collateral may be liquidated.  For loans that are impaired as defined by accounting standards, impairment is measured by one of three methods: 1) the fair value of collateral less cost to sell, 2) present value of expected future cash flows or 3) the loan’s observable market price.  All impaired loans are reviewed on a quarterly basis for changes in the measurement of impairment.  Any change to the previously recognized impairment loss is recognized as a change to the allowance account and recorded in the consolidated statement of income as a component of the provision for loan losses.

The following table provides information on loans specifically evaluated for impairment as of June 30, 2014 and December 31, 2013:

	June 30, 2014						December 31, 2013
	Recorded		Unpaid				Recorded		Unpaid
	Investment		Principal				Investment		Principal
	Balance		Balance		Related		Balance		Balance		Related
(in thousands)	(Book)		(Legal)		Allowance		(Book)		(Legal)		Allowance
ORIGINATED
With no related allowance recorded:
Commercial Loans
Commercial	$	2,000	$	2,096			$	4,721	$	4,777
Commercial Real Estate		6,854		7,823				4,613		5,164
Agricultural		119		189				125		195
Agricultural Real Estate		1,406		1,697				1,431		1,708
Business Banking		702		1,094				210		602
Total Commercial Loans		11,081		12,899				11,100		12,446
Consumer Loans
Home Equity		5,600		6,031				3,248		3,472
Residential Real Estate Mortgages		2,738		3,073				2,012		2,255
Total		19,419		22,003				16,360		18,173
With an allowance recorded:
Commercial Loans
Commercial Real Estate		2,793		4,649		600		5,020		6,877		715
ACQUIRED
With no related allowance recorded:
Commercial Loans
Commercial		-		-				6,501		6,538
Commercial Real Estate		3,430		3,836				3,559		3,842
Total Commercial Loans		3,430		3,836				10,060		10,380
With an allowance recorded:
Commercial Loans
Commercial		6,242		6,496		1,500		-		-		-
Total:	$	31,884	$	36,984	$	2,100	$	31,440	$	35,430	$	715

The following tables summarize the average recorded investments on impaired loans specifically evaluated for impairment and the interest income recognized for the three months ended June 30, 2014 and 2013:

	For the three months ended
	June 30, 2014				June 30, 2013
	Average				Average
	Recorded		Interest Income		Recorded		Interest Income
(in thousands)	Investment		Recognized		Investment		Recognized
ORIGINATED
Commercial Loans
Commercial	$	2,013	$	-	$	3,354	$	29
Commercial Real Estate		10,062		42		11,222		(51	)
Agricultural		123		-		201		(3	)
Agricultural Real Estate		1,412		12		896		12
Business Banking		548		11		78		3
Consumer Loans
Home Equity		5,289		60		2,967		29
Residential Real Estate Mortgage		2,803		26		1,998		17
Total Originated	$	22,250	$	151	$	20,716	$	36
ACQUIRED
Commercial Loans
Commercial		6,315		-		-		-
Commercial Real Estate		3,462		-		-		-
Total Acquired	$	9,777	$	-	$	-	$	-
Total Loans	$	32,027	$	151	$	20,716	$	36

	For the six months ended
	June 30, 2014				June 30, 2013
	Average				Average
	Recorded		Interest Income		Recorded		Interest Income
(in thousands)	Investment		Recognized		Investment		Recognized
ORIGINATED
Commercial Loans
Commercial	$	2,025	$	-	$	4,331	$	58
Commercial Real Estate		10,739		84		11,361		21
Agricultural		124		1		270		1
Agricultural Real Estate		1,418		23		898		24
Business Banking		429		23		79		3
Consumer Loans
Home Equity		4,959		103		2,944		58
Residential Real Estate Mortgage		2,778		50		2,028		28
Total Originated		22,472		284		21,911		193
ACQUIRED
Commercial Loans
Commercial		6,375		-		-		-
Commercial Real Estate		3,493		-		-		-
Total Acquired	$	9,868	$	-	$	-	$	-
Total Loans	$	32,339	$	284	$	21,911	$	193

Credit Quality Indicators

The Company has developed an internal loan grading system to evaluate and quantify the Company’s loan portfolio with respect to quality and risk.  The system focuses on, among other things, financial strength of borrowers, experience and depth of borrower’s management, primary and secondary sources of repayment, payment history, nature of the business, and outlook on particular industries.  The internal grading system enables the Company to monitor the quality of the entire loan portfolio on a consistent basis and provide management with an early warning system, enabling recognition and response to problem loans and potential problem loans.

Commercial Grading System

For commercial and agricultural loans, the Company uses a grading system that relies on quantifiable and measurable characteristics when available.  This would include comparison of financial strength to available industry averages, comparison of transaction factors (loan terms and conditions) to loan policy, and comparison of credit history to stated repayment terms and industry averages. Some grading factors are necessarily more subjective such as economic and industry factors, regulatory environment, and management.  Classified commercial loans consist of loans graded substandard and below.  The grading system for commercial and agricultural loans is as follows:

· Doubtful

A doubtful loan has a high probability of total or substantial loss, but because of specific pending events that may strengthen the asset, its classification as a loss is deferred. Doubtful borrowers are usually in default, lack adequate liquidity or capital, and lack the resources necessary to remain an operating entity. Pending events can include mergers, acquisitions, liquidations, capital injections, the perfection of liens on additional collateral, the valuation of collateral, and refinancing. Generally, pending events should be resolved within a relatively short period and the ratings will be adjusted based on the new information. Nonaccrual treatment is required for doubtful assets because of the high probability of loss.

· Substandard

Substandard loans have a high probability of payment default, or they have other well-defined weaknesses. They require more intensive supervision by bank management. Substandard loans are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity, or marginal capitalization. Repayment may depend on collateral or other credit risk mitigants. For some Substandard loans, the likelihood of full collection of interest and principal may be in doubt and those loans should be placed on nonaccrual. Although Substandard assets in the aggregate will have a distinct potential for loss, an individual asset’s loss potential does not have to be distinct for the asset to be rated Substandard.

· Special Mention

Special Mention loans have potential weaknesses that may, if not checked or corrected, weaken the asset or inadequately protect the Company’s position at some future date. These loans pose elevated risk, but their weakness does not yet justify a Substandard classification. Borrowers may be experiencing adverse operating trends (declining revenues or margins) or may be struggling with an ill-proportioned balance sheet (e.g., increasing inventory without an increase in sales, high leverage, tight liquidity). Adverse economic or market conditions, such as interest rate increases or the entry of a new competitor, may also support a Special Mention rating. Although a Special Mention loan has a higher probability of default than a pass asset, its default is not imminent.

· Pass

Loans graded as Pass encompass all loans not graded as Doubtful, Substandard, or Special Mention.  Pass loans are in compliance with loan covenants, and payments are generally made as agreed.  Pass loans range from superior quality to fair quality.

Business Banking Grading System

Business banking loans are graded as either Classified or Non-classified:

· Classified

Classified loans are inadequately protected by the current worth and paying capacity of the obligor or, if applicable, the collateral pledged.   These loans have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt, or in some cases make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.   Classified loans have a high probability of payment default, or a high probability of total or substantial loss.  These loans require more intensive supervision by management and are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity, or marginal capitalization.  Repayment may depend on collateral or other credit risk mitigants.  When the likelihood of full collection of interest and principal may be in doubt; classified loans are considered to have a nonaccrual status.   In some cases, Classified loans are considered uncollectible and of such little value that their continuance as assets is not warranted.

· Non-classified

Loans graded as Non-classified encompass all loans not graded as Classified.  Non-classified loans are in compliance with loan covenants, and payments are generally made as agreed.

Consumer and Residential Mortgage Grading System

Consumer and Residential Mortgage loans are graded as either Performing or Nonperforming.   Nonperforming loans are loans that are 1) over 90 days past due and interest is still accruing, 2) on nonaccrual status or 3) restructured.  All loans not meeting any of these three criteria are considered Performing.

The following tables illustrate the Company’s credit quality by loan class as of June 30, 2014 and December 31, 2013:

Credit Quality Indicators

As of June 30, 2014

ORIGINATED
Commercial Credit Exposure			Commercial				Agricultural
By Internally Assigned Grade:	Commercial		Real Estate		Agricultural		Real Estate		Total
Pass	$	606,388	$	946,883	$	52,603	$	38,503	$	1,644,377
Special Mention		11,782		19,949		354		7		32,092
Substandard		39,036		34,557		4,052		3,852		81,497
Doubtful		-		-		76		-		76
Total	$	657,206	$	1,001,389	$	57,085	$	42,362	$	1,758,042
Business Banking Credit Exposure
By Internally Assigned Grade:	Business Banking								Total
Non-classified	$	323,200							$	323,200
Classified		17,514								17,514
Total	$	340,714							$	340,714
Consumer Credit Exposure
By Payment Activity:	Indirect		Home Equity		Direct				Total
Performing	$	1,279,599	$	499,588	$	55,431			$	1,834,618
Nonperforming		2,459		8,611		94				11,164
Total	$	1,282,058	$	508,199	$	55,525			$	1,845,782
Residential Mortgage Credit Exposure	Residential
By Payment Activity:	Mortgage								Total
Performing	$	775,972							$	775,972
Nonperforming		7,830								7,830
Total	$	783,802							$	783,802

Credit Quality Indicators

As of June 30, 2014

ACQUIRED
Commercial Credit Exposure			Commercial
By Internally Assigned Grade:	Commercial		Real Estate		Agricultural		Total
Pass	$	84,842	$	197,499	$	-	$	282,341
Special Mention		4,339		2,478		-		6,817
Substandard		9,507		14,238		-		23,745
Total	$	98,688	$	214,215	$	-	$	312,903
Business Banking Credit Exposure
By Internally Assigned Grade:	Business Banking						Total
Non-classified	$	59,227					$	59,227
Classified		5,360						5,360
Total	$	64,587					$	64,587
Consumer Credit Exposure
By Payment Activity:	Indirect		Home Equity		Direct		Total
Performing	$	91,807	$	80,642	$	6,040	$	178,489
Nonperforming		172		550		42		764
Total	$	91,979	$	81,192	$	6,082	$	179,253
Residential Mortgage Credit Exposure	Residential
By Payment Activity:	Mortgage						Total
Performing	$	285,907					$	285,907
Nonperforming		3,498						3,498
Total	$	289,405					$	289,405

Credit Quality Indicators

As of December 31, 2013

ORIGINATED
Commercial Credit Exposure			Commercial				Agricultural
By Internally Assigned Grade:	Commercial		Real Estate		Agricultural		Real Estate		Total
Pass	$	576,079	$	878,411	$	60,043	$	33,136	$	1,547,669
Special Mention		16,836		22,777		381		43		40,037
Substandard		23,508		33,128		4,726		3,473		64,835
Doubtful		-		-		12		-		12
Total	$	616,423	$	934,316	$	65,162	$	36,652	$	1,652,553
Business Banking Credit Exposure
By Internally Assigned Grade:	Business Banking								Total
Non-classified	$	319,578							$	319,578
Classified		18,101								18,101
Total	$	337,679							$	337,679
Consumer Credit Exposure
By Payment Activity:	Indirect		Home Equity		Direct				Total
Performing	$	1,158,800	$	525,777	$	58,151			$	1,742,728
Nonperforming		3,044		7,046		132				10,222
Total	$	1,161,844	$	532,823	$	58,283			$	1,752,950
Residential Mortgage Credit Exposure	Residential
By Payment Activity:	Mortgage								Total
Performing	$	725,308							$	725,308
Nonperforming		7,913								7,913
Total	$	733,221							$	733,221

Credit Quality Indicators

As of December 31, 2013

ACQUIRED
Commercial Credit Exposure			Commercial
By Internally Assigned Grade:	Commercial		Real Estate		Agricultural		Total
Pass	$	85,692	$	205,010	$	-	$	290,702
Special Mention		2,230		6,183		-		8,413
Substandard		15,304		17,821		-		33,125
Total	$	103,226	$	229,014	$	-	$	332,240
Business Banking Credit Exposure
By Internally Assigned Grade:	Business Banking						Total
Non-classified	$	65,437					$	65,437
Classified		4,712						4,712
Total	$	70,149					$	70,149
Consumer Credit Exposure
By Payment Activity:	Indirect		Home Equity		Direct		Total
Performing	$	124,922	$	86,506	$	7,367	$	218,795
Nonperforming		164		570		58		792
Total	$	125,086	$	87,076	$	7,425	$	219,587
Residential Mortgage Credit Exposure	Residential
By Payment Activity:	Mortgage						Total
Performing	$	304,544					$	304,544
Nonperforming		3,872						3,872
Total	$	308,416					$	308,416

Troubled Debt Restructured Loans

The Company’s loan portfolio includes certain loans that have been modified where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties.  These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions.  Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months.  Substantially all of these modifications included one or a combination of the following: an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; temporary reduction in the interest rate; or change in scheduled payment amount.

When the Company modifies a loan, management evaluates any possible impairment based on the present value of the expected future cash flows, discounted at the contractual interest rate of the original loan agreement, except when the sole (remaining) source of repayment for the loan is the operation or liquidation of the collateral.  In these cases, management uses the current fair value of the collateral, less selling costs, instead of discounted cash flows.  If management determines that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized by segment or class of loan as applicable, through an allowance estimate or a charge-off to the allowance.  Segment and class status is determined by the loan’s classification at origination.

TDRs that occurred during the three month period ending June 30, 2014 consisted of 3 home equity loans totaling $0.4 million, 5 direct consumer loans totaling $0.3 million, and 2 residential real estate mortgages totaling $0.2 million.  For all such modifications, the pre and post outstanding recorded investment amount remained unchanged. During the three month period ending June 30, 2014 there were 2 defaults on home equity loan TDRs totaling $0.3 million and one default on a direct consumer loan TDR totaling $34,000.

TDRs that occurred during the six month period ending June 30, 2014 consisted of 5 home equity loans totaling $0.4 million, 25 direct consumer loans totaling $1.3 million, and 15 residential real estate mortgages totaling $1.2 million.  For all such modifications, the pre and post outstanding recorded investment amount remained unchanged. During the six month period ending June 30, 2014 there were 2 defaults on home equity loan TDRs totaling $0.3 million, five defaults on direct consumer loan TDRs totaling $0.2 million, and one default on a residential real estate mortgage TDR totaling $0.1 million.

TDRs that occurred during the three month period ending June 30, 2013 consisted of one commercial reasl estate loan totaling $0.9 million, 10 home equity loans totaling $0.5 million, and one residential real estate mortgage totaling $0.1 million.  For all such modifications, the pre and post outstanding recorded investment amount remained unchanged. During the three month period ending June 30, 2013 there were three defaults on home equity loan TDRs totaling $0.2 million.

TDRs that occurred during the six month period ending June 30, 2013 consisted of one commercial real estate loan totaling $0.9 million, 14 home equity loans totaling $0.6 million, and one residential real estate mortgage totaling $0.1 million.  For all such modifications, the pre and post outstanding recorded investment amount remained unchanged. During the six month period ending June 30, 2013 there were three defaults on home equity loan TDRs totaling $0.2 million.

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Long-Term Debt

6 Months Ended

Jun. 30, 2014

Long-Term Debt [Abstract]

Long-Term Debt

Note 5. Long-Term Debt

As part of a debt restructuring strategy during the second quarter of 2014, the Company repaid $165.0 million in long-term borrowings, resulting in $17.1 million in prepayment penalties.  Prepayment penalties of $4.6 million were recognized as expense in the second quarter of 2014 and related to the $45.0 million of the long-term debt strategy that was completed during the quarter.  The remaining prepayment penalties of approximately $13 million will be recognized in the third quarter of 2014 upon completion of the restructure strategy.

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Earnings Per Share

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Earnings Per Share

Note 7. Earnings Per Share

Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity (such as the Company’s dilutive stock options and restricted stock units).

The following is a reconciliation of basic and diluted earnings per share for the periods presented in the consolidated statements of income.

Three months ended June 30,	2014		2013
(in thousands, except per share data)
Basic EPS:
Weighted average common shares outstanding		43,865		43,923
Net income available to common shareholders		27,640		16,916
Basic EPS	$	0.63	$	0.39
Diluted EPS:
Weighted average common shares outstanding		43,865		43,923
Dilutive effect of common stock options and restricted stock		498		393
Weighted average common shares and common share equivalents		44,363		44,316
Net income available to common shareholders		27,640		16,916
Diluted EPS	$	0.62	$	0.38

Six months ended June 30,	2014		2013
(in thousands, except per share data)
Basic EPS:
Weighted average common shares outstanding		43,829		40,187
Net income available to common shareholders		45,649		24,565
Basic EPS	$	1.04	$	0.61
Diluted EPS:
Weighted average common shares outstanding		43,829		40,187
Dilutive effect of common stock options and restricted stock		500		388
Weighted average common shares and common share equivalents		44,329		40,575
Net income available to common shareholders		45,649		24,565
Diluted EPS	$	1.03	$	0.61

There were 503,058 stock options for the quarter ended June 30, 2014 and 1,231,395 stock options for the quarter ended June 30, 2013 that were not considered in the calculation of diluted earnings per share since the stock options’ exercise price was greater than the average market price during these periods.

There were 500,541 stock options for the six months ended June 30, 2014 and 1,203,046 stock options for the six months ended June 30, 2013 that were not considered in the calculation of diluted earnings per share since the stock options’ exercise price was greater than the average market price during these periods.

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Allowance for Loan Losses and Credit Quality of Loans, Allowance for Loan Losses (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance as of Beginning of Period	$ 69,434,000	$ 68,734,000	$ 69,434,000	$ 69,334,000
Charge-offs	(5,240,000)	(5,153,000)	(10,070,000)	(12,869,000)
Recoveries	1,174,000	1,201,000	2,408,000	2,659,000
Provision	4,166,000	6,402,000	7,762,000	12,060,000
Balance as of Ending of Period	69,534,000	71,184,000	69,534,000	71,184,000
Allowance for loan losses for acquired loan portfolio	1.5	0
Provision expense and net charge-offs related to acquired loans	100,000	200,000	200,000	400,000
Allowance loan losses [Abstract]
Allowance for loan losses	69,534,000	71,184,000	69,534,000	71,184,000
Allowance for loans individually evaluated for impairment	2,100,000		2,100,000		715,000
Allowance for loans collectively evaluated for impairment	67,434,000		67,434,000		68,719,000
Ending balance of loans	5,574,488,000		5,574,488,000		5,406,795,000
Commercial Loans [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance as of Beginning of Period	34,437,000	35,358,000	35,090,000	35,624,000
Charge-offs	(1,427,000)	(1,198,000)	(1,906,000)	(4,520,000)
Recoveries	314,000	416,000	713,000	883,000
Provision	1,799,000	3,128,000	1,226,000	5,717,000
Balance as of Ending of Period	35,123,000	37,704,000	35,123,000	37,704,000
Allowance loan losses [Abstract]
Allowance for loan losses	35,123,000	37,704,000	35,123,000	37,704,000
Allowance for loans individually evaluated for impairment	2,100,000		2,100,000		715,000
Allowance for loans collectively evaluated for impairment	33,023,000		33,023,000		34,375,000
Ending balance of loans	2,476,246,000		2,476,246,000		2,392,621,000
Consumer Loans [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance as of Beginning of Period	28,436,000	26,285,000	27,694,000	27,162,000
Charge-offs	(3,648,000)	(3,653,000)	(7,680,000)	(7,376,000)
Recoveries	714,000	696,000	1,455,000	1,673,000
Provision	2,471,000	3,128,000	6,504,000	4,997,000
Balance as of Ending of Period	27,973,000	26,456,000	27,973,000	26,456,000
Allowance loan losses [Abstract]
Allowance for loan losses	27,973,000	26,456,000	27,973,000	26,456,000
Allowance for loans individually evaluated for impairment	0		0		0
Allowance for loans collectively evaluated for impairment	27,973,000		27,973,000		27,694,000
Ending balance of loans	2,025,035,000		2,025,035,000		1,972,537,000
Residential Real Estate Mortgages [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance as of Beginning of Period	6,225,000	6,708,000	6,520,000	6,252,000
Charge-offs	(165,000)	(302,000)	(484,000)	(973,000)
Recoveries	146,000	89,000	240,000	103,000
Provision	(1,000)	311,000	(71,000)	1,424,000
Balance as of Ending of Period	6,205,000	6,806,000	6,205,000	6,806,000
Allowance loan losses [Abstract]
Allowance for loan losses	6,205,000	6,806,000	6,205,000	6,806,000
Allowance for loans individually evaluated for impairment	0		0		0
Allowance for loans collectively evaluated for impairment	6,205,000		6,205,000		6,520,000
Ending balance of loans	1,073,207,000		1,073,207,000		1,041,637,000
Unallocated [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance as of Beginning of Period	336,000	383,000	130,000	296,000
Charge-offs	0	0	0	0
Recoveries	0	0	0	0
Provision	(103,000)	(165,000)	103,000	(78,000)
Balance as of Ending of Period	233,000	218,000	233,000	218,000
Allowance loan losses [Abstract]
Allowance for loan losses	233,000	218,000	233,000	218,000
Allowance for loans collectively evaluated for impairment	233,000		233,000		130,000
Originated Loans [Member]
Allowance loan losses [Abstract]
Ending balance of loans	4,728,340,000		4,728,340,000		4,476,403,000
Ending balance of loans individually evaluated for impairment	22,212,000		22,212,000		21,380,000
Ending balance of loans collectively evaluated for impairment	4,706,128,000		4,706,128,000		4,455,023,000
Originated Loans [Member] | Commercial Loans [Member]
Allowance loan losses [Abstract]
Ending balance of loans	2,098,756,000		2,098,756,000		1,990,232,000
Ending balance of loans individually evaluated for impairment	13,874,000		13,874,000		16,120,000
Ending balance of loans collectively evaluated for impairment	2,084,882,000		2,084,882,000		1,974,112,000
Originated Loans [Member] | Consumer Loans [Member]
Allowance loan losses [Abstract]
Ending balance of loans	1,845,782,000		1,845,782,000		1,752,950,000
Ending balance of loans individually evaluated for impairment	5,600,000		5,600,000		3,248,000
Ending balance of loans collectively evaluated for impairment	1,840,182,000		1,840,182,000		1,749,702,000
Originated Loans [Member] | Residential Real Estate Mortgages [Member]
Allowance loan losses [Abstract]
Ending balance of loans	783,802,000		783,802,000		733,221,000
Ending balance of loans individually evaluated for impairment	2,738,000		2,738,000		2,012,000
Ending balance of loans collectively evaluated for impairment	781,064,000		781,064,000		731,209,000
Acquired Loans [Member]
Allowance loan losses [Abstract]
Ending balance of loans	846,148,000		846,148,000		930,392,000
Ending balance of loans individually evaluated for impairment	9,672,000		9,672,000		10,060,000
Ending balance of loans collectively evaluated for impairment	836,476,000		836,476,000		920,332,000
Acquired Loans [Member] | Commercial Loans [Member]
Allowance loan losses [Abstract]
Ending balance of loans	377,490,000		377,490,000		402,389,000
Ending balance of loans individually evaluated for impairment	9,672,000		9,672,000		10,060,000
Ending balance of loans collectively evaluated for impairment	367,818,000		367,818,000		392,329,000
Acquired Loans [Member] | Consumer Loans [Member]
Allowance loan losses [Abstract]
Ending balance of loans	179,253,000		179,253,000		219,587,000
Ending balance of loans individually evaluated for impairment	0		0		0
Ending balance of loans collectively evaluated for impairment	179,253,000		179,253,000		219,587,000
Acquired Loans [Member] | Residential Real Estate Mortgages [Member]
Allowance loan losses [Abstract]
Ending balance of loans	289,405,000		289,405,000		308,416,000
Ending balance of loans individually evaluated for impairment	0		0		0
Ending balance of loans collectively evaluated for impairment	$ 289,405,000		$ 289,405,000		$ 308,416,000

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Description of Business (Policies)

6 Months Ended

Jun. 30, 2014

Description of Business [Abstract]

Nature of Operations

NBT Bancorp Inc. (the “Registrant” or the “Company”) is a registered financial holding company incorporated in the state of Delaware in 1986, with its principal headquarters located in Norwich, New York.  The principal assets of the Registrant consist of all of the outstanding shares of common stock of its subsidiaries, including:  NBT Bank, National Association (the “Bank”), NBT Financial Services, Inc. (“NBT Financial”), NBT Holdings, Inc. (“NBT Holdings”), Hathaway Agency, Inc., and CNBF Capital Trust I, NBT Statutory Trust I and NBT Statutory Trust II (collectively, the “Trusts”).  The Company’s principal sources of revenue are the management fees and dividends it receives from the Bank, NBT Financial and NBT Holdings.

The Company’s business, primarily conducted through the Bank but also through its other subsidiaries, consists of providing commercial banking and financial services to customers in its market area, which includes central and upstate New York, northeastern Pennsylvania, southern New Hampshire, western Massachusetts and the greater Burlington, Vermont area.  The Company has been, and intends to continue to be, a community-oriented financial institution offering a variety of financial services.  The Company’s business philosophy is to operate as a community bank with local decision-making, principally in non-metropolitan markets, providing a broad array of banking and financial services to retail, commercial, and municipal customers. 

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Securities (Tables)

6 Months Ended

Jun. 30, 2014

Securities [Abstract]

Amortized cost, estimated fair value, and unrealized gains and losses of securities available for sale

The amortized cost, estimated fair value, and unrealized gains and losses of securities available for sale are as follows:

(In thousands)	Amortized cost		Unrealized gains		Unrealized losses		Estimated fair value
June 30, 2014
U.S. Treasury	$	33,129	$	195	$	-	$	33,324
Federal Agency		310,181		478		3,518		307,141
State & municipal		103,253		2,267		172		105,348
Mortgage-backed:
Government-sponsored enterprises		368,988		8,473		428		377,033
U.S. government agency securities		19,527		921		94		20,354
Collateralized mortgage obligations:
Government-sponsored enterprises		480,694		2,315		11,816		471,193
U.S. government agency securities		48,065		610		59		48,616
Other securities		12,962		3,025		197		15,790
Total securities available for sale	$	1,376,799	$	18,284	$	16,284	$	1,378,799
December 31, 2013
U.S. Treasury	$	43,279	$	337	$	-	$	43,616
Federal Agency		285,880		343		7,308		278,915
State & municipal		113,435		1,842		1,612		113,665
Mortgage-backed:
Government-sponsored enterprises		337,666		5,788		2,131		341,323
U.S. government agency securities		21,924		1,002		85		22,841
Collateralized mortgage obligations:
Government-sponsored enterprises		521,257		1,777		18,141		504,893
U.S. government agency securities		43,943		794		102		44,635
Other securities		12,367		2,854		228		14,993
Total securities available for sale	$	1,379,751	$	14,737	$	29,607	$	1,364,881

Amortized cost, estimated fair value, and unrealized gains and losses of securities held to maturity

The amortized cost, estimated fair value, and unrealized gains and losses of securities held to maturity are as follows:

	Amortized		Unrealized		Unrealized		Estimated
(In thousands)	cost		gains		losses		fair value
June 30, 2014
Mortgage-backed	$	853	$	125	$	-	$	978
Collateralized mortgage obligations		59,792		-		3,139		56,653
State & municipal		65,320		425		-		65,745
Total securities held to maturity	$	125,965	$	550	$	3,139	$	123,376
December 31, 2013
Mortgage-backed	$	953	$	128	$	-	$	1,081
Collateralized mortgage obligations		62,025		-		4,569		57,456
State & municipal		54,305		442		8		54,739
Total securities held to maturity	$	117,283	$	570	$	4,577	$	113,276

Investment securities with unrealized losses

The following table sets forth information with regard to investment securities with unrealized losses at June 30, 2014 and December 31, 2013:

	Less than 12 months							12 months or longer							Total
Security Type:	Fair Value		Unrealized losses			Number of Positions		Fair Value		Unrealized losses			Number of Positions		Fair Value		Unrealized losses			Number of Positions
June 30, 2014
Investment securities available for sale:
Federal agency	$	14,584		(17	)		2	$	227,183	$	(3,501	)		19	$	241,767	$	(3,518	)		21
State & municipal		8,256		(22	)		28		20,416		(150	)		70		28,672		(172	)		98
Mortgage-backed		1,523		(6	)		12		49,695		(516	)		36		51,218		(522	)		48
Collateralized mortgage obligations		89,915		(542	)		12		269,579		(11,333	)		23		359,494		(11,875	)		35
Other securities		2,553		(34	)		1		3,191		(163	)		2		5,744		(197	)		3
Total securities with unrealized losses	$	116,831	$	(621	)		55	$	570,064	$	(15,663	)		150	$	686,895	$	(16,284	)		205
June 30, 2014
Investment securities held to maturity:
Collateralized mortgage obligations		56,653		(3,139	)		5		-		-			-	$	56,653		(3,139	)		5
December 31, 2013
Investment securities available for sale:
Federal agency	$	233,935	$	(6,927	)		20	$	9,619	$	(381	)		1	$	243,554	$	(7,308	)		21
State & municipal		50,328		(1,612	)		177		-		-			-		50,328		(1,612	)		177
Mortgage-backed		143,080		(2,216	)		79		-		-			-		143,080		(2,216	)		79
Collateralized mortgage obligations		379,273		(18,243	)		36		-		-			-		379,273		(18,243	)		36
Other securities		5,490		(203	)		2		223		(25	)		1		5,713		(228	)		3
Total securities with unrealized losses	$	812,106	$	(29,201	)		314	$	9,842	$	(406	)		2	$	821,948	$	(29,607	)		316
December 31, 2013
Investment securities held to maturity:
Collateralized mortgage obligations	$	57,456	$	(4,569	)		5	$	-	$	-			-	$	57,456	$	(4,569	)		5
State & municipal		1,012		(8	)		1		-		-			-		1,012		(8	)		1
Total securities with unrealized losses	$	58,468	$	(4,577	)		6	$	-	$	-			-	$	58,468	$	(4,577	)		6

Contractual maturities of debt securities

The following tables set forth information with regard to contractual maturities of debt securities at June 30, 2014:

(In thousands)	Amortized cost		Estimated fair value
Debt securities classified as available for sale
Within one year	$	29,964	$	30,109
From one to five years		359,226		358,895
From five to ten years		215,602		220,020
After ten years		759,045		753,985
	$	1,363,837	$	1,363,009
Debt securities classified as held to maturity
Within one year	$	30,983	$	31,083
From one to five years		17,462		17,651
From five to ten years		15,636		15,772
After ten years		61,884		58,870
	$	125,965	$	123,376

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Earnings Per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Basic EPS [Abstract]
Weighted average common shares outstanding (in shares)	43,865,000	43,923,000	43,829,000	40,187,000
Net income available to common shareholders	$ 27,640	$ 16,916	$ 45,649	$ 24,565
Basic EPS (in dollars per share)	$ 0.63	$ 0.39	$ 1.04	$ 0.61
Diluted EPS [Abstract]
Weighted average common shares outstanding (in shares)	43,865,000	43,923,000	43,829,000	40,187,000
Dilutive effect of common stock options and restricted stock (in shares)	498,000	393,000	500,000	388,000
Weighted average common shares and common share equivalents (in shares)	44,363,000	44,316,000	44,329,000	40,575,000
Net income available to common shareholders	$ 27,640	$ 16,916	$ 45,649	$ 24,565
Diluted EPS (in dollars per share)	$ 0.62	$ 0.38	$ 1.03	$ 0.61
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock options excluded from calculation of diluted EPS (in shares)	503,058	1,231,395	500,541	1,203,046

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Consolidated Statements of Comprehensive Income (unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Consolidated Statements of Comprehensive Income (unaudited) [Abstract]
Net income	$ 27,640	$ 16,916	$ 45,649	$ 24,565
Other comprehensive income (loss), net of tax
Unrealized net holding gains (losses) arising during the period (pre-tax amounts of $8,267, ($24,712), $16,892 and ($26,464))	4,992	(14,923)	10,200	(15,978)
Reclassification adjustment for net gains related to securities available for sale included in net income (pre-tax amounts of $14, ($61), $21 and $1,084)	(8)	37	(13)	(650)
Pension and other benefits:
Amortization of prior service cost and actuarial gains (pre-tax amounts of $19, $710, $38 and $1,536)	11	426	23	922
Total other comprehensive income (loss)	4,995	(14,460)	10,210	(15,706)
Comprehensive income	$ 32,635	$ 2,456	$ 55,859	$ 8,859

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Description of Business

6 Months Ended

Jun. 30, 2014

Description of Business [Abstract]

Description of Business

Note 1. Description of Business

NBT Bancorp Inc. (the “Registrant” or the “Company”) is a registered financial holding company incorporated in the state of Delaware in 1986, with its principal headquarters located in Norwich, New York.  The principal assets of the Registrant consist of all of the outstanding shares of common stock of its subsidiaries, including:  NBT Bank, National Association (the “Bank”), NBT Financial Services, Inc. (“NBT Financial”), NBT Holdings, Inc. (“NBT Holdings”), Hathaway Agency, Inc., and CNBF Capital Trust I, NBT Statutory Trust I and NBT Statutory Trust II (collectively, the “Trusts”).  The Company’s principal sources of revenue are the management fees and dividends it receives from the Bank, NBT Financial and NBT Holdings.

The Company’s business, primarily conducted through the Bank but also through its other subsidiaries, consists of providing commercial banking and financial services to customers in its market area, which includes central and upstate New York, northeastern Pennsylvania, southern New Hampshire, western Massachusetts and the greater Burlington, Vermont area.  The Company has been, and intends to continue to be, a community-oriented financial institution offering a variety of financial services.  The Company’s business philosophy is to operate as a community bank with local decision-making, principally in non-metropolitan markets, providing a broad array of banking and financial services to retail, commercial, and municipal customers. 

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Allowance for Loan Losses and Credit Quality of Loans (Tables)

6 Months Ended

Jun. 30, 2014

Allowance for Loan Losses and Credit Quality of Loans [Abstract]

Allowance for loan losses by portfolio

The following tables illustrate the changes in the allowance for loan losses by our portfolio segments for the three and six months ended June 30, 2014 and 2013:

							Residential
Three months ended June 30	Commercial			Consumer			Real Estate
	Loans			Loans			Mortgages			Unallocated			Total
Balance as of March 31, 2014	$	34,437		$	28,436		$	6,225		$	336		$	69,434
Charge-offs		(1,427	)		(3,648	)		(165	)		-			(5,240	)
Recoveries		314			714			146			-			1,174
Provision		1,799			2,471			(1	)		(103	)		4,166
Ending Balance as of June 30, 2014	$	35,123		$	27,973		$	6,205		$	233		$	69,534
Balance as of March 31, 2013	$	35,358		$	26,285		$	6,708		$	383		$	68,734
Charge-offs		(1,198	)		(3,653	)		(302	)		-			(5,153	)
Recoveries		416			696			89			-			1,201
Provision		3,128			3,128			311			(165	)		6,402
Ending Balance as of June 30, 2013	$	37,704		$	26,456		$	6,806		$	218		$	71,184

							Residential
Six months ended June 30,	Commercial			Consumer			Real Estate
	Loans			Loans			Mortgages			Unallocated			Total
Balance as of December 31, 2013	$	35,090		$	27,694		$	6,520		$	130		$	69,434
Charge-offs		(1,906	)		(7,680	)		(484	)		-			(10,070	)
Recoveries		713			1,455			240			-			2,408
Provision		1,226			6,504			(71	)		103			7,762
Ending Balance as of June 30, 2014	$	35,123		$	27,973		$	6,205		$	233		$	69,534
Balance as of December 31, 2012	$	35,624		$	27,162		$	6,252		$	296		$	69,334
Charge-offs		(4,520	)		(7,376	)		(973	)		-			(12,869	)
Recoveries		883			1,673			103			-			2,659
Provision		5,717			4,997			1,424			(78	)		12,060
Ending Balance as of June 30, 2013	$	37,704		$	26,456		$	6,806		$	218		$	71,184

The following tables illustrate the allowance for loan losses and the recorded investment by portfolio segments as of June 30, 2014 and December 31, 2013:

Allowance for Loan Losses and Recorded Investment in Loans

(in thousands)

					Residential
	Commercial		Consumer		Real Estate
	Loans		Loans		Mortgages		Unallocated		Total
As of June 30, 2014
Allowance for loan losses	$	35,123	$	27,973	$	6,205	$	233	$	69,534
Allowance for loans individually evaluated for impairment		2,100		-		-				2,100
Allowance for loans collectively evaluated for impairment	$	33,023	$	27,973	$	6,205	$	233	$	67,434
Ending balance of loans	$	2,476,246	$	2,025,035	$	1,073,207			$	5,574,488
Ending balance of originated loans individually evaluated for impairment		13,874		5,600		2,738				22,212
Ending balance of acquired loans individually evaluated for impairment		9,672		-		-				9,672
Ending balance of acquired loans collectively evaluated for impairment		367,818		179,253		289,405				836,476
Ending balance of originated loans collectively evaluated for impairment	$	2,084,882	$	1,840,182	$	781,064			$	4,706,128
As of December 31, 2013
Allowance for loan losses	$	35,090	$	27,694	$	6,520	$	130	$	69,434
Allowance for loans individually evaluated for impairment		715		-		-				715
Allowance for loans collectively evaluated for impairment	$	34,375	$	27,694	$	6,520	$	130	$	68,719
Ending balance of loans	$	2,392,621	$	1,972,537	$	1,041,637			$	5,406,795
Ending balance of originated loans individually evaluated for impairment		16,120		3,248		2,012				21,380
Ending balance of acquired loans individually evaluated for impairment		10,060		-		-				10,060
Ending balance of acquired loans collectively evaluated for impairment		392,329		219,587		308,416				920,332
Ending balance of originated loans collectively evaluated for impairment	$	1,974,112	$	1,749,702	$	731,209			$	4,455,023

Past due and nonperforming loans by loan class

The following table illustrates the Company’s nonaccrual loans by loan class:

Loans on Nonaccrual Status as of:

(In thousands)	June 30, 2014		December 31, 2013
ORIGINATED
Commercial Loans
Commercial	$	3,885	$	3,669
Commercial Real Estate		6,616		7,834
Agricultural		1,343		1,135
Agricultural Real Estate		1,590		961
Business Banking		6,008		5,701
		19,442		19,300
Consumer Loans
Indirect		1,359		1,461
Home Equity		7,772		5,931
Direct		67		86
		9,198		7,478
Residential Real Estate Mortgages		7,711		7,105
	$	36,351	$	33,883
ACQUIRED
Commercial Loans
Commercial	$	6,339	$	6,599
Commercial Real Estate		3,429		3,559
Business Banking		954		1,340
		10,722		11,498
Consumer Loans
Indirect		118		93
Home Equity		514		570
Direct		31		49
		663		712
Residential Real Estate Mortgages		3,498		3,872
	$	14,883	$	16,082
TOTAL NONACCRUAL LOANS	$	51,234	$	49,965

The following tables set forth information with regard to past due and nonperforming loans by loan class as of June 30, 2014 and December 31, 2013:

Age Analysis of Past Due Financing Receivables

As of June 30, 2014

(in thousands)

					Greater Than
	31-60 Days		61-90 Days		90 Days		Total						Recorded
	Past Due		Past Due		Past Due		Past Due						Total
	Accruing		Accruing		Accruing		Accruing		Non-Accrual		Current		Loans
ORIGINATED
Commercial Loans
Commercial	$	53	$	-	$	-	$	53	$	3,885	$	653,268	$	657,206
Commercial Real Estate		-		-		-		-		6,616		994,773		1,001,389
Agricultural		170		-		-		170		1,343		55,572		57,085
Agricultural Real Estate		4		-		-		4		1,590		40,768		42,362
Business Banking		869		451		-		1,320		6,008		333,386		340,714
		1,096		451		-		1,547		19,442		2,077,767		2,098,756
Consumer Loans
Indirect		12,444		2,015		1,100		15,559		1,359		1,265,140		1,282,058
Home Equity		4,470		995		839		6,304		7,772		494,123		508,199
Direct		529		138		27		694		67		54,764		55,525
		17,443		3,148		1,966		22,557		9,198		1,814,027		1,845,782
Residential Real Estate Mortgages		3,082		594		119		3,795		7,711		772,296		783,802
	$	21,621	$	4,193	$	2,085	$	27,899	$	36,351	$	4,664,090	$	4,728,340
ACQUIRED
Commercial Loans
Commercial	$	14	$	-	$	-	$	14	$	6,339		92,335	$	98,688
Commercial Real Estate		582		-		-		582		3,429		210,204		214,215
Business Banking		441		-		-		441		954		63,192		64,587
		1,037		-		-		1,037		10,722		365,731		377,490
Consumer Loans
Indirect		481		114		54		649		118		91,212		91,979
Home Equity		370		204		36		610		514		80,068		81,192
Direct		73		6		11		90		31		5,961		6,082
		924		324		101		1,349		663		177,241		179,253
Residential Real Estate Mortgages		1,317		-		-		1,317		3,498		284,590		289,405
	$	3,278	$	324	$	101	$	3,703	$	14,883	$	827,562	$	846,148
Total Loans	$	24,899	$	4,517	$	2,186	$	31,602	$	51,234	$	5,491,652	$	5,574,488

Age Analysis of Past Due Financing Receivables

As of December 31, 2013

(in thousands)

					Greater Than
	31-60 Days		61-90 Days		90 Days		Total						Recorded
	Past Due		Past Due		Past Due		Past Due						Total
	Accruing		Accruing		Accruing		Accruing		Non-Accrual		Current		Loans
ORIGINATED
Commercial Loans
Commercial	$	105	$	247	$	-	$	352	$	3,669	$	612,402	$	616,423
Commercial Real Estate		1,366		-		-		1,366		7,834		925,116		934,316
Agricultural		150		21		-		171		1,135		63,856		65,162
Agricultural Real Estate		519		-		-		519		961		35,172		36,652
Business Banking		1,228		122		105		1,455		5,701		330,523		337,679
		3,368		390		105		3,863		19,300		1,967,069		1,990,232
Consumer Loans
Indirect		14,093		2,878		1,583		18,554		1,461		1,141,829		1,161,844
Home Equity		6,033		1,888		1,115		9,036		5,931		517,856		532,823
Direct		679		125		46		850		86		57,347		58,283
		20,805		4,891		2,744		28,440		7,478		1,717,032		1,752,950
Residential Real Estate Mortgages		3,951		379		808		5,138		7,105		720,978		733,221
	$	28,124	$	5,660	$	3,657	$	37,441	$	33,883	$	4,405,079	$	4,476,403
ACQUIRED
Commercial Loans
Commercial	$	24	$	-	$	-	$	24	$	6,599	$	96,603	$	103,226
Commercial Real Estate		-		-		-		-		3,559		225,455		229,014
Business Banking		320		2		-		322		1,340		68,487		70,149
		344		2		-		346		11,498		390,545		402,389
Consumer Loans
Indirect		939		113		71		1,123		93		123,870		125,086
Home Equity		753		63		-		816		570		85,690		87,076
Direct		76		56		9		141		49		7,235		7,425
		1,768		232		80		2,080		712		216,795		219,587
Residential Real Estate Mortgages		1,725		-		-		1,725		3,872		302,819		308,416
	$	3,837	$	234	$	80	$	4,151	$	16,082	$	910,159	$	930,392
Total Loans	$	31,961	$	5,894	$	3,737	$	41,592	$	49,965	$	5,315,238	$	5,406,795

Impaired loans and specific reserve allocations

The following table provides information on loans specifically evaluated for impairment as of June 30, 2014 and December 31, 2013:

	June 30, 2014						December 31, 2013
	Recorded		Unpaid				Recorded		Unpaid
	Investment		Principal				Investment		Principal
	Balance		Balance		Related		Balance		Balance		Related
(in thousands)	(Book)		(Legal)		Allowance		(Book)		(Legal)		Allowance
ORIGINATED
With no related allowance recorded:
Commercial Loans
Commercial	$	2,000	$	2,096			$	4,721	$	4,777
Commercial Real Estate		6,854		7,823				4,613		5,164
Agricultural		119		189				125		195
Agricultural Real Estate		1,406		1,697				1,431		1,708
Business Banking		702		1,094				210		602
Total Commercial Loans		11,081		12,899				11,100		12,446
Consumer Loans
Home Equity		5,600		6,031				3,248		3,472
Residential Real Estate Mortgages		2,738		3,073				2,012		2,255
Total		19,419		22,003				16,360		18,173
With an allowance recorded:
Commercial Loans
Commercial Real Estate		2,793		4,649		600		5,020		6,877		715
ACQUIRED
With no related allowance recorded:
Commercial Loans
Commercial		-		-				6,501		6,538
Commercial Real Estate		3,430		3,836				3,559		3,842
Total Commercial Loans		3,430		3,836				10,060		10,380
With an allowance recorded:
Commercial Loans
Commercial		6,242		6,496		1,500		-		-		-
Total:	$	31,884	$	36,984	$	2,100	$	31,440	$	35,430	$	715

The following tables summarize the average recorded investments on impaired loans specifically evaluated for impairment and the interest income recognized for the three months ended June 30, 2014 and 2013:

	For the three months ended
	June 30, 2014				June 30, 2013
	Average				Average
	Recorded		Interest Income		Recorded		Interest Income
(in thousands)	Investment		Recognized		Investment		Recognized
ORIGINATED
Commercial Loans
Commercial	$	2,013	$	-	$	3,354	$	29
Commercial Real Estate		10,062		42		11,222		(51	)
Agricultural		123		-		201		(3	)
Agricultural Real Estate		1,412		12		896		12
Business Banking		548		11		78		3
Consumer Loans
Home Equity		5,289		60		2,967		29
Residential Real Estate Mortgage		2,803		26		1,998		17
Total Originated	$	22,250	$	151	$	20,716	$	36
ACQUIRED
Commercial Loans
Commercial		6,315		-		-		-
Commercial Real Estate		3,462		-		-		-
Total Acquired	$	9,777	$	-	$	-	$	-
Total Loans	$	32,027	$	151	$	20,716	$	36

	For the six months ended
	June 30, 2014				June 30, 2013
	Average				Average
	Recorded		Interest Income		Recorded		Interest Income
(in thousands)	Investment		Recognized		Investment		Recognized
ORIGINATED
Commercial Loans
Commercial	$	2,025	$	-	$	4,331	$	58
Commercial Real Estate		10,739		84		11,361		21
Agricultural		124		1		270		1
Agricultural Real Estate		1,418		23		898		24
Business Banking		429		23		79		3
Consumer Loans
Home Equity		4,959		103		2,944		58
Residential Real Estate Mortgage		2,778		50		2,028		28
Total Originated		22,472		284		21,911		193
ACQUIRED
Commercial Loans
Commercial		6,375		-		-		-
Commercial Real Estate		3,493		-		-		-
Total Acquired	$	9,868	$	-	$	-	$	-
Total Loans	$	32,339	$	284	$	21,911	$	193

Financing receivable credit quality by loan class

The following tables illustrate the Company’s credit quality by loan class as of June 30, 2014 and December 31, 2013:

Credit Quality Indicators

As of June 30, 2014

ORIGINATED
Commercial Credit Exposure			Commercial				Agricultural
By Internally Assigned Grade:	Commercial		Real Estate		Agricultural		Real Estate		Total
Pass	$	606,388	$	946,883	$	52,603	$	38,503	$	1,644,377
Special Mention		11,782		19,949		354		7		32,092
Substandard		39,036		34,557		4,052		3,852		81,497
Doubtful		-		-		76		-		76
Total	$	657,206	$	1,001,389	$	57,085	$	42,362	$	1,758,042
Business Banking Credit Exposure
By Internally Assigned Grade:	Business Banking								Total
Non-classified	$	323,200							$	323,200
Classified		17,514								17,514
Total	$	340,714							$	340,714
Consumer Credit Exposure
By Payment Activity:	Indirect		Home Equity		Direct				Total
Performing	$	1,279,599	$	499,588	$	55,431			$	1,834,618
Nonperforming		2,459		8,611		94				11,164
Total	$	1,282,058	$	508,199	$	55,525			$	1,845,782
Residential Mortgage Credit Exposure	Residential
By Payment Activity:	Mortgage								Total
Performing	$	775,972							$	775,972
Nonperforming		7,830								7,830
Total	$	783,802							$	783,802

Credit Quality Indicators

As of June 30, 2014

ACQUIRED
Commercial Credit Exposure			Commercial
By Internally Assigned Grade:	Commercial		Real Estate		Agricultural		Total
Pass	$	84,842	$	197,499	$	-	$	282,341
Special Mention		4,339		2,478		-		6,817
Substandard		9,507		14,238		-		23,745
Total	$	98,688	$	214,215	$	-	$	312,903
Business Banking Credit Exposure
By Internally Assigned Grade:	Business Banking						Total
Non-classified	$	59,227					$	59,227
Classified		5,360						5,360
Total	$	64,587					$	64,587
Consumer Credit Exposure
By Payment Activity:	Indirect		Home Equity		Direct		Total
Performing	$	91,807	$	80,642	$	6,040	$	178,489
Nonperforming		172		550		42		764
Total	$	91,979	$	81,192	$	6,082	$	179,253
Residential Mortgage Credit Exposure	Residential
By Payment Activity:	Mortgage						Total
Performing	$	285,907					$	285,907
Nonperforming		3,498						3,498
Total	$	289,405					$	289,405

Credit Quality Indicators

As of December 31, 2013

ORIGINATED
Commercial Credit Exposure			Commercial				Agricultural
By Internally Assigned Grade:	Commercial		Real Estate		Agricultural		Real Estate		Total
Pass	$	576,079	$	878,411	$	60,043	$	33,136	$	1,547,669
Special Mention		16,836		22,777		381		43		40,037
Substandard		23,508		33,128		4,726		3,473		64,835
Doubtful		-		-		12		-		12
Total	$	616,423	$	934,316	$	65,162	$	36,652	$	1,652,553
Business Banking Credit Exposure
By Internally Assigned Grade:	Business Banking								Total
Non-classified	$	319,578							$	319,578
Classified		18,101								18,101
Total	$	337,679							$	337,679
Consumer Credit Exposure
By Payment Activity:	Indirect		Home Equity		Direct				Total
Performing	$	1,158,800	$	525,777	$	58,151			$	1,742,728
Nonperforming		3,044		7,046		132				10,222
Total	$	1,161,844	$	532,823	$	58,283			$	1,752,950
Residential Mortgage Credit Exposure	Residential
By Payment Activity:	Mortgage								Total
Performing	$	725,308							$	725,308
Nonperforming		7,913								7,913
Total	$	733,221							$	733,221

Credit Quality Indicators

As of December 31, 2013

ACQUIRED
Commercial Credit Exposure			Commercial
By Internally Assigned Grade:	Commercial		Real Estate		Agricultural		Total
Pass	$	85,692	$	205,010	$	-	$	290,702
Special Mention		2,230		6,183		-		8,413
Substandard		15,304		17,821		-		33,125
Total	$	103,226	$	229,014	$	-	$	332,240
Business Banking Credit Exposure
By Internally Assigned Grade:	Business Banking						Total
Non-classified	$	65,437					$	65,437
Classified		4,712						4,712
Total	$	70,149					$	70,149
Consumer Credit Exposure
By Payment Activity:	Indirect		Home Equity		Direct		Total
Performing	$	124,922	$	86,506	$	7,367	$	218,795
Nonperforming		164		570		58		792
Total	$	125,086	$	87,076	$	7,425	$	219,587
Residential Mortgage Credit Exposure	Residential
By Payment Activity:	Mortgage						Total
Performing	$	304,544					$	304,544
Nonperforming		3,872						3,872
Total	$	308,416					$	308,416

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Allowance for Loan Losses and Credit Quality of Loans, Troubled Debt Restructurings (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014 Contract	Jun. 30, 2013 Contract	Jun. 30, 2014 Contract	Jun. 30, 2013 Contract
Financing Receivable, Modifications [Line Items]
Period of sustained repayment performance for nonperforming TDRs to be returned to performing status			6 months
Number of contracts	5	1	25	1
Pre-modification outstanding recorded investment	$ 300,000	$ 900,000	$ 1,300,000	$ 900,000
Home Equity [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts	3	10	5	14
Pre-modification outstanding recorded investment	400,000	500,000	400,000	600,000
Residential Real Estate Mortgages [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts	2	1	15	1
Pre-modification outstanding recorded investment	200,000	100,000	1,200,000	100,000
Subsequent Default [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts	1		5
Pre-modification outstanding recorded investment	34,000		200,000
Subsequent Default [Member] | Home Equity [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts	2	3	2	3
Pre-modification outstanding recorded investment	300,000	200,000	300,000	200,000
Subsequent Default [Member] | Residential Real Estate Mortgages [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts			1
Pre-modification outstanding recorded investment			$ 100,000

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Sale of Equity Investment

6 Months Ended

Jun. 30, 2014

Sale of Equity Investment [Abstract]

Sale of Equity Investments Disclosure

Note  11. Sale of Equity Investment

On April 17, 2014, NBT Capital Corp., a wholly-owned subsidiary of NBT, sold to LendingClub Corporation, its 20% ownership interest in Springstone Financial, LLC, which NBT originally acquired in exchange for a $3 million investment, as part of LendingClub’s acquisition of all of the outstanding equity in Springstone.  In total, LendingClub paid the group of selling equityholders a purchase price equal to $140 million in cash and preferred stock.  As a result of this sale, the Company recognized a gain of $19.4 million during the second quarter of 2014.