10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 WASHINGTON, DC 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017

COMMISSION FILE NUMBER: 0-14703

NBT BANCORP INC.

(Exact name of registrant as specified in its charter)

Delaware	16-1268674
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

52 SOUTH BROAD STREET

NORWICH, NEW YORK 13815

(Address of principal executive office) (Zip Code)

(607) 337-2265 (Registrant’s telephone number, including area code)

Securities registered pursuant to section 12(b) of the Act:

Title of each class:	Name of each exchange on which registered:
Common Stock, par value $0.01 per share	The NASDAQ Stock Market LLC

Securities registered pursuant to section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes   No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  No

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   No  

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 (§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   No 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive Proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 

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

Large accelerated filer 	Accelerated filer 	Non-accelerated filer 
Smaller reporting company 	Emerging growth company 

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No

Based on the closing price of the registrant’s common stock as of June 30, 2017, the aggregate market value of the voting stock, common stock, par value, $0.01 per share, held by non-affiliates of the registrant is $1,569,184,151.

The number of shares of common stock outstanding as of February 9, 2018, was 43,592,795.

1

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement for its Annual Meeting of Stockholders to be held on May 22, 2018 are incorporated by reference into Part III, Items 10, 11, 12, 13 and 14 of this Form 10-K.

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NBT BANCORP INC.

FORM 10-K – Year Ended December 31, 2017

TABLE OF CONTENTS

PART I
ITEM 1	BUSINESS	4
ITEM 1A	RISK FACTORS	17
ITEM 1B	UNRESOLVED STAFF COMMENTS	24
ITEM 2	PROPERTIES	25
ITEM 3	LEGAL PROCEEDINGS	26
ITEM 4	MINE SAFETY DISCLOSURES	26
PART II
ITEM 5	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	26
ITEM 6	SELECTED FINANCIAL DATA	28
ITEM 7	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	30
ITEM 7A	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	47
ITEM 8	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	49
	Report of Independent Registered Public Accounting Firm	49
	Consolidated Balance Sheets at December 31, 2017 and 2016	50
	Consolidated Statements of Income for each of the years in the three-year period ended December 31, 2017	51
	Consolidated Statements of Comprehensive Income for each of the years in the three-year period ended December 31, 2017	52
	Consolidated Statements of Changes in Stockholders’ Equity for each of the years in the three-year period ended December 31, 2017	53
	Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31, 2017	54
	Notes to Consolidated Financial Statements	55
ITEM 9	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	97
ITEM 9A	CONTROLS AND PROCEDURES	97
ITEM 9B	OTHER INFORMATION	100
PART III
ITEM 10	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	100
ITEM 11	EXECUTIVE COMPENSATION	100
ITEM 12	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	100
ITEM 13	CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE	100
ITEM 14	PRINCIPAL ACCOUNTANT FEES AND SERVICES	100
PART IV
ITEM 15	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	101
ITEM 16	FORM 10-K SUMMARY	103
SIGNATURES		104

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PART I

ITEM 1. 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 Company, on a consolidated basis, at December 31, 2017 had assets of $9.1 billion and stockholders’ equity of $958.2 million.

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., CNBF Capital Trust I, NBT Statutory Trust I, NBT Statutory Trust II, Alliance Financial Capital Trust I and Alliance Financial Capital 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, retail banking and wealth management services primarily to customers in its market area, which includes central and upstate New York, northeastern Pennsylvania, southern New Hampshire, western Massachusetts, Vermont and the southern coastal Maine 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 providing a broad array of banking and financial services to retail, commercial and municipal customers. The financial condition and operating results of the Company are dependent on its net interest income, which is the difference between the interest and dividend income earned on its earning assets, primarily loans and investments and the interest expense paid on its interest bearing liabilities, primarily consisting of deposits and borrowings. Among other factors, net income is also affected by provisions for loan losses and noninterest income, such as service charges on deposit accounts, insurance and other financial services revenue, trust revenue and gains/losses on securities sales, bank owned life insurance income, ATM and debit card fees and retirement plan administration fees as well as noninterest expense, such as salaries and employee benefits, occupancy, equipment, data processing and communications, professional fees and outside services, office supplies and postage, amortization of intangible assets, loan collection and other real estate owned ("OREO") expenses, advertising, FDIC expenses and other expenses.

Some of the market areas that the Company serves are experiencing economic challenges and volatility. A variety of factors (e.g., any substantial rise in inflation or rise in unemployment rates, decrease in consumer confidence, adverse international economic conditions, natural disasters, war or political instability) may affect both the Company’s markets and the national market. The Company will continue to emphasize managing its funding costs and lending and investment rates to maintain profitability effectively. In addition, the Company will continue to seek and maintain relationships that can generate noninterest income. We anticipate that this approach should help mitigate profit fluctuations that are caused by movements in interest rates, business and consumer loan cycles and local economic factors.

NBT Bank, N.A.

The Bank is a full service commercial bank formed in 1856, which provides a broad range of financial products to individuals, corporations and municipalities throughout the central and upstate New York, northeastern Pennsylvania, western Massachusetts, southern New Hampshire, Vermont and southern coastal Maine market areas.

Through its network of branch locations, the Bank offers a wide range of products and services tailored to individuals, businesses and municipalities. Deposit products offered by the Bank include demand deposit accounts, savings accounts, negotiable order of withdrawal (“NOW”) accounts, money market deposit accounts (“MMDA”) and certificate of deposit (“CD”) accounts. The Bank offers various types of each deposit account to accommodate the needs of its customers with varying rates, terms and features. Loan products offered by the Bank include indirect and direct consumer loans, home equity loans, mortgages, business banking loans and commercial loans, with varying rates, terms and features to accommodate the needs of its customers. The Bank also offers various other products and services through its branch network such as trust and investment services and financial planning and life insurance services. In addition to its branch network, the Bank also offers access to certain products and services electronically through 24-hour online, mobile and telephone channels that enable customers to check balances, make deposits, transfer funds, pay bills, access statements, apply for loans and access various other products and services. 

NBT Financial Services, Inc.

Through NBT Financial Services, the Company operates EPIC Advisors, Inc. (“EPIC”), a retirement plan administrator. Through EPIC, the Company offers services including retirement plan consulting and recordkeeping services. EPIC’s headquarters are located in Rochester, New York.

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NBT Holdings, Inc.

Through NBT Holdings, the Company operates NBT-Mang Insurance Agency, LLC (“Mang”), a full-service insurance agency acquired by the Company on September 1, 2008. Mang’s headquarters are in Norwich, New York. Through Mang, the Company offers a full array of insurance products, including personal property and casualty, business liability and commercial insurance, tailored to serve the specific insurance needs of individuals as well as businesses in a range of industries operating in the markets served by the Company.

The Trusts

The Trusts were organized to raise additional regulatory capital and to provide funding for certain acquisitions. CNBF Capital Trust I (“Trust I”) and NBT Statutory Trust I are Delaware statutory business trusts formed in 1999 and 2005, respectively, for the purpose of issuing trust preferred securities and lending the proceeds to the Company. In connection with the acquisition of CNB Bancorp, Inc., the Company formed NBT Statutory Trust II (“Trust II”) in February 2006 to fund the cash portion of the acquisition as well as to provide regulatory capital. In connection with the acquisition of Alliance Financial Corporation (“Alliance”), the Company acquired two statutory trusts, Alliance Financial Capital Trust I and Alliance Financial Capital Trust II, which were formed in 2003 and 2006, respectively. The Company guarantees, on a limited basis, payments of distributions on the trust preferred securities and payments on redemption of the trust preferred securities. The Trusts are variable interest entities for which the Company is not the primary beneficiary, as defined by Financial Accounting Standards Board ("FASB") Accounting Standards Codification (“ASC”). In accordance with ASC, the accounts of the Trusts are not included in the Company’s consolidated financial statements.

Operating Subsidiaries of the Bank

The Bank has seven operating subsidiaries, NBT Capital Corp., Broad Street Property Associates, Inc., NBT Services, Inc., CNB Realty Trust, Alliance Preferred Funding Corp., Alliance Leasing, Inc. and Columbia Ridge Capital Management, Inc. NBT Capital Corp., formed in 1998, is a venture capital corporation formed to assist young businesses to develop and grow primarily in the markets they serve. Broad Street Property Associates, Inc., formed in 2004, is a property management company. CNB Realty Trust, formed in 1998, is a real estate investment trust. Alliance Preferred Funding Corp., formed in 1999, is a real estate investment trust. Alliance Leasing, Inc. was formed in 2002 to provide equipment leasing services. Columbia Ridge Capital Management, Inc. was acquired in 2016 and is a registered investment advisor that provides investment management and financial consulting services.

Competition

The financial services industry, including commercial banking, is highly competitive and we encounter strong competition for deposits, loans and other financial products and services in our market area. The increasingly competitive environment is the result of the continued low rate environment, changes in regulation, changes in technology and product delivery systems, additional financial service providers and the accelerating pace of consolidation among financial services providers. The Company competes for loans, deposits and customers with other commercial banks, savings and loan associations, securities and brokerage companies, mortgage companies, insurance companies, finance companies, money market funds, credit unions and other nonbank financial service providers.

The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. Banks, securities firms and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking. In addition, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems.

Some of the Company’s nonbanking competitors have fewer regulatory constraints and may have lower cost structures. In addition, some of the Company’s competitors have assets, capital and lending limits greater than that of the Company, have greater access to capital markets and offer a broader range of products and services than the Company. These institutions may have the ability to finance wide-ranging advertising campaigns and may be able to offer lower rates on loans and higher rates on deposits than the Company can offer. Some of these institutions offer services, such as credit cards and international banking, which the Company does not directly offer.

Various in-state market competitors and out-of-state banks continue to enter or have announced plans to enter or expand their presence in the market areas in which the Company currently operates. With the addition of new banking presences within our market, the Company expects increased competition for loans, deposits and other financial products and services.

In order to compete with other financial services providers, the Company stresses the community nature of its banking operations and principally relies upon local promotional activities, personal relationships established by officers, directors and employees with their customers and specialized services tailored to meet the needs of the communities served. We also offer certain customer services, such as agricultural lending, that many of our larger competitors do not offer. While the Company’s position varies by market, the Company’s management believes that it can compete effectively as a result of local market knowledge, local decision making and awareness of customer needs.

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The table below summarizes the Bank’s deposits and market share by the thirty-eight counties of New York, Pennsylvania, New Hampshire, Massachusetts, Vermont and Maine in which it had customer facilities as of June 30, 2017.  Market share is based on deposits of all commercial banks, credit unions, savings and loans associations and savings banks.

County	State	Deposits in thousands*		Market Share			Market Rank		Number of Branches*		Number of ATMs*
Chenango	NY	$	912,559		95.23	%		1		11		12
Fulton	NY		469,501		63.14	%		1		5		6
Schoharie	NY		220,361		48.22	%		1		4		4
Hamilton	NY		44,578		44.66	%		2		1		1
Cortland	NY		278,943		40.65	%		1		5		7
Montgomery	NY		264,234		36.53	%		2		5		4
Otsego	NY		355,933		32.80	%		2		8		11
Delaware	NY		312,890		31.89	%		1		5		5
Essex	NY		199,357		27.62	%		2		3		5
Madison	NY		223,268		25.35	%		2		4		8
Susquehanna	PA		174,753		20.41	%		2		5		7
Broome	NY		370,208		13.75	%		2		7		10
Saint Lawrence	NY		165,489		13.68	%		3		5		5
Oneida	NY		475,730		13.38	%		4		7		9
Pike	PA		82,836		11.45	%		5		2		2
Oswego	NY		140,096		11.28	%		4		4		6
Wayne	PA		118,528		9.20	%		4		3		4
Herkimer	NY		59,319		9.02	%		4		2		1
Tioga	NY		34,906		7.75	%		5		1		1
Clinton	NY		105,184		7.63	%		5		3		3
Lackawanna	PA		413,114		7.28	%		6		12		17
Schenectady	NY		158,950		5.79	%		5		2		2
Franklin	NY		28,894		5.54	%		4		1		1
Onondaga	NY		454,061		4.22	%		6		11		13
Saratoga	NY		153,381		3.42	%		8		4		4
Monroe	PA		79,468		2.96	%		8		4		4
Berkshire	MA		124,705		2.93	%		7		6		6
Greene	NY		39,733		2.84	%		5		2		2
Warren	NY		45,380		2.56	%		7		2		3
Chittenden	VT		81,225		1.84	%		7		3		3
Cheshire	NH		27,215		1.81	%		7		1		-
Rensselaer	NY		31,153		1.62	%		10		1		1
Luzerne	PA		79,314		1.32	%		13		4		6
Albany	NY		226,583		1.14	%		9		4		5
Hillsborough	NH		74,688		0.66	%		12		2		2
Rutland	VT		4,281		0.43	%		9		1		1
Rockingham	NH		9,923		0.13	%		22		1		2
Cumberland	ME		7,712		0.09	%		16		1		-
		$	7,048,453							152		183

Source: SNL Financial LLC

* Branch and ATM data is as of December 31, 2017.

6

Data Privacy and Security Practices

The Company’s enterprise security strategy revolves around people, processes and technology. The program is designed to assist our customers in managing their risks across the supply chain. The Company employs a defense in depth strategy, which combines physical control measures with logical control measures and uses a layered security model to provide end-to-end security of Company and client information. The high-level objective of the information security program is to protect the confidentiality, integrity and availability of all information assets in our environment. We accomplish this by building our program around six foundational control areas: program oversight and governance, safeguards and controls, security awareness training, service provider oversight, incident response and business continuity. The Company’s data security and privacy practices are in compliance with all applicable laws and regulations including the Gramm-Leach Bliley Act of 2001 and applicable privacy laws described under the heading Supervision and Regulation in this Item 1. Business section.

The controls identified in our enterprise security program are managed by various stakeholders throughout the Company and monitored by the information security team. All employees are required to take information security and privacy training at when they join the Company and then complete annual online training certification and ad hoc face to face trainings. The Company engages outside consultants to perform periodic audits of our information and data security controls and processes including penetration testing of the Company’s public facing websites and corporate networks. The Board of Directors requires the Information Security Officer to report to them the status of the overall information security and data privacy program.

Investment in Human Capital

The Company’s strategic initiative regarding investing in human capital includes key initiatives to attract, develop and retain our valued employees. Talent management continues to be a top priority as specific competencies are predicted to be in short-supply with the transition of our baby boomer population into retirement.

To aid in retention and attract talent, the Company took advantage of the recent Tax Reform Act to increase our minimum hiring pay rate to $15 per hour and provided a 5% pay increase to the remaining employees earning $50,000 and under annually. We implemented a new and detailed compensation program in 2017 to align career path programs and reward performance. The Company’s incentive programs recognize all full-time employees at all levels and are designed to motivate employees to support achievement of company success, with appropriate risk assessment and prevention measures designed to prevent fraud.

Learning and Development

The Company focuses on the future by encouraging and promoting internal development. We have four distinct programs that address and encourage development and foster retention. Our high-potential program is in its fifth cycle of leader development. Our emerging leaders program develops our up-and-coming next generation of leaders. Our management development program aims at attracting key external talent, particularly through benefit programs such as financial education, tuition repayment, graduate school tuition assistance and flexible work arrangements. The program has placed many graduates in key positions where they have made significant contributions. Our professional development program provides an entry point for early career professions.  This program provides an overview of banking functions over a 12-18 month period, ultimately placing employees with working knowledge in positions of responsibility around the Company.  In addition, employees have access to career paths throughout the Company’s business areas, supported by individual development plans and internal learning management system resources.

Diversity and Inclusion

We have enhanced the visibility and structure of our long-standing commitment to diversity and inclusion ("D&I"). Our Chief Diversity Officer, named in 2017, has placed a high level of focus on relevant and impactful D&I initiatives by building upon our strong cultural foundation. Aligning with the data from our annual employee engagement survey, a three-year strategic roadmap has been developed by the D&I steering committee.  The Company has a D&I steering committee comprised of members of the executive team, including the Chief Executive Officer. The plan is shared with our board of directors, management and employees, who are often included in implementing specific action items.

The Company developed a purpose statement to support the D&I initiative, which states that the Company strives to create an environment that is open and welcoming to all, leading to high employee engagement and job performance.  We believe this will enable the Company to outperform our peers and ensure high levels of shareholder return and thus financial independence. We strive to ensure our executives are demonstrating the highest ethical leadership, are approachable and inspire trust.

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Conduct and Ethics

In today’s world, it is critical that the board of directors and senior management vigorously endorse a no-tolerance stance for workplace harassment, biases and unethical behavior. The Company’s values-based Code of Business Conduct and Ethics is extensively communicated on our website, intranet, company newsletter and internally socialized through a blog entitled “Respectfully Yours.” Company-wide reminders regarding our intolerance of racial and sexual harassment have been provided to each employee this year in response to certain national events. Frequent training specific to managers and employees, regular publication of our whistleblower policy and reporting mechanisms provide framework to the Company’s motto of: “The right people. Doing the right things. In the right way.”

Engaging Employees

The Company seeks to further refine its workforce programs through its annual employee engagement survey, which has a high 90% participation rate and provides valuable insight into the Company’s areas of strength and opportunities to enhance strategies. Based on the most recent survey, high impact strengths included leadership, alignment to company goals and individual work, sense of team and identity, autonomy to get things done, access to learning and development and social responsibility. The executive team owns several initiatives directly tied to the survey feedback. The Company believes that engaged employees will drive retention and effort, ultimately correlating to a better experience for our customers.

Supervision and Regulation

The Company, the Bank and certain of its non-banking subsidiaries are subject to extensive regulation under federal and state laws. The regulatory framework applicable to bank holding companies and their subsidiary banks is intended to protect depositors, federal deposit insurance funds and the stability of the U.S. banking system. This system is not designed to protect equity investors in bank holding companies, such as the Company.

Set forth below is a summary of the significant laws and regulations applicable to the Company and its subsidiaries. The description that follows is qualified in its entirety by reference to the full text of the statutes, regulations and policies that are described. Such statutes, regulations and policies are subject to ongoing review by Congress and state legislatures and federal and state regulatory agencies. A change in any of the statutes, regulations or regulatory policies applicable to the Company and its subsidiaries could have a material effect on the results of the Company.

Overview

The Company is a registered bank holding company and financial holding company under the Bank Holding Company Act of 1956, as amended (the “BHC Act”) and is subject to the supervision of and regular examination by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board” or “FRB”) as its primary federal regulator. The Company is also subject to the jurisdiction of the Securities and Exchange Commission (“SEC”) and is subject to the disclosure and other regulatory requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, as administered by the SEC. The Company's common stock is listed on the NASDAQ Global Select market under the ticker symbol, “NBTB,” and the Company is subject to the NASDAQ stock market rules.

The Bank is chartered as a national banking association under the National Bank Act. The Bank is subject to the supervision of, and to regular examination by, the Office of the Comptroller of the Currency (“OCC”) as its chartering authority and primary federal regulator. The Bank is also subject to the supervision and regulation, to a limited extent, of the Federal Deposit Insurance Corporation (“FDIC”) as its deposit insurer. Financial products and services offered by the Company and the Bank are subject to federal consumer protection laws and implementing regulations promulgated by the Consumer Financial Protection Bureau (“CFPB”). The Company and the Bank are also subject to oversight by state attorneys general for compliance with state consumer protection laws. The Bank's deposits are insured by the FDIC up to the applicable deposit insurance limits in accordance with FDIC laws and regulations. The non-bank subsidiaries of the Company and the Bank are subject to federal and state laws and regulations, including regulations of the FRB and the OCC, respectively.

Since the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), U.S. banks and financial services firms have been subject to enhanced regulation and oversight. Several provisions of the Dodd-Frank Act are subject to further rulemaking, guidance and interpretation by the federal banking agencies. While the current administration and its appointees to the federal banking agencies have expressed interest in reviewing, revising and perhaps, repealing portions of the Dodd-Frank Act and certain of its implementing regulations, it is not clear whether any such legislation or regulatory changes will be enacted or, if enacted, what the effect on the Company would be.

Federal Bank Holding Company Regulation

The Company is a bank holding company as defined by the BHC Act. The BHC Act generally limits the business of the Company to banking, managing or controlling banks and other activities that the FRB has determined to be so closely related to banking “as to be a proper incident thereto.” The Company has also qualified for and elected to be a financial holding company. Financial holding companies may engage in any activity, or acquire and retain the shares of a company engaged in any activity that is either (i) financial in nature or incidental to such financial activity (as determined by the FRB in consultation with the Secretary of the Treasury), or (ii) complementary to a financial activity and that does not pose a substantial risk to the safety and soundness of depository institutions or the financial system (as solely determined by the FRB). If a bank holding company seeks to engage in the broader range of activities permitted under the BHC Act for financial holding companies, (i) the bank holding company and all of its depository institution subsidiaries must be “well-capitalized” and “well-managed,” as defined in the FRB's Regulation Y and (ii) it must file a declaration with the FRB that it elects to be a “financial holding company.” In order for a financial holding company to commence any activity that is financial in nature, incidental thereto, or complementary to a financial activity, or to acquire a company engaged in any such activity permitted by the BHC Act, each insured depository institution subsidiary of the financial holding company must have received a rating of at least “satisfactory” in its most recent examination under the Community Reinvestment Act of 1977 (the “CRA”). See the section titled “Community Reinvestment Act of 1977” for further information relating to the CRA.

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Regulation of Mergers and Acquisitions

The BHC Act, the Bank Merger Act and other federal and state statutes regulate acquisitions of depository institutions and their holding companies. The BHC Act requires prior FRB approval for a bank holding company to acquire, directly or indirectly, 5% or more of any class of voting securities of a commercial bank or its parent holding company and for a company, other than a bank holding company, to acquire 25% or more of any class of voting securities of a bank or bank holding company. Under the Change in Bank Control Act, any person, including a company, may not acquire, directly or indirectly, control of a bank without providing 60 days’ prior notice and receiving a non-objection from the appropriate federal banking agency.

Under the Bank Merger Act, prior approval of the OCC is required for a national bank to merge with another bank where the national bank is the surviving bank or to purchase the assets or assume the deposits of another bank. In reviewing applications seeking approval of merger and acquisition transactions, the federal banking agencies will consider, among other criteria, the competitive effect and public benefits of the transactions, the capital position of the combined banking organization, the applicant's performance record under the CRA and the effectiveness of the subject organizations in combating money laundering activities.

As a financial holding company, the Company is permitted to acquire control of non-depository institutions engaged in activities that are financial in nature and in activities that are incidental to financial activities without prior FRB approval. However, the BHC Act, as amended by the Dodd-Frank Act, requires prior written approval from the FRB or prior written notice to the FRB before a financial holding company may acquire control of a company with consolidated assets of $10 billion or more.

Capital Distributions

The principal source of the Company's liquidity is dividends from the Bank. The OCC oversees the ability of the Bank to make capital distributions, including dividends. The OCC generally prohibits a depository institution from making any capital distributions (including payment of a dividend) or paying any management fee to its parent holding company if the bank would thereafter be undercapitalized. The OCC’s prior approval is required if the total of all dividends declared by a national bank in any calendar year would exceed the sum of the bank's net income for that year and its undistributed net income for the preceding two calendar years, less any required transfers to surplus. The National Bank Act also prohibits national banks from paying dividends that would be greater than the bank's undivided profits after deducting statutory bad debt in excess of the bank's allowance for loan losses.

The federal banking agencies have indicated that paying dividends that deplete a bank's capital base to an inadequate level would be an unsafe and unsound banking practice and that banking organizations should generally pay dividends only out of current operating earnings. The appropriate federal regulatory authority is authorized to determine, based on the financial condition of a bank holding company or a bank, that the payment of dividends would be an unsafe or unsound practice and to prohibit such payment.

Affiliate and Insider Transactions

Transactions between the Bank and its affiliates, including the Company, are governed by sections 23A and 23B of the Federal Reserve Act (the “FRA”) and the FRB’s implementing Regulation W. An “affiliate” of a bank includes any company or entity that controls, is controlled by or is under common control with the Bank. In a bank holding company context, at a minimum, the parent holding company of a bank and companies that are controlled by such parent holding company, are affiliates of the bank. Generally, sections 23A and 23B of the FRA are intended to protect insured depository institutions from losses in transactions with affiliates. These sections place quantitative and qualitative limitations on covered transactions between the Bank and its affiliates and require that all transactions between a bank and its affiliates occur on market terms that are consistent with safe and sound banking practices.

Section 22(h) of the FRA and its implementing Regulation O restricts loans to directors, executive officers and principal stockholders (“Insiders”). Under Section 22(h), loans to Insiders and their related interests may not exceed, together with all other outstanding loans to such persons and affiliated entities, the Bank's total capital and surplus. Loans to Insiders above specified amounts must receive the prior approval of the Bank’s board of directors. Further, under Section 22(h) of the FRA, loans to directors, executive officers and principal stockholders must be made on terms substantially the same as offered in comparable transactions to other persons, except that such Insiders may receive preferential loans made under a benefit or compensation program that is widely available to the Bank’s employees and does not give preference to the Insider over the employees. Section 22(g) of the FRA places additional limitations on loans to executive officers.

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Federal Deposit Insurance and Brokered Deposits

The FDIC’s deposit insurance limit is $250,000 per depositor, per insured bank, for each account ownership category. The Bank’s deposit accounts are fully insured by the FDIC Deposit Insurance Fund (the “DIF”) up to the deposit insurance limits in accordance with applicable laws and regulations.

The FDIC uses a risk-based assessment system that imposes insurance premiums based upon a risk matrix that takes into account a bank's capital level and supervisory rating (“CAMELS rating”). The risk matrix uses different risk categories distinguished by capital levels and supervisory ratings. As a result of the Dodd-Frank Act, the base for deposit insurance assessments is now consolidated average assets less average tangible equity. Assessment rates are calculated using formulas that take into account the risk of the institution being assessed. In addition to deposit insurance assessments, the Federal Deposit Insurance Act (“FDIA”) provides for additional assessments related to outstanding bonds issued by The Financing Corporation ("FICO"). The FICO is a mixed-ownership government corporation established by the Competitive Equality Banking Act of 1987 whose sole purpose was to function as a financing vehicle for the now defunct Federal Savings & Loan Insurance Company. The FICO assessments are adjusted quarterly to reflect changes in the assessment base of the DIF and do not vary depending upon a depository institution’s capitalization or supervisory evaluation. Outstanding FICO bonds mature through 2019.

Under FDIC laws and regulations, no FDIC-insured depository institution can accept brokered deposits unless it is well-capitalized or unless it is adequately capitalized and receives a waiver from the FDIC. Applicable laws and regulations also prohibit any depository institution that is not well-capitalized from paying an interest rate on brokered deposits in excess of three-quarters of one percentage point over certain prevailing market rates.

The Dodd-Frank Act requires that the FDIC raise the minimum reserve ratio of the DIF from 1.15% to 1.35% and that the FDIC offset the effect of this increase on insured depository institutions with total consolidated assets of less than $10 billion. In March 2016, the FDIC issued a final rule affecting insured depository institutions with total consolidated assets of more than $10 billion. The final rule imposes a surcharge of 4.5 cents per $100 of the institution’s assessment base on deposit insurance assessment rates paid by these larger institutions. If the reserve ratio does not reach 1.35% by December 31, 2018, through implementation of the surcharge, the FDIC will impose an additional, one-time shortfall assessment on insured depository institutions with more than $10 billion in assets on March 31, 2019, to be paid by June 30, 2019. The FDIC also has authority to further increase deposit insurance assessments. At this time, the Bank is not subject to this surcharge.

Under the FDIA, the FDIC may terminate deposit insurance upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. The Bank's management is not aware of any practice, condition or violation that might lead to the termination of its deposit insurance.

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Federal Home Loan Bank System

The Bank is also a member of the Federal Home Loan Bank (“FHLB”) of New York, which provides a central credit facility primarily for member institutions for home mortgage and neighborhood lending. The Bank is subject to the rules and requirements of the FHLB, including the requirement to acquire and hold shares of capital stock in the FHLB in an amount at least equal to the sum of 0.125% of the aggregate principal amount of its unpaid residential mortgage loans and similar obligations at the beginning of each year, up to a maximum of $25.0 million. The Bank was in compliance with FHLB rules and requirements as of December 31, 2017.

Debit Card Interchange Fees

The Dodd-Frank Act requires that any interchange transaction fee charged for a debit transaction be reasonable and proportional to the cost incurred by the issuer for the transaction. FRB regulations mandated by the Dodd-Frank Act limit interchange fees on debit cards to a maximum of 21 cents per transaction plus 5 basis points of the transaction amount. The rule also permits a fraud-prevention adjustment of 1 cent per transaction conditioned upon an issuer developing, implementing and updating reasonably designed fraud-prevention policies and procedures. Issuers that, together with their affiliates, have less than $10 billion of assets, such as the Company, are exempt from the debit card interchange fee standards. However, FRB regulations prohibit all issuers, including the Company and the Bank, from restricting the number of networks over which electronic debit transactions may be processed to less than two unaffiliated networks.

Source of Strength Doctrine

FRB policy requires bank holding companies to act as a source of financial and managerial strength to their subsidiary banks. Section 616 of the Dodd-Frank Act codifies the requirement that bank holding companies serve as a source of financial strength to their subsidiary depository institutions. As a result, the Company is expected to commit resources to support the Bank, including at times when the Company may not be in a financial position to provide such resources. Any capital loan by the Company to the Bank is subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary banks. The U.S. Bankruptcy Code provides that, in the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to priority of payment.

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In addition, under the National Bank Act, if the Bank’s capital stock is impaired by losses or otherwise, the OCC is authorized to require payment of the deficiency by assessment upon the Company. If the assessment is not paid within three months, the OCC could order a sale of Bank stock held by the Company to cover any deficiency.

Capital Adequacy and Prompt Corrective Action

In July 2013, the FRB, the OCC and the FDIC approved final rules (the “Capital Rules”) that established a new capital framework for U.S. banking organizations. The Capital Rules generally implement the Basel Committee on Banking Supervision’s (the “Basel Committee”) December 2010 final capital framework referred to as “Basel III” for strengthening international capital standards. The Capital Rules revise the definitions and the components of regulatory capital, as well as address other issues affecting the numerator in banking institutions’ regulatory capital ratios. The Capital Rules also address asset risk weights and other matters affecting the denominator in banking institutions’ regulatory capital ratios and replace the existing general risk-weighting approach with a more risk-sensitive approach.

The Capital Rules: (i) require a capital measure called “Common Equity Tier 1” (“CET1”) and related regulatory capital ratio of CET1 to risk-weighted assets; (ii) specify that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting certain revised requirements; (iii) mandate that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital; and (iv) expand the scope of the deductions from and adjustments to capital as compared to existing regulations. Under the Capital Rules, for most banking organizations, including the Company, the most common form of Additional Tier 1 capital is non-cumulative perpetual preferred stock and the most common forms of Tier 2 capital are subordinated notes and a portion of the allocation for loan losses, in each case, subject to the Capital Rules’ specific requirements.

Pursuant to the Capital Rules, the minimum capital ratios as of January 1, 2015 are:

● 4.5% CET1 to risk-weighted assets;

● 6.0% Tier 1 capital (CET1 plus Additional Tier 1 capital) to risk-weighted assets;

● 8.0% Total capital (Tier 1 capital plus Tier 2 capital) to risk-weighted assets; and

● 4.0% Tier 1 capital to average consolidated assets as reported on consolidated financial statements (known as the “leverage ratio”).

The Capital Rules also require a “capital conservation buffer,” composed entirely of CET1, on top of these minimum risk-weighted asset ratios. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of CET1 to risk-weighted assets above the minimum but below the capital conservation buffer will face constraints on dividends, equity and other capital instrument repurchases and compensation based on the amount of the shortfall. When fully phased-in on January 1, 2019, the capital standards applicable to the Company and the Bank will include an additional capital conservation buffer of 2.5% of CET1, effectively resulting in minimum ratios inclusive of the capital conservation buffer of (i) CET1 to risk-weighted assets of at least 7%, (ii) Tier 1 capital to risk-weighted assets of at least 8.5% and (iii) Total capital to risk-weighted assets of at least 10.5%. The risk-weighting categories in the Capital Rules are standardized and include a risk-sensitive number of categories, depending on the nature of the assets, generally ranging from 0% for U.S. government and agency securities, to 600% for certain equity exposures and resulting in higher risk weights for a variety of asset classes.

The Capital Rules provide for a number of deductions from and adjustments to CET1. These include, for example, the requirement that mortgage servicing rights, deferred tax assets arising from temporary differences that could not be realized through net operating loss carrybacks and significant investments in non-consolidated financial entities be deducted from CET1 to the extent that any one such category exceeds 10% of CET1 or all such items, in the aggregate, exceed 15% of CET1. The deductions and adjustments will be incrementally phased in between January 1, 2015 and January 1, 2019.

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In addition, under the prior general risk-based capital rules, the effects of accumulated other comprehensive income or loss (“AOCI”) items included in stockholders’ equity (for example, marks-to-market of securities held in the available for sale ("AFS") portfolio) under GAAP were excluded for the purposes of determining regulatory capital ratios. Under the Capital Rules, the effects of certain AOCI items are not excluded; however, banking organizations not using the advanced approaches, including the Company and the Bank, were permitted to make a one-time permanent election to continue to exclude these items in January 2015. The Capital Rules also preclude certain hybrid securities, such as trust preferred securities issued after May 19, 2010, from inclusion in bank holding companies’ Tier 1 capital.

Implementation of the deductions and other adjustments to CET1 began on January 1, 2015, are phased-in over a 4-year period (beginning at 40% on January 1, 2015 and an additional 20% per year thereafter). The implementation of the capital conservation buffer began on January 1, 2016 at the 0.625% level and increase by 0.625% on each subsequent January 1, until it reaches 2.5% on January 1, 2019.

In September 2017, the federal banking agencies proposed simplifying the Capital Rules. The proposal would apply primarily to non-advanced approaches institutions, such as the Company. The proposal would simplify and clarify a number of the more complex aspects of the Capital Rules, including the treatment for certain acquisition, development and construction loans, mortgage servicing assets, certain deferred tax assets, investments in the capital instruments of unconsolidated financial institutions and minority interest. In November 2017, the FRB finalized a rule extending the currently applicable capital rules for non-advanced approaches institutions, including the treatment of mortgage servicing assets. That rule is in effect pending the comment period and review of the general proposal to simplify the Capital Rules for non-advanced approaches institutions.

Management believes that the Company is in compliance, and will continue to be in compliance, with the targeted capital ratios as such requirements are phased in.

Prompt Corrective Action and Safety and Soundness

Pursuant to Section 38 of the Federal Deposit Insurance Act (“FDIA”), federal banking agencies are required to take “prompt corrective action” (“PCA”) should an insured depository institutions fail to meet certain capital adequacy standards. At each successive lower capital category, an insured depository institution is subject to more restrictions and prohibitions, including restrictions on growth, restrictions on interest rates paid on deposits, restrictions or prohibitions on payment of dividends and restrictions on the acceptance of brokered deposits. Furthermore, if an insured depository institution is classified in one of the undercapitalized categories, it is required to submit a capital restoration plan to the appropriate federal banking agency and the holding company must guarantee the performance of that plan. Based upon its capital levels, a bank that is classified as well-capitalized, adequately capitalized or undercapitalized, may be treated as though it were in the next lower capital category if the appropriate federal banking agency, after notice and opportunity for hearing, determines that an unsafe or unsound condition or an unsafe or unsound practice, warrants such treatment.

For purposes of PCA, to be: (i) well-capitalized, an insured depository institution must have a total risk based capital ratio of at least 10%, a Tier 1 risk based capital ratio of at least 8%, a CET1 risk based capital ratio of at least 6.5%, and a Tier 1 leverage ratio of at least 5%; (ii) adequately capitalized, an insured depository institution must have a total risk based capital ratio of at least 8%, a Tier 1 risk based capital ratio of at least 6%, a CET1 risk based capital ratio of at least 4.5%, and a Tier 1 leverage ratio of at least 4%; (iii) undercapitalized, an insured depository institution would have a total risk based capital ratio of less than 8%, a Tier 1 risk based capital ratio of less than 6%, a CET1 risk based capital ratio of less than 4.5%, and a Tier 1 leverage ratio of less than 4%; (iv) significantly undercapitalized, an insured depository institution would have a total risk based capital ratio of less than 6%, a Tier 1 risk based capital ratio of less than 4%, a CET1 risk based capital ratio of less than 3%, and a Tier 1 leverage ratio of less than 3%.; (v) critically undercapitalized, an insured depository institution would have a ratio of tangible equity to total assets that is less than or equal to 2%.

Bank holding companies and insured depository institutions may also be subject to potential enforcement actions of varying levels of severity for unsafe or unsound practices in conducting their business or for violation of any law, rule, regulation, condition imposed in writing by the agency or term of a written agreement with the agency. In more serious cases, enforcement actions may include the issuance of directives to increase capital; the issuance of formal and informal agreements; the imposition of civil monetary penalties; the issuance of a cease and desist order that can be judicially enforced; the issuance of removal and prohibition orders against officers, directors and other institution−affiliated parties; the termination of the insured depository institution’s deposit insurance; the appointment of a conservator or receiver for the insured depository institution; and the enforcement of such actions through injunctions or restraining orders based upon a judicial determination that the FDIC, as receiver, would be harmed if such equitable relief was not granted.

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Volcker Rule

Section 619 of the Dodd-Frank Act, commonly known as the Volcker Rule, restricts the ability of banking entities, such as the Company, from: (i) engaging in “proprietary trading” and (ii) investing in or sponsoring certain covered funds, subject to certain limited exceptions. Regulations implementing the Volcker Rule define the term "covered fund" as any issuer that would be an investment company under the Investment Company Act but for the exemptions in section 3(c)(1) or 3(c)(7) of that Act, which includes collateralized loan obligation (“CLO”) and collateralized debt obligation securities. The regulations provide an exemption for CLOs meeting certain requirements. Compliance with the Volcker Rule was required on July 21, 2017. Given the Company’s size and the scope of its activities, the implementation of the Volcker Rule did not have a significant effect on its consolidated financial statements.

Depositor Preference

The FDIA provides that, in the event of the “liquidation or other resolution” of an insured depository institution, the claims of depositors of the institution, including the claims of the FDIC as subrogee of insured depositors and certain claims for administrative expenses of the FDIC as a receiver, will have priority over other general unsecured claims against the institution. If an insured depository institution fails, insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, non-deposit creditors, including the parent bank holding company, with respect to any extensions of credit they have made to such insured depository institution.

Consumer Protection and CFPB Supervision

The Dodd-Frank Act centralized responsibility for consumer financial protection by creating the CFPB, an independent agency charged with responsibility for implementing, enforcing and examining compliance with federal consumer financial laws. The CFPB has examination authority over all banks and savings institutions with more than $10 billion in assets. As the Company is below this threshold, the OCC continues to exercise primary examination authority over the Bank with regard to compliance with federal consumer financial laws and regulations. Under the Dodd-Frank Act, state attorneys general are empowered to enforce rules issued by the CFPB.

The Company is subject to federal consumer financial statutes and the regulations promulgated thereunder including, but not limited to:

● the Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

● the Equal Credit Opportunity Act (“ECOA”), prohibiting discrimination in connection with the extension of credit;

● the Home Mortgage Disclosure Act (“HMDA”), requiring home mortgage lenders, including the Bank, to make available to the public expanded information regarding the pricing of home mortgage loans, including the “rate spread” between the annual percentage rate and the average prime offer rate for mortgage loans of a comparable type;

● the Fair Credit Reporting Act (“FCRA”), governing the provision of consumer information to credit reporting agencies and the use of consumer information; and

● the Fair Debt Collection Practices Act, governing the manner in which consumer debts may be collected by collection agencies.

The Bank’s failure to comply with any of the consumer financial laws can result in civil actions, regulatory enforcement action by the federal banking agencies and the U.S. Department of Justice.

USA PATRIOT Act

The Bank Secrecy Act (“BSA”), as amended by the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA PATRIOT Act”), imposes obligations on U.S. financial institutions, including banks and broker-dealer subsidiaries, to implement policies, procedures and controls which are reasonably designed to detect and report instances of money laundering and the financing of terrorism. Financial institutions also are required to respond to requests for information from federal banking agencies and law enforcement agencies. Information sharing among financial institutions for the above purposes is encouraged by an exemption granted to complying financial institutions from the privacy provisions of the GLBA and other privacy laws. Financial institutions that hold correspondent accounts for foreign banks or provide private banking services to foreign individuals are required to take measures to avoid dealing with certain foreign individuals or entities, including foreign banks with profiles that raise money laundering concerns and are prohibited from dealing with foreign "shell banks" and persons from jurisdictions of particular concern. The primary federal banking agencies and the Secretary of the Treasury have adopted regulations to implement several of these provisions. On May 11, 2018, the Bank must comply with the new Customer Due Diligence Rule, which clarified and strengthened the existing obligations for identifying new and existing customers and explicitly include risk-based procedures for conducting ongoing customer due diligence. All financial institutions also are required to establish internal anti-money laundering programs. The effectiveness of a financial institution in combating money laundering activities is a factor to be considered in any application submitted by the financial institution under the Bank Merger Act. The Company has a Bank Secrecy Act and USA PATRIOT Act board-approved compliance program commensurate with its risk profile and appetite.

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Identity Theft Prevention

The Fair Credit Reporting Act’s (“FCRA”) Red Flags Rule requires financial institutions with covered accounts (e.g., consumer bank accounts and loans) to develop, implement and administer an identity theft prevention program. This program must include reasonable policies and procedures to detect suspicious patterns or practices that indicate the possibility of identity theft, such as inconsistencies in personal information or changes in account activity.

Office of Foreign Assets Control Regulation

The United States has imposed economic sanctions that affect transactions with designated foreign countries, nationals and others. These are typically known as the “OFAC” rules based on their administration by the U.S. Treasury Department Office of Foreign Assets Control (“OFAC”). The OFAC-administered sanctions targeting countries take many different forms. Generally, they contain one or more of the following elements: (i) restrictions on trade with or investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on “U.S. persons” engaging in financial transactions relating to making investments in or providing investment-related advice or assistance to a sanctioned country; and (ii) a blocking of assets in which the government or specially designated nationals of the sanctioned country have an interest, by prohibiting transfers of property subject to U.S. jurisdiction (including property in the possession or control of U.S. persons). Blocked assets (property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. Failure to comply with these sanctions could have serious legal and reputational consequences.

Financial Privacy and Data Security

The Company and the Bank are subject to federal laws, including the Gramm-Leach-Bliley Act (“GLBA”) and certain state laws containing consumer privacy protection provisions. These provisions limit the ability of banks and other financial institutions to disclose nonpublic information about consumers to affiliated and non-affiliated third parties and limit the reuse of certain consumer information received from nonaffiliated financial institutions. These provisions require notice of privacy policies to clients and, in some circumstances, allow consumers to prevent disclosure of certain nonpublic personal information to affiliates or non-affiliated third parties by means of “opt out” or “opt in” authorizations.

The GLBA requires that financial institutions implement comprehensive written information security programs that include administrative, technical and physical safeguards to protect consumer information. Further, pursuant to interpretive guidance issued under the GLBA and certain state laws, financial institutions are required to notify clients of security breaches resulting in unauthorized access to their personal information. The Bank believes it is in compliance with all GLBA obligations.

The Bank is also subject to data security standards, privacy and data breach notice requirements, primarily those issued by the OCC. The federal banking agencies, through the Federal Financial Institutions Examination Council, have adopted guidelines to encourage financial institutions to address cyber security risks and identify, assess and mitigate these risks, both internally and at critical third party services providers.

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Community Reinvestment Act of 1977

The Bank has a responsibility under the CRA, as implemented by OCC regulations, to help meet the credit needs of its communities, including low- and moderate-income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA. Regulators periodically assess the Bank’s record of compliance with the CRA. The Bank’s failure to comply with the CRA could, at a minimum, result in regulatory restrictions on its activities and the activities of the Company. The Bank’s latest CRA rating was “Satisfactory.”

Future Legislative Initiatives

Congress, state legislatures and financial regulatory agencies may introduce various legislative and regulatory initiatives that could affect the financial services industry, generally. Such initiatives may include proposals to expand or contract the powers of bank holding companies and/or depository institutions or proposals to substantially change the financial institution regulatory system. Such legislation could change banking statutes and the operating environment of the Company in substantial and unpredictable ways. If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions and other financial institutions. The Company cannot predict whether any such legislation will be enacted, and, if enacted, the effect that it or any implementing regulations would have on the financial condition or results of operations of the Company. A change in statutes, regulations or regulatory policies applicable to the Company or any of its subsidiaries could have a material effect on the business of the Company.

Employees

At December 31, 2017, the Company had 1,733 full-time equivalent employees. The Company’s employees are not presently represented by any collective bargaining group.

Available Information

The Company’s website is http://www.nbtbancorp.com. The Company makes available free of charge through its website its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports as soon as reasonably practicable after such material is electronically filed or furnished with the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act. We also make available through our website other reports filed with or furnished to the SEC under the Exchange Act, including our proxy statements and reports filed by officers and directors under Section 16(a) of that Act, as well as our Code of Business Conduct and Ethics and other codes/committee charters. The references to our website do not constitute incorporation by reference of the information contained in the website and such information should not be considered part of this document.

Any materials we file with the SEC may be read and copied at the SEC's Public Reference Room at 100 F Street, N.E., Washington, DC, 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

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ITEM 1A. Risk Factors

There are risks inherent to the Company’s business. The material risks and uncertainties that management believes affect the Company are described below. Any of the following risks could affect the Company’s financial condition and results of operations and could be material and/or adverse in nature. You should consider all of the following risks together with all of the other information in this Annual Report on Form 10-K.

Deterioration in local economic conditions may negatively impact our financial performance.

The Company’s success depends primarily on the general economic conditions in central and upstate New York, northeastern Pennsylvania, southern New Hampshire, western Massachusetts, Vermont, southern coastal Maine and the specific local markets in which the Company operates. Unlike larger national or other regional banks that are more geographically diversified, the Company provides banking and financial services to customers primarily in the upstate New York areas of Norwich, Syracuse, Oneonta, Amsterdam-Gloversville, Albany, Binghamton, Utica-Rome, Plattsburgh, Glens Falls and Ogdensburg-Massena, the northeastern Pennsylvania areas of Scranton, Wilkes-Barre and East Stroudsburg, Berkshire County, Massachusetts, southern New Hampshire, Vermont and the southern coastal Maine area. The local economic conditions in these areas have a significant impact on the demand for the Company’s products and services as well as the ability of the Company’s customers to repay loans, the value of the collateral securing loans and the stability of the Company’s deposit funding sources.

As a lender with the majority of our loans secured by real estate or made to businesses in New York, Pennsylvania, New Hampshire, Massachusetts, Vermont and Maine, a downturn in these local economies could cause significant increases in nonperforming loans, which could negatively impact our earnings. Declines in real estate values in our market areas could cause any of our loans to become inadequately collateralized, which would expose us to greater risk of loss. Additionally, a decline in real estate values could result in the decline of originations of such loans, as most of our loans and the collateral securing our loans, are located in those areas.

Variations in interest rates may negatively affect our financial performance.

The Company’s earnings and financial condition are largely dependent upon net interest income, which is the difference between interest earned from loans and investments and interest paid on deposits and borrowings. The narrowing of interest rate spreads could adversely affect the Company’s earnings and financial condition. The Company cannot predict with certainty, or control, changes in interest rates. Regional and local economic conditions and the policies of regulatory authorities, including monetary policies of the FRB, affect interest income and interest expense. High interest rates could also affect the amount of loans that the Company can originate because higher rates could cause customers to apply for fewer mortgages or cause depositors to shift funds from accounts that have a comparatively lower cost to accounts with a higher cost.  The Company may also experience customer attrition due to competitor pricing. If the cost of interest-bearing deposits increases at a rate greater than the yields on interest-earning assets increase, net interest income will be negatively affected. Changes in the asset and liability mix may also affect net interest income. Similarly, lower interest rates cause higher yielding assets to prepay and floating or adjustable rate assets to reset to lower rates. If the Company is not able to reduce its funding costs sufficiently, due to either competitive factors or the maturity schedule of existing liabilities, then the Company’s net interest margin will decline.

Although management believes it has implemented effective asset and liability management strategies to mitigate the potential adverse effects of changes in interest rates on the Company’s results of operations, any substantial or unexpected change in, or prolonged change in market interest rates could have a material adverse effect on the Company’s financial condition and results of operations. See the section captioned “Net Interest Income” in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 7A. Quantitative and Qualitative Disclosure About Market Risk located elsewhere in this report for further discussion related to the Company’s management of interest rate risk.

Our lending, and particularly our emphasis on commercial lending, exposes us to the risk of losses upon borrower default.

As of December 31, 2017, approximately 46% of the Company’s loan portfolio consisted of commercial and industrial, agricultural, commercial construction and commercial real estate loans. These types of loans generally expose a lender to greater risk of non-payment and loss than residential real estate loans because repayment of the loans often depends on the successful operation of the property, the income stream of the borrowers and, for construction loans, the accuracy of the estimate of the property’s value at completion of construction and the estimated cost of construction. Such loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to residential real estate loans. Because the Company’s loan portfolio contains a significant number of commercial and industrial, agricultural, construction and commercial real estate loans with relatively large balances, the deterioration of one or a few of these loans could cause a significant increase in nonperforming loans. An increase in nonperforming loans could result in a net loss of earnings from these loans, an increase in the provision for loan losses and/or an increase in loan charge-offs, all of which could have a material adverse effect on the Company’s financial condition and results of operations. See the section captioned “Loans” in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations located elsewhere in this report for further discussion related to commercial and industrial, agricultural, construction and commercial real estate loans.

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If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings will decrease.

The Company maintains an allowance for loan losses, which is an allowance established through a provision for loan losses charged to expense, that represents management’s best estimate of incurred losses within the existing portfolio of loans. The allowance, in the judgment of management, is necessary to reserve for estimated loan losses and risks inherent in the loan portfolio. The level of the allowance reflects management’s continuing evaluation of industry concentrations; specific credit risks; loan loss experience; current loan portfolio quality; present economic, political, environmental and regulatory conditions and unidentified losses inherent in the current loan portfolio. The determination of the appropriate level of the allowance for loan losses inherently involves a high degree of subjectivity and requires the Company to make significant estimates of current credit risks and future trends, all of which may undergo material changes. Changes in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of the Company’s control, may require an increase in the allowance for loan losses. Bank regulatory agencies periodically review the Company’s allowance for loan losses and may require an increase in the provision for loan losses or the recognition of further loan charge-offs, based on judgments different from those of management. In addition, if charge-offs in future periods exceed the allowance for loan losses, the Company may need additional provisions to increase the allowance for loan losses. These potential increases in the allowance for loan losses would result in a decrease in net income and, possibly, capital and may have a material adverse effect on the Company’s financial condition and results of operations. See the section captioned “Risk Management – Credit Risk” in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations located elsewhere in this report for further discussion related to the Company’s process for determining the appropriate level of the allowance for loan losses.

Strong competition within our industry and market area could hurt our performance and slow our growth.

The Company faces substantial competition in all areas of its operations from a variety of different competitors, many of which are larger and may have more financial resources. Such competitors primarily include national, regional and community banks within the various markets in which the Company operates. Additionally, various banks continue to enter or have announced plans to enter the market areas in which the Company currently operates. The Company also faces competition from many other types of financial institutions, including, without limitation, savings and loans, credit unions, finance companies, brokerage firms, insurance companies and other financial intermediaries. The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. Technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Many of the Company’s competitors have fewer regulatory constraints and may have lower cost structures. Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than the Company can.

The Company’s ability to compete successfully depends on a number of factors, including, among other things:

● the ability to develop, maintain and build upon long-term customer relationships based on top quality service, high ethical standards and safe, sound assets;

● the ability to expand the Company’s market position;

● the scope, relevance and pricing of products and services offered to meet customer needs and demands;

● the rate at which the Company introduces new products, services and technologies relative to its competitors;

● customer satisfaction with the Company’s level of service;

● industry and general economic trends; and

● the ability to attract and retain talented employees.

Failure to perform in any of these areas could significantly weaken the Company’s competitive position, which could adversely affect the Company’s growth and profitability, which, in turn, could have a material adverse effect on the Company’s financial condition and results of operations.

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We are subject to extensive government regulation and supervision, which may interfere with our ability to conduct our business and may negatively impact our financial results.

We are subject to extensive federal and state regulation and supervision. Banking regulations are primarily intended to protect depositors’ funds, the DIF and the safety and soundness of the banking system as a whole, not stockholders. These regulations affect the Company’s lending practices, capital structure, investment practices, dividend policy and growth, among other things. Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes. Changes to statutes, regulations or regulatory policies, including changes in interpretation or implementation of statutes, regulations or policies, could affect the Company in substantial and unpredictable ways. Such changes could subject the Company to additional costs, limit the types of financial services and products the Company may offer and/or limit the pricing the Company may charge on certain banking services, among other things. Compliance personnel and resources may increase our costs of operations and adversely impact our earnings.

Failure to comply with laws, regulations or policies could result in sanctions by regulatory agencies, civil money penalties and/or reputation damage, which could have a material adverse effect on our business, financial condition and results of operations. While the Company has policies and procedures designed to prevent any such violations, there can be no assurance that such violations will not occur. See the section captioned “Supervision and Regulation” in Item 1. Business of this report for further information.

We will be subject to heightened regulatory requirements if we exceed $10 billion in total consolidated assets.

Based on our historical growth rates and current size, it is possible that our total assets could exceed $10 billion dollars in the near future. The Dodd-Frank Act and its implementing regulations impose enhanced supervisory requirements on bank holding companies with more than $10 billion in total consolidated assets. For bank holding companies with more than $10 billion but less than $50 billion in total consolidated assets, such requirements include, among other things:

● compliance with the FRB’s annual stress testing requirements;

● increased capital, leverage, liquidity and risk management standards;

● examinations by the CFPB for compliance with federal consumer financial protection laws and regulations;

● limits on interchange fees on debit cards; and

● changes to the FDIC deposit insurance assessments calculation that would increase our insurance premium costs.

Federal financial regulators may require us to take actions to prepare for compliance before we exceed $10 billion in total consolidated assets. Our regulators may consider our preparation for compliance with these regulatory requirements when examining our operations or considering any request for regulatory approval. We may, therefore, incur compliance costs before we reach $10 billion in total consolidated assets and may be required to maintain the additional compliance procedures even if we do not grow at the anticipated rate or at all.

Failure to comply with these new requirements may negatively impact the results of our operations and financial condition. To ensure compliance, we will be required to investment significant resources, which may necessitate hiring additional personnel and implementing additional internal controls. These additional compliance costs may have a material adverse effect on our business, results of operations and financial condition.

The Company is subject to liquidity risk, which could adversely affect net interest income and earnings

The purpose of the Company’s liquidity management is to meet the cash flow obligations of its customers for both deposits and loans. The primary liquidity measurement the Company utilizes is called basic surplus, which captures the adequacy of the Company’s access to reliable sources of cash relative to the stability of its funding mix of average liabilities. 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. However, competitive pressure on deposit pricing could result in a decrease in the Company’s deposit base or an increase in funding costs. In addition, liquidity will come under additional pressure if loan growth exceeds deposit growth. These scenarios could lead to a decrease in the Company’s basic surplus measure below the minimum policy level of 5%. To manage this risk, the Company has the ability to purchase brokered time deposits, borrow against established borrowing facilities with other banks (Federal funds) and enter into repurchase agreements with investment companies. Depending on the level of interest rates, the Company’s net interest income, and therefore earnings, could be adversely affected. See the section captioned “Liquidity Risk” in Item 7.

19

Our ability to service our debt, pay dividends and otherwise pay our obligations as they come due is substantially dependent on capital distributions from our subsidiaries.

The Company is a separate and distinct legal entity from its subsidiaries. It receives substantially all of its revenue from dividends from its subsidiaries. These dividends are the principal source of funds to pay dividends on the Company’s common stock and interest and principal on the Company’s debt. Various federal and/or state laws and regulations limit the amount of dividends that the Bank may pay to the Company. In addition, the Company’s right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s creditors. In the event the Bank is unable to pay dividends to the Company, the Company may not be able to service debt, pay obligations or pay dividends on the Company’s common stock. The inability to receive dividends from the Bank could have a material adverse effect on the Company’s business, financial condition and results of operations.

A breach of information security, including as a result of cyber-attacks, could disrupt our business and impact our earnings.

We depend upon data processing, communication and information exchange on a variety of computing platforms and networks and over the internet. In addition, we rely on the services of a variety of vendors to meet our data processing and communication needs. Despite existing safeguards, we cannot be certain that all of our systems are free from vulnerability to attack or other technological difficulties or failures. If information security is breached or difficulties or failures occur, despite the controls we and our third party vendors have instituted, information can be lost or misappropriated, resulting in financial loss or costs to us, reputational harm or damages to others. Such costs or losses could exceed the amount of insurance coverage, if any, which would adversely affect our earnings. As cyber threats continue to evolve, we may be required to expend significant additional resources to modify our protective measures or to investigate and remediate any information security vulnerabilities.

The Company may be adversely affected by fraud.

As a financial institution, the Company is inherently exposed to operational risk in the form of theft and other fraudulent activity by employees, customers and other third parties targeting the Company and/or the Company’s customers or data. Such activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering and other dishonest acts. Although the Company devotes substantial resources to maintaining effective policies and internal controls to identify and prevent such incidents, given the increasing sophistication of possible perpetrators, the Company may experience financial losses or reputational harm as a result of fraud.

We continually encounter technological change and the failure to understand and adapt to these changes could hurt our business.

The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to serve customers better and to reduce costs. The Company’s future success depends, in part, upon its ability to address the needs of its customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in the Company’s operations. Many of the Company’s competitors have substantially greater resources to invest in technological improvements. The Company may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to its customers. Failure to successfully keep pace with technological changes affecting the financial services industry could have a material adverse impact on the Company’s business and, in turn, the Company’s financial condition and results of operations.

The Company relies on third parties to provide key components of its business infrastructure.

The Company relies on third parties to provide key components for its business operations, such as data processing and storage, recording and monitoring transactions, online banking interfaces and services, internet connections and network access. While the Company selects these third-party vendors carefully, it does not control their actions. Any problems caused by these third parties, including those resulting from breakdowns or other disruptions in communication services provided by a vendor, failure of a vendor to handle current or higher volumes, cyber-attacks and security breaches at a vendor, failure of a vendor to provide services for any reason or poor performance of services by a vendor, could adversely affect the Company’s ability to deliver products and services to its customers and otherwise conduct its business. Financial or operational difficulties of a third-party vendor could also hurt the Company’s operations if those difficulties interfere with the vendor's ability to serve the Company. Replacing these third party vendors also could create significant delays and expense that adversely affect the Company’s business and performance.

20

The possibility of the economy’s return to recessionary conditions and the possibility of further turmoil or volatility in the financial markets would likely have an adverse effect on our business, financial position and results of operations.

The economy in the United States and globally has experienced volatility in recent years and may continue to do so for the foreseeable future. There can be no assurance that economic conditions will not worsen. Unfavorable or uncertain economic conditions can be caused by declines in economic growth, business activity or investor or business confidence, limitations on the availability or increases in the cost of credit and capital, increases in inflation or interest rates, the timing and impact of changing governmental policies, natural disasters, terrorist attacks, acts of war or a combination of these or other factors. A worsening of business and economic conditions recovery could have adverse effects on our business, including the following:

● investors may have less confidence in the equity markets in general and in financial services industry stocks in particular, which could place downward pressure on the Company’s stock price and resulting market valuation; 

● consumer and business confidence levels could be lowered and cause declines in credit usage and adverse changes in payment patterns, causing increases in delinquencies and default rates; 

● the Company’s ability to assess the creditworthiness of its customers may be impaired if the models and approaches the Company uses to select, manage and underwrite its customers become less predictive of future behaviors;

● the Company could suffer decreases in demand for loans or other financial products and services or decreased deposits or other investments in accounts with the Company; 

● demand for and income received from the Company's fee-based services could decline;

● customers of the Company's trust and benefit plan administration business may liquidate investments, which together with lower asset values, may reduce the level of assets under management and administration and thereby decrease the Company's investment management and administration revenues; 

● competition in the financial services industry could intensify as a result of the increasing consolidation of financial services companies in connection with current market conditions or otherwise; and; 

● the value of loans and other assets or collateral securing loans may decrease.

We are subject to other-than-temporary impairment risk, which could negatively impact our financial performance.

The Company recognizes an impairment charge when the decline in the fair value of equity, debt securities and cost-method investments below their cost basis are judged to be other-than-temporary. Significant judgment is used to identify events or circumstances that would likely have a significant adverse effect on the future use of the investment. The Company considers various factors in determining whether an impairment is other-than-temporary, including the severity and duration of the impairment, forecasted recovery, the financial condition and near-term prospects of the investee, whether the Company has the intent to sell and whether it is more likely than not it will be forced to sell the security in question. Information about unrealized gains and losses is subject to changing conditions. The values of securities with unrealized gains and losses will fluctuate, as will the values of securities that we identify as potentially distressed. Our current evaluation of other-than-temporary impairments reflects our intent to hold securities for a reasonable period of time sufficient for a forecasted recovery of fair value. However, our intent to hold certain of these securities may change in future periods as a result of facts and circumstances impacting a specific security. If our intent to hold a security with an unrealized loss changes and we do not expect the security to fully recover prior to the expected time of disposition, we will write down the security to its fair value in the period that our intent to hold the security changes.

The process of evaluating the potential impairment of goodwill and other intangibles is highly subjective and requires significant judgment. The Company estimates the expected future cash flows of its various businesses and determines the carrying value of these businesses. The Company exercises judgment in assigning and allocating certain assets and liabilities to these businesses. The Company then compares the carrying value, including goodwill and other intangibles, to the discounted future cash flows. If the total of future cash flows is less than the carrying amount of the assets, an impairment loss is recognized based on the excess of the carrying amount over the fair value of the assets. Estimates of the future cash flows associated with the assets are critical to these assessments. Changes in these estimates based on changed economic conditions or business strategies could result in material impairment charges and therefore have a material adverse impact on the Company’s financial condition and performance.

The risks presented by acquisitions could adversely affect our financial condition and results of operations.

The business strategy of the Company has included and may continue to include growth through acquisition. Any future acquisitions will be accompanied by the risks commonly encountered in acquisitions. These risks may include, among other things:

● our ability to realize anticipated cost savings;

● the difficulty of integrating operations and personnel, the loss of key employees;

● the potential disruption of our or the acquired company’s ongoing business in such a way that could result in decreased revenues, the inability of our management to maximize our financial and strategic position;

● the inability to maintain uniform standards, controls, procedures and policies; and

● the impairment of relationships with the acquired company’s employees and customers as a result of changes in ownership and management.

21

We cannot provide any assurance that we will be successful in overcoming these risks or any other problems encountered in connection with acquisitions. Our inability to overcome these risks could have an adverse effect on the achievement of our business strategy and results of operations.

There are substantial risks and uncertainties associated with the introduction or expansion of lines of business or new products and services within existing lines of business.

From time to time, the Company may implement new lines of business or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new products and services, the Company may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved and price and profitability targets may not prove attainable. External factors, such as compliance with regulations, competitive alternatives and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. Furthermore, any new line of business and/or new product or service could have a significant impact on the effectiveness of the Company’s system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on the Company’s business, results of operations and financial condition.

Our controls and procedures may fail or be circumvented, which may result in a material adverse effect on our business.

Management regularly reviews and updates our internal controls, disclosure controls and procedures and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of the controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations and financial condition.

We are exposed to risk of environmental liabilities with respect to properties to which we obtain title.

A significant portion of our loan portfolio at December 31, 2017 was secured by real estate. In the course of our business, we may foreclose and take title to real estate and could be subject to environmental liabilities with respect to these properties. We may be held liable to a government entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or may be required to clean up hazardous or toxic substances, or chemical releases at a property. The costs associated with investigation and remediation activities could be substantial. In addition, if we are the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. These costs and claims could adversely affect our business, results of operations and prospects.

We may be adversely affected by the soundness of other financial institutions including the FHLB of New York.

Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services companies are interrelated as a result of trading, clearing, counterparty or other relationships. We have exposure to many different industries and counterparties and we routinely execute transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, mutual and hedge funds and other institutional clients. As a result, defaults by, or even rumors or questions about, one or more financial services companies, or the financial services industry generally, have led to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions. Many of these transactions expose us to credit risk in the event of default of our counterparty or client. In addition, our credit risk may be exacerbated if the collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due us. There is no assurance that any such losses would not materially and adversely affect our business, financial condition or results of operations.

The Company owns common stock of FHLB of New York in order to qualify for membership in the FHLB system, which enables it to borrow funds under the FHLB of New York’s advance program. The carrying value and fair market value of our FHLB of New York common stock was $31.5 million as of December 31, 2017. There are 11 branches of the FHLB, including New York, which are jointly liable for the consolidated obligations of the FHLB system. To the extent that one FHLB branch cannot meet its obligations to pay its share of the system’s debt, other FHLB branches can be called upon to make the payment. Any adverse effects on the FHLB of New York could adversely affect the value of our investment in its common stock and negatively impact our results of operations.

22

Provisions of our certificate of incorporation and bylaws, as well as Delaware law and certain banking laws, could delay or prevent a takeover of us by a third party.

Provisions of the Company’s certificate of incorporation and bylaws, the corporate law of the State of Delaware and state and federal banking laws, including regulatory approval requirements, could delay, defer or prevent a third party from acquiring the Company, despite the possible benefit to the Company’s stockholders, or otherwise adversely affect the market price of the Company’s common stock. These provisions include supermajority voting requirements for certain business combinations and advance notice requirements for nominations for election to the Company’s board of directors and for proposing matters that stockholders may act on at stockholder meetings. In addition, the Company is subject to Delaware law, which among other things prohibits the Company from engaging in a business combination with any interested stockholder for a period of three years from the date the person became an interested stockholder unless certain conditions are met. These provisions may discourage potential takeover attempts, discouraging bids for the Company’s common stock at a premium over market price or adversely affect the market price of and the voting and other rights of the holders of the Company’s common stock. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors other than candidates nominated by the Board.

The Company’s common stock price may fluctuate significantly.

The Company’s common stock price constantly changes. The market price of the Company's common stock may continue to fluctuate significantly in response to a number of factors including, but not limited to:

● the political climate and whether the proposed policies of the current Presidential administration in the U.S. that have affected market prices for financial institution stocks are successfully implemented;

● changes in securities analysts’ recommendations or expectations of financial performance;

● volatility of stock market prices and volumes;

● incorrect information or speculation;

● changes in industry valuations;

● variations in operating results from general expectations;

● actions taken against the Company by various regulatory agencies;

● changes in authoritative accounting guidance;

● changes in general domestic economic conditions such as inflation rates, tax rates, unemployment rates, labor and healthcare cost trend rates, recessions and changing government policies, laws and regulations; and

● severe weather, natural disasters, acts of war or terrorism and other external events.

There may be future sales or other dilution of the Company's equity, which may adversely affect the market price of the Company's stock.

The Company is not restricted from issuing additional common stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive, common stock. The Company also grants a significant number of shares of common stock to employees and directors under the Company's incentive plan each year. The issuance of any additional shares of the Company's common stock or preferred stock or securities convertible into, exchangeable for or that represent the right to receive common stock or the exercise of such securities could be substantially dilutive to stockholders of the Company's common stock. Holders of the Company's common stock have no preemptive rights that entitle such holders to purchase their pro rata share of any offering of shares or any class or series. Because the Company's decision to issue securities in any future offering will depend on market conditions, its acquisition activity and other factors, the Company cannot predict or estimate the amount, timing or nature of its future offerings. Thus, the Company's stockholders bear the risk of the Company's future offerings reducing the market price of the Company's common stock and diluting their stock holdings in the Company.

23

The FASB has recently issued an accounting standard update that will result in a significant change in how we recognize credit losses and may have a material impact on our financial condition or results of operations.

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"), which replaces the current "incurred loss" model for recognizing credit losses with an "expected loss" model referred to as the Current Expected Credit Loss ("CECL") model. Under the CECL model, we will be required to present certain financial assets carried at amortized cost, such as loans held for investment and held to maturity ("HTM") debt securities, at the net amount expected to be collected. The measurement of expected credit losses is to be based on information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. This measurement will take place at the time the financial asset is first added to the balance sheet and periodically thereafter. This differs significantly from the "incurred loss" model required under current accounting principles generally accepted in the United States of America ("GAAP"), which delays recognition until it is probable a loss has been incurred. Accordingly, the Company expects that the adoption of the CECL model will materially affect how we determine the allowance for loan losses and could require the Company to increase our allowance significantly. Moreover, the CECL model may create more volatility in the level of our allowance for loan losses. If the Company is required to materially increase our level of allowance for loan losses for any reason, such increase could adversely affect the Company's business, financial condition and results of operations. ASU 2016-13 will become effective for the Company for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years. The Company is currently evaluating the impact the CECL model will have on its accounting, but the Company expects to recognize a one-time cumulative-effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is adopted, consistent with regulatory expectations set forth in interagency guidance issued at the end of 2016. The Company cannot yet determine the magnitude of any such one-time cumulative-effect adjustment of the overall impact of the new standard on our financial condition or results of operations.

Changes in the federal, state or local tax laws may negatively impact our financial performance. 

We are subject to changes in tax law that could increase our effective tax rates. These law changes may be retroactive to previous periods and as a result could negatively affect our current and future financial performance. The Tax Cuts and Jobs Act of 2017 (the “Tax Act”), the full impact of which is subject to further evaluation and analysis, is likely to have both positive and negative effects on our financial performance. For example, the new legislation will result in a reduction in our federal corporate tax rate from 35% to 21% beginning in 2018, which will have a favorable impact on our earnings and capital generation abilities. However, the new legislation also enacted limitations on certain deductions, such as the deduction of FDIC deposit insurance premiums, which will partially offset the anticipated increase in net earnings from the lower tax rate. The Tax Act resulted in the remeasurement of the Company's deferred tax assets and liabilities arising for the corporate rate reduction. A certain amount of this adjustment is provisional, related to consideration of depreciation, compensation matters and different interpretations by various regulatory authorities. Similarly, the Bank’s customers are likely to experience varying effects from both the individual and business tax provisions of the Tax Act and such effects, whether positive or negative, may have a corresponding impact on our business and the economy as a whole.

ITEM 1B. Unresolved Staff Comments

None.

24

ITEM  2. Properties

The Company owns its headquarters located at 52 South Broad Street, Norwich, New York 13815. The Company operated the following community banking branches and ATMs as of December 31, 2017:

County	Branches		ATMs		County	Branches		ATMs
New York					Pennsylvania
Albany		4		5	Lackawanna		12		17
Broome		7		10	Luzerne		4		6
Chenango		11		12	Monroe		4		4
Clinton		3		3	Pike		2		2
Cortland		5		7	Susquehanna		5		7
Delaware		5		5	Wayne		3		4
Essex		3		5
Franklin		1		1	New Hampshire
Fulton		5		6	Cheshire		1		-
Greene		2		2	Hillsborough		2		2
Hamilton		1		1	Rockingham		1		2
Herkimer		2		1
Madison		4		8	Vermont
Montgomery		5		4	Chittenden		3		3
Oneida		7		9	Rutland		1		1
Onondaga		11		13
Oswego		4		6	Massachusetts
Otsego		8		11	Berkshire		6		6
Rensselaer		1		1
Saint Lawrence		5		5	Maine
Saratoga		4		4	Cumberland		1		-
Schenectady		2		2
Schoharie		4		4
Tioga		1		1
Warren		2		3
					Total		152		183

The Company leases 66 of the above listed branches from third parties. The Company owns all other banking premises. The Company believes that its offices are sufficient for its present operations. All of the above ATMs are owned by the Company.

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ITEM 3. 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.

ITEM 4. Mine Safety Disclosures

None.

PART II

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder matters and Issuer Purchases of Equity Securities

Market Information

The common stock of the Company, par value $0.01 per share (the “Common Stock”), is quoted on the NASDAQ Global Select Market under the symbol “NBTB.” The following table sets forth the high and low sales prices and dividends declared for the Common Stock for the periods indicated:

	High		Low		Dividend
2017
1st quarter	$	42.56	$	35.96	$	0.23
2nd quarter		40.85		34.80		0.23
3rd quarter		38.03		31.28		0.23
4th quarter		40.47		35.18		0.23
2016
1st quarter	$	27.50	$	23.81	$	0.22
2nd quarter		29.55		25.67		0.22
3rd quarter		33.04		27.31		0.23
4th quarter		42.49		32.26		0.23

The closing price of the Common Stock on February 9, 2018 was $35.79.

As of February 9, 2018, there were 6,126 stockholders of record of Common Stock.  No unregistered securities were sold by the Company during the year ended December 31, 2017.

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Stock Performance Graph

The following stock performance graph compares the cumulative total stockholder return (i.e., price change, reinvestment of cash dividends and stock dividends received) on our Common Stock against the cumulative total return of the NASDAQ Stock Market (U.S. Companies) Index and the KBW Regional Bank Index (Peer Group). The stock performance graph assumes that $100 was invested on December 31, 2012. The graph further assumes the reinvestment of dividends into additional shares of the same class of equity securities at the frequency with which dividends are paid on such securities during the relevant fiscal year. The yearly points marked on the horizontal axis correspond to December 31 of that year. We calculate each of the referenced indices in the same manner. All are market-capitalization-weighted indices, so companies judged by the market to be more important (i.e., more valuable) count for more in all indices.

	Period Ending
Index		12/31/12		12/31/13		12/31/14		12/31/15		12/31/16		12/31/17
NBT Bancorp		$	100.00	$	132.34	$	138.95	$	152.36	$	235.43	$	212.08
KBW Regional Bank Index		$	100.00	$	146.72	$	150.21	$	159.19	$	221.23	$	225.15
NASDAQ Composite Index		$	100.00	$	140.11	$	160.85	$	172.31	$	187.68	$	243.42

Source: Bloomberg, L.P.

Dividends

We depend primarily upon dividends from our subsidiaries for a substantial part of our revenue. Accordingly, our ability to pay dividends to our stockholders depends primarily upon the receipt of dividends or other capital distributions from our subsidiaries. Payment of dividends to the Company from the Bank is subject to certain regulatory and other restrictions. Under OCC regulations, the Bank may pay dividends to the Company without prior regulatory approval so long as it meets its applicable regulatory capital requirements before and after payment of such dividends and its total dividends do not exceed its net income to date over the calendar year plus retained net income over the preceding two years. At December 31, 2017, the Bank was in compliance with all applicable minimum capital requirements and had the ability to pay dividends of $107.5 million to the Company without the prior approval of the OCC.

If the capital of the Company is diminished by depreciation in the value of its property or by losses, or otherwise, to an amount less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets, no dividends may be paid out of net profits until the deficiency in the amount of capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets has been repaired. See the section captioned “Supervision and Regulation” in Item 1. Business and Note 16 to the consolidated financial statements is included in Item 8. Financial Statements and Supplementary Data, which are located elsewhere in this report.

Stock Repurchase

The Company did not purchase shares of its common stock during year ended December 31, 2017. On October 23, 2017, the NBT Board of Directors authorized a new repurchase program for NBT to repurchase up to 1,000,000 shares of its outstanding stock. This plan expires on December 31, 2019.

27

ITEM 6. Selected Financial Data

The following summary of financial and other information about the Company is derived from the Company’s audited consolidated financial statements for each of the last five fiscal years ended December 31 and should be read in conjunction with Item 7 and the Company’s consolidated financial statements and accompanying notes, included elsewhere in this report:

	Year ended December 31,
(In thousands, except share and per share data)	2017			2016			2015			2014			2013 (1)
Interest, fee and dividend income	$	309,407		$	286,947		$	273,224		$	275,081		$	268,723
Interest expense		25,914			22,506			20,616			23,203			30,644
Net interest income		283,493			264,441			252,608			251,878			238,079
Provision for loan losses		30,988			25,431			18,285			19,539			22,424
Noninterest income excluding net securities gains (losses)		119,437			116,357			115,394			125,935			101,789
Net securities gains (losses)		1,867			(644	)		3,087			92			1,426
Noninterest expense		245,648			235,922			236,176			246,063			228,927
Income before income taxes		128,161			118,801			116,628			112,303			89,943
Net income		82,151			78,409			76,425			75,074			61,747
Per common share
Basic earnings	$	1.89		$	1.81		$	1.74		$	1.71		$	1.47
Diluted earnings		1.87			1.80			1.72			1.69			1.46
Cash dividends paid		0.92			0.90			0.87			0.84			0.81
Book value at year-end		22.01			21.11			20.31			19.69			18.77
Tangible book value at year-end (2)		15.54			14.61			13.79			13.22			12.09
Average diluted common shares outstanding		43,905			43,622			44,389			44,395			42,351
Securities available for sale, at fair value	$	1,255,925		$	1,338,290		$	1,174,544		$	1,013,171		$	1,364,881
Securities held to maturity, at amortized cost		484,073			527,948			471,031			454,361			117,283
Loans		6,584,773			6,198,057			5,883,133			5,595,271			5,406,795
Allowance for loan losses		69,500			65,200			63,018			66,359			69,434
Assets		9,136,812			8,867,268			8,262,646			7,807,340			7,652,175
Deposits		7,170,636			6,973,688			6,604,843			6,299,605			5,890,224
Borrowings		909,188			886,986			674,124			548,943			866,061
Stockholders’ equity		958,177			913,316			882,004			864,181			816,569
Key ratios
Return on average assets		0.91	%		0.92	%		0.96	%		0.97	%		0.85	%
Return on average equity		8.71	%		8.74	%		8.70	%		8.84	%		8.09	%
Average equity to average assets		10.45	%		10.49	%		10.98	%		10.95	%		10.50	%
Net interest margin		3.47	%		3.43	%		3.50	%		3.61	%		3.66	%
Dividend payout ratio		49.20	%		50.00	%		49.92	%		49.16	%		55.48	%
Tier 1 leverage		9.14	%		9.11	%		9.44	%		9.39	%		8.93	%
Common equity tier 1 capital ratio		10.06	%		9.98	%		10.20	%		N/A			N/A
Tier 1 risk-based capital		11.42	%		11.42	%		11.73	%		12.32	%		11.74	%
Total risk-based capital		12.42	%		12.39	%		12.74	%		13.50	%		12.99	%

⁽¹⁾ Includes the impact of the acquisition of Alliance Financial Corporation ("Alliance") on March 8, 2013.

⁽²⁾ Tangible book value calculation (non-GAAP):

28

	Year ended December 31,
(In thousands, except share and per share data)	2017		2016		2015		2014		2013
Stockholders' equity	$	958,177	$	913,316	$	882,004	$	864,181	$	816,569
Intangibles		281,463		281,254		283,222		283,951		290,554
Tangible equity	$	676,714	$	632,062	$	598,782	$	580,230	$	526,015
Diluted common shares outstanding		43,543		43,258		43,431		43,896		43,513
Tangible book value	$	15.54	$	14.61	$	13.79	$	13.22	$	12.09

Selected Quarterly Financial Data

	2017												2016
(In thousands, except share and per share data)	Fourth			Third			Second			First			Fourth			Third			Second			First
Interest, fee and dividend income	$	80,230		$	78,847		$	75,894		$	74,436		$	73,109		$	72,509		$	71,375		$	69,954
Interest expense		6,779			6,917			6,273			5,945			5,684			5,847			5,598			5,377
Net interest income		73,451			71,930			69,621			68,491			67,425			66,662			65,777			64,577
Provision for loan losses		8,153			7,889			7,567			7,379			8,165			6,388			4,780			6,098
Noninterest income excluding net securities gains (losses)		29,603			30,782			30,302			28,750			28,762			29,644			29,613			28,338
Net securities gains (losses)		1,869			(4	)		2			-			(674	)		-			1			29
Noninterest expense		63,444			60,601			60,321			61,282			57,639			59,614			60,445			58,224
Net income		17,637			22,876			21,359			20,279			19,608			20,001			19,909			18,891
Basic earnings per share	$	0.40		$	0.52		$	0.49		$	0.47		$	0.45		$	0.46		$	0.46		$	0.44
Diluted earnings per share	$	0.40		$	0.52		$	0.49		$	0.46		$	0.45		$	0.46		$	0.46		$	0.43
Annualized net interest margin		3.52	%		3.47	%		3.44	%		3.46	%		3.41	%		3.40	%		3.44	%		3.47	%
Annualized return on average assets		0.77	%		1.00	%		0.95	%		0.92	%		0.89	%		0.92	%		0.94	%		0.92	%
Annualized return on average equity		7.27	%		9.55	%		9.11	%		8.94	%		8.54	%		8.80	%		9.00	%		8.63	%
Weighted average diluted common shares outstanding		43,958			43,915			43,901			43,883			43,703			43,562			43,454			43,707

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ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 nonperforming 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 ("FRB"); (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 ("FASB") 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, but not limited to, those described above, 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.

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

General

The financial review, which follows focuses on the factors affecting the consolidated financial condition and results of operations of the Company and its wholly-owned subsidiaries, the Bank, NBT Financial Services and NBT Holdings during 2017 and, in summary form, the preceding two years. Collectively, the Registrant and its subsidiaries are referred to herein as “the Company.” Net interest margin is presented in this discussion on a fully taxable equivalent ("FTE") basis. Average balances discussed are daily averages unless otherwise described. The audited consolidated financial statements and related notes as of December 31, 2017 and 2016 and for each of the years in the three-year period ended December 31, 2017 should be read in conjunction with this review. Amounts in prior period consolidated financial statements are reclassified whenever necessary to conform to the 2017 presentation.

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 and  provision for income taxes.

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 appropriate, 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.

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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.

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 effect on the Company’s results of operations.

The Company’s policies on the allowance for loan losses, pension accounting and provision for income taxes are disclosed in Note 1 to the consolidated financial statements. A more detailed description of the allowance for loan losses is included in the section captioned “Risk Management – Credit Risk” in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-K. All significant pension accounting assumptions, income tax assumptions and intangible asset assumptions and detail are disclosed in Notes 13, 12 and 7 to the consolidated financial statements, respectively. 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.

Non-GAAP Measures

This Annual Report on Form 10-K 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 acquisition-related intangible amortization expense on earnings and equity as well as providing a FTE yield on securities and loans. Where non-GAAP disclosures are used in this Annual Report on Form 10-K, 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 results of the Company’s core business as well as provide information standard in the financial institution industry. Non-GAAP measures should not be considered a substitute 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.

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 assets and equity, net interest margin, noninterest income, operating expenses, 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 fiscal year ended December 31, 2017:

● Net income for 2017 was $82.2 million, the highest in the Company's history, and up from $78.4 million in 2016.

● Net income for 2017 excluding the $4.4 million estimated one-time, non-cash charge recorded in the provision for income taxes related to tax reform was $86.6 million, up 10.4% from 2016.

31

● Net interest margin for 2017 increased 4 basis points driven by increases in loans and securities.

● Continued demand deposit growth strategies resulting in 8.4% growth in average deposits from 2016 to 2017.

● Asset quality indicators showed stability from last year:

▪ Nonperforming loans to total loans were 0.47% at December 31, 2017 compared to 0.65% at December 31, 2016;

▪ Past due loans to total loans decreased to 0.63% at December 31, 2017 from 0.64% at December 31, 2016; and

▪ Net charge-offs to average loans were 0.42% for 2017 compared to 0.39% in 2016.

● Increased efforts to grow noninterest income with focus on organic growth of our wealth management businesses.

The Company reported net income of $82.2 million or $1.87 per diluted share for 2017, up 4.8% from net income of $78.4 million or $1.80 per diluted share for 2016. Net income excluding the $4.4 million estimated one-time, non-cash charge recorded in the provision for income taxes related to the enactment of the Tax Act was up 10.4% from 2016 to $86.6 million or $1.97 diluted earnings per share. The Tax Act resulted in the remeasurement of the Company's deferred tax assets and liabilities arising from the lower federal tax rate. The estimate may change, possibly materially, due to further analysis, guidance and changes in interpretations.

Net interest income was $283.5 million for the year ended December 31, 2017, up $19.1 million, or 7.2%, from $264.4 million in 2016. FTE net interest margin was 3.47% for the year ended December 31, 2017, up from 3.43% for the year ended December 31, 2016. Average interest earning assets were up $457.9 million, or 5.9%, for the year ended December 31, 2017 as compared to 2016. The provision for loan losses totaled $31.0 million for the year ended December 31, 2017, up $5.6 million, or 21.9%, from $25.4 million for the year ended December 31, 2016.

2018 Outlook

The Company’s 2017 earnings reflected the Company’s continued ability to manage through the existing economic conditions and challenges in the financial services industry, while investing in the Company’s future. During 2017, the Company, along with other financial services firms, benefitted from rising asset yields with limited increases in deposit costs. Significant items that may have an impact on 2018 results include:

● Continued improvement in economic conditions may lead to further increases in interest rates. This would result in principal and interest payments on currently outstanding loans and investments being reinvested at higher rates. In addition, rising market rates would likely increase deposit and borrowing costs from current low levels. This could potentially offset, or more than offset, the benefits of higher rates on our earning assets. The magnitude and timing of interest rate increases, along with the shape of the yield curve, will impact net interest income in 2018.

● The Tax Act has created an important opportunity for the Company to invest in employees, our customer experience and our communities as the Company will realize a reduction in tax expense beginning in 2018 due to the Federal tax rate for corporations reduction from 35% to 21%. In conjunction with such reduction, the Company is raising the starting hourly pay rate of $11 to $15 per hour and employees earning $50,000 or less will receive a permanent minimum increase of 5%. This will positively impact over 61% of the Company's workforce. Moreover, in 2018 the Company will be increasing both its investment in infrastructure to enhance customer-facing technology and contributions to nonprofit organizations in its footprint.

● Proposals for regulatory relief are currently on the legislative agenda. The success and timing of these potential reforms will determine the significance and materiality of any such measures in 2018.

● The Company's continued focus on long-term strategies including growth in the New England markets, diversification of revenue, improving operating efficiencies and investing in technology.

● The Company’s 2018 outlook is subject to factors in addition to those identified above and those risks and uncertainties that could impact the Company’s future results are explained in ITEM 1A. RISK FACTORS.

Asset/Liability Management

The Company attempts to maximize net interest income and net income, while actively managing its liquidity and interest rate sensitivity through the mix of various core deposit products and other sources of funds, which in turn fund an appropriate mix of earning assets. The changes in the Company’s asset mix and sources of funds, and the resulting impact on net interest income, on a FTE basis, are discussed below. The following table includes 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%.

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Average Balances and Net Interest Income

	2017							2016							2015
(Dollars in thousands)	Average Balance		Interest		Yield/ Rate			Average Balance		Interest		Yield/ Rate			Average Balance		Interest		Yield/ Rate
Assets:
Short-term interest bearing accounts	$	9,636	$	179		1.86	%	$	16,301	$	95		0.58	%	$	10,157	$	33		0.33	%
Securities available for sale (1)(2)		1,350,995		28,969		2.14	%		1,237,930		24,450		1.98	%		1,059,284		20,888		1.97	%
Securities held to maturity (1)		507,583		13,490		2.66	%		487,837		12,255		2.51	%		459,589		11,296		2.46	%
Federal Reserve Bank and FHLB stock		46,673		2,634		5.64	%		38,867		1,973		5.08	%		33,044		1,712		5.18	%
Loans (3)		6,359,447		267,934		4.21	%		6,035,513		251,723		4.17	%		5,743,860		242,587		4.22	%
Total interest earning assets	$	8,274,334	$	313,206		3.79	%	$	7,816,448	$	290,496		3.72	%	$	7,305,934	$	276,516		3.78	%
Other assets		752,258							740,506							691,583
Total assets	$	9,026,592						$	8,556,954						$	7,997,517
Liabilities and Stockholders' Equity:
Money market deposit accounts	$	1,697,386	$	3,864		0.23	%	$	1,668,555	$	3,599		0.22	%	$	1,582,078	$	3,351		0.21	%
NOW deposit accounts		1,153,361		1,051		0.09	%		1,077,581		546		0.05	%		987,638		515		0.05	%
Savings deposits		1,214,480		683		0.06	%		1,135,182		652		0.06	%		1,071,753		651		0.06	%
Time deposits		817,370		8,877		1.09	%		905,126		9,569		1.06	%		960,188		9,740		1.01	%
Total interest bearing deposits	$	4,882,597	$	14,475		0.30	%	$	4,786,444	$	14,366		0.30	%	$	4,601,657	$	14,257		0.31	%
Short-term borrowings		690,036		5,996		0.87	%		497,654		2,309		0.46	%		339,885		783		0.23	%
Long-term debt		93,389		2,299		2.46	%		118,860		3,204		2.70	%		130,705		3,355		2.57	%
Junior subordinated debt		101,196		3,144		3.11	%		101,196		2,627		2.60	%		101,196		2,221		2.19	%
Total interest bearing liabilities	$	5,767,218	$	25,914		0.45	%	$	5,504,154	$	22,506		0.41	%	$	5,173,443	$	20,616		0.40	%
Demand deposits		2,217,785							2,045,465							1,857,027
Other liabilities		97,913							110,105							88,937
Stockholders' equity		943,676							897,230							878,110
Total liabilities and stockholders' equity	$	9,026,592						$	8,556,954						$	7,997,517
Net FTE interest income			$	287,292						$	267,990						$	255,900
Interest rate spread						3.34	%						3.31	%						3.38	%
Net interest margin						3.47	%						3.43	%						3.50	%
Taxable equivalent adjustment			$	3,799						$	3,549						$	3,292
Net interest income			$	283,493						$	264,441						$	252,608

⁽¹⁾ Securities are shown at average amortized cost.

⁽²⁾ Excluding net unrealized gains or losses.

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

Note: Interest income for tax-exempt securities and loans has been adjusted to a FTE basis using the statutory Federal income tax rate of 35%.

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2017 OPERATING RESULTS AS COMPARED TO 2016 OPERATING RESULTS

Net Interest Income

Net interest income was $283.5 million for the year ended December 31, 2017, up $19.1 million from 2016. FTE net interest margin was 3.47% for the year ended December 31, 2017 up from 3.43% for the year ended December 31, 2016. Average interest earning assets were up $457.9 million, or 5.9%, for the year ended December 31, 2017, as compared to the same period in 2016, driven by a $323.9 million increase in loans and a $132.8 million increase in securities. Interest income increased $22.5 million, or 7.8%, due to the increase in earning assets combined with a 7 basis point ("bp") improvement in asset yields. Interest expense was up $3.4 million, or 15.1%, for the year ended December 31, 2017 as compared to the same period in 2016 and resulted primarily from a $263.1 million increase in the average balance of interest bearing liabilities and a 4 bp increase in rates driven by changes in mix and higher borrowing costs.

Analysis of Changes in FTE Net Interest Income

	Increase (Decrease) 2017 over 2016									Increase (Decrease) 2016 over 2015
(In thousands)	Volume			Rate			Total			Volume			Rate			Total
Short-term interest-bearing accounts	$	(52	)	$	136		$	84		$	27		$	35		$	62
Securities available for sale		2,331			2,188			4,519			3,527			35			3,562
Securities held to maturity		508			727			1,235			706			253			959
Federal Reserve Bank and FHLB stock		425			236			661			296			(35	)		261
Loans		13,627			2,584			16,211			12,194			(3,058	)		9,136
Total FTE interest income	$	16,839		$	5,871		$	22,710		$	16,750		$	(2,770	)	$	13,980
Money market deposit accounts		63			202			265			186			62			248
NOW deposit accounts		41			464			505			46			(15	)		31
Savings deposits		45			(14	)		31			37			(36	)		1
Time deposits		(948	)		256			(692	)		(572	)		401			(171	)
Short-term borrowings		1,132			2,555			3,687			479			1,047			1,526
Long-term debt		(644	)		(261	)		(905	)		(314	)		163			(151	)
Junior subordinated debt		-			517			517			-			406			406
Total FTE interest expense	$	(311	)	$	3,719		$	3,408		$	(138	)	$	2,028		$	1,890
Change in FTE net interest income	$	17,150		$	2,152		$	19,302		$	16,888		$	(4,798	)	$	12,090

Loans and Corresponding Interest and Fees on Loans

The average balance of loans increased by approximately $323.9 million, or 5.4%, from 2016 to 2017. The yield on average loans increased from 4.17% in 2016 to 4.21% in 2017, as loan rates increased due to the interest rate environment in 2017. FTE interest income from loans increased 6.4%, from $251.7 million in 2016 to $267.9 million in 2017. This increase was due to the increases in yields and the average loan balances.

Total loans increased $386.7 million, or 6.2%, from December 31, 2016 to December 31, 2017. Increases in commercial real estate, consumer and commercial loans were the primary drivers of the increase in total loans from 2016 as the Company experienced strong originations in 2017 in the upstate New York, Pennsylvania and New England markets.

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The following table reflects the loan portfolio by major categories for the years indicated:

Composition of Loan Portfolio

	December 31,
(In thousands)	2017		2016		2015		2014		2013
Residential real estate mortgages	$	1,321,695	$	1,262,614	$	1,196,780	$	1,115,715	$	1,041,502
Commercial		1,317,174		1,242,701		1,159,089		1,144,761		1,180,995
Commercial real estate		1,711,095		1,543,301		1,430,618		1,334,984		1,218,988
Consumer		1,740,038		1,641,657		1,568,204		1,430,216		1,345,395
Home equity		494,771		507,784		528,442		569,595		619,915
Total	$	6,584,773	$	6,198,057	$	5,883,133	$	5,595,271	$	5,406,795

Residential real estate mortgages consist primarily of loans secured by first or second deeds of trust on primary residences. Loans in the commercial and agricultural categories, including commercial and agricultural real estate mortgages, consist primarily of short-term and/or floating rate loans made to small and medium-sized entities. Consumer loans include $1.2 billion of indirect installment loans to individuals, which is secured by automobiles and other personal property including marine, recreational vehicles and manufactured housing, as of December 31, 2017 and 2016. Consumer loans also consist of direct installment loans to individuals secured by similar collateral. Although automobile loans have generally been originated through dealers, all applications submitted through dealers are subject to the Company’s normal underwriting and loan approval procedures. In addition, the consumer loan portfolio as of December 31, 2017 and 2016 includes $403.6 million $374.9 million, respectively, of unsecured consumer loans across a national footprint originated through our relationship with national technology-driven consumer lending companies that began 10 years ago as the result of our investment in Springstone Financial LLC ("Springstone"). Advances of credit through this specialty lending business line are to prime borrowers and are subject to the Company's underwriting standards. Real estate construction and development loans include commercial construction and development and residential construction loans. Commercial construction loans are for small and medium-sized office buildings and other commercial properties and residential construction loans are primarily for projects located in upstate New York and northeastern Pennsylvania. 

Risks associated with the commercial real estate portfolio include the ability of borrowers to pay interest and principal during the loan’s term, as well as the ability of the borrowers to refinance at the end of the loan term.

The following table, Maturities and Sensitivities of Certain Loans to Changes in Interest Rates, summarizes the maturities of the commercial and agricultural and real estate construction and development loan portfolios and the sensitivity of those loans to interest rate fluctuations at December 31, 2017. Scheduled repayments are reported in the maturity category in which the contractual payment is due.

Maturities and Sensitivities of Certain Loans to Changes in Interest Rates

	Remaining maturity at December 31, 2017
(In thousands)		Within One Year		After One Year But Within Five Years		After Five Years		Total
Floating/adjustable rate:
Commercial, commercial real estate, agricultural and agricultural real estate		$	474,290	$	419,618	$	1,335,712	$	2,229,620
Fixed rate:
Commercial, commercial real estate, agricultural and agricultural real estate			65,990		441,692		290,967		798,649
Total		$	540,280	$	861,310	$	1,626,679	$	3,028,269

Securities and Corresponding Interest and Dividend Income

The average balance of securities available for sale ("AFS") increased $113.1 million, or 9.1%, from 2016 to 2017. The FTE yield on average AFS securities was 2.14% for 2017 compared to 1.98% in 2016.

The average balance of securities held to maturity ("HTM") increased from $487.8 million in 2016 to $507.6 million in 2017. At December 31, 2017, HTM securities were comprised primarily of tax-exempt municipal securities. The FTE yield on HTM securities increased from 2.51% in 2016 to 2.66% in 2017.

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The average balance of Federal Reserve Bank and FHLB stock increased to $46.7 million in 2017 from $38.9 million in 2016. The FTE yield from investments in Federal Reserve Bank and FHLB stock increased from 5.08% in 2016 to 5.64% in 2017.

Securities Portfolio

	As of December 31,
	2017				2016				2015
(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
AFS securities:
Federal agency	$	109,862	$	108,899	$	175,135	$	174,408	$	312,580	$	311,272
State & municipal		42,171		41,956		47,053		46,726		31,208		31,637
Mortgage-backed		556,755		554,927		528,769		529,844		406,277		409,896
Collateralized mortgage obligations		546,754		535,994		574,253		566,573		405,635		404,971
Other securities		10,623		14,149		15,849		20,739		13,637		16,768
Total AFS securities	$	1,266,165	$	1,255,925	$	1,341,059	$	1,338,290	$	1,169,337	$	1,174,544
HTM securities:
Mortgage-backed	$	96,775	$	96,107	$	97,201	$	96,112	$	10,043	$	10,031
Collateralized mortgage obligations		186,327		183,974		225,213		224,765		272,550		272,401
State & municipal		200,971		201,790		205,534		204,173		188,438		190,708
Total HTM securities	$	484,073	$	481,871	$	527,948	$	525,050	$	471,031	$	473,140

Our mortgage backed securities, U.S. agency notes and CMOs are all “prime/conforming” and are guaranteed by Fannie Mae, Freddie Mac, the FHLB, the 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 securities backed by subprime mortgages in our investment portfolio.

The following tables set forth information with regard to contractual maturities of debt securities at December 31, 2017:

(Dollars in thousands)	Amortized cost		Estimated fair value		Weighted Average Yield
AFS debt securities:
Within one year	$	63,309	$	63,186		2.06	%
From one to five years		90,119		89,275		2.13	%
From five to ten years		178,128		177,961		2.67	%
After ten years		923,986		911,354		2.50	%
Total AFS debt securities	$	1,255,542	$	1,241,776
HTM debt securities:
Within one year	$	31,412	$	31,413		2.03	%
From one to five years		42,363		42,588		3.10	%
From five to ten years		174,950		174,937		2.39	%
After ten years		235,348		232,933		2.27	%
Total HTM debt securities	$	484,073	$	481,871

Funding Sources and Corresponding Interest Expense

The Company utilizes traditional deposit products such as time, savings, NOW, money market and demand deposits as its primary source for funding. Other sources, such as short-term FHLB advances, federal funds purchased, securities sold under agreements to repurchase, brokered time deposits and long-term FHLB borrowings are utilized as necessary to support the Company’s growth in assets and to achieve interest rate sensitivity objectives. The average balance of interest-bearing liabilities increased $263.1 million from 2016 and totaled $5.8 billion in 2017. The rate paid on interest-bearing liabilities increased from 0.41% in 2016 to 0.45% in 2017. This increase in rates and increase in average balances caused an increase in interest expense of $3.4 million, or 15.1%, from $22.5 million in 2016 to $25.9 million in 2017.

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Deposits

Average interest bearing deposits increased $96.2 million, or 2.0%, from 2016 to 2017, due primarily to organic deposit growth. Average money market deposits increased $28.8 million or 1.7% during 2017 compared to 2016. Average NOW accounts increased $75.8 million or 7.0% during 2017 as compared to 2016. The average balance of savings accounts increased $79.3 million or 7.0% during 2017 compared to 2016. These increases were partially offset by a decrease in average time deposits, which decreased $87.8 million, or 9.7%, from 2016 to 2017. The average balance of demand deposits increased $172.3 million, or 8.4%, during 2017 compared to 2016. This growth in demand deposits was driven principally by increases in accounts from retail, municipal and commercial customers.

The rate paid on average interest-bearing deposits was 0.30% for 2017 and 2016. The rate paid for money market deposit accounts increased from 0.22% during 2016 to 0.23% during 2017. The rate paid for NOW deposit accounts increased from 0.05% in 2016 to 0.09% 2017. The rate paid for savings deposits was 0.06% for 2017 and 2016. The rate paid for time deposits increased from 1.06% during 2016 to 1.09% during 2017.

The following table presents the maturity distribution of time deposits of $250,000 or more:

(In thousands)	December 31, 2017
Within three months	$	17,792
After three but within twelve months		28,133
After one but within three years		33,335
Over three years		13,571
Total	$	92,831

Borrowings

Average short-term borrowings increased to $690.0 million in 2017 from $497.7 million in 2016 funding earning asset growth.  The average rate paid on short-term borrowings increased from 0.46% in 2016 to 0.87% in 2017. Average long-term debt decreased from $118.9 million in 2016 to $93.4 million in 2017.

The average balance of junior subordinated debt remained at $101.2 million in 2017. The average rate paid for junior subordinated debt in 2017 was 3.11%, up from 2.60% in 2016.

Short-term borrowings consist of federal funds purchased and securities sold under repurchase agreements, which generally represent overnight borrowing transactions and other short-term borrowings, primarily FHLB advances, with original maturities of one year or less. The Company has unused lines of credit and access to brokered deposits available for short-term financing of approximately $2.0 billion and $1.9 billion at December 31, 2017 and 2016, respectively. Securities collateralizing repurchase agreements are held in safekeeping by non-affiliated financial institutions and are under the Company’s control. Long-term debt, which is comprised primarily of FHLB advances, are collateralized by the FHLB stock owned by the Company, certain of its mortgage-backed securities and a blanket lien on its residential real estate mortgage loans.

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 years indicated:

	Years ended December 31,
(In thousands)	2017		2016			2015
Insurance and other financial services revenue	$	23,532	$	24,396		$	24,211
Service charges on deposit accounts		16,750		16,729			17,056
ATM and debit card fees		21,372		19,448			18,248
Retirement plan administration fees		20,213		16,063			14,146
Trust		19,586		18,565			19,026
Bank owned life insurance income		5,175		5,195			4,334
Net securities gains (losses)		1,867		(644	)		3,087
Gain on the sale of equity investment		818		-			4,179
Other		11,991		15,961			14,194
Total noninterest income	$	121,304	$	115,713		$	118,481

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Noninterest income for the year ended December 31, 2017 was $121.3 million, up $5.6 million, or 4.8%, from the same period of 2016. The increase in noninterest income from the prior year was driven by higher retirement plan administration fees, net securities gains (losses), ATM and debit card fees and trust revenues that were partially offset by lower other noninterest income and insurance and other financial services revenue during 2017 as compared to 2016. Retirement plan administration fees increased in 2017 as compared to the prior year due primarily to acquisitions completed in 2016 and the acquisition of Downeast Pension Services ("DPS") in the second quarter of 2017. Net securities gains (losses) increased due to a gain recognized on the sale of securities in 2017 as compared to a net loss in 2016. ATM and debit card fees increased from the prior year due to a higher number of accounts and increased usage in 2017 as compared to 2016. Trust revenue increased from the prior year due to market returns and account growth. Other noninterest income decreased from 2016 to 2017 due to lower swap fee income and a net decrease in non-recurring items of $1.4 million. Insurance and other financial services revenue decreased from the prior year primarily due to the divestiture of a book of business in the third quarter of 2016. Noninterest income as a percent of total revenue excluding net securities gains (losses) and the gain on the sale of equity investment was 29.5% and 30.6% for the years ended December 31, 2017 and 2016, respectively.

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 years indicated:

	Years ended December 31,
(In thousands)	2017		2016		2015
Salaries and employee benefits	$	133,610	$	131,284	$	125,633
Occupancy		21,808		20,940		22,095
Data processing and communications		17,068		16,495		16,588
Professional fees and outside services		13,499		13,617		13,407
Equipment		15,225		14,295		13,408
Office supplies and postage		6,284		6,168		6,367
FDIC expenses		4,767		5,111		5,145
Advertising		2,744		2,556		2,654
Amortization of intangible assets		3,960		3,928		4,864
Loan collection and other real estate owned, net		4,763		3,458		2,620
Other		21,920		18,070		23,395
Total noninterest expense	$	245,648	$	235,922	$	236,176

Noninterest expense for the year ended December 31, 2017 was $245.6 million, up $9.7 million, or 4.1% from 2016. This increase was due to higher salaries and employee benefits, loan collection and other real estate owned ("OREO") expense and other noninterest expense. Other noninterest expense increased $3.9 million due to the write-down of an intangible asset no longer in use due to a change in business strategy combined with a favorable settlement of an accrual in 2016. Salaries and employee benefits increased from the prior year due to the acquisition of DPS in the second quarter of 2017 and higher medical costs. Loan collection and OREO expense increased from the prior year due primarily to commercial property write-downs.

Income Taxes

We calculate our current and deferred tax provision based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed during the subsequent year. Adjustments based on filed returns are recorded when identified, which is generally in the third quarter of the subsequent year for U.S. federal and state provisions.

The amount of income taxes the Company pays is subject at times to ongoing audits by federal and state tax authorities, which may result in proposed assessments. Future results may include favorable or unfavorable adjustments to the estimated tax liabilities in the period the assessments are proposed or resolved or when statutes of limitation on potential assessments expire. As a result, the Company’s effective tax rate may fluctuate significantly on a quarterly or annual basis.

On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act includes significant changes to the U.S. corporate income tax system including a federal corporate rate reduction from 35% to 21%. The Company follows the guidance in SEC Staff Accounting Bulletin 118 ("SAB 118"), which provides additional clarification regarding the application of ASC Topic 740, Income Taxes, in situations where the Company does not have the necessary information available, prepared or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Act for the reporting period in which the Tax Act was enacted. SAB 118 provides for a measurement period beginning in the reporting period that includes the Tax Act's enactment data and ending when the Company has obtained, prepared and analyzed the information needed in order to complete the accounting requirements but in no circumstances should the measurement period extend beyond one year from the enactment date.

In connection with our initial analysis of the impact of the Tax Act, the Company recorded a $4.4 million adjustment in the year ended December 31, 2017 for remeasurement of deferred tax assets and liabilities for the corporate rate reduction. A certain amount of this adjustment is provisional, related to consideration of depreciation, compensation matters and different interpretations by various regulatory authorities.

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Income tax expense for the year ended December 31, 2017 was $46.0 million, up $5.6 million, or 13.9%, from $40.4 million, for the same period of 2016. The effective tax rate of 35.9% for 2017 was up from 34.0% for 2016. The increase from the prior year was primarily due to a higher level of taxable income in 2017 combined with the $4.4 million estimated non-cash charge related to the enactment of the Tax Act resulting in the remeasurement of the Company's deferred tax assets and liabilities arising from the lower federal tax rate. The estimate may change, possibly materially, due to further analysis, guidance and changes in interpretations. Offsetting this charge was a $1.8 million income tax benefit related to the adoption FASB ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting in 2017. Excluding the Tax Act charge and the tax benefit of ASU 2016-09, the effective tax rate was 33.8% for 2017. The adjusted income tax expense on the Company's income was different from the income tax expense at the Federal statutory rate of 35% due primarily to tax-exempt income and, to a lesser extent, the effect of state income taxes and Federal low income housing credits.

Risk Management – Credit Risk

Credit risk is managed through a network of loan officers, credit committees, loan policies and oversight from the senior credit officers and Board of Directors. Management follows a policy of continually identifying, analyzing and grading credit risk inherent in each loan portfolio. An ongoing independent review, subsequent to management’s review, of individual credits in the commercial loan portfolio is performed by the independent loan review function. These components of the Company’s underwriting and monitoring functions are critical to the timely identification, classification and resolution of problem credits.

Nonperforming Assets

	As of December 31,
(Dollars in thousands)	2017			%			2016			%			2015			%			2014			%			2013			%
Nonaccrual loans:
Commercial, agricultural and real estate loans	$	12,485			48	%	$	19,351			54	%	$	14,655			43	%	$	18,226			45	%	$	27,033			54	%
Real estate mortgages		5,919			23	%		8,027			23	%		8,625			26	%		10,867			26	%		10,296			21	%
Consumer		4,324			17	%		4,653			13	%		6,009			18	%		8,086			20	%		7,213			14	%
Troubled debt restructured loans		2,980			12	%		3,681			10	%		4,455			13	%		3,895			9	%		5,423			11	%
Total nonaccrual loans	$	25,708			100	%	$	35,712			100	%	$	33,744			100	%	$	41,074			100	%	$	49,965			100	%
Loans 90 days or more past due and still accruing:
Commercial, agricultural and real estate loans	$	-			-	%	$	-			-	%	$	-			-	%	$	84			2	%	$	105			3	%
Real estate mortgages		1,402			26	%		1,733			36	%		1,022			28	%		1,927			39	%		808			22	%
Consumer		4,008			74	%		3,077			64	%		2,640			72	%		2,930			59	%		2,824			75	%
Total loans 90 days or more past due and still accruing	$	5,410			100	%	$	4,810			100	%	$	3,662			100	%	$	4,941			100	%	$	3,737			100	%
Total nonperforming loans	$	31,118					$	40,522					$	37,406					$	46,015					$	53,702
Other real estate owned		4,529						5,581						4,666						3,964						2,904
Total nonperforming assets	$	35,647					$	46,103					$	42,072					$	49,979					$	56,606
Total nonperforming loans to total loans		0.47	%					0.65	%					0.64	%					0.82	%					0.99	%
Total nonperforming assets to total assets		0.39	%					0.52	%					0.51	%					0.64	%					0.74	%
Total allowance for loan losses to nonperforming loans		223.34	%					160.90	%					168.47	%					144.21	%					129.29	%

Total nonperforming assets were $35.6 million at December 31, 2017, compared to $46.1 million at December 31, 2016. Nonperforming loans at December 31, 2017 were $31.1 million or 0.47% of total loans compared with $40.5 million or 0.65% of total loans at December 31, 2016. Included in nonperforming loans are $2.4 million and $5.6 million of nonaccrual loans in the acquired loan portfolio at December 31, 2017 and 2016, respectively. Excluding nonaccrual acquired loans, originated nonperforming loans to originated loans was 0.46% and 0.61% at December 31, 2017 and 2016, respectively.

The Company recorded a provision for loan losses of $31.0 million for the year ended December 31, 2017 compared with $25.4 million for the year ended December 31, 2016. Net charge-offs to average loans for the year ended December 31, 2017 were 0.42%, compared with 0.39% for the year ended December 31, 2016. The allowance for loan losses was 223.34% of nonperforming loans at December 31, 2017 as compared to 160.90% at December 31, 2016. The allowance for loan losses as a percentage of loans was 1.06% (1.12% excluding acquired loans with no related allowance recorded) at December 31, 2017 compared to 1.05% (1.13% excluding acquired loans with no related allowance recorded) at December 31, 2016.

Impaired loans, which primarily consist of nonaccruing commercial, commercial real estate, agricultural, agricultural real estate loans and business banking, as well as loans that have been modified in a troubled debt restructuring (“TDR”), decreased to $21.1 million at December 31, 2017 as compared to $28.9 million at December 31, 2016. At December 31, 2017, $0.1 million of the total impaired loans had a specific reserve allocation of $0.1 million compared to $7.0 million of impaired loans at December 31, 2016, which had a specific reserve allocation of $1.5 million.

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The allowance for loan losses is maintained at a level estimated by management to provide adequately for incurred 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.

Management considers the accounting policy relating to the allowance for loan losses to be a critical accounting policy given the inherent uncertainty in evaluating the levels 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 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 recognize additions to the allowance based on their examinations.

After a thorough consideration of the factors discussed above, any required additions to the allowance for loan losses are made periodically by charges to the provision for loan losses. These charges are necessary to maintain the allowance at a level which management believes is reasonably reflective of overall level of incurred losses inherent in the portfolio. While management uses available information to recognize losses on loans, additions 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.

Total net charge-offs for 2017 were $26.7 million, up from $23.2 million in 2016. Net charge-offs to average loans was 0.42% for 2017 as compared with 0.39% for 2016. For the originated portfolio, net charge-offs to average loans for the year ended December 31, 2017 was 0.44%, compared to 0.41% for 2016. Gross charge-offs were up to $33.1 million for 2017 from $29.3 million for 2016. Recoveries were up to $6.4 million for 2017 from $6.1 million for 2016.

Allowance for Loan Losses

(Dollars in thousands)	2017			2016			2015			2014			2013
Balance at January 1,	$	65,200		$	63,018		$	66,359		$	69,434		$	69,334
Loans charged-off:
Commercial and agricultural		4,169			4,592			5,718			9,414			10,459
Residential real estate mortgages		1,846			1,343			2,229			1,417			1,771
Consumer*		27,072			23,364			18,140			16,642			15,459
Total loans charged-off	$	33,087		$	29,299		$	26,087		$	27,473		$	27,689
Recoveries:
Commercial and agricultural	$	1,077		$	1,887		$	1,014		$	1,774		$	1,956
Residential real estate mortgages		180			293			320			285			272
Consumer*		5,142			3,870			3,127			2,800			3,137
Total recoveries	$	6,399		$	6,050		$	4,461		$	4,859		$	5,365
Net loans charged-off	$	26,688		$	23,249		$	21,626		$	22,614		$	22,324
Provision for loan losses	$	30,988		$	25,431		$	18,285		$	19,539		$	22,424
Balance at December 31,	$	69,500		$	65,200		$	63,018		$	66,359		$	69,434
Allowance for loan losses to loans outstanding at end of year		1.06	%		1.05	%		1.07	%		1.19	%		1.28	%
Net charge-offs to average loans outstanding		0.42	%		0.39	%		0.38	%		0.41	%		0.44	%

* Consumer charge-off and recoveries include consumer and home equity.

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In addition to the nonperforming loans discussed above, the Company has also identified approximately $57.5 million in potential problem loans at December 31, 2017 as compared to $70.0 million at December 31, 2016. Potential problem loans are loans that are currently performing, with a possibility of loss if weaknesses are not corrected. Such loans may need to be disclosed as nonperforming at some time in the future. Potential problem loans are classified by the Company’s loan rating system as “substandard.” At December 31, 2017 , there were 17 potential problem loans exceeding $1.0 million, totaling $33.2 million in aggregated compared to 17 potential problem loans exceeding $1.0 million, totaling $34.9 million in aggregate at December 31, 2016. 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.  To mitigate this risk, the Company maintains a diversified loan portfolio, has no significant concentration in any particular industry and originates loans primarily within its footprint.

The following table sets forth the allocation of the allowance for loan losses by category, as well as the percentage of loans in each category to total loans, as prepared by the Company. This allocation is based on management’s assessment of the risk characteristics of each of the component parts of the total loan portfolio as of a given point in time and is subject to changes as and when the risk factors of each such component part change. The allocation is not indicative of either the specific amounts of the loan categories in which future charge-offs may be taken, nor should it be taken as an indicator of future loss trends. The allocation of the allowance to each category does not restrict the use of the allowance to absorb losses in any category.

Allocation of the Allowance for Loan Losses

	December 31,
	2017					2016					2015					2014					2013
(Dollars in thousands)	Allowance		Category Percent of Loans			Allowance		Category Percent of Loans			Allowance		Category Percent of Loans			Allowance		Category Percent of Loans			Allowance		Category Percent of of Loans
Commercial and agricultural	$	27,606		46	%	$	25,444		45	%	$	25,545		44	%	$	32,433		44	%	$	35,090		44	%
Real estate mortgages		5,064		20	%		6,381		20	%		7,960		20	%		7,130		20	%		6,520		19	%
Consumer		36,830		34	%		33,375		35	%		29,253		36	%		26,720		36	%		27,694		37	%
Unallocated		-		-	%		-		-	%		260		-	%		76		-	%		130		-	%
Total	$	69,500		100	%	$	65,200		100	%	$	63,018		100	%	$	66,359		100	%	$	69,434		100	%

The Company’s accounting policy relating to the allowance for loan losses requires a review of each significant loan type within the loan portfolio, considering asset quality trends for each type, including, but not limited to, delinquencies, nonaccruals, historical charge-off experience and specific economic factors (i.e. milk prices are considered when reviewing agricultural loans). Based on this review, management believes the reserve allocations are adequate to address any trends in asset quality indicators. As a result of the general improvement and stabilization of asset quality indicators in 2017, as well as the aforementioned review of the loan portfolio, the allowance for loan losses as a percentage of originated loans decreased from 1.13% as of December 31, 2016 to 1.12% as of December 31, 2017. Acquired loans were recorded at fair value on the date of acquisition, with no carryover of the related allowance for loan losses. Generally, the fair value discount represents expected credit losses, net of market interest rate adjustments. The discount on loans receivable will be amortized to interest income over the estimated remaining life of the acquired loans using the level yield method.

At December 31, 2017 and 2016, approximately 63% and 59%, respectively, of the Company’s loans were secured by real estate located in central and northern New York, northeastern Pennsylvania, western Massachusetts, southern New Hampshire, Vermont and Maine. Accordingly, the ultimate collectability of a substantial portion of the Company’s portfolio is susceptible to changes in market conditions of those areas. Management is not aware of any material concentrations of credit to any industry or individual borrowers.

Subprime mortgage lending, which has been the riskiest sector of the residential housing market, is not a market that the Company has ever actively pursued. The market does not apply a uniform definition of what constitutes “subprime” lending. Our reference to subprime lending relies upon the “Statement on Subprime Mortgage Lending” issued by the OTS and the other federal bank regulatory agencies (the “Agencies”), on June 29, 2007, which further referenced the “Expanded Guidance for Subprime Lending Programs,” or the Expanded Guidance, issued by the Agencies by press release dated January 31, 2001. In the Expanded Guidance, the Agencies indicated that subprime lending does not refer to individual subprime loans originated and managed, in the ordinary course of business, as exceptions to prime risk selection standards. The Agencies recognize that many prime loan portfolios will contain such accounts. The Agencies also excluded prime loans that develop credit problems after acquisition and community development loans from the subprime arena. According to the Expanded Guidance, subprime loans are other loans to borrowers, which display one or more characteristics of reduced payment capacity. Five specific criteria, which are not intended to be exhaustive and are not meant to define specific parameters for all subprime borrowers and may not match all markets or institutions’ specific subprime definitions, are set forth, including having a FICO score of 660 or below. Based upon the definition and exclusions described above, the Company is a prime lender. Within the loan portfolio, there are loans that, at the time of origination, had FICO scores of 660 or below. However, since the Company is a portfolio lender, it reviews all data contained in borrower credit reports and does not base underwriting decisions solely on FICO scores. We believe the aforementioned loans, when made, were amply collateralized and otherwise conformed to our prime lending standards.

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For acquired loans that are not deemed to be impaired at acquisition, credit discounts representing the principal losses expected over the life of the loan are a component of the initial fair value and amortized over the life of the asset.

As a result of the application of this accounting methodology, certain credit-related ratios may not necessarily be directly comparable with periods prior to acquisitions or comparable with other institutions. The credit metrics most impacted by our acquisition of loans related to the acquisition of Alliance Financial Corporation ("Alliance") were the allowance for loans losses to total loans and total allowance for loan losses to nonperforming loans. As of December 31, 2017, the allowance for loan losses to total originated loans and the total allowance for loan losses to originated nonperforming loans were 1.12% and 243.85%, respectively. As of December 31, 2016, the allowance for loan losses to total originated loans and the total allowance for loan losses to originated nonperforming loans were 1.13% and 186.82%, respectively.

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 Asset Liability Committee ("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. 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 “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. 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 December 31, 2017 and 2016, the Company's Basic Surplus measurement was 11.9% and 13.6% of total assets, or $1.1 billion and $1.2 billion, respectively, which were above the Company's minimum of 5% (calculated at $456.8 million and $443.4 million, of period end total assets at December 31, 2017 and 2016, respectively) set forth in its liquidity policies.

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. At December 31, 2017, the Company considered its Basic Surplus position to be strong. However, certain events may adversely impact the Company’s liquidity position in 2018. Improvement in the economy may increase competitive pressure on deposit pricing, which, in turn, could result in a decrease in the Company’s deposit base or increase funding costs. Additionally, liquidity will come under additional pressure if loan growth exceeds deposit growth in 2018. These scenarios could lead to a decrease in the Company’s Basic Surplus measure below the minimum policy level of 5%. To manage this risk, the Company has the ability to purchase brokered time deposits, borrow against established borrowing facilities with other banks (Federal funds) and enter into repurchase agreements with investment companies. The additional liquidity that could be provided by these measures was $1.6 billion at December 31, 2017 and 2016. In addition, the Bank has enhanced its “Borrower-in-Custody” program with the FRB with the addition of the ability to pledge automobile loans. At December 31, 2017 and 2016, the Bank had the capacity to borrow $868.0 million and $831.9 million, respectively, from this program.

At December 31, 2017 and 2016, FHLB advances outstanding totaled $633.9 million and $598.0 million, respectively. The Bank is a member of the FHLB system and had additional borrowing capacity from the FHLB of approximately $0.9 billion and $0.8 billion at December 31, 2017 and 2016, respectively. In addition, unpledged securities could have been used to increase borrowing capacity at the FHLB by an additional $541.2 million and $705.9 million at December 31, 2017and 2016, respectively, or used to collateralize other borrowings, such as repurchase agreements.

At December 31, 2017, a portion of the Company’s loans and securities were pledged as collateral on borrowings. Therefore, future growth of earning assets will depend upon the Company’s ability to obtain additional funding, through growth of core deposits and collateral management and may require further use of brokered time deposits or other higher cost borrowing arrangements.

42

Net cash flows provided by operating activities totaled $136.9 million and $109.5 million in 2017 and 2016, respectively. The critical elements of net operating cash flows include net income, adjusted for non-cash income and expense items such as the provision for loan losses, deferred income tax expense, depreciation and amortization and cash flows generated through changes in other assets and liabilities.

Net cash flows used by investing activities totaled $305.2 million and $630.0 million in 2017 and 2016, respectively. Critical elements of investing activities are loan and investment securities transactions.

Net cash flows provided by financing activities totaled $178.8 million and $529.3 million in 2017 and 2016, respectively. The critical elements of financing activities are proceeds from deposits, borrowings and stock issuance. In addition, financing activities are impacted by dividends and treasury stock transactions.

Contractual Obligations

In connection with its financing and operating activities, the Company has entered into certain contractual obligations. The Company’s future minimum cash payments, excluding interest, associated with its contractual obligations pursuant to its borrowing agreements, operating leases and other obligations at December 31, 2017 are as follows:

	Payments Due by Period
(In thousands)	2018		2019		2020		2021		2022		Thereafter		Total
Long-term debt obligations	$	40,037	$	20,000	$	25,000	$	56	$	-	$	3,776	$	88,869
Junior subordinated debt		-		-		-		-		-		101,196		101,196
Operating lease obligations		7,910		7,227		6,547		5,352		4,646		16,660		48,342
Capital lease obligations		201		188		149		78		8		-		624
IT/Software obligations		6,826		1,695		850		11		-		-		9,382
Data processing commitments		3,186		3,186		3,186		1,140		1,140		-		11,838
Total contractual obligations	$	58,160	$	32,296	$	35,732	$	6,637	$	5,794	$	121,632	$	260,251

We have obligations under our pension, post-retirement plan, directors’ retirement and supplemental executive retirement plans as described in Note 13 to the consolidated financial statements. The supplemental executive retirement, pension and postretirement benefit and directors’ retirement payments represent actuarially determined future benefit payments to eligible plan participants.

Commitments to Extend Credit

The Company makes contractual commitments to extend credit, which include unused lines of credit, which are subject to the Company’s credit approval and monitoring procedures.  At December 31, 2017 and 2016, commitments to extend credit in the form of loans, including unused lines of credit, amounted to $1.6 billion and $1.5 billion, respectively. In the opinion of management, there are no material commitments to extend credit, including unused lines of credit that represent unusual risks. All commitments to extend credit in the form of loans, including unused lines of credit, expire within one year.

Standby Letters of Credit

The Company does not issue any guarantees that would require liability-recognition or disclosure, other than its standby letters of credit. The Company guarantees the obligations or performance of customers by issuing stand-by 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 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, portfolio maintenance and management procedures in effect to monitor 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 requirements. At December 31, 2017 and 2016, outstanding standby letters of credit were approximately $41.1 million and $36.8 million, respectively. The fair value of the Company’s standby letters of credit at December 31, 2017 and 2016 was not significant. The following table sets forth the commitment expiration  period for standby letters of credit:

(In thousands)		December 31, 2017
Within one year	$	18,545
After one but within three years		19,645
After three but within five years		2,044
After five years		901
Total	$	41,135

43

Interest Rate Swaps

The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting.

For derivatives designated as fair value hedges, changes in the fair value of the derivative and the hedged item related to the hedged risk are recognized in earnings. Any hedge ineffectiveness would be recognized in the income statement line item pertaining to the hedged item. For derivatives designated as cash flow hedges, changes in fair value of the effective portion of the cash flow hedges are reported in other comprehensive income ("OCI"). When the cash flows associated with the hedged item are realized, the gain or loss included in OCI is recognized in the Consolidated Statement of Income.

When the Company purchases a portion of a commercial loan that has an existing interest rate swap, it enters a risk participation agreement with the counterparty and assumes the credit risk of the loan customer related to the swap. Any fee paid to the Company under a risk participation agreement is in consideration of the credit risk of the counterparties and is recognized in the income statement. Credit risk on the risk participation agreements is determined after considering the risk rating, probability of default and loss given default of the counterparties.

Loans Serviced for Others and Loans Sold with Recourse

The total amount of loans serviced by the Company for unrelated third parties was approximately $586.7 million and $604.0 million at December 31, 2017 and 2016, respectively. At December 31, 2017 and 2016, the Company had approximately $0.6 million and $0.9 million, respectively, of mortgage servicing rights. At December 31, 2017 and 2016, the Company serviced $29.1 million and $28.5 million, respectively, of agricultural loans sold with recourse. Due to sufficient collateral on these loans, no reserve is considered necessary at December 31, 2017 and 2016. As of December 31, 2017 and 2016, the Company serviced $71.2 million and $72.2 million, respectively, of consumer loans serviced for Springstone.

Capital Resources

Consistent with its goal to operate a sound and profitable financial institution, the Company actively seeks to maintain a “well-capitalized” institution in accordance with regulatory standards. The principal source of capital to the Company is earnings retention. The Company’s capital measurements are in excess of both regulatory minimum guidelines and meet the requirements to be considered well-capitalized.

The Company’s principal source of funds to pay interest on trust preferred debentures and pay cash dividends to its shareholders are dividends from its subsidiaries. Various laws and regulations restrict the ability of banks to pay dividends to their shareholders. Generally, the payment of dividends by the Company in the future as well as the payment of interest on the capital securities will require the generation of sufficient future earnings by its subsidiaries.

The Bank also is subject to substantial regulatory restrictions on its ability to pay dividends to the Company. Under OCC regulations, the Bank may not pay a dividend, without prior OCC approval, if the total amount of all dividends declared during the calendar year, including the proposed dividend, exceeds the sum of its retained net income to date during the calendar year and its retained net income over the preceding two years. At December 31, 2017 and 2016, approximately $107.5 million and $102.5 million, respectively, 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 also is subject to the Bank being in compliance with regulatory capital requirements. The Bank is currently in compliance with these requirements.

Stock Repurchase Plan

The Company did not purchase shares of its common stock during the year ended December 31, 2017. As of December 31, 2017, there were 1,000,000 shares available for repurchase under a plan authorized on October 23, 2017, which expires on December 31, 2019.

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Recent Accounting Updates

See Note 23 to the consolidated financial statements for a detailed discussion of new accounting pronouncements.

2016 OPERATING RESULTS AS COMPARED TO 2015 OPERATING RESULTS

Net Interest Income

Net interest income was $264.4 million for the year ended December 31, 2016, up $11.8 million from 2015. FTE net interest margin was 3.43% for the year ended December 31, 2016, down from 3.50% for the year ended December 31, 2015. Average interest earning assets were up $510.5 million, or 7.0%, for the year ended December 31, 2016 as compared to 2015. This increase from last year was driven primarily by $314.9 million, or 5.4%, period end loan growth and a $220.7 million, or 13.4%, increase in investment securities in 2016. The benefit of earning asset growth was partially offset by a 6 bp decrease in earning assets yields, driven by a 5 bp decrease in loan yields from 2015 to 2016. Average interest bearing liabilities increased $330.7 million, or 6.4%, from the year ended December 31, 2015 to the year ended December 31, 2016. Total average deposits increased $373.2 million, or 5.8%, for the year ended December 31, 2016 as compared to the prior year driven primarily by a 10.1% increase in noninterest bearing demand deposits, as well as increases in money market deposit accounts, NOW and savings deposits in 2016. Average short-term borrowings increased $157.8 million for the year ended December 31, 2016 as compared to the prior year funding earning asset growth. The rates paid on interest bearing liabilities increased by 1 bp for the year ended December 31, 2016 as compared to 2015.

Loans and Corresponding Interest and Fees on Loans

The average balance of loans increased by approximately $291.7 million, or 5.1%, from 2015 to 2016. The yield on average loans decreased from 4.22% in 2015 to 4.17% in 2016, as loan rates declined due to the continued low rate environment in 2016. FTE interest income from loans increased 3.8%, from $242.6 million in 2015 to $251.7 million in 2016. This increase was due to the decrease in yields, partially offset by the increase in average loan balances.

Total loans increased $314.9 million, or 5.4%, from December 31, 2015 to December 31, 2016. Increases in commercial real estate loans and commercial loans were the primary drivers of the increase in total loans from 2015 as the Company experienced strong originations in 2016 in the upstate New York, Pennsylvania and New England markets.

Securities and Corresponding Interest and Dividend Income

The average balance of AFS securities increased $178.6 million, or 16.9%, from 2015 to 2016. The FTE yield on average AFS securities was 1.98% for 2016 compared to 1.97% in 2015.

The average balance of HTM securities increased from $459.6 million in 2015 to $487.8 million in 2016. At December 31, 2016, HTM securities were comprised primarily of tax-exempt municipal securities. The FTE yield on HTM securities increased from 2.46% in 2015 to 2.51% in 2016.

The average balance of Federal Reserve Bank and FHLB stock increased to $38.9 million in 2016 from $33.0 million in 2015. The FTE yield from investments in Federal Reserve Bank and FHLB banks increased from 5.18% in 2015 to 5.08% in 2016.

Funding Sources and Corresponding Interest Expense

The Company utilizes traditional deposit products such as time, savings, NOW, money market and demand deposits as its primary source for funding. Other sources, such as short-term FHLB advances, federal funds purchased, securities sold under agreements to repurchase, brokered time deposits and long-term FHLB borrowings are utilized as necessary to support the Company’s growth in assets and to achieve interest rate sensitivity objectives.

The average balance of interest-bearing liabilities increased $330.7 million from 2015 and totaled $5.5 billion in 2016. The rate paid on interest-bearing liabilities increased from 0.40% in 2015 to 0.41% in 2016. This increase in rates and increase in average balances caused an increase in interest expense of $1.9 million, or 9.2%, from $20.6 million in 2015 to $22.5 million in 2016.

45

Deposits

Average interest bearing deposits increased $184.8 million, or 4.0%, from 2015 to 2016, due primarily to organic deposit growth. Average money market deposits increased $86.5 million or 5.5% during 2016 when compared to 2015. Average NOW accounts increased $89.9 million or 9.1% during 2016 as compared to 2015. The average balance of savings accounts increased $63.4 million or 5.9% during 2016 when compared to 2015. These increases were partially offset by a decrease in average time deposits, which decreased $55.1 million, or 5.7%, from 2015 to 2016. The average balance of demand deposits increased $188.4 million, or 10.1%, during 2016 when compared to 2015. This growth in demand deposits was driven principally by increases in accounts from retail, municipal and commercial customers.

The rate paid on average interest-bearing deposits was 0.30% for 2016 and 0.31% for 2015. The rate paid for money market deposit accounts increased from 0.21% during 2015 to 0.22% during 2016. The rate paid for NOW deposit accounts was 0.05% for 2015 and 2016. The rate paid for savings deposits was 0.06% for 2016 and 2015. The rate paid for time deposits increased from 1.01% during 2015 to 1.06% during 2016.

Borrowings

Average short-term borrowings increased to $497.7 million in 2016 from $339.9 million in 2015 funding earning asset growth. The average rate paid on short-term borrowings increased from 0.23% in 2015 to 0.46% in 2016. Average long-term debt decreased from $130.7 million in 2015 to $118.9 million in 2016.

The average balance of junior subordinated debt remained at $101.2 million in 2016. The average rate paid for junior subordinated debt in 2016 was 2.60%, up from 2.19% in 2015.

Short-term borrowings consist of Federal funds purchased and securities sold under repurchase agreements, which generally represent overnight borrowing transactions and other short-term borrowings, primarily FHLB advances, with original maturities of one year or less. The Company has unused lines of credit and access to brokered deposits available for short-term financing of approximately $1.9 billion and $2.1 billion at December 31, 2016 and 2015, respectively. Securities collateralizing repurchase agreements are held in safekeeping by non-affiliated financial institutions and are under the Company’s control. Long-term debt, which is comprised primarily of FHLB advances, are collateralized by the FHLB stock owned by the Company, certain of its mortgage-backed securities and a blanket lien on its residential real estate mortgage loans.

Noninterest Income

Noninterest income for the year ended December 31, 2016 was $115.7 million, down $2.8 million, or 2.3%, from the year ended December 31, 2015. The decrease was primarily due to the $4.2 million gain recognized in the third quarter of 2015 from the 2014 sale of Springstone. In addition, net securities income was down $3.7 million from 2015 due to a $0.6 million securities loss in 2016 versus a net securities gain for $3.1 million in 2015. The decreases were offset by increases in retirement plan administration fees, other noninterest income, ATM and debit card fees, bank owned life insurance income and insurance and other financial services revenue. Retirement plan administration fees were up $1.9 million, or 13.6%, from 2015 due primarily to the 2015 fourth quarter acquisition of Third Party Administrators, Inc. and the 2016 third quarter acquisition of Actuarial Designs & Solutions, Inc. Other noninterest income was up $1.8 million, or 12.4%, primarily due to higher swap fee income in 2016 than in 2015, an increase in mortgage banking income and a $0.9 million gain on the sale of equity investments for compliance with the Dodd-Frank Wall Street Reform and Consumer Protection Act in the third quarter of 2016. Noninterest income as a percentage of total revenue excluding net securities (losses) gains and the gain on the sale of equity investment was 30.6% for the years ended December 31, 2016 and 2015.

Noninterest Expense

Noninterest expense for the year ended December 31, 2016 was $235.9 million, down $0.3 million, or 0.1%, from 2015. This decrease was driven primarily by lower other noninterest expense during 2016 than 2015 primarily due to reorganization expenses incurred during the third quarter of 2015, offset by higher salaries and employee benefit expenses in 2016. Salaries and employee benefits expenses increased $5.7 million, or 4.5%, from 2015 to 2016, due to higher salaries and medical insurance costs that were partially offset by lower pension credit and contract termination costs.

Income Taxes

Income tax expense for the year ended December 31, 2016 was $40.4 million, up from $40.2 million for the same period in 2015. The effective tax rate was 34.0% for the year ended December 31, 2016, compared to 34.5% for the same period in 2015. The decrease in the effective tax rate was due to the higher level of tax-exempt income to total income in 2016 compared to 2015.

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ITEM 7A. Quantitative and Qualitative Disclosure About Market Risk

Interest rate risk is the most significant 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 or are immaterial to the results of operations.

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 for 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 the 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.

The primary tool utilized by ALCO to manage interest rate risk is earnings at risk modeling (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. 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. Two additional models are run in which a gradual increase of 200 bps and a gradual decrease of 100 bps takes place over a 12 month period with a static balance sheet. 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 resultant 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, particularly prime- and LIBOR-based loans) repricing downward faster than the interest bearing liabilities that remain at or near their floors. In the rising rate scenarios, net interest income is projected to experience a slight decline from the flat rate scenario; however, the potential impact on earnings is dependent on the ability to lag deposit repricing on NOW, savings, MMDA and CD accounts. Net interest income for the next twelve 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 December 31, 2017 balance sheet position:

Interest Rate Sensitivity Analysis

Change in interest rates (In basis points)	Percent change in net interest income
+200		(3.43	%)
-100		(1.85	%)

The Company anticipates that in the current environment of rising short-term interest rates, the trajectory of net interest income will depend significantly on the ability to manage deposit pricing in a competitive market. Through the end of 2017, deposit pricing has remained relatively stable through five increases in the federal fund rate totaling 125 basis points. The Company anticipates that further increases in the federal funds rate will result in modest increases in deposit rates. In order to maintain the net interest margin in 2018, the Company will continue to focus on increasing earning assets and funding growth through lower cost core deposits.

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Another tool used by ALCO to manage interest rate risk is financial modeling of net portfolio values (discounted present value of assets minus discounted present value of liabilities). The table below represents the percent change in net portfolio values from base case (flat rates) for +200/-100 instantaneous rate shocks:

Net Portfolio Value Sensitivity Analysis

Change in interest rates (In basis points)	Percent change in net portfolio value
+200		(1.98	%)
-100		8.98	%

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ITEM 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

NBT Bancorp Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of NBT Bancorp Inc. and subsidiaries (the “Company”) as of December 31, 2017 and 2016, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2017, and the related notes (collectively, the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2017, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 1, 2018 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/S/ KPMG LLP

We have served as the Company’s auditor since 1987.

Albany, New York

March 1, 2018

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Consolidated Balance Sheets
	As of December 31,
(In thousands, except share and per share data)	2017			2016
Assets
Cash and due from banks	$	156,852		$	147,789
Short-term interest bearing accounts		2,812			1,392
Securities available for sale, at fair value		1,255,925			1,338,290
Securities held to maturity (fair value $481,871 and $525,050)		484,073			527,948
Trading securities		11,467			9,259
Federal Reserve Bank and Federal Home Loan Bank stock		46,706			47,033
Loans		6,584,773			6,198,057
Less allowance for loan losses		69,500			65,200
Net loans	$	6,515,273		$	6,132,857
Premises and equipment, net		81,305			84,187
Goodwill		268,043			265,439
Intangible assets, net		13,420			15,815
Bank owned life insurance		172,388			168,012
Other assets		128,548			129,247
Total assets	$	9,136,812		$	8,867,268
Liabilities
Demand (noninterest bearing)	$	2,286,892		$	2,195,845
Savings, NOW and money market		4,076,978			3,905,432
Time		806,766			872,411
Total deposits	$	7,170,636		$	6,973,688
Short-term borrowings		719,123			681,703
Long-term debt		88,869			104,087
Junior subordinated debt		101,196			101,196
Other liabilities		98,811			93,278
Total liabilities	$	8,178,635		$	7,953,952
Stockholders’ equity
Preferred stock, $0.01 par value; authorized 2,500,000 shares at December 31, 2017 and 2016	$	-		$	-
Common stock, $0.01 par value; authorized 100,000,000 shares at December 31, 2017 and 2016, respectively; issued 49,651,493 at December 31, 2017 and 2016		497			497
Additional paid-in-capital		574,209			575,078
Retained earnings		543,713			501,761
Accumulated other comprehensive loss		(22,077	)		(21,520	)
Common stock in treasury, at cost, 6,108,684 and 6,393,743 shares at December 31, 2017 and 2016, respectively		(138,165	)		(142,500	)
Total stockholders’ equity	$	958,177		$	913,316
Total liabilities and stockholders’ equity	$	9,136,812		$	8,867,268

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Income
	Years ended December 31,
(In thousands, except per share data)	2017		2016			2015
Interest, fee and dividend income
Interest and fees on loans	$	267,096	$	250,994		$	241,828
Securities available for sale		28,564		24,033			20,418
Securities held to maturity		10,934		9,852			9,233
Other		2,813		2,068			1,745
Total interest, fee and dividend income	$	309,407	$	286,947		$	273,224
Interest expense
Deposits		14,475		14,366			14,257
Short-term borrowings		5,996		2,309			783
Long-term debt		2,299		3,204			3,355
Junior subordinated debt		3,144		2,627			2,221
Total interest expense	$	25,914	$	22,506		$	20,616
Net interest income	$	283,493	$	264,441		$	252,608
Provision for loan losses		30,988		25,431			18,285
Net interest income after provision for loan losses	$	252,505	$	239,010		$	234,323
Noninterest income
Insurance and other financial services revenue	$	23,532	$	24,396		$	24,211
Service charges on deposit accounts		16,750		16,729			17,056
ATM and debit card fees		21,372		19,448			18,248
Retirement plan administration fees		20,213		16,063			14,146
Trust		19,586		18,565			19,026
Bank owned life insurance income		5,175		5,195			4,334
Net securities gains (losses)		1,867		(644	)		3,087
Gain on the sale of equity investment		818		-			4,179
Other		11,991		15,961			14,194
Total noninterest income	$	121,304	$	115,713		$	118,481
Noninterest expense
Salaries and employee benefits	$	133,610	$	131,284		$	125,633
Occupancy		21,808		20,940			22,095
Data processing and communications		17,068		16,495			16,588
Professional fees and outside services		13,499		13,617			13,407
Equipment		15,225		14,295			13,408
Office supplies and postage		6,284		6,168			6,367
FDIC expenses		4,767		5,111			5,145
Advertising		2,744		2,556			2,654
Amortization of intangible assets		3,960		3,928			4,864
Loan collection and other real estate owned, net		4,763		3,458			2,620
Other		21,920		18,070			23,395
Total noninterest expense	$	245,648	$	235,922		$	236,176
Income before income tax expense	$	128,161	$	118,801		$	116,628
Income tax expense		46,010		40,392			40,203
Net income	$	82,151	$	78,409		$	76,425
Earnings per share
Basic	$	1.89	$	1.81		$	1.74
Diluted	$	1.87	$	1.80		$	1.72

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Comprehensive Income
	Years ended December 31,
(In thousands)	2017			2016			2015
Net income	$	82,151		$	78,409		$	76,425
Other comprehensive (loss) income, net of tax:
Unrealized net holding (losses) arising during the year (pre-tax amounts of $(6,915), $(8,618) and $(3,159))	$	(4,070	)	$	(5,265	)	$	(1,930	)
Reclassification adjustment for net (gains) losses related to securities available for sale included in net income (pre-tax amounts of $(1,869), $644 and $(3,087))		(1,153	)		393			(1,886	)
Reclassification adjustment for an impairment write-down of an equity security (pre-tax amounts of $1,312, $- and $-)		811			-			-
Unrealized gains on derivatives (cash flow hedges) (pre-tax amounts of $609, $2,901 and $-)		372			1,772			-
Amortization of unrealized net gains and losses related to the reclassification of available for sale investment securities to held to maturity (pre-tax amounts of $875, $1,094 and $1,311)		540			668			801
Pension and other benefits:
Amortization of prior service cost and actuarial gains (pre-tax amounts of $1,852, $2,370 and $2,239)		1,112			1,421			1,371
Decrease (increase) in unrecognized actuarial loss (pre-tax amounts of $2,401, $3,154 and $(6,144))		1,831			1,909			(3,747	)
Total other comprehensive (loss) income	$	(557	)	$	898		$	(5,391	)
Comprehensive income	$	81,594		$	79,307		$	71,034

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Changes in Stockholders’ Equity
(In thousands, except share and per share data)	Common Stock		Additional Paid-in- Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Common Stock in Treasury			Total
Balance at December 31, 2014	$	497	$	576,504		$	423,956		$	(17,027	)	$	(119,749	)	$	864,181
Net income		-		-			76,425			-			-			76,425
Cash dividends - $0.87 per share		-		-			(38,149	)		-			-			(38,149	)
Purchase of 1,047,152 treasury shares		-		-			-			-			(26,797	)		(26,797	)
Net issuance of 581,400 shares to employee and other stock plans, including tax benefit		-		(3,864	)		-			-			11,513			7,649
Stock-based compensation		-		4,086			-			-			-			4,086
Other comprehensive loss		-		-			-			(5,391	)		-			(5,391	)
Balance at December 31, 2015	$	497	$	576,726		$	462,232		$	(22,418	)	$	(135,033	)	$	882,004
Net income		-		-			78,409			-			-			78,409
Cash dividends - $0.90 per share		-		-			(38,880	)		-			-			(38,880	)
Purchase of 675,535 treasury shares		-		-			-			-			(17,193	)		(17,193	)
Net issuance of 502,585 shares to employee and other stock plans, including tax benefit		-		(6,026	)		-			-			9,726			3,700
Stock-based compensation		-		4,378			-			-			-			4,378
Other comprehensive income		-		-			-			898			-			898
Balance at December 31, 2016	$	497	$	575,078		$	501,761		$	(21,520	)	$	(142,500	)	$	913,316
Net income		-		-			82,151			-			-			82,151
Cash dividends - $0.92 per share		-		-			(40,104	)		-			-			(40,104	)
Net issuance of 285,059 shares to employee and other stock plans		-		(4,608	)		-			-			4,335			(273	)
Stock-based compensation		-		3,739			(95	)		-			-			3,644
Other comprehensive loss		-		-			-			(557	)		-			(557	)
Balance at December 31, 2017	$	497	$	574,209		$	543,713		$	(22,077	)	$	(138,165	)	$	958,177

See accompanying notes to consolidated financial statements.

53

Consolidated Statements of Cash Flows
	Years ended December 31,
(In thousands)	2017			2016			2015
Operating activities
Net income	$	82,151		$	78,409		$	76,425
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses		30,988			25,431			18,285
Depreciation and amortization of premises and equipment		9,056			9,023			8,646
Net accretion on securities		4,786			5,278			2,554
Amortization of intangible assets		3,960			3,928			4,864
Excess tax benefit on stock-based compensation		1,769			1,055			(43	)
Stock-based compensation expense		3,644			4,378			4,086
Bank owned life insurance income		(5,175	)		(5,195	)		(4,334	)
Trading security purchases		(1,586	)		(287	)		(810	)
Net unrealized (gains) losses in trading securities		(623	)		(594	)		226
Proceeds from sales of loans held for sale		111,284			96,603			72,498
Originations and purchases of loans held for sale		(111,206	)		(96,692	)		(69,677	)
Net gains on sales of loans held for sale		(349	)		(499	)		(239	)
Net security (gains) losses		(1,867	)		644			(3,087	)
Net (gains) on sales and write-down of other real estate owned		(221	)		(687	)		(1,337	)
(Gain) on sale of equity investment		(818	)		-			(4,179	)
Impairment write-down of equity security		1,312			-			-
Impairment write-down of goodwill and intangible assets		1,530			2,565			-
(Gain) on asset sold		-			(2,462	)		-
Re-evaluation of deferred tax amounts from Tax Act		4,407			-			-
Net decrease in other assets		28			364			15,386
Net increase (decrease) in other liabilities		3,834			(10,697	)		5,236
Net cash provided by operating activities	$	136,904		$	110,565		$	124,500
Investing activities
Net cash (used in) acquisitions	$	(4,000	)	$	(2,000	)	$	(3,100	)
Securities available for sale:
Proceeds from maturities, calls and principal paydowns		290,613			324,781			299,302
Proceeds from sales		14,788			98,466			15,091
Purchases		(233,804	)		(597,428	)		(481,262	)
Securities held to maturity:
Proceeds from maturities, calls and principal paydowns		103,759			100,893			79,212
Proceeds from sales		764			-			-
Purchases		(60,706	)		(157,418	)		(95,272	)
Other:
Net increase in loans		(419,114	)		(344,448	)		(315,363	)
Proceeds from Federal Home Loan Bank stock redemption		248,887			158,818			60,852
Purchases of Federal Reserve Bank and Federal Home Loan Bank stock		(248,560	)		(169,178	)		(64,899	)
Proceeds from settlement of bank owned life insurance		799			1,477			1,541
Purchase of bank owned life insurance		-			(47,250	)		-
Purchases of premises and equipment, net		(6,691	)		(3,308	)		(8,193	)
Proceeds from sale of equity investment		818			-			4,179
Proceeds from sales of other real estate owned		7,254			6,635			3,908
Net cash (used in) investing activities	$	(305,193	)	$	(629,960	)	$	(504,004	)
Financing activities
Net increase in deposits	$	196,948		$	368,845		$	305,238
Net increase in short-term borrowings		37,419			239,222			125,679
Proceeds from issuance of long-term debt		25,000			23,880			-
Repayments of long-term debt		(40,218	)		(50,240	)		(498	)
Proceeds from the issuance of shares to employee benefit plans and other stock plans		3,309			6,032			9,356
Cash paid by employer for tax-withholding on stock issuance		(3,582	)		(3,387	)		(1,664	)
Purchase of treasury stock		-			(17,193	)		(26,797	)
Cash dividends		(40,104	)		(38,880	)		(38,149	)
Net cash provided by financing activities	$	178,772		$	528,279		$	373,165
Net increase (decrease) in cash and cash equivalents	$	10,483		$	8,884		$	(6,339	)
Cash and cash equivalents at beginning of year		149,181			140,297			146,636
Cash and cash equivalents at end of year	$	159,664		$	149,181		$	140,297

Supplemental disclosure of cash flow information:
	Years ended December 31,
Cash paid during the year for:	2017		2016		2015
Interest expense	$	25,887	$	22,466	$	20,908
Income taxes paid, net of refund		33,675		40,879		28,684
Noncash investing activities:
Loans transferred to other real estate owned	$	5,981	$	6,863	$	3,293
Acquisitions:
Fair value of assets acquired	$	3,096	$	2,584	$	1,756

See accompanying notes to consolidated financial statements.

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NBT BANCORP INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

1. Summary of Significant Accounting Policies

The accounting and reporting policies of NBT Bancorp Inc. (“NBT Bancorp”) and its subsidiaries, NBT Bank, National Association (“NBT Bank” or the "Bank"), NBT Holdings, Inc. and NBT Financial Services, Inc., conform, in all material respects, with accounting principles generally accepted in the United States of America (“GAAP”) and to general practices within the banking industry. Collectively, NBT Bancorp and its subsidiaries are referred to herein as “the Company.”

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Estimates associated with the allowance for loan losses, income taxes, pension expense, fair values of financial instruments, status of contingencies and other-than-temporary impairment ("OTTI") on investments are particularly susceptible to material change in the near term.

The following is a description of significant policies and practices:

Consolidation

The accompanying consolidated financial statements include the accounts of NBT Bancorp and its wholly-owned subsidiaries mentioned above. All material intercompany transactions have been eliminated in consolidation. Amounts previously reported in the consolidated financial statements are reclassified whenever necessary to conform to the current year’s presentation. In the “Parent Company Financial Information,” the investment in subsidiaries is recorded using the equity method of accounting.

The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a variable interest entity under GAAP. Voting interest entities are entities in which the total equity investment at risk is sufficient to enable the entity to finance itself independently and provides the equity holders with the obligation to absorb losses, the right to receive residual returns and the right to make decisions about the entity’s activities. The Company consolidates voting interest entities in which it has all, or at least a majority of, the voting interest. As defined in applicable accounting standards, variable interest entities (“VIEs”) are entities that lack one or more of the characteristics of a voting interest entity. A controlling financial interest in a VIE is present when the Company has both the power and ability to direct the activities of the VIE that most significantly impact the VIE's economic performance and an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The Company’s wholly-owned subsidiaries CNBF Capital Trust I, NBT Statutory Trust I, NBT Statutory Trust II, Alliance Financial Capital Trust I and Alliance Financial Capital Trust II are VIEs for which the Company is not the primary beneficiary. Accordingly, the accounts of these entities are not included in the Company’s consolidated financial statements.

Segment Reporting

The Company’s operations are primarily in the community banking industry and include the provision of traditional banking services. The Company also provides other services through its subsidiaries such as insurance, retirement plan administration and trust administration. The Company operates solely in the geographical regions of central and upstate New York, northeastern Pennsylvania, western Massachusetts, southern New Hampshire, Vermont and southern coastal Maine. The Company has no reportable operating segments.

Cash Equivalents

The Company considers amounts due from correspondent banks, cash items in process of collection and institutional money market mutual funds to be cash equivalents for purposes of the consolidated statements of cash flows.

Securities

The Company classifies its securities at date of purchase as either held to maturity ("HTM"), trading or available for sale ("AFS"). HTM debt securities are those that the Company has the ability and intent to hold until maturity. Trading securities are securities purchased with the intent to sell within a short period of time. AFS securities are securities that are not classified as a HTM or trading securities. AFS securities are recorded at fair value. Unrealized holding gains and losses, net of the related tax effect, on AFS securities are excluded from earnings and are reported in the consolidated statements of stockholders’ equity and the consolidated statements of comprehensive income as a component of accumulated other comprehensive income or loss ("AOCI"). HTM securities are recorded at amortized cost. Trading securities are recorded at fair value, with net unrealized gains and losses recognized in income. Transfers of securities between categories are recorded at fair value at the date of transfer. Non-marketable equity securities are carried at cost.

Declines in the fair value of HTM and AFS securities below their amortized cost, less any current period credit loss, that are deemed to be OTTI are reflected in earnings as a realized loss, or in other comprehensive income ("OCI"). The classification is dependent upon whether the Company intends to sell the security, or whether it is more likely than not it will be required to sell the security before recovery. The OTTI 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 OTTI 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 OTTI impairment related to the credit loss shall be recognized in earnings. The amount of the total OTTI related to other factors shall be recognized in OCI, net of applicable taxes.

55

In estimating OTTI 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.

Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to yield using the interest method. Dividend and interest income are recognized when earned. Realized gains and losses on securities sold are derived using the specific identification method for determining the cost of securities sold.

Investments in Federal Reserve Bank and Federal Home Loan Bank (“FHLB”) stock are required for membership in those organizations and are carried at cost since there is no market value available. The FHLB New York continues to pay dividends and repurchase stock. As such, the Company has not recognized any impairment on its holdings of Federal Reserve Bank and FHLB stock.

Loans

Loans are recorded at their current unpaid principal balance, net of unearned income and unamortized loan fees and expenses, which are amortized under the effective interest method over the estimated lives of the loans. Interest income on loans is accrued based on the principal amount outstanding.

For all loan classes within the Company’s loan portfolio, 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 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.

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. For all loan classes within the Company’s loan portfolio, 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. 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.

Commercial type loans are considered impaired when it is probable that the borrower will not repay the loan according to the original contractual terms of the loan agreement and all loan types are considered impaired if the loan is restructured in a troubled debt restructuring (“TDR”). 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.

A loan is considered to be a TDR when the Company grants a concession to the borrower because of the borrower’s financial condition that the Company would not otherwise consider. Such concessions include the reduction of interest rates, forgiveness of all or a portion of principal or interest, or other modifications at interest rates that are less than the current market rate for new obligations with similar risk. TDR loans are nonaccrual loans; however, they can be returned to accrual status after a period of performance, generally evidenced by six months of compliance with their modified terms.

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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.

Acquired Loans

Acquired loans are initially measured at fair value as of the acquisition date without carryover of historical allowance for loan losses.

For loans that meet the criteria stipulated in ASC 310-30, Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality, the Company shall recognize the accretable yield, which is defined as the excess of all cash flows expected at acquisition over the initial fair value of the loan, as interest income on a level-yield basis over the expected remaining life of the loan. The excess of the loan's contractually required payments over the cash flows expected to be collected is the nonaccretable difference. The nonaccretable difference shall not be recognized as an adjustment of yield, a loss accrual or a valuation allowance. Decreases in the expected cash flows in subsequent periods require the establishment of an allowance for loan losses. Improvements in expected cash flows in future periods result in a reduction of the nonaccretable discount, with such amount reclassified as part of the accretable yield and subsequently recognized in interest income over the remaining lives of the acquired loans on a level-yield basis if the amount and timing of future cash flows is reasonably estimable.

Acquired loans that met the criteria for nonaccrual of interest prior to the acquisition are considered performing upon acquisition, regardless of whether the customer is contractually delinquent, if the Company can reasonably estimate the timing and amount of the expected cash flows on such loans and if the Company expects to fully collect the new carrying value of the loans. As such, the Company may no longer consider the loan to be nonaccrual or nonperforming and may accrue interest on these loans, including the impact of any accretable yield. As such, charge-offs on acquired loans are first applied to the nonaccretable difference and then to any allowance for loan losses recognized subsequent to acquisition.

For loans that meet the criteria stipulated in ASC 310-20 - Receivables - Nonrefundable Fees and Other Costs ("ASC 310-20"), the Company shall amortize/accrete into interest income the premium/discount determined at the date of purchase on a level-yield basis over the life of the loan. Subsequent to the acquisition date, the methods utilized to estimate the required allowance for loan losses are similar to originated loans. Loans accounted for under ASC 310-20 are placed on nonaccrual status when past due in accordance with the Company's nonaccrual policy.

An acquired loan may be resolved either through receipt of payment (in full or in part) from the borrower, the sale of the loan to a third party, or foreclosure of the collateral. In the event of a sale of the loan, a gain or loss on sale is recognized and reported within noninterest income based on the difference between the sales proceeds and the carrying amount of the loan. In other cases, individual loans are removed from the pool based on comparing the amount received from its resolution (fair value of the underlying collateral less costs to sell in the case of a foreclosure) with its outstanding balance. Any difference between these amounts is recorded as a charge-off through the allowance for loan losses. Acquired loans subject to modification are not removed from the pool even if those loans would otherwise be deemed TDRs as the pool and not the individual loan, represents the unit of account.

Allowance for Loan Losses

The allowance for loan losses is the amount, which in the opinion of management, is necessary to absorb incurred losses inherent in the loan portfolio. The allowance is determined based upon numerous considerations, including local and regional conditions, the growth and composition of the loan portfolio with respect to the mix between the various types of loans and their related risk characteristics, a review of the value of collateral supporting the loans, comprehensive reviews of the loan portfolio by the independent loan review staff and management, as well as consideration of volume and trends of delinquencies, nonperforming loans and loan charge-offs. Loan losses are charged off against the allowance, while recoveries of amounts previously charged off are credited to the allowance. As a result of tests of adequacy, required additions to the allowance for loan losses are made periodically by charges to the provision for loan losses.

The allowance for loan losses related to impaired loans specifically allocated for impairment is based on discounted expected cash flows using the loan’s initial effective interest rate or the fair value of the collateral for certain loans where repayment of the loan is expected to be provided solely by the underlying collateral ("collateral dependent"). The Company’s impaired loans are generally collateral dependent. The Company considers the estimated cost to sell, on a discounted basis, when determining the fair value of collateral in the measurement of impairment if those costs are expected to reduce the cash flows available to repay or otherwise satisfy the loans.

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The allowance for loan losses for homogeneous non impaired loans is calculated using a systematic methodology with both a quantitative and a qualitative analysis that is applied on a quarterly basis. For purposes of our allowance methodology, the loan portfolio is segmented as described in Note 5. Each segment has a distinct set of risk characteristics monitored by management. We further assess andmonitor risk and performance at a more disaggregated level, which includes our internal risk grading system for the commercialsegments.

We first apply historical loss rates to pools of loans with similar risk characteristics. Loss rates are calculated by historical charge-offs that have occurred within each pool of loans over the lookback period ("LBP"), multiplied by the loss emergence period ("LEP"). The LBP represents the historical data period utilized to calculate loss rates. The LEP is an estimate of the average amount of time from the point at which a loss is incurred on a loan to the point at which the loss is confirmed. In general, the LEP will be shorter in an economic slowdown or recession and longer during times of economic stability or growth, as customers are better able to delay loss confirmation after a potential loss event has occurred. In conjunction with our annual review of the ALL assumptions, we update our study of LEPs for each portfolio segment using our loan charge-off history.

After consideration of the historic loss analysis, management applies additional qualitative adjustments so that the allowance for loan losses is reflective of the estimate of incurred losses that exist in the loan portfolio at the balance sheet date.  Qualitative adjustments are made if, in the judgment of management, incurred loan losses inherent in the loan portfolio are not fully captured in the historical loss analysis. Qualitative considerations include the loan portfolio trends, 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 experience across one of 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. The evaluation of the various components of the allowance for loan losses requires considerable judgment in order to estimate inherent loss exposures. 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.

Management believes that the allowance for loan losses is adequate. While management uses available information to recognize loan losses, future additions to the allowance for loan losses may be necessary based on changes in economic conditions or changes in the values of properties securing loans in the process of foreclosure. In addition, various regulatory agencies, as an integral part 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 for loan losses based on their judgments about information available to them at the time of their examination, which may not be currently available to management.

Premises and Equipment

Premises and equipment are stated at cost, less accumulated depreciation. Depreciation of premises and equipment is determined using the straight-line method over the estimated useful lives of the respective assets. Expenditures for maintenance, repairs and minor replacements are charged to expense as incurred.

Other Real Estate Owned

Other real estate owned ("OREO") consists of properties acquired through foreclosure or by acceptance of a deed in lieu of foreclosure. These assets are recorded at the lower of fair value of the asset acquired less estimated costs to sell or “cost” (defined as the fair value at initial foreclosure). At the time of foreclosure, or when foreclosure occurs in-substance, the excess, if any, of the loan over the fair market value of the assets received, less estimated selling costs, is charged to the allowance for loan losses and any subsequent valuation write-downs are charged to other expense. In connection with the determination of the allowance for loan losses and the valuation of OREO, management obtains appraisals for properties. Operating costs associated with the properties are charged to expense as incurred. Gains on the sale of OREO are included in income when title has passed and the sale has met the minimum down payment requirements prescribed by GAAP. The balance of OREO is recorded in other assets on the consolidated balance sheets.

Goodwill and Other Intangible Assets

Goodwill represents the cost of acquired business in excess of the fair value of the related net assets acquired. Goodwill is not amortized but tested at the reporting unit level for impairment on an annual basis and on an interim basis or when events or circumstances dictate. The Company has elected June 30 as the annual impairment testing date for the insurance and retirement services reporting units and December 31 for the Bank reporting unit.

The Company has the option to first assess qualitative factors, by performing a qualitative analysis, to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the events or circumstances, the Company determines it is not more likely than not that the fair value of a reporting unit is greater than its carrying amount, the impairment test is not required. If the Company concludes otherwise, the Company is required to perform a quantitative impairment test. In the quantitative impairment test, the estimated fair value of a reporting unit is compared to the carrying amount in order to determine if impairment is indicated. If the estimated fair value exceeds the carrying amount, the reporting unit is not deemed to be impaired. If the estimated fair value is below the carrying value of the reporting unit, the difference is the amount of impairment.

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Intangible assets that have indefinite useful lives are not amortized, but are tested at least annually for impairment. Intangible assets that have finite useful lives are amortized over their useful lives. Core deposit intangibles and trust intangibles at the Company are amortized using the sum-of-the-years’-digits method. Covenants not to compete are amortized on a straight-line basis. Customer lists are amortized using an accelerated method. When facts and circumstances indicate potential impairment of amortizable intangible assets, the Company evaluates the recoverability of the asset carrying value, using estimates of undiscounted future cash flows over the remaining asset life. Any impairment loss is measured by the excess of carrying value over fair value.

Determining the fair value of a reporting unit under the goodwill impairment tests and determining the fair value of other intangible assets are judgmental and often involve the use of significant estimates and assumptions. Estimates of fair value are primarily determined using the discounted cash flows method, which uses significant estimates and assumptions including projected future cash flows, discount rates reflecting the market rate of return and projected growth rates. Future events may impact such estimates and assumptions and could cause the Company to conclude that our goodwill or intangible assets have become impaired, which would result in recording an impairment loss.

Bank-Owned Life Insurance

The Bank has purchased life insurance policies on certain employees, key executives and directors. Bank-owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

Treasury Stock

Treasury stock acquisitions are recorded at cost. Subsequent sales of treasury stock are recorded on an average cost basis. Gains on the sale of treasury stock are credited to additional paid-in-capital. Losses on the sale of treasury stock are charged to additional paid-in-capital to the extent of previous gains, otherwise charged to retained earnings.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes interest accrued and penalties related to unrecognized tax benefits in income tax expense.

Tax positions are recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50 percent likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

Pension Costs

The Company maintains a noncontributory, defined benefit pension plan covering substantially all employees, as well as supplemental employee retirement plans covering certain executives and a defined benefit postretirement healthcare plan that covers certain employees. Costs associated with these plans, based on actuarial computations of current and future benefits for employees, are charged to current operating expenses.

Stock-Based Compensation

We maintain various long-term incentive stock benefit plans under which we grant stock options and restricted stock units to certain directors and key employees. We recognize compensation expense in our consolidated statements of income over the requisite service period, based on the grant-date fair value of the award. For restricted stock awards and units, we recognize compensation expense ratably over the vesting period for the fair value of the award, measured at the grant date. The fair values of options are estimated using the Black-Scholes option pricing model.

Earnings Per Share

Basic earnings per share ("EPS") 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 EPS 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).

Comprehensive Income

At the Company, comprehensive income represents net income plus OCI, which consists primarily of the net change in unrealized gains (losses) on AFS securities for the period, changes in the funded status of employee benefit plans and unrealized gains (losses) on derivatives designated as hedging instruments. AOCI represents the net unrealized gains (losses) on AFS securities, the previously unrecognized portion of the funded status of employee benefit plans and the fair value of instruments designated as hedging instruments, net of income taxes, as of the consolidated balance sheet dates.

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Derivative Instruments and Hedging Activities

The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting.

For derivatives designated as fair value hedges, changes in the fair value of the derivative and the hedged item related to the hedged risk are recognized in earnings. Any hedge ineffectiveness would be recognized in the income statement line item pertaining to the hedged item. For derivatives designated as cash flow hedges, changes in fair value of the effective portion of the cash flow hedges are reported in OCI. When the cash flows associated with the hedged item are realized, the gain or loss included in OCI is recognized in the consolidated statements of income.

When the Company purchases a portion of a commercial loan that has an existing interest rate swap, it enters a risk participation agreement with the counterparty and assumes the credit risk of the loan customer related to the swap. Any fee paid to the Company under a risk participation agreement is in consideration of the credit risk of the counterparties and is recognized in the income statement. Credit risk on the risk participation agreements is determined after considering the risk rating, probability of default and loss given default of the counterparties.

Fair Value Measurements

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 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.

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Other Financial Instruments

The Company is a party to certain other financial instruments with off-balance-sheet risk such as commitments to extend credit, unused lines of credit as well as certain mortgage loans sold to investors with recourse. The Company’s policy is to record such instruments when funded.

Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Under the standby letters of credit, the Company is required to make payments to the beneficiary of the letters of credit upon request by the beneficiary contingent upon the customer's failure to perform under the terms of the underlying contract with the beneficiary. Standby letters of credit typically have one year expirations with an option to renew upon annual review. The Company typically receives a fee for these transactions. The fair value of stand-by letters of credit is recorded upon inception.

Loan Sales and Loan Servicing

Loan sales are recorded when the sales are funded. Mortgage servicing rights are recorded at fair value upon sale of the loan. Loans held for sale are recorded at the lower of cost or market.

Repurchase Agreements

Repurchase agreements are accounted for as secured financing transactions since the Company maintains effective control over the transferred securities and the transfer meets the other criteria for such accounting. Obligations to repurchase securities sold are reflected as a liability in the consolidated balance sheets. The securities underlying the agreements are delivered to a custodial account for the benefit of the dealer or bank with whom each transaction is executed. The dealers or banks, who may sell, loan or otherwise dispose of such securities to other parties in the normal course of their operations, agree to resell to the Company the same securities at the maturities of the agreements.

Trust Operations

Assets held by the Company in a fiduciary or agency capacity for its customers are not included in the accompanying consolidated balance sheets, since such assets are not assets of the Company. Trust income is recognized on the accrual method based on contractual rates applied to the balances of trust accounts.

Reclassifications

Amounts in prior period consolidated financial statements are reclassified whenever necessary to confirm with current period presentation.

Subsequent Events

The Company has evaluated subsequent events for potential recognition and/or disclosure and there were none identified.

2. Acquisitions

In 2017, the Company acquired Downeast Pension Services, Inc. for total consideration of $5.7 million. As part of the acquisition, the Company recorded goodwill of $2.6 million and $1.7 million contingent consideration recorded in other liabilities on the consolidated balance sheet as of December 31, 2017.

In 2016, the Company acquired Actuarial Designs & Solutions, Inc. for total consideration of $3.0 million and Columbia Ridge Capital Management, Inc., for total consideration of $1.3 million. As part of the acquisitions, the Company recorded goodwill of $1.3 million and $0.8 million, respectively.

In 2015 , the Company acquired Third Party Administrators, Inc., a retirement plan administration company for total consideration of $4.1 million. As part of the acquisition, the Company recorded goodwill of $2.3 million.

The operating results of acquired companies are included in the consolidated results after the dates of acquisition.

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3. Securities

The amortized cost, estimated fair value and unrealized gains (losses) of AFS securities are as follows:

(In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
As of December 31, 2017
Federal agency	$	109,862	$	-	$	963	$	108,899
State & municipal		42,171		62		277		41,956
Mortgage-backed:
Government-sponsored enterprises		530,392		1,406		3,345		528,453
U.S. government agency securities		26,363		334		223		26,474
Collateralized mortgage obligations:
Government-sponsored enterprises		496,033		254		10,114		486,173
U.S. government agency securities		50,721		165		1,065		49,821
Other securities		10,623		3,672		146		14,149
Total AFS securities	$	1,266,165	$	5,893	$	16,133	$	1,255,925
As of December 31, 2016
Federal agency	$	175,135	$	78	$	805	$	174,408
State & municipal		47,053		153		480		46,726
Mortgage-backed:
Government-sponsored enterprises		513,814		3,345		2,492		514,667
U.S. government securities		14,955		411		189		15,177
Collateralized mortgage obligations:
Government-sponsored enterprises		513,431		532		7,688		506,275
U.S. government securities		60,822		184		708		60,298
Other securities		15,849		6,394		1,504		20,739
Total AFS securities	$	1,341,059	$	11,097	$	13,866	$	1,338,290

The components of net realized gains (losses) on the sale of AFS securities are as follows. These amounts were reclassified out of AOCI and into earnings:

	Years ended December 31,
(In thousands)	2017			2016			2015
Gross realized gains	$	2,241		$	683		$	3,099
Gross realized (losses)		(372	)		(1,327	)		(12	)
Net AFS realized gains (losses)	$	1,869		$	(644	)	$	3,087

Included in net gains (losses) from sales transactions, the Company also recorded gains from calls on AFS securities of approximately $0.1 million for each of the years ended December 31, 2017, 2016 and 2015.

In the year ended December 31, 2017, the Company recognized a loss of $2 thousand on HTM securities sales transactions. There were no sales of HTM securities in the year ended December 31, 2016.

At December 31, 2017 and 2016, AFS and HTM securities with amortized costs totaling $1.5 billion were pledged to secure public deposits and for other purposes required or permitted by law. Additionally, at December 31, 2017 and 2016, AFS and HTM securities with an amortized cost of $231.3 million and $235.6 million, respectively, were pledged as collateral for securities sold under the repurchase agreements.

The amortized cost, estimated fair value and unrealized gains (losses) of HTM securities are as follows:

(In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
As of December 31, 2017
Mortgage-backed:
Government-sponsored enterprises	$	96,357	$	85	$	810	$	95,632
U.S. government agency securities		418		57		-		475
Collateralized mortgage obligations:
Government-sponsored enterprises		186,327		224		2,577		183,974
State & municipal		200,971		1,439		620		201,790
Total HTM securities	$	484,073	$	1,805	$	4,007	$	481,871
As of December 31, 2016
Mortgage-backed:
Government-sponsored enterprises	$	96,668	$	-	$	1,176	$	95,492
U.S. government agency securities		533		87		-		620
Collateralized mortgage obligations:
Government-sponsored enterprises		225,213		1,060		1,508		224,765
State & municipal		205,534		434		1,795		204,173
Total HTM securities	$	527,948	$	1,581	$	4,479	$	525,050

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At December 31, 2017 and 2016, all of the mortgaged-backed HTM securities were comprised of U.S. government agency securities.

The following table sets forth information with regard to investment securities with unrealized losses segregated according to the length of time the securities had been in a continuous unrealized loss position:

	Less than 12 months							12 months or longer							Total
(In thousands)	Fair Value		Unrealized Losses			Number of Positions		Fair Value		Unrealized Losses			Number of Positions		Fair Value		Unrealized Losses			Number of Positions
As of December 31, 2017
AFS securities:
Federal agency	$	64,653	$	(242	)		5	$	44,246	$	(721	)		4	$	108,899	$	(963	)		9
State & municipal		23,566		(200	)		39		5,994		(77	)		8		29,560		(277	)		47
Mortgage-backed		317,630		(2,381	)		55		58,316		(1,188	)		24		375,946		(3,569	)		79
Collateralized mortgage obligations		227,917		(2,658	)		35		275,303		(8,521	)		42		503,220		(11,179	)		77
Other securities		-		-			-		2,959		(146	)		1		2,959		(146	)		1
Total securities with unrealized losses	$	633,766	$	(5,481	)		134	$	386,818	$	(10,653	)		79	$	1,020,584	$	(16,134	)		213
HTM securities:
Mortgage-backed	$	15,477	$	(140	)		2	$	33,703	$	(670	)		2	$	49,180	$	(810	)		4
Collateralized mortgage obligations		118,476		(1,064	)		17		37,614		(1,513	)		6		156,090		(2,577	)		23
State & municipal		22,387		(132	)		40		15,720		(488	)		24		38,107		(620	)		64
Total securities with unrealized losses	$	156,340	$	(1,336	)		59	$	87,037	$	(2,671	)		32	$	243,377	$	(4,007	)		91
As of December 31, 2016
AFS securities:
Federal agency	$	119,363	$	(805	)		10	$	-	$	-			-	$	119,363	$	(805	)		10
State & municipal		31,873		(478	)		55		483		(2	)		1		32,356		(480	)		56
Mortgage-backed		277,524		(2,668	)		49		985		(13	)		4		278,509		(2,681	)		53
Collateralized mortgage obligations		473,746		(8,396	)		57		-		-			-		473,746		(8,396	)		57
Other securities		-		-			-		4,363		(1,504	)		2		4,363		(1,504	)		2
Total securities with unrealized losses	$	902,506	$	(12,347	)		171	$	5,831	$	(1,519	)		7	$	908,337	$	(13,866	)		178
HTM securities:
Mortgage-backed	$	95,492	$	(1,176	)		5	$	-	$	-			-	$	95,492	$	(1,176	)		5
Collateralized mortgage obligations		108,587		(319	)		12		35,209		(1,189	)		4		143,796		(1,508	)		16
State & municipal		81,984		(1,795	)		155		-		-			-		81,984		(1,795	)		155
Total securities with unrealized losses	$	286,063	$	(3,290	)		172	$	35,209	$	(1,189	)		4	$	321,272	$	(4,479	)		176

Declines in the fair value of HTM and AFS securities below their amortized cost, less any current period credit loss, that are deemed to be OTTI are reflected in earnings as a realized loss, or in OCI. The classification is dependent upon whether the Company intends to sell the security, or whether it is more likely than not it will be required to sell the security before recovery. The OTTI 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 Company will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the OTTI 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 OTTI related to the credit loss shall be recognized in earnings. The amount of the total OTTI related to other factors shall be recognized in OCI net of applicable taxes.

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In estimating OTTI 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 ability and intent to hold the securities classified as HTM until they mature, at which time it is believed the Company will receive full value for the securities. The unrealized losses on HTM debt securities are due to increases in market interest rates over yields 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 if market yields for such investments decline.

Management also has the intent to hold, and will not be required to sell, the securities classified as AFS for a period of time sufficient for a recovery of cost, which may be until maturity. The unrealized losses on AFS debt securities 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. For AFS debt and equity securities, OTTI losses are recognized in earnings if the Company intends to sell the security. In other cases the Company considers the relevant factors noted above, as well as the Company's intent and ability to retain its investment for a period of time sufficient to allow for any anticipated recovery in market value and whether evidence exists to support a realizable value equal to or greater than the cost basis. Any impairment loss on an equity security is equal to the full difference between the cost basis and the fair value of the security.

As of December 31, 2017 and 2016, management believes the impairments detailed in the table above are temporary. For the year ended December 31, 2017, $1.3 million of an OTTI loss on an AFS equity investment was realized in the Company’s consolidated statements of income. There were no OTTI losses realized in the Company’s consolidated statements of income for years ended December 31, 2016 and 2015.

During the year ended December 31, 2017, the Company sold HTM securities with an amortized cost of $0.8 million and an unrealized loss of $2 thousand. Due to significant deterioration in the creditworthiness of the issuers of the HTM securities sold, the Company changed its intent to hold the HTM securities that were sold to maturity, which did not affect the Company's intent to hold the remainder of the HTM portfolio to maturity. There were no sales of HTM securities in the year ended December 31, 2016.

The following tables set forth information with regard to contractual maturities of debt securities at December 31, 2017:

(In thousands)	Amortized Cost		Estimated Fair Value
AFS debt securities:
Within one year	$	63,309	$	63,186
From one to five years		90,119		89,275
From five to ten years		178,128		177,961
After ten years		923,987		911,354
Total AFS debt securities	$	1,255,543	$	1,241,776
HTM debt securities:
Within one year	$	31,412	$	31,413
From one to five years		42,363		42,588
From five to ten years		174,950		174,937
After ten years		235,348		232,933
Total HTM debt securities	$	484,073	$	481,871

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 December 31, 2017 and 2016.

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4. Loans

A summary of loans, net of deferred fees and origination costs, by category is as follows:

	At December 31,
(In thousands)	2017		2016
Residential real estate mortgages	$	1,321,695	$	1,262,614
Commercial		1,317,174		1,242,701
Commercial real estate		1,711,095		1,543,301
Consumer		1,740,038		1,641,657
Home equity		494,771		507,784
Total loans	$	6,584,773	$	6,198,057

Included in the above loans are net deferred loan origination costs totaling $42.6 million and $40.3 million at December 31, 2017 and 2016, respectively. The Company had $0.7 million residential loans held for sale as of December 31, 2017. The Company had $0.6 million of residential loans held for sale as of December 31, 2016.

The total amount of loans serviced by the Company for unrelated third parties was $586.7 million and $604.0 million at December 31, 2017 and 2016, respectively. At December 31, 2017 and 2016, the Company had $0.6 million and $0.9 million, respectively, of mortgage servicing rights.

At December 31, 2017 and 2016, the Company serviced $29.1 million and $28.5 million, respectively, of agricultural loans sold with recourse. Due to sufficient collateral on these loans and government guarantees, no reserve is considered necessary at December 31, 2017 and 2016.

FHLB advances are collateralized by a blanket lien on the Company’s residential real estate mortgages.

In the ordinary course of business, the Company has made loans at prevailing rates and terms to directors, officers and other related parties. Such loans, in management’s opinion, do not present more than the normal risk of collectability or incorporate other unfavorable features. The aggregate amount of loans outstanding to qualifying related parties and changes during the years are summarized as follows:

(In thousands)	2017			2016
Balance at January 1,	$	2,050		$	2,346
New loans		297			936
Adjustment due to change in composition of related parties		198			(406	)
Repayments		(968	)		(826	)
Balance at December 31,	$	1,577		$	2,050

5. 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 probable incurred losses inherent in the current loan portfolio. The appropriateness of the allowance for loan losses is continuously monitored. It is assessed for appropriateness 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

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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 typically 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, which are generally less liquid than real estate. 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 property, which generally consist of real estate with completed structures. These commercial real estate loans are secured by liens on the real estate, which may include both owner occupied and non-owner-occupied properties, such as apartments, commercial structures, housing businesses, health care facilities and other facilities. These loans are typically less risky than commercial loans, since they are secured by real estate and buildings. The Company’s underwriting analysis includes credit verification, independent appraisals, a review of the borrower’s financial condition and a detailed analysis of the borrower’s underlying cash flows. These loans are typically 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. Agricultural real estate loans are made to finance the purchase and improvements of farm properties that generally consist of barns, production facilities and land. The agricultural real estate loans are secured by liens on the farm real estate. Because they are secured by land and buildings, these loans may be less risky than agricultural loans. The Company’s underwriting analysis includes credit verification, independent appraisals, a review of the borrower’s financial condition and a detailed analysis of the borrower’s underlying cash flows. 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 $750 thousand 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 these risks, 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 70% 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. As of December 31, 2017 and 2016, respectively, the consumer loan portfolio includes $403.6 million and $374.9 million of unsecured consumer loans across a national footprint originated through our relationship with national technology-driven consumer lending companies. Advances of credit through this specialty lending business line are to prime borrowers and are subject to the Company’s underwriting standards.

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 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.

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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. When market conditions are favorable, for longer term, fixed-rate residential mortgages without escrow, the Company retains the servicing, but sells the right to receive principal and interest to Freddie Mac. This practice allows the Company to manage interest rate, liquidity risk and credit risk. 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. 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.

Allowance for Loan Loss Calculation

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 impaired loans, these include estimates of impairment, if any, 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.

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 are necessary to maintain the allowance at a level that management believes is reflective of overall level of incurred 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 table illustrates the changes in the allowance for loan losses by portfolio segment:

(In thousands)	Commercial Loans			Consumer Loans			Residential Real Estate Mortgages			Unallocated			Total
Balance as of December 31, 2016	$	25,444		$	33,375		$	6,381		$	-		$	65,200
Charge-offs		(4,169	)		(27,072	)		(1,846	)		-			(33,087	)
Recoveries		1,077			5,142			180			-			6,399
Provision		5,254			25,385			349			-			30,988
Ending Balance as of December 31, 2017	$	27,606		$	36,830		$	5,064		$	-		$	69,500
Balance as of December 31, 2015	$	25,545		$	29,253		$	7,960		$	260		$	63,018
Charge-offs		(4,592	)		(23,364	)		(1,343	)		-			(29,299	)
Recoveries		1,887			3,870			293			-			6,050
Provision		2,604			23,616			(529	)		(260	)		25,431
Ending Balance as of December 31, 2016	$	25,444		$	33,375		$	6,381		$	-		$	65,200
Balance as of December 31, 2014	$	32,433		$	26,720		$	7,130		$	76		$	66,359
Charge-offs		(5,718	)		(18,140	)		(2,229	)		-			(26,087	)
Recoveries		1,014			3,127			320			-			4,461
Provision		(2,184	)		17,546			2,739			184			18,285
Ending Balance as of December 31, 2015	$	25,545		$	29,253		$	7,960		$	260		$	63,018

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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. There was no allowance for loan losses for the acquired loan portfolio as of December 31, 2017 and $0.7 million as of December 31, 2016. Net charge-offs related to acquired loans totaled approximately $0.7 million, $0.5 million and $2.7 million during the years ended December 31, 2017, 2016 and 2015, respectively, and are included in the table above.

The following table illustrates the allowance for loan losses and the recorded investment by portfolio segment: 

(In thousands)	Commercial Loans		Consumer Loans		Residential Real Estate Mortgages		Total
As of December 31, 2017
Allowance for loan losses	$	27,606	$	36,830	$	5,064	$	69,500
Allowance for loans individually evaluated for impairment		57		-		-		57
Allowance for loans collectively evaluated for impairment		27,549		36,830		5,064		69,443
Ending balance of loans		3,028,269		2,234,809		1,321,695		6,584,773
Ending balance of originated loans individually evaluated for impairment		5,876		8,432		6,830		21,138
Ending balance of acquired loans collectively evaluated for impairment		187,313		43,906		170,472		401,691
Ending balance of originated loans collectively evaluated for impairment	$	2,835,080	$	2,182,471	$	1,144,393	$	6,161,944
As of December 31, 2016
Allowance for loan losses	$	25,444	$	33,375	$	6,381	$	65,200
Allowance for loans individually evaluated for impairment		1,517		-		-		1,517
Allowance for loans collectively evaluated for impairment		23,927		33,375		6,381		63,683
Ending balance of loans		2,786,002		2,149,441		1,262,614		6,198,057
Ending balance of originated loans individually evaluated for impairment		13,070		8,488		6,111		27,669
Ending balance of acquired loans individually evaluated for impairment		1,205		-		-		1,205
Ending balance of acquired loans collectively evaluated for impairment		236,413		63,005		199,471		498,889
Ending balance of originated loans collectively evaluated for impairment	$	2,535,314	$	2,077,948	$	1,057,032	$	5,670,294

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The following table sets forth information with regard to past due and nonperforming loans by loan class:

(In thousands)	31-60 Days Past Due Accruing		61-90 Days Past Due Accruing		Greater Than 90 Days Past Due Accruing		Total Past Due Accruing		Nonaccrual		Current		Recorded Total Loans
As of December 31, 2017
Originated
Commercial Loans:
Commercial	$	-	$	-	$	-	$	-	$	202	$	753,577	$	753,779
Commercial Real Estate		161		138		-		299		3,178		1,533,065		1,536,542
Agricultural		117		-		-		117		1,043		34,386		35,546
Agricultural Real Estate		493		-		-		493		2,736		30,905		34,134
Business Banking		1,907		597		-		2,504		5,304		473,147		480,955
Total Commercial Loans	$	2,678	$	735	$	-	$	3,413	$	12,463	$	2,825,080	$	2,840,956
Consumer Loans:
Indirect	$	18,747	$	4,033	$	3,492	$	26,272	$	2,115	$	1,642,664	$	1,671,051
Home Equity		2,887		854		341		4,082		2,736		448,081		454,899
Direct		341		108		70		519		35		64,399		64,953
Total Consumer Loans	$	21,975	$	4,995	$	3,903	$	30,873	$	4,886	$	2,155,144	$	2,190,903
Residential Real Estate Mortgages	$	3,730	$	667	$	1,262	$	5,659	$	5,987	$	1,139,577	$	1,151,223
Total Originated Loans	$	28,383	$	6,397	$	5,165	$	39,945	$	23,336	$	6,119,801	$	6,183,082
Acquired
Commercial Loans:
Commercial	$	-	$	-	$	-	$	-	$	-	$	39,575	$	39,575
Commercial Real Estate		-		-		-		-		2		106,632		106,634
Business Banking		354		-		-		354		669		40,081		41,104
Total Commercial Loans	$	354	$	-	$	-	$	354	$	671	$	186,288	$	187,313
Consumer Loans:
Indirect	$	38	$	-	$	1	$	39	$	22	$	1,157	$	1,218
Home Equity		254		34		103		391		225		39,256		39,872
Direct		6		1		1		8		23		2,785		2,816
Total Consumer Loans	$	298	$	35	$	105	$	438	$	270	$	43,198	$	43,906
Residential Real Estate Mortgages	$	627	$	226	$	140	$	993	$	1,431	$	168,048	$	170,472
Total Acquired Loans	$	1,279	$	261	$	245	$	1,785	$	2,372	$	397,534	$	401,691
Total Loans	$	29,662	$	6,658	$	5,410	$	41,730	$	25,708	$	6,517,335	$	6,584,773

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(In thousands)	31-60 Days Past Due Accruing		61-90 Days Past Due Accruing		Greater Than 90 Days Past Due Accruing		Total Past Due Accruing		Nonaccrual		Current		Recorded Total Loans
As of December 31, 2016
Originated
Commercial Loans:
Commercial	$	33	$	5	$	-	$	38	$	2,964	$	650,568	$	653,570
Commercial Real Estate		-		-		-		-		7,935		1,343,854		1,351,789
Agricultural		-		-		-		-		730		37,186		37,916
Agricultural Real Estate		-		-		-		-		1,803		30,619		32,422
Business Banking		1,609		318		-		1,927		4,860		465,900		472,687
Total Commercial Loans	$	1,642	$	323	$	-	$	1,965	$	18,292	$	2,528,127	$	2,548,384
Consumer Loans:
Indirect	$	19,253	$	4,185	$	2,499	$	25,937	$	2,145	$	1,538,593	$	1,566,675
Home Equity		3,416		1,065		528		5,009		2,851		448,797		456,657
Direct		452		125		20		597		107		62,400		63,104
Total Consumer Loans	$	23,121	$	5,375	$	3,047	$	31,543	$	5,103	$	2,049,790	$	2,086,436
Residential Real Estate Mortgages	$	2,725	$	172	$	1,406	$	4,303	$	6,682	$	1,052,158	$	1,063,143
Total Originated Loans	$	27,488	$	5,870	$	4,453	$	37,811	$	30,077	$	5,630,075	$	5,697,963
Acquired
Commercial Loans:
Commercial	$	-	$	-	$	-	$	-	$	-	$	49,447	$	49,447
Commercial Real Estate		-		-		-		-		1,891		135,398		137,289
Business Banking		236		-		-		236		804		49,842		50,882
Total Commercial Loans	$	236	$	-	$	-	$	236	$	2,695	$	234,687	$	237,618
Consumer Loans:
Indirect	$	100	$	5	$	-	$	105	$	47	$	8,541	$	8,693
Home Equity		254		53		30		337		237		50,553		51,127
Direct		30		2		-		32		20		3,133		3,185
Total Consumer Loans	$	384	$	60	$	30	$	474	$	304	$	62,227	$	63,005
Residential Real Estate Mortgages	$	609	$	28	$	327	$	964	$	2,636	$	195,871	$	199,471
Total Acquired Loans	$	1,229	$	88	$	357	$	1,674	$	5,635	$	492,785	$	500,094
Total Loans	$	28,717	$	5,958	$	4,810	$	39,485	$	35,712	$	6,122,860	$	6,198,057

There were no material commitments to extend further credit to borrowers with nonperforming loans as of December 31, 2017 and 2016.

Classified loans, including all TDRs and nonaccrual commercial loans that are graded Substandard or below, with outstanding balances of $750 thousand or more are evaluated for impairment through the Company’s quarterly status review process. The Company considers commercial loans less than $750 thousand to be homogeneous loans. 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 identified as impaired, 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.  These impaired loans are reviewed on a quarterly basis for changes in the measurement of impairment.  Any change to the previously recognized amount of impairment loss is recognized as a component of the provision for loan losses.

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The following provides additional information on impaired loans specifically evaluated for impairment:

	December 31, 2017						December 31, 2016
(In thousands)	Recorded Investment Balance (Book)		Unpaid Principal Balance (Legal)		Related Allowance		Recorded Investment Balance (Book)		Unpaid Principal Balance (Legal)		Related Allowance
Originated
With no related allowance recorded:
Commercial Loans:
Commercial	$	-	$	251			$	1,278	$	1,697
Commercial Real Estate		2,211		3,979				3,816		3,841
Agricultural		452		465				130		137
Agricultural Real Estate		2,250		2,423				1,434		1,567
Business Banking		860		1,730				655		728
Total Commercial Loans	$	5,773	$	8,848			$	7,313	$	7,970
Consumer Loans:
Indirect	$	131	$	143			$	5	$	16
Home Equity		8,027		9,966				8,483		9,429
Direct		274		274				-		-
Total Consumer Loans	$	8,432	$	10,383			$	8,488	$	9,445
Residential Real Estate Mortgages	$	6,830	$	8,780			$	6,111	$	6,906
Total	$	21,035	$	28,011			$	21,912	$	24,321
With an allowance recorded:
Commercial Loans:
Commercial Real Estate	$	76	$	82	$	30	$	5,553	$	5,736	$	735
Agricultural		27		27		27		49		49		37
Agricultural Real Estate		-		-		-		155		155		54
Total Commercial Loans	$	103	$	109	$	57	$	5,757	$	5,940	$	826
Acquired
With an allowance recorded:
Commercial Loans:
Commercial Real Estate	$	-	$	-	$	-	$	1,205	$	1,321	$	691
Total Commercial Loans	$	-	$	-	$	-	$	1,205	$	1,321	$	691
Total	$	21,138	$	28,120	$	57	$	28,874	$	31,582	$	1,517

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The following table summarizes the average recorded investments on loans specifically evaluated for impairment and the interest income recognized:

	December 31, 2017				December 31, 2016				December 31, 2015
(In thousands)	Average Recorded Investment		Interest Income Recognized Accrual		Average Recorded Investment		Interest Income Recognized Accrual		Average Recorded Investment		Interest Income Recognized Accrual
Originated
Commercial Loans:
Commercial	$	1,841	$	-	$	6,217	$	-	$	2,219	$	71
Commercial Real Estate		3,534		115		5,828		167		8,538		164
Agricultural		224		1		715		1		148		1
Agricultural Real Estate		1,709		43		908		44		628		45
Business Banking		875		12		830		9		960		21
Total Commerical Loans	$	8,183	$	171	$	14,498	$	221	$	12,493	$	302
Consumer Loans:
Indirect	$	35	$	3	$	8	$	-	$	-	$	-
Home Equity		8,226		446		8,278		480		7,070		374
Direct		178		8		-		-		-		-
Total Consumer Loans	$	8,439	$	457	$	8,286	$	480	$	7,070	$	374
Residential Real Estate Mortgages	$	6,523		296		6,143		269		5,128		219
Total Originated	$	23,145	$	924	$	28,927	$	970	$	24,691	$	895
Acquired
Commercial Loans
Commercial	$	-	$	-	$	-	$	-	$	2,045	$	-
Commercial Real Estate		93		-		1,205		-		5,734		-
Total Commerical Loans	$	93	$	-	$	1,205	$	-	$	7,779	$	-
Total Acquired	$	93	$	-	$	1,205	$	-	$	7,779	$	-
Total	$	23,238	$	924	$	30,132	$	970	$	32,470	$	895

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 loans are graded Doubtful, Substandard, Special Mention and Pass.

 ● 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 (i.e., declining revenues or margins) or may be struggling with an ill-proportioned balance sheet (i.e., 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.

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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 Nonperforming or Performing.  

● Nonperforming

Nonperforming loans are loans that are 1) over 90 days past due and interest is still accruing or 2) on nonaccrual status.

● Performing

All loans not meeting any of these three criteria are considered Performing.

The following tables illustrate the Company’s credit quality by loan class:

(In thousands)	December 31, 2017
Originated
Commercial Credit Exposure
By Internally Assigned Grade:	Commercial		Commercial Real Estate		Agricultural		Agricultural Real Estate		Total
Pass	$	708,567	$	1,481,926	$	31,142	$	23,381	$	2,245,016
Special Mention		30,337		28,264		2,294		2,441		63,336
Substandard		14,875		26,352		2,110		8,312		51,649
Total	$	753,779	$	1,536,542	$	35,546	$	34,134	$	2,360,001

Business Banking Credit Exposure
By Internally Assigned Grade:		Business Banking		Total
Non-classified	$	468,898	$	468,898
Classified		12,057		12,057
Total	$	480,955	$	480,955

Consumer Credit Exposure
By Payment Activity:	Indirect		Home Equity		Direct		Total
Performing	$	1,665,444	$	451,822	$	64,848	$	2,182,114
Nonperforming		5,607		3,077		105		8,789
Total	$	1,671,051	$	454,899	$	64,953	$	2,190,903

Residential Mortgage Credit Exposure
By Payment Activity:	Residential Mortgage		Total
Performing	$	1,143,974	$	1,143,974
Nonperforming		7,249		7,249
Total	$	1,151,223	$	1,151,223

73

Acquired
Commercial Credit Exposure
By Internally Assigned Grade:	Commercial		Commercial Real Estate		Total
Pass	$	37,825	$	103,248	$	141,073
Special Mention		425		498		923
Substandard		1,325		2,888		4,213
Total	$	39,575	$	106,634	$	146,209

Business Banking Credit Exposure
By Internally Assigned Grade:	Business Banking		Total
Non-classified	$	38,236	$	38,236
Classified		2,868		2,868
Total	$	41,104	$	41,104

Consumer Credit Exposure
By Payment Activity:	Indirect		Home E quity		Direct		Total
Performing	$	1,195	$	39,544	$	2,792	$	43,531
Nonperforming		23		328		24		375
Total	$	1,218	$	39,872	$	2,816	$	43,906

Residential Mortgage Credit Exposure
By Payment Activity:	Residential Mortgage		Total
Performing	$	168,901	$	168,901
Nonperforming		1,571		1,571
Total	$	170,472	$	170,472

74

(In thousands)	December 31, 2016
Originated
Commercial Credit Exposure
By Internally Assigned Grade:	Commercial		Commercial Real Estate		Agricultural		Agricultural Real Estate		Total
Pass	$	616,829	$	1,288,409	$	36,762	$	28,912	$	1,970,912
Special Mention		7,750		31,053		25		1,896		40,724
Substandard		28,991		32,327		1,124		1,614		64,056
Doubtful		-		-		5		-		5
Total	$	653,570	$	1,351,789	$	37,916	$	32,422	$	2,075,697

Business Banking Credit Exposure
By Internally Assigned Grade:	Business Banking		Total
Non-classified	$	458,864	$	458,864
Classified		13,823		13,823
Total	$	472,687	$	472,687

Consumer Credit Exposure
By Payment Activity:	Indirect		Home Equity		Direct		Total
Performing	$	1,562,031	$	453,278	$	62,977	$	2,078,286
Nonperforming		4,644		3,379		127		8,150
Total	$	1,566,675	$	456,657	$	63,104	$	2,086,436

Residential Mortgage Credit Exposure
By Payment Activity:	Residential Mortgage		Total
Performing	$	1,055,055	$	1,055,055
Nonperforming		8,088		8,088
Total	$	1,063,143	$	1,063,143

Acquired
Commercial Credit Exposure
By Internally Assigned Grade:	Commercial		Commercial Real Estate		Total
Pass	$	48,194	$	127,660	$	175,854
Special Mention		76		1,231		1,307
Substandard		1,177		7,193		8,370
Doubtful		-		1,205		1,205
Total	$	49,447	$	137,289	$	186,736

Business Banking Credit Exposure
By Internally Assigned Grade:	Business Banking		Total
Non-classified	$	47,347	$	47,347
Classified		3,535		3,535
Total	$	50,882	$	50,882

Consumer Credit Exposure
By Payment Activity:	Indirect		Home Equity		Direct		Total
Performing	$	8,646	$	50,860	$	3,165	$	62,671
Nonperforming		47		267		20		334
Total	$	8,693	$	51,127	$	3,185	$	63,005

Residential Mortgage Credit Exposure
By Payment Activity:	Residential Mortgage		Total
Performing	$	196,508	$	196,508
Nonperforming		2,963		2,963
Total	$	199,471	$	199,471

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Troubled Debt Restructuring

When the Company modifies a loan in a troubled debt restructuring, such modifications include 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. Residential and home equity TDRs occurring during 2017 and 2016 were due to the reduction in the interest rate or extension of the term.  Commercial and business banking TDRs during 2017 and 2016 were both a reduction of the interest rate and change in terms.

When the Company modifies a loan in a troubled debt restructuring, management measures for impairment, if any, 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 sold (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. If management determines that the value of the modified loan is less than the recorded investment in the loan an impairment charge would be recorded.

The following tables illustrate the recorded investment and number of modifications for modified loans, including the recorded investment in the loans prior to a modification and the recorded investment in the loans after restructuring:

	Year ended December 31, 2017
(In thousands)	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Commercial Loans:
Commercial		1	$	3,300	$	3,239
Business Banking		3		385		381
Total Commercial Loans		4	$	3,685	$	3,620
Consumer Loans:
Indirect		8	$	145	$	143
Home Equity		13		552		600
Direct		2		279		279
Total Consumer Loans		23	$	976	$	1,022
Residential Real Estate Mortgages		15	$	1,454	$	1,474
Total Troubled Debt Restructurings		42	$	6,115	$	6,116

	Year ended December 31, 2016
(In thousands)	Number of contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Consumer Loans:
Home Equity		28	$	1,886	$	1,743
Total Consumer Loans		28	$	1,886	$	1,743
Residential Real Estate Mortgages		13	$	1,084	$	843
Total Troubled Debt Restructurings		41	$	2,970	$	2,586

The following table illustrates the recorded investment and number of modifications for TDRs where a concession has been made and subsequently defaulted during the period:

	Year ended December 31, 2017				Year ended December 31, 2016
(In thousands)	Number of contracts		Recorded Investment		Number of contracts		Recorded Investment
Commercial Loans:
Commercial		1	$	145		1	$	169
Commercial Real Estate		-		-		1		1,573
Business Banking		1		329		1		67
Total Commercial Loans		2	$	474		3	$	1,809
Consumer Loans:
Indirect		2	$	19		-	$	-
Home Equity		34		1,720		34		1,770
Total Consumer Loans		36	$	1,739		34	$	1,770
Residential Real Estate Mortgages		19	$	1,302		16	$	1,109
Total Troubled Debt Restructurings		57	$	3,515		53	$	4,688

76

6. Premises and Equipment, Net

A summary of premises and equipment follows:

	December 31,
(In thousands)	2017		2016
Land, buildings and improvements	$	121,771	$	121,037
Equipment		57,080		56,243
Premises and equipment before accumulated depreciation	$	178,851	$	177,280
Accumulated depreciation		97,546		93,093
Total premises and equipment	$	81,305	$	84,187

Buildings and improvements are depreciated based on useful lives of 15 to 40 years. Equipment is depreciated based on useful lives of three to ten years.

Rental expense included in occupancy expense amounted to $8.5 million in 2017, $7.8 million in December 31, 2016 and $7.9 million in December 31, 2015. The future minimum rental payments related to non-cancelable operating leases with original terms of one year or more are as follows:

(In thousands)	December 31, 2017
2018	$	7,910
2019		7,227
2020		6,547
2021		5,352
2022		4,646
Thereafter		16,660
Total	$	48,342

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7. Goodwill and Other Intangible Assets

A summary of goodwill is as follows:

(In thousands)
January 1, 2017	$	265,439
Goodwill Acquired		2,604
December 31, 2017	$	268,043
January 1, 2016	$	265,957
Goodwill Acquired		2,047
Goodwill Adjustments		(2,565	)
December 31, 2016	$	265,439

The Company has intangible assets with definite useful lives capitalized on its consolidated balance sheet in the form of core deposit and other identified intangible assets.  These intangible assets are amortized over their estimated useful lives, which range primarily from one to twenty years.

There was no impairment of goodwill recorded during the year ended December 31, 2017. During the year ended December 31, 2016, as a result of the disposition of a line of business in the Company's insurance agency subsidiary, the Company performed a goodwill impairment test that resulted in an impairment charge of $2.6 million.

A summary of core deposit and other intangible assets follows:

	December 31,
(In thousands)	2017		2016
Core deposit intangibles:
Gross carrying amount	$	8,975	$	8,975
Less: accumulated amortization		6,581		5,626
Net carrying amount	$	2,394	$	3,349
Identified intangible assets:
Gross carrying amount	$	33,632	$	32,338
Less: accumulated amortization		22,606		19,872
Net carrying amount	$	11,026	$	12,466
Total intangibles:
Gross carrying amount	$	42,607	$	41,313
Less: accumulated amortization		29,187		25,498
Net carrying amount	$	13,420	$	15,815

Amortization expense on intangible assets with definite useful lives totaled $4.0 million for 2017, $3.9 million for 2016 and $4.9 million for 2015.  Amortization expense on intangible assets with definite useful lives is expected to total $3.3 million for 2018, $2.7 million for 2019, $2.2 million for 2020, $1.6 million for 2021, $1.1 million for 2022 and $2.5 million thereafter.  Other identified intangible assets include customer lists and non-competes. 

During the year ended December 31, 2017, the Company disposed of an intangible asset that resulted in an impairment charge of $1.5 million. There was no impairment of intangible assets recorded during the year ended December 31, 2016.

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8. Deposits

The following table sets forth the maturity distribution of time deposits:

(In thousands)	December 31, 2017
Within one year	$	394,674
After one but within two years		259,710
After two but within three years		62,536
After three but within four years		40,151
After four but within five years		28,525
After five years		21,170
Total	$	806,766

Time deposits of $250,000 or more aggregated $92.8 million and $84.3 million December 31, 2017 and 2016, respectively.

9. Short-Term Borrowings

In addition to the liquidity provided by balance sheet cash flows, liquidity must also be supplemented with additional sources such as credit lines from correspondent banks as well as borrowings from the FHLB and the Federal Reserve Bank. Other funding alternatives may also be appropriate from time to time, including wholesale and retail repurchase agreements and brokered certificate of deposit (“CD”) accounts.

Short-term borrowings totaled $719.1 million and $681.7 million at December 31, 2017 and 2016, respectively, and consist of Federal funds purchased and securities sold under repurchase agreements, which generally represent overnight borrowing transactions and other short-term borrowings, primarily FHLB advances, with original maturities of one year or less.

The Company has unused lines of credit with the FHLB and access to brokered deposits available for short-term financing of approximately $2.0 billion and $1.9 billion at December 31, 2017 and 2016, respectively. Borrowings on the FHLB lines are secured by FHLB stock, certain securities and one-to-four family first lien mortgage loans. Securities collateralizing repurchase agreements are held in safekeeping by nonaffiliated financial institutions and are under the Company’s control.

Information related to short-term borrowings is summarized as follows as of December 31,:

(Dollars in thousands)	2017			2016			2015
Federal funds purchased:
Balance at year-end	$	60,000		$	50,000		$	99,500
Average during the year		54,162			65,257			97,424
Maximum month end balance		80,000			85,000			159,000
Weighted average rate during the year		2.16	%		0.98	%		0.36	%
Weighted average rate at year-end		2.41	%		1.19	%		0.51	%
Securities sold under repurchase agreements:
Balance at year-end	$	182,123		$	173,703		$	167,981
Average during the year		175,539			168,821			162,201
Maximum month end balance		190,326			189,875			178,326
Weighted average rate during the year		0.07	%		0.06	%		0.06	%
Weighted average rate at year-end		0.07	%		0.07	%		0.06	%
Other short-term borrowings:
Balance at year-end	$	477,000		$	458,000		$	175,000
Average during the year		460,334			263,575			80,260
Maximum month end balance		591,000			424,000			175,000
Weighted average rate during the year		1.02	%		0.59	%		0.42	%
Weighted average rate at year-end		1.18	%		0.70	%		0.56	%

See Note 3 for additional information regarding securities pledged as collateral for securities sold under the repurchase agreements.

79

10. Long-Term Debt

Long-term debt consists of obligations having an original maturity at issuance of more than one year. A majority of the Company’s long-term debt is comprised of FHLB advances collateralized by the FHLB stock owned by the Company, certain of its mortgage-backed securities and a blanket lien on its residential real estate mortgage loans. A summary is as follows:

(Dollars in thousands)	December 31, 2017										December 31, 2016
Maturity	Amount		Weighted Average Rate			Callable Amount		Weighted Average Rate			Amount		Weighted Average Rate			Callable Amount		Weighted Average Rate
2017	$	-		-		$	-		-		$	40,150		2.67	%	$	25,000		3.48	%
2018		40,037		2.57	%		25,000		3.15	%		40,000		2.57	%		25,000		3.15	%
2019		20,000		1.96	%		-		-			20,000		1.96	%		-		-
2020		25,000		2.34	%		-		-			-		-			-		-
2021		56		4.00	%		-		-			72		4.00	%		-		-
2031		3,776		2.45	%		-		-			3,865		2.45	%		-		-
Total	$	88,869				$	25,000				$	104,087				$	50,000

11. Junior Subordinated Debt

The Company sponsors five business trusts, CNBF Capital Trust I, NBT Statutory Trust I, NBT Statutory Trust II, Alliance Financial Capital Trust I and Alliance Financial Capital Trust II (collectively, the “Trusts”). The Company’s junior subordinated debentures include amounts related to the Company’s NBT Statutory Trust I and II as well as junior subordinated debentures associated with one statutory trust affiliate that was acquired from our merger with CNB Financial Corp. and two statutory trusts that were acquired from our acquisition of Alliance Financial Corporation (“Alliance”). The Trusts were formed for the purpose of issuing company-obligated mandatorily redeemable trust preferred securities to third-party investors and investing in the proceeds from the sale of such preferred securities solely in junior subordinated debt securities of the Company for general corporate purposes. The Company guarantees, on a limited basis, payments of distributions on the trust preferred securities and payments on redemption of the trust preferred securities. The Trusts are VIEs for which the Company is not the primary beneficiary, as defined by GAAP.  In accordance with GAAP, the accounts of the Trusts are not included in the Company’s consolidated financial statements. See Note 1 for additional information about the Company’s consolidation policy. 

The debentures held by each trust are the sole assets of that trust. The Trusts hold, as their sole assets, junior subordinated debentures of the Company with face amounts totaling $98.0 million at December 31, 2017. The Company owns all of the common securities of the Trusts and has accordingly recorded $3.2 million in equity method investments classified as other assets in our consolidated balance sheets at December 31, 2017. The Company owns all of the common stock of the Trusts, which have issued trust preferred securities in conjunction with the Company issuing trust preferred debentures to the Trusts. The terms of the trust preferred debentures are substantially the same as the terms of the trust preferred securities.

80

As of December 31, 2017, the Trusts had the following trust preferred securities outstanding and held the following junior subordinated debentures of the Company (dollars in thousands): 

Description	Issuance Date	Trust Preferred Securities Outstanding		Interest Rate	Trust Preferred Debt Owed To Trust		Final Maturity Date
CNBF Capital Trust I	August 1999	$	18,000	3-month LIBOR plus 2.75%	$	18,720	August 2029
NBT Statutory Trust I	November 2005		5,000	3-month LIBOR plus 1.40%		5,155	December 2035
NBT Statutory Trust II	February 2006		50,000	3-month LIBOR plus 1.40%		51,547	March 2036
Alliance Financial Capital Trust I	December 2003		10,000	3-month LIBOR plus 2.85%		10,310	January 2034
Alliance Financial Capital Trust II	September 2006		15,000	3-month LIBOR plus 1.65%		15,464	September 2036

The Company’s junior subordinated debentures are redeemable prior to the maturity date at our option upon each trust’s stated option repurchase dates and from time to time thereafter. These debentures are also redeemable in whole at any time upon the occurrence of specific events defined within the trust indenture. Our obligations under the debentures and related documents, taken together, constitute a full and unconditional guarantee by the Company of the issuers’ obligations under the trust preferred securities. The Company owns all of the common stock of the Trusts, which have issued trust preferred securities in conjunction with the Company issuing trust preferred debentures to the Trusts. The terms of the trust preferred debentures are substantially the same as the terms of the trust preferred securities.

With respect to the Trusts, the Company has the right to defer payments of interest on the debentures issued to the Trusts at any time or from time to time for a period of up to ten consecutive semi-annual periods with respect to each deferral period. Under the terms of the debentures, if in certain circumstances there is an event of default under the debentures or the Company elects to defer interest on the debentures, the Company may not, with certain exceptions, declare or pay any dividends or distributions on its capital stock or purchase or acquire any of its capital stock.

Despite the fact that the Trusts are not included in the Company’s consolidated financial statements, $97 million of the $101 million in trust preferred securities issued by these subsidiary trusts is included in the Tier 1 capital of the Company for regulatory capital purposes as allowed by the Federal Reserve Board (NBT Bank owns $1.0 million of CNBF Trust I securities). The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 requires bank holding companies with assets greater than $500 million to be subject to the same capital requirements as insured depository institutions, meaning, for instance, that such bank holding companies will not be able to count trust preferred securities issued after May 19, 2010 as Tier 1 capital. The aforementioned Trusts are grandfathered with respect to this enactment based on their date of issuance.

12. Income Taxes

The significant components of income tax expense attributable to operations are as follows:

	Years ended December 31,
(In thousands)	2017			2016		2015
Current:
Federal	$	35,839		$	30,492	$	32,871
State		6,599			5,628		4,329
Total Current	$	42,438		$	36,120	$	37,200
Deferred:
Federal	$	3,850		$	3,994	$	2,521
State		(278	)		278		482
Total Deferred	$	3,572		$	4,272	$	3,003
Total income tax expense	$	46,010		$	40,392	$	40,203

81

On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act includes significant changes to the U.S. corporate income tax system including: a federal corporate rate reduction from 35% to 21%. The Tax Act also establishes new tax laws that will affect years subsequent to 2017. ASC 740, Income Taxes, requires a company to record the effects of a tax law change in the period of enactment, however shortly after the enactment of the Tax Act, the SEC staff issued Staff Accounting Bulletin 118 ("SAB 118"), which allows a company to record a provisional amount when it does not have the necessary information available, prepared, or analyzed in reasonable detail to complete its accounting for the change in the tax law. The measurement period ends when the company has obtained, prepared and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year.

In connection with our initial analysis of the impact of the Tax Act, the Company recorded a $4.4 million adjustment in the year ended December 31, 2017 for remeasurement of deferred tax assets and liabilities for the corporate rate reduction. A certain amount of this adjustment is provisional, related to consideration of depreciation, compensation matters and different interpretations by various regulatory authorities.

In the first quarter of 2017, the Company adopted the provision of Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, requiring that all excess tax benefits and tax deficiencies associated with equity-based compensation be recognized as an income tax benefit or expense in the income statement. Previously, tax effects resulting from changes in the Company's share price subsequent to the grant date were recorded through stockholders' equity at the time of vesting or exercise. The adoption of ASU 2016-09 resulted in income tax benefits of $1.8 million in the year ended December 31, 2017.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:

	December 31,
(In thousands)	2017			2016
Deferred tax assets:
Allowance for loan losses	$	17,390		$	24,925
Deferred compensation		7,230			11,578
Postretirement benefit obligation		2,159			2,929
Fair value adjustments from acquisitions		919			1,883
Unrealized losses on securities		3,715			3,259
Accrued liabilities		769			1,775
Stock-based compensation expense		2,642			4,817
Other		711			1,148
Total deferred tax assets	$	35,535		$	52,314
Deferred tax liabilities:
Pension benefits	$	12,439		$	17,303
Amortization of intangible assets		11,110			17,557
Premises and equipment, primarily due to accelerated depreciation		2,792			4,375
Deferred loan costs		634			1,759
Cash flow hedges		877			1,129
Other		390			501
Total deferred tax liabilities	$	28,242		$	42,624
Net deferred tax asset at year-end	$	7,293		$	9,690
Net deferred tax asset at beginning of year		9,690			14,940
(Decrease) in net deferred tax asset	$	(2,397	)	$	(5,250	)

Realization of deferred tax assets is dependent upon the generation of future taxable income or the existence of sufficient taxable income within the available carryback period. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized. Based on available evidence, gross deferred tax assets will ultimately be realized and a valuation allowance was not deemed necessary at December 31, 2017 and 2016.

The following is a reconciliation of the provision for income taxes to the amount computed by applying the applicable Federal statutory rate of 35% to income before taxes:

	Years ended December 31,
(In thousands)	2017			2016			2015
Federal income tax at statutory rate	$	44,857		$	41,581		$	40,820
Tax exempt income		(2,303	)		(2,205	)		(2,037	)
Net increase in cash surrender value of life insurance		(1,780	)		(1,712	)		(1,373	)
Federal tax credit		(1,343	)		(1,323	)		(939	)
State taxes, net of federal tax benefit		4,107			3,838			3,127
Federal tax reform (Tax Act)		4,407			-			-
Stock-based compensation, excess tax benefit		(1,619	)		-			-
Other, net		(316	)		213			605
Income tax expense	$	46,010		$	40,392		$	40,203

A reconciliation of the beginning and ending balance of Federal and State gross unrecognized tax benefits ("UTBs") is as follows:

(In thousands)	2017			2016
Balance at January 1	$	559		$	-
Additions for tax positions of prior years		-			425
Reduction for tax positions of prior years		(31	)		-
Current period tax positions		137			134
Balance at December 31	$	665		$	559
Amount that would affect the effective tax rate if recognized, gross of tax	$	525		$	363

82

At December 31, 2015 the Company had no UTBs. We recognize interest and penalties on the income tax expense line in the accompanying consolidated statements of income. We monitor changes in tax statutes and regulations to determine if significant changes will occur over the next 12 months.  As of December 31, 2017, no significant changes to UTBs are projected; however, tax audit examinations are possible. The Company recognized an insignificant amount of interest expense related to UTBs in the consolidated statement of income for the year ended December 31, 2017.

During the year ended December 31, 2017, the Company settled the tax audit by the state of New York for tax years, 2011, 2012 and 2013 without any material audit assessments. The Company is no longer subject to U.S. Federal tax examination by tax authorities for years prior to 2014 and New York State for years prior to 2013. The 2013 tax year related to New York examinations, while previously audited by the state, remains open by statute.

13. Employee Benefit Plans

Defined Benefit Post-retirement Plans

The Company has a qualified, noncontributory, defined benefit pension plan (“the Plan”) covering substantially all of its employees at December 31, 2017. Benefits paid from the plan are based on age, years of service, compensation, social security benefits and are determined in accordance with defined formulas. The Company’s policy is to fund the Plan in accordance with Employee Retirement Income Security Act of 1974 standards. Assets of the Plan are invested in publicly traded stocks and mutual funds. Prior to January 1, 2000, the Plan was a traditional defined benefit plan based on final average compensation. On January 1, 2000, the Plan was converted to a cash balance plan with grandfathering provisions for existing participants. Effective March 1, 2013, the Plan was amended. Benefit accruals for participants who, as of January 1, 2000, elected to continue participating in the traditional defined benefit plan design were frozen as of March 1, 2013. In May 2013, the noncontributory, frozen, defined benefit pension plan assumed from Alliance in the acquisition was merged into the Plan.

In addition to the Plan, the Company provides supplemental employee retirement plans to certain current and former executives.  The Company also assumed supplemental retirement plans for certain former executives in the Alliance acquisition.

The supplemental employee retirement plans and the defined benefit pension plan are collectively referred to herein as “Pension Benefits.”

In addition, the Company provides certain health care benefits for retired employees. Benefits were accrued over the employees’ active service period. Only employees that were employed by NBT Bank on or before January 1, 2000 are eligible to receive post-retirement health care benefits. The 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. Employees become eligible for these benefits if they reach normal retirement age while working for the Company. For eligible employees described above, the Company funds the cost of post-retirement 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 post-retirement benefits are referred to herein as “Other Benefits.”

Accounting standards require an employer to: (1) recognize the overfunded or underfunded status of defined benefit post-retirement plans, which is measured as the difference between plan assets at fair value and the benefit obligation, as an asset or liability in its balance sheet; (2) recognize changes in that funded status in the year in which the changes occur through comprehensive income; and (3) measure the defined benefit plan assets and obligations as of the date of its year-end balance sheet.

The components of AOCI, which have not yet been recognized as components of net periodic benefit cost, related to pensions and other post-retirement benefits are summarized below:

	Pension Benefits				Other Benefits
(In thousands)	2017		2016		2017		2016
Net actuarial loss	$	23,585	$	28,328	$	1,731	$	1,430
Prior service cost (credit)		94		140		196		(38	)
Total amounts recognized in AOCI (pre-tax)	$	23,679	$	28,468	$	1,927	$	1,392

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A December 31 measurement date is used for the pension, supplemental pension and post-retirement benefit plans.  The following table sets forth changes in benefit obligations, changes in plan assets and the funded status of the pension plans and other post-retirement benefits:

	Pension Benefits						Other Benefits
(In thousands)	2017			2016			2017			2016
Change in benefit obligation:
Benefit obligation at beginning of year	$	90,477		$	92,445		$	7,478		$	8,322
Service cost		1,511			2,162			12			14
Interest cost		4,168			4,223			357			353
Plan participants' contributions		-			-			218			234
Actuarial loss (gain)		4,028			(1,635	)		388			(786	)
Curtailment/ settlement		-			(715	)		286			-
Benefits paid		(9,234	)		(6,003	)		(689	)		(659	)
Projected benefit obligation at end of year	$	90,950		$	90,477		$	8,050		$	7,478
Change in plan assets:
Fair value of plan assets at beginning of year	$	116,216		$	107,529		$	-		$	-
Actual return on plan assets		15,032			8,259			-			-
Employer contributions		2,212			6,431			471			425
Plan participants' contributions		-			-			218			234
Benefits paid		(9,234	)		(6,003	)		(689	)		(659	)
Fair value of plan assets at end of year	$	124,226		$	116,216		$	-		$	-
Funded (unfunded) status at year end	$	33,276		$	25,739		$	(8,050	)	$	(7,478	)

An asset is recognized for an overfunded plan and a liability is recognized for an underfunded plan. The accumulated benefit obligation for pension benefits was $91.0 million and $90.5 million at December 31, 2017 and 2016, respectively. The accumulated benefit obligation for other post-retirement benefits was $8.1 million and $7.5 million at December 31, 2017 and 2016, respectively. The funded status of the pension and other post-retirement benefit plans has been recognized as follows in the consolidated balance sheets at December 31, 2017 and 2016. 

	Pension Benefits						Other Benefits
(In thousands)	2017			2016			2017			2016
Other assets	$	52,775		$	45,344		$	-		$	-
Other liabilities		(19,499	)		(19,605	)		(8,050	)		(7,478	)
Funded status	$	33,276		$	25,739		$	(8,050	)	$	(7,478	)

The following assumptions were used to determine the benefit obligation and the net periodic pension cost for the years indicated:

	Years ended December 31,
	2017			2016			2015
Weighted average assumptions:
The following assumptions were used to determine benefit obligations:
Discount rate		4.20% - 4.21	%		4.76%-4.84	%		4.69%-4.71	%
Expected long-term return on plan assets		7.00	%		7.00	%		7.00	%
Rate of compensation increase		3.00	%		3.00	%		3.00	%
The following assumptions were used to determine net periodic pension cost:
Discount rate		4.76% - 4.84	%		4.69%-4.71	%		4.19%-4.30	%
Expected long-term return on plan assets		7.00	%		7.00	%		7.50	%
Rate of compensation increase		3.00	%		3.00	%		3.00%-3.75	%

Net periodic benefit cost and other amounts recognized in OCI for the years ended December 31 included the following components:

	Pension Benefits									Other Benefits
(In thousands)	2017			2016			2015			2017			2016			2015
Components of net periodic benefit cost:
Service cost	$	1,511		$	2,162		$	2,677		$	12		$	14		$	17
Interest cost		4,168			4,223			3,977			357			353			374
Expected return on plan assets		(7,929	)		(7,430	)		(8,589	)		-			-			-
Amortization of gain due to curtailment		-			(768	)		(154	)		-			-			-
Amortization of prior service cost (credit)		46			32			21			51			(57	)		(219	)
Amortization of unrecognized net loss		1,668			2,235			2,174			87			117			263
Net periodic pension cost	$	(536	)	$	454		$	106		$	507		$	427		$	435
Other changes in plan assets and benefit obligations recognized in OCI (pre-tax):
Net (gain) loss	$	(3,075	)	$	(2,464	)	$	6,523		$	388		$	(786	)	$	(333	)
Prior service cost		-			96			-			286			-			-
Amortization of gain due to settlement		-			(43	)		(46	)		-			-			-
Amortization of prior service (cost) credit		(46	)		(32	)		(21	)		(51	)		57			219
Amortization of unrecognized net (loss)		(1,668	)		(2,235	)		(2,174	)		(87	)		(117	)		(263	)
Total recognized in OCI	$	(4,789	)	$	(4,678	)	$	4,282		$	536		$	(846	)	$	(377	)
Total recognized in net periodic benefit cost and OCI, pre-tax	$	(5,325	)	$	(4,224	)	$	4,388		$	1,043		$	(419	)	$	58

The Company expects that $1.2 million in net actuarial loss and nominal prior service costs will be recognized as components of net periodic benefit cost in 2018.

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The following table sets forth estimated future benefit payments for the pension plans and other post-retirement benefit plans as of December 31, 2017:

(In thousands)	Pension Benefits		Other Benefits
2018	$	7,256	$	606
2019		7,087		598
2020		6,997		583
2021		6,728		559
2022		6,666		566
2023 - 2027		37,688		2,818

The Company made no voluntary contributions to the pension and other benefit plans during the year ended December 31, 2017. The Company made voluntary contributions to the pension plan totaling $5.6 million and no contributions to other benefit plans during the year ended December 31, 2016.

For measurement purposes, the annual rates of increase in the per capita cost of covered medical and prescription drug benefits for fiscal year 2017 were assumed to be 6.3 % to 10.5 % percent. The rates were assumed to decrease gradually to 3.9 % for fiscal year 2075 and remain at that level thereafter. Assumed health care cost trend rates have a significant effect on amounts reported for health care plans. A one-percentage point change in the health care trend rates would have the following effects as of and for the year ended December 31, 2017: 

(In thousands)	One Percentage Point Increase		One Percentage Point Decrease
Increase (decrease) on total service and interest cost components	$	40	$	(34	)
Increase (decrease) on post-retirement accumulated benefit obligation		855		(738	)

Plan Investment Policy

The Company’s key investment objectives in managing its defined benefit plan assets are to ensure that present and future benefit obligations to all participants and beneficiaries are met as they become due; to provide a total return that, over the long-term, maximizes the ratio of the plan assets to liabilities, while minimizing the present value of required Company contributions, at the appropriate levels of risk; to meet statutory requirements and regulatory agencies’ requirements; and to satisfy applicable accounting standards. The Company periodically evaluates the asset allocations, funded status, rate of return assumption and contribution strategy for satisfaction of our investment objectives. 

The target and actual allocations expressed as a percentage of the defined benefit pension plan’s assets are as follows:

	Target 2017		2017		2016
Cash and cash equivalents		0 - 20%		3%		2%
Fixed income securities		25 - 55%		45%		46%
Equities		40 - 65%		52%		52%
Total				100%		100%

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Only high-quality bonds are to be included in the portfolio.  All issues that are rated lower than A by Standard and Poor’s are to be excluded. Equity securities at December 31, 2017 and 2016 do not include any Company common stock. 

The following table presents the financial instruments recorded at fair value on a recurring basis by the Plan:

(In thousands)	Level 1		Level 2		December 31, 2017
Cash and cash equivalents	$	3,684	$	-	$	3,684
Foreign equity mutual funds		44,508		-		44,508
Equity mutual funds		26,747		-		26,747
U.S. government bonds		-		99		99
Corporate bonds		-		49,188		49,188
Total	$	74,939	$	49,287	$	124,226

	Level 1		Level 2		December 31, 2016
Cash and cash equivalents	$	3,500	$	-	$	3,500
Foreign equity mutual funds		33,687		-		33,687
Equity mutual funds		28,256		-		28,256
U.S. government bonds		-		1,283		1,283
Corporate bonds		-		49,490		49,490
Total	$	65,443	$	50,773	$	116,216

The plan had no financial instruments recorded at fair value on a non-recurring basis as of December 31, 2017 and 2016.

Determination of Assumed Rate of Return

The expected long-term rate-of-return on assets was 7.0% at December 31, 2017 and 2016. This assumption represents the rate of return on plan assets reflecting the average rate of earnings expected on the funds invested or to be invested to provide for the benefits included in the projected benefit obligation. The assumption has been determined by reflecting expectations regarding future rates of return for the portfolio considering the asset distribution and related historical rates of return. The appropriateness of the assumption is reviewed annually.

Employee 401(k) and Employee Stock Ownership Plans

The Company maintains a 401(k) and employee stock ownership plan (the “401(k) Plan”). The Company contributes to the 401(k) Plan based on employees’ contributions out of their annual salaries. In addition, the Company may also make discretionary contributions to the 401(k) Plan based on profitability.  Participation in the 401(k) Plan is contingent upon certain age and service requirements. The employer contributions associated with the 401(k) Plan were $2.8 million in 2017, $2.7 million in 2016 and $2.5 million in 2015.

Other Retirement Benefits

Included in other liabilities is $2.4 million and $2.6 million at December 31, 2017 and 2016, respectively, for supplemental retirement benefits for retired executives from legacy plans assumed in acquisitions. The Company recognized $0.1, $0.2 and $0.3 million in expense for the years ended December 31, 2017, 2016 and 2015, respectively, related to these plans.

14. Stock-Based Compensation

In April 2008, the Company adopted the NBT Bancorp Inc. 2008 Omnibus Incentive Plan (the “Stock Plan”). Under the terms of the Stock Plan, options and other equity-based awards are granted to directors and employees to increase their direct proprietary interest in the operations and success of the Company. The Stock Plan assumed all prior equity-based incentive plans and any new equity-based awards are granted under the terms of the Stock Plan. Under terms of the Stock Plan, stock options are granted to purchase shares of the Company’s common stock at a price equal to the fair market value of the common stock on the date of the grant. Options granted have a vesting period of four years and terminate ten years from the date of the grant. Shares issued as a result of stock option exercises and vesting of restricted shares and stock unit awards are funded from the Company’s treasury stock. Restricted shares granted under the Plan vest after five years for employees and three years for non-employee directors. Restricted stock units granted under the Stock Plan may have different terms and conditions. Performance shares and units granted under the Stock Plan for executives may have different terms and conditions. Since 2011, the Company primarily grants restricted stock unit awards. Stock option grants since that time were reloads of existing grants.

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The following table summarizes information concerning stock options outstanding:

(In thousands, except share and per share data)	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2017		230,174		$	24.35
Granted		1,500			40.63
Exercised		(118,844	)		25.94
Expired		(800	)		24.46
Outstanding at December 31, 2017		112,030		$	22.88		2.13	$	1,566
Exercisable at December 31, 2017		107,280		$	22.41		1.84	$	1,544
Expected to Vest		4,750		$	33.52		8.68	$	22

Total stock-based compensation expense for stock option awards totaled $0.1 million, $0.2 million and $0.2 million for the years ended December 31, 2017, 2016 and 2015, respectively. Cash proceeds, tax benefits and intrinsic value related to total stock options exercised is as follows: 

	Years ended December 31,
(In thousands)	2017		2016		2015
Proceeds from stock options exercised	$	3,083	$	8,398	$	12,044
Tax benefits related to stock options exercised		650		1,223		952
Intrinsic value of stock options exercised		1,699		3,143		2,446
Fair value of shares vested during the year		329		105		63

The Company has outstanding restricted stock granted from various plans at December 31, 2017. The Company recognized $3.5 million, $4.2 million and $3.9 million in stock-based compensation expense related to these stock awards for the years ended December 31, 2017, 2016 and 2015, respectively. Tax benefits recognized with respect to restricted stock awards and stock units were $2.5 million, $2.9 million and $1.5 million for the years ended December 31, 2017, 2016 and 2015, respectively. Unrecognized compensation cost related to restricted stock awards and stock units totaled $4.8 million at December 31, 2017 and will be recognized over 2.1 years on a weighted average basis. Shares issued are funded from the Company’s treasury stock. The following table summarizes information for unvested restricted stock units outstanding as of December 31, 2017:

	Number of Shares			Weighted- Average Grant Date Fair Value
Unvested at January 1, 2017		613,163		$	22.62
Forfeited		(5,545	)		23.18
Vested		(198,652	)		22.34
Granted		125,772			36.15
Unvested at December 31, 2017		534,738		$	25.77

The Company has 2,813,597 securities remaining available to be granted as part of the Plan at December 31, 2017.

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15. Stockholders’ Equity

In accordance with GAAP, unrecognized prior service costs and net actuarial gains or losses associated with the Company’s pension and postretirement benefit plans and unrealized gains on derivatives and on AFS securities are included in AOCI, net of tax. For the years ended December 31, components of AOCI are:

(In thousands)	2017			2016			2015
Unrecognized prior service cost and net actuarial (losses) on pension plans	$	(15,284	)	$	(18,227	)	$	(21,557	)
Unrealized gains on derivatives (cash flow hedges)		2,144			1,772			-
Unrealized net holding (losses) on AFS securities		(8,937	)		(5,065	)		(861	)
AOCI	$	(22,077	)	$	(21,520	)	$	(22,418	)

Certain restrictions exist regarding the ability of the subsidiary bank to transfer funds to the Company in the form of cash dividends. The approval of the Office of Comptroller of the Currency (the "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 specified in applicable OCC regulations. At December 31, 2017, approximately $107.5 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 also is subject to the Bank being in compliance with regulatory capital requirements. The Bank is currently in compliance with these requirements. Under the State of Delaware General Corporation Law, the Company may declare and pay dividends either out of accumulated net retained earnings or capital surplus.

The Company did not purchase any shares of its common stock during the year ended December 31, 2017. There are 1,000,000 shares available for repurchase under this plan, which expires on December 31, 2019.

16. Regulatory Capital Requirements

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of NBT Bank’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 Capital to risk-weighted assets and of Tier 1 capital to average assets. As of December 31, 2017 and 2016, the Company and the Bank meet all capital adequacy requirements to which they were subject.

Under their prompt corrective action regulations, regulatory authorities are required to take certain supervisory actions (and may take additional discretionary actions) with respect to an undercapitalized institution. Such actions could have a direct material effect on an institution’s financial statements. The regulations establish a framework for the classification of banks into five categories: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. As of December 31, 2017 and 2016, the most recent notifications from the Bank’s regulators categorized the Bank as well-capitalized under the regulatory framework for prompt corrective action.  To be categorized as well-capitalized the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 Capital to Average Asset ratios as set forth in the table below. There are no conditions or events since that notification that management believes have changed the Bank’s category.

Beginning in 2016, in addition to maintaining minimum capital ratios, the Company began to be subject to a capital conservation buffer ("Buffer") above the minimum to avoid restriction on capital distributions and discretionary bonus paychecks to officers. At December 31, 2017 and 2016 the Buffer was 1.25% and 0.625%, respectively. The Buffer regulatory minimum ratio is in the process of being phased in over four years, which started in 2016 with the minimum requirement of 0.625%, and is fully phased in for fiscal year 2019 with a requirement of 2.5%.

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The Company and NBT Bank’s actual capital amounts and ratios are presented as follows:

	Actual					Regulatory Ratio Requirements
(Dollars in thousands)	Amount		Ratio			Minimum Capital Adequacy			Minimum plus Buffer			For Classification as Well- Capitalized
As of December 31, 2017
Tier I Capital (to average assets)
Company	$	810,445		9.14	%		4.00	%					5.00	%
NBT Bank		756,521		8.59	%		4.00	%					5.00	%
Common Equity Tier 1 Capital
Company		713,445		10.06	%		4.50	%		5.75	%		6.50	%
NBT Bank		756,521		10.74	%		4.50	%		5.75	%		6.50	%
Tier I Capital (to risk-weighted assets)
Company		810,445		11.42	%		6.00	%		7.25	%		6.00	%
NBT Bank		756,521		10.74	%		6.00	%		7.25	%		6.00	%
Total Capital (to risk-weighted assets)
Company		880,874		12.42	%		8.00	%		9.25	%		10.00	%
NBT Bank		826,950		11.74	%		8.00	%		9.25	%		10.00	%
As of December 31, 2016
Tier I Capital (to average assets)
Company	$	773,111		9.11	%		4.00	%					5.00	%
NBT Bank		723,992		8.59	%		4.00	%					5.00	%
Common Equity Tier 1 Capital
Company		676,111		9.98	%		4.50	%		5.125	%		6.50	%
NBT Bank		723,992		10.76	%		4.50	%		5.125	%		6.50	%
Tier I Capital (to risk-weighted assets)
Company		773,111		11.42	%		6.00	%		6.625	%		8.00	%
NBT Bank		723,992		10.76	%		6.00	%		6.625	%		8.00	%
Total Capital (to risk-weighted assets)
Company		839,152		12.39	%		8.00	%		8.625	%		10.00	%
NBT Bank		790,034		11.75	%		8.00	%		8.625	%		10.00	%

17. Earnings Per Share

The following is a reconciliation of basic and diluted EPS for the years presented in the consolidated statements of income:

	Years ended December 31,
	2017						2016						2015
(In thousands except share and per share data)	Net Income		Weighted Average Shares		Per Share Amount		Net Income		Weighted Average Shares		Per Share Amount		Net Income		Weighted Average Shares		Per Share Amount
Basic EPS	$	82,151		43,575	$	1.89	$	78,409		43,244	$	1.81	$	76,425		43,836	$	1.74
Effect of dilutive securities:
Stock-based compensation				330						378						553
Diluted EPS	$	82,151		43,905	$	1.87	$	78,409		43,622	$	1.80	$	76,425		44,389	$	1.72

There was a nominal number of weighted average stock options outstanding for the years ended December 31, 2017, 2016 and 2015, respectively, that were not considered in the calculation of diluted EPS since the stock options’ exercise prices were greater than the average market price during these periods.

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18. Reclassification Adjustments Out of Other Comprehensive Income (Loss)

The following table summarizes the reclassification adjustments out of AOCI:

Detail About AOCI Components	Amount Reclassified from AOCI									Affected Line Item in the Consolidated Statements of OCI
	Years ended
(In thousands)	December 31, 2017			December 31, 2016			December 31, 2015
AFS securities:
(Gains) losses on AFS securities	$	(1,869	)	$	644		$	(3,087	)	Net securities (gains) losses
Amortization of unrealized gains related to securities transfer		875			1,094			1,311		Interest income
Impairment write-down of an equity security		1,312			-			-		Other noninterest income
Tax effect	$	(120	)	$	(677	)	$	691		Income tax (expense) benefit
Net of tax	$	198		$	1,061		$	(1,085	)
Pension and other benefits:
Amortization of net losses	$	1,755		$	2,395		$	2,437		Salaries and employee benefits
Amortization of prior service costs		97			(25	)		(198	)	Salaries and employee benefits
Tax effect		(740	)		(949	)		(868	)	Income tax (expense) benefit
Net of tax	$	1,112		$	1,421		$	1,371
Total reclassifications, net of tax	$	1,310		$	2,482		$	286

19. Commitments and Contingent Liabilities

The Company’s concentrations of credit risk are reflected in the consolidated balance sheets.  The concentrations of credit risk with standby letters of credit, unused lines of credit, commitments to originate new loans and loans sold with recourse generally follow the loan classifications.

At December 31, 2017, approximately 59% of the Company’s loans were secured by real estate located in central and upstate New York, northeastern Pennsylvania, western Massachusetts, southern New Hampshire and Vermont. Accordingly, the ultimate collectability of a substantial portion of the Company’s portfolio is susceptible to changes in market conditions of those areas. Management is not aware of any material concentrations of credit to any industry or individual borrowers.

The Company is a party to certain financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, unused lines of credit, standby letters of credit and certain agricultural real estate loans sold to investors with recourse, with the sold portion having a government guarantee that is assignable back to the Company upon repurchase of the loan in the event of default. The Company’s exposure to credit loss in the event of nonperformance by the other party to the commitments to extend credit, unused lines of credit, standby letters of credit and loans sold with recourse is represented by the contractual amount of those instruments. The credit risk associated with commitments to extend credit and standby and commercial letters of credit is essentially the same as that involved with extending loans to customers and is subject to normal credit policies. Collateral may be obtained based on management’s assessment of the customer’s creditworthiness. 

	At December 31,
(In thousands)	2017		2016
Unused lines of credit	$	351,227	$	292,140
Commitments to extend credits, primarily variable rate		1,215,187		1,177,842
Standby letters of credit		41,135		36,815
Loans sold with recourse		29,120		28,463

Since many loan commitments, standby letters of credit, and guarantees and indemnification contracts expire without being funded in whole or in part, the contract amounts are not necessarily indicative of future cash flows. The Company does not issue any guarantees that would require liability-recognition or disclosure, other than its standby letters of credit.

The Company guarantees the obligations or performance of customers by issuing stand-by letters of credit to third parties. These stand-by letters of credit are frequently issued in support of third party debt, such as corporate debt issuances, industrial revenue bonds and municipal securities. The risk involved in issuing stand-by letters of credit is essentially the same as the credit risk involved in extending loan facilities to customers and letters of credit are subject to the same credit origination, portfolio maintenance and management procedures in effect to monitor other credit and off-balance sheet products. Typically, these instruments have terms of 5 years or less and expire unused; therefore, the total amounts do not necessarily represent future cash requirements. The fair value of the Company’s stand-by letters of credit at December 31, 2017 and 2016 was not significant.

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In the normal course of business there are various outstanding legal proceedings. If legal costs are deemed material by management, the Company accrues for the estimated loss from a loss contingency if the information available indicates that it is probable that a liability had been incurred at the date of the financial statements and the amount of loss can be reasonably estimated.

The Company is required to maintain reserve balances with the Federal Reserve Bank. The required average total reserve for NBT Bank for the 14-day maintenance period ending December 20, 2017 was $59.0 million.

20. Derivative Instruments and Hedging Activities

The Company is exposed to certain risks arising from both its business operations and economic conditions.  The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, primarily by managing the amount, sources and duration of its assets and liabilities and through the use of derivative instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to certain fixed rate borrowings. The Company also has interest rate derivatives that result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate risk in the Company’s assets or liabilities. The Company manages a matched book with respect to its derivative instruments in order to minimize its net risk exposure resulting from such transactions.

Derivatives Not Designated as Hedging Instruments

The Company enters into interest rate swaps to facilitate customer transactions and meet their financing needs. These swaps are considered derivatives, but are not designated in hedging relationships. These instruments have interest rate and credit risk associated with them. To mitigate the interest rate risk, the Company enters into offsetting interest rate swaps with counterparties. The counterparty swaps are also considered derivatives and are also not designated in hedging relationships. Interest rate swaps are recorded within other assets or other liabilities on the consolidated balance sheet at their estimated fair value. Changes to the fair value of assets and liabilities arising from these derivatives are included, net, in other operating income in the consolidated statement of income.

The Company has seven risk participation agreements with financial institution counterparties for interest rate swaps related to loans in which we are a participant. The risk participation agreement provides credit protection to the financial institution should the borrower fail to perform on its interest rate derivative contract with the financial institution.

Derivatives Designated as Hedging Instruments

The Company has entered into interest rate swaps to modify the interest rate characteristics of certain short-term FHLB advances from variable rate to fixed rate in order to reduce the impact of changes in future cash flows due to market interest rate changes. These agreements are designated as cash flow hedges.

The following table depicts the fair value adjustment recorded related to the notional amount of derivatives outstanding as well as the notional amount of risk participation agreements:

	December 31,
(In thousands)	2017		2016
Derivatives Not Designated as Hedging Instruments:
Fair value adjustment	$	210	$	309
Notional amount:
Interest rate derivatives		481,185		371,101
Risk participation agreements		35,628		11,421
Derivatives Designated as Hedging Instruments:
Fair value adjustment - interest rate derivatives		3,510		2,704
Notional amount - interest rate derivatives		250,000		250,000

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The following table indicates the gain or loss recognized in income on derivatives for the years ended December 31:

	December 31,
(In thousands)	2017		2016			2015
Non-hedging interest rate derivatives:
Increase in interest income	$	179	$	95		$	33
Increase in other income		2,945		3,480			684
Hedging interest rate derivatives:
Decrease (increase) in interest expense		289		(70	)		-

21. Fair Values of Financial Instruments

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 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 prices 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. Certain common equity securities are reported at fair value utilizing Level 1 inputs (exchange quoted prices). Other investment securities are reported at fair value utilizing Level 1 and Level 2 inputs. The prices for Level 2 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, amount other things. Management reviews the methodologies used in pricing the securities by its third party providers.

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 years ended December 31, 2017 and 2016, the Company has made no transfers of assets between the levels of the fair value hierarchy.

The following table sets 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)	Level 1		Level 2		Level 3		December 31, 2017
Assets:
AFS securities:
Federal agency	$	-	$	108,899	$	-	$	108,899
State & municipal		-		41,956		-		41,956
Mortgage-backed		-		554,927		-		554,927
Collateralized mortgage obligations		-		535,994		-		535,994
Other securities		5,845		8,304		-		14,149
Total AFS securities	$	5,845	$	1,250,080	$	-	$	1,255,925
Trading securities		11,467		-		-		11,467
Derivatives		-		3,732		-		3,732
Total	$	17,312	$	1,253,812	$	-	$	1,271,124
Liabilities:
Derivatives	$	-	$	324	$	-	$	324
Total	$	-	$	324	$	-	$	324

92

(In thousands)	Level 1		Level 2		Level 3		December 31, 2016
Assets:
AFS securities:
Federal agency	$	-	$	174,408	$	-	$	174,408
State & municipal		-		46,726		-		46,726
Mortgage-backed		-		529,844		-		529,844
Collateralized mortgage obligations		-		566,573		-		566,573
Other securities		11,493		9,246		-		20,739
Total AFS securities	$	11,493	$	1,326,797	$	-	$	1,338,290
Trading securities		9,259		-		-		9,259
Derivatives		-		3,210		-		3,210
Total	$	20,752	$	1,330,007	$	-	$	1,350,759
Liabilities:
Derivatives	$	-	$	506	$	-	$	506
Total	$	-	$	506	$	-	$	506

GAAP requires disclosure of assets and liabilities measured and recorded at fair value on a non-recurring basis such as goodwill, loans held for sale, OREO, collateral-dependent impaired loans, mortgage servicing rights and HTM securities. The only non-recurring fair value measurements recorded during the years ended December 31, 2017 and 2016 were related to impaired loans, write-downs of OREO and impairments of goodwill and intangible assets. 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.

As of December 31, 2017 and 2016, the Company had collateral dependent impaired loans with a carrying value of $0.1 million and $7.0 million, which had specific reserves included in the allowance for loan losses of $0.1 million and $1.5 million, respectively. 

The following table sets forth information with regard to estimated fair values of financial instruments. 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, AFS securities, trading securities, accrued interest receivable, non-maturity deposits, short-term borrowings, accrued interest payable and interest rate swaps.

			December 31, 2017				December 31, 2016
(In thousands)	Fair Value Hierarchy		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
HTM securities		2	$	484,073	$	481,871	$	527,948	$	525,050
Net loans		3		6,515,273		6,651,931		6,132,857		6,273,233
Financial liabilities:
Time deposits		2	$	806,766	$	801,294	$	872,411	$	868,153
Long-term debt		2		88,869		88,346		104,087		104,113
Junior subordinated debt		2		101,196		104,593		101,196		102,262

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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.

Fair values for securities are based on quoted market prices or dealer quotes, where available. Where quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. When necessary, the Company utilizes matrix pricing from a third party pricing vendor to determine fair value pricing. Matrix prices are based on quoted prices for securities with similar coupons, ratings and maturities, rather than on specific bids and offers for the designated security.

GAAP gives entities the option to measure eligible financial assets, financial liabilities and Company commitments at fair value (i.e., the fair value option), on an instrument-by-instrument basis, that are otherwise not permitted to be accounted for at fair value under other accounting standards.  The election to use the fair value option is available when an entity first recognizes a financial asset or financial liability or upon entering into a Company commitment.  Subsequent changes in fair value must be recorded in earnings. As of December 31, 2017 and 2016, the Company did not elect the fair value option for any eligible items.

HTM Securities

The fair value of the Company’s investment HTM securities 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 trust preferred debentures has been estimated using a discounted cash flow analysis.

Interest Rate Swaps

The Company enters into interest rate swaps to facilitate customer transactions and meet their financing needs. These swaps are considered derivatives, but are not designated in hedging relationships. These instruments have interest rate and credit risk associated with them. To mitigate the interest rate risk, the Company enters into offsetting interest rate swaps with counterparties. The counterparty swaps are also considered derivatives and are also not designated in hedging relationships. Interest rate swaps are recorded within other assets or other liabilities on the consolidated balance sheet at their estimated fair value. Changes to the fair value of assets and liabilities arising from these derivatives are included, net, in other operating income in the consolidated statement of income.

The Company has entered into interest rate swaps to modify the interest rate characteristics of certain short-term FHLB advances from variable rate to fixed rate in order to reduce the impact of changes in future cash flows due to market interest rate changes. These agreements are designated as cash flow hedges.

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22. Parent Company Financial Information

Condensed Balance Sheets

	December 31,
(In thousands)	2017		2016
Assets
Cash and cash equivalents	$	7,572	$	4,152
AFS securities, at estimated fair value		10,065		15,273
Trading securities		11,245		8,968
Investment in subsidiaries, on equity basis		1,048,908		1,006,444
Other assets		40,461		44,178
Total assets	$	1,118,251	$	1,079,015
Liabilities and Stockholders’ Equity
Total liabilities	$	160,074	$	165,699
Stockholders’ equity		958,177		913,316
Total liabilities and stockholders’ equity	$	1,118,251	$	1,079,015

Condensed Statements of Income

	Years ended December 31,
(In thousands)	2017		2016			2015
Dividends from subsidiaries	$	38,300	$	10,200		$	78,200
Management fee from subsidiaries		99,319		95,244			92,629
Net securities gains		2,237		652			3,034
Interest, dividends and other income		928		976			693
Total revenue	$	140,784	$	107,072		$	174,556
Operating expenses		100,667		97,977			94,332
Income before income tax benefit and equity in undistributed income of subsidiaries		40,117		9,095			80,224
Income tax expense (benefit)		2,233		(321	)		515
Dividends in excess of income (equity in undistributed income) of subsidiaries		44,267		68,993			(3,284	)
Net income	$	82,151	$	78,409		$	76,425

Condensed Statements of Cash Flow

	Years ended December 31,
(In thousands)	2017			2016			2015
Operating activities
Net income	$	82,151		$	78,409		$	76,425
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization of premises and equipment		2,974			2,805			2,522
Excess tax benefit on stock-based compensation		1,769			1,055			(43	)
Stock-based compensation expense		3,644			4,378			4,086
Net (gain) on sales of AFS securities		(2,238	)		(652	)		(3,034	)
Re-evaluation of deferred tax amounts from Tax Act		3,339			-			-
Equity in undistributed income of subsidiaries		(82,567	)		(79,193	)		(74,916	)
Cash dividend from subsidiaries		38,300			10,200			78,200
Bank owned life insurance income		(328	)		(356	)		(292	)
Net change in other liabilities		(5,624	)		(8,596	)		6,770
Net change in other assets		(368	)		22,728			(6,652	)
Net cash provided by operating activities	$	41,052		$	30,778		$	83,066
Investing activities
Proceeds on sales and maturities of AFS securities	$	4,710		$	1,783		$	5,297
Purchases of AFS securities		(9	)		(580	)		(3,083	)
Proceeds from settlement of bank owned life insurance		308			-			-
Net purchases of premises and equipment		(2,264	)		(3,083	)		(2,930	)
Net cash provided by (used in) investing activities	$	2,745		$	(1,880	)	$	(716	)
Financing activities
Proceeds from the issuance of shares to employee benefit plans and other stock plans	$	3,309		$	6,032		$	8,856
Cash paid by employer for tax-withholding on stock issuance		(3,582	)		(3,387	)		(1,164	)
Purchases of treasury shares		-			(17,193	)		(26,797	)
Cash dividends and payments for fractional shares		(40,104	)		(38,880	)		(38,149	)
Net cash (used in) financing activities	$	(40,377	)	$	(53,428	)	$	(57,254	)
Net increase (decrease) in cash and cash equivalents	$	3,420		$	(24,530	)	$	25,096
Cash and cash equivalents at beginning of year		4,152			28,682			3,586
Cash and cash equivalents at end of year	$	7,572		$	4,152		$	28,682

A statement of changes in stockholders’ equity has not been presented since it is the same as the consolidated statement of changes in stockholders’ equity previously presented.

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23. Recent Accounting Pronouncements

Recently Adopted Accounting Standards

Effective December 31, 2017, the Company adopted the provisions of SAB 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, which was issued by the SEC in December 2017. SAB 118 provides guidance on the timing of recognition for the effects of the Tax Act. Under SAB 118, companies are provided a measurement period of up to one year from the enactment of the Tax Act to evaluate and record its effects. Companies are required to record provisional amounts when sufficient information to make a reasonable estimate is available and are expected to make final adjustments when the required information is available. SAB 118 contains several disclosure requirements regarding a company’s assessment and recording the effects of the Tax Act, including the amounts recorded and the status of estimating potential additional effects. SAB 118 was effective immediately upon issuance. The disclosures required by SAB 118 were included in Note 12 of the consolidated financial statements.

Effective July 1, 2017, the Company early adopted the provision of FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 amends and simplifies the subsequent measurement of goodwill; the amendments eliminate Step 2 from the goodwill impairment test. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the qualitative impairment test is necessary. The amendments were applied on a prospective basis and the adoption did not have a significant impact on the consolidated financial statements.

Effective January 1, 2017, the Company adopted the provision of FASB ASU No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 requires several revisions to equity compensation accounting. Under the new guidance all excess tax benefits and deficiencies that occur when an award vests, is exercised or expires are recognized in income tax expense as discrete period items. Previously, these transactions were typically recorded directly within equity. Consistent with this change, excess tax benefits and deficiencies are no longer included within estimated proceeds when performing the treasury stock method for calculating diluted earnings per share. Excess tax benefits are also recognized at the time an award is exercised or vests compared to the previous requirements to delay recognition until the deduction reduces taxes payable. The presentation of excess tax benefits in the statement of cash flows shifted to an operating activity from the prior classification as a financing activity. ASU 2016-09 also provides an accounting policy election to recognize forfeitures of awards as they occur when estimating stock-based compensation expense rather than the previous requirement to estimate forfeitures from inception. Further, ASU 2016-09 permits employers to use a net settlement feature to withhold taxes on equity compensation awards up to the maximum statutory tax rate without affecting the equity classification of the award. Transition to the new guidance was accomplished through a combination of cumulative-effect adjustment to equity (forfeitures) and prospective methodologies (cash flows, tax windfalls and shortfalls). The adoption of ASU 2016-09 resulted in income tax benefits of $1.8 million in the year ended December 31, 2017 and the effect on earnings per share calculations and election to account for forfeitures as incurred have not been significant.

Accounting Standards Issued Not Yet Adopted

In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of -Certain Tax Effects from Accumulated Other Comprehensive Income. ASU 2018-02 requires a reclassification from AOCI to retained earnings for stranded tax effects resulting from the newly enacted federal corporate income tax rate in the Tax Act. The Tax Act included a reduction to the Federal corporate income tax rate from 35% to 21% effective January 1, 2018. The amount of the reclassification from AOCI to retained earnings would be the difference between the historical corporate income tax rate and the newly enacted rate and will be accounted for as a cumulative-effect adjustment to the balance sheet. ASU 2018-02 is effective for the Company on January 1, 2019. Early adoption is permitted. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures and does not expect the impact to be material.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. ASU 2017-12 better aligns the accounting and reporting of hedging relationships with the economics of risk management activities. The standard requires the modified retrospective transition approach as of the date of adoption. ASU 2017-12 is effective for the Company on January 1, 2019. Early adoption is permitted. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures and does not expect the impact to be material.

In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718). ASU 2017-09 provides guidance about which changes to the terms and conditions of a share-based payment award require an entity to apply modification accounting. ASU 2017-09 is effective for the Company on January 1, 2018. Management has evaluated the effect that this guidance will have and concluded that the impact on the consolidated financial statements and related disclosures will not be material upon adoption on January 1, 2018.

In March 2017, the FASB issued ASU No. 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20). ASU 2017-08 requires amortization of premiums to the earliest call date on debt securities with call features that are explicit, on contingent and callable at fixed prices on present dates. The ASU does not impact securities held at a discount; the discount continues to be amortized to the contractual maturity. The guidance is required to be applied with a modified retrospective approach through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. ASU 2017-08 is effective for the Company on January 1, 2019. Early adoption is permitted. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures and does not expect the impact to be material.

In March 2017, the FASB issued ASU No. 2017-07, Compensation – Retirement Benefits (Topic 715). ASU 2017-07 requires the service cost component of net periodic pension and post-retirement benefit cost to be reported separately in the consolidated statements of income from the other components. Additionally, the amendments in the ASU require presentation of the service cost component in the consolidated statements of income in the same line item as other employee compensation costs and presentation of the other components in a different line item from the service cost component. The amendments in this ASU are required to be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic post-retirement benefit cost in the income statement and prospectively, on or after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic post-retirement benefit in assets with a practical expedient allowed for prior comparative period presentation permitted. ASU 2017-07 is effective for the Company on January 1, 2018. Management has evaluated the effect that this guidance will have and concluded that the impact on the consolidated financial statements and related disclosures will not be material upon adoption on January 1, 2018.

In February 2017, the FASB issued ASU No. 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20). ASU 2017-05 will clarify the scope of Subtopic 610-20 and add guidance for partial sales of nonfinancial assets. The amendments define the term in substance nonfinancial assets and clarify that a nonfinancial asset within the scope may include nonfinancial assets transferred within a legal entity to a counterparty, in part, as a financial asset promised to a counterparty in a contract. Additionally, the amendments in ASU clarify that an entity should identify each distinct nonfinancial asset or in substance nonfinancial assets and allocate consideration to each distinct asset. The amendments should be applied either on retrospectively to each period presented or with a modified retrospective approach. ASU 2017-05 is effective for the Company on January 1, 2018 and the Company is required to apply the amendment at the same time that is applies the amendments in 2014-09. Management has evaluated the effect that this guidance will have and concluded that the impact on the consolidated financial statements and related disclosures will not be material upon adoption on January 1, 2018.

96

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU 2017-01 provides a more robust framework to use in determining when a set of assets and activities (“set”) is a business and to address stakeholder feedback that the definition of a business in current GAAP is applied too broadly. The primary amendments in the ASU provide a screen to exclude transactions where substantially all of the fair value of the transferred set is concentrated in a single asset, or group of similar assets, from being evaluated as a business. ASU 2017-01 is effective for the Company on January 1, 2018 using the prospective method. Management has evaluated the effect that this guidance will have and concluded that the impact on the consolidated financial statements and related disclosures will not be material upon adoption on January 1, 2018.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. ASU 2016-18 addresses diversity in practice from entities classifying and presenting transfers between cash and restricted cash as operating, investing or financing activities or as a combination of those activities in the statement of cash flows. The ASU requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the Statement of Cash Flows. As a result, transfers between such categories will no longer be presented in the Statement of Cash Flows. ASU 2016-18 is effective for the Company on January 1, 2018 using the retrospective method. Management has evaluated the effect that this guidance will have and concluded that the impact on the consolidated financial statements and related disclosures will not be material upon adoption on January 1, 2018.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments). ASU 2016-15 addresses diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This standard addresses the following eight specific cash flow issues: Debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. ASU 2016-15 is effective for the Company on January 1, 2018. Management has evaluated the effect that this guidance will have and concluded that the impact on the consolidated financial statements and related disclosures will not be material upon adoption on January 1, 2018.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, ASU 2016-13 amends the accounting for credit losses on AFS debt securities and purchased financial assets with credit deterioration. ASU 2016-13 is effective for the Company on January 1, 2020. Early adoption is permitted for all organizations for fiscal years and interim periods within those fiscal years, beginning after December 15, 2018. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize right of use assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize a right of use asset and lease liability. Additionally, when measuring assets and liabilities arising from a lease, optional payments should be included only if the lessee is reasonable certain to exercise an option to extend the lease, exercise a purchase option or not exercise an option to terminate the lease. ASU 2016-02 is effective for the Company on January 1, 2019. Early adoption is permitted in any interim or annual period. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments and requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value. Any changes in fair value on equity investments with readily determinable market value will be recognized in net income unless the investments qualify for a new practicability exception. This ASU also requires entities to recognize changes in instrument-specific credit risk related to financial liabilities measured under the fair value option in OCI. No changes were made to the guidance for classifying and measuring investments in debt securities and loans. ASU 2016-01 is effective for the Company on January 1, 2018. Management has evaluated the effect that this guidance will have and concluded that the impact on the consolidated financial statements and related disclosures will not be material upon adoption on January 1, 2018.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 is a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under GAAP and is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects consideration to which the entity expects to be entitled in exchange for those goods and services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. For financial reporting purposes, the standard allows for either full retrospective adoption, meaning the standard is applied to all of the periods presented, or modified retrospective adoption, meaning the standard is applied only to the most current period presented in the financial statements with the cumulative effect of initially applying the standard recognized at the date of initial application. ASU 2014-09 was initially effective for the Company on January 1, 2017; however, in August 2015, the FASB issued ASU No. 2015-14 - Revenue from Contracts with Customers - Deferral of the Effective Date, which deferred the effective date to January 1, 2018. In addition, the FASB has begun to issue targeted updates to clarify specific implementation issues of ASU 2014-09. These updates include ASU No. 2016-08 - Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU No. 2016-10 - Identifying Performance Obligations and Licensing, ASU No. 2016-12 - Narrow-Scope Improvements and Practical Expedients and ASU No. 2016-20 - Technical Corrections and Improvements to Top 606 - Revenue from Contract with Customers.

In evaluating this standard, management determined that the majority of revenue earned by the Company is from revenue streams not included in the scope of this standard such as interest earned from loans, investment securities and bank owned life insurance income. For applicable revenue streams such as ATM and debit card fees, insurance, other financial services revenue, service charges on deposit accounts, retirement plan administration fees and trust fees, management reviewed the applicable contracts provisions and applied the principles in the new standard for revenue recognition. Based on the results of that review, management determined that the impact on the consolidated financial statements and related disclosures will not be material upon adoption on January 1, 2018.

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

ITEM 9A. Controls and Procedures

As of the end of the period covered by this Annual Report on Form 10-K, an evaluation was carried out by the Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report. No changes were made to the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

97

Management Report on Internal Controls Over Financial Reporting

The management of NBT Bancorp, Inc. (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s consolidated financial statements for external purposes in accordance with generally accepted accounting principles.

As of December 31, 2017, management assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in “Internal Control — Integrated Framework (2013),” issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Based on the assessment, management determined that the Company’s internal control over financial reporting as of December 31, 2017 was effective at the reasonable assurance level based on those criteria.

KPMG LLP, the independent registered public accounting firm that audited the consolidated financial statements of the Company included in this Annual Report on Form 10-K, has issued a report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017. The report, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017, is included in this Item under the heading “Report of Independent Registered Public Accounting Firm” on the following page.

98

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

NBT Bancorp Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited NBT Bancorp Inc.’s and subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2017 and 2016, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2017, and the related notes (collectively, the “consolidated financial statements”) and our report dated March 1, 2018 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

Albany, New York

March 1, 2018 

99

ITEM 9B. Other Information

None.

PART III

ITEM 10. Directors, Executive Officers and Corporate Governance

The information required by this item is incorporated herein by reference to the Company’s definitive Proxy Statement for its Annual Meeting of shareholders to be held on May 22, 2018 (the “Proxy Statement”), which will be filed with the SEC within 120 days after the Company’s 2017 fiscal year end.

ITEM 11. Executive Compensation

The information required by this item is incorporated herein by reference to the Proxy Statement, which will be filed with the SEC within 120 days after the Company’s 2017 fiscal year end.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table provides information with respect to shares of common stock that may be issued under the Company’s existing equity compensation plans:

Plan Category	A. Number of securities to be issued upon exercise of outstanding options, warrants and rights		B. Weighted- average exercise price of Outstanding options, warrants and rights		Number of securities remaining available for Future issuance under Equity compensation plans (excluding securities reflected in column A)
Equity compensation plans approved by stockholders		112,030	$	22.88		2,813,597
Equity compensation plans not approved by stockholders	None		None		None

The other information required by this item is incorporated herein by reference to the Proxy Statement, which will be filed with the SEC within 120 days of the Company’s 2017 fiscal year end.

ITEM 13. Certain Relationships, Related Transactions and Director Independence

The information required by this item is incorporated herein by reference to the Proxy Statement, which will be filed with the SEC within 120 days of the Company’s 2017 fiscal year end.

ITEM 14. Principal Accountant Fees and Services

The information required by this item is incorporated herein by reference to the Proxy Statement, which will be filed with the SEC within 120 days of the Company’s 2017 fiscal year end.

100

PART  IV

ITEM 15. Exhibits and Financial Statement Schedules

(a)(1)	The following Consolidated Financial Statements are included in Part II, Item 8 hereof:
	Report of Independent Registered Public Accounting Firm.
	Consolidated Balance Sheets as of December 31, 2017 and 2016.
	Consolidated Statements of Income for each of the three years ended December 31, 2017, 2016 and 2015.
	Consolidated Statements of Changes in Stockholders’ Equity for each of the three years ended December 31, 2017, 2016 and 2015.
	Consolidated Statements of Cash Flows for each of the three years ended December 31, 2017, 2016 and 2015.
	Consolidated Statements of Comprehensive Income for each of the three years ended December 31, 2017, 2016 and 2015.
	Notes to the Consolidated Financial Statements.
(a)(2)  There are no financial statement schedules that are required to be filed as part of this form since they are not applicable or the information is included in the consolidated financial statements.
(a)(3)  See below for all exhibits filed herewith and the Exhibit Index.

3.1	Restated Certificate of Incorporation of NBT Bancorp Inc. as amended through July 1, 2015 (filed as Exhibit 3.1 to Registrant's Form 10-Q, filed on August 10, 2015, and incorporated herein by reference)
3.2	Amended and Restated Bylaws of NBT Bancorp Inc. effective January 23, 2017 (filed as Exhibit 3.1 to Registrant’s Form 8-K, filed on January 25, 2017, 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 Bancorp Inc. common stock (filed as Exhibit 4.1 to the Registrant’s Amendment No. 1 to Registration Statement on Form S-4, filed on December 27, 2005, and incorporated herein by reference).
10.1	NBT Bancorp Inc. 1993 Stock Option Plan (filed as Exhibit 99.1 to Registrant's Form S-8 Registration Statement, file number 333-71830, filed on October 18, 2001, and incorporated by reference herein).*
10.2	NBT Bancorp Inc. Non-Employee Director, Divisional Director and Subsidiary Director Stock Option Plan (filed as Exhibit 99.1 to Registrant's Form S-8 Registration Statement, file number 333-73038, filed on November 9, 2001, and incorporated by reference herein).*
10.3	NBT Bancorp Inc. Non-employee Directors Restricted and Deferred Stock Plan (filed as Exhibit 10.5 to Registrant’s Form 10-K for the year ended December 31, 2008, filed on March 2, 2009, and incorporated herein by reference).*
10.4	NBT Bancorp Inc. Performance Share Plan (filed as Exhibit 10.6 to Registrant’s Form 10-K for the year ended December 31, 2008, filed on March 2, 2009, and incorporated herein by reference).*
10.5	Supplemental Executive Retirement Agreement between NBT Bancorp Inc. and Martin A. Dietrich as amended and restated January 20, 2010 (filed as Exhibit 10.14 to Registrant’s Form 10-K for the year ended December 31, 2009, filed on March 1, 2010, and incorporated herein by reference).*
10.6	Amended and Restated Employment Agreement, dated December 19, 2016, by and between NBT Bancorp Inc. and Michael J. Chewens (filed as Exhibit 10.3 to Registrant's Form 8-K, filed on December 20, 2016, and incorporated herein by reference).*

101

10.7	Form of Amended and Restated NBT Bancorp Inc. Supplemental Retirement Agreement, dated as of November 5, 2009, between NBT Bancorp Inc. and Mr. Chewens (filed as Exhibit 10.7 to Registrant’s Form 10-Q for the quarterly period ended September 30, 2009, filed on November 9, 2009, and incorporated herein by reference).*
10.8	Amendment to the Supplemental Executive Retirement Agreement, dated March 10, 2015, by and between NBT Bancorp Inc. and Michael J. Chewens (filed as Exhibit 10.6 to Registrant's Form 8-K, filed on March 16, 2015, and incorporated herein by reference).*
10.9	Split-Dollar Agreement between NBT Bancorp Inc., NBT Bank, National Association and Martin A. Dietrich made November 10, 2008 (filed as Exhibit 10.1 to Registrant’s Form 10-Q for the quarterly period ended September 30, 2008, filed on November 10, 2008, and incorporated herein by reference).*
10.10	First Amendment dated November 5, 2009 to Split-Dollar Agreement between NBT Bancorp Inc., NBT Bank, National Association and Martin A. Dietrich made November 10, 2008 (filed as Exhibit 10.6 to Registrant’s Form 10-Q for the quarterly period ended September 30, 2009, filed on November 9, 2009, and incorporated herein by reference).*
10.11	Second Amendment dated July 28, 2014 to Split-Dollar Agreement between NBT Bancorp, Inc., NBT Bank, National Association, and Martin A. Dietrich made November 10, 2008 (filed as Exhibit 10.1 to Registrant's Form 8-K, filed on August 1, 2014, and incorporated herein by reference).*
10.12	NBT Bancorp Inc. 2008 Omnibus Incentive Plan (filed as Appendix A of Registrant’s Definitive Proxy Statement on Form 14A, filed on March 31, 2008, and incorporated herein by reference).*
10.13	Long-Term Incentive Compensation Plan for Named Executive Officers (filed as Exhibit 10.24 to Registrant’s Form 10-K for the year ended December 31, 2011, filed on February 29, 2012, and incorporated herein by reference).*
10.14	Amended and Restated Employment Agreement, dated December 19,  2016, by and between NBT Bancorp Inc. and Timothy L. Brenner (filed as Exhibit 10.4 to Registrant's Form 8-K, filed on December 20, 2016, and incorporated herein by reference).*
10.15	Amended and Restated Supplemental Retirement Agreement and First Amendment to the Supplemental Retirement Agreement between Alliance Financial Corporation, Alliance Bank, N.A. and Jack H. Webb (filed as Exhibit 10.29 to Registrant's Form 10-K for the year ended December 31, 2013, filed on March 3, 2014, and incorporated herein by reference).*
10.16	Employment Agreement, dated December 19, 2016, by and between NBT Bancorp Inc. and John H. Watt, Jr. (filed as Exhibit 10.1 to Registrant's Form 8-K, filed on December 20, 2016, and incorporated herein by reference).*
10.17	Split-Dollar Agreement between NBT Bancorp Inc., NBT Bank, National Association and John H. Watt, Jr. dated May 9, 2017 (filed as Exhibit 10.1 to Registrant's Form 10-Q, filed on May 10, 2017, and incorporated herein by reference).*
10.18	Supplemental Executive Retirement Agreement, dated December 19, 2016 by and between NBT Bancorp Inc. and John H. Watt, Jr. (filed as Exhibit 10.2 to Registrant’s Form 8-K, filed on December 20, 2016, and incorporated herein by reference).*
10.19	Employment Agreement, dated December 19, 2016, by and between NBT Bancorp Inc. and Joseph R. Stagliano.*
10.20	Employment Agreement, dated April 3, 2017, by and between NBT Bancorp Inc. and Sarah A. Halliday.*
10.21	Form of Amendment to Employment Agreements, dated September 27, 2017, by and between NBT Bancorp Inc. and John H. Watt, Jr., Timothy L. Brenner, Joseph R. Stagliano and Sarah A. Halliday, respectively (Filed as Exhibit 10.1 to Registrant's Form 8-K, filed on September 29, 2017, and incorporated herein by reference).*
21	A list of the subsidiaries of the Registrant.
23	Consent of KPMG LLP.
31.1	Certification by the Chief Executive Officer pursuant to Rules 13(a)-14(a)/15(d)-14(e) of the Securities and Exchange Act of 1934.
31.2	Certification by the Chief Financial Officer pursuant to Rules 13(a)-14(a)/15(d)-14(e) of the Securities and Exchange Act of 1934.
32.1	Certification by the Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Chief Financial  Officer pursuant to 18 U.S.C. 1350, as adopted 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.

* Management contract or compensatory plan or arrangement.

(b) Exhibits to this Form 10-K are attached or incorporated herein by reference as noted above.

(c) Not applicable.

102

ITEM 16. Form 10-K Summary

None.

103

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act  of 1934, NBT Bancorp Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly  authorized.

NBT BANCORP INC. (Registrant)

March 1, 2018

/s/ John H. Watt Jr.

John H. Watt Jr.

Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

/s/ Martin A. Dietrich

Martin A. Dietrich

Chairman and Director

Date:   March 1, 2018

/s/ John H. Watt Jr.

John H. Watt Jr.

NBT Bancorp Inc. President, Chief Executive Officer, and Director (Principal Executive Officer)

Date:   March 1, 2018

/s/ Michael J. Chewens

Michael J. Chewens

Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

Date:   March 1, 2018

 /s/ Patricia T. Civil

Patricia T. Civil, Director

Date:   March 1, 2018

/s/ Timothy E. Delaney

Timothy E. Delaney, Director

Date:   March 1, 2018

/s/ James H. Douglas

James H. Douglas, Director

Date:   March 1, 2018

/s/ Andrew S. Kowalczyk III

Andrew S. Kowalczyk III, Director

Date:   March 1, 2018

/s/ John C. Mitchell

John C. Mitchell, Director

Date:   March 1, 2018

/s/ V. Daniel Robinson II

V. Daniel Robinson II, Director

Date:   March 1, 2018

/s/ Matthew J. Salanger

Matthew J. Salanger, Director

Date:   March 1, 2018

/s/ Joseph A. Santangelo

Joseph A. Santangelo, Director

Date:   March 1, 2018

/s/ Lowell A. Seifter

Lowell A. Seifter, Director

Date:   March 1, 2018

/s/ Robert A. Wadsworth

Robert A. Wadsworth, Director

Date:   March 1, 2018

/s/ Jack H. Webb

Jack H. Webb, Director

Date:   March 1, 2018

104

EX-10.19

Exhibit 10.19

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of December 19, 2016, by and between Joseph R. Stagliano ("Executive") and NBT BANCORP INC., a Delaware corporation having its principal office in Norwich, New York ("NBTB").

W I T N E S S E T H :

WHEREAS, Executive currently serves as Executive Vice President of NBTB and Executive Vice President of Operations and Retail Banking of NBT Bank, National Association, a national banking association which is a wholly-owned subsidiary of NBTB ("NBT Bank") (together with NBTB, the "Company");

WHEREAS, Executive and NBTB have previously entered into an Employment Agreement, dated April 23, 2007, as amended and restated as of November 5, 2009 (the "Previous Employment Agreement"), and a Change in Control Agreement, dated April 23, 2007, as amended and restated as of November 5, 2009 and as amended as of January 24, 2013  (the "Change in Control Agreement");

WHEREAS, the Company desires (i) to secure the continued employment of Executive, subject to the provisions of this Agreement and (ii) to update, to consolidate into one agreement, and to supersede the terms and conditions of the Previous Employment Agreement and the Change in Control Agreement; and

WHEREAS, Executive desires to enter into the Agreement for such periods and upon the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements hereinafter set forth, intending to be legally bound, the parties agree as follows:

1. Employment; Responsibilities and Duties.

(a) NBTB hereby agrees to employ Executive and to cause NBT Bank and any successor organization to NBT Bank to employ Executive, and Executive hereby agrees to serve as Executive Vice President of NBTB and Executive Vice President of Operations and Retail Banking of NBT Bank, and of any successor organization to NBTB or NBT Bank, as applicable, during the Term of Employment (as defined in Section 2 below).  During the Term of Employment, Executive shall perform all duties and shall have the responsibilities and authority as set forth in the bylaws of NBTB or NBT Bank, as applicable, or as may otherwise be determined and assigned to him by NBTB or NBT Bank.  During the Term of Employment, Executive shall report directly to the Chief Executive Officer of NBTB or his designee.

(b) Executive shall devote his full working time and best efforts to the performance of his responsibilities and duties hereunder.  During the Term of Employment, Executive shall not, without the prior written consent of the chief executive officer of NBTB or his designee, render services in any capacity, whether as an employee, independent contractor, or otherwise, whether or not compensated, to any person or entity other than the Company or its affiliates; provided, that Executive may, where involvement in such activities does not, as reasonably determined by the Board of Directors of NBTB (the "Board"), individually or in the aggregate significantly interfere with the performance of his duties or violate the provisions of Section 4 hereof, (i) render services to charitable organizations, (ii) manage his personal investments in compliance with any Company limits or policies, and (iii) with the prior permission of the chief executive officer of NBTB or his designee, hold such other directorships or part-time academic appointments or have such other business affiliations as would otherwise be prohibited under this Section 1.

2. Term of Employment.

(a) The term of this Agreement (the "Term of Employment") shall be the period commencing on the date of this Agreement (the "Commencement Date") and continuing until the "Termination Date," which, subject to Section 2(b) hereof, shall mean the earliest to occur of:

(i) January 1, 2019; provided, however, that on December 31, 2017 and on each December 31thereafter (each, a "Renewal Date"), the remaining Term of Employment shall automatically be extended by one additional year (to a total of two (2) years) unless either the Company or Executive provides written notice to the other party of non-renewal at least ninety (90) days prior to the applicable Renewal Date;

(ii) the death of Executive;

(iii) Executive's inability to engage in any substantial gainful activity, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months ("Disability");

(iv) the discharge of Executive by NBTB or NBT Bank for "Cause," which shall mean the termination of Executive's employment on account of: (a) any willful or gross misconduct by Executive with respect to the business and affairs of NBTB or NBT Bank, or with respect to any of their affiliates, for which Executive is assigned material responsibilities or duties; (b) the conviction of Executive of a felony (after the earlier of (I) the expiration of any applicable appeal period without perfection of an appeal by Executive or (II) the denial of any appeal as to which no further appeal or review is available to Executive), whether or not committed in the course of his employment with NBTB and NBT Bank; (c) Executive's willful neglect, failure, or refusal to carry out his duties hereunder in a reasonable manner (other than any such failure resulting from Disability or death or from termination by Executive for Good Reason, as hereinafter defined); or (d) the breach by Executive of any representation or warranty in Section 4 hereof or of any provision of this Agreement which breach is material and adverse to NBTB, NBT Bank, or any of their affiliates for which Executive is assigned material responsibilities or duties; provided, however, in each case, the Company shall provide prior written notice to Executive that specifically identifies the event which NBTB or NBT Bank believes constitutes Cause hereunder, and to the extent applicable, Executive shall have sixty (60) days from receiving such notice to cure;

(v) Executive's resignation from his positions as Executive Vice President of NBTB and Executive Vice President of Operations and Retail Banking of NBT Bank other than for Good Reason (as hereinafter defined);

(vi) the termination of Executive's employment by NBTB or NBT Bank "without Cause," which shall mean Executive's termination of employment for any reason other than those set forth in Subsections (i)-(v) of this Section 2(a), at any time, upon the thirtieth (30^th) day following notice to Executive; provided, further, for the avoidance of doubt, that the Company's providing notice of non-renewal of the Agreement in accordance with Section 2(a)(i) shall not constitute a termination of Executive's employment without Cause and shall not give rise to any severance benefits hereunder, other than as provided in Section 6(a); or

(vii) Executive's resignation for Good Reason.  "Good Reason" shall mean, without Executive's express written consent, reassignment of Executive to a material reduction in duties, responsibilities, or position other than for Cause, a material decrease in the amount or level of Executive's Base Salary or benefits from the amount or level established in Section 3 hereof, or requiring Executive to be based anywhere other than where Executive's office is located upon the date of this Agreement, except for required travel on the Company's business to an extent substantially consistent with the business travel obligations which Executive undertook on behalf of the Company as of the date of this Agreement.  Notwithstanding the foregoing, if there exists (without regard to this sentence) an event or condition that constitutes Good Reason, NBTB shall have thirty (30) days from the date on which Executive gives the written notice thereof to cure such event or condition (such notice to be given by Executive within ninety (90) days from the date the event or condition first occurs) and, if NBTB does so cure, such event or condition shall cease to constitute Good Reason thirty (30) days after the end of the cure period.

(b) Notwithstanding anything to the contrary in Section 2(a) hereof, in the event a tender offer or exchange offer is made by a Person (including any individual, corporation, partnership, group, association, or other "person," as such term is used in Section 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), other than the Company or any employee benefit plan(s) sponsored by the Company) for more than thirty percent (30%) of the combined voting power of the Company's outstanding securities ordinarily having the right to vote at elections of directors ("Voting Securities"), including shares of common stock, no par value, of the Company (the "Company Shares"), Executive agrees that he will not leave the employ of the Company (other than as a result of Disability) and will render services to the Company in the capacity in which he then serves until such tender offer or exchange offer has been abandoned or terminated or a Change in Control of the Company has occurred as a result of such tender offer or exchange offer.  If, during the period Executive is obligated to continue in the employ of the Company pursuant to this Section 2(b), the Company terminates Executive's employment without Cause or Executive provides written notice of his decision to terminate his employment for Good Reason, Executive's obligations under this Section 2(b) shall thereupon terminate, and Executive will be entitled to payments provided under Section 6(b).

(c) A Termination Date shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a "separation from service" within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the "Code") and, for purposes of any such provision of this Agreement, any references to a "termination," "termination of employment," or like terms shall mean a "separation from service."

3. Compensation.  For the services to be performed by Executive for the Company and its affiliates under this Agreement, Executive shall be compensated in the following manner:

(a) Base Salary.  During the Term of Employment:

(i) The Company shall pay Executive a salary, which on an annual basis shall be three hundred forty-four thousand five hundred dollars ($344,500.00) ("Base Salary"), subject to annual adjustments based on recommendations from the NBTB Compensation and Benefits Committee and in line with compensation for comparable positions in companies of similar size and structure, but in no case less than three hundred forty-four thousand five hundred dollars ($344,500.00). The Base Salary shall be payable in accordance with the normal payroll practices of the Company, with respect to executive personnel as presently in effect or as they may be modified by the Company from time to time.

(ii) Executive shall be eligible to be considered for performance bonuses commensurate with Executive's title and salary grade in accordance with the compensation policies of the Company with respect to executive personnel in effect as of the Commencement Date or as they may be modified by the Company from time to time.

(b) Employee Benefit Plans or Arrangements.  During the Term of Employment, Executive shall be entitled to participate in all employee benefit plans of the Company, as presently in effect as of the Commencement Date or as they may be modified by the Company from time to time, under such terms as may be applicable to officers of Executive's rank employed by NBTB, NBT Bank, or their affiliates, including, without limitation, plans providing retirement benefits, stock options, restricted stock, or stock units, medical insurance, life insurance, disability insurance, long term care insurance, and accidental death or dismemberment insurance, provided that there be no duplication of such benefits as are provided under any other provision of this Agreement.

(c Equity Awards.  Executive shall be eligible for awards, as determined by and in the sole discretion of the Board, under NBTB's 2008 Omnibus Incentive Plan, or any successor thereto, as applicable to officers of Executive's rank.

(d) Vacation and Sick Leave.  During the Term of Employment, Executive shall be entitled to paid annual vacation periods and sick leave in accordance with the policies of the Company applicable to officers of Executive's rank employed by NBTB, NBT Bank, or their affiliates, as in effect as of the Commencement Date or as may be modified by the Company from time to time, but in no event shall Executive be entitled to less than four (4) weeks of paid vacation per year.

(e Automobile.  During the Term of Employment, Executive shall be entitled to the use of an automobile owned by NBTB, NBT Bank, or any of their affiliates, the make, model, and year of which automobile shall be appropriate to an officer of Executive's rank and which shall be replaced every three (3) years (or earlier if accumulated mileage exceeds seventy-five thousand (75,000) miles).   Executive shall be responsible for all expenses of ownership and use of anysuch automobile, subject to reimbursement of expenses for business use in accordance with Section 3(i).

(f) Enhanced Retirement Benefit.  During the Term of Employment, Executive shall be eligible to receive a contribution to his deferred compensation account on an annual basis in an amount as determined by and in the sole discretion of the Board.

(g) Withholding.  All compensation to be paid to Executive hereunder shall be subject to applicable federal, state, and local taxes and all other required withholdings.  Executive hereby acknowledges and agrees that he is responsible for all taxes in connection with any benefits, fringe benefits, or perquisites provided under this Agreement, and he is not entitled to a Gross Up.

(h) Expenses.  During the Term of Employment, Executive shall be reimbursed for reasonable travel and other expenses incurred or paid by Executive in connection with the performance of his services under this Agreement, upon presentation of expense statements or vouchers or such other supporting information as may from time to time be requested by the Company, in accordance with such policies of the Company as are in effect as of the Commencement Date and as may be modified by the Company from time to time, under such terms as may be applicable to officers of Executive's rank employed by NBTB, NBT Bank, or their affiliates.  All expenses or other reimbursements under this Agreement shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by Executive (provided that if any such reimbursements constitute taxable income to Executive, such reimbursements shall be paid no later than March 15^th of the calendar year following the calendar year in which the expenses to be reimbursed were incurred), and no such reimbursement of expenses eligible for reimbursement in any taxable year shall in any way affect the expenses eligible for reimbursement in any other taxable year.

4. Confidential Business Information; Non-Competition; Non-Solicitation.

(a) Executive acknowledges that certain business methods, creative techniques, and technical data of the Company and any of its affiliates and the like are deemed by the Company to be and are in fact confidential business information of the Company or its affiliates or are entrusted to third parties.  Such confidential information includes, but is not limited to, procedures, methods, sales relationships developed while in the service of the Company or its affiliates, knowledge of customers and their requirements, marketing plans, marketing information, studies, forecasts, and surveys, competitive analyses, mailing and marketing lists, new business proposals, lists of vendors, consultants, and other persons who render service or provide material to the Company or its affiliates, and compositions, ideas, plans, and methods belonging to or related to the affairs of the Company or its affiliates (collectively, "Confidential Information").  In this regard, the Company asserts proprietary rights in all of its Confidential Information and that of its affiliates, except for such information as is clearly in the public domain.  Notwithstanding the foregoing, information that would be generally known or available to persons skilled in Executive's fields shall be considered to be "clearly in the public domain" for the purposes of the preceding sentence.  Executive acknowledges that in connection with his employment with the Company, Executive has had or may have access to such Confidential Information, and he agrees that he will not disclose or divulge to any third party, except as may be required by his duties hereunder, by law, regulation, or order of a court or government authority, or as directed by the Company, nor shall he use to the detriment of the Company or its affiliates or use in any business or on behalf of any business competitive with or substantially similar to any business of the Company or its affiliates, any Confidential Information obtained during the course of his employment by the Company.  In the event that disclosure is required by law, regulation, or order of a court or government authority, Executive agrees that as soon as practical and in any event no later than thirty (30) days after receiving notice that Executive is required to make such disclosure, Executive will provide notice to the Company of such requirement by law, regulation, or order of a court or government authority.  This Section 4(a) shall not be construed as restricting Executive from disclosing such information to the employees of the Company or its affiliates.  On or before the Termination Date, Executive shall promptly deliver to the Company any and all Confidential Information in his possession, whether tangible, electronic, or intangible in form.

(b) Executive acknowledges that in the course of employment with the Company, Executive has had and will have access to and gained knowledge of the trade secrets and other Confidential Information of the Company and its affiliates; has had and will have substantial relationships with the customers of the Company and its affiliates; and has performed and will perform services of special, unique, and extraordinary value to the Company and its affiliates.  Therefore, Executive agrees that notwithstanding the termination of this Agreement for any reason, from the Commencement Date until the second (2nd) anniversary of the Termination Date, the Executive shall not, directly or indirectly, on behalf of himself or any other person or entity, without the written consent of the Company:

(i) become an officer, employee, consultant, director, or trustee of any savings bank, savings and loan association, savings and loan holding company, bank or bank holding company, where such position entails providing services to such company in any city, town, or county in which the Company or its affiliates has an office, determined as of the Termination Date, where Executive's position or service for such business is competitive with or otherwise similar to any of Executive's positions or services for the Company or its affiliates;

(ii induce or solicit any customer, supplier, or agent of the Company or its affiliates about whom Executive has gained Confidential Information or with whom Executive, by virtue of his employment with the Company, has established a relationship or had frequent contact, to terminate or curtail an existing business or commercial relationship with the Company or its affiliates;

(iii) induce or solicit any customer or supplier of the Company or its affiliates about whom Executive has gained Confidential Information or with whom Executive, by virtue of his employment with the Company, has established a relationship or had frequent contact, to provide or purchase goods or services similar to the goods or services provided by it to or purchased by it from the Company or its affiliates; provided, however, that the provisions of this clause (iii) only apply to those persons or entities who are customers or suppliers of the Company or its affiliates as of the Termination Date or who were customers of the Company or its affiliates during the one-year period prior to the Termination Date; or

(iv) solicit, induce, recruit, offer employment to, hire, or take any other action intended, or that a reasonable person acting in like circumstances would expect, to have the effect of causing any officer or employee of NBTB, NBT Bank, or their affiliates, to terminate his or her employment.

(c) Executive acknowledges and agrees that irreparable injury will result to the Company in the event of a breach of any of the provisions of this Section 4 (the "Designated Provisions") and that the Company will have no adequate remedy at law with respect thereto.  Accordingly, in the event of a material breach of any Designated Provision, and in addition to any other legal or equitable remedy the Company may have, the Company shall be entitled to the entry of a preliminary and permanent injunction (including, without limitation, specific performance) by a court of competent jurisdiction in Chenango County, New York, or elsewhere, to restrain the violation or breach thereof by Executive, and Executive submits to the jurisdiction of such court in any such action.

(d) It is the desire and intent of the parties that the provisions of this Section 4 shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought.  Accordingly, if any particular provision of this Section 4 shall be adjudicated to be invalid or unenforceable, such provision shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of such provision in the particular jurisdiction in which such adjudication is made.  In addition, should any court determine that the provisions of this Section 4 shall be unenforceable with respect to scope, duration, or geographic area, such court shall be empowered to substitute, to the extent enforceable, provisions similar hereto or other provisions so as to provide to the Company, to the fullest extent permitted by applicable law, the benefits intended by this Section 4.

5. Life Insurance.  In light of the unusual abilities and experience of Executive, NBTB (or NBT Bank or their affiliates) in its discretion may apply for and procure as owner and for its own benefit insurance on the life of Executive, in such amount and in such form as NBTB may choose.  NBTB shall make all payments for such insurance and shall receive all benefits from it.  Executive shall have no interest whatsoever in any such policy or policies but, at the request of NBTB, shall submit to medical examinations and supply such information and execute such documents as may reasonably be required by the insurance company or companies to which NBTB has applied for insurance.

6. Payments Upon Termination.

(a) Generally.  In the event that the Term of Employment shall be terminated for any reason, Executive shall, in consideration for Executive's covenants pursuant to Section 4 hereof, be entitled to receive, upon the occurrence of any such event:

(i) any unpaid Base Salary, payable pursuant to Section 3(a)(i) hereof, which shall have been earned and accrued as of the Termination Date; and

(ii) such rights as Executive shall have accrued as of the Termination Date under the terms of any plans or arrangements in which he participates pursuant to Section 3 hereof, any right to reimbursement for expenses accrued as of the Termination Date pursuant to Section 3(i) hereof, and the right to receive the cash equivalent of paid annual leave accrued but unpaid as of the Termination Date pursuant to Section 3(d) hereof.

(b) Termination without Cause or Resignation for Good Reason.  Subject to Sections 6(c) and 6(d) of this Agreement, in the event that the Term of Employment shall be terminated for the reason set forth in Section 2(a)(vi) (termination without Cause) or Section 2(a)(vii) (resignation for Good Reason) of this Agreement, Executive shall be entitled to receive, in addition to the amounts and rights set forth in Section 6(a) hereof, a lump sum payment equal to twice Executive's Base Salary.

(c) Change in Control.

(i) Subject to Section 6(d) hereof, in the event that the Term of Employment shall be terminated for the reason set forth in Section 2(a)(vi) (termination without Cause) or Section 2(a)(vii) (resignation for Good Reason) hereof within twenty-four (24) months of a Change in Control (it being recognized that more than one such event may occur, in which case the twenty-four (24)-month period shall run from the date of each such occurrence), Executive shall be entitled to receive, in addition to the amounts and rights set forth in Section 6(a) hereof and in lieu of the amounts and rights set forth in Section 6(b), the following:

(A) A payment equal to the product of 2.99 multiplied by the sum of (1) Executive's Base Salary for the calendar year in which the Change in Control occurs and (2) Executive's average bonus earned for the three (3) previous calendar years; provided that such payment shall be paid in three (3) equal, annual installments, with the first installment to be made within thirty (30) days of Executive's Termination Date and the remaining two (2) installments made on the first business day of January of the next calendar year; provided, further, that under no circumstances shall two (2) installment payments be made during a single tax year of Executive; and

(B) (1) the Company shall maintain in full force and effect, for Executive's continued benefit and, if applicable, for the continued benefit of Executive's spouse and dependents, for two (2) years after the Termination Date, or such longer period as may be provided by the terms of the appropriate plan, certain noncash employee benefit plans, programs, or arrangements (including, without limitation, life insurance and health, dental, and vision insurance plans, but excluding disability or accidental death and dismemberment insurance) in which Executive was entitled to participate immediately prior to the Termination Date, as in effect at the Termination Date, or, if more favorable to Executive and, if applicable, Executive's spouse and dependents, as in effect generally at any time thereafter with respect to executive employees of the Company or any successor; provided that Executive's continued eligibility for and participation in such plans, programs, and arrangements is possible after Termination Date under the general terms and provisions of such plans, programs, and arrangements; provided, however, that if Executive becomes eligible to participate in a benefit plan, program, or arrangement of another employer which confers substantially similar benefits upon Executive, Executive shall cease to receive benefits under this subsection in respect of such plan, program, or arrangement; provided, further, that for health benefits that extend beyond the COBRA limitation period, the Company shall pay Executive an amount equal to the benefits that Executive would have received under this Section 6(c)(i)(B)(1) without regard to such limitation, and (2) Executive's benefit under any retirement plans maintained by the Company in which Executive is a participant shall be fully vested upon the Termination Date.  In the event that Executive's participation in any such plan, program, or arrangement is not possible after the Termination Date under the general terms and provisions of such plans, programs, and arrangements, the Company shall arrange to provide Executive with benefits substantially similar to those which Executive is entitled to receive under such plans, programs, and arrangements or alternatively, pay an amount equal to the reasonable value of such substantially similar benefits. If Executive elects or, if applicable, his spouse or dependents elect, COBRA continuation coverage after the Termination Date, the Company will pay the applicable COBRA premium for the maximum period during which such coverage is available.  Executive and, if applicable, Executive's spouse and dependents may elect, in lieu of COBRA continuation coverage, to have the acquiring entity obtain an individual or group health insurance coverage and the acquiring entity will pay premiums thereunder for the maximum period during which you and, if applicable, your spouse and family could have elected to receive COBRA continuation coverage.

(ii) In the event that the Term of Employment shall be terminated for the reason set forth in Section 2(a)(iii) (termination on account of Disability) hereof within twenty-four (24) months of a Change in Control (it being recognized that more than one such event may occur, in which case the twenty-four (24)-month period shall run from the date of each such occurrence), Executive's benefits shall thereafter be determined in accordance with the Company's long-term disability income insurance plan.  If the Company's long-term disability income insurance plan is modified or terminated following a Change in Control, the Company shall substitute such a plan with benefits applicable to Executive substantially similar to those provided by such plan prior to its modification or termination.  During any period that Executive fails to perform his duties hereunder as a result of incapacity due to physical or mental illness, Executive shall continue to receive his Base Salary at the rate then in effect until his employment is termi-nated by the Company for Disability.

(iii) A "Change in Control" of the Company shall mean the occurrence of one of the following:

(A) A change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A, as in effect on the date hereof, pursuant to the Exchange Act; provided that, without limitation, such a change in control shall be deemed to have occurred at such time as any Person hereafter becomes the "Beneficial Owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of thirty percent (30%) or more of the combined voting power of NBTB's Voting Securities;

(B) During any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by NBTB's shareholders, of each new director was approved by a vote of at least two-thirds (2/3) of the directors then still in office, who were directors at the beginning of the period;

(C) There shall be consummated (x) any consolidation or merger of NBTB in which NBTB is not the continuing or surviving corporation or pursuant to which Voting Securities would be converted into cash, securities, or other property, other than a merger of NBTB in which the holders of Voting Securities immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (y) any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of NBTB, provided that any such consolidation, merger, sale, lease, exchange, or other transfer consummated at the insistence of an appropriate banking regulatory agency shall not constitute a change in control of NBTB;

(D) Approval by the shareholders of NBTB of any plan or proposal for the liquidation or dissolution of NBTB; or

(E) Any event which would be described in Subsections (A), (B), (C), or (D) of this Section 6(c)(iii) if "NBT Bank" were substituted for "NBTB" therein.

In no event, however, shall a Change in Control be deemed to have occurred as a result of any acquisition of securities or assets of the Company, the Bank, or any subsidiary of either of them, (A) by NBTB, NBT Bank, or any subsidiary of either of them or (B) by any employee benefit plan maintained by any of them.

(iv) Within five (5) days following the consummation of a Change in Control of the Company, the Company (or its successor) shall establish a trust that conforms in all regards with the model trust published in Revenue Procedure 92-64 and deposit an amount sufficient to satisfy all liabilities of the Company under Section 6(c) of this Agreement.  The trust shall be established with an independent trustee, if the Executive so chooses, and the Company (or its successor) shall be responsible for all set-up and ongoing fees associated with the trust until the satisfaction of all obligations under the trust.

(d) Release.  Payment and provision of the benefits described in Sections 6(b) and 6(c) of this Agreement (the "Severance Payments") are subject to Executive's execution and delivery to NBTB of a Separation Agreement and Release, in substantially the form attached hereto as Exhibit A (the "Release"), which shall be incorporated by reference into this Agreement and become a part hereof, within sixty (60) days of Executive's termination of employment, which has (and not until it has) become irrevocable, releasing NBTB, NBT Bank, and any of their affiliates, and their directors, officers, and employees, from any and all claims or potential claims arising from or related to Executive's employment with NBTB, NBT Bank, or any of their affiliates or Executive's termination of employment.  If the Release is executed and delivered and no longer subject to revocation as provided in the preceding sentence, payments or benefits shall commence upon the first scheduled payment date immediately after the date the Release is executed and no longer subject to revocation (the "Release Effective Date").  The first such cash payment shall include payment of all amounts that otherwise would have been due prior to the Release Effective Date under the terms of this Agreement applied as though such payments commenced immediately upon Executive's Termination Date, and any payments made thereafter shall continue as provided herein.  The delayed benefits shall in any event expire at the time such benefits would have expired had such benefits commenced immediately following Executive's Termination Date.

The Company may provide, in its sole discretion, that Executive may continue to participate in any benefits delayed pursuant to this Section 6(d) during the period of such delay, provided that Executive shall bear the full cost of such benefits during such delay period.  Upon the date such benefits would otherwise commence pursuant to this Section 6(d), the Company may reimburse Executive the Company's share of the cost of such benefits, to the extent that such costs would otherwise have been paid by the Company or to the extent that such benefits would otherwise have been provided by the Company at no cost to Executive, in each case had such benefits commenced immediately upon Executive's Termination Date.  Any remaining benefits shall be reimbursed or provided by the Company in accordance with the schedule and procedures specified herein.

(e) No Mitigation.  Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor, except as expressly set forth in Section 6(c)(i)(B) of this Agreement, shall the amount of any payment or benefit provided for in this Agreement be reduced by any compensation earned or benefits received by Executive as the result of employment by another employer after the Termination Date or otherwise.

(f) Regulatory Limits.  Notwithstanding any other provision in this Agreement, the Company may terminate or suspend this Agreement and the employment of Executive hereunder, as if such termination were for Cause, to the extent required by the applicable federal or state statue related to banking, deposit insurance, or bank or savings institution holding companies, or by regulations or orders issued by the Office of the Controller of the Currency, the Federal Deposit Insurance Corporation, or any other state or federal banking regulatory agency having jurisdiction over NBTB or NBT Bank, and no payment shall be required to be made to or for the benefit of Executive under this Agreement to the extent such payment is prohibited by applicable law, regulation, or order issued by a banking agency or a court of competent jurisdiction; provided, that it shall be the Company's burden to prove that any such action was so required.

7. Maximization of After-Tax Amounts.  Notwithstanding anything contained herein to the contrary, in the event any payments or benefits Executive becomes entitled to pursuant to this Agreement or any other payments or benefits received or to be received by Executive in connection with a Change in Control or termination of employment (whether pursuant to the terms of any other agreement, plan, or arrangement, or otherwise, with the Company, any Person whose actions result in a Change in Control, or any affiliate of the Company or such Person) (collectively the "Payments") will be subject to the tax (the "Excise Tax") imposed by Code Section 4999, the payments or benefits due under this Agreement shall be reduced so that the Payments will not result in the imposition of such Excise Tax.  The Payment reduction contemplated by the preceding sentence shall be implemented by determining the "Parachute Payment Ratio" (as defined below) for each "parachute payment" within the meaning of Code Section 280G ("Section 280G"), and then reducing the "parachute payments" in order beginning with the "parachute payment" with the highest Parachute Payment Ratio.  For "parachute payments" with the same Parachute Payment Ratio, such "parachute payments" shall be reduced based on the time of payment of such "parachute payments" with amounts having later payment dates being reduced first.  For "parachute payments" with the same Parachute Payment Ratio and the same time of payment, such "parachute payments" shall be reduced on a pro rata basis (but not below zero) prior to reducing "parachute payments" with a lower Parachute Payment Ratio.  For purposes hereof, the term "Parachute Payment Ratio" shall mean a fraction, the numerator of which is the value of the applicable "parachute payment" for purposes of Section 280G and the denominator of which is the intrinsic value of such "parachute payment."  For purposes of determining whether any of the Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) the entire amount of the Payments shall be treated as "parachute payments" within the meaning of Code Section 280G(b)(2) and as subject to the Excise Tax, unless and to the extent, in the written opinion of the Company's independent accountants and as reasonably acceptable to Executive, such payments (in whole or in part) are not subject to the Excise Tax; and (ii) the value of any noncash benefits or any deferred payment or benefit (constituting a part of the Payments) shall be determined by the Company's independent auditors in accordance with the principles of Code Sections 280G(d)(3) and (4).  Notwithstanding the foregoing, if (i) the Payments exceed three (3) times Executive's "base amount" as defined within Section 280G and (ii) Executive would receive at least $50,000 more on a net after-tax basis if his Payments were not reduced pursuant to this Section 7 (after Executive's payment of the Excise Tax), then the Company will not reduce the Payments to Executive, and Executive shall be responsible for the Excise Tax related thereto.  For purposes of determining the net after-tax benefit, Executive shall be deemed to pay federal income taxes at the highest marginal rate of the federal income taxation applicable to individuals (without taking into account surtaxes or loss or reduction of deductions) for the calendar year in which the Termination Date occurs and state and local income taxes at the highest marginal rates of taxation in the state and locality of your residence on the Termination Date.

8. Representations and Warranties.

(a) Executive represents and warrants to the Company that his execution, delivery, and performance of this Agreement will not result in or constitute a breach of or conflict with any term, covenant, condition, or provision of any commitment, contract, or other agreement or instrument, including, without limitation, any other employment agreement, to which Executive is or has been a party.

(b) Executive shall indemnify, defend, and hold harmless the Company for, from, and against any and all losses, claims, suits, damages, expenses, or liabilities, including court costs and counsel fees, which the Company has incurred or to which the Company may become subject, insofar as such losses, claims, suits, damages, expenses, liabilities, costs, or fees arise out of or are based upon any failure of any representation or warranty of Executive in Section 8(a) hereof to be true and correct when made.

9. Notices.  All notices, consents, waivers, or other communications which are required or permitted hereunder shall be in writing and shall be deemed to have been duly given when delivered personally or by messenger, transmitted by telex or telegram, by express courier, or sent by registered or certified mail, return receipt requested, postage prepaid.  All communications shall be addressed to the appropriate address of each party as follows:

If to NBTB or NBT Bank:

NBT Bancorp Inc.

52 South Broad Street

Norwich, New York  13815

Attention:  Chief Executive Officer

With a required copy to:

Richard Schaberg

Hogan Lovells US L.L.P.

555 13^th Street, N.W.

Washington, D.C. 20004-1109

Fax: (202) 637-5910

If to Executive, to Executive's most recent address on file with the Company.

All such notices shall be deemed to have been given on the date delivered, transmitted, or mailed in the manner provided above.

10. Assignment; Successors.  Neither party may assign this Agreement or any rights or obligations hereunder without the consent of the other party.  This Agreement shall inure to the benefit of, and be binding upon, any corporate or other successor or assignee of the Company which shall acquire, directly or indirectly, by merger, consolidation, purchase, or otherwise, all or substantially all of the business or assets of the Company.  The Company shall require any such successor, by an agreement in form and substance satisfactory to Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Company would be required to perform if no such succession had taken place.  This Agreement shall inure to the benefit of and be enforceable by Executive's personal or legal representatives, executors, administrators, successors, heirs, distributes, devisees, and legatees.  If Executive should die while any amount would still be payable to Executive hereunder if Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive's devisee, legatee, or other designee, or if there is no such designee, to Executive's estate.

11. Governing Law.  This Agreement shall be governed by, construed, and enforced in accordance with the laws of the State of New York, without giving effect to the principles of conflicts of law thereof.  The parties hereby designate Chenango County, New York to be the proper jurisdiction and venue for any suit or action arising out of this Agreement.  Each of the parties consents to personal jurisdiction in such venue for such a proceeding and agrees that it may be served with process in any action with respect to this Agreement or the transactions contemplated thereby by certified or registered mail, return receipt requested, or to its registered agent for service of process in the State of New York.  Each of the parties irrevocably and unconditionally waives and agrees, to the fullest extent permitted by law, not to plead any objection that it may now or hereafter have to the laying of venue or the convenience of the forum of any action or claim with respect to this Agreement or the transactions contemplated thereby brought in the courts aforesaid.

12. Entire Agreement; Amendment; Waiver.  This Agreement constitutes the entire understanding between the Company and Executive relating to the subject matter hereof.  Any previous discussions, agreements, commitments, or understandings between the parties hereto or between Executive and NBTB, NBT Bank, or any of their affiliates, whether oral or written, regarding the subject matter hereof, including without limitation the terms and conditions of employment, compensation, benefits, retirement, competition following employment, and the like, are superseded by this Agreement.  Without limitation, this Agreement expressly supersedes the Previous Employment Agreement and the Change in Control Agreement.  Neither this Agreement nor any provisions hereof can be modified, changed, discharged, or terminated except by an instrument in writing signed by the party against whom any waiver, change, discharge, or termination is sought.  No waiver, by either party hereto at any time, of any breach by the other party hereto or of compliance with any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same, or at any prior or subsequent, time.

13. Illegality; Severability.

(a) Notwithstanding anything in this Agreement to the contrary, this Agreement is not intended and shall not be construed to require any payment to Executive which would violate any federal or state statute or regulation, including without limitation the "golden parachute payment regulations" of the Federal Deposit Insurance Corporation codified to Part 359 of title 12, Code of Federal Regulations.

(b If any provision or provisions of this Agreement shall be held to be invalid, illegal, or unenforceable for any reason whatsoever:

(i) the validity, legality, and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal, or unenforceable) shall not in any way be affected or impaired thereby; and

(ii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provisions held to be invalid, illegal, or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal, or unenforceable.

14. 409A Compliance.

(a) The intent of the parties is that payments and benefits under this Agreement comply with Code Section 409A and the regulations and guidance promulgated thereunder and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith.  In no event whatsoever shall NBTB, NBT Bank, or any of their directors, officers, employees, or agents be liable for any additional tax, interest, or penalty that may be imposed on Executive by Code Section 409A or damages for failing to comply with Code Section 409A.  Notwithstanding any other provision of this Agreement to the contrary, in no event shall any payment under this Agreement that constitutes "deferred compensation" for purposes of Code Section 409A be subject to offset, counterclaim, or recoupment by any other amount payable to Executive unless otherwise permitted by Code Section 409A.  For purposes of Code Section 409A, Executive's right to receive any installment payment pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.

(b) Notwithstanding any other payment schedule provided herein to the contrary, if Executive is deemed on the Termination Date a "specified employee" within the meaning of that term under Code Section 409A, then each of the following shall apply:

(i) With regard to any payment that is considered deferred compensation under Code Section 409A payable on account of a "separation from service," such payment shall be made on the date which is the earlier of (A) the expiration of the six (6)-month period measured from the date of Executive's "separation from service," and (B) the date of Executive's death (the "Delay Period"), to the extent required under Code Section 409A.  Upon the expiration of the Delay Period, all payments delayed pursuant to this Section 14 (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid to Executive in a lump sum, and all remaining payments due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein; and

(ii To the extent that any benefits to be provided during the Delay Period are considered deferred compensation under Code Section 409A provided on account of a "separation from service," and such benefits are not otherwise exempt from Code Section 409A, Executive shall pay the cost of such benefits during the Delay Period, and the Company shall reimburse Executive, to the extent that such costs would otherwise have been paid by the Company or to the extent that such benefits would otherwise have been provided by the Company at no cost to Executive, the Company's share of the cost of such benefits upon expiration of the Delay Period, and any remaining benefits shall be reimbursed or provided by the Company in accordance with the procedures specified herein.

15. Arbitration.  Subject to the right of each party to seek specific performance (which right shall not be subject to arbitration), if a dispute arises out of or is in any way related to this Agreement or the asserted breach thereof, such dispute shall be referred to arbitration before the American Arbitration Association (the "AAA") pursuant to the AAA's National Rules for the Resolution of Employment Disputes (the "Arbitration Rules").  A dispute subject to the provisions of this Section 15 will exist if either party notifies the other party in writing that a dispute subject to arbitration exists and states, with reasonable specificity, the issue subject to arbitration (the "Arbitration Notice").  The parties agree that, after the issuance of the Arbitration Notice, the parties will try in good faith between the date of the issuance of the Arbitration Notice and the date the dispute is set for arbitration to resolve the dispute by mediation in accordance with the Arbitration Rules.  If the dispute is not resolved by the date set for arbitration, then any controversy or claim arising out of this Agreement or the asserted breach hereof shall be resolved by binding arbitration and judgment upon any award rendered by arbitrator(s) may be entered in a court having jurisdiction. In the event any claim or dispute involves an amount in excess of $100,000, either party may request that the matter be heard and resolved by a single arbitrator.  The arbitrator shall have the same power to compel the attendance of witnesses and to order the production of documents or other materials and to enforce discovery as could be exercised by a United States District Court judge sitting in Chenango County, New York.  In the event of any arbitration, each party shall have a reasonable right to conduct discovery to the same extent permitted by the Federal Rules of Civil Procedure, provided that discovery shall be concluded within ninety (90) days after the date the matter is set for arbitration.  The arbitrator or arbitrators shall have the power to award reasonable attorneys' fees to the prevailing party.  Any provisions in this Agreement to the contrary notwithstanding, this Section 15 shall be governed by the Federal Arbitration Act, and the parties have entered into this Agreement pursuant to such act.

16. Costs of Litigation.  In the event litigation is commenced to enforce any of the provisions hereof, or to obtain declaratory relief in connection with any of the provisions hereof, the prevailing party shall be entitled to recover reasonable attorneys' fees.  In the event this Agreement is asserted in any litigation as a defense to any liability, claim, demand, action, cause of action, or right asserted in such litigation, the party prevailing on the issue of that defense shall be entitled to recovery of reasonable attorneys' fees.

17. Company Right to Recover.  If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company as a result of misconduct, with regard to any financial reporting requirement under the securities laws, and Executive is subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002 and Executive knowingly engaged in the misconduct, was grossly negligent in engaging in the misconduct, knowingly failed to prevent the misconduct, or was grossly negligent in failing to prevent the misconduct, Executive shall reimburse the Company the amount of any payment earned or accrued during the twelve (12)-month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever first occurred) of the financial document that contained such material noncompliance.

Notwithstanding anything in this Agreement, if the Company is required to prepare an accounting restatement, Executive will forfeit any payments made based on the achievement of pre-established performance goals that are later determined, as a result of the accounting restatement, not to have been achieved.

To the extent that any payment is made to Executive pursuant to this Agreement and information later becomes available that would have led to supervisory disapproval of the payment, then the Company and its successors expressly reserve the right to suspend or deny full allocation of all remaining payments and/or compel repayment of any or all dispersed payments, should later information warrant such action.  Subsequent information which would lead to the exercise of these rights would include, without limitation, any information indicating that Executive has committed, is substantially responsible for, or has violated the respective acts or omissions, conditions, or offenses outlined in 12 C.F.R. section 359.4(a)(4).

18. Cooperation.  The parties agree that certain matters in which Executive will be involved during the Term of Employment may necessitate Executive's cooperation in the future. Accordingly, following the termination of Executive's employment for any reason, to the extent reasonably requested by the Board, Executive shall cooperate with the Company in connection with matters arising out of Executive's service to the Company; provided, that the Company shall make reasonable efforts to minimize disruption of Executive's other activities. The Company shall reimburse Executive for reasonable expenses incurred in connection with such cooperation and, to the extent that Executive is required to spend substantial time on such matters, the Company shall compensate the Executive at an hourly rate based on Executive's Base Salary on the Termination Date or at another mutually agreed upon rate.

19. Affiliation.  A company will be deemed to be an "affiliate" of, or  "affiliated" with NBTB or NBT Bank according to the definition of "Affiliate" set forth in Rule 12b-2 of the General Rules and Regulations under the Exchange Act.

20. Headings.  The section and subsection headings herein have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms or provisions hereof.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties hereto have executed or caused this Agreement to be executed as of the day and year first above written.

NBT BANCORP INC.

By:

Name: John H. Watt, Jr.

Title: President & Chief Executive Officer

EXECUTIVE

Joseph R. Stagliano

Exhibit A

SEPARATION AGREEMENT AND RELEASE

I.              In consideration of receipt and acceptance of the separation payments described in the Employment Agreement and listed on Appendix A between NBT BANCORP INC. ("NBTB") and Joseph R. Stagliano ("Executive"), dated December 19, 2016 (the "Employment Agreement"), into which this Separation Agreement and Release ("Separation Agreement") is incorporated by reference, Executive, on behalf of himself and his agents, heirs, executors, administrators, successors, and assigns, unconditionally and generally releases NBTB and NBT Bank, National Association ("NBT Bank"), their respective current and former owners, officers, directors, parents, affiliates, subsidiaries, related entities, agents and employees, and the heirs, executors, administrators, successors and assigns of all of the foregoing (collectively, "Releasee"), from or in connection with, and Executive hereby waives and/or settles, with prejudice, any and all complaints, causes of action, suits, controversies, or any liability, claims, demands, or damages, known or unknown and of any nature whatsoever and which Executive ever had, now has or shall or may have as of the date of this Separation Agreement, including without limitation, those arising directly or indirectly pursuant to or out of any aspect of Executive's employment or termination from employment with NBTB, NBT Bank or any other Releasee.

II.             Specifically, without limitation of the foregoing, and except as to the enforcement of this Separation Agreement and any rights which cannot be waived as a matter of law, the release and waiver of claims under this Separation Agreement shall include and apply to any rights and/or claims (i) arising under any contract or employment arrangement, express or implied, written or oral; (ii) for wrongful dismissal or termination of employment; (iii) arising under any applicable federal, state, local or other statutes, laws, ordinances, regulations or the like, or case law, that relate to employment or employment practices and/or specifically, that prohibit discrimination based upon age, race, religion, sex, national origin, disability, genetic information or any other unlawful bases, including without limitation, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, the Civil Rights Act of 1866, the Equal Pay Act of 1963, the Family Medical Leave Act of 1993, the Fair Labor Standards Act, the Employee Retirement Income Security Act of 1974, Executive Order 11246, the Worker Adjustment and Retraining Notification Act, the New York State Human Rights Law, the New York City Human Rights Law, the New York Labor Law, all as amended, and any other statutes, orders, laws, ordinances, regulations applicable to Employee's employment, of any state or city in which any Releasee is subject to jurisdiction, and/or any political subdivision thereof; (iv) based upon any other federal, state or local statutes, orders, laws, ordinances, regulations, case law, public policy, or common law or the like; (v) concerning recruitment, hiring, discharge, promotions, transfers, employment status, right to reemployment, wages, bonus or incentive pay, severance pay, stock or stock options, employment benefits (including, without limitation, sick or other leave, medical, disability, life, or any other insurance, 401(k), pension, other retirement plans or benefits, or any other fringe benefits), workers' compensation, intentional or negligent misrepresentation and/or infliction of emotional distress, interference with contract, fraud, libel, slander, defamation, invasion of privacy or loss of consortium, together with any and all tort, contract, or other claims which have been or might have been asserted by Executive or on his behalf in any suit, charge of discrimination, or claim against the Releasee; and (vi) for damages, including without limitation, punitive or compensatory damages, or for attorneys' fees, expenses, costs, wages, injunctive or equitable relief.

III.            Executive expressly understands and acknowledges that it is possible that unknown losses or claims exist or that present losses may have been underestimated in amount or severity, and Executive explicitly took that into account in determining the amount of consideration to be paid for the giving of the release in this Separation Agreement, and a portion of said consideration and the mutual covenants were given in exchange for a full satisfaction and discharge of such claims.

IV.            Executive and NBT Bank acknowledge that the above release and waiver of claims shall not apply to the obligation of NBT Bank to make payments (if any) of any vested benefit under NBT Bank's tax-qualified employee benefit plans nor to Executive's right to continue healthcare insurance under the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985.

V.             Executive represents and warrants that he has not filed or commenced any complaints, claims, actions or proceeding of any kind against any Releasee with any federal, state or local court or any administrative or regulatory body.  Executive agrees not to commence or participate as a party in any proceeding in any court or forum against any Releasee which is based upon any act, omission or occurrence up to and including the date of the execution of this Separation Agreement.  Executive further agrees not to encourage or participate in any action or proceeding brought by any person (except a government agency) against any Releasee.  Notwithstanding the foregoing, this Separation Agreement does not affect Executive's right to file a charge or complaint with any state, local or federal agency or to participate or cooperate in such a matter.  However, Executive acknowledges that he is not entitled to monetary damages resulting from any such actions.

VI.            This Separation Agreement is not and shall not be construed as an admission by any Releasee or Executive of any wrongdoing or illegal acts or omissions and each party expressly denies that they engaged in any wrongdoing or illegal or acts or omissions.  Executive shall not, except as may be required by law, make any oral or written negative, disparaging or adverse statements, suggestions or representations of or concerning NBT Bank or any Releasee.

VII.          Executive agrees to cooperate reasonably with and to be readily available to NBT Bank to assist in any matter, including government agency investigations, court litigation or potential litigation, about which Executive may have knowledge.  If Executive receives a subpoena or other legal process relating in any way to same, Executive immediately will provide NBT Bank notice of the contact or the service of such subpoena or other legal process, and shall cooperate with NBT Bank in responding.

VIII.        Except as prohibited by law, each Releasee shall be excused from any obligation to make payment of the separation payments in the Employment Agreement in the event that  paragraphs I through IV of this Separation Agreement are determined to be void or unenforceable, in whole or in part; or Executive is found to have made a material misstatement in any term, condition, representation or acknowledgement in this Separation Agreement, in either of which event Executive shall also be liable for any damages and costs suffered or incurred by any Releasee by reason of such misstatement or breach.

IX.           This Separation Agreement shall be incorporated by reference into the Employment Agreement and shall be made a part thereof.

X.             Executive agrees and acknowledges that:

(a) With respect to the General Release in Section II hereof, Executive agrees and understands that he is specifically releasing all claims under the Age Discrimination in Employment Act, as amended, 29 U.S.C. § 621 et seq.  Executive acknowledges that he has read and understands this Agreement and executes it voluntarily and without coercion;

(b)  Executive has been advised by NBT Bank to consult with an attorney before executing this Separation Agreement and has been given twenty-one (21) days to review this Separation Agreement and to consider whether to sign this Separation Agreement.  Executive may elect to sign this Separation Agreement prior to the expiration of the twenty-one (21) day consideration period specified herein, and Executive agrees that if he elects to do so, such election is knowing and voluntary and comes after full opportunity to consult with an attorney;

(c)  Executive has the right to revoke this Separation Agreement within the seven (7) day period following the date Executive signs this Separation Agreement (the "Revocation Period") and any revocation shall be made by providing a signed notice in writing, delivered personally or by fax to the Chief Human Resources Officer at NBT Bancorp, 52 South Broad Street, Norwich, New York, 13815 no later than 5:00 p.m. on the seventh calendar day following his execution of this Separation Agreement;

(d) This Separation Agreement will not be effective or enforceable, and the separation payments under the Employment Agreement are not required and shall not be delivered or paid, until Executive has delivered a signed, notarized original of this Separation Agreement to the Chief Human Resources Officer at NBT Bancorp, 52 South Broad Street, Norwich, New York, 13815 and the Revocation Period has expired without revocation of this Separation Agreement.  It is not necessary that any Releasee sign this Separation Agreement following Executive's full and complete execution of it for it to become fully effective and enforceable;

(e) Executive relied solely on his own judgment and/or that of this attorney regarding the consideration for and the terms of this Separation Agreement and is signing this Separation Agreement knowingly and voluntarily of his own free will;

(f) Executive is not entitled to the separation payments under the Employment Agreement unless he agrees to and honors the terms of the terms of this Separation Agreement; and

(g) Executive has read and understands this Separation Agreement and further understands that, subject to the limitations contained herein, it includes a general release of any and all known and unknown, foreseen or unforeseen claims presently asserted or otherwise arising through the date of his singing of this Separation Agreement that he may have against any Releasee.

XI.           Executive understands all of the terms of this Separation Agreement, and agrees that such terms are fair, reasonable and are not the result of any fraud, duress, coercion, pressure or undue influence exercised by or on behalf of any Releasee; and Executive has agreed to and entered into this Separation Agreement and all of its terms, knowingly, freely and voluntarily.

XII.          There are no other agreements of any nature between any Releasee and Executive with respect to the matters discussed in this Separation Agreement with respect to the matters discussed in this Separation Agreement, except as expressly stated herein, and in signing this Separation Agreement, Executive is not relying on any agreements or representation, except those expressly contained in this Separation Agreement.

XIII.         This Separation Agreement shall be governed by the laws of New York, excluding the choice of law rules thereof.

XIV.        This Separation Agreement may be executed in counterparts, each of which shall be deemed an original, and, when executed by all parties to this Separation Agreement, shall constitute one and the same instrument.  Facsimile or PDF transmissions of this Separation Agreement signed by any party hereto shall be deemed an original counterpart and binding.

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IN WITNESS WHEREOF, the parties hereto have executed this Separation Agreement.

Date

Joseph R. Stagliano

STATE OF NEW YORK	)
	:  ss.:
COUNTY OF	)

On the ____ day of _________, 20__, personally came _________________ and being duly sworn, acknowledged that he is the person described in and who executed the foregoing Separation Agreement and acknowledged that he executed same.

Notary Public

NBT BANCORP INC.

By:

Date:

Title:

Appendix A

[Separation Payments]

EX-10.20

Exhibit 10.20

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of April 3, 2017, by and between SARAH A. HALLIDAY ("Executive") and NBT BANCORP INC., a Delaware corporation having its principal office in Norwich, New York ("NBTB").

W I T N E S S E T H :

WHEREAS, Executive is an Executive Vice President of NBTB and President of Commercial Banking of NBT Bank, National Association, a national banking association which is a wholly-owned subsidiary of NBTB ("NBT Bank") (together with NBTB, the "Company");

WHEREAS, the Company desires to secure the continued employment of Executive, subject to the provisions of this Agreement; and

WHEREAS, Executive desires to enter into the Agreement for such periods and upon the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements hereinafter set forth, intending to be legally bound, the parties agree as follows:

1. Employment; Responsibilities and Duties.

(a) NBTB hereby agrees to employ Executive and to cause NBT Bank and any successor organization to NBT Bank to employ Executive, and Executive hereby agrees to serve as Executive Vice President of NBTB and President of Commercial Banking of NBT Bank, and of any successor organization to NBTB or NBT Bank, as applicable, during the Term of Employment (as defined in Section 2 below).  During the Term of Employment, Executive shall perform all duties and shall have the responsibilities and authority as set forth in the bylaws of NBTB or NBT Bank, as applicable, or as may otherwise be determined and assigned to her by NBTB or NBT Bank.  During the Term of Employment, Executive shall report directly to the Chief Executive Officer of NBTB or her designee.

(b) Executive shall devote her full working time and best efforts to the performance of her responsibilities and duties hereunder.  During the Term of Employment, Executive shall not, without the prior written consent of the Chief Executive Officer of NBTB or her designee, render services in any capacity, whether as an employee, independent contractor, or otherwise, whether or not compensated, to any person or entity other than the Company or its affiliates; provided, that Executive may, where involvement in such activities does not, as reasonably determined by the Board of Directors of NBTB (the "Board"), individually or in the aggregate significantly interfere with the performance of her duties or violate the provisions of Section 4 hereof, (i) render services to charitable organizations, (ii) manage her personal investments in compliance with any Company limits or policies, and (iii) with the prior permission of the Chief Executive Officer of NBTB or her designee hold such other directorships or part-time academic appointments or have such other business affiliations as would otherwise be prohibited under this Section 1.

2. Term of Employment.

(a) The term of this Agreement (the "Term of Employment") shall be the period commencing on the date of this Agreement (the "Commencement Date") and continuing until the "Termination Date," which, subject to Section 2(b) hereof, shall mean the earliest to occur of:

(i) January 1, 2019; provided, however, that on December 31, 2017 and on each December 31 thereafter (each, a "Renewal Date"), the remaining Term of Employment shall automatically be extended by one additional year (to a total of two (2) years) unless either the Company or Executive provides written notice to the other party of non-renewal at least ninety (90) days prior to the applicable Renewal Date;

(ii) the death of Executive;

(iii) Executive's inability to engage in any substantial gainful activity, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months ("Disability");

(iv) the discharge of Executive by NBTB or NBT Bank for "Cause," which shall mean the termination of Executive's employment on account of: (a) any willful or gross misconduct by Executive with respect to the business and affairs of NBTB or NBT Bank, or with respect to any of their affiliates, for which Executive is assigned material responsibilities or duties; (b) the conviction of Executive of a felony (after the earlier of (I) the expiration of any applicable appeal period without perfection of an appeal by Executive or (II) the denial of any appeal as to which no further appeal or review is available to Executive), whether or not committed in the course of her employment with NBTB and NBT Bank; (c) Executive's willful neglect, failure, or refusal to carry out her duties hereunder in a reasonable manner (other than any such failure resulting from Disability or death or from termination by Executive for Good Reason, as hereinafter defined); or (d) the breach by Executive of any representation or warranty in Section 4 hereof or of any provision of this Agreement which breach is material and adverse to NBTB, NBT Bank, or any of their affiliates for which Executive is assigned material responsibilities or duties; provided, however, in each case, the Company shall provide prior written notice to Executive that specifically identifies the event which NBTB or NBT Bank believes constitutes Cause hereunder, and to the extent applicable, Executive shall have sixty (60) days from receiving such notice to cure;

(v) Executive's resignation from her positions as Executive Vice President of NBTB and President of Commercial Banking of NBT Bank other than for Good Reason (as hereinafter defined);

(vi) the termination of Executive's employment by NBTB or NBT Bank "without Cause," which shall mean Executive's termination of employment for any reason other than those set forth in Subsections (i)-(v) of this Section 2(a), at any time, upon the thirtieth (30^th) day following notice to Executive; provided, further, for the avoidance of doubt, that the Company's providing notice of non-renewal of the Agreement in accordance with Section 2(a)(i) shall not constitute a termination of Executive's employment without Cause and shall not give rise to any severance benefits hereunder, other than as provided in Section 6(a); or

(vii) Executive's resignation for Good Reason.  "Good Reason" shall mean, without Executive's express written consent, reassignment of Executive to a material reduction in duties, responsibilities, or position other than for Cause, a material decrease in the amount or level of Executive's Base Salary or benefits from the amount or level established in Section 3 hereof, or requiring Executive to be based anywhere other than where Executive's office is located upon the date of this Agreement, except for required travel on the Company's business to an extent substantially consistent with the business travel obligations which Executive undertook on behalf of the Company as of the date of this Agreement.  Notwithstanding the foregoing, if there exists (without regard to this sentence) an event or condition that constitutes Good Reason, NBTB shall have thirty (30) days from the date on which Executive gives the written notice thereof to cure such event or condition (such notice to be given by Executive within ninety (90) days from the date the event or condition first occurs) and, if NBTB does so cure, such event or condition shall cease to constitute Good Reason thirty (30) days after the end of the cure period.

(b) Notwithstanding anything to the contrary in Section 2(a) hereof, in the event a tender offer or exchange offer is made by a Person (including any individual, corporation, partnership, group, association, or other "person," as such term is used in Section 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), other than the Company or any employee benefit plan(s) sponsored by the Company) for more than thirty percent (30%) of the combined voting power of the Company's outstanding securities ordinarily having the right to vote at elections of directors ("Voting Securities"), including shares of common stock, no par value, of the Company (the "Company Shares"), Executive agrees that she will not leave the employ of the Company (other than as a result of Disability) and will render services to the Company in the capacity in which she then serves until such tender offer or exchange offer has been abandoned or terminated or a Change in Control of the Company has occurred as a result of such tender offer or exchange offer.  If, during the period Executive is obligated to continue in the employ of the Company pursuant to this Section 2(b), the Company terminates Executive's employment without Cause or Executive provides written notice of her decision to terminate her employment for Good Reason, Executive's obligations under this Section 2(b) shall thereupon terminate, and Executive will be entitled to payments provided under Section 6(b).

(c) A Termination Date shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a "separation from service" within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the "Code") and, for purposes of any such provision of this Agreement, any references to a "termination," "termination of employment," or like terms shall mean a "separation from service."

3. Compensation.  For the services to be performed by Executive for the Company and its affiliates under this Agreement, Executive shall be compensated in the following manner:

(a) Base Salary.  During the Term of Employment:

(i) The Company shall pay Executive a salary, which on an annual basis shall be three hundred twenty-five thousand dollars ($325,000) ("Base Salary"), subject to annual adjustments based on recommendations from the NBTB Compensation and Benefits Committee and in line with compensation for comparable positions in companies of similar size and structure, but in no case less than three hundred twenty-five thousand dollars ($325,000). The Base Salary shall be payable in accordance with the normal payroll practices of the Company, with respect to executive personnel as presently in effect or as they may be modified by the Company from time to time.

(ii) Executive shall be eligible to be considered for performance bonuses commensurate with Executive's title and salary grade in accordance with the compensation policies of the Company with respect to executive personnel in effect as of the Commencement Date or as they may be modified by the Company from time to time.

(b) Employee Benefit Plans or Arrangements.  During the Term of Employment, Executive shall be entitled to participate in all employee benefit plans of the Company, as presently in effect as of the Commencement Date or as they may be modified by the Company from time to time, under such terms as may be applicable to officers of Executive's rank employed by NBTB, NBT Bank, or their affiliates, including, without limitation, plans providing retirement benefits, restricted stock, or stock units, medical insurance, life insurance, disability insurance, long term care insurance, and accidental death or dismemberment insurance, provided that there be no duplication of such benefits as are provided under any other provision of this Agreement.

(c) Equity Awards.  Executive shall be eligible for awards, as determined by and in the sole discretion of the Board, under NBTB's 2008 Omnibus Incentive Plan, or any successor thereto, as applicable to officers of Executive's rank.

(d) Vacation and Sick Leave.  During the Term of Employment, Executive shall be entitled to paid annual vacation periods and sick leave in accordance with the policies of the Company applicable to officers of Executive's rank employed by NBTB, NBT Bank, or their affiliates, as in effect as of the Commencement Date or as may be modified by the Company from time to time, but in no event shall Executive be entitled to less than four (4) weeks of paid vacation per year.

(e) Automobile.  During the Term of Employment, Executive shall be entitled to the use of an automobile owned by NBTB, NBT Bank, or any of their affiliates, the make, model, and year of which automobile shall be appropriate to an officer of Executive's rank and which shall be replaced every three (3) years (or earlier if accumulated mileage exceeds seventy-five thousand (75,000) miles).   Executive shall be responsible for all expenses of ownership and use of anysuch automobile, subject to reimbursement of expenses for business use in accordance with Section 3(i).

(f) Country Club Dues.  During the Term of Employment, Executive shall be reimbursed for dues and assessments incurred in relation to Executive's membership at a country club mutually agreed upon by NBTB and Executive, subject to specific Internal Revenue Service rules.  Executive shall be responsible for any income taxes associated with the use of such club membership.

(g) Enhanced Retirement Benefit.  During the Term of Employment, Executive shall be eligible to receive a contribution to her deferred compensation account on an annual basis in an amount as determined by and in the sole discretion of the Board.

(h) Withholding.  All compensation to be paid to Executive hereunder shall be subject to applicable federal, state, and local taxes and all other required withholdings.  Executive hereby acknowledges and agrees that she is responsible for all taxes in connection with any benefits, fringe benefits, or perquisites provided under this Agreement, and she is not entitled to a Gross Up.

(i) Expenses.  During the Term of Employment, Executive shall be reimbursed for reasonable travel and other expenses incurred or paid by Executive in connection with the performance of her services under this Agreement, upon presentation of expense statements or vouchers or such other supporting information as may from time to time be requested by the Company, in accordance with such policies of the Company as are in effect as of the Commencement Date and as may be modified by the Company from time to time, under such terms as may be applicable to officers of Executive's rank employed by NBTB, NBT Bank, or their affiliates.  All expenses or other reimbursements under this Agreement shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by Executive (provided that if any such reimbursements constitute taxable income to Executive, such reimbursements shall be paid no later than March 15^th of the calendar year following the calendar year in which the expenses to be reimbursed were incurred), and no such reimbursement of expenses eligible for reimbursement in any taxable year shall in any way affect the expenses eligible for reimbursement in any other taxable year.

4. Confidential Business Information; Non-Competition; Non-Solicitation.

(a) Executive acknowledges that certain business methods, creative techniques, and technical data of the Company and any of its affiliates and the like are deemed by the Company to be and are in fact confidential business information of the Company or its affiliates or are entrusted to third parties.  Such confidential information includes, but is not limited to, procedures, methods, sales relationships developed while in the service of the Company or its affiliates, knowledge of customers and their requirements, marketing plans, marketing information, studies, forecasts, and surveys, competitive analyses, mailing and marketing lists, new business proposals, lists of vendors, consultants, and other persons who render service or provide material to the Company or its affiliates, and compositions, ideas, plans, and methods belonging to or related to the affairs of the Company or its affiliates (collectively, "Confidential Information").  In this regard, the Company asserts proprietary rights in all of its Confidential Information and that of its affiliates, except for such information as is clearly in the public domain.  Notwithstanding the foregoing, information that would be generally known or available to persons skilled in Executive's fields shall be considered to be "clearly in the public domain" for the purposes of the preceding sentence.  Executive acknowledges that in connection with her employment with the Company, Executive has had or may have access to such Confidential Information, and she agrees that she will not disclose or divulge to any third party, except as may be required by her duties hereunder, by law, regulation, or order of a court or government authority, or as directed by the Company, nor shall she use to the detriment of the Company or its affiliates or use in any business or on behalf of any business competitive with or substantially similar to any business of the Company or its affiliates, any Confidential Information obtained during the course of her employment by the Company.  In the event that disclosure is required by law, regulation, or order of a court or government authority, Executive agrees that as soon as practical and in any event no later than thirty (30) days after receiving notice that Executive is required to make such disclosure, Executive will provide notice to the Company of such requirement by law, regulation, or order of a court or government authority.  This Section 4(a) shall not be construed as restricting Executive from disclosing such information to the employees of the Company or its affiliates.  On or before the Termination Date, Executive shall promptly deliver to the Company any and all Confidential Information in her possession, whether tangible, electronic, or intangible in form.

(b) Executive acknowledges that in the course of employment with the Company, Executive has had and will have access to and gained knowledge of the trade secrets and other Confidential Information of the Company and its affiliates; has had and will have substantial relationships with the customers of the Company and its affiliates; and has performed and will perform services of special, unique, and extraordinary value to the Company and its affiliates.  Therefore, Executive agrees that notwithstanding the termination of this Agreement for any reason, from the Commencement Date until the second (2^nd) anniversary of the Termination Date, the Executive shall not, directly or indirectly, on behalf of himself or any other person or entity, without the written consent of the Company:

(i) become an officer, employee, consultant, director, or trustee of any savings bank, savings and loan association, savings and loan holding company, bank or bank holding company, where such position entails providing services to such company in any city, town, or county in which the Company or its affiliates has an office, determined as of the Termination Date, where Executive's position or service for such business is competitive with or otherwise similar to any of Executive's positions or services for the Company or its affiliates;

(ii) induce or solicit any customer, supplier, or agent of the Company or its affiliates about whom Executive has gained Confidential Information or with whom Executive, by virtue of her employment with the Company, has established a relationship or had frequent contact, to terminate or curtail an existing business or commercial relationship with the Company or its affiliates;

(iii) induce or solicit any customer or supplier of the Company or its affiliates about whom Executive has gained Confidential Information or with whom Executive, by virtue of her employment with the Company, has established a relationship or had frequent contact, to provide or purchase goods or services similar to the goods or services provided by it to or purchased by it from the Company or its affiliates; provided, however, that the provisions of this clause (iii) only apply to those persons or entities who are customers or suppliers of the Company or its affiliates as of the Termination Date or who were customers of the Company or its affiliates during the one-year period prior to the Termination Date; or

(iv) solicit, induce, recruit, offer employment to, hire, or take any other action intended, or that a reasonable person acting in like circumstances would expect, to have the effect of causing any officer or employee of NBTB, NBT Bank, or their affiliates, to terminate her or her employment.

(c) Executive acknowledges and agrees that irreparable injury will result to the Company in the event of a breach of any of the provisions of this Section 4 (the "Designated Provisions") and that the Company will have no adequate remedy at law with respect thereto.  Accordingly, in the event of a material breach of any Designated Provision, and in addition to any other legal or equitable remedy the Company may have, the Company shall be entitled to the entry of a preliminary and permanent injunction (including, without limitation, specific performance) by a court of competent jurisdiction in Chenango County, New York, or elsewhere, to restrain the violation or breach thereof by Executive, and Executive submits to the jurisdiction of such court in any such action.

(d) It is the desire and intent of the parties that the provisions of this Section 4 shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought.  Accordingly, if any particular provision of this Section 4 shall be adjudicated to be invalid or unenforceable, such provision shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of such provision in the particular jurisdiction in which such adjudication is made.  In addition, should any court determine that the provisions of this Section 4 shall be unenforceable with respect to scope, duration, or geographic area, such court shall be empowered to substitute, to the extent enforceable, provisions similar hereto or other provisions so as to provide to the Company, to the fullest extent permitted by applicable law, the benefits intended by this Section 4.

5. Life Insurance.  In light of the unusual abilities and experience of Executive, NBTB (or NBT Bank or their affiliates) in its discretion may apply for and procure as owner and for its own benefit insurance on the life of Executive, in such amount and in such form as NBTB may choose.  NBTB shall make all payments for such insurance and shall receive all benefits from it.  Executive shall have no interest whatsoever in any such policy or policies but, at the request of NBTB, shall submit to medical examinations and supply such information and execute such documents as may reasonably be required by the insurance company or companies to which NBTB has applied for insurance.

6. Payments Upon Termination.

(a) Generally.  In the event that the Term of Employment shall be terminated for any reason, Executive shall, in consideration for Executive's covenants pursuant to Section 4 hereof, be entitled to receive, upon the occurrence of any such event:

(i) any unpaid Base Salary, payable pursuant to Section 3(a)(i) hereof, which shall have been earned and accrued as of the Termination Date; and

(ii) such rights as Executive shall have accrued as of the Termination Date under the terms of any plans or arrangements in which she participates pursuant to Section 3 hereof, any right to reimbursement for expenses accrued as of the Termination Date pursuant to Section 3(i) hereof, and the right to receive the cash equivalent of paid annual leave accrued but unpaid as of the Termination Date pursuant to Section 3(d) hereof.

(b) Termination without Cause or Resignation for Good Reason.  Subject to Sections 6(c) and 6(d) of this Agreement, in the event that the Term of Employment shall be terminated for the reason set forth in Section 2(a)(vi) (termination without Cause) or Section 2(a)(vii) (resignation for Good Reason) of this Agreement, Executive shall be entitled to receive, in addition to the amounts and rights set forth in Section 6(a) hereof, a lump sum payment equal to twice Executive's Base Salary.

(c) Change in Control.

(i) Subject to Section 6(d) hereof, in the event that the Term of Employment shall be terminated for the reason set forth in Section 2(a)(vi) (termination without Cause) or Section 2(a)(vii) (resignation for Good Reason) hereof within twenty-four (24) months of a Change in Control (it being recognized that more than one such event may occur, in which case the twenty-four (24)-month period shall run from the date of each such occurrence), Executive shall be entitled to receive, in addition to the amounts and rights set forth in Section 6(a) hereof and in lieu of the amounts and rights set forth in Section 6(b), the following:

(A) A payment equal to the product of 2.99 multiplied by the sum of (1) Executive's Base Salary for the calendar year in which the Change in Control occurs and (2) Executive's average bonus earned for the three (3) previous calendar years; provided that such payment shall be paid in three (3) equal, annual installments, with the first installment to be made within thirty (30) days of Executive's Termination Date and the remaining two (2) installments made on the first business day of January of the next calendar year; provided, further, that under no circumstances shall two (2) installment payments be made during a single tax year of Executive; and

(B) (1) the Company shall maintain in full force and effect, for Executive's continued benefit and, if applicable, for the continued benefit of Executive's spouse and dependents, for two (2) years after the Termination Date, or such longer period as may be provided by the terms of the appropriate plan, certain noncash employee benefit plans, programs, or arrangements (including, without limitation, life insurance and health, dental, and vision insurance plans, but excluding disability or accidental death and dismemberment insurance) in which Executive was entitled to participate immediately prior to the Termination Date, as in effect at the Termination Date, or, if more favorable to Executive and, if applicable, Executive's spouse and dependents, as in effect generally at any time thereafter with respect to executive employees of the Company or any successor; provided that Executive's continued eligibility for and participation in such plans, programs, and arrangements is possible after Termination Date under the general terms and provisions of such plans, programs, and arrangements; provided, however, that if Executive becomes eligible to participate in a benefit plan, program, or arrangement of another employer which confers substantially similar benefits upon Executive, Executive shall cease to receive benefits under this subsection in respect of such plan, program, or arrangement; provided, further, that for health benefits that extend beyond the COBRA limitation period, the Company shall pay Executive an amount equal to the benefits that Executive would have received under this Section 6(c)(i)(B)(1) without regard to such limitation, and (2) Executive's benefit under any retirement plans maintained by the Company in which Executive is a participant shall be fully vested upon the Termination Date.  In the event that Executive's participation in any such plan, program, or arrangement is not possible after the Termination Date under the general terms and provisions of such plans, programs, and arrangements, the Company shall arrange to provide Executive with benefits substantially similar to those which Executive is entitled to receive under such plans, programs, and arrangements or alternatively, pay an amount equal to the reasonable value of such substantially similar benefits. If Executive elects or, if applicable, her spouse or dependents elect, COBRA continuation coverage after the Termination Date, the Company will pay the applicable COBRA premium for the maximum period during which such coverage is available.  Executive and, if applicable, Executive's spouse and dependents may elect, in lieu of COBRA continuation coverage, to have the acquiring entity obtain an individual or group health insurance coverage and the acquiring entity will pay premiums thereunder for the maximum period during which you and, if applicable, your spouse and family could have elected to receive COBRA continuation coverage.

(ii) In the event that the Term of Employment shall be terminated for the reason set forth in Section 2(a)(iii) (termination on account of Disability) hereof within twenty-four (24) months of a Change in Control (it being recognized that more than one such event may occur, in which case the twenty-four (24)-month period shall run from the date of each such occurrence), Executive's benefits shall thereafter be determined in accordance with the Company's long-term disability income insurance plan.  If the Company's long-term disability income insurance plan is modified or terminated following a Change in Control, the Company shall substitute such a plan with benefits applicable to Executive substantially similar to those provided by such plan prior to its modification or termination.  During any period that Executive fails to perform her duties hereunder as a result of incapacity due to physical or mental illness, Executive shall continue to receive her Base Salary at the rate then in effect until her employment is termi-nated by the Company for Disability.

(iii) A "Change in Control" of the Company shall mean the occurrence of one of the following:

(A) A change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A, as in effect on the date hereof, pursuant to the Exchange Act; provided that, without limitation, such a change in control shall be deemed to have occurred at such time as any Person hereafter becomes the "Beneficial Owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of thirty percent (30%) or more of the combined voting power of NBTB's Voting Securities;

(B) During any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by NBTB's shareholders, of each new director was approved by a vote of at least two-thirds (2/3) of the directors then still in office, who were directors at the beginning of the period;

(C) There shall be consummated (x) any consolidation or merger of NBTB in which NBTB is not the continuing or surviving corporation or pursuant to which Voting Securities would be converted into cash, securities, or other property, other than a merger of NBTB in which the holders of Voting Securities immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (y) any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of NBTB, provided that any such consolidation, merger, sale, lease, exchange, or other transfer consummated at the insistence of an appropriate banking regulatory agency shall not constitute a change in control of NBTB;

(D) Approval by the shareholders of NBTB of any plan or proposal for the liquidation or dissolution of NBTB; or

(E) Any event which would be described in Subsections (A), (B), (C), or (D) of this Section 6(c)(iii) if "NBT Bank" were substituted for "NBTB" therein.

In no event, however, shall a Change in Control be deemed to have occurred as a result of any acquisition of securities or assets of the Company, the Bank, or any subsidiary of either of them, (A) by NBTB, NBT Bank, or any subsidiary of either of them or (B) by any employee benefit plan maintained by any of them.

(iv) Within five (5) days following the consummation of a Change in Control of the Company, the Company (or its successor) shall establish a trust that conforms in all regards with the model trust published in Revenue Procedure 92-64 and deposit an amount sufficient to satisfy all liabilities of the Company under Section 6(c) of this Agreement.  The trust shall be established with an independent trustee, if the Executive so chooses, and the Company (or its successor) shall be responsible for all set-up and ongoing fees associated with the trust until the satisfaction of all obligations under the trust.

(d) Release.Payment and provision of the benefits described in Sections 6(b) and 6(c) of this Agreement (the "Severance Payments") are subject to Executive's execution and delivery to NBTB of a Separation Agreement and Release, in substantially the form attached hereto as Exhibit A (the "Release"), which shall be incorporated by reference into this Agreement and become a part hereof, within sixty (60) days of Executive's termination of employment, which has (and not until it has) become irrevocable, releasing NBTB, NBT Bank, and any of their affiliates, and their directors, officers, and employees, from any and all claims or potential claims arising from or related to Executive's employment with NBTB, NBT Bank, or any of their affiliates or Executive's termination of employment.  If the Release is executed and delivered and no longer subject to revocation as provided in the preceding sentence, payments or benefits shall commence upon the first scheduled payment date immediately after the date the Release is executed and no longer subject to revocation (the "Release Effective Date").  The first such cash payment shall include payment of all amounts that otherwise would have been due prior to the Release Effective Date under the terms of this Agreement applied as though such payments commenced immediately upon Executive's Termination Date, and any payments made thereafter shall continue as provided herein.  The delayed benefits shall in any event expire at the time such benefits would have expired had such benefits commenced immediately following Executive's Termination Date.

The Company may provide, in its sole discretion, that Executive may continue to participate in any benefits delayed pursuant to this Section 6(d) during the period of such delay, provided that Executive shall bear the full cost of such benefits during such delay period.  Upon the date such benefits would otherwise commence pursuant to this Section 6(d), the Company may reimburse Executive the Company's share of the cost of such benefits, to the extent that such costs would otherwise have been paid by the Company or to the extent that such benefits would otherwise have been provided by the Company at no cost to Executive, in each case had such benefits commenced immediately upon Executive's Termination Date.  Any remaining benefits shall be reimbursed or provided by the Company in accordance with the schedule and procedures specified herein.

(e) No Mitigation.  Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor, except as expressly set forth in Section 6(c)(i)(B) of this Agreement, shall the amount of any payment or benefit provided for in this Agreement be reduced by any compensation earned or benefits received by Executive as the result of employment by another employer after the Termination Date or otherwise.

(f) Regulatory Limits.  Notwithstanding any other provision in this Agreement, the Company may terminate or suspend this Agreement and the employment of Executive hereunder, as if such termination were for Cause, to the extent required by the applicable federal or state statue related to banking, deposit insurance, or bank or savings institution holding companies, or by regulations or orders issued by the Office of the Controller of the Currency, the Federal Deposit Insurance Corporation, or any other state or federal banking regulatory agency having jurisdiction over NBTB or NBT Bank, and no payment shall be required to be made to or for the benefit of Executive under this Agreement to the extent such payment is prohibited by applicable law, regulation, or order issued by a banking agency or a court of competent jurisdiction; provided, that it shall be the Company's burden to prove that any such action was so required.

7. Maximization of After-Tax Amounts.  Notwithstanding anything contained herein to the contrary, in the event any payments or benefits Executive becomes entitled to pursuant to this Agreement or any other payments or benefits received or to be received by Executive in connection with a Change in Control or termination of employment (whether pursuant to the terms of any other agreement, plan, or arrangement, or otherwise, with the Company, any Person whose actions result in a Change in Control, or any affiliate of the Company or such Person) (collectively the "Payments") will be subject to the tax (the "Excise Tax") imposed by Code Section 4999, the payments or benefits due under this Agreement shall be reduced so that the Payments will not result in the imposition of such Excise Tax.  The Payment reduction contemplated by the preceding sentence shall be implemented by determining the "Parachute Payment Ratio" (as defined below) for each "parachute payment" within the meaning of Code Section 280G ("Section 280G"), and then reducing the "parachute payments" in order beginning with the "parachute payment" with the highest Parachute Payment Ratio.  For "parachute payments" with the same Parachute Payment Ratio, such "parachute payments" shall be reduced based on the time of payment of such "parachute payments" with amounts having later payment dates being reduced first.  For "parachute payments" with the same Parachute Payment Ratio and the same time of payment, such "parachute payments" shall be reduced on a pro rata basis (but not below zero) prior to reducing "parachute payments" with a lower Parachute Payment Ratio.  For purposes hereof, the term "Parachute Payment Ratio" shall mean a fraction, the numerator of which is the value of the applicable "parachute payment" for purposes of Section 280G and the denominator of which is the intrinsic value of such "parachute payment."  For purposes of determining whether any of the Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) the entire amount of the Payments shall be treated as "parachute payments" within the meaning of Code Section 280G(b)(2) and as subject to the Excise Tax, unless and to the extent, in the written opinion of the Company's independent accountants and as reasonably acceptable to Executive, such payments (in whole or in part) are not subject to the Excise Tax; and (ii) the value of any noncash benefits or any deferred payment or benefit (constituting a part of the Payments) shall be determined by the Company's independent auditors in accordance with the principles of Code Sections 280G(d)(3) and (4).  Notwithstanding the foregoing, if (i) the Payments exceed three (3) times Executive's "base amount" as defined within Section 280G and (ii) Executive would receive at least $50,000 more on a net after-tax basis if her Payments were not reduced pursuant to this Section 7 (after Executive's payment of the Excise Tax), then the Company will not reduce the Payments to Executive, and Executive shall be responsible for the Excise Tax related thereto.  For purposes of determining the net after-tax benefit, Executive shall be deemed to pay federal income taxes at the highest marginal rate of the federal income taxation applicable to individuals (without taking into account surtaxes or loss or reduction of deductions) for the calendar year in which the Termination Date occurs and state and local income taxes at the highest marginal rates of taxation in the state and locality of your residence on the Termination Date.

8. Representations and Warranties.

(a) Executive represents and warrants to the Company that her execution, delivery, and performance of this Agreement will not result in or constitute a breach of or conflict with any term, covenant, condition, or provision of any commitment, contract, or other agreement or instrument, including, without limitation, any other employment agreement, to which Executive is or has been a party.

(b) Executive shall indemnify, defend, and hold harmless the Company for, from, and against any and all losses, claims, suits, damages, expenses, or liabilities, including court costs and counsel fees, which the Company has incurred or to which the Company may become subject, insofar as such losses, claims, suits, damages, expenses, liabilities, costs, or fees arise out of or are based upon any failure of any representation or warranty of Executive in Section 8(a) hereof to be true and correct when made.

9. Notices. All notices, consents, waivers, or other communications which are required or permitted hereunder shall be in writing and shall be deemed to have been duly given when delivered personally or by messenger, transmitted by telex or telegram, by express courier, or sent by registered or certified mail, return receipt requested, postage prepaid.  All communications shall be addressed to the appropriate address of each party as follows:

If to NBTB or NBT Bank:

NBT Bancorp Inc.

52 South Broad Street

Norwich, New York 13815

Attention: Chief Executive Officer

With a required copy to:

Richard Schaberg

Hogan Lovells US L.L.P.

555 13^th Street, N.W.

Washington, D.C. 20004-1109

Fax: (202) 637-5910

If to Executive, to Executive's most recent address on file with the Company.

All such notices shall be deemed to have been given on the date delivered, transmitted, or mailed in the manner provided above.

10. Assignment; Successors.  Neither party may assign this Agreement or any rights or obligations hereunder without the consent of the other party.  This Agreement shall inure to the benefit of, and be binding upon, any corporate or other successor or assignee of the Company which shall acquire, directly or indirectly, by merger, consolidation, purchase, or otherwise, all or substantially all of the business or assets of the Company.  The Company shall require any such successor, by an agreement in form and substance satisfactory to Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Company would be required to perform if no such succession had taken place.  This Agreement shall inure to the benefit of and be enforceable by Executive's personal or legal representatives, executors, administrators, successors, heirs, distributes, devisees, and legatees.  If Executive should die while any amount would still be payable to Executive hereunder if Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive's devisee, legatee, or other designee, or if there is no such designee, to Executive's estate.

11. Governing Law.  This Agreement shall be governed by, construed, and enforced in accordance with the laws of the State of New York, without giving effect to the principles of conflicts of law thereof.  The parties hereby designate Chenango County, New York to be the proper jurisdiction and venue for any suit or action arising out of this Agreement.  Each of the parties consents to personal jurisdiction in such venue for such a proceeding and agrees that it may be served with process in any action with respect to this Agreement or the transactions contemplated thereby by certified or registered mail, return receipt requested, or to its registered agent for service of process in the State of New York.  Each of the parties irrevocably and unconditionally waives and agrees, to the fullest extent permitted by law, not to plead any objection that it may now or hereafter have to the laying of venue or the convenience of the forum of any action or claim with respect to this Agreement or the transactions contemplated thereby brought in the courts aforesaid.

12. Entire Agreement; Amendment; Waiver.  This Agreement constitutes the entire understanding between the Company and Executive relating to the subject matter hereof.  Any previous discussions, agreements, commitments, or understandings between the parties hereto or between Executive and NBTB, NBT Bank, or any of their affiliates, whether oral or written, regarding the subject matter hereof, including without limitation the terms and conditions of employment, compensation, benefits, retirement, competition following employment, and the like, are superseded by this Agreement.  Without limitation, this Agreement expressly supersedes the Previous Employment Agreement.  Neither this Agreement nor any provisions hereof can be modified, changed, discharged, or terminated except by an instrument in writing signed by the party against whom any waiver, change, discharge, or termination is sought.  No waiver, by either party hereto at any time, of any breach by the other party hereto or of compliance with any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same, or at any prior or subsequent, time.

13. Illegality; Severability.

(a) Notwithstanding anything in this Agreement to the contrary, this Agreement is not intended and shall not be construed to require any payment to Executive which would violate any federal or state statute or regulation, including without limitation the "golden parachute payment regulations" of the Federal Deposit Insurance Corporation codified to Part 359 of title 12, Code of Federal Regulations.

(b) If any provision or provisions of this Agreement shall be held to be invalid, illegal, or unenforceable for any reason whatsoever:

(i) the validity, legality, and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal, or unenforceable) shall not in any way be affected or impaired thereby; and

(ii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provisions held to be invalid, illegal, or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal, or unenforceable.

14. 409A Compliance.

(a) The intent of the parties is that payments and benefits under this Agreement comply with Code Section 409A and the regulations and guidance promulgated thereunder and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith.  In no event whatsoever shall NBTB, NBT Bank, or any of their directors, officers, employees, or agents be liable for any additional tax, interest, or penalty that may be imposed on Executive by Code Section 409A or damages for failing to comply with Code Section 409A.  Notwithstanding any other provision of this Agreement to the contrary, in no event shall any payment under this Agreement that constitutes "deferred compensation" for purposes of Code Section 409A be subject to offset, counterclaim, or recoupment by any other amount payable to Executive unless otherwise permitted by Code Section 409A.  For purposes of Code Section 409A, Executive's right to receive any installment payment pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.

(b) Notwithstanding any other payment schedule provided herein to the contrary, if Executive is deemed on the Termination Date a "specified employee" within the meaning of that term under Code Section 409A, then each of the following shall apply:

(i) With regard to any payment that is considered deferred compensation under Code Section 409A payable on account of a "separation from service," such payment shall be made on the date which is the earlier of (A) the expiration of the six (6)-month period measured from the date of Executive's "separation from service," and (B) the date of Executive's death (the "Delay Period"), to the extent required under Code Section 409A.  Upon the expiration of the Delay Period, all payments delayed pursuant to this Section 14 (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid to Executive in a lump sum, and all remaining payments due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein; and

(ii) To the extent that any benefits to be provided during the Delay Period are considered deferred compensation under Code Section 409A provided on account of a "separation from service," and such benefits are not otherwise exempt from Code Section 409A, Executive shall pay the cost of such benefits during the Delay Period, and the Company shall reimburse Executive, to the extent that such costs would otherwise have been paid by the Company or to the extent that such benefits would otherwise have been provided by the Company at no cost to Executive, the Company's share of the cost of such benefits upon expiration of the Delay Period, and any remaining benefits shall be reimbursed or provided by the Company in accordance with the procedures specified herein.

15. Arbitration.  Subject to the right of each party to seek specific performance (which right shall not be subject to arbitration), if a dispute arises out of or is in any way related to this Agreement or the asserted breach thereof, such dispute shall be referred to arbitration before the American Arbitration Association the ("AAA") pursuant to the AAA's National Rules for the Resolution of Employment Disputes (the "Arbitration Rules").  A dispute subject to the provisions of this Section 15 will exist if either party notifies the other party in writing that a dispute subject to arbitration exists and states, with reasonable specificity, the issue subject to arbitration (the "Arbitration Notice").  The parties agree that, after the issuance of the Arbitration Notice, the parties will try in good faith between the date of the issuance of the Arbitration Notice and the date the dispute is set for arbitration to resolve the dispute by mediation in accordance with the Arbitration Rules.  If the dispute is not resolved by the date set for arbitration, then any controversy or claim arising out of this Agreement or the asserted breach hereof shall be resolved by binding arbitration and judgment upon any award rendered by arbitrator(s) may be entered in a court having jurisdiction. In the event any claim or dispute involves an amount in excess of $100,000, either party may request that the matter be heard and resolved by a single arbitrator.  The arbitrator shall have the same power to compel the attendance of witnesses and to order the production of documents or other materials and to enforce discovery as could be exercised by a United States District Court judge sitting in Chenango County, New York.  In the event of any arbitration, each party shall have a reasonable right to conduct discovery to the same extent permitted by the Federal Rules of Civil Procedure, provided that discovery shall be concluded within ninety (90) days after the date the matter is set for arbitration.  The arbitrator or arbitrators shall have the power to award reasonable attorneys' fees to the prevailing party.  Any provisions in this Agreement to the contrary notwithstanding, this Section 15 shall be governed by the Federal Arbitration Act, and the parties have entered into this Agreement pursuant to such act.

16. Costs of Litigation.  In the event litigation is commenced to enforce any of the provisions hereof, or to obtain declaratory relief in connection with any of the provisions hereof, the prevailing party shall be entitled to recover reasonable attorneys' fees.  In the event this Agreement is asserted in any litigation as a defense to any liability, claim, demand, action, cause of action, or right asserted in such litigation, the party prevailing on the issue of that defense shall be entitled to recovery of reasonable attorneys' fees.

17. Company Right to Recover.  If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company as a result of misconduct, with regard to any financial reporting requirement under the securities laws, and Executive is subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002 and Executive knowingly engaged in the misconduct, was grossly negligent in engaging in the misconduct, knowingly failed to prevent the misconduct, or was grossly negligent in failing to prevent the misconduct, Executive shall reimburse the Company the amount of any payment earned or accrued during the twelve (12)-month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever first occurred) of the financial document that contained such material noncompliance.

Notwithstanding anything in this Agreement, if the Company is required to prepare an accounting restatement, Executive will forfeit any payments made based on the achievement of pre-established performance goals that are later determined, as a result of the accounting restatement, not to have been achieved.

To the extent that any payment is made to Executive pursuant to this Agreement and information later becomes available that would have led to supervisory disapproval of the payment, then the Company and its successors expressly reserve the right to suspend or deny full allocation of all remaining payments and/or compel repayment of any or all dispersed payments, should later information warrant such action.  Subsequent information which would lead to the exercise of these rights would include, without limitation, any information indicating that Executive has committed, is substantially responsible for, or has violated the respective acts or omissions, conditions, or offenses outlined in 12 C.F.R. section 359.4(a)(4).

18. Cooperation.  The parties agree that certain matters in which Executive will be involved during the Term of Employment may necessitate Executive's cooperation in the future. Accordingly, following the termination of Executive's employment for any reason, to the extent reasonably requested by the Board, Executive shall cooperate with the Company in connection with matters arising out of Executive's service to the Company; provided, that the Company shall make reasonable efforts to minimize disruption of Executive's other activities. The Company shall reimburse Executive for reasonable expenses incurred in connection with such cooperation and, to the extent that Executive is required to spend substantial time on such matters, the Company shall compensate the Executive at an hourly rate based on Executive's Base Salary on the Termination Date or at another mutually agreed upon rate.

19. Affiliation.  A company will be deemed to be an "affiliate" of, or  "affiliated" with NBTB or NBT Bank according to the definition of "Affiliate" set forth in Rule 12b-2 of the General Rules and Regulations under the Exchange Act.

20. Headings.  The section and subsection headings herein have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms or provisions hereof.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties hereto have executed or caused this Agreement to be executed as of the day and year first above written.

NBT BANCORP INC.

By:

Name: John H. Watt, Jr.

Title: President & Chief Executive Officer

EXECUTIVE

Sarah A. Halliday

Exhibit A

SEPARATION AGREEMENT AND RELEASE

I.              In consideration of receipt and acceptance of the separation payments described in the Employment Agreement and listed on Appendix A between NBT BANCORP INC. ("NBTB") and Sarah A. Halliday ("Executive"), dated April 3, 2017 (the "Employment Agreement"), into which this Separation Agreement and Release ("Separation Agreement") is incorporated by reference, Executive, on behalf of herself and her agents, heirs, executors, administrators, successors, and assigns, unconditionally and generally releases NBTB and NBT Bank, National Association ("NBT Bank"), their respective current and former owners, officers, directors, parents, affiliates, subsidiaries, related entities, agents and employees, and the heirs, executors, administrators, successors and assigns of all of the foregoing (collectively, "Releasee"), from or in connection with, and Executive hereby waives and/or settles, with prejudice, any and all complaints, causes of action, suits, controversies, or any liability, claims, demands, or damages, known or unknown and of any nature whatsoever and which Executive ever had, now has or shall or may have as of the date of this Separation Agreement, including without limitation, those arising directly or indirectly pursuant to or out of any aspect of Executive's employment or termination from employment with NBTB, NBT Bank or any other Releasee.

II.            Specifically, without limitation of the foregoing, and except as to the enforcement of this Separation Agreement and any rights which cannot be waived as a matter of law, the release and waiver of claims under this Separation Agreement shall include and apply to any rights and/or claims (i) arising under any contract or employment arrangement, express or implied, written or oral; (ii) for wrongful dismissal or termination of employment; (iii) arising under any applicable federal, state, local or other statutes, laws, ordinances, regulations or the like, or case law, that relate to employment or employment practices and/or specifically, that prohibit discrimination based upon age, race, religion, sex, national origin, disability, genetic information or any other unlawful bases, including without limitation, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, the Civil Rights Act of 1866, the Equal Pay Act of 1963, the Family Medical Leave Act of 1993, the Fair Labor Standards Act, the Employee Retirement Income Security Act of 1974, Executive Order 11246, the Worker Adjustment and Retraining Notification Act, the New York State Human Rights Law, the New York City Human Rights Law, the New York Labor Law, all as amended, and any other statutes, orders, laws, ordinances, regulations applicable to Employee's employment, of any state or city in which any Releasee is subject to jurisdiction, and/or any political subdivision thereof; (iv) based upon any other federal, state or local statutes, orders, laws, ordinances, regulations, case law, public policy, or common law or the like; (v) concerning recruitment, hiring, discharge, promotions, transfers, employment status, right to reemployment, wages, bonus or incentive pay, severance pay, stock or stock options, employment benefits (including, without limitation, sick or other leave, medical, disability, life, or any other insurance, 401(k), pension, other retirement plans or benefits, or any other fringe benefits), workers' compensation, intentional or negligent misrepresentation and/or infliction of emotional distress, interference with contract, fraud, libel, slander, defamation, invasion of privacy or loss of consortium, together with any and all tort, contract, or other claims which have been or might have been asserted by Executive or on herbehalf in any suit, charge of discrimination, or claim against the Releasee; and (vi) for damages, including without limitation, punitive or compensatory damages, or for attorneys' fees, expenses, costs, wages, injunctive or equitable relief.

III.           Executive expressly understands and acknowledges that it is possible that unknown losses or claims exist or that present losses may have been underestimated in amount or severity, and Executive explicitly took that into account in determining the amount of consideration to be paid for the giving of the release in this Separation Agreement, and a portion of said consideration and the mutual covenants were given in exchange for a full satisfaction and discharge of such claims.

IV.           Executive and NBT Bank acknowledge that the above release and waiver of claims shall not apply to the obligation of NBT Bank to make payments (if any) of any vested benefit under NBT Bank's tax-qualified employee benefit plans nor to Executive's right to continue healthcare insurance under the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985.

V.            Executive represents and warrants that she has not filed or commenced any complaints, claims, actions or proceeding of any kind against any Releasee with any federal, state or local court or any administrative or regulatory body.  Executive agrees not to commence or participate as a party in any proceeding in any court or forum against any Releasee which is based upon any act, omission or occurrence up to and including the date of the execution of this Separation Agreement.  Executive further agrees not to encourage or participate in any action or proceeding brought by any person (except a government agency) against any Releasee.  Notwithstanding the foregoing, this Separation Agreement does not affect Executive's right to file a charge or complaint with any state, local or federal agency or to participate or cooperate in such a matter.  However, Executive acknowledges that she is not entitled to monetary damages resulting from any such actions.

VI.           This Separation Agreement is not and shall not be construed as an admission by any Releasee or Executive of any wrongdoing or illegal acts or omissions and each party expressly denies that they engaged in any wrongdoing or illegal or acts or omissions.  Executive shall not, except as may be required by law, make any oral or written negative, disparaging or adverse statements, suggestions or representations of or concerning NBT Bank or any Releasee.

VII.         Executive agrees to cooperate reasonably with and to be readily available to NBT Bank to assist in any matter, including government agency investigations, court litigation or potential litigation, about which Executive may have knowledge.  If Executive receives a subpoena or other legal process relating in any way to same, Executive immediately will provide NBT Bank notice of the contact or the service of such subpoena or other legal process, and shall cooperate with NBT Bank in responding.

VIII.        Except as prohibited by law, each Releasee shall be excused from any obligation to make payment of the separation payments in the Employment Agreement in the event that  paragraphs I through IV of this Separation Agreement are determined to be void or unenforceable, in whole or in part; or Executive is found to have made a material misstatement in any term, condition, representation or acknowledgement in this Separation Agreement, in either of which event Executive shall also be liable for any damages and costs suffered or incurred by any Releasee by reason of such misstatement or breach.

IX.          This Separation Agreement shall be incorporated by reference into the Employment Agreement and shall be made a part thereof.

X.            Executive agrees and acknowledges that:

(a) With respect to the General Release in Section II hereof, Executive agrees and understands that she is specifically releasing all claims under the Age Discrimination in Employment Act, as amended, 29 U.S.C. § 621 et seq.  Executive acknowledges that she has read and understands this Agreement and executes it voluntarily and without coercion;

(b)  Executive has been advised by NBT Bank to consult with an attorney before executing this Separation Agreement and has been given twenty-one (21) days to review this Separation Agreement and to consider whether to sign this Separation Agreement.  Executive may elect to sign this Separation Agreement prior to the expiration of the twenty-one (21) day consideration period specified herein, and Executive agrees that if she elects to do so, such election is knowing and voluntary and comes after full opportunity to consult with an attorney;

(c)  Executive has the right to revoke this Separation Agreement within the seven (7) day period following the date Executive signs this Separation Agreement (the "Revocation Period") and any revocation shall be made by providing a signed notice in writing, delivered personally or by fax to the Chief Human Resources Officer at NBT Bancorp, 52 South Broad Street, Norwich, New York, 13815 no later than 5:00 p.m. on the seventh calendar day following her execution of this Separation Agreement;

(d) This Separation Agreement will not be effective or enforceable, and the separation payments under the Employment Agreement are not required and shall not be delivered or paid, until Executive has delivered a signed, notarized original of this Separation Agreement to the Chief Human Resources Officer at NBT Bancorp, 52 South Broad Street, Norwich, New York, 13815 and the Revocation Period has expired without revocation of this Separation Agreement.  It is not necessary that any Releasee sign this Separation Agreement following Executive's full and complete execution of it for it to become fully effective and enforceable;

(e) Executive relied solely on her own judgment and/or that of this attorney regarding the consideration for and the terms of this Separation Agreement and is signing this Separation Agreement knowingly and voluntarily of her own free will;

(f) Executive is not entitled to the separation payments under the Employment Agreement unless she agrees to and honors the terms of the terms of this Separation Agreement; and

(g) Executive has read and understands this Separation Agreement and further understands that, subject to the limitations contained herein, it includes a general release of any and all known and unknown, foreseen or unforeseen claims presently asserted or otherwise arising through the date of her singing of this Separation Agreement that she may have against any Releasee.

XI.          Executive understands all of the terms of this Separation Agreement, and agrees that such terms are fair, reasonable and are not the result of any fraud, duress, coercion, pressure or undue influence exercised by or on behalf of any Releasee; and Executive has agreed to and entered into this Separation Agreement and all of its terms, knowingly, freely and voluntarily.

XII.         There are no other agreements of any nature between any Releasee and Executive with respect to the matters discussed in this Separation Agreement with respect to the matters discussed in this Separation Agreement, except as expressly stated herein, and in signing this Separation Agreement, Executive is not relying on any agreements or representation, except those expressly contained in this Separation Agreement.

XIII.        This Separation Agreement shall be governed by the laws of New York, excluding the choice of law rules thereof.

XIV.        This Separation Agreement may be executed in counterparts, each of which shall be deemed an original, and, when executed by all parties to this Separation Agreement, shall constitute one and the same instrument.  Facsimile or PDF transmissions of this Separation Agreement signed by any party hereto shall be deemed an original counterpart and binding.

[Remainder of page intentionally left blank; signature page to follow]

IN WITNESS WHEREOF, the parties hereto have executed this Separation Agreement.

Date

Sarah A. Halliday

STATE OF NEW YORK	)
	:  ss.:
COUNTY OF	)

On the ____ day of _________, 20__, personally came _________________ and being duly sworn, acknowledged that she is the person described in and who executed the foregoing Separation Agreement and acknowledged that she executed same.

Notary Public

NBT BANCORP INC.

By:

Date:

Title:

Appendix A

[Separation Payments]

EX-21

EXHIBIT 21

List of Subsidiaries of the Registrant

	Jurisdiction of Incorporation	Names Under Which Subsidiary does Business
NBT Bancorp Inc. Subsidiaries:
NBT Bank, National Association	Organized in the United States of America	NBT Bank
NBT Financial Services, Inc.	Delaware	NBT Financial Services
Hathaway Agency, Inc.	New York	Hathaway Agency
CNBF Capital Trust I	Delaware	CNBF Capital Trust I
NBT Statutory Trust I	Delaware	NBT Statutory Trust I
NBT Statutory Trust II	Delaware	NBT Statutory Trust II
NBT Holdings, Inc.	New York	NBT Holdings
Alliance Financial Capital Trust I	Delaware	Alliance Financial Capital Trust I
Alliance Financial Capital Trust II	Delaware	Alliance Financial Capital Trust II
NBT Bank, National Association Subsidiaries:
NBT Capital Corp.	New York	NBT Capital Corp.
LA Lease, Inc.	Pennsylvania	LA Lease
Colonial Financial Services, Inc.	New York	Colonial Financial Services
NBT Services, Inc.	Delaware	NBT Services
Broad Street Property Associates, Inc.	New York	Broad Street Property Associates
Pennstar Bank Services Company	Delaware	Pennstar Bank Services
FNB Financial Services, Inc.	Delaware	FNB Financial Services
CNB Realty Trust	Maryland	CNB Realty Trust
Alliance Preferred Funding Corp.	Delaware	Alliance Preferred Funding
Alliance Leasing, Inc.	New York	Alliance Leasing
NBT Financial Services, Inc. Subsidiaries:
Pennstar Financial Services, Inc.	Pennsylvania	Pennstar Financial Services
EPIC Advisors, Inc.	New York	EPIC Advisors
Columbia Ridge Capital Management, Inc.	New York	Columbia Ridge Capital Management
NBT Holdings, Inc. Subsidiaries:
NBT Insurance Agency, LLC	New York	NBT - Mang Insurance Agency

EX-23

 EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

NBT Bancorp Inc.:

We consent to incorporation by reference in the Registration Statements on Form S-3 (File No. 333-203795) and Forms S-8 (File Nos. 333-71830, 333-72772, 333-73038, 333-66472, 333-97995, 333-107479, 333-107480, 333-127098, 333-139956, 333-150956 and 333-168332) of NBT Bancorp Inc. and subsidiaries (the "Company") of our reports dated March 1, 2018, with respect to the consolidated balance sheets of the Company as of December 31, 2017 and 2016, and the related consolidated statements of income, comprehensive income, changes in stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 2017 and the related notes (collectively, the "consolidated financial statements"), and the effectiveness of internal control over financial reporting as of December 31, 2017, which reports appear in the December 31, 2017 annual report on Form 10-K of NBT Bancorp Inc.

/s/ KPMG LLP

Albany, New York

March 1, 2018

EX-31.1

EXHIBIT 31.1

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

 I, John H. Watt Jr., certify that:

1.  I have reviewed this annual report on Form 10-K 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:  March 1, 2018

By:	/s/ John H. Watt Jr.
	John H. Watt Jr.
	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 annual report on Form 10-K 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:  March 1, 2018

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-K of the Company for the Annual Period Ended December 31, 2017, 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/ John H. Watt Jr.

John H. Watt Jr.

Chief Executive Officer

March 1, 2018

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-K of the Company for the Annual Period Ended December 31, 2017,  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

March 1, 2018

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

Document and Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2017	Feb. 09, 2018	Jun. 30, 2017
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 Public Float			$ 1,569,184,151
Entity Common Stock, Shares Outstanding		43,592,795
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	FY
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2017

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Assets
Cash and due from banks	$ 156,852	$ 147,789
Short-term interest bearing accounts	2,812	1,392
Securities available for sale, at fair value	1,255,925	1,338,290
Securities held to maturity (fair value $481,871 and $525,050)	484,073	527,948
Trading securities	11,467	9,259
Federal Reserve Bank and Federal Home Loan Bank stock	46,706	47,033
Loans	6,584,773	6,198,057
Less allowance for loan losses	69,500	65,200
Net loans	6,515,273	6,132,857
Premises and equipment, net	81,305	84,187
Goodwill	268,043	265,439
Intangible assets, net	13,420	15,815
Bank owned life insurance	172,388	168,012
Other assets	128,548	129,247
Total assets	9,136,812	8,867,268
Liabilities
Demand (noninterest bearing)	2,286,892	2,195,845
Savings, NOW and money market	4,076,978	3,905,432
Time	806,766	872,411
Total deposits	7,170,636	6,973,688
Short-term borrowings	719,123	681,703
Long-term debt	88,869	104,087
Junior subordinated debt	101,196	101,196
Other liabilities	98,811	93,278
Total liabilities	8,178,635	7,953,952
Stockholders' equity
Preferred stock, $0.01 par value; authorized 2,500,000 shares at December 31, 2017 and 2016	0	0
Common stock, $0.01 par value; authorized 100,000,000 shares at December 31, 2017 and 2016, respectively; issued 49,651,493 at December 31, 2017 and 2016	497	497
Additional paid-in-capital	574,209	575,078
Retained earnings	543,713	501,761
Accumulated other comprehensive loss	(22,077)	(21,520)
Common stock in treasury, at cost, 6,108,684 and 6,393,743 shares at December 31, 2017 and 2016, respectively	(138,165)	(142,500)
Total stockholders' equity	958,177	913,316
Total liabilities and stockholders' equity	$ 9,136,812	$ 8,867,268

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Assets
Securities held to maturity fair value	$ 481,871	$ 525,050
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)	49,651,493	49,651,493
Common stock in treasury, at cost (in shares)	6,108,684	6,393,743

XML

Consolidated Statements of Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Interest, fee and dividend income
Interest and fees on loans	$ 267,096	$ 250,994	$ 241,828
Securities available for sale	28,564	24,033	20,418
Securities held to maturity	10,934	9,852	9,233
Other	2,813	2,068	1,745
Total interest, fee and dividend income	309,407	286,947	273,224
Interest expense
Deposits	14,475	14,366	14,257
Short-term borrowings	5,996	2,309	783
Long-term debt	2,299	3,204	3,355
Junior subordinated debt	3,144	2,627	2,221
Total interest expense	25,914	22,506	20,616
Net interest income	283,493	264,441	252,608
Provision for loan losses	30,988	25,431	18,285
Net interest income after provision for loan losses	252,505	239,010	234,323
Noninterest income
Insurance and other financial services revenue	23,532	24,396	24,211
Service charges on deposit accounts	16,750	16,729	17,056
ATM and debit card fees	21,372	19,448	18,248
Retirement plan administration fees	20,213	16,063	14,146
Trust	19,586	18,565	19,026
Bank owned life insurance income	5,175	5,195	4,334
Net securities gains (losses)	1,867	(644)	3,087
Gain on the sale of equity investment	818	0	4,179
Other	11,991	15,961	14,194
Total noninterest income	121,304	115,713	118,481
Noninterest expense
Salaries and employee benefits	133,610	131,284	125,633
Occupancy	21,808	20,940	22,095
Data processing and communications	17,068	16,495	16,588
Professional fees and outside services	13,499	13,617	13,407
Equipment	15,225	14,295	13,408
Office supplies and postage	6,284	6,168	6,367
FDIC expenses	4,767	5,111	5,145
Advertising	2,744	2,556	2,654
Amortization of intangible assets	3,960	3,928	4,864
Loan collection and other real estate owned, net	4,763	3,458	2,620
Other	21,920	18,070	23,395
Total noninterest expense	245,648	235,922	236,176
Income before income tax expense	128,161	118,801	116,628
Income tax (expense) benefit	46,010	40,392	40,203
Net income	$ 82,151	$ 78,409	$ 76,425
Earnings per share
Basic (in dollars per share)	$ 1.89	$ 1.81	$ 1.74
Diluted (in dollars per share)	$ 1.87	$ 1.80	$ 1.72

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Consolidated Statements of Comprehensive Income [Abstract]
Net income	$ 82,151	$ 78,409	$ 76,425
Other comprehensive (loss) income, net of tax:
Unrealized net holding (losses) arising during the year (pre-tax amounts of $(6,915), $(8,618) and $(3,159))	(4,070)	(5,265)	(1,930)
Reclassification adjustment for net (gains) losses related to securities available for sale included in net income (pre-tax amounts of ($1,869), $644 and ($3,087))	(1,153)	393	(1,886)
Reclassification adjustment for an impairment write-down of an equity security (pre-tax amounts of $1,312, $- and $-)	811	0	0
Unrealized gains on derivatives (cash flow hedges) (pre-tax amounts of $609, $2,901 and $-)	372	1,772	0
Amortization of unrealized net gains and losses related to the reclassification of available for sale securities to held to maturity (pre-tax amounts of $875, $1,094 and $1,311)	540	668	801
Pension and other benefits:
Amortization of prior service cost and actuarial gains (pre-tax amounts of $1,852, $2,370 and $2,239)	1,112	1,421	1,371
Decrease (increase) in unrecognized actuarial loss (pre-tax amounts of $2,401, $3,154 and $(6,144))	1,831	1,909	(3,747)
Total other comprehensive (loss) income	(557)	898	(5,391)
Comprehensive income	$ 81,594	$ 79,307	$ 71,034

XML

Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Other comprehensive (loss) income, net of tax:
Unrealized net holding (losses) arising during the period , pre-tax amounts	$ (6,915)	$ (8,618)	$ (3,159)
Reclassification adjustment for net (gains) losses related to securities available for sale included in net income, pre-tax amounts	(1,869)	644	(3,087)
Reclassification adjustment for an impairment write-down of equity security, pre-tax amounts	1,312	0	0
Unrealized gain on derivatives (cash flow hedges), pre-tax amounts	609	2,901	0
Amortization of unrealized net gains and losses related to the reclassification of available for sale investment securities to held to maturity, pre-tax amounts	875	1,094	1,311
Amortization of prior service cost and actuarial gains, pre-tax amounts	1,852	2,370	2,239
Decrease (increase) in unrecognized actuarial loss, pre-tax amounts	$ 2,401	$ 3,154	$ (6,144)

XML

Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in-Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive (Loss) Income [Member]	Common Stock in Treasury [Member]	Total
Balance at Dec. 31, 2014	$ 497	$ 576,504	$ 423,956	$ (17,027)	$ (119,749)	$ 864,181
Net income	0	0	76,425	0	0	76,425
Cash dividends	0	0	(38,149)	0	0	(38,149)
Purchase of treasury shares	0	0	0	0	(26,797)	(26,797)
Net issuance of shares to employee and other stock plans, including tax benefit for 2016 and 2015	0	(3,864)	0	0	11,513	7,649
Stock-based compensation	0	4,086	0	0	0	4,086
Other comprehensive income (loss)	0	0	0	(5,391)	0	(5,391)
Balance at Dec. 31, 2015	497	576,726	462,232	(22,418)	(135,033)	882,004
Net income	0	0	78,409	0	0	78,409
Cash dividends	0	0	(38,880)	0	0	(38,880)
Purchase of treasury shares	0	0	0	0	(17,193)	(17,193)
Net issuance of shares to employee and other stock plans, including tax benefit for 2016 and 2015	0	(6,026)	0	0	9,726	3,700
Stock-based compensation	0	4,378	0	0	0	4,378
Other comprehensive income (loss)	0	0	0	898	0	898
Balance at Dec. 31, 2016	497	575,078	501,761	(21,520)	(142,500)	913,316
Net income	0	0	82,151	0	0	82,151
Cash dividends	0	0	(40,104)	0	0	(40,104)
Net issuance of shares to employee and other stock plans, including tax benefit for 2016 and 2015	0	(4,608)	0	0	4,335	(273)
Stock-based compensation	0	3,739	(95)	0	0	3,644
Other comprehensive income (loss)	0	0	0	(557)	0	(557)
Balance at Dec. 31, 2017	$ 497	$ 574,209	$ 543,713	$ (22,077)	$ (138,165)	$ 958,177

XML

Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) - $ / shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Consolidated Statements of Changes in Stockholders' Equity [Abstract]
Cash dividends - per share (in dollars per share)	$ 0.92	$ 0.90	$ 0.87
Purchase of treasury shares (in shares)	0	675,535	1,047,152
Net issuance of shares to employee and other stock plans, including tax benefit for 2016 and 2015 (in shares)	285,059	502,585	581,400

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Operating activities
Net income	$ 82,151	$ 78,409	$ 76,425
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses	30,988	25,431	18,285
Depreciation and amortization of premises and equipment	9,056	9,023	8,646
Net accretion on securities	4,786	5,278	2,554
Amortization of intangible assets	3,960	3,928	4,864
Excess tax benefit on stock-based compensation	1,769	1,055	(43)
Stock-based compensation expense	3,644	4,378	4,086
Bank owned life insurance income	(5,175)	(5,195)	(4,334)
Trading security purchases	(1,586)	(287)	(810)
Net unrealized (gains) losses in trading securities	(623)	(594)	226
Proceeds from sales of loans held for sale	111,284	96,603	72,498
Originations and purchases of loans held for sale	(111,206)	(96,692)	(69,677)
Net gains on sales of loans held for sale	(349)	(499)	(239)
Net security (gains) losses	(1,867)	644	(3,087)
Net (gains) on sales and write-down of other real estate owned	(221)	(687)	(1,337)
(Gain) on sale of equity investment	(818)	0	(4,179)
Impairment write-down of equity security	1,312	0	0
Impairment write-down of goodwill and intangible assets	1,530	2,565	0
(Gain) on asset sold	0	(2,462)	0
Re-evaluation of deferred tax amounts from Tax Act	4,407	0	0
Net decrease in other assets	28	364	15,386
Net increase (decrease) in other liabilities	3,834	(10,697)	5,236
Net cash provided by operating activities	136,904	110,565	124,500
Investing activities
Net cash (used in) acquisitions	(4,000)	(2,000)	(3,100)
Securities available for sale:
Proceeds from maturities, calls and principal paydowns	290,613	324,781	299,302
Proceeds from sales	14,788	98,466	15,091
Purchases	(233,804)	(597,428)	(481,262)
Securities held to maturity:
Proceeds from maturities, calls, and principal paydowns	103,759	100,893	79,212
Proceeds from sales	764	0	0
Purchases	(60,706)	(157,418)	(95,272)
Other:
Net increase in loans	(419,114)	(344,448)	(315,363)
Proceeds from Federal Home Loan Bank stock redemption	248,887	158,818	60,852
Purchases of Federal Reserve Bank and Federal Home Loan Bank stock	(248,560)	(169,178)	(64,899)
Proceeds from settlement of bank owned life insurance	799	1,477	1,541
Purchase of bank owned life insurance	0	(47,250)	0
Purchases of premises and equipment, net	(6,691)	(3,308)	(8,193)
Proceeds from sale of equity investment	818	0	4,179
Proceeds from sales of other real estate owned	7,254	6,635	3,908
Net cash provided by (used in) investing activities	(305,193)	(629,960)	(504,004)
Financing activities
Net increase in deposits	196,948	368,845	305,238
Net increase in short-term borrowings	37,419	239,222	125,679
Proceeds from issuance of long-term debt	25,000	23,880	0
Repayments of long-term debt	(40,218)	(50,240)	(498)
Proceeds from the issuance of shares to employee benefit plans and other stock plans	3,309	6,032	9,356
Cash paid by employer for tax-withholding on stock issuance	(3,582)	(3,387)	(1,664)
Purchase of treasury stock	0	(17,193)	(26,797)
Cash dividends	(40,104)	(38,880)	(38,149)
Net cash provided by (used in) financing activities	178,772	528,279	373,165
Net increase (decrease) in cash and cash equivalents	10,483	8,884	(6,339)
Cash and cash equivalents at beginning of year	149,181	140,297	146,636
Cash and cash equivalents at end of year	159,664	149,181	140,297
Cash paid during the year for:
Interest expense	25,887	22,466	20,908
Income taxes paid, net of refund	33,675	40,879	28,684
Noncash investing activities:
Loans transferred to other real estate owned	5,981	6,863	3,293
Acquisitions:
Fair value of assets acquired	$ 3,096	$ 2,584	$ 1,756

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2017

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

1. Summary of Significant Accounting Policies

The accounting and reporting policies of NBT Bancorp Inc. (“NBT Bancorp”) and its subsidiaries, NBT Bank, National Association (“NBT Bank” or the "Bank"), NBT Holdings, Inc. and NBT Financial Services, Inc., conform, in all material respects, with accounting principles generally accepted in the United States of America (“GAAP”) and to general practices within the banking industry. Collectively, NBT Bancorp and its subsidiaries are referred to herein as “the Company.”

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Estimates associated with the allowance for loan losses, income taxes, pension expense, fair values of financial instruments, status of contingencies and other-than-temporary impairment ("OTTI") on investments are particularly susceptible to material change in the near term.

The following is a description of significant policies and practices:

Consolidation

The accompanying consolidated financial statements include the accounts of NBT Bancorp and its wholly-owned subsidiaries mentioned above. All material intercompany transactions have been eliminated in consolidation. Amounts previously reported in the consolidated financial statements are reclassified whenever necessary to conform to the current year’s presentation. In the “Parent Company Financial Information,” the investment in subsidiaries is recorded using the equity method of accounting.

The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a variable interest entity under GAAP. Voting interest entities are entities in which the total equity investment at risk is sufficient to enable the entity to finance itself independently and provides the equity holders with the obligation to absorb losses, the right to receive residual returns and the right to make decisions about the entity’s activities. The Company consolidates voting interest entities in which it has all, or at least a majority of, the voting interest. As defined in applicable accounting standards, variable interest entities (“VIEs”) are entities that lack one or more of the characteristics of a voting interest entity. A controlling financial interest in a VIE is present when the Company has both the power and ability to direct the activities of the VIE that most significantly impact the VIE's economic performance and an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The Company’s wholly-owned subsidiaries CNBF Capital Trust I, NBT Statutory Trust I, NBT Statutory Trust II, Alliance Financial Capital Trust I and Alliance Financial Capital Trust II are VIEs for which the Company is not the primary beneficiary. Accordingly, the accounts of these entities are not included in the Company’s consolidated financial statements.

Segment Reporting

The Company’s operations are primarily in the community banking industry and include the provision of traditional banking services. The Company also provides other services through its subsidiaries such as insurance, retirement plan administration and trust administration. The Company operates solely in the geographical regions of central and upstate New York, northeastern Pennsylvania, western Massachusetts, southern New Hampshire, Vermont and southern coastal Maine. The Company has no reportable operating segments.

Cash Equivalents

The Company considers amounts due from correspondent banks, cash items in process of collection and institutional money market mutual funds to be cash equivalents for purposes of the consolidated statements of cash flows.

Securities

The Company classifies its securities at date of purchase as either held to maturity ("HTM"), trading or available for sale ("AFS"). HTM debt securities are those that the Company has the ability and intent to hold until maturity. Trading securities are securities purchased with the intent to sell within a short period of time. AFS securities are securities that are not classified as a HTM or trading securities. AFS securities are recorded at fair value. Unrealized holding gains and losses, net of the related tax effect, on AFS securities are excluded from earnings and are reported in the consolidated statements of stockholders’ equity and the consolidated statements of comprehensive income as a component of accumulated other comprehensive income or loss ("AOCI"). HTM securities are recorded at amortized cost. Trading securities are recorded at fair value, with net unrealized gains and losses recognized in income. Transfers of securities between categories are recorded at fair value at the date of transfer. Non-marketable equity securities are carried at cost.

Declines in the fair value of HTM and AFS securities below their amortized cost, less any current period credit loss, that are deemed to be OTTI are reflected in earnings as a realized loss, or in other comprehensive income ("OCI"). The classification is dependent upon whether the Company intends to sell the security, or whether it is more likely than not it will be required to sell the security before recovery. The OTTI 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 OTTI 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 OTTI impairment related to the credit loss shall be recognized in earnings. The amount of the total OTTI related to other factors shall be recognized in OCI, net of applicable taxes.

In estimating OTTI 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.

Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to yield using the interest method. Dividend and interest income are recognized when earned. Realized gains and losses on securities sold are derived using the specific identification method for determining the cost of securities sold.

Investments in Federal Reserve Bank and Federal Home Loan Bank (“FHLB”) stock are required for membership in those organizations and are carried at cost since there is no market value available. The FHLB New York continues to pay dividends and repurchase stock. As such, the Company has not recognized any impairment on its holdings of Federal Reserve Bank and FHLB stock.

Loans

Loans are recorded at their current unpaid principal balance, net of unearned income and unamortized loan fees and expenses, which are amortized under the effective interest method over the estimated lives of the loans. Interest income on loans is accrued based on the principal amount outstanding.

For all loan classes within the Company’s loan portfolio, 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 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.

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. For all loan classes within the Company’s loan portfolio, 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. 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.

Commercial type loans are considered impaired when it is probable that the borrower will not repay the loan according to the original contractual terms of the loan agreement and all loan types are considered impaired if the loan is restructured in a troubled debt restructuring (“TDR”). 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.

A loan is considered to be a TDR when the Company grants a concession to the borrower because of the borrower’s financial condition that the Company would not otherwise consider. Such concessions include the reduction of interest rates, forgiveness of all or a portion of principal or interest, or other modifications at interest rates that are less than the current market rate for new obligations with similar risk. TDR loans are nonaccrual loans; however, they can be returned to accrual status after a period of performance, generally evidenced by six months of compliance with their modified terms.

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.

Acquired Loans

Acquired loans are initially measured at fair value as of the acquisition date without carryover of historical allowance for loan losses.

For loans that meet the criteria stipulated in ASC 310-30, Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality, the Company shall recognize the accretable yield, which is defined as the excess of all cash flows expected at acquisition over the initial fair value of the loan, as interest income on a level-yield basis over the expected remaining life of the loan. The excess of the loan's contractually required payments over the cash flows expected to be collected is the nonaccretable difference. The nonaccretable difference shall not be recognized as an adjustment of yield, a loss accrual or a valuation allowance. Decreases in the expected cash flows in subsequent periods require the establishment of an allowance for loan losses. Improvements in expected cash flows in future periods result in a reduction of the nonaccretable discount, with such amount reclassified as part of the accretable yield and subsequently recognized in interest income over the remaining lives of the acquired loans on a level-yield basis if the amount and timing of future cash flows is reasonably estimable.

Acquired loans that met the criteria for nonaccrual of interest prior to the acquisition are considered performing upon acquisition, regardless of whether the customer is contractually delinquent, if the Company can reasonably estimate the timing and amount of the expected cash flows on such loans and if the Company expects to fully collect the new carrying value of the loans. As such, the Company may no longer consider the loan to be nonaccrual or nonperforming and may accrue interest on these loans, including the impact of any accretable yield. As such, charge-offs on acquired loans are first applied to the nonaccretable difference and then to any allowance for loan losses recognized subsequent to acquisition.

For loans that meet the criteria stipulated in ASC 310-20 - Receivables - Nonrefundable Fees and Other Costs ("ASC 310-20"), the Company shall amortize/accrete into interest income the premium/discount determined at the date of purchase on a level-yield basis over the life of the loan. Subsequent to the acquisition date, the methods utilized to estimate the required allowance for loan losses are similar to originated loans. Loans accounted for under ASC 310-20 are placed on nonaccrual status when past due in accordance with the Company's nonaccrual policy.

An acquired loan may be resolved either through receipt of payment (in full or in part) from the borrower, the sale of the loan to a third party, or foreclosure of the collateral. In the event of a sale of the loan, a gain or loss on sale is recognized and reported within noninterest income based on the difference between the sales proceeds and the carrying amount of the loan. In other cases, individual loans are removed from the pool based on comparing the amount received from its resolution (fair value of the underlying collateral less costs to sell in the case of a foreclosure) with its outstanding balance. Any difference between these amounts is recorded as a charge-off through the allowance for loan losses. Acquired loans subject to modification are not removed from the pool even if those loans would otherwise be deemed TDRs as the pool and not the individual loan, represents the unit of account.

Allowance for Loan Losses

The allowance for loan losses is the amount, which in the opinion of management, is necessary to absorb incurred losses inherent in the loan portfolio. The allowance is determined based upon numerous considerations, including local and regional conditions, the growth and composition of the loan portfolio with respect to the mix between the various types of loans and their related risk characteristics, a review of the value of collateral supporting the loans, comprehensive reviews of the loan portfolio by the independent loan review staff and management, as well as consideration of volume and trends of delinquencies, nonperforming loans and loan charge-offs. Loan losses are charged off against the allowance, while recoveries of amounts previously charged off are credited to the allowance. As a result of tests of adequacy, required additions to the allowance for loan losses are made periodically by charges to the provision for loan losses.

The allowance for loan losses related to impaired loans specifically allocated for impairment is based on discounted expected cash flows using the loan’s initial effective interest rate or the fair value of the collateral for certain loans where repayment of the loan is expected to be provided solely by the underlying collateral ("collateral dependent"). The Company’s impaired loans are generally collateral dependent. The Company considers the estimated cost to sell, on a discounted basis, when determining the fair value of collateral in the measurement of impairment if those costs are expected to reduce the cash flows available to repay or otherwise satisfy the loans.

The allowance for loan losses for homogeneous non impaired loans is calculated using a systematic methodology with both a quantitative and a qualitative analysis that is applied on a quarterly basis. For purposes of our allowance methodology, the loan portfolio is segmented as described in Note 5. Each segment has a distinct set of risk characteristics monitored by management. We further assess andmonitor risk and performance at a more disaggregated level, which includes our internal risk grading system for the commercialsegments.

We first apply historical loss rates to pools of loans with similar risk characteristics. Loss rates are calculated by historical charge-offs that have occurred within each pool of loans over the lookback period ("LBP"), multiplied by the loss emergence period ("LEP"). The LBP represents the historical data period utilized to calculate loss rates. The LEP is an estimate of the average amount of time from the point at which a loss is incurred on a loan to the point at which the loss is confirmed. In general, the LEP will be shorter in an economic slowdown or recession and longer during times of economic stability or growth, as customers are better able to delay loss confirmation after a potential loss event has occurred. In conjunction with our annual review of the ALL assumptions, we update our study of LEPs for each portfolio segment using our loan charge-off history.

After consideration of the historic loss analysis, management applies additional qualitative adjustments so that the allowance for loan losses is reflective of the estimate of incurred losses that exist in the loan portfolio at the balance sheet date.  Qualitative adjustments are made if, in the judgment of management, incurred loan losses inherent in the loan portfolio are not fully captured in the historical loss analysis. Qualitative considerations include the loan portfolio trends, 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 experience across one of 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. The evaluation of the various components of the allowance for loan losses requires considerable judgment in order to estimate inherent loss exposures. 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.

Management believes that the allowance for loan losses is adequate. While management uses available information to recognize loan losses, future additions to the allowance for loan losses may be necessary based on changes in economic conditions or changes in the values of properties securing loans in the process of foreclosure. In addition, various regulatory agencies, as an integral part 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 for loan losses based on their judgments about information available to them at the time of their examination, which may not be currently available to management.

Premises and Equipment

Premises and equipment are stated at cost, less accumulated depreciation. Depreciation of premises and equipment is determined using the straight-line method over the estimated useful lives of the respective assets. Expenditures for maintenance, repairs and minor replacements are charged to expense as incurred.

Other Real Estate Owned

Other real estate owned ("OREO") consists of properties acquired through foreclosure or by acceptance of a deed in lieu of foreclosure. These assets are recorded at the lower of fair value of the asset acquired less estimated costs to sell or “cost” (defined as the fair value at initial foreclosure). At the time of foreclosure, or when foreclosure occurs in-substance, the excess, if any, of the loan over the fair market value of the assets received, less estimated selling costs, is charged to the allowance for loan losses and any subsequent valuation write-downs are charged to other expense. In connection with the determination of the allowance for loan losses and the valuation of OREO, management obtains appraisals for properties. Operating costs associated with the properties are charged to expense as incurred. Gains on the sale of OREO are included in income when title has passed and the sale has met the minimum down payment requirements prescribed by GAAP. The balance of OREO is recorded in other assets on the consolidated balance sheets.

Goodwill and Other Intangible Assets

Goodwill represents the cost of acquired business in excess of the fair value of the related net assets acquired. Goodwill is not amortized but tested at the reporting unit level for impairment on an annual basis and on an interim basis or when events or circumstances dictate. The Company has elected June 30 as the annual impairment testing date for the insurance and retirement services reporting units and December 31 for the Bank reporting unit.

The Company has the option to first assess qualitative factors, by performing a qualitative analysis, to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the events or circumstances, the Company determines it is not more likely than not that the fair value of a reporting unit is greater than its carrying amount, the impairment test is not required. If the Company concludes otherwise, the Company is required to perform a quantitative impairment test. In the quantitative impairment test, the estimated fair value of a reporting unit is compared to the carrying amount in order to determine if impairment is indicated. If the estimated fair value exceeds the carrying amount, the reporting unit is not deemed to be impaired. If the estimated fair value is below the carrying value of the reporting unit, the difference is the amount of impairment.

Intangible assets that have indefinite useful lives are not amortized, but are tested at least annually for impairment. Intangible assets that have finite useful lives are amortized over their useful lives. Core deposit intangibles and trust intangibles at the Company are amortized using the sum-of-the-years’-digits method. Covenants not to compete are amortized on a straight-line basis. Customer lists are amortized using an accelerated method. When facts and circumstances indicate potential impairment of amortizable intangible assets, the Company evaluates the recoverability of the asset carrying value, using estimates of undiscounted future cash flows over the remaining asset life. Any impairment loss is measured by the excess of carrying value over fair value.

Determining the fair value of a reporting unit under the goodwill impairment tests and determining the fair value of other intangible assets are judgmental and often involve the use of significant estimates and assumptions. Estimates of fair value are primarily determined using the discounted cash flows method, which uses significant estimates and assumptions including projected future cash flows, discount rates reflecting the market rate of return and projected growth rates. Future events may impact such estimates and assumptions and could cause the Company to conclude that our goodwill or intangible assets have become impaired, which would result in recording an impairment loss.

Bank-Owned Life Insurance

The Bank has purchased life insurance policies on certain employees, key executives and directors. Bank-owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

Treasury Stock

Treasury stock acquisitions are recorded at cost. Subsequent sales of treasury stock are recorded on an average cost basis. Gains on the sale of treasury stock are credited to additional paid-in-capital. Losses on the sale of treasury stock are charged to additional paid-in-capital to the extent of previous gains, otherwise charged to retained earnings.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes interest accrued and penalties related to unrecognized tax benefits in income tax expense.

Tax positions are recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50 percent likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

Pension Costs

The Company maintains a noncontributory, defined benefit pension plan covering substantially all employees, as well as supplemental employee retirement plans covering certain executives and a defined benefit postretirement healthcare plan that covers certain employees. Costs associated with these plans, based on actuarial computations of current and future benefits for employees, are charged to current operating expenses.

Stock-Based Compensation

We maintain various long-term incentive stock benefit plans under which we grant stock options and restricted stock units to certain directors and key employees. We recognize compensation expense in our consolidated statements of income over the requisite service period, based on the grant-date fair value of the award. For restricted stock awards and units, we recognize compensation expense ratably over the vesting period for the fair value of the award, measured at the grant date. The fair values of options are estimated using the Black-Scholes option pricing model.

Earnings Per Share

Basic earnings per share ("EPS") 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 EPS 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).

Comprehensive Income

At the Company, comprehensive income represents net income plus OCI, which consists primarily of the net change in unrealized gains (losses) on AFS securities for the period, changes in the funded status of employee benefit plans and unrealized gains (losses) on derivatives designated as hedging instruments. AOCI represents the net unrealized gains (losses) on AFS securities, the previously unrecognized portion of the funded status of employee benefit plans and the fair value of instruments designated as hedging instruments, net of income taxes, as of the consolidated balance sheet dates.

Derivative Instruments and Hedging Activities

The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting.

For derivatives designated as fair value hedges, changes in the fair value of the derivative and the hedged item related to the hedged risk are recognized in earnings. Any hedge ineffectiveness would be recognized in the income statement line item pertaining to the hedged item. For derivatives designated as cash flow hedges, changes in fair value of the effective portion of the cash flow hedges are reported in OCI. When the cash flows associated with the hedged item are realized, the gain or loss included in OCI is recognized in the consolidated statements of income.

When the Company purchases a portion of a commercial loan that has an existing interest rate swap, it enters a risk participation agreement with the counterparty and assumes the credit risk of the loan customer related to the swap. Any fee paid to the Company under a risk participation agreement is in consideration of the credit risk of the counterparties and is recognized in the income statement. Credit risk on the risk participation agreements is determined after considering the risk rating, probability of default and loss given default of the counterparties.

Fair Value Measurements

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 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.

Other Financial Instruments

The Company is a party to certain other financial instruments with off-balance-sheet risk such as commitments to extend credit, unused lines of credit as well as certain mortgage loans sold to investors with recourse. The Company’s policy is to record such instruments when funded.

Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Under the standby letters of credit, the Company is required to make payments to the beneficiary of the letters of credit upon request by the beneficiary contingent upon the customer's failure to perform under the terms of the underlying contract with the beneficiary. Standby letters of credit typically have one year expirations with an option to renew upon annual review. The Company typically receives a fee for these transactions. The fair value of stand-by letters of credit is recorded upon inception.

Loan Sales and Loan Servicing

Loan sales are recorded when the sales are funded. Mortgage servicing rights are recorded at fair value upon sale of the loan. Loans held for sale are recorded at the lower of cost or market.

Repurchase Agreements

Repurchase agreements are accounted for as secured financing transactions since the Company maintains effective control over the transferred securities and the transfer meets the other criteria for such accounting. Obligations to repurchase securities sold are reflected as a liability in the consolidated balance sheets. The securities underlying the agreements are delivered to a custodial account for the benefit of the dealer or bank with whom each transaction is executed. The dealers or banks, who may sell, loan or otherwise dispose of such securities to other parties in the normal course of their operations, agree to resell to the Company the same securities at the maturities of the agreements.

Trust Operations

Assets held by the Company in a fiduciary or agency capacity for its customers are not included in the accompanying consolidated balance sheets, since such assets are not assets of the Company. Trust income is recognized on the accrual method based on contractual rates applied to the balances of trust accounts.

Reclassifications

Amounts in prior period consolidated financial statements are reclassified whenever necessary to confirm with current period presentation.

Subsequent Events

The Company has evaluated subsequent events for potential recognition and/or disclosure and there were none identified.

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Acquisitions

12 Months Ended

Dec. 31, 2017

Acquisitions [Abstract]

Acquisitions

2. Acquisitions

In 2017, the Company acquired Downeast Pension Services, Inc. for total consideration of $5.7 million. As part of the acquisition, the Company recorded goodwill of $2.6 million and $1.7 million contingent consideration recorded in other liabilities on the consolidated balance sheet as of December 31, 2017.

In 2016, the Company acquired Actuarial Designs & Solutions, Inc. for total consideration of $3.0 million and Columbia Ridge Capital Management, Inc., for total consideration of $1.3 million. As part of the acquisitions, the Company recorded goodwill of $1.3 million and $0.8 million, respectively.

In 2015 , the Company acquired Third Party Administrators, Inc., a retirement plan administration company for total consideration of $4.1 million. As part of the acquisition, the Company recorded goodwill of $2.3 million.

The operating results of acquired companies are included in the consolidated results after the dates of acquisition.

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Securities

12 Months Ended

Dec. 31, 2017

Securities [Abstract]

Securities

3. Securities

The amortized cost, estimated fair value and unrealized gains (losses) of AFS securities are as follows:

(In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
As of December 31, 2017
Federal agency	$	109,862	$	-	$	963	$	108,899
State & municipal		42,171		62		277		41,956
Mortgage-backed:
Government-sponsored enterprises		530,392		1,406		3,345		528,453
U.S. government agency securities		26,363		334		223		26,474
Collateralized mortgage obligations:
Government-sponsored enterprises		496,033		254		10,114		486,173
U.S. government agency securities		50,721		165		1,065		49,821
Other securities		10,623		3,672		146		14,149
Total AFS securities	$	1,266,165	$	5,893	$	16,133	$	1,255,925
As of December 31, 2016
Federal agency	$	175,135	$	78	$	805	$	174,408
State & municipal		47,053		153		480		46,726
Mortgage-backed:
Government-sponsored enterprises		513,814		3,345		2,492		514,667
U.S. government securities		14,955		411		189		15,177
Collateralized mortgage obligations:
Government-sponsored enterprises		513,431		532		7,688		506,275
U.S. government securities		60,822		184		708		60,298
Other securities		15,849		6,394		1,504		20,739
Total AFS securities	$	1,341,059	$	11,097	$	13,866	$	1,338,290

The components of net realized gains (losses) on the sale of AFS securities are as follows. These amounts were reclassified out of AOCI and into earnings:

	Years ended December 31,
(In thousands)	2017			2016			2015
Gross realized gains	$	2,241		$	683		$	3,099
Gross realized (losses)		(372	)		(1,327	)		(12	)
Net AFS realized gains (losses)	$	1,869		$	(644	)	$	3,087

Included in net gains (losses) from sales transactions, the Company also recorded gains from calls on AFS securities of approximately $0.1 million for each of the years ended December 31, 2017, 2016 and 2015.

In the year ended December 31, 2017, the Company recognized a loss of $2 thousand on HTM securities sales transactions. There were no sales of HTM securities in the year ended December 31, 2016.

At December 31, 2017 and 2016, AFS and HTM securities with amortized costs totaling $1.5 billion were pledged to secure public deposits and for other purposes required or permitted by law. Additionally, at December 31, 2017 and 2016, AFS and HTM securities with an amortized cost of $231.3 million and $235.6 million, respectively, were pledged as collateral for securities sold under the repurchase agreements.

The amortized cost, estimated fair value and unrealized gains (losses) of HTM securities are as follows:

(In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
As of December 31, 2017
Mortgage-backed:
Government-sponsored enterprises	$	96,357	$	85	$	810	$	95,632
U.S. government agency securities		418		57		-		475
Collateralized mortgage obligations:
Government-sponsored enterprises		186,327		224		2,577		183,974
State & municipal		200,971		1,439		620		201,790
Total HTM securities	$	484,073	$	1,805	$	4,007	$	481,871
As of December 31, 2016
Mortgage-backed:
Government-sponsored enterprises	$	96,668	$	-	$	1,176	$	95,492
U.S. government agency securities		533		87		-		620
Collateralized mortgage obligations:
Government-sponsored enterprises		225,213		1,060		1,508		224,765
State & municipal		205,534		434		1,795		204,173
Total HTM securities	$	527,948	$	1,581	$	4,479	$	525,050

At December 31, 2017 and 2016, all of the mortgaged-backed HTM securities were comprised of U.S. government agency securities.

The following table sets forth information with regard to investment securities with unrealized losses segregated according to the length of time the securities had been in a continuous unrealized loss position:

	Less than 12 months							12 months or longer							Total
(In thousands)	Fair Value		Unrealized Losses			Number of Positions		Fair Value		Unrealized Losses			Number of Positions		Fair Value		Unrealized Losses			Number of Positions
As of December 31, 2017
AFS securities:
Federal agency	$	64,653	$	(242	)		5	$	44,246	$	(721	)		4	$	108,899	$	(963	)		9
State & municipal		23,566		(200	)		39		5,994		(77	)		8		29,560		(277	)		47
Mortgage-backed		317,630		(2,381	)		55		58,316		(1,188	)		24		375,946		(3,569	)		79
Collateralized mortgage obligations		227,917		(2,658	)		35		275,303		(8,521	)		42		503,220		(11,179	)		77
Other securities		-		-			-		2,959		(146	)		1		2,959		(146	)		1
Total securities with unrealized losses	$	633,766	$	(5,481	)		134	$	386,818	$	(10,653	)		79	$	1,020,584	$	(16,134	)		213
HTM securities:
Mortgage-backed	$	15,477	$	(140	)		2	$	33,703	$	(670	)		2	$	49,180	$	(810	)		4
Collateralized mortgage obligations		118,476		(1,064	)		17		37,614		(1,513	)		6		156,090		(2,577	)		23
State & municipal		22,387		(132	)		40		15,720		(488	)		24		38,107		(620	)		64
Total securities with unrealized losses	$	156,340	$	(1,336	)		59	$	87,037	$	(2,671	)		32	$	243,377	$	(4,007	)		91
As of December 31, 2016
AFS securities:
Federal agency	$	119,363	$	(805	)		10	$	-	$	-			-	$	119,363	$	(805	)		10
State & municipal		31,873		(478	)		55		483		(2	)		1		32,356		(480	)		56
Mortgage-backed		277,524		(2,668	)		49		985		(13	)		4		278,509		(2,681	)		53
Collateralized mortgage obligations		473,746		(8,396	)		57		-		-			-		473,746		(8,396	)		57
Other securities		-		-			-		4,363		(1,504	)		2		4,363		(1,504	)		2
Total securities with unrealized losses	$	902,506	$	(12,347	)		171	$	5,831	$	(1,519	)		7	$	908,337	$	(13,866	)		178
HTM securities:
Mortgage-backed	$	95,492	$	(1,176	)		5	$	-	$	-			-	$	95,492	$	(1,176	)		5
Collateralized mortgage obligations		108,587		(319	)		12		35,209		(1,189	)		4		143,796		(1,508	)		16
State & municipal		81,984		(1,795	)		155		-		-			-		81,984		(1,795	)		155
Total securities with unrealized losses	$	286,063	$	(3,290	)		172	$	35,209	$	(1,189	)		4	$	321,272	$	(4,479	)		176

Declines in the fair value of HTM and AFS securities below their amortized cost, less any current period credit loss, that are deemed to be OTTI are reflected in earnings as a realized loss, or in OCI. The classification is dependent upon whether the Company intends to sell the security, or whether it is more likely than not it will be required to sell the security before recovery. The OTTI 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 Company will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the OTTI 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 OTTI related to the credit loss shall be recognized in earnings. The amount of the total OTTI related to other factors shall be recognized in OCI net of applicable taxes.

In estimating OTTI 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 ability and intent to hold the securities classified as HTM until they mature, at which time it is believed the Company will receive full value for the securities. The unrealized losses on HTM debt securities are due to increases in market interest rates over yields 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 if market yields for such investments decline.

Management also has the intent to hold, and will not be required to sell, the securities classified as AFS for a period of time sufficient for a recovery of cost, which may be until maturity. The unrealized losses on AFS debt securities 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. For AFS debt and equity securities, OTTI losses are recognized in earnings if the Company intends to sell the security. In other cases the Company considers the relevant factors noted above, as well as the Company's intent and ability to retain its investment for a period of time sufficient to allow for any anticipated recovery in market value and whether evidence exists to support a realizable value equal to or greater than the cost basis. Any impairment loss on an equity security is equal to the full difference between the cost basis and the fair value of the security.

As of December 31, 2017 and 2016, management believes the impairments detailed in the table above are temporary. For the year ended December 31, 2017, $1.3 million of an OTTI loss on an AFS equity investment was realized in the Company’s consolidated statements of income. There were no OTTI losses realized in the Company’s consolidated statements of income for years ended December 31, 2016 and 2015.

During the year ended December 31, 2017, the Company sold HTM securities with an amortized cost of $0.8 million and an unrealized loss of $2 thousand. Due to significant deterioration in the creditworthiness of the issuers of the HTM securities sold, the Company changed its intent to hold the HTM securities that were sold to maturity, which did not affect the Company's intent to hold the remainder of the HTM portfolio to maturity. There were no sales of HTM securities in the year ended December 31, 2016.

The following tables set forth information with regard to contractual maturities of debt securities at December 31, 2017:

(In thousands)	Amortized Cost		Estimated Fair Value
AFS debt securities:
Within one year	$	63,309	$	63,186
From one to five years		90,119		89,275
From five to ten years		178,128		177,961
After ten years		923,987		911,354
Total AFS debt securities	$	1,255,543	$	1,241,776
HTM debt securities:
Within one year	$	31,412	$	31,413
From one to five years		42,363		42,588
From five to ten years		174,950		174,937
After ten years		235,348		232,933
Total HTM debt securities	$	484,073	$	481,871

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 December 31, 2017 and 2016.

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Loans

12 Months Ended

Dec. 31, 2017

Loans [Abstract]

Loans

4. Loans

A summary of loans, net of deferred fees and origination costs, by category is as follows:

	At December 31,
(In thousands)	2017		2016
Residential real estate mortgages	$	1,321,695	$	1,262,614
Commercial		1,317,174		1,242,701
Commercial real estate		1,711,095		1,543,301
Consumer		1,740,038		1,641,657
Home equity		494,771		507,784
Total loans	$	6,584,773	$	6,198,057

Included in the above loans are net deferred loan origination costs totaling $42.6 million and $40.3 million at December 31, 2017 and 2016, respectively. The Company had $0.7 million residential loans held for sale as of December 31, 2017. The Company had $0.6 million of residential loans held for sale as of December 31, 2016.

The total amount of loans serviced by the Company for unrelated third parties was $586.7 million and $604.0 million at December 31, 2017 and 2016, respectively. At December 31, 2017 and 2016, the Company had $0.6 million and $0.9 million, respectively, of mortgage servicing rights.

At December 31, 2017 and 2016, the Company serviced $29.1 million and $28.5 million, respectively, of agricultural loans sold with recourse. Due to sufficient collateral on these loans and government guarantees, no reserve is considered necessary at December 31, 2017 and 2016.

FHLB advances are collateralized by a blanket lien on the Company’s residential real estate mortgages.

In the ordinary course of business, the Company has made loans at prevailing rates and terms to directors, officers and other related parties. Such loans, in management’s opinion, do not present more than the normal risk of collectability or incorporate other unfavorable features. The aggregate amount of loans outstanding to qualifying related parties and changes during the years are summarized as follows:

(In thousands)	2017			2016
Balance at January 1,	$	2,050		$	2,346
New loans		297			936
Adjustment due to change in composition of related parties		198			(406	)
Repayments		(968	)		(826	)
Balance at December 31,	$	1,577		$	2,050

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Allowance for Loan Losses and Credit Quality of Loans

12 Months Ended

Dec. 31, 2017

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

Allowance for Loan Losses and Credit Quality of Loans

5. 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 probable incurred losses inherent in the current loan portfolio. The appropriateness of the allowance for loan losses is continuously monitored. It is assessed for appropriateness 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 typically 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, which are generally less liquid than real estate. 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 property, which generally consist of real estate with completed structures. These commercial real estate loans are secured by liens on the real estate, which may include both owner occupied and non-owner-occupied properties, such as apartments, commercial structures, housing businesses, health care facilities and other facilities. These loans are typically less risky than commercial loans, since they are secured by real estate and buildings. The Company’s underwriting analysis includes credit verification, independent appraisals, a review of the borrower’s financial condition and a detailed analysis of the borrower’s underlying cash flows. These loans are typically 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. Agricultural real estate loans are made to finance the purchase and improvements of farm properties that generally consist of barns, production facilities and land. The agricultural real estate loans are secured by liens on the farm real estate. Because they are secured by land and buildings, these loans may be less risky than agricultural loans. The Company’s underwriting analysis includes credit verification, independent appraisals, a review of the borrower’s financial condition and a detailed analysis of the borrower’s underlying cash flows. 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 $750 thousand 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 these risks, 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 70% 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. As of December 31, 2017 and 2016, respectively, the consumer loan portfolio includes $403.6 million and $374.9 million of unsecured consumer loans across a national footprint originated through our relationship with national technology-driven consumer lending companies. Advances of credit through this specialty lending business line are to prime borrowers and are subject to the Company’s underwriting standards.

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 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. When market conditions are favorable, for longer term, fixed-rate residential mortgages without escrow, the Company retains the servicing, but sells the right to receive principal and interest to Freddie Mac. This practice allows the Company to manage interest rate, liquidity risk and credit risk. 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. 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.

Allowance for Loan Loss Calculation

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 impaired loans, these include estimates of impairment, if any, 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.

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 are necessary to maintain the allowance at a level that management believes is reflective of overall level of incurred 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 table illustrates the changes in the allowance for loan losses by portfolio segment:

(In thousands)	Commercial Loans			Consumer Loans			Residential Real Estate Mortgages			Unallocated			Total
Balance as of December 31, 2016	$	25,444		$	33,375		$	6,381		$	-		$	65,200
Charge-offs		(4,169	)		(27,072	)		(1,846	)		-			(33,087	)
Recoveries		1,077			5,142			180			-			6,399
Provision		5,254			25,385			349			-			30,988
Ending Balance as of December 31, 2017	$	27,606		$	36,830		$	5,064		$	-		$	69,500
Balance as of December 31, 2015	$	25,545		$	29,253		$	7,960		$	260		$	63,018
Charge-offs		(4,592	)		(23,364	)		(1,343	)		-			(29,299	)
Recoveries		1,887			3,870			293			-			6,050
Provision		2,604			23,616			(529	)		(260	)		25,431
Ending Balance as of December 31, 2016	$	25,444		$	33,375		$	6,381		$	-		$	65,200
Balance as of December 31, 2014	$	32,433		$	26,720		$	7,130		$	76		$	66,359
Charge-offs		(5,718	)		(18,140	)		(2,229	)		-			(26,087	)
Recoveries		1,014			3,127			320			-			4,461
Provision		(2,184	)		17,546			2,739			184			18,285
Ending Balance as of December 31, 2015	$	25,545		$	29,253		$	7,960		$	260		$	63,018

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. There was no allowance for loan losses for the acquired loan portfolio as of December 31, 2017 and $0.7 million as of December 31, 2016. Net charge-offs related to acquired loans totaled approximately $0.7 million, $0.5 million and $2.7 million during the years ended December 31, 2017, 2016 and 2015, respectively, and are included in the table above.

The following table illustrates the allowance for loan losses and the recorded investment by portfolio segment: 

(In thousands)	Commercial Loans		Consumer Loans		Residential Real Estate Mortgages		Total
As of December 31, 2017
Allowance for loan losses	$	27,606	$	36,830	$	5,064	$	69,500
Allowance for loans individually evaluated for impairment		57		-		-		57
Allowance for loans collectively evaluated for impairment		27,549		36,830		5,064		69,443
Ending balance of loans		3,028,269		2,234,809		1,321,695		6,584,773
Ending balance of originated loans individually evaluated for impairment		5,876		8,432		6,830		21,138
Ending balance of acquired loans collectively evaluated for impairment		187,313		43,906		170,472		401,691
Ending balance of originated loans collectively evaluated for impairment	$	2,835,080	$	2,182,471	$	1,144,393	$	6,161,944
As of December 31, 2016
Allowance for loan losses	$	25,444	$	33,375	$	6,381	$	65,200
Allowance for loans individually evaluated for impairment		1,517		-		-		1,517
Allowance for loans collectively evaluated for impairment		23,927		33,375		6,381		63,683
Ending balance of loans		2,786,002		2,149,441		1,262,614		6,198,057
Ending balance of originated loans individually evaluated for impairment		13,070		8,488		6,111		27,669
Ending balance of acquired loans individually evaluated for impairment		1,205		-		-		1,205
Ending balance of acquired loans collectively evaluated for impairment		236,413		63,005		199,471		498,889
Ending balance of originated loans collectively evaluated for impairment	$	2,535,314	$	2,077,948	$	1,057,032	$	5,670,294

The following table sets forth information with regard to past due and nonperforming loans by loan class:

(In thousands)	31-60 Days Past Due Accruing		61-90 Days Past Due Accruing		Greater Than 90 Days Past Due Accruing		Total Past Due Accruing		Nonaccrual		Current		Recorded Total Loans
As of December 31, 2017
Originated
Commercial Loans:
Commercial	$	-	$	-	$	-	$	-	$	202	$	753,577	$	753,779
Commercial Real Estate		161		138		-		299		3,178		1,533,065		1,536,542
Agricultural		117		-		-		117		1,043		34,386		35,546
Agricultural Real Estate		493		-		-		493		2,736		30,905		34,134
Business Banking		1,907		597		-		2,504		5,304		473,147		480,955
Total Commercial Loans	$	2,678	$	735	$	-	$	3,413	$	12,463	$	2,825,080	$	2,840,956
Consumer Loans:
Indirect	$	18,747	$	4,033	$	3,492	$	26,272	$	2,115	$	1,642,664	$	1,671,051
Home Equity		2,887		854		341		4,082		2,736		448,081		454,899
Direct		341		108		70		519		35		64,399		64,953
Total Consumer Loans	$	21,975	$	4,995	$	3,903	$	30,873	$	4,886	$	2,155,144	$	2,190,903
Residential Real Estate Mortgages	$	3,730	$	667	$	1,262	$	5,659	$	5,987	$	1,139,577	$	1,151,223
Total Originated Loans	$	28,383	$	6,397	$	5,165	$	39,945	$	23,336	$	6,119,801	$	6,183,082
Acquired
Commercial Loans:
Commercial	$	-	$	-	$	-	$	-	$	-	$	39,575	$	39,575
Commercial Real Estate		-		-		-		-		2		106,632		106,634
Business Banking		354		-		-		354		669		40,081		41,104
Total Commercial Loans	$	354	$	-	$	-	$	354	$	671	$	186,288	$	187,313
Consumer Loans:
Indirect	$	38	$	-	$	1	$	39	$	22	$	1,157	$	1,218
Home Equity		254		34		103		391		225		39,256		39,872
Direct		6		1		1		8		23		2,785		2,816
Total Consumer Loans	$	298	$	35	$	105	$	438	$	270	$	43,198	$	43,906
Residential Real Estate Mortgages	$	627	$	226	$	140	$	993	$	1,431	$	168,048	$	170,472
Total Acquired Loans	$	1,279	$	261	$	245	$	1,785	$	2,372	$	397,534	$	401,691
Total Loans	$	29,662	$	6,658	$	5,410	$	41,730	$	25,708	$	6,517,335	$	6,584,773

(In thousands)	31-60 Days Past Due Accruing		61-90 Days Past Due Accruing		Greater Than 90 Days Past Due Accruing		Total Past Due Accruing		Nonaccrual		Current		Recorded Total Loans
As of December 31, 2016
Originated
Commercial Loans:
Commercial	$	33	$	5	$	-	$	38	$	2,964	$	650,568	$	653,570
Commercial Real Estate		-		-		-		-		7,935		1,343,854		1,351,789
Agricultural		-		-		-		-		730		37,186		37,916
Agricultural Real Estate		-		-		-		-		1,803		30,619		32,422
Business Banking		1,609		318		-		1,927		4,860		465,900		472,687
Total Commercial Loans	$	1,642	$	323	$	-	$	1,965	$	18,292	$	2,528,127	$	2,548,384
Consumer Loans:
Indirect	$	19,253	$	4,185	$	2,499	$	25,937	$	2,145	$	1,538,593	$	1,566,675
Home Equity		3,416		1,065		528		5,009		2,851		448,797		456,657
Direct		452		125		20		597		107		62,400		63,104
Total Consumer Loans	$	23,121	$	5,375	$	3,047	$	31,543	$	5,103	$	2,049,790	$	2,086,436
Residential Real Estate Mortgages	$	2,725	$	172	$	1,406	$	4,303	$	6,682	$	1,052,158	$	1,063,143
Total Originated Loans	$	27,488	$	5,870	$	4,453	$	37,811	$	30,077	$	5,630,075	$	5,697,963
Acquired
Commercial Loans:
Commercial	$	-	$	-	$	-	$	-	$	-	$	49,447	$	49,447
Commercial Real Estate		-		-		-		-		1,891		135,398		137,289
Business Banking		236		-		-		236		804		49,842		50,882
Total Commercial Loans	$	236	$	-	$	-	$	236	$	2,695	$	234,687	$	237,618
Consumer Loans:
Indirect	$	100	$	5	$	-	$	105	$	47	$	8,541	$	8,693
Home Equity		254		53		30		337		237		50,553		51,127
Direct		30		2		-		32		20		3,133		3,185
Total Consumer Loans	$	384	$	60	$	30	$	474	$	304	$	62,227	$	63,005
Residential Real Estate Mortgages	$	609	$	28	$	327	$	964	$	2,636	$	195,871	$	199,471
Total Acquired Loans	$	1,229	$	88	$	357	$	1,674	$	5,635	$	492,785	$	500,094
Total Loans	$	28,717	$	5,958	$	4,810	$	39,485	$	35,712	$	6,122,860	$	6,198,057

There were no material commitments to extend further credit to borrowers with nonperforming loans as of December 31, 2017 and 2016.

Classified loans, including all TDRs and nonaccrual commercial loans that are graded Substandard or below, with outstanding balances of $750 thousand or more are evaluated for impairment through the Company’s quarterly status review process. The Company considers commercial loans less than $750 thousand to be homogeneous loans. 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 identified as impaired, 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.  These impaired loans are reviewed on a quarterly basis for changes in the measurement of impairment.  Any change to the previously recognized amount of impairment loss is recognized as a component of the provision for loan losses.

The following provides additional information on impaired loans specifically evaluated for impairment:

	December 31, 2017						December 31, 2016
(In thousands)	Recorded Investment Balance (Book)		Unpaid Principal Balance (Legal)		Related Allowance		Recorded Investment Balance (Book)		Unpaid Principal Balance (Legal)		Related Allowance
Originated
With no related allowance recorded:
Commercial Loans:
Commercial	$	-	$	251			$	1,278	$	1,697
Commercial Real Estate		2,211		3,979				3,816		3,841
Agricultural		452		465				130		137
Agricultural Real Estate		2,250		2,423				1,434		1,567
Business Banking		860		1,730				655		728
Total Commercial Loans	$	5,773	$	8,848			$	7,313	$	7,970
Consumer Loans:
Indirect	$	131	$	143			$	5	$	16
Home Equity		8,027		9,966				8,483		9,429
Direct		274		274				-		-
Total Consumer Loans	$	8,432	$	10,383			$	8,488	$	9,445
Residential Real Estate Mortgages	$	6,830	$	8,780			$	6,111	$	6,906
Total	$	21,035	$	28,011			$	21,912	$	24,321
With an allowance recorded:
Commercial Loans:
Commercial Real Estate	$	76	$	82	$	30	$	5,553	$	5,736	$	735
Agricultural		27		27		27		49		49		37
Agricultural Real Estate		-		-		-		155		155		54
Total Commercial Loans	$	103	$	109	$	57	$	5,757	$	5,940	$	826
Acquired
With an allowance recorded:
Commercial Loans:
Commercial Real Estate	$	-	$	-	$	-	$	1,205	$	1,321	$	691
Total Commercial Loans	$	-	$	-	$	-	$	1,205	$	1,321	$	691
Total	$	21,138	$	28,120	$	57	$	28,874	$	31,582	$	1,517

The following table summarizes the average recorded investments on loans specifically evaluated for impairment and the interest income recognized:

	December 31, 2017				December 31, 2016				December 31, 2015
(In thousands)	Average Recorded Investment		Interest Income Recognized Accrual		Average Recorded Investment		Interest Income Recognized Accrual		Average Recorded Investment		Interest Income Recognized Accrual
Originated
Commercial Loans:
Commercial	$	1,841	$	-	$	6,217	$	-	$	2,219	$	71
Commercial Real Estate		3,534		115		5,828		167		8,538		164
Agricultural		224		1		715		1		148		1
Agricultural Real Estate		1,709		43		908		44		628		45
Business Banking		875		12		830		9		960		21
Total Commerical Loans	$	8,183	$	171	$	14,498	$	221	$	12,493	$	302
Consumer Loans:
Indirect	$	35	$	3	$	8	$	-	$	-	$	-
Home Equity		8,226		446		8,278		480		7,070		374
Direct		178		8		-		-		-		-
Total Consumer Loans	$	8,439	$	457	$	8,286	$	480	$	7,070	$	374
Residential Real Estate Mortgages	$	6,523		296		6,143		269		5,128		219
Total Originated	$	23,145	$	924	$	28,927	$	970	$	24,691	$	895
Acquired
Commercial Loans
Commercial	$	-	$	-	$	-	$	-	$	2,045	$	-
Commercial Real Estate		93		-		1,205		-		5,734		-
Total Commerical Loans	$	93	$	-	$	1,205	$	-	$	7,779	$	-
Total Acquired	$	93	$	-	$	1,205	$	-	$	7,779	$	-
Total	$	23,238	$	924	$	30,132	$	970	$	32,470	$	895

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 loans are graded Doubtful, Substandard, Special Mention and Pass.

 ● 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 (i.e., declining revenues or margins) or may be struggling with an ill-proportioned balance sheet (i.e., 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 Nonperforming or Performing.  

● Nonperforming

Nonperforming loans are loans that are 1) over 90 days past due and interest is still accruing or 2) on nonaccrual status.

● Performing

All loans not meeting any of these three criteria are considered Performing.

The following tables illustrate the Company’s credit quality by loan class:

(In thousands)	December 31, 2017
Originated
Commercial Credit Exposure
By Internally Assigned Grade:	Commercial		Commercial Real Estate		Agricultural		Agricultural Real Estate		Total
Pass	$	708,567	$	1,481,926	$	31,142	$	23,381	$	2,245,016
Special Mention		30,337		28,264		2,294		2,441		63,336
Substandard		14,875		26,352		2,110		8,312		51,649
Total	$	753,779	$	1,536,542	$	35,546	$	34,134	$	2,360,001

Business Banking Credit Exposure
By Internally Assigned Grade:		Business Banking		Total
Non-classified	$	468,898	$	468,898
Classified		12,057		12,057
Total	$	480,955	$	480,955

Consumer Credit Exposure
By Payment Activity:	Indirect		Home Equity		Direct		Total
Performing	$	1,665,444	$	451,822	$	64,848	$	2,182,114
Nonperforming		5,607		3,077		105		8,789
Total	$	1,671,051	$	454,899	$	64,953	$	2,190,903

Residential Mortgage Credit Exposure
By Payment Activity:	Residential Mortgage		Total
Performing	$	1,143,974	$	1,143,974
Nonperforming		7,249		7,249
Total	$	1,151,223	$	1,151,223

Acquired
Commercial Credit Exposure
By Internally Assigned Grade:	Commercial		Commercial Real Estate		Total
Pass	$	37,825	$	103,248	$	141,073
Special Mention		425		498		923
Substandard		1,325		2,888		4,213
Total	$	39,575	$	106,634	$	146,209

Business Banking Credit Exposure
By Internally Assigned Grade:	Business Banking		Total
Non-classified	$	38,236	$	38,236
Classified		2,868		2,868
Total	$	41,104	$	41,104

Consumer Credit Exposure
By Payment Activity:	Indirect		Home E quity		Direct		Total
Performing	$	1,195	$	39,544	$	2,792	$	43,531
Nonperforming		23		328		24		375
Total	$	1,218	$	39,872	$	2,816	$	43,906

Residential Mortgage Credit Exposure
By Payment Activity:	Residential Mortgage		Total
Performing	$	168,901	$	168,901
Nonperforming		1,571		1,571
Total	$	170,472	$	170,472

(In thousands)	December 31, 2016
Originated
Commercial Credit Exposure
By Internally Assigned Grade:	Commercial		Commercial Real Estate		Agricultural		Agricultural Real Estate		Total
Pass	$	616,829	$	1,288,409	$	36,762	$	28,912	$	1,970,912
Special Mention		7,750		31,053		25		1,896		40,724
Substandard		28,991		32,327		1,124		1,614		64,056
Doubtful		-		-		5		-		5
Total	$	653,570	$	1,351,789	$	37,916	$	32,422	$	2,075,697

Business Banking Credit Exposure
By Internally Assigned Grade:	Business Banking		Total
Non-classified	$	458,864	$	458,864
Classified		13,823		13,823
Total	$	472,687	$	472,687

Consumer Credit Exposure
By Payment Activity:	Indirect		Home Equity		Direct		Total
Performing	$	1,562,031	$	453,278	$	62,977	$	2,078,286
Nonperforming		4,644		3,379		127		8,150
Total	$	1,566,675	$	456,657	$	63,104	$	2,086,436

Residential Mortgage Credit Exposure
By Payment Activity:	Residential Mortgage		Total
Performing	$	1,055,055	$	1,055,055
Nonperforming		8,088		8,088
Total	$	1,063,143	$	1,063,143

Acquired
Commercial Credit Exposure
By Internally Assigned Grade:	Commercial		Commercial Real Estate		Total
Pass	$	48,194	$	127,660	$	175,854
Special Mention		76		1,231		1,307
Substandard		1,177		7,193		8,370
Doubtful		-		1,205		1,205
Total	$	49,447	$	137,289	$	186,736

Business Banking Credit Exposure
By Internally Assigned Grade:	Business Banking		Total
Non-classified	$	47,347	$	47,347
Classified		3,535		3,535
Total	$	50,882	$	50,882

Consumer Credit Exposure
By Payment Activity:	Indirect		Home Equity		Direct		Total
Performing	$	8,646	$	50,860	$	3,165	$	62,671
Nonperforming		47		267		20		334
Total	$	8,693	$	51,127	$	3,185	$	63,005

Residential Mortgage Credit Exposure
By Payment Activity:	Residential Mortgage		Total
Performing	$	196,508	$	196,508
Nonperforming		2,963		2,963
Total	$	199,471	$	199,471

Troubled Debt Restructuring

When the Company modifies a loan in a troubled debt restructuring, such modifications include 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. Residential and home equity TDRs occurring during 2017 and 2016 were due to the reduction in the interest rate or extension of the term.  Commercial and business banking TDRs during 2017 and 2016 were both a reduction of the interest rate and change in terms.

When the Company modifies a loan in a troubled debt restructuring, management measures for impairment, if any, 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 sold (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. If management determines that the value of the modified loan is less than the recorded investment in the loan an impairment charge would be recorded.

The following tables illustrate the recorded investment and number of modifications for modified loans, including the recorded investment in the loans prior to a modification and the recorded investment in the loans after restructuring:

	Year ended December 31, 2017
(In thousands)	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Commercial Loans:
Commercial		1	$	3,300	$	3,239
Business Banking		3		385		381
Total Commercial Loans		4	$	3,685	$	3,620
Consumer Loans:
Indirect		8	$	145	$	143
Home Equity		13		552		600
Direct		2		279		279
Total Consumer Loans		23	$	976	$	1,022
Residential Real Estate Mortgages		15	$	1,454	$	1,474
Total Troubled Debt Restructurings		42	$	6,115	$	6,116

	Year ended December 31, 2016
(In thousands)	Number of contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Consumer Loans:
Home Equity		28	$	1,886	$	1,743
Total Consumer Loans		28	$	1,886	$	1,743
Residential Real Estate Mortgages		13	$	1,084	$	843
Total Troubled Debt Restructurings		41	$	2,970	$	2,586

The following table illustrates the recorded investment and number of modifications for TDRs where a concession has been made and subsequently defaulted during the period:

	Year ended December 31, 2017				Year ended December 31, 2016
(In thousands)	Number of contracts		Recorded Investment		Number of contracts		Recorded Investment
Commercial Loans:
Commercial		1	$	145		1	$	169
Commercial Real Estate		-		-		1		1,573
Business Banking		1		329		1		67
Total Commercial Loans		2	$	474		3	$	1,809
Consumer Loans:
Indirect		2	$	19		-	$	-
Home Equity		34		1,720		34		1,770
Total Consumer Loans		36	$	1,739		34	$	1,770
Residential Real Estate Mortgages		19	$	1,302		16	$	1,109
Total Troubled Debt Restructurings		57	$	3,515		53	$	4,688

XML

Premises and Equipment, Net

12 Months Ended

Dec. 31, 2017

Premises and Equipment, Net [Abstract]

Premises and Equipment, Net

6. Premises and Equipment, Net

A summary of premises and equipment follows:

	December 31,
(In thousands)	2017		2016
Land, buildings and improvements	$	121,771	$	121,037
Equipment		57,080		56,243
Premises and equipment before accumulated depreciation	$	178,851	$	177,280
Accumulated depreciation		97,546		93,093
Total premises and equipment	$	81,305	$	84,187

Buildings and improvements are depreciated based on useful lives of 15 to 40 years. Equipment is depreciated based on useful lives of three to ten years.

Rental expense included in occupancy expense amounted to $8.5 million in 2017, $7.8 million in December 31, 2016 and $7.9 million in December 31, 2015. The future minimum rental payments related to non-cancelable operating leases with original terms of one year or more are as follows:

(In thousands)	December 31, 2017
2018	$	7,910
2019		7,227
2020		6,547
2021		5,352
2022		4,646
Thereafter		16,660
Total	$	48,342

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Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2017

Goodwill and Other Intangible Assets [Abstract]

Goodwill and Other Intangible Assets

7. Goodwill and Other Intangible Assets

A summary of goodwill is as follows:

(In thousands)
January 1, 2017	$	265,439
Goodwill Acquired		2,604
December 31, 2017	$	268,043
January 1, 2016	$	265,957
Goodwill Acquired		2,047
Goodwill Adjustments		(2,565	)
December 31, 2016	$	265,439

The Company has intangible assets with definite useful lives capitalized on its consolidated balance sheet in the form of core deposit and other identified intangible assets.  These intangible assets are amortized over their estimated useful lives, which range primarily from one to twenty years.

There was no impairment of goodwill recorded during the year ended December 31, 2017. During the year ended December 31, 2016, as a result of the disposition of a line of business in the Company's insurance agency subsidiary, the Company performed a goodwill impairment test that resulted in an impairment charge of $2.6 million.

A summary of core deposit and other intangible assets follows:

	December 31,
(In thousands)	2017		2016
Core deposit intangibles:
Gross carrying amount	$	8,975	$	8,975
Less: accumulated amortization		6,581		5,626
Net carrying amount	$	2,394	$	3,349
Identified intangible assets:
Gross carrying amount	$	33,632	$	32,338
Less: accumulated amortization		22,606		19,872
Net carrying amount	$	11,026	$	12,466
Total intangibles:
Gross carrying amount	$	42,607	$	41,313
Less: accumulated amortization		29,187		25,498
Net carrying amount	$	13,420	$	15,815

Amortization expense on intangible assets with definite useful lives totaled $4.0 million for 2017, $3.9 million for 2016 and $4.9 million for 2015.  Amortization expense on intangible assets with definite useful lives is expected to total $3.3 million for 2018, $2.7 million for 2019, $2.2 million for 2020, $1.6 million for 2021, $1.1 million for 2022 and $2.5 million thereafter.  Other identified intangible assets include customer lists and non-competes. 

During the year ended December 31, 2017, the Company disposed of an intangible asset that resulted in an impairment charge of $1.5 million. There was no impairment of intangible assets recorded during the year ended December 31, 2016.

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Deposits

12 Months Ended

Dec. 31, 2017

Deposits [Abstract]

Deposits

8. Deposits

The following table sets forth the maturity distribution of time deposits:

(In thousands)	December 31, 2017
Within one year	$	394,674
After one but within two years		259,710
After two but within three years		62,536
After three but within four years		40,151
After four but within five years		28,525
After five years		21,170
Total	$	806,766

Time deposits of $250,000 or more aggregated $92.8 million and $84.3 million December 31, 2017 and 2016, respectively.

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Short-Term Borrowings

12 Months Ended

Dec. 31, 2017

Short-Term Borrowings [Abstract]

Short-Term Borrowings

9. Short-Term Borrowings

In addition to the liquidity provided by balance sheet cash flows, liquidity must also be supplemented with additional sources such as credit lines from correspondent banks as well as borrowings from the FHLB and the Federal Reserve Bank. Other funding alternatives may also be appropriate from time to time, including wholesale and retail repurchase agreements and brokered certificate of deposit (“CD”) accounts.

Short-term borrowings totaled $719.1 million and $681.7 million at December 31, 2017 and 2016, respectively, and consist of Federal funds purchased and securities sold under repurchase agreements, which generally represent overnight borrowing transactions and other short-term borrowings, primarily FHLB advances, with original maturities of one year or less.

The Company has unused lines of credit with the FHLB and access to brokered deposits available for short-term financing of approximately $2.0 billion and $1.9 billion at December 31, 2017 and 2016, respectively. Borrowings on the FHLB lines are secured by FHLB stock, certain securities and one-to-four family first lien mortgage loans. Securities collateralizing repurchase agreements are held in safekeeping by nonaffiliated financial institutions and are under the Company’s control.

Information related to short-term borrowings is summarized as follows as of December 31,:

(Dollars in thousands)	2017			2016			2015
Federal funds purchased:
Balance at year-end	$	60,000		$	50,000		$	99,500
Average during the year		54,162			65,257			97,424
Maximum month end balance		80,000			85,000			159,000
Weighted average rate during the year		2.16	%		0.98	%		0.36	%
Weighted average rate at year-end		2.41	%		1.19	%		0.51	%
Securities sold under repurchase agreements:
Balance at year-end	$	182,123		$	173,703		$	167,981
Average during the year		175,539			168,821			162,201
Maximum month end balance		190,326			189,875			178,326
Weighted average rate during the year		0.07	%		0.06	%		0.06	%
Weighted average rate at year-end		0.07	%		0.07	%		0.06	%
Other short-term borrowings:
Balance at year-end	$	477,000		$	458,000		$	175,000
Average during the year		460,334			263,575			80,260
Maximum month end balance		591,000			424,000			175,000
Weighted average rate during the year		1.02	%		0.59	%		0.42	%
Weighted average rate at year-end		1.18	%		0.70	%		0.56	%

See Note 3 for additional information regarding securities pledged as collateral for securities sold under the repurchase agreements.

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Long-Term Debt

12 Months Ended

Dec. 31, 2017

Long-Term Debt [Abstract]

Long-Term Debt

10. Long-Term Debt

Long-term debt consists of obligations having an original maturity at issuance of more than one year. A majority of the Company’s long-term debt is comprised of FHLB advances collateralized by the FHLB stock owned by the Company, certain of its mortgage-backed securities and a blanket lien on its residential real estate mortgage loans. A summary is as follows:

(Dollars in thousands)	December 31, 2017										December 31, 2016
Maturity	Amount		Weighted Average Rate			Callable Amount		Weighted Average Rate			Amount		Weighted Average Rate			Callable Amount		Weighted Average Rate
2017	$	-		-		$	-		-		$	40,150		2.67	%	$	25,000		3.48	%
2018		40,037		2.57	%		25,000		3.15	%		40,000		2.57	%		25,000		3.15	%
2019		20,000		1.96	%		-		-			20,000		1.96	%		-		-
2020		25,000		2.34	%		-		-			-		-			-		-
2021		56		4.00	%		-		-			72		4.00	%		-		-
2031		3,776		2.45	%		-		-			3,865		2.45	%		-		-
Total	$	88,869				$	25,000				$	104,087				$	50,000

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Junior Subordinated Debt

12 Months Ended

Dec. 31, 2017

Junior Subordinated Debt [Abstract]

Junior Subordinated Debt

11. Junior Subordinated Debt

The Company sponsors five business trusts, CNBF Capital Trust I, NBT Statutory Trust I, NBT Statutory Trust II, Alliance Financial Capital Trust I and Alliance Financial Capital Trust II (collectively, the “Trusts”). The Company’s junior subordinated debentures include amounts related to the Company’s NBT Statutory Trust I and II as well as junior subordinated debentures associated with one statutory trust affiliate that was acquired from our merger with CNB Financial Corp. and two statutory trusts that were acquired from our acquisition of Alliance Financial Corporation (“Alliance”). The Trusts were formed for the purpose of issuing company-obligated mandatorily redeemable trust preferred securities to third-party investors and investing in the proceeds from the sale of such preferred securities solely in junior subordinated debt securities of the Company for general corporate purposes. The Company guarantees, on a limited basis, payments of distributions on the trust preferred securities and payments on redemption of the trust preferred securities. The Trusts are VIEs for which the Company is not the primary beneficiary, as defined by GAAP.  In accordance with GAAP, the accounts of the Trusts are not included in the Company’s consolidated financial statements. See Note 1 for additional information about the Company’s consolidation policy. 

The debentures held by each trust are the sole assets of that trust. The Trusts hold, as their sole assets, junior subordinated debentures of the Company with face amounts totaling $98.0 million at December 31, 2017. The Company owns all of the common securities of the Trusts and has accordingly recorded $3.2 million in equity method investments classified as other assets in our consolidated balance sheets at December 31, 2017. The Company owns all of the common stock of the Trusts, which have issued trust preferred securities in conjunction with the Company issuing trust preferred debentures to the Trusts. The terms of the trust preferred debentures are substantially the same as the terms of the trust preferred securities.

As of December 31, 2017, the Trusts had the following trust preferred securities outstanding and held the following junior subordinated debentures of the Company (dollars in thousands): 

Description	Issuance Date	Trust Preferred Securities Outstanding		Interest Rate	Trust Preferred Debt Owed To Trust		Final Maturity Date
CNBF Capital Trust I	August 1999	$	18,000	3-month LIBOR plus 2.75%	$	18,720	August 2029
NBT Statutory Trust I	November 2005		5,000	3-month LIBOR plus 1.40%		5,155	December 2035
NBT Statutory Trust II	February 2006		50,000	3-month LIBOR plus 1.40%		51,547	March 2036
Alliance Financial Capital Trust I	December 2003		10,000	3-month LIBOR plus 2.85%		10,310	January 2034
Alliance Financial Capital Trust II	September 2006		15,000	3-month LIBOR plus 1.65%		15,464	September 2036

The Company’s junior subordinated debentures are redeemable prior to the maturity date at our option upon each trust’s stated option repurchase dates and from time to time thereafter. These debentures are also redeemable in whole at any time upon the occurrence of specific events defined within the trust indenture. Our obligations under the debentures and related documents, taken together, constitute a full and unconditional guarantee by the Company of the issuers’ obligations under the trust preferred securities. The Company owns all of the common stock of the Trusts, which have issued trust preferred securities in conjunction with the Company issuing trust preferred debentures to the Trusts. The terms of the trust preferred debentures are substantially the same as the terms of the trust preferred securities.

With respect to the Trusts, the Company has the right to defer payments of interest on the debentures issued to the Trusts at any time or from time to time for a period of up to ten consecutive semi-annual periods with respect to each deferral period. Under the terms of the debentures, if in certain circumstances there is an event of default under the debentures or the Company elects to defer interest on the debentures, the Company may not, with certain exceptions, declare or pay any dividends or distributions on its capital stock or purchase or acquire any of its capital stock.

Despite the fact that the Trusts are not included in the Company’s consolidated financial statements, $97 million of the $101 million in trust preferred securities issued by these subsidiary trusts is included in the Tier 1 capital of the Company for regulatory capital purposes as allowed by the Federal Reserve Board (NBT Bank owns $1.0 million of CNBF Trust I securities). The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 requires bank holding companies with assets greater than $500 million to be subject to the same capital requirements as insured depository institutions, meaning, for instance, that such bank holding companies will not be able to count trust preferred securities issued after May 19, 2010 as Tier 1 capital. The aforementioned Trusts are grandfathered with respect to this enactment based on their date of issuance.

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Income Taxes

12 Months Ended

Dec. 31, 2017

Income Taxes [Abstract]

Income Taxes

12. Income Taxes

The significant components of income tax expense attributable to operations are as follows:

	Years ended December 31,
(In thousands)	2017			2016		2015
Current:
Federal	$	35,839		$	30,492	$	32,871
State		6,599			5,628		4,329
Total Current	$	42,438		$	36,120	$	37,200
Deferred:
Federal	$	3,850		$	3,994	$	2,521
State		(278	)		278		482
Total Deferred	$	3,572		$	4,272	$	3,003
Total income tax expense	$	46,010		$	40,392	$	40,203

On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act includes significant changes to the U.S. corporate income tax system including: a federal corporate rate reduction from 35% to 21%. The Tax Act also establishes new tax laws that will affect years subsequent to 2017. ASC 740, Income Taxes, requires a company to record the effects of a tax law change in the period of enactment, however shortly after the enactment of the Tax Act, the SEC staff issued Staff Accounting Bulletin 118 ("SAB 118"), which allows a company to record a provisional amount when it does not have the necessary information available, prepared, or analyzed in reasonable detail to complete its accounting for the change in the tax law. The measurement period ends when the company has obtained, prepared and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year.

In connection with our initial analysis of the impact of the Tax Act, the Company recorded a $4.4 million adjustment in the year ended December 31, 2017 for remeasurement of deferred tax assets and liabilities for the corporate rate reduction. A certain amount of this adjustment is provisional, related to consideration of depreciation, compensation matters and different interpretations by various regulatory authorities.

In the first quarter of 2017, the Company adopted the provision of Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, requiring that all excess tax benefits and tax deficiencies associated with equity-based compensation be recognized as an income tax benefit or expense in the income statement. Previously, tax effects resulting from changes in the Company's share price subsequent to the grant date were recorded through stockholders' equity at the time of vesting or exercise. The adoption of ASU 2016-09 resulted in income tax benefits of $1.8 million in the year ended December 31, 2017.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:

	December 31,
(In thousands)	2017			2016
Deferred tax assets:
Allowance for loan losses	$	17,390		$	24,925
Deferred compensation		7,230			11,578
Postretirement benefit obligation		2,159			2,929
Fair value adjustments from acquisitions		919			1,883
Unrealized losses on securities		3,715			3,259
Accrued liabilities		769			1,775
Stock-based compensation expense		2,642			4,817
Other		711			1,148
Total deferred tax assets	$	35,535		$	52,314
Deferred tax liabilities:
Pension benefits	$	12,439		$	17,303
Amortization of intangible assets		11,110			17,557
Premises and equipment, primarily due to accelerated depreciation		2,792			4,375
Deferred loan costs		634			1,759
Cash flow hedges		877			1,129
Other		390			501
Total deferred tax liabilities	$	28,242		$	42,624
Net deferred tax asset at year-end	$	7,293		$	9,690
Net deferred tax asset at beginning of year		9,690			14,940
(Decrease) in net deferred tax asset	$	(2,397	)	$	(5,250	)

Realization of deferred tax assets is dependent upon the generation of future taxable income or the existence of sufficient taxable income within the available carryback period. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized. Based on available evidence, gross deferred tax assets will ultimately be realized and a valuation allowance was not deemed necessary at December 31, 2017 and 2016.

The following is a reconciliation of the provision for income taxes to the amount computed by applying the applicable Federal statutory rate of 35% to income before taxes:

	Years ended December 31,
(In thousands)	2017			2016			2015
Federal income tax at statutory rate	$	44,857		$	41,581		$	40,820
Tax exempt income		(2,303	)		(2,205	)		(2,037	)
Net increase in cash surrender value of life insurance		(1,780	)		(1,712	)		(1,373	)
Federal tax credit		(1,343	)		(1,323	)		(939	)
State taxes, net of federal tax benefit		4,107			3,838			3,127
Federal tax reform (Tax Act)		4,407			-			-
Stock-based compensation, excess tax benefit		(1,619	)		-			-
Other, net		(316	)		213			605
Income tax expense	$	46,010		$	40,392		$	40,203

A reconciliation of the beginning and ending balance of Federal and State gross unrecognized tax benefits ("UTBs") is as follows:

(In thousands)	2017			2016
Balance at January 1	$	559		$	-
Additions for tax positions of prior years		-			425
Reduction for tax positions of prior years		(31	)		-
Current period tax positions		137			134
Balance at December 31	$	665		$	559
Amount that would affect the effective tax rate if recognized, gross of tax	$	525		$	363

At December 31, 2015 the Company had no UTBs. We recognize interest and penalties on the income tax expense line in the accompanying consolidated statements of income. We monitor changes in tax statutes and regulations to determine if significant changes will occur over the next 12 months.  As of December 31, 2017, no significant changes to UTBs are projected; however, tax audit examinations are possible. The Company recognized an insignificant amount of interest expense related to UTBs in the consolidated statement of income for the year ended December 31, 2017.

During the year ended December 31, 2017, the Company settled the tax audit by the state of New York for tax years, 2011, 2012 and 2013 without any material audit assessments. The Company is no longer subject to U.S. Federal tax examination by tax authorities for years prior to 2014 and New York State for years prior to 2013. The 2013 tax year related to New York examinations, while previously audited by the state, remains open by statute.

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Employee Benefit Plans

12 Months Ended

Dec. 31, 2017

Defined Benefit Post-retirement Plans [Abstract]

Defined Benefit Post-retirement Plans

13. Employee Benefit Plans

Defined Benefit Post-retirement Plans

The Company has a qualified, noncontributory, defined benefit pension plan (“the Plan”) covering substantially all of its employees at December 31, 2017. Benefits paid from the plan are based on age, years of service, compensation, social security benefits and are determined in accordance with defined formulas. The Company’s policy is to fund the Plan in accordance with Employee Retirement Income Security Act of 1974 standards. Assets of the Plan are invested in publicly traded stocks and mutual funds. Prior to January 1, 2000, the Plan was a traditional defined benefit plan based on final average compensation. On January 1, 2000, the Plan was converted to a cash balance plan with grandfathering provisions for existing participants. Effective March 1, 2013, the Plan was amended. Benefit accruals for participants who, as of January 1, 2000, elected to continue participating in the traditional defined benefit plan design were frozen as of March 1, 2013. In May 2013, the noncontributory, frozen, defined benefit pension plan assumed from Alliance in the acquisition was merged into the Plan.

In addition to the Plan, the Company provides supplemental employee retirement plans to certain current and former executives.  The Company also assumed supplemental retirement plans for certain former executives in the Alliance acquisition.

The supplemental employee retirement plans and the defined benefit pension plan are collectively referred to herein as “Pension Benefits.”

In addition, the Company provides certain health care benefits for retired employees. Benefits were accrued over the employees’ active service period. Only employees that were employed by NBT Bank on or before January 1, 2000 are eligible to receive post-retirement health care benefits. The 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. Employees become eligible for these benefits if they reach normal retirement age while working for the Company. For eligible employees described above, the Company funds the cost of post-retirement 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 post-retirement benefits are referred to herein as “Other Benefits.”

Accounting standards require an employer to: (1) recognize the overfunded or underfunded status of defined benefit post-retirement plans, which is measured as the difference between plan assets at fair value and the benefit obligation, as an asset or liability in its balance sheet; (2) recognize changes in that funded status in the year in which the changes occur through comprehensive income; and (3) measure the defined benefit plan assets and obligations as of the date of its year-end balance sheet.

The components of AOCI, which have not yet been recognized as components of net periodic benefit cost, related to pensions and other post-retirement benefits are summarized below:

	Pension Benefits				Other Benefits
(In thousands)	2017		2016		2017		2016
Net actuarial loss	$	23,585	$	28,328	$	1,731	$	1,430
Prior service cost (credit)		94		140		196		(38	)
Total amounts recognized in AOCI (pre-tax)	$	23,679	$	28,468	$	1,927	$	1,392

A December 31 measurement date is used for the pension, supplemental pension and post-retirement benefit plans.  The following table sets forth changes in benefit obligations, changes in plan assets and the funded status of the pension plans and other post-retirement benefits:

	Pension Benefits						Other Benefits
(In thousands)	2017			2016			2017			2016
Change in benefit obligation:
Benefit obligation at beginning of year	$	90,477		$	92,445		$	7,478		$	8,322
Service cost		1,511			2,162			12			14
Interest cost		4,168			4,223			357			353
Plan participants' contributions		-			-			218			234
Actuarial loss (gain)		4,028			(1,635	)		388			(786	)
Curtailment/ settlement		-			(715	)		286			-
Benefits paid		(9,234	)		(6,003	)		(689	)		(659	)
Projected benefit obligation at end of year	$	90,950		$	90,477		$	8,050		$	7,478
Change in plan assets:
Fair value of plan assets at beginning of year	$	116,216		$	107,529		$	-		$	-
Actual return on plan assets		15,032			8,259			-			-
Employer contributions		2,212			6,431			471			425
Plan participants' contributions		-			-			218			234
Benefits paid		(9,234	)		(6,003	)		(689	)		(659	)
Fair value of plan assets at end of year	$	124,226		$	116,216		$	-		$	-
Funded (unfunded) status at year end	$	33,276		$	25,739		$	(8,050	)	$	(7,478	)

An asset is recognized for an overfunded plan and a liability is recognized for an underfunded plan. The accumulated benefit obligation for pension benefits was $91.0 million and $90.5 million at December 31, 2017 and 2016, respectively. The accumulated benefit obligation for other post-retirement benefits was $8.1 million and $7.5 million at December 31, 2017 and 2016, respectively. The funded status of the pension and other post-retirement benefit plans has been recognized as follows in the consolidated balance sheets at December 31, 2017 and 2016. 

	Pension Benefits						Other Benefits
(In thousands)	2017			2016			2017			2016
Other assets	$	52,775		$	45,344		$	-		$	-
Other liabilities		(19,499	)		(19,605	)		(8,050	)		(7,478	)
Funded status	$	33,276		$	25,739		$	(8,050	)	$	(7,478	)

The following assumptions were used to determine the benefit obligation and the net periodic pension cost for the years indicated:

	Years ended December 31,
	2017			2016			2015
Weighted average assumptions:
The following assumptions were used to determine benefit obligations:
Discount rate		4.20% - 4.21	%		4.76%-4.84	%		4.69%-4.71	%
Expected long-term return on plan assets		7.00	%		7.00	%		7.00	%
Rate of compensation increase		3.00	%		3.00	%		3.00	%
The following assumptions were used to determine net periodic pension cost:
Discount rate		4.76% - 4.84	%		4.69%-4.71	%		4.19%-4.30	%
Expected long-term return on plan assets		7.00	%		7.00	%		7.50	%
Rate of compensation increase		3.00	%		3.00	%		3.00%-3.75	%

Net periodic benefit cost and other amounts recognized in OCI for the years ended December 31 included the following components:

	Pension Benefits									Other Benefits
(In thousands)	2017			2016			2015			2017			2016			2015
Components of net periodic benefit cost:
Service cost	$	1,511		$	2,162		$	2,677		$	12		$	14		$	17
Interest cost		4,168			4,223			3,977			357			353			374
Expected return on plan assets		(7,929	)		(7,430	)		(8,589	)		-			-			-
Amortization of gain due to curtailment		-			(768	)		(154	)		-			-			-
Amortization of prior service cost (credit)		46			32			21			51			(57	)		(219	)
Amortization of unrecognized net loss		1,668			2,235			2,174			87			117			263
Net periodic pension cost	$	(536	)	$	454		$	106		$	507		$	427		$	435
Other changes in plan assets and benefit obligations recognized in OCI (pre-tax):
Net (gain) loss	$	(3,075	)	$	(2,464	)	$	6,523		$	388		$	(786	)	$	(333	)
Prior service cost		-			96			-			286			-			-
Amortization of gain due to settlement		-			(43	)		(46	)		-			-			-
Amortization of prior service (cost) credit		(46	)		(32	)		(21	)		(51	)		57			219
Amortization of unrecognized net (loss)		(1,668	)		(2,235	)		(2,174	)		(87	)		(117	)		(263	)
Total recognized in OCI	$	(4,789	)	$	(4,678	)	$	4,282		$	536		$	(846	)	$	(377	)
Total recognized in net periodic benefit cost and OCI, pre-tax	$	(5,325	)	$	(4,224	)	$	4,388		$	1,043		$	(419	)	$	58

The Company expects that $1.2 million in net actuarial loss and nominal prior service costs will be recognized as components of net periodic benefit cost in 2018.

The following table sets forth estimated future benefit payments for the pension plans and other post-retirement benefit plans as of December 31, 2017:

(In thousands)	Pension Benefits		Other Benefits
2018	$	7,256	$	606
2019		7,087		598
2020		6,997		583
2021		6,728		559
2022		6,666		566
2023 - 2027		37,688		2,818

The Company made no voluntary contributions to the pension and other benefit plans during the year ended December 31, 2017. The Company made voluntary contributions to the pension plan totaling $5.6 million and no contributions to other benefit plans during the year ended December 31, 2016.

For measurement purposes, the annual rates of increase in the per capita cost of covered medical and prescription drug benefits for fiscal year 2017 were assumed to be 6.3 % to 10.5 % percent. The rates were assumed to decrease gradually to 3.9 % for fiscal year 2075 and remain at that level thereafter. Assumed health care cost trend rates have a significant effect on amounts reported for health care plans. A one-percentage point change in the health care trend rates would have the following effects as of and for the year ended December 31, 2017: 

(In thousands)	One Percentage Point Increase		One Percentage Point Decrease
Increase (decrease) on total service and interest cost components	$	40	$	(34	)
Increase (decrease) on post-retirement accumulated benefit obligation		855		(738	)

Plan Investment Policy

The Company’s key investment objectives in managing its defined benefit plan assets are to ensure that present and future benefit obligations to all participants and beneficiaries are met as they become due; to provide a total return that, over the long-term, maximizes the ratio of the plan assets to liabilities, while minimizing the present value of required Company contributions, at the appropriate levels of risk; to meet statutory requirements and regulatory agencies’ requirements; and to satisfy applicable accounting standards. The Company periodically evaluates the asset allocations, funded status, rate of return assumption and contribution strategy for satisfaction of our investment objectives. 

The target and actual allocations expressed as a percentage of the defined benefit pension plan’s assets are as follows:

	Target 2017		2017		2016
Cash and cash equivalents		0 - 20%		3%		2%
Fixed income securities		25 - 55%		45%		46%
Equities		40 - 65%		52%		52%
Total				100%		100%

Only high-quality bonds are to be included in the portfolio.  All issues that are rated lower than A by Standard and Poor’s are to be excluded. Equity securities at December 31, 2017 and 2016 do not include any Company common stock. 

The following table presents the financial instruments recorded at fair value on a recurring basis by the Plan:

(In thousands)	Level 1		Level 2		December 31, 2017
Cash and cash equivalents	$	3,684	$	-	$	3,684
Foreign equity mutual funds		44,508		-		44,508
Equity mutual funds		26,747		-		26,747
U.S. government bonds		-		99		99
Corporate bonds		-		49,188		49,188
Total	$	74,939	$	49,287	$	124,226

	Level 1		Level 2		December 31, 2016
Cash and cash equivalents	$	3,500	$	-	$	3,500
Foreign equity mutual funds		33,687		-		33,687
Equity mutual funds		28,256		-		28,256
U.S. government bonds		-		1,283		1,283
Corporate bonds		-		49,490		49,490
Total	$	65,443	$	50,773	$	116,216

The plan had no financial instruments recorded at fair value on a non-recurring basis as of December 31, 2017 and 2016.

Determination of Assumed Rate of Return

The expected long-term rate-of-return on assets was 7.0% at December 31, 2017 and 2016. This assumption represents the rate of return on plan assets reflecting the average rate of earnings expected on the funds invested or to be invested to provide for the benefits included in the projected benefit obligation. The assumption has been determined by reflecting expectations regarding future rates of return for the portfolio considering the asset distribution and related historical rates of return. The appropriateness of the assumption is reviewed annually.

Employee 401(k) and Employee Stock Ownership Plans

The Company maintains a 401(k) and employee stock ownership plan (the “401(k) Plan”). The Company contributes to the 401(k) Plan based on employees’ contributions out of their annual salaries. In addition, the Company may also make discretionary contributions to the 401(k) Plan based on profitability.  Participation in the 401(k) Plan is contingent upon certain age and service requirements. The employer contributions associated with the 401(k) Plan were $2.8 million in 2017, $2.7 million in 2016 and $2.5 million in 2015.

Other Retirement Benefits

Included in other liabilities is $2.4 million and $2.6 million at December 31, 2017 and 2016, respectively, for supplemental retirement benefits for retired executives from legacy plans assumed in acquisitions. The Company recognized $0.1, $0.2 and $0.3 million in expense for the years ended December 31, 2017, 2016 and 2015, respectively, related to these plans.

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Stock-Based Compensation

12 Months Ended

Dec. 31, 2017

Stock-Based Compensation [Abstract]

Stock-Based Compensation

14. Stock-Based Compensation

In April 2008, the Company adopted the NBT Bancorp Inc. 2008 Omnibus Incentive Plan (the “Stock Plan”). Under the terms of the Stock Plan, options and other equity-based awards are granted to directors and employees to increase their direct proprietary interest in the operations and success of the Company. The Stock Plan assumed all prior equity-based incentive plans and any new equity-based awards are granted under the terms of the Stock Plan. Under terms of the Stock Plan, stock options are granted to purchase shares of the Company’s common stock at a price equal to the fair market value of the common stock on the date of the grant. Options granted have a vesting period of four years and terminate ten years from the date of the grant. Shares issued as a result of stock option exercises and vesting of restricted shares and stock unit awards are funded from the Company’s treasury stock. Restricted shares granted under the Plan vest after five years for employees and three years for non-employee directors. Restricted stock units granted under the Stock Plan may have different terms and conditions. Performance shares and units granted under the Stock Plan for executives may have different terms and conditions. Since 2011, the Company primarily grants restricted stock unit awards. Stock option grants since that time were reloads of existing grants.

The following table summarizes information concerning stock options outstanding:

(In thousands, except share and per share data)	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2017		230,174		$	24.35
Granted		1,500			40.63
Exercised		(118,844	)		25.94
Expired		(800	)		24.46
Outstanding at December 31, 2017		112,030		$	22.88		2.13	$	1,566
Exercisable at December 31, 2017		107,280		$	22.41		1.84	$	1,544
Expected to Vest		4,750		$	33.52		8.68	$	22

Total stock-based compensation expense for stock option awards totaled $0.1 million, $0.2 million and $0.2 million for the years ended December 31, 2017, 2016 and 2015, respectively. Cash proceeds, tax benefits and intrinsic value related to total stock options exercised is as follows: 

	Years ended December 31,
(In thousands)	2017		2016		2015
Proceeds from stock options exercised	$	3,083	$	8,398	$	12,044
Tax benefits related to stock options exercised		650		1,223		952
Intrinsic value of stock options exercised		1,699		3,143		2,446
Fair value of shares vested during the year		329		105		63

The Company has outstanding restricted stock granted from various plans at December 31, 2017. The Company recognized $3.5 million, $4.2 million and $3.9 million in stock-based compensation expense related to these stock awards for the years ended December 31, 2017, 2016 and 2015, respectively. Tax benefits recognized with respect to restricted stock awards and stock units were $2.5 million, $2.9 million and $1.5 million for the years ended December 31, 2017, 2016 and 2015, respectively. Unrecognized compensation cost related to restricted stock awards and stock units totaled $4.8 million at December 31, 2017 and will be recognized over 2.1 years on a weighted average basis. Shares issued are funded from the Company’s treasury stock. The following table summarizes information for unvested restricted stock units outstanding as of December 31, 2017:

	Number of Shares			Weighted- Average Grant Date Fair Value
Unvested at January 1, 2017		613,163		$	22.62
Forfeited		(5,545	)		23.18
Vested		(198,652	)		22.34
Granted		125,772			36.15
Unvested at December 31, 2017		534,738		$	25.77

The Company has 2,813,597 securities remaining available to be granted as part of the Plan at December 31, 2017.

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Stockholders' Equity

12 Months Ended

Dec. 31, 2017

Stockholders' Equity [Abstract]

Stockholders' Equity

15. Stockholders’ Equity

In accordance with GAAP, unrecognized prior service costs and net actuarial gains or losses associated with the Company’s pension and postretirement benefit plans and unrealized gains on derivatives and on AFS securities are included in AOCI, net of tax. For the years ended December 31, components of AOCI are:

(In thousands)	2017			2016			2015
Unrecognized prior service cost and net actuarial (losses) on pension plans	$	(15,284	)	$	(18,227	)	$	(21,557	)
Unrealized gains on derivatives (cash flow hedges)		2,144			1,772			-
Unrealized net holding (losses) on AFS securities		(8,937	)		(5,065	)		(861	)
AOCI	$	(22,077	)	$	(21,520	)	$	(22,418	)

Certain restrictions exist regarding the ability of the subsidiary bank to transfer funds to the Company in the form of cash dividends. The approval of the Office of Comptroller of the Currency (the "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 specified in applicable OCC regulations. At December 31, 2017, approximately $107.5 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 also is subject to the Bank being in compliance with regulatory capital requirements. The Bank is currently in compliance with these requirements. Under the State of Delaware General Corporation Law, the Company may declare and pay dividends either out of accumulated net retained earnings or capital surplus.

The Company did not purchase any shares of its common stock during the year ended December 31, 2017. There are 1,000,000 shares available for repurchase under this plan, which expires on December 31, 2019.

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Regulatory Capital Requirements

12 Months Ended

Dec. 31, 2017

Regulatory Capital Requirements [Abstract]

Regulatory Capital Requirements

16. Regulatory Capital Requirements

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of NBT Bank’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 Capital to risk-weighted assets and of Tier 1 capital to average assets. As of December 31, 2017 and 2016, the Company and the Bank meet all capital adequacy requirements to which they were subject.

Under their prompt corrective action regulations, regulatory authorities are required to take certain supervisory actions (and may take additional discretionary actions) with respect to an undercapitalized institution. Such actions could have a direct material effect on an institution’s financial statements. The regulations establish a framework for the classification of banks into five categories: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. As of December 31, 2017 and 2016, the most recent notifications from the Bank’s regulators categorized the Bank as well-capitalized under the regulatory framework for prompt corrective action.  To be categorized as well-capitalized the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 Capital to Average Asset ratios as set forth in the table below. There are no conditions or events since that notification that management believes have changed the Bank’s category.

Beginning in 2016, in addition to maintaining minimum capital ratios, the Company began to be subject to a capital conservation buffer ("Buffer") above the minimum to avoid restriction on capital distributions and discretionary bonus paychecks to officers. At December 31, 2017 and 2016 the Buffer was 1.25% and 0.625%, respectively. The Buffer regulatory minimum ratio is in the process of being phased in over four years, which started in 2016 with the minimum requirement of 0.625%, and is fully phased in for fiscal year 2019 with a requirement of 2.5%.

The Company and NBT Bank’s actual capital amounts and ratios are presented as follows:

	Actual					Regulatory Ratio Requirements
(Dollars in thousands)	Amount		Ratio			Minimum Capital Adequacy			Minimum plus Buffer			For Classification as Well- Capitalized
As of December 31, 2017
Tier I Capital (to average assets)
Company	$	810,445		9.14	%		4.00	%					5.00	%
NBT Bank		756,521		8.59	%		4.00	%					5.00	%
Common Equity Tier 1 Capital
Company		713,445		10.06	%		4.50	%		5.75	%		6.50	%
NBT Bank		756,521		10.74	%		4.50	%		5.75	%		6.50	%
Tier I Capital (to risk-weighted assets)
Company		810,445		11.42	%		6.00	%		7.25	%		6.00	%
NBT Bank		756,521		10.74	%		6.00	%		7.25	%		6.00	%
Total Capital (to risk-weighted assets)
Company		880,874		12.42	%		8.00	%		9.25	%		10.00	%
NBT Bank		826,950		11.74	%		8.00	%		9.25	%		10.00	%
As of December 31, 2016
Tier I Capital (to average assets)
Company	$	773,111		9.11	%		4.00	%					5.00	%
NBT Bank		723,992		8.59	%		4.00	%					5.00	%
Common Equity Tier 1 Capital
Company		676,111		9.98	%		4.50	%		5.125	%		6.50	%
NBT Bank		723,992		10.76	%		4.50	%		5.125	%		6.50	%
Tier I Capital (to risk-weighted assets)
Company		773,111		11.42	%		6.00	%		6.625	%		8.00	%
NBT Bank		723,992		10.76	%		6.00	%		6.625	%		8.00	%
Total Capital (to risk-weighted assets)
Company		839,152		12.39	%		8.00	%		8.625	%		10.00	%
NBT Bank		790,034		11.75	%		8.00	%		8.625	%		10.00	%

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Earnings Per Share

12 Months Ended

Dec. 31, 2017

Earnings Per Share [Abstract]

Earnings Per Share

17. Earnings Per Share

The following is a reconciliation of basic and diluted EPS for the years presented in the consolidated statements of income:

	Years ended December 31,
	2017						2016						2015
(In thousands except share and per share data)	Net Income		Weighted Average Shares		Per Share Amount		Net Income		Weighted Average Shares		Per Share Amount		Net Income		Weighted Average Shares		Per Share Amount
Basic EPS	$	82,151		43,575	$	1.89	$	78,409		43,244	$	1.81	$	76,425		43,836	$	1.74
Effect of dilutive securities:
Stock-based compensation				330						378						553
Diluted EPS	$	82,151		43,905	$	1.87	$	78,409		43,622	$	1.80	$	76,425		44,389	$	1.72

There was a nominal number of weighted average stock options outstanding for the years ended December 31, 2017, 2016 and 2015, respectively, that were not considered in the calculation of diluted EPS since the stock options’ exercise prices were greater than the average market price during these periods.

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Reclassification Adjustments Out of Other Comprehensive Income (Loss)

12 Months Ended

Dec. 31, 2017

Reclassification Adjustments Out of Other Comprehensive Income [Abstract]

Reclassification Adjustments Out of Other Comprehensive Income

18. Reclassification Adjustments Out of Other Comprehensive Income (Loss)

The following table summarizes the reclassification adjustments out of AOCI:

Detail About AOCI Components	Amount Reclassified from AOCI									Affected Line Item in the Consolidated Statements of OCI
	Years ended
(In thousands)	December 31, 2017			December 31, 2016			December 31, 2015
AFS securities:
(Gains) losses on AFS securities	$	(1,869	)	$	644		$	(3,087	)	Net securities (gains) losses
Amortization of unrealized gains related to securities transfer		875			1,094			1,311		Interest income
Impairment write-down of an equity security		1,312			-			-		Other noninterest income
Tax effect	$	(120	)	$	(677	)	$	691		Income tax (expense) benefit
Net of tax	$	198		$	1,061		$	(1,085	)
Pension and other benefits:
Amortization of net losses	$	1,755		$	2,395		$	2,437		Salaries and employee benefits
Amortization of prior service costs		97			(25	)		(198	)	Salaries and employee benefits
Tax effect		(740	)		(949	)		(868	)	Income tax (expense) benefit
Net of tax	$	1,112		$	1,421		$	1,371
Total reclassifications, net of tax	$	1,310		$	2,482		$	286

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Commitments and Contingent Liabilities

12 Months Ended

Dec. 31, 2017

Commitments and Contingent Liabilities [Abstract]

Commitments and Contingent Liabilities

19. Commitments and Contingent Liabilities

The Company’s concentrations of credit risk are reflected in the consolidated balance sheets.  The concentrations of credit risk with standby letters of credit, unused lines of credit, commitments to originate new loans and loans sold with recourse generally follow the loan classifications.

At December 31, 2017, approximately 59% of the Company’s loans were secured by real estate located in central and upstate New York, northeastern Pennsylvania, western Massachusetts, southern New Hampshire and Vermont. Accordingly, the ultimate collectability of a substantial portion of the Company’s portfolio is susceptible to changes in market conditions of those areas. Management is not aware of any material concentrations of credit to any industry or individual borrowers.

The Company is a party to certain financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, unused lines of credit, standby letters of credit and certain agricultural real estate loans sold to investors with recourse, with the sold portion having a government guarantee that is assignable back to the Company upon repurchase of the loan in the event of default. The Company’s exposure to credit loss in the event of nonperformance by the other party to the commitments to extend credit, unused lines of credit, standby letters of credit and loans sold with recourse is represented by the contractual amount of those instruments. The credit risk associated with commitments to extend credit and standby and commercial letters of credit is essentially the same as that involved with extending loans to customers and is subject to normal credit policies. Collateral may be obtained based on management’s assessment of the customer’s creditworthiness. 

	At December 31,
(In thousands)	2017		2016
Unused lines of credit	$	351,227	$	292,140
Commitments to extend credits, primarily variable rate		1,215,187		1,177,842
Standby letters of credit		41,135		36,815
Loans sold with recourse		29,120		28,463

Since many loan commitments, standby letters of credit, and guarantees and indemnification contracts expire without being funded in whole or in part, the contract amounts are not necessarily indicative of future cash flows. The Company does not issue any guarantees that would require liability-recognition or disclosure, other than its standby letters of credit.

The Company guarantees the obligations or performance of customers by issuing stand-by letters of credit to third parties. These stand-by letters of credit are frequently issued in support of third party debt, such as corporate debt issuances, industrial revenue bonds and municipal securities. The risk involved in issuing stand-by letters of credit is essentially the same as the credit risk involved in extending loan facilities to customers and letters of credit are subject to the same credit origination, portfolio maintenance and management procedures in effect to monitor other credit and off-balance sheet products. Typically, these instruments have terms of 5 years or less and expire unused; therefore, the total amounts do not necessarily represent future cash requirements. The fair value of the Company’s stand-by letters of credit at December 31, 2017 and 2016 was not significant.

In the normal course of business there are various outstanding legal proceedings. If legal costs are deemed material by management, the Company accrues for the estimated loss from a loss contingency if the information available indicates that it is probable that a liability had been incurred at the date of the financial statements and the amount of loss can be reasonably estimated.

The Company is required to maintain reserve balances with the Federal Reserve Bank. The required average total reserve for NBT Bank for the 14-day maintenance period ending December 20, 2017 was $59.0 million.

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Derivative Instruments and Hedging Activities

12 Months Ended

Dec. 31, 2017

Derivative Instruments and Hedging Activities [Abstract]

Derivative Instruments and Hedging Activities

20. Derivative Instruments and Hedging Activities

The Company is exposed to certain risks arising from both its business operations and economic conditions.  The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, primarily by managing the amount, sources and duration of its assets and liabilities and through the use of derivative instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to certain fixed rate borrowings. The Company also has interest rate derivatives that result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate risk in the Company’s assets or liabilities. The Company manages a matched book with respect to its derivative instruments in order to minimize its net risk exposure resulting from such transactions.

Derivatives Not Designated as Hedging Instruments

The Company enters into interest rate swaps to facilitate customer transactions and meet their financing needs. These swaps are considered derivatives, but are not designated in hedging relationships. These instruments have interest rate and credit risk associated with them. To mitigate the interest rate risk, the Company enters into offsetting interest rate swaps with counterparties. The counterparty swaps are also considered derivatives and are also not designated in hedging relationships. Interest rate swaps are recorded within other assets or other liabilities on the consolidated balance sheet at their estimated fair value. Changes to the fair value of assets and liabilities arising from these derivatives are included, net, in other operating income in the consolidated statement of income.

The Company has seven risk participation agreements with financial institution counterparties for interest rate swaps related to loans in which we are a participant. The risk participation agreement provides credit protection to the financial institution should the borrower fail to perform on its interest rate derivative contract with the financial institution.

Derivatives Designated as Hedging Instruments

The Company has entered into interest rate swaps to modify the interest rate characteristics of certain short-term FHLB advances from variable rate to fixed rate in order to reduce the impact of changes in future cash flows due to market interest rate changes. These agreements are designated as cash flow hedges.

The following table depicts the fair value adjustment recorded related to the notional amount of derivatives outstanding as well as the notional amount of risk participation agreements:

	December 31,
(In thousands)	2017		2016
Derivatives Not Designated as Hedging Instruments:
Fair value adjustment	$	210	$	309
Notional amount:
Interest rate derivatives		481,185		371,101
Risk participation agreements		35,628		11,421
Derivatives Designated as Hedging Instruments:
Fair value adjustment - interest rate derivatives		3,510		2,704
Notional amount - interest rate derivatives		250,000		250,000

The following table indicates the gain or loss recognized in income on derivatives for the years ended December 31:

	December 31,
(In thousands)	2017		2016			2015
Non-hedging interest rate derivatives:
Increase in interest income	$	179	$	95		$	33
Increase in other income		2,945		3,480			684
Hedging interest rate derivatives:
Decrease (increase) in interest expense		289		(70	)		-

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Fair Values of Financial Instruments

12 Months Ended

Dec. 31, 2017

Fair Values of Financial Instruments [Abstract]

Fair Values of Financial Instruments

21. Fair Values of Financial Instruments

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 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 prices 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. Certain common equity securities are reported at fair value utilizing Level 1 inputs (exchange quoted prices). Other investment securities are reported at fair value utilizing Level 1 and Level 2 inputs. The prices for Level 2 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, amount other things. Management reviews the methodologies used in pricing the securities by its third party providers.

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 years ended December 31, 2017 and 2016, the Company has made no transfers of assets between the levels of the fair value hierarchy.

The following table sets 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)	Level 1		Level 2		Level 3		December 31, 2017
Assets:
AFS securities:
Federal agency	$	-	$	108,899	$	-	$	108,899
State & municipal		-		41,956		-		41,956
Mortgage-backed		-		554,927		-		554,927
Collateralized mortgage obligations		-		535,994		-		535,994
Other securities		5,845		8,304		-		14,149
Total AFS securities	$	5,845	$	1,250,080	$	-	$	1,255,925
Trading securities		11,467		-		-		11,467
Derivatives		-		3,732		-		3,732
Total	$	17,312	$	1,253,812	$	-	$	1,271,124
Liabilities:
Derivatives	$	-	$	324	$	-	$	324
Total	$	-	$	324	$	-	$	324

(In thousands)	Level 1		Level 2		Level 3		December 31, 2016
Assets:
AFS securities:
Federal agency	$	-	$	174,408	$	-	$	174,408
State & municipal		-		46,726		-		46,726
Mortgage-backed		-		529,844		-		529,844
Collateralized mortgage obligations		-		566,573		-		566,573
Other securities		11,493		9,246		-		20,739
Total AFS securities	$	11,493	$	1,326,797	$	-	$	1,338,290
Trading securities		9,259		-		-		9,259
Derivatives		-		3,210		-		3,210
Total	$	20,752	$	1,330,007	$	-	$	1,350,759
Liabilities:
Derivatives	$	-	$	506	$	-	$	506
Total	$	-	$	506	$	-	$	506

GAAP requires disclosure of assets and liabilities measured and recorded at fair value on a non-recurring basis such as goodwill, loans held for sale, OREO, collateral-dependent impaired loans, mortgage servicing rights and HTM securities. The only non-recurring fair value measurements recorded during the years ended December 31, 2017 and 2016 were related to impaired loans, write-downs of OREO and impairments of goodwill and intangible assets. 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.

As of December 31, 2017 and 2016, the Company had collateral dependent impaired loans with a carrying value of $0.1 million and $7.0 million, which had specific reserves included in the allowance for loan losses of $0.1 million and $1.5 million, respectively. 

The following table sets forth information with regard to estimated fair values of financial instruments. 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, AFS securities, trading securities, accrued interest receivable, non-maturity deposits, short-term borrowings, accrued interest payable and interest rate swaps.

			December 31, 2017				December 31, 2016
(In thousands)	Fair Value Hierarchy		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
HTM securities		2	$	484,073	$	481,871	$	527,948	$	525,050
Net loans		3		6,515,273		6,651,931		6,132,857		6,273,233
Financial liabilities:
Time deposits		2	$	806,766	$	801,294	$	872,411	$	868,153
Long-term debt		2		88,869		88,346		104,087		104,113
Junior subordinated debt		2		101,196		104,593		101,196		102,262

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.

Fair values for securities are based on quoted market prices or dealer quotes, where available. Where quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. When necessary, the Company utilizes matrix pricing from a third party pricing vendor to determine fair value pricing. Matrix prices are based on quoted prices for securities with similar coupons, ratings and maturities, rather than on specific bids and offers for the designated security.

GAAP gives entities the option to measure eligible financial assets, financial liabilities and Company commitments at fair value (i.e., the fair value option), on an instrument-by-instrument basis, that are otherwise not permitted to be accounted for at fair value under other accounting standards.  The election to use the fair value option is available when an entity first recognizes a financial asset or financial liability or upon entering into a Company commitment.  Subsequent changes in fair value must be recorded in earnings. As of December 31, 2017 and 2016, the Company did not elect the fair value option for any eligible items.

HTM Securities

The fair value of the Company’s investment HTM securities 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 trust preferred debentures has been estimated using a discounted cash flow analysis.

Interest Rate Swaps

The Company enters into interest rate swaps to facilitate customer transactions and meet their financing needs. These swaps are considered derivatives, but are not designated in hedging relationships. These instruments have interest rate and credit risk associated with them. To mitigate the interest rate risk, the Company enters into offsetting interest rate swaps with counterparties. The counterparty swaps are also considered derivatives and are also not designated in hedging relationships. Interest rate swaps are recorded within other assets or other liabilities on the consolidated balance sheet at their estimated fair value. Changes to the fair value of assets and liabilities arising from these derivatives are included, net, in other operating income in the consolidated statement of income.

The Company has entered into interest rate swaps to modify the interest rate characteristics of certain short-term FHLB advances from variable rate to fixed rate in order to reduce the impact of changes in future cash flows due to market interest rate changes. These agreements are designated as cash flow hedges.

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Parent Company Financial Information

12 Months Ended

Dec. 31, 2017

Parent Company Financial Information [Abstract]

Parent Company Financial Information

22. Parent Company Financial Information

Condensed Balance Sheets

	December 31,
(In thousands)	2017		2016
Assets
Cash and cash equivalents	$	7,572	$	4,152
AFS securities, at estimated fair value		10,065		15,273
Trading securities		11,245		8,968
Investment in subsidiaries, on equity basis		1,048,908		1,006,444
Other assets		40,461		44,178
Total assets	$	1,118,251	$	1,079,015
Liabilities and Stockholders’ Equity
Total liabilities	$	160,074	$	165,699
Stockholders’ equity		958,177		913,316
Total liabilities and stockholders’ equity	$	1,118,251	$	1,079,015

Condensed Statements of Income

	Years ended December 31,
(In thousands)	2017		2016			2015
Dividends from subsidiaries	$	38,300	$	10,200		$	78,200
Management fee from subsidiaries		99,319		95,244			92,629
Net securities gains		2,237		652			3,034
Interest, dividends and other income		928		976			693
Total revenue	$	140,784	$	107,072		$	174,556
Operating expenses		100,667		97,977			94,332
Income before income tax benefit and equity in undistributed income of subsidiaries		40,117		9,095			80,224
Income tax expense (benefit)		2,233		(321	)		515
Dividends in excess of income (equity in undistributed income) of subsidiaries		44,267		68,993			(3,284	)
Net income	$	82,151	$	78,409		$	76,425

Condensed Statements of Cash Flow

	Years ended December 31,
(In thousands)	2017			2016			2015
Operating activities
Net income	$	82,151		$	78,409		$	76,425
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization of premises and equipment		2,974			2,805			2,522
Excess tax benefit on stock-based compensation		1,769			1,055			(43	)
Stock-based compensation expense		3,644			4,378			4,086
Net (gain) on sales of AFS securities		(2,238	)		(652	)		(3,034	)
Re-evaluation of deferred tax amounts from Tax Act		3,339			-			-
Equity in undistributed income of subsidiaries		(82,567	)		(79,193	)		(74,916	)
Cash dividend from subsidiaries		38,300			10,200			78,200
Bank owned life insurance income		(328	)		(356	)		(292	)
Net change in other liabilities		(5,624	)		(8,596	)		6,770
Net change in other assets		(368	)		22,728			(6,652	)
Net cash provided by operating activities	$	41,052		$	30,778		$	83,066
Investing activities
Proceeds on sales and maturities of AFS securities	$	4,710		$	1,783		$	5,297
Purchases of AFS securities		(9	)		(580	)		(3,083	)
Proceeds from settlement of bank owned life insurance		308			-			-
Net purchases of premises and equipment		(2,264	)		(3,083	)		(2,930	)
Net cash provided by (used in) investing activities	$	2,745		$	(1,880	)	$	(716	)
Financing activities
Proceeds from the issuance of shares to employee benefit plans and other stock plans	$	3,309		$	6,032		$	8,856
Cash paid by employer for tax-withholding on stock issuance		(3,582	)		(3,387	)		(1,164	)
Purchases of treasury shares		-			(17,193	)		(26,797	)
Cash dividends and payments for fractional shares		(40,104	)		(38,880	)		(38,149	)
Net cash (used in) financing activities	$	(40,377	)	$	(53,428	)	$	(57,254	)
Net increase (decrease) in cash and cash equivalents	$	3,420		$	(24,530	)	$	25,096
Cash and cash equivalents at beginning of year		4,152			28,682			3,586
Cash and cash equivalents at end of year	$	7,572		$	4,152		$	28,682

A statement of changes in stockholders’ equity has not been presented since it is the same as the consolidated statement of changes in stockholders’ equity previously presented.

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Recent Accounting Pronouncements

12 Months Ended

Dec. 31, 2017

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

23. Recent Accounting Pronouncements

Recently Adopted Accounting Standards

Effective December 31, 2017, the Company adopted the provisions of SAB 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, which was issued by the SEC in December 2017. SAB 118 provides guidance on the timing of recognition for the effects of the Tax Act. Under SAB 118, companies are provided a measurement period of up to one year from the enactment of the Tax Act to evaluate and record its effects. Companies are required to record provisional amounts when sufficient information to make a reasonable estimate is available and are expected to make final adjustments when the required information is available. SAB 118 contains several disclosure requirements regarding a company’s assessment and recording the effects of the Tax Act, including the amounts recorded and the status of estimating potential additional effects. SAB 118 was effective immediately upon issuance. The disclosures required by SAB 118 were included in Note 12 of the consolidated financial statements.

Effective July 1, 2017, the Company early adopted the provision of FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 amends and simplifies the subsequent measurement of goodwill; the amendments eliminate Step 2 from the goodwill impairment test. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the qualitative impairment test is necessary. The amendments were applied on a prospective basis and the adoption did not have a significant impact on the consolidated financial statements.

Effective January 1, 2017, the Company adopted the provision of FASB ASU No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 requires several revisions to equity compensation accounting. Under the new guidance all excess tax benefits and deficiencies that occur when an award vests, is exercised or expires are recognized in income tax expense as discrete period items. Previously, these transactions were typically recorded directly within equity. Consistent with this change, excess tax benefits and deficiencies are no longer included within estimated proceeds when performing the treasury stock method for calculating diluted earnings per share. Excess tax benefits are also recognized at the time an award is exercised or vests compared to the previous requirements to delay recognition until the deduction reduces taxes payable. The presentation of excess tax benefits in the statement of cash flows shifted to an operating activity from the prior classification as a financing activity. ASU 2016-09 also provides an accounting policy election to recognize forfeitures of awards as they occur when estimating stock-based compensation expense rather than the previous requirement to estimate forfeitures from inception. Further, ASU 2016-09 permits employers to use a net settlement feature to withhold taxes on equity compensation awards up to the maximum statutory tax rate without affecting the equity classification of the award. Transition to the new guidance was accomplished through a combination of cumulative-effect adjustment to equity (forfeitures) and prospective methodologies (cash flows, tax windfalls and shortfalls). The adoption of ASU 2016-09 resulted in income tax benefits of $1.8 million in the year ended December 31, 2017 and the effect on earnings per share calculations and election to account for forfeitures as incurred have not been significant.

Accounting Standards Issued Not Yet Adopted

In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of -Certain Tax Effects from Accumulated Other Comprehensive Income. ASU 2018-02 requires a reclassification from AOCI to retained earnings for stranded tax effects resulting from the newly enacted federal corporate income tax rate in the Tax Act. The Tax Act included a reduction to the Federal corporate income tax rate from 35% to 21% effective January 1, 2018. The amount of the reclassification from AOCI to retained earnings would be the difference between the historical corporate income tax rate and the newly enacted rate and will be accounted for as a cumulative-effect adjustment to the balance sheet. ASU 2018-02 is effective for the Company on January 1, 2019. Early adoption is permitted. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures and does not expect the impact to be material.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. ASU 2017-12 better aligns the accounting and reporting of hedging relationships with the economics of risk management activities. The standard requires the modified retrospective transition approach as of the date of adoption. ASU 2017-12 is effective for the Company on January 1, 2019. Early adoption is permitted. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures and does not expect the impact to be material.

In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718). ASU 2017-09 provides guidance about which changes to the terms and conditions of a share-based payment award require an entity to apply modification accounting. ASU 2017-09 is effective for the Company on January 1, 2018. Management has evaluated the effect that this guidance will have and concluded that the impact on the consolidated financial statements and related disclosures will not be material upon adoption on January 1, 2018.

In March 2017, the FASB issued ASU No. 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20). ASU 2017-08 requires amortization of premiums to the earliest call date on debt securities with call features that are explicit, on contingent and callable at fixed prices on present dates. The ASU does not impact securities held at a discount; the discount continues to be amortized to the contractual maturity. The guidance is required to be applied with a modified retrospective approach through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. ASU 2017-08 is effective for the Company on January 1, 2019. Early adoption is permitted. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures and does not expect the impact to be material.

In March 2017, the FASB issued ASU No. 2017-07, Compensation – Retirement Benefits (Topic 715). ASU 2017-07 requires the service cost component of net periodic pension and post-retirement benefit cost to be reported separately in the consolidated statements of income from the other components. Additionally, the amendments in the ASU require presentation of the service cost component in the consolidated statements of income in the same line item as other employee compensation costs and presentation of the other components in a different line item from the service cost component. The amendments in this ASU are required to be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic post-retirement benefit cost in the income statement and prospectively, on or after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic post-retirement benefit in assets with a practical expedient allowed for prior comparative period presentation permitted. ASU 2017-07 is effective for the Company on January 1, 2018. Management has evaluated the effect that this guidance will have and concluded that the impact on the consolidated financial statements and related disclosures will not be material upon adoption on January 1, 2018.

In February 2017, the FASB issued ASU No. 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20). ASU 2017-05 will clarify the scope of Subtopic 610-20 and add guidance for partial sales of nonfinancial assets. The amendments define the term in substance nonfinancial assets and clarify that a nonfinancial asset within the scope may include nonfinancial assets transferred within a legal entity to a counterparty, in part, as a financial asset promised to a counterparty in a contract. Additionally, the amendments in ASU clarify that an entity should identify each distinct nonfinancial asset or in substance nonfinancial assets and allocate consideration to each distinct asset. The amendments should be applied either on retrospectively to each period presented or with a modified retrospective approach. ASU 2017-05 is effective for the Company on January 1, 2018 and the Company is required to apply the amendment at the same time that is applies the amendments in 2014-09. Management has evaluated the effect that this guidance will have and concluded that the impact on the consolidated financial statements and related disclosures will not be material upon adoption on January 1, 2018.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU 2017-01 provides a more robust framework to use in determining when a set of assets and activities (“set”) is a business and to address stakeholder feedback that the definition of a business in current GAAP is applied too broadly. The primary amendments in the ASU provide a screen to exclude transactions where substantially all of the fair value of the transferred set is concentrated in a single asset, or group of similar assets, from being evaluated as a business. ASU 2017-01 is effective for the Company on January 1, 2018 using the prospective method. Management has evaluated the effect that this guidance will have and concluded that the impact on the consolidated financial statements and related disclosures will not be material upon adoption on January 1, 2018.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. ASU 2016-18 addresses diversity in practice from entities classifying and presenting transfers between cash and restricted cash as operating, investing or financing activities or as a combination of those activities in the statement of cash flows. The ASU requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the Statement of Cash Flows. As a result, transfers between such categories will no longer be presented in the Statement of Cash Flows. ASU 2016-18 is effective for the Company on January 1, 2018 using the retrospective method. Management has evaluated the effect that this guidance will have and concluded that the impact on the consolidated financial statements and related disclosures will not be material upon adoption on January 1, 2018.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments). ASU 2016-15 addresses diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This standard addresses the following eight specific cash flow issues: Debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. ASU 2016-15 is effective for the Company on January 1, 2018. Management has evaluated the effect that this guidance will have and concluded that the impact on the consolidated financial statements and related disclosures will not be material upon adoption on January 1, 2018.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, ASU 2016-13 amends the accounting for credit losses on AFS debt securities and purchased financial assets with credit deterioration. ASU 2016-13 is effective for the Company on January 1, 2020. Early adoption is permitted for all organizations for fiscal years and interim periods within those fiscal years, beginning after December 15, 2018. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize right of use assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize a right of use asset and lease liability. Additionally, when measuring assets and liabilities arising from a lease, optional payments should be included only if the lessee is reasonable certain to exercise an option to extend the lease, exercise a purchase option or not exercise an option to terminate the lease. ASU 2016-02 is effective for the Company on January 1, 2019. Early adoption is permitted in any interim or annual period. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments and requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value. Any changes in fair value on equity investments with readily determinable market value will be recognized in net income unless the investments qualify for a new practicability exception. This ASU also requires entities to recognize changes in instrument-specific credit risk related to financial liabilities measured under the fair value option in OCI. No changes were made to the guidance for classifying and measuring investments in debt securities and loans. ASU 2016-01 is effective for the Company on January 1, 2018. Management has evaluated the effect that this guidance will have and concluded that the impact on the consolidated financial statements and related disclosures will not be material upon adoption on January 1, 2018.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 is a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under GAAP and is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects consideration to which the entity expects to be entitled in exchange for those goods and services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. For financial reporting purposes, the standard allows for either full retrospective adoption, meaning the standard is applied to all of the periods presented, or modified retrospective adoption, meaning the standard is applied only to the most current period presented in the financial statements with the cumulative effect of initially applying the standard recognized at the date of initial application. ASU 2014-09 was initially effective for the Company on January 1, 2017; however, in August 2015, the FASB issued ASU No. 2015-14 - Revenue from Contracts with Customers - Deferral of the Effective Date, which deferred the effective date to January 1, 2018. In addition, the FASB has begun to issue targeted updates to clarify specific implementation issues of ASU 2014-09. These updates include ASU No. 2016-08 - Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU No. 2016-10 - Identifying Performance Obligations and Licensing, ASU No. 2016-12 - Narrow-Scope Improvements and Practical Expedients and ASU No. 2016-20 - Technical Corrections and Improvements to Top 606 - Revenue from Contract with Customers.

In evaluating this standard, management determined that the majority of revenue earned by the Company is from revenue streams not included in the scope of this standard such as interest earned from loans, investment securities and bank owned life insurance income. For applicable revenue streams such as ATM and debit card fees, insurance, other financial services revenue, service charges on deposit accounts, retirement plan administration fees and trust fees, management reviewed the applicable contracts provisions and applied the principles in the new standard for revenue recognition. Based on the results of that review, management determined that the impact on the consolidated financial statements and related disclosures will not be material upon adoption on January 1, 2018.

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2017

Summary of Significant Accounting Policies [Abstract]

Consolidation

Consolidation

The accompanying consolidated financial statements include the accounts of NBT Bancorp and its wholly-owned subsidiaries mentioned above. All material intercompany transactions have been eliminated in consolidation. Amounts previously reported in the consolidated financial statements are reclassified whenever necessary to conform to the current year’s presentation. In the “Parent Company Financial Information,” the investment in subsidiaries is recorded using the equity method of accounting.

The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a variable interest entity under GAAP. Voting interest entities are entities in which the total equity investment at risk is sufficient to enable the entity to finance itself independently and provides the equity holders with the obligation to absorb losses, the right to receive residual returns and the right to make decisions about the entity’s activities. The Company consolidates voting interest entities in which it has all, or at least a majority of, the voting interest. As defined in applicable accounting standards, variable interest entities (“VIEs”) are entities that lack one or more of the characteristics of a voting interest entity. A controlling financial interest in a VIE is present when the Company has both the power and ability to direct the activities of the VIE that most significantly impact the VIE's economic performance and an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The Company’s wholly-owned subsidiaries CNBF Capital Trust I, NBT Statutory Trust I, NBT Statutory Trust II, Alliance Financial Capital Trust I and Alliance Financial Capital Trust II are VIEs for which the Company is not the primary beneficiary. Accordingly, the accounts of these entities are not included in the Company’s consolidated financial statements.

Segment Reporting

Segment Reporting

The Company’s operations are primarily in the community banking industry and include the provision of traditional banking services. The Company also provides other services through its subsidiaries such as insurance, retirement plan administration and trust administration. The Company operates solely in the geographical regions of central and upstate New York, northeastern Pennsylvania, western Massachusetts, southern New Hampshire, Vermont and southern coastal Maine. The Company has no reportable operating segments.

Cash Equivalents

Cash Equivalents

The Company considers amounts due from correspondent banks, cash items in process of collection and institutional money market mutual funds to be cash equivalents for purposes of the consolidated statements of cash flows.

Securities

Securities

The Company classifies its securities at date of purchase as either held to maturity ("HTM"), trading or available for sale ("AFS"). HTM debt securities are those that the Company has the ability and intent to hold until maturity. Trading securities are securities purchased with the intent to sell within a short period of time. AFS securities are securities that are not classified as a HTM or trading securities. AFS securities are recorded at fair value. Unrealized holding gains and losses, net of the related tax effect, on AFS securities are excluded from earnings and are reported in the consolidated statements of stockholders’ equity and the consolidated statements of comprehensive income as a component of accumulated other comprehensive income or loss ("AOCI"). HTM securities are recorded at amortized cost. Trading securities are recorded at fair value, with net unrealized gains and losses recognized in income. Transfers of securities between categories are recorded at fair value at the date of transfer. Non-marketable equity securities are carried at cost.

Declines in the fair value of HTM and AFS securities below their amortized cost, less any current period credit loss, that are deemed to be OTTI are reflected in earnings as a realized loss, or in other comprehensive income ("OCI"). The classification is dependent upon whether the Company intends to sell the security, or whether it is more likely than not it will be required to sell the security before recovery. The OTTI 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 OTTI 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 OTTI impairment related to the credit loss shall be recognized in earnings. The amount of the total OTTI related to other factors shall be recognized in OCI, net of applicable taxes.

In estimating OTTI 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.

Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to yield using the interest method. Dividend and interest income are recognized when earned. Realized gains and losses on securities sold are derived using the specific identification method for determining the cost of securities sold.

Investments in Federal Reserve Bank and Federal Home Loan Bank (“FHLB”) stock are required for membership in those organizations and are carried at cost since there is no market value available. The FHLB New York continues to pay dividends and repurchase stock. As such, the Company has not recognized any impairment on its holdings of Federal Reserve Bank and FHLB stock.

Loans

Loans

Loans are recorded at their current unpaid principal balance, net of unearned income and unamortized loan fees and expenses, which are amortized under the effective interest method over the estimated lives of the loans. Interest income on loans is accrued based on the principal amount outstanding.

For all loan classes within the Company’s loan portfolio, 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 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.

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. For all loan classes within the Company’s loan portfolio, 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. 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.

Commercial type loans are considered impaired when it is probable that the borrower will not repay the loan according to the original contractual terms of the loan agreement and all loan types are considered impaired if the loan is restructured in a troubled debt restructuring (“TDR”). 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.

A loan is considered to be a TDR when the Company grants a concession to the borrower because of the borrower’s financial condition that the Company would not otherwise consider. Such concessions include the reduction of interest rates, forgiveness of all or a portion of principal or interest, or other modifications at interest rates that are less than the current market rate for new obligations with similar risk. TDR loans are nonaccrual loans; however, they can be returned to accrual status after a period of performance, generally evidenced by six months of compliance with their modified terms.

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.

Acquired Loans

Acquired Loans

Acquired loans are initially measured at fair value as of the acquisition date without carryover of historical allowance for loan losses.

For loans that meet the criteria stipulated in ASC 310-30, Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality, the Company shall recognize the accretable yield, which is defined as the excess of all cash flows expected at acquisition over the initial fair value of the loan, as interest income on a level-yield basis over the expected remaining life of the loan. The excess of the loan's contractually required payments over the cash flows expected to be collected is the nonaccretable difference. The nonaccretable difference shall not be recognized as an adjustment of yield, a loss accrual or a valuation allowance. Decreases in the expected cash flows in subsequent periods require the establishment of an allowance for loan losses. Improvements in expected cash flows in future periods result in a reduction of the nonaccretable discount, with such amount reclassified as part of the accretable yield and subsequently recognized in interest income over the remaining lives of the acquired loans on a level-yield basis if the amount and timing of future cash flows is reasonably estimable.

Acquired loans that met the criteria for nonaccrual of interest prior to the acquisition are considered performing upon acquisition, regardless of whether the customer is contractually delinquent, if the Company can reasonably estimate the timing and amount of the expected cash flows on such loans and if the Company expects to fully collect the new carrying value of the loans. As such, the Company may no longer consider the loan to be nonaccrual or nonperforming and may accrue interest on these loans, including the impact of any accretable yield. As such, charge-offs on acquired loans are first applied to the nonaccretable difference and then to any allowance for loan losses recognized subsequent to acquisition.

For loans that meet the criteria stipulated in ASC 310-20 - Receivables - Nonrefundable Fees and Other Costs ("ASC 310-20"), the Company shall amortize/accrete into interest income the premium/discount determined at the date of purchase on a level-yield basis over the life of the loan. Subsequent to the acquisition date, the methods utilized to estimate the required allowance for loan losses are similar to originated loans. Loans accounted for under ASC 310-20 are placed on nonaccrual status when past due in accordance with the Company's nonaccrual policy.

An acquired loan may be resolved either through receipt of payment (in full or in part) from the borrower, the sale of the loan to a third party, or foreclosure of the collateral. In the event of a sale of the loan, a gain or loss on sale is recognized and reported within noninterest income based on the difference between the sales proceeds and the carrying amount of the loan. In other cases, individual loans are removed from the pool based on comparing the amount received from its resolution (fair value of the underlying collateral less costs to sell in the case of a foreclosure) with its outstanding balance. Any difference between these amounts is recorded as a charge-off through the allowance for loan losses. Acquired loans subject to modification are not removed from the pool even if those loans would otherwise be deemed TDRs as the pool and not the individual loan, represents the unit of account.

Allowance for Loan Losses

Allowance for Loan Losses

The allowance for loan losses is the amount, which in the opinion of management, is necessary to absorb incurred losses inherent in the loan portfolio. The allowance is determined based upon numerous considerations, including local and regional conditions, the growth and composition of the loan portfolio with respect to the mix between the various types of loans and their related risk characteristics, a review of the value of collateral supporting the loans, comprehensive reviews of the loan portfolio by the independent loan review staff and management, as well as consideration of volume and trends of delinquencies, nonperforming loans and loan charge-offs. Loan losses are charged off against the allowance, while recoveries of amounts previously charged off are credited to the allowance. As a result of tests of adequacy, required additions to the allowance for loan losses are made periodically by charges to the provision for loan losses.

The allowance for loan losses related to impaired loans specifically allocated for impairment is based on discounted expected cash flows using the loan’s initial effective interest rate or the fair value of the collateral for certain loans where repayment of the loan is expected to be provided solely by the underlying collateral ("collateral dependent"). The Company’s impaired loans are generally collateral dependent. The Company considers the estimated cost to sell, on a discounted basis, when determining the fair value of collateral in the measurement of impairment if those costs are expected to reduce the cash flows available to repay or otherwise satisfy the loans.

The allowance for loan losses for homogeneous non impaired loans is calculated using a systematic methodology with both a quantitative and a qualitative analysis that is applied on a quarterly basis. For purposes of our allowance methodology, the loan portfolio is segmented as described in Note 5. Each segment has a distinct set of risk characteristics monitored by management. We further assess andmonitor risk and performance at a more disaggregated level, which includes our internal risk grading system for the commercialsegments.

We first apply historical loss rates to pools of loans with similar risk characteristics. Loss rates are calculated by historical charge-offs that have occurred within each pool of loans over the lookback period ("LBP"), multiplied by the loss emergence period ("LEP"). The LBP represents the historical data period utilized to calculate loss rates. The LEP is an estimate of the average amount of time from the point at which a loss is incurred on a loan to the point at which the loss is confirmed. In general, the LEP will be shorter in an economic slowdown or recession and longer during times of economic stability or growth, as customers are better able to delay loss confirmation after a potential loss event has occurred. In conjunction with our annual review of the ALL assumptions, we update our study of LEPs for each portfolio segment using our loan charge-off history.

After consideration of the historic loss analysis, management applies additional qualitative adjustments so that the allowance for loan losses is reflective of the estimate of incurred losses that exist in the loan portfolio at the balance sheet date.  Qualitative adjustments are made if, in the judgment of management, incurred loan losses inherent in the loan portfolio are not fully captured in the historical loss analysis. Qualitative considerations include the loan portfolio trends, 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 experience across one of 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. The evaluation of the various components of the allowance for loan losses requires considerable judgment in order to estimate inherent loss exposures. 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.

Management believes that the allowance for loan losses is adequate. While management uses available information to recognize loan losses, future additions to the allowance for loan losses may be necessary based on changes in economic conditions or changes in the values of properties securing loans in the process of foreclosure. In addition, various regulatory agencies, as an integral part 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 for loan losses based on their judgments about information available to them at the time of their examination, which may not be currently available to management.

Premises and Equipment

Premises and Equipment

Premises and equipment are stated at cost, less accumulated depreciation. Depreciation of premises and equipment is determined using the straight-line method over the estimated useful lives of the respective assets. Expenditures for maintenance, repairs and minor replacements are charged to expense as incurred.

Other Real Estate Owned

Other Real Estate Owned

Other real estate owned ("OREO") consists of properties acquired through foreclosure or by acceptance of a deed in lieu of foreclosure. These assets are recorded at the lower of fair value of the asset acquired less estimated costs to sell or “cost” (defined as the fair value at initial foreclosure). At the time of foreclosure, or when foreclosure occurs in-substance, the excess, if any, of the loan over the fair market value of the assets received, less estimated selling costs, is charged to the allowance for loan losses and any subsequent valuation write-downs are charged to other expense. In connection with the determination of the allowance for loan losses and the valuation of OREO, management obtains appraisals for properties. Operating costs associated with the properties are charged to expense as incurred. Gains on the sale of OREO are included in income when title has passed and the sale has met the minimum down payment requirements prescribed by GAAP. The balance of OREO is recorded in other assets on the consolidated balance sheets.

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

Goodwill represents the cost of acquired business in excess of the fair value of the related net assets acquired. Goodwill is not amortized but tested at the reporting unit level for impairment on an annual basis and on an interim basis or when events or circumstances dictate. The Company has elected June 30 as the annual impairment testing date for the insurance and retirement services reporting units and December 31 for the Bank reporting unit.

The Company has the option to first assess qualitative factors, by performing a qualitative analysis, to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the events or circumstances, the Company determines it is not more likely than not that the fair value of a reporting unit is greater than its carrying amount, the impairment test is not required. If the Company concludes otherwise, the Company is required to perform a quantitative impairment test. In the quantitative impairment test, the estimated fair value of a reporting unit is compared to the carrying amount in order to determine if impairment is indicated. If the estimated fair value exceeds the carrying amount, the reporting unit is not deemed to be impaired. If the estimated fair value is below the carrying value of the reporting unit, the difference is the amount of impairment.

Intangible assets that have indefinite useful lives are not amortized, but are tested at least annually for impairment. Intangible assets that have finite useful lives are amortized over their useful lives. Core deposit intangibles and trust intangibles at the Company are amortized using the sum-of-the-years’-digits method. Covenants not to compete are amortized on a straight-line basis. Customer lists are amortized using an accelerated method. When facts and circumstances indicate potential impairment of amortizable intangible assets, the Company evaluates the recoverability of the asset carrying value, using estimates of undiscounted future cash flows over the remaining asset life. Any impairment loss is measured by the excess of carrying value over fair value.

Determining the fair value of a reporting unit under the goodwill impairment tests and determining the fair value of other intangible assets are judgmental and often involve the use of significant estimates and assumptions. Estimates of fair value are primarily determined using the discounted cash flows method, which uses significant estimates and assumptions including projected future cash flows, discount rates reflecting the market rate of return and projected growth rates. Future events may impact such estimates and assumptions and could cause the Company to conclude that our goodwill or intangible assets have become impaired, which would result in recording an impairment loss.

Bank-Owned Life Insurance

Bank-Owned Life Insurance

The Bank has purchased life insurance policies on certain employees, key executives and directors. Bank-owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

Treasury Stock

Treasury Stock

Treasury stock acquisitions are recorded at cost. Subsequent sales of treasury stock are recorded on an average cost basis. Gains on the sale of treasury stock are credited to additional paid-in-capital. Losses on the sale of treasury stock are charged to additional paid-in-capital to the extent of previous gains, otherwise charged to retained earnings.

Income Taxes

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes interest accrued and penalties related to unrecognized tax benefits in income tax expense.

Tax positions are recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50 percent likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

Pension Costs

Pension Costs

The Company maintains a noncontributory, defined benefit pension plan covering substantially all employees, as well as supplemental employee retirement plans covering certain executives and a defined benefit postretirement healthcare plan that covers certain employees. Costs associated with these plans, based on actuarial computations of current and future benefits for employees, are charged to current operating expenses.

Stock-Based Compensation

Stock-Based Compensation

We maintain various long-term incentive stock benefit plans under which we grant stock options and restricted stock units to certain directors and key employees. We recognize compensation expense in our consolidated statements of income over the requisite service period, based on the grant-date fair value of the award. For restricted stock awards and units, we recognize compensation expense ratably over the vesting period for the fair value of the award, measured at the grant date. The fair values of options are estimated using the Black-Scholes option pricing model.

Earnings Per Share

Earnings Per Share

Basic earnings per share ("EPS") 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 EPS 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).

Comprehensive Income

Comprehensive Income

At the Company, comprehensive income represents net income plus OCI, which consists primarily of the net change in unrealized gains (losses) on AFS securities for the period, changes in the funded status of employee benefit plans and unrealized gains (losses) on derivatives designated as hedging instruments. AOCI represents the net unrealized gains (losses) on AFS securities, the previously unrecognized portion of the funded status of employee benefit plans and the fair value of instruments designated as hedging instruments, net of income taxes, as of the consolidated balance sheet dates.

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting.

For derivatives designated as fair value hedges, changes in the fair value of the derivative and the hedged item related to the hedged risk are recognized in earnings. Any hedge ineffectiveness would be recognized in the income statement line item pertaining to the hedged item. For derivatives designated as cash flow hedges, changes in fair value of the effective portion of the cash flow hedges are reported in OCI. When the cash flows associated with the hedged item are realized, the gain or loss included in OCI is recognized in the consolidated statements of income.

When the Company purchases a portion of a commercial loan that has an existing interest rate swap, it enters a risk participation agreement with the counterparty and assumes the credit risk of the loan customer related to the swap. Any fee paid to the Company under a risk participation agreement is in consideration of the credit risk of the counterparties and is recognized in the income statement. Credit risk on the risk participation agreements is determined after considering the risk rating, probability of default and loss given default of the counterparties.

Fair Value Measurements

Fair Value Measurements

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 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.

Other Financial Instruments

Other Financial Instruments

The Company is a party to certain other financial instruments with off-balance-sheet risk such as commitments to extend credit, unused lines of credit as well as certain mortgage loans sold to investors with recourse. The Company’s policy is to record such instruments when funded.

Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Under the standby letters of credit, the Company is required to make payments to the beneficiary of the letters of credit upon request by the beneficiary contingent upon the customer's failure to perform under the terms of the underlying contract with the beneficiary. Standby letters of credit typically have one year expirations with an option to renew upon annual review. The Company typically receives a fee for these transactions. The fair value of stand-by letters of credit is recorded upon inception.

Loan Sales and Loan Servicing

Loan Sales and Loan Servicing

Loan sales are recorded when the sales are funded. Mortgage servicing rights are recorded at fair value upon sale of the loan. Loans held for sale are recorded at the lower of cost or market.

Repurchase Agreements

Repurchase Agreements

Repurchase agreements are accounted for as secured financing transactions since the Company maintains effective control over the transferred securities and the transfer meets the other criteria for such accounting. Obligations to repurchase securities sold are reflected as a liability in the consolidated balance sheets. The securities underlying the agreements are delivered to a custodial account for the benefit of the dealer or bank with whom each transaction is executed. The dealers or banks, who may sell, loan or otherwise dispose of such securities to other parties in the normal course of their operations, agree to resell to the Company the same securities at the maturities of the agreements.

Trust Operations

Trust Operations

Assets held by the Company in a fiduciary or agency capacity for its customers are not included in the accompanying consolidated balance sheets, since such assets are not assets of the Company. Trust income is recognized on the accrual method based on contractual rates applied to the balances of trust accounts.

Reclassifications

Reclassifications

Amounts in prior period consolidated financial statements are reclassified whenever necessary to confirm with current period presentation.

Subsequent Events

Subsequent Events

The Company has evaluated subsequent events for potential recognition and/or disclosure and there were none identified.

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Recent Accounting Pronouncements (Policies)

12 Months Ended

Dec. 31, 2017

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

Recently Adopted Accounting Standards

Effective December 31, 2017, the Company adopted the provisions of SAB 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, which was issued by the SEC in December 2017. SAB 118 provides guidance on the timing of recognition for the effects of the Tax Act. Under SAB 118, companies are provided a measurement period of up to one year from the enactment of the Tax Act to evaluate and record its effects. Companies are required to record provisional amounts when sufficient information to make a reasonable estimate is available and are expected to make final adjustments when the required information is available. SAB 118 contains several disclosure requirements regarding a company’s assessment and recording the effects of the Tax Act, including the amounts recorded and the status of estimating potential additional effects. SAB 118 was effective immediately upon issuance. The disclosures required by SAB 118 were included in Note 12 of the consolidated financial statements.

Effective July 1, 2017, the Company early adopted the provision of FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 amends and simplifies the subsequent measurement of goodwill; the amendments eliminate Step 2 from the goodwill impairment test. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the qualitative impairment test is necessary. The amendments were applied on a prospective basis and the adoption did not have a significant impact on the consolidated financial statements.

Effective January 1, 2017, the Company adopted the provision of FASB ASU No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 requires several revisions to equity compensation accounting. Under the new guidance all excess tax benefits and deficiencies that occur when an award vests, is exercised or expires are recognized in income tax expense as discrete period items. Previously, these transactions were typically recorded directly within equity. Consistent with this change, excess tax benefits and deficiencies are no longer included within estimated proceeds when performing the treasury stock method for calculating diluted earnings per share. Excess tax benefits are also recognized at the time an award is exercised or vests compared to the previous requirements to delay recognition until the deduction reduces taxes payable. The presentation of excess tax benefits in the statement of cash flows shifted to an operating activity from the prior classification as a financing activity. ASU 2016-09 also provides an accounting policy election to recognize forfeitures of awards as they occur when estimating stock-based compensation expense rather than the previous requirement to estimate forfeitures from inception. Further, ASU 2016-09 permits employers to use a net settlement feature to withhold taxes on equity compensation awards up to the maximum statutory tax rate without affecting the equity classification of the award. Transition to the new guidance was accomplished through a combination of cumulative-effect adjustment to equity (forfeitures) and prospective methodologies (cash flows, tax windfalls and shortfalls). The adoption of ASU 2016-09 resulted in income tax benefits of $1.8 million in the year ended December 31, 2017 and the effect on earnings per share calculations and election to account for forfeitures as incurred have not been significant.

Accounting Standards Issued Not Yet Adopted

Accounting Standards Issued Not Yet Adopted

In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of -Certain Tax Effects from Accumulated Other Comprehensive Income. ASU 2018-02 requires a reclassification from AOCI to retained earnings for stranded tax effects resulting from the newly enacted federal corporate income tax rate in the Tax Act. The Tax Act included a reduction to the Federal corporate income tax rate from 35% to 21% effective January 1, 2018. The amount of the reclassification from AOCI to retained earnings would be the difference between the historical corporate income tax rate and the newly enacted rate and will be accounted for as a cumulative-effect adjustment to the balance sheet. ASU 2018-02 is effective for the Company on January 1, 2019. Early adoption is permitted. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures and does not expect the impact to be material.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. ASU 2017-12 better aligns the accounting and reporting of hedging relationships with the economics of risk management activities. The standard requires the modified retrospective transition approach as of the date of adoption. ASU 2017-12 is effective for the Company on January 1, 2019. Early adoption is permitted. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures and does not expect the impact to be material.

In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718). ASU 2017-09 provides guidance about which changes to the terms and conditions of a share-based payment award require an entity to apply modification accounting. ASU 2017-09 is effective for the Company on January 1, 2018. Management has evaluated the effect that this guidance will have and concluded that the impact on the consolidated financial statements and related disclosures will not be material upon adoption on January 1, 2018.

In March 2017, the FASB issued ASU No. 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20). ASU 2017-08 requires amortization of premiums to the earliest call date on debt securities with call features that are explicit, on contingent and callable at fixed prices on present dates. The ASU does not impact securities held at a discount; the discount continues to be amortized to the contractual maturity. The guidance is required to be applied with a modified retrospective approach through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. ASU 2017-08 is effective for the Company on January 1, 2019. Early adoption is permitted. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures and does not expect the impact to be material.

In March 2017, the FASB issued ASU No. 2017-07, Compensation – Retirement Benefits (Topic 715). ASU 2017-07 requires the service cost component of net periodic pension and post-retirement benefit cost to be reported separately in the consolidated statements of income from the other components. Additionally, the amendments in the ASU require presentation of the service cost component in the consolidated statements of income in the same line item as other employee compensation costs and presentation of the other components in a different line item from the service cost component. The amendments in this ASU are required to be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic post-retirement benefit cost in the income statement and prospectively, on or after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic post-retirement benefit in assets with a practical expedient allowed for prior comparative period presentation permitted. ASU 2017-07 is effective for the Company on January 1, 2018. Management has evaluated the effect that this guidance will have and concluded that the impact on the consolidated financial statements and related disclosures will not be material upon adoption on January 1, 2018.

In February 2017, the FASB issued ASU No. 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20). ASU 2017-05 will clarify the scope of Subtopic 610-20 and add guidance for partial sales of nonfinancial assets. The amendments define the term in substance nonfinancial assets and clarify that a nonfinancial asset within the scope may include nonfinancial assets transferred within a legal entity to a counterparty, in part, as a financial asset promised to a counterparty in a contract. Additionally, the amendments in ASU clarify that an entity should identify each distinct nonfinancial asset or in substance nonfinancial assets and allocate consideration to each distinct asset. The amendments should be applied either on retrospectively to each period presented or with a modified retrospective approach. ASU 2017-05 is effective for the Company on January 1, 2018 and the Company is required to apply the amendment at the same time that is applies the amendments in 2014-09. Management has evaluated the effect that this guidance will have and concluded that the impact on the consolidated financial statements and related disclosures will not be material upon adoption on January 1, 2018.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU 2017-01 provides a more robust framework to use in determining when a set of assets and activities (“set”) is a business and to address stakeholder feedback that the definition of a business in current GAAP is applied too broadly. The primary amendments in the ASU provide a screen to exclude transactions where substantially all of the fair value of the transferred set is concentrated in a single asset, or group of similar assets, from being evaluated as a business. ASU 2017-01 is effective for the Company on January 1, 2018 using the prospective method. Management has evaluated the effect that this guidance will have and concluded that the impact on the consolidated financial statements and related disclosures will not be material upon adoption on January 1, 2018.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. ASU 2016-18 addresses diversity in practice from entities classifying and presenting transfers between cash and restricted cash as operating, investing or financing activities or as a combination of those activities in the statement of cash flows. The ASU requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the Statement of Cash Flows. As a result, transfers between such categories will no longer be presented in the Statement of Cash Flows. ASU 2016-18 is effective for the Company on January 1, 2018 using the retrospective method. Management has evaluated the effect that this guidance will have and concluded that the impact on the consolidated financial statements and related disclosures will not be material upon adoption on January 1, 2018.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments). ASU 2016-15 addresses diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This standard addresses the following eight specific cash flow issues: Debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. ASU 2016-15 is effective for the Company on January 1, 2018. Management has evaluated the effect that this guidance will have and concluded that the impact on the consolidated financial statements and related disclosures will not be material upon adoption on January 1, 2018.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, ASU 2016-13 amends the accounting for credit losses on AFS debt securities and purchased financial assets with credit deterioration. ASU 2016-13 is effective for the Company on January 1, 2020. Early adoption is permitted for all organizations for fiscal years and interim periods within those fiscal years, beginning after December 15, 2018. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize right of use assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize a right of use asset and lease liability. Additionally, when measuring assets and liabilities arising from a lease, optional payments should be included only if the lessee is reasonable certain to exercise an option to extend the lease, exercise a purchase option or not exercise an option to terminate the lease. ASU 2016-02 is effective for the Company on January 1, 2019. Early adoption is permitted in any interim or annual period. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments and requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value. Any changes in fair value on equity investments with readily determinable market value will be recognized in net income unless the investments qualify for a new practicability exception. This ASU also requires entities to recognize changes in instrument-specific credit risk related to financial liabilities measured under the fair value option in OCI. No changes were made to the guidance for classifying and measuring investments in debt securities and loans. ASU 2016-01 is effective for the Company on January 1, 2018. Management has evaluated the effect that this guidance will have and concluded that the impact on the consolidated financial statements and related disclosures will not be material upon adoption on January 1, 2018.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 is a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under GAAP and is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects consideration to which the entity expects to be entitled in exchange for those goods and services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. For financial reporting purposes, the standard allows for either full retrospective adoption, meaning the standard is applied to all of the periods presented, or modified retrospective adoption, meaning the standard is applied only to the most current period presented in the financial statements with the cumulative effect of initially applying the standard recognized at the date of initial application. ASU 2014-09 was initially effective for the Company on January 1, 2017; however, in August 2015, the FASB issued ASU No. 2015-14 - Revenue from Contracts with Customers - Deferral of the Effective Date, which deferred the effective date to January 1, 2018. In addition, the FASB has begun to issue targeted updates to clarify specific implementation issues of ASU 2014-09. These updates include ASU No. 2016-08 - Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU No. 2016-10 - Identifying Performance Obligations and Licensing, ASU No. 2016-12 - Narrow-Scope Improvements and Practical Expedients and ASU No. 2016-20 - Technical Corrections and Improvements to Top 606 - Revenue from Contract with Customers.

In evaluating this standard, management determined that the majority of revenue earned by the Company is from revenue streams not included in the scope of this standard such as interest earned from loans, investment securities and bank owned life insurance income. For applicable revenue streams such as ATM and debit card fees, insurance, other financial services revenue, service charges on deposit accounts, retirement plan administration fees and trust fees, management reviewed the applicable contracts provisions and applied the principles in the new standard for revenue recognition. Based on the results of that review, management determined that the impact on the consolidated financial statements and related disclosures will not be material upon adoption on January 1, 2018.

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Securities (Tables)

12 Months Ended

Dec. 31, 2017

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 (losses) of AFS securities are as follows:

(In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
As of December 31, 2017
Federal agency	$	109,862	$	-	$	963	$	108,899
State & municipal		42,171		62		277		41,956
Mortgage-backed:
Government-sponsored enterprises		530,392		1,406		3,345		528,453
U.S. government agency securities		26,363		334		223		26,474
Collateralized mortgage obligations:
Government-sponsored enterprises		496,033		254		10,114		486,173
U.S. government agency securities		50,721		165		1,065		49,821
Other securities		10,623		3,672		146		14,149
Total AFS securities	$	1,266,165	$	5,893	$	16,133	$	1,255,925
As of December 31, 2016
Federal agency	$	175,135	$	78	$	805	$	174,408
State & municipal		47,053		153		480		46,726
Mortgage-backed:
Government-sponsored enterprises		513,814		3,345		2,492		514,667
U.S. government securities		14,955		411		189		15,177
Collateralized mortgage obligations:
Government-sponsored enterprises		513,431		532		7,688		506,275
U.S. government securities		60,822		184		708		60,298
Other securities		15,849		6,394		1,504		20,739
Total AFS securities	$	1,341,059	$	11,097	$	13,866	$	1,338,290

Schedule of sales transactions of securities available for sale

The components of net realized gains (losses) on the sale of AFS securities are as follows. These amounts were reclassified out of AOCI and into earnings:

	Years ended December 31,
(In thousands)	2017			2016			2015
Gross realized gains	$	2,241		$	683		$	3,099
Gross realized (losses)		(372	)		(1,327	)		(12	)
Net AFS realized gains (losses)	$	1,869		$	(644	)	$	3,087

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

The amortized cost, estimated fair value and unrealized gains (losses) of HTM securities are as follows:

(In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
As of December 31, 2017
Mortgage-backed:
Government-sponsored enterprises	$	96,357	$	85	$	810	$	95,632
U.S. government agency securities		418		57		-		475
Collateralized mortgage obligations:
Government-sponsored enterprises		186,327		224		2,577		183,974
State & municipal		200,971		1,439		620		201,790
Total HTM securities	$	484,073	$	1,805	$	4,007	$	481,871
As of December 31, 2016
Mortgage-backed:
Government-sponsored enterprises	$	96,668	$	-	$	1,176	$	95,492
U.S. government agency securities		533		87		-		620
Collateralized mortgage obligations:
Government-sponsored enterprises		225,213		1,060		1,508		224,765
State & municipal		205,534		434		1,795		204,173
Total HTM securities	$	527,948	$	1,581	$	4,479	$	525,050

Investment securities with unrealized losses

The following table sets forth information with regard to investment securities with unrealized losses segregated according to the length of time the securities had been in a continuous unrealized loss position:

	Less than 12 months							12 months or longer							Total
(In thousands)	Fair Value		Unrealized Losses			Number of Positions		Fair Value		Unrealized Losses			Number of Positions		Fair Value		Unrealized Losses			Number of Positions
As of December 31, 2017
AFS securities:
Federal agency	$	64,653	$	(242	)		5	$	44,246	$	(721	)		4	$	108,899	$	(963	)		9
State & municipal		23,566		(200	)		39		5,994		(77	)		8		29,560		(277	)		47
Mortgage-backed		317,630		(2,381	)		55		58,316		(1,188	)		24		375,946		(3,569	)		79
Collateralized mortgage obligations		227,917		(2,658	)		35		275,303		(8,521	)		42		503,220		(11,179	)		77
Other securities		-		-			-		2,959		(146	)		1		2,959		(146	)		1
Total securities with unrealized losses	$	633,766	$	(5,481	)		134	$	386,818	$	(10,653	)		79	$	1,020,584	$	(16,134	)		213
HTM securities:
Mortgage-backed	$	15,477	$	(140	)		2	$	33,703	$	(670	)		2	$	49,180	$	(810	)		4
Collateralized mortgage obligations		118,476		(1,064	)		17		37,614		(1,513	)		6		156,090		(2,577	)		23
State & municipal		22,387		(132	)		40		15,720		(488	)		24		38,107		(620	)		64
Total securities with unrealized losses	$	156,340	$	(1,336	)		59	$	87,037	$	(2,671	)		32	$	243,377	$	(4,007	)		91
As of December 31, 2016
AFS securities:
Federal agency	$	119,363	$	(805	)		10	$	-	$	-			-	$	119,363	$	(805	)		10
State & municipal		31,873		(478	)		55		483		(2	)		1		32,356		(480	)		56
Mortgage-backed		277,524		(2,668	)		49		985		(13	)		4		278,509		(2,681	)		53
Collateralized mortgage obligations		473,746		(8,396	)		57		-		-			-		473,746		(8,396	)		57
Other securities		-		-			-		4,363		(1,504	)		2		4,363		(1,504	)		2
Total securities with unrealized losses	$	902,506	$	(12,347	)		171	$	5,831	$	(1,519	)		7	$	908,337	$	(13,866	)		178
HTM securities:
Mortgage-backed	$	95,492	$	(1,176	)		5	$	-	$	-			-	$	95,492	$	(1,176	)		5
Collateralized mortgage obligations		108,587		(319	)		12		35,209		(1,189	)		4		143,796		(1,508	)		16
State & municipal		81,984		(1,795	)		155		-		-			-		81,984		(1,795	)		155
Total securities with unrealized losses	$	286,063	$	(3,290	)		172	$	35,209	$	(1,189	)		4	$	321,272	$	(4,479	)		176

Contractual maturities of debt securities

The following tables set forth information with regard to contractual maturities of debt securities at December 31, 2017:

(In thousands)	Amortized Cost		Estimated Fair Value
AFS debt securities:
Within one year	$	63,309	$	63,186
From one to five years		90,119		89,275
From five to ten years		178,128		177,961
After ten years		923,987		911,354
Total AFS debt securities	$	1,255,543	$	1,241,776
HTM debt securities:
Within one year	$	31,412	$	31,413
From one to five years		42,363		42,588
From five to ten years		174,950		174,937
After ten years		235,348		232,933
Total HTM debt securities	$	484,073	$	481,871

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Loans (Tables)

12 Months Ended

Dec. 31, 2017

Loans [Abstract]

Loans, net of deferred fees and origination costs

A summary of loans, net of deferred fees and origination costs, by category is as follows:

	At December 31,
(In thousands)	2017		2016
Residential real estate mortgages	$	1,321,695	$	1,262,614
Commercial		1,317,174		1,242,701
Commercial real estate		1,711,095		1,543,301
Consumer		1,740,038		1,641,657
Home equity		494,771		507,784
Total loans	$	6,584,773	$	6,198,057

Related party loans

In the ordinary course of business, the Company has made loans at prevailing rates and terms to directors, officers and other related parties. Such loans, in management’s opinion, do not present more than the normal risk of collectability or incorporate other unfavorable features. The aggregate amount of loans outstanding to qualifying related parties and changes during the years are summarized as follows:

(In thousands)	2017			2016
Balance at January 1,	$	2,050		$	2,346
New loans		297			936
Adjustment due to change in composition of related parties		198			(406	)
Repayments		(968	)		(826	)
Balance at December 31,	$	1,577		$	2,050

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

12 Months Ended

Dec. 31, 2017

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

Allowance for loan losses by portfolio

(In thousands)	Commercial Loans			Consumer Loans			Residential Real Estate Mortgages			Unallocated			Total
Balance as of December 31, 2016	$	25,444		$	33,375		$	6,381		$	-		$	65,200
Charge-offs		(4,169	)		(27,072	)		(1,846	)		-			(33,087	)
Recoveries		1,077			5,142			180			-			6,399
Provision		5,254			25,385			349			-			30,988
Ending Balance as of December 31, 2017	$	27,606		$	36,830		$	5,064		$	-		$	69,500
Balance as of December 31, 2015	$	25,545		$	29,253		$	7,960		$	260		$	63,018
Charge-offs		(4,592	)		(23,364	)		(1,343	)		-			(29,299	)
Recoveries		1,887			3,870			293			-			6,050
Provision		2,604			23,616			(529	)		(260	)		25,431
Ending Balance as of December 31, 2016	$	25,444		$	33,375		$	6,381		$	-		$	65,200
Balance as of December 31, 2014	$	32,433		$	26,720		$	7,130		$	76		$	66,359
Charge-offs		(5,718	)		(18,140	)		(2,229	)		-			(26,087	)
Recoveries		1,014			3,127			320			-			4,461
Provision		(2,184	)		17,546			2,739			184			18,285
Ending Balance as of December 31, 2015	$	25,545		$	29,253		$	7,960		$	260		$	63,018

The following table illustrates the allowance for loan losses and the recorded investment by portfolio segment: 

(In thousands)	Commercial Loans		Consumer Loans		Residential Real Estate Mortgages		Total
As of December 31, 2017
Allowance for loan losses	$	27,606	$	36,830	$	5,064	$	69,500
Allowance for loans individually evaluated for impairment		57		-		-		57
Allowance for loans collectively evaluated for impairment		27,549		36,830		5,064		69,443
Ending balance of loans		3,028,269		2,234,809		1,321,695		6,584,773
Ending balance of originated loans individually evaluated for impairment		5,876		8,432		6,830		21,138
Ending balance of acquired loans collectively evaluated for impairment		187,313		43,906		170,472		401,691
Ending balance of originated loans collectively evaluated for impairment	$	2,835,080	$	2,182,471	$	1,144,393	$	6,161,944
As of December 31, 2016
Allowance for loan losses	$	25,444	$	33,375	$	6,381	$	65,200
Allowance for loans individually evaluated for impairment		1,517		-		-		1,517
Allowance for loans collectively evaluated for impairment		23,927		33,375		6,381		63,683
Ending balance of loans		2,786,002		2,149,441		1,262,614		6,198,057
Ending balance of originated loans individually evaluated for impairment		13,070		8,488		6,111		27,669
Ending balance of acquired loans individually evaluated for impairment		1,205		-		-		1,205
Ending balance of acquired loans collectively evaluated for impairment		236,413		63,005		199,471		498,889
Ending balance of originated loans collectively evaluated for impairment	$	2,535,314	$	2,077,948	$	1,057,032	$	5,670,294

Past due and nonperforming loans by loan class

The following table sets forth information with regard to past due and nonperforming loans by loan class:

(In thousands)	31-60 Days Past Due Accruing		61-90 Days Past Due Accruing		Greater Than 90 Days Past Due Accruing		Total Past Due Accruing		Nonaccrual		Current		Recorded Total Loans
As of December 31, 2017
Originated
Commercial Loans:
Commercial	$	-	$	-	$	-	$	-	$	202	$	753,577	$	753,779
Commercial Real Estate		161		138		-		299		3,178		1,533,065		1,536,542
Agricultural		117		-		-		117		1,043		34,386		35,546
Agricultural Real Estate		493		-		-		493		2,736		30,905		34,134
Business Banking		1,907		597		-		2,504		5,304		473,147		480,955
Total Commercial Loans	$	2,678	$	735	$	-	$	3,413	$	12,463	$	2,825,080	$	2,840,956
Consumer Loans:
Indirect	$	18,747	$	4,033	$	3,492	$	26,272	$	2,115	$	1,642,664	$	1,671,051
Home Equity		2,887		854		341		4,082		2,736		448,081		454,899
Direct		341		108		70		519		35		64,399		64,953
Total Consumer Loans	$	21,975	$	4,995	$	3,903	$	30,873	$	4,886	$	2,155,144	$	2,190,903
Residential Real Estate Mortgages	$	3,730	$	667	$	1,262	$	5,659	$	5,987	$	1,139,577	$	1,151,223
Total Originated Loans	$	28,383	$	6,397	$	5,165	$	39,945	$	23,336	$	6,119,801	$	6,183,082
Acquired
Commercial Loans:
Commercial	$	-	$	-	$	-	$	-	$	-	$	39,575	$	39,575
Commercial Real Estate		-		-		-		-		2		106,632		106,634
Business Banking		354		-		-		354		669		40,081		41,104
Total Commercial Loans	$	354	$	-	$	-	$	354	$	671	$	186,288	$	187,313
Consumer Loans:
Indirect	$	38	$	-	$	1	$	39	$	22	$	1,157	$	1,218
Home Equity		254		34		103		391		225		39,256		39,872
Direct		6		1		1		8		23		2,785		2,816
Total Consumer Loans	$	298	$	35	$	105	$	438	$	270	$	43,198	$	43,906
Residential Real Estate Mortgages	$	627	$	226	$	140	$	993	$	1,431	$	168,048	$	170,472
Total Acquired Loans	$	1,279	$	261	$	245	$	1,785	$	2,372	$	397,534	$	401,691
Total Loans	$	29,662	$	6,658	$	5,410	$	41,730	$	25,708	$	6,517,335	$	6,584,773

(In thousands)	31-60 Days Past Due Accruing		61-90 Days Past Due Accruing		Greater Than 90 Days Past Due Accruing		Total Past Due Accruing		Nonaccrual		Current		Recorded Total Loans
As of December 31, 2016
Originated
Commercial Loans:
Commercial	$	33	$	5	$	-	$	38	$	2,964	$	650,568	$	653,570
Commercial Real Estate		-		-		-		-		7,935		1,343,854		1,351,789
Agricultural		-		-		-		-		730		37,186		37,916
Agricultural Real Estate		-		-		-		-		1,803		30,619		32,422
Business Banking		1,609		318		-		1,927		4,860		465,900		472,687
Total Commercial Loans	$	1,642	$	323	$	-	$	1,965	$	18,292	$	2,528,127	$	2,548,384
Consumer Loans:
Indirect	$	19,253	$	4,185	$	2,499	$	25,937	$	2,145	$	1,538,593	$	1,566,675
Home Equity		3,416		1,065		528		5,009		2,851		448,797		456,657
Direct		452		125		20		597		107		62,400		63,104
Total Consumer Loans	$	23,121	$	5,375	$	3,047	$	31,543	$	5,103	$	2,049,790	$	2,086,436
Residential Real Estate Mortgages	$	2,725	$	172	$	1,406	$	4,303	$	6,682	$	1,052,158	$	1,063,143
Total Originated Loans	$	27,488	$	5,870	$	4,453	$	37,811	$	30,077	$	5,630,075	$	5,697,963
Acquired
Commercial Loans:
Commercial	$	-	$	-	$	-	$	-	$	-	$	49,447	$	49,447
Commercial Real Estate		-		-		-		-		1,891		135,398		137,289
Business Banking		236		-		-		236		804		49,842		50,882
Total Commercial Loans	$	236	$	-	$	-	$	236	$	2,695	$	234,687	$	237,618
Consumer Loans:
Indirect	$	100	$	5	$	-	$	105	$	47	$	8,541	$	8,693
Home Equity		254		53		30		337		237		50,553		51,127
Direct		30		2		-		32		20		3,133		3,185
Total Consumer Loans	$	384	$	60	$	30	$	474	$	304	$	62,227	$	63,005
Residential Real Estate Mortgages	$	609	$	28	$	327	$	964	$	2,636	$	195,871	$	199,471
Total Acquired Loans	$	1,229	$	88	$	357	$	1,674	$	5,635	$	492,785	$	500,094
Total Loans	$	28,717	$	5,958	$	4,810	$	39,485	$	35,712	$	6,122,860	$	6,198,057

Impaired loans and specific reserve allocations

The following provides additional information on impaired loans specifically evaluated for impairment:

	December 31, 2017						December 31, 2016
(In thousands)	Recorded Investment Balance (Book)		Unpaid Principal Balance (Legal)		Related Allowance		Recorded Investment Balance (Book)		Unpaid Principal Balance (Legal)		Related Allowance
Originated
With no related allowance recorded:
Commercial Loans:
Commercial	$	-	$	251			$	1,278	$	1,697
Commercial Real Estate		2,211		3,979				3,816		3,841
Agricultural		452		465				130		137
Agricultural Real Estate		2,250		2,423				1,434		1,567
Business Banking		860		1,730				655		728
Total Commercial Loans	$	5,773	$	8,848			$	7,313	$	7,970
Consumer Loans:
Indirect	$	131	$	143			$	5	$	16
Home Equity		8,027		9,966				8,483		9,429
Direct		274		274				-		-
Total Consumer Loans	$	8,432	$	10,383			$	8,488	$	9,445
Residential Real Estate Mortgages	$	6,830	$	8,780			$	6,111	$	6,906
Total	$	21,035	$	28,011			$	21,912	$	24,321
With an allowance recorded:
Commercial Loans:
Commercial Real Estate	$	76	$	82	$	30	$	5,553	$	5,736	$	735
Agricultural		27		27		27		49		49		37
Agricultural Real Estate		-		-		-		155		155		54
Total Commercial Loans	$	103	$	109	$	57	$	5,757	$	5,940	$	826
Acquired
With an allowance recorded:
Commercial Loans:
Commercial Real Estate	$	-	$	-	$	-	$	1,205	$	1,321	$	691
Total Commercial Loans	$	-	$	-	$	-	$	1,205	$	1,321	$	691
Total	$	21,138	$	28,120	$	57	$	28,874	$	31,582	$	1,517

The following table summarizes the average recorded investments on loans specifically evaluated for impairment and the interest income recognized:

	December 31, 2017				December 31, 2016				December 31, 2015
(In thousands)	Average Recorded Investment		Interest Income Recognized Accrual		Average Recorded Investment		Interest Income Recognized Accrual		Average Recorded Investment		Interest Income Recognized Accrual
Originated
Commercial Loans:
Commercial	$	1,841	$	-	$	6,217	$	-	$	2,219	$	71
Commercial Real Estate		3,534		115		5,828		167		8,538		164
Agricultural		224		1		715		1		148		1
Agricultural Real Estate		1,709		43		908		44		628		45
Business Banking		875		12		830		9		960		21
Total Commerical Loans	$	8,183	$	171	$	14,498	$	221	$	12,493	$	302
Consumer Loans:
Indirect	$	35	$	3	$	8	$	-	$	-	$	-
Home Equity		8,226		446		8,278		480		7,070		374
Direct		178		8		-		-		-		-
Total Consumer Loans	$	8,439	$	457	$	8,286	$	480	$	7,070	$	374
Residential Real Estate Mortgages	$	6,523		296		6,143		269		5,128		219
Total Originated	$	23,145	$	924	$	28,927	$	970	$	24,691	$	895
Acquired
Commercial Loans
Commercial	$	-	$	-	$	-	$	-	$	2,045	$	-
Commercial Real Estate		93		-		1,205		-		5,734		-
Total Commerical Loans	$	93	$	-	$	1,205	$	-	$	7,779	$	-
Total Acquired	$	93	$	-	$	1,205	$	-	$	7,779	$	-
Total	$	23,238	$	924	$	30,132	$	970	$	32,470	$	895

Financing receivable credit quality by loan class

The following tables illustrate the Company’s credit quality by loan class:

(In thousands)	December 31, 2017
Originated
Commercial Credit Exposure
By Internally Assigned Grade:	Commercial		Commercial Real Estate		Agricultural		Agricultural Real Estate		Total
Pass	$	708,567	$	1,481,926	$	31,142	$	23,381	$	2,245,016
Special Mention		30,337		28,264		2,294		2,441		63,336
Substandard		14,875		26,352		2,110		8,312		51,649
Total	$	753,779	$	1,536,542	$	35,546	$	34,134	$	2,360,001

Business Banking Credit Exposure
By Internally Assigned Grade:		Business Banking		Total
Non-classified	$	468,898	$	468,898
Classified		12,057		12,057
Total	$	480,955	$	480,955

Consumer Credit Exposure
By Payment Activity:	Indirect		Home Equity		Direct		Total
Performing	$	1,665,444	$	451,822	$	64,848	$	2,182,114
Nonperforming		5,607		3,077		105		8,789
Total	$	1,671,051	$	454,899	$	64,953	$	2,190,903

Residential Mortgage Credit Exposure
By Payment Activity:	Residential Mortgage		Total
Performing	$	1,143,974	$	1,143,974
Nonperforming		7,249		7,249
Total	$	1,151,223	$	1,151,223

Acquired
Commercial Credit Exposure
By Internally Assigned Grade:	Commercial		Commercial Real Estate		Total
Pass	$	37,825	$	103,248	$	141,073
Special Mention		425		498		923
Substandard		1,325		2,888		4,213
Total	$	39,575	$	106,634	$	146,209

Business Banking Credit Exposure
By Internally Assigned Grade:	Business Banking		Total
Non-classified	$	38,236	$	38,236
Classified		2,868		2,868
Total	$	41,104	$	41,104

Consumer Credit Exposure
By Payment Activity:	Indirect		Home E quity		Direct		Total
Performing	$	1,195	$	39,544	$	2,792	$	43,531
Nonperforming		23		328		24		375
Total	$	1,218	$	39,872	$	2,816	$	43,906

Residential Mortgage Credit Exposure
By Payment Activity:	Residential Mortgage		Total
Performing	$	168,901	$	168,901
Nonperforming		1,571		1,571
Total	$	170,472	$	170,472

(In thousands)	December 31, 2016
Originated
Commercial Credit Exposure
By Internally Assigned Grade:	Commercial		Commercial Real Estate		Agricultural		Agricultural Real Estate		Total
Pass	$	616,829	$	1,288,409	$	36,762	$	28,912	$	1,970,912
Special Mention		7,750		31,053		25		1,896		40,724
Substandard		28,991		32,327		1,124		1,614		64,056
Doubtful		-		-		5		-		5
Total	$	653,570	$	1,351,789	$	37,916	$	32,422	$	2,075,697

Business Banking Credit Exposure
By Internally Assigned Grade:	Business Banking		Total
Non-classified	$	458,864	$	458,864
Classified		13,823		13,823
Total	$	472,687	$	472,687

Consumer Credit Exposure
By Payment Activity:	Indirect		Home Equity		Direct		Total
Performing	$	1,562,031	$	453,278	$	62,977	$	2,078,286
Nonperforming		4,644		3,379		127		8,150
Total	$	1,566,675	$	456,657	$	63,104	$	2,086,436

Residential Mortgage Credit Exposure
By Payment Activity:	Residential Mortgage		Total
Performing	$	1,055,055	$	1,055,055
Nonperforming		8,088		8,088
Total	$	1,063,143	$	1,063,143

Acquired
Commercial Credit Exposure
By Internally Assigned Grade:	Commercial		Commercial Real Estate		Total
Pass	$	48,194	$	127,660	$	175,854
Special Mention		76		1,231		1,307
Substandard		1,177		7,193		8,370
Doubtful		-		1,205		1,205
Total	$	49,447	$	137,289	$	186,736

Business Banking Credit Exposure
By Internally Assigned Grade:	Business Banking		Total
Non-classified	$	47,347	$	47,347
Classified		3,535		3,535
Total	$	50,882	$	50,882

Consumer Credit Exposure
By Payment Activity:	Indirect		Home Equity		Direct		Total
Performing	$	8,646	$	50,860	$	3,165	$	62,671
Nonperforming		47		267		20		334
Total	$	8,693	$	51,127	$	3,185	$	63,005

Residential Mortgage Credit Exposure
By Payment Activity:	Residential Mortgage		Total
Performing	$	196,508	$	196,508
Nonperforming		2,963		2,963
Total	$	199,471	$	199,471

Troubled debt restructurings on financing receivables

The following tables illustrate the recorded investment and number of modifications for modified loans, including the recorded investment in the loans prior to a modification and the recorded investment in the loans after restructuring:

	Year ended December 31, 2017
(In thousands)	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Commercial Loans:
Commercial		1	$	3,300	$	3,239
Business Banking		3		385		381
Total Commercial Loans		4	$	3,685	$	3,620
Consumer Loans:
Indirect		8	$	145	$	143
Home Equity		13		552		600
Direct		2		279		279
Total Consumer Loans		23	$	976	$	1,022
Residential Real Estate Mortgages		15	$	1,454	$	1,474
Total Troubled Debt Restructurings		42	$	6,115	$	6,116

	Year ended December 31, 2016
(In thousands)	Number of contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Consumer Loans:
Home Equity		28	$	1,886	$	1,743
Total Consumer Loans		28	$	1,886	$	1,743
Residential Real Estate Mortgages		13	$	1,084	$	843
Total Troubled Debt Restructurings		41	$	2,970	$	2,586

The following table illustrates the recorded investment and number of modifications for TDRs where a concession has been made and subsequently defaulted during the period:

	Year ended December 31, 2017				Year ended December 31, 2016
(In thousands)	Number of contracts		Recorded Investment		Number of contracts		Recorded Investment
Commercial Loans:
Commercial		1	$	145		1	$	169
Commercial Real Estate		-		-		1		1,573
Business Banking		1		329		1		67
Total Commercial Loans		2	$	474		3	$	1,809
Consumer Loans:
Indirect		2	$	19		-	$	-
Home Equity		34		1,720		34		1,770
Total Consumer Loans		36	$	1,739		34	$	1,770
Residential Real Estate Mortgages		19	$	1,302		16	$	1,109
Total Troubled Debt Restructurings		57	$	3,515		53	$	4,688

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Premises and Equipment, Net (Tables)

12 Months Ended

Dec. 31, 2017

Premises and Equipment, Net [Abstract]

Summary of premises and equipment

A summary of premises and equipment follows:

	December 31,
(In thousands)	2017		2016
Land, buildings and improvements	$	121,771	$	121,037
Equipment		57,080		56,243
Premises and equipment before accumulated depreciation	$	178,851	$	177,280
Accumulated depreciation		97,546		93,093
Total premises and equipment	$	81,305	$	84,187

Future minimum rental payments related to noncancelable operating leases

Rental expense included in occupancy expense amounted to $8.5 million in 2017, $7.8 million in December 31, 2016 and $7.9 million in December 31, 2015. The future minimum rental payments related to non-cancelable operating leases with original terms of one year or more are as follows:

(In thousands)	December 31, 2017
2018	$	7,910
2019		7,227
2020		6,547
2021		5,352
2022		4,646
Thereafter		16,660
Total	$	48,342

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Goodwill and Other Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2017

Goodwill and Other Intangible Assets [Abstract]

Summary of goodwill

A summary of goodwill is as follows:

(In thousands)
January 1, 2017	$	265,439
Goodwill Acquired		2,604
December 31, 2017	$	268,043
January 1, 2016	$	265,957
Goodwill Acquired		2,047
Goodwill Adjustments		(2,565	)
December 31, 2016	$	265,439

Summary of core deposit and other intangible assets

A summary of core deposit and other intangible assets follows:

	December 31,
(In thousands)	2017		2016
Core deposit intangibles:
Gross carrying amount	$	8,975	$	8,975
Less: accumulated amortization		6,581		5,626
Net carrying amount	$	2,394	$	3,349
Identified intangible assets:
Gross carrying amount	$	33,632	$	32,338
Less: accumulated amortization		22,606		19,872
Net carrying amount	$	11,026	$	12,466
Total intangibles:
Gross carrying amount	$	42,607	$	41,313
Less: accumulated amortization		29,187		25,498
Net carrying amount	$	13,420	$	15,815

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Deposits (Tables)

12 Months Ended

Dec. 31, 2017

Deposits [Abstract]

Maturity distribution of time deposits

The following table sets forth the maturity distribution of time deposits:

(In thousands)	December 31, 2017
Within one year	$	394,674
After one but within two years		259,710
After two but within three years		62,536
After three but within four years		40,151
After four but within five years		28,525
After five years		21,170
Total	$	806,766

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Short-Term Borrowings (Tables)

12 Months Ended

Dec. 31, 2017

Short-Term Borrowings [Abstract]

Information related to short-term borrowings

Information related to short-term borrowings is summarized as follows as of December 31,:

(Dollars in thousands)	2017			2016			2015
Federal funds purchased:
Balance at year-end	$	60,000		$	50,000		$	99,500
Average during the year		54,162			65,257			97,424
Maximum month end balance		80,000			85,000			159,000
Weighted average rate during the year		2.16	%		0.98	%		0.36	%
Weighted average rate at year-end		2.41	%		1.19	%		0.51	%
Securities sold under repurchase agreements:
Balance at year-end	$	182,123		$	173,703		$	167,981
Average during the year		175,539			168,821			162,201
Maximum month end balance		190,326			189,875			178,326
Weighted average rate during the year		0.07	%		0.06	%		0.06	%
Weighted average rate at year-end		0.07	%		0.07	%		0.06	%
Other short-term borrowings:
Balance at year-end	$	477,000		$	458,000		$	175,000
Average during the year		460,334			263,575			80,260
Maximum month end balance		591,000			424,000			175,000
Weighted average rate during the year		1.02	%		0.59	%		0.42	%
Weighted average rate at year-end		1.18	%		0.70	%		0.56	%

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Long-Term Debt (Tables)

12 Months Ended

Dec. 31, 2017

Long-Term Debt [Abstract]

Summary of long-term debt

Long-term debt consists of obligations having an original maturity at issuance of more than one year. A majority of the Company’s long-term debt is comprised of FHLB advances collateralized by the FHLB stock owned by the Company, certain of its mortgage-backed securities and a blanket lien on its residential real estate mortgage loans. A summary is as follows:

(Dollars in thousands)	December 31, 2017										December 31, 2016
Maturity	Amount		Weighted Average Rate			Callable Amount		Weighted Average Rate			Amount		Weighted Average Rate			Callable Amount		Weighted Average Rate
2017	$	-		-		$	-		-		$	40,150		2.67	%	$	25,000		3.48	%
2018		40,037		2.57	%		25,000		3.15	%		40,000		2.57	%		25,000		3.15	%
2019		20,000		1.96	%		-		-			20,000		1.96	%		-		-
2020		25,000		2.34	%		-		-			-		-			-		-
2021		56		4.00	%		-		-			72		4.00	%		-		-
2031		3,776		2.45	%		-		-			3,865		2.45	%		-		-
Total	$	88,869				$	25,000				$	104,087				$	50,000

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Junior Subordinated Debt (Tables)

12 Months Ended

Dec. 31, 2017

Junior Subordinated Debt [Abstract]

Schedule of debt of VIE where entity is not primary beneficiary

As of December 31, 2017, the Trusts had the following trust preferred securities outstanding and held the following junior subordinated debentures of the Company (dollars in thousands): 

Description	Issuance Date	Trust Preferred Securities Outstanding		Interest Rate	Trust Preferred Debt Owed To Trust		Final Maturity Date
CNBF Capital Trust I	August 1999	$	18,000	3-month LIBOR plus 2.75%	$	18,720	August 2029
NBT Statutory Trust I	November 2005		5,000	3-month LIBOR plus 1.40%		5,155	December 2035
NBT Statutory Trust II	February 2006		50,000	3-month LIBOR plus 1.40%		51,547	March 2036
Alliance Financial Capital Trust I	December 2003		10,000	3-month LIBOR plus 2.85%		10,310	January 2034
Alliance Financial Capital Trust II	September 2006		15,000	3-month LIBOR plus 1.65%		15,464	September 2036

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Income Taxes [Abstract]

Components of income tax expense attributable to operations

The significant components of income tax expense attributable to operations are as follows:

	Years ended December 31,
(In thousands)	2017			2016		2015
Current:
Federal	$	35,839		$	30,492	$	32,871
State		6,599			5,628		4,329
Total Current	$	42,438		$	36,120	$	37,200
Deferred:
Federal	$	3,850		$	3,994	$	2,521
State		(278	)		278		482
Total Deferred	$	3,572		$	4,272	$	3,003
Total income tax expense	$	46,010		$	40,392	$	40,203

Components of deferred tax assets and liabilities

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:

	December 31,
(In thousands)	2017			2016
Deferred tax assets:
Allowance for loan losses	$	17,390		$	24,925
Deferred compensation		7,230			11,578
Postretirement benefit obligation		2,159			2,929
Fair value adjustments from acquisitions		919			1,883
Unrealized losses on securities		3,715			3,259
Accrued liabilities		769			1,775
Stock-based compensation expense		2,642			4,817
Other		711			1,148
Total deferred tax assets	$	35,535		$	52,314
Deferred tax liabilities:
Pension benefits	$	12,439		$	17,303
Amortization of intangible assets		11,110			17,557
Premises and equipment, primarily due to accelerated depreciation		2,792			4,375
Deferred loan costs		634			1,759
Cash flow hedges		877			1,129
Other		390			501
Total deferred tax liabilities	$	28,242		$	42,624
Net deferred tax asset at year-end	$	7,293		$	9,690
Net deferred tax asset at beginning of year		9,690			14,940
(Decrease) in net deferred tax asset	$	(2,397	)	$	(5,250	)

Reconciliation of the provision for income taxes to the amount computed by applying the federal statutory rate

The following is a reconciliation of the provision for income taxes to the amount computed by applying the applicable Federal statutory rate of 35% to income before taxes:

	Years ended December 31,
(In thousands)	2017			2016			2015
Federal income tax at statutory rate	$	44,857		$	41,581		$	40,820
Tax exempt income		(2,303	)		(2,205	)		(2,037	)
Net increase in cash surrender value of life insurance		(1,780	)		(1,712	)		(1,373	)
Federal tax credit		(1,343	)		(1,323	)		(939	)
State taxes, net of federal tax benefit		4,107			3,838			3,127
Federal tax reform (Tax Act)		4,407			-			-
Stock-based compensation, excess tax benefit		(1,619	)		-			-
Other, net		(316	)		213			605
Income tax expense	$	46,010		$	40,392		$	40,203

Reconciliation of gross unrecognized tax benefits

A reconciliation of the beginning and ending balance of Federal and State gross unrecognized tax benefits ("UTBs") is as follows:

(In thousands)	2017			2016
Balance at January 1	$	559		$	-
Additions for tax positions of prior years		-			425
Reduction for tax positions of prior years		(31	)		-
Current period tax positions		137			134
Balance at December 31	$	665		$	559
Amount that would affect the effective tax rate if recognized, gross of tax	$	525		$	363

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Employee Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2017

Defined Benefit Post-retirement Plans [Abstract]

Components of accumulated other comprehensive income (loss), net periodic benefit cost

The components of AOCI, which have not yet been recognized as components of net periodic benefit cost, related to pensions and other post-retirement benefits are summarized below:

	Pension Benefits				Other Benefits
(In thousands)	2017		2016		2017		2016
Net actuarial loss	$	23,585	$	28,328	$	1,731	$	1,430
Prior service cost (credit)		94		140		196		(38	)
Total amounts recognized in AOCI (pre-tax)	$	23,679	$	28,468	$	1,927	$	1,392

Changes in benefit obligations, changes in plan assets, and the funded status of the pension plans and postretirement benefits

A December 31 measurement date is used for the pension, supplemental pension and post-retirement benefit plans.  The following table sets forth changes in benefit obligations, changes in plan assets and the funded status of the pension plans and other post-retirement benefits:

	Pension Benefits						Other Benefits
(In thousands)	2017			2016			2017			2016
Change in benefit obligation:
Benefit obligation at beginning of year	$	90,477		$	92,445		$	7,478		$	8,322
Service cost		1,511			2,162			12			14
Interest cost		4,168			4,223			357			353
Plan participants' contributions		-			-			218			234
Actuarial loss (gain)		4,028			(1,635	)		388			(786	)
Curtailment/ settlement		-			(715	)		286			-
Benefits paid		(9,234	)		(6,003	)		(689	)		(659	)
Projected benefit obligation at end of year	$	90,950		$	90,477		$	8,050		$	7,478
Change in plan assets:
Fair value of plan assets at beginning of year	$	116,216		$	107,529		$	-		$	-
Actual return on plan assets		15,032			8,259			-			-
Employer contributions		2,212			6,431			471			425
Plan participants' contributions		-			-			218			234
Benefits paid		(9,234	)		(6,003	)		(689	)		(659	)
Fair value of plan assets at end of year	$	124,226		$	116,216		$	-		$	-
Funded (unfunded) status at year end	$	33,276		$	25,739		$	(8,050	)	$	(7,478	)

Amounts recognized in balance sheet

An asset is recognized for an overfunded plan and a liability is recognized for an underfunded plan. The accumulated benefit obligation for pension benefits was $91.0 million and $90.5 million at December 31, 2017 and 2016, respectively. The accumulated benefit obligation for other post-retirement benefits was $8.1 million and $7.5 million at December 31, 2017 and 2016, respectively. The funded status of the pension and other post-retirement benefit plans has been recognized as follows in the consolidated balance sheets at December 31, 2017 and 2016. 

	Pension Benefits						Other Benefits
(In thousands)	2017			2016			2017			2016
Other assets	$	52,775		$	45,344		$	-		$	-
Other liabilities		(19,499	)		(19,605	)		(8,050	)		(7,478	)
Funded status	$	33,276		$	25,739		$	(8,050	)	$	(7,478	)

Assumptions used to determine benefit obligations and net periodic pension cost

The following assumptions were used to determine the benefit obligation and the net periodic pension cost for the years indicated:

	Years ended December 31,
	2017			2016			2015
Weighted average assumptions:
The following assumptions were used to determine benefit obligations:
Discount rate		4.20% - 4.21	%		4.76%-4.84	%		4.69%-4.71	%
Expected long-term return on plan assets		7.00	%		7.00	%		7.00	%
Rate of compensation increase		3.00	%		3.00	%		3.00	%
The following assumptions were used to determine net periodic pension cost:
Discount rate		4.76% - 4.84	%		4.69%-4.71	%		4.19%-4.30	%
Expected long-term return on plan assets		7.00	%		7.00	%		7.50	%
Rate of compensation increase		3.00	%		3.00	%		3.00%-3.75	%

Components of net periodic pension benefits and other benefit costs

Net periodic benefit cost and other amounts recognized in OCI for the years ended December 31 included the following components:

	Pension Benefits									Other Benefits
(In thousands)	2017			2016			2015			2017			2016			2015
Components of net periodic benefit cost:
Service cost	$	1,511		$	2,162		$	2,677		$	12		$	14		$	17
Interest cost		4,168			4,223			3,977			357			353			374
Expected return on plan assets		(7,929	)		(7,430	)		(8,589	)		-			-			-
Amortization of gain due to curtailment		-			(768	)		(154	)		-			-			-
Amortization of prior service cost (credit)		46			32			21			51			(57	)		(219	)
Amortization of unrecognized net loss		1,668			2,235			2,174			87			117			263
Net periodic pension cost	$	(536	)	$	454		$	106		$	507		$	427		$	435
Other changes in plan assets and benefit obligations recognized in OCI (pre-tax):
Net (gain) loss	$	(3,075	)	$	(2,464	)	$	6,523		$	388		$	(786	)	$	(333	)
Prior service cost		-			96			-			286			-			-
Amortization of gain due to settlement		-			(43	)		(46	)		-			-			-
Amortization of prior service (cost) credit		(46	)		(32	)		(21	)		(51	)		57			219
Amortization of unrecognized net (loss)		(1,668	)		(2,235	)		(2,174	)		(87	)		(117	)		(263	)
Total recognized in OCI	$	(4,789	)	$	(4,678	)	$	4,282		$	536		$	(846	)	$	(377	)
Total recognized in net periodic benefit cost and OCI, pre-tax	$	(5,325	)	$	(4,224	)	$	4,388		$	1,043		$	(419	)	$	58

Estimated future benefit payments for the pension plans and other postretirement benefit plans

The following table sets forth estimated future benefit payments for the pension plans and other post-retirement benefit plans as of December 31, 2017:

(In thousands)	Pension Benefits		Other Benefits
2018	$	7,256	$	606
2019		7,087		598
2020		6,997		583
2021		6,728		559
2022		6,666		566
2023 - 2027		37,688		2,818

Effect of one-percentage point change in assumed health care cost trend rates

For measurement purposes, the annual rates of increase in the per capita cost of covered medical and prescription drug benefits for fiscal year 2017 were assumed to be 6.3 % to 10.5 % percent. The rates were assumed to decrease gradually to 3.9 % for fiscal year 2075 and remain at that level thereafter. Assumed health care cost trend rates have a significant effect on amounts reported for health care plans. A one-percentage point change in the health care trend rates would have the following effects as of and for the year ended December 31, 2017: 

(In thousands)	One Percentage Point Increase		One Percentage Point Decrease
Increase (decrease) on total service and interest cost components	$	40	$	(34	)
Increase (decrease) on post-retirement accumulated benefit obligation		855		(738	)

Target and actual allocations of defined benefit pension plan's assets

The target and actual allocations expressed as a percentage of the defined benefit pension plan’s assets are as follows:

	Target 2017		2017		2016
Cash and cash equivalents		0 - 20%		3%		2%
Fixed income securities		25 - 55%		45%		46%
Equities		40 - 65%		52%		52%
Total				100%		100%

Financial instruments recorded at fair value on a recurring basis by the Plan

The following table presents the financial instruments recorded at fair value on a recurring basis by the Plan:

(In thousands)	Level 1		Level 2		December 31, 2017
Cash and cash equivalents	$	3,684	$	-	$	3,684
Foreign equity mutual funds		44,508		-		44,508
Equity mutual funds		26,747		-		26,747
U.S. government bonds		-		99		99
Corporate bonds		-		49,188		49,188
Total	$	74,939	$	49,287	$	124,226

	Level 1		Level 2		December 31, 2016
Cash and cash equivalents	$	3,500	$	-	$	3,500
Foreign equity mutual funds		33,687		-		33,687
Equity mutual funds		28,256		-		28,256
U.S. government bonds		-		1,283		1,283
Corporate bonds		-		49,490		49,490
Total	$	65,443	$	50,773	$	116,216

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Stock-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2017

Stock-Based Compensation [Abstract]

Stock option activity

The following table summarizes information concerning stock options outstanding:

(In thousands, except share and per share data)	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2017		230,174		$	24.35
Granted		1,500			40.63
Exercised		(118,844	)		25.94
Expired		(800	)		24.46
Outstanding at December 31, 2017		112,030		$	22.88		2.13	$	1,566
Exercisable at December 31, 2017		107,280		$	22.41		1.84	$	1,544
Expected to Vest		4,750		$	33.52		8.68	$	22

Cash proceeds, tax benefits and intrinsic value of stock options exercised

Total stock-based compensation expense for stock option awards totaled $0.1 million, $0.2 million and $0.2 million for the years ended December 31, 2017, 2016 and 2015, respectively. Cash proceeds, tax benefits and intrinsic value related to total stock options exercised is as follows: 

	Years ended December 31,
(In thousands)	2017		2016		2015
Proceeds from stock options exercised	$	3,083	$	8,398	$	12,044
Tax benefits related to stock options exercised		650		1,223		952
Intrinsic value of stock options exercised		1,699		3,143		2,446
Fair value of shares vested during the year		329		105		63

Unvested restricted stock units activity

The Company has outstanding restricted stock granted from various plans at December 31, 2017. The Company recognized $3.5 million, $4.2 million and $3.9 million in stock-based compensation expense related to these stock awards for the years ended December 31, 2017, 2016 and 2015, respectively. Tax benefits recognized with respect to restricted stock awards and stock units were $2.5 million, $2.9 million and $1.5 million for the years ended December 31, 2017, 2016 and 2015, respectively. Unrecognized compensation cost related to restricted stock awards and stock units totaled $4.8 million at December 31, 2017 and will be recognized over 2.1 years on a weighted average basis. Shares issued are funded from the Company’s treasury stock. The following table summarizes information for unvested restricted stock units outstanding as of December 31, 2017:

	Number of Shares			Weighted- Average Grant Date Fair Value
Unvested at January 1, 2017		613,163		$	22.62
Forfeited		(5,545	)		23.18
Vested		(198,652	)		22.34
Granted		125,772			36.15
Unvested at December 31, 2017		534,738		$	25.77

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Stockholders' Equity (Tables)

12 Months Ended

Dec. 31, 2017

Stockholders' Equity [Abstract]

Components of accumulated other comprehensive (loss) income

In accordance with GAAP, unrecognized prior service costs and net actuarial gains or losses associated with the Company’s pension and postretirement benefit plans and unrealized gains on derivatives and on AFS securities are included in AOCI, net of tax. For the years ended December 31, components of AOCI are:

(In thousands)	2017			2016			2015
Unrecognized prior service cost and net actuarial (losses) on pension plans	$	(15,284	)	$	(18,227	)	$	(21,557	)
Unrealized gains on derivatives (cash flow hedges)		2,144			1,772			-
Unrealized net holding (losses) on AFS securities		(8,937	)		(5,065	)		(861	)
AOCI	$	(22,077	)	$	(21,520	)	$	(22,418	)

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Regulatory Capital Requirements (Tables)

12 Months Ended

Dec. 31, 2017

Regulatory Capital Requirements [Abstract]

Schedule of compliance with regulatory compliance requirements under banking regulations

The Company and NBT Bank’s actual capital amounts and ratios are presented as follows:

	Actual					Regulatory Ratio Requirements
(Dollars in thousands)	Amount		Ratio			Minimum Capital Adequacy			Minimum plus Buffer			For Classification as Well- Capitalized
As of December 31, 2017
Tier I Capital (to average assets)
Company	$	810,445		9.14	%		4.00	%					5.00	%
NBT Bank		756,521		8.59	%		4.00	%					5.00	%
Common Equity Tier 1 Capital
Company		713,445		10.06	%		4.50	%		5.75	%		6.50	%
NBT Bank		756,521		10.74	%		4.50	%		5.75	%		6.50	%
Tier I Capital (to risk-weighted assets)
Company		810,445		11.42	%		6.00	%		7.25	%		6.00	%
NBT Bank		756,521		10.74	%		6.00	%		7.25	%		6.00	%
Total Capital (to risk-weighted assets)
Company		880,874		12.42	%		8.00	%		9.25	%		10.00	%
NBT Bank		826,950		11.74	%		8.00	%		9.25	%		10.00	%
As of December 31, 2016
Tier I Capital (to average assets)
Company	$	773,111		9.11	%		4.00	%					5.00	%
NBT Bank		723,992		8.59	%		4.00	%					5.00	%
Common Equity Tier 1 Capital
Company		676,111		9.98	%		4.50	%		5.125	%		6.50	%
NBT Bank		723,992		10.76	%		4.50	%		5.125	%		6.50	%
Tier I Capital (to risk-weighted assets)
Company		773,111		11.42	%		6.00	%		6.625	%		8.00	%
NBT Bank		723,992		10.76	%		6.00	%		6.625	%		8.00	%
Total Capital (to risk-weighted assets)
Company		839,152		12.39	%		8.00	%		8.625	%		10.00	%
NBT Bank		790,034		11.75	%		8.00	%		8.625	%		10.00	%

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Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2017

Earnings Per Share [Abstract]

Reconciliation of basic and diluted earnings per share

The following is a reconciliation of basic and diluted EPS for the years presented in the consolidated statements of income:

	Years ended December 31,
	2017						2016						2015
(In thousands except share and per share data)	Net Income		Weighted Average Shares		Per Share Amount		Net Income		Weighted Average Shares		Per Share Amount		Net Income		Weighted Average Shares		Per Share Amount
Basic EPS	$	82,151		43,575	$	1.89	$	78,409		43,244	$	1.81	$	76,425		43,836	$	1.74
Effect of dilutive securities:
Stock-based compensation				330						378						553
Diluted EPS	$	82,151		43,905	$	1.87	$	78,409		43,622	$	1.80	$	76,425		44,389	$	1.72

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

12 Months Ended

Dec. 31, 2017

Reclassification Adjustments Out of Other Comprehensive Income [Abstract]

Reclassification Out of Accumulated Other Comprehensive Income

The following table summarizes the reclassification adjustments out of AOCI:

Detail About AOCI Components	Amount Reclassified from AOCI									Affected Line Item in the Consolidated Statements of OCI
	Years ended
(In thousands)	December 31, 2017			December 31, 2016			December 31, 2015
AFS securities:
(Gains) losses on AFS securities	$	(1,869	)	$	644		$	(3,087	)	Net securities (gains) losses
Amortization of unrealized gains related to securities transfer		875			1,094			1,311		Interest income
Impairment write-down of an equity security		1,312			-			-		Other noninterest income
Tax effect	$	(120	)	$	(677	)	$	691		Income tax (expense) benefit
Net of tax	$	198		$	1,061		$	(1,085	)
Pension and other benefits:
Amortization of net losses	$	1,755		$	2,395		$	2,437		Salaries and employee benefits
Amortization of prior service costs		97			(25	)		(198	)	Salaries and employee benefits
Tax effect		(740	)		(949	)		(868	)	Income tax (expense) benefit
Net of tax	$	1,112		$	1,421		$	1,371
Total reclassifications, net of tax	$	1,310		$	2,482		$	286

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Commitments and Contingent Liabilities (Tables)

12 Months Ended

Dec. 31, 2017

Commitments and Contingent Liabilities [Abstract]

Schedule of maximum commitments potential obligation

The Company is a party to certain financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, unused lines of credit, standby letters of credit and certain agricultural real estate loans sold to investors with recourse, with the sold portion having a government guarantee that is assignable back to the Company upon repurchase of the loan in the event of default. The Company’s exposure to credit loss in the event of nonperformance by the other party to the commitments to extend credit, unused lines of credit, standby letters of credit and loans sold with recourse is represented by the contractual amount of those instruments. The credit risk associated with commitments to extend credit and standby and commercial letters of credit is essentially the same as that involved with extending loans to customers and is subject to normal credit policies. Collateral may be obtained based on management’s assessment of the customer’s creditworthiness. 

	At December 31,
(In thousands)	2017		2016
Unused lines of credit	$	351,227	$	292,140
Commitments to extend credits, primarily variable rate		1,215,187		1,177,842
Standby letters of credit		41,135		36,815
Loans sold with recourse		29,120		28,463

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Derivative Instruments and Hedging Activities (Tables)

12 Months Ended

Dec. 31, 2017

Derivative Instruments and Hedging Activities [Abstract]

Credit Value Adjustment Recorded Related to Notional Amount of Derivatives Outstanding and Notional Amount of Risk Participation Agreements

The following table depicts the fair value adjustment recorded related to the notional amount of derivatives outstanding as well as the notional amount of risk participation agreements:

	December 31,
(In thousands)	2017		2016
Derivatives Not Designated as Hedging Instruments:
Fair value adjustment	$	210	$	309
Notional amount:
Interest rate derivatives		481,185		371,101
Risk participation agreements		35,628		11,421
Derivatives Designated as Hedging Instruments:
Fair value adjustment - interest rate derivatives		3,510		2,704
Notional amount - interest rate derivatives		250,000		250,000

Gain or Loss Recognized in Income on Derivatives

The following table indicates the gain or loss recognized in income on derivatives for the years ended December 31:

	December 31,
(In thousands)	2017		2016			2015
Non-hedging interest rate derivatives:
Increase in interest income	$	179	$	95		$	33
Increase in other income		2,945		3,480			684
Hedging interest rate derivatives:
Decrease (increase) in interest expense		289		(70	)		-

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Fair Values of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2017

Fair Values of Financial Instruments [Abstract]

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

The following table sets 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)	Level 1		Level 2		Level 3		December 31, 2017
Assets:
AFS securities:
Federal agency	$	-	$	108,899	$	-	$	108,899
State & municipal		-		41,956		-		41,956
Mortgage-backed		-		554,927		-		554,927
Collateralized mortgage obligations		-		535,994		-		535,994
Other securities		5,845		8,304		-		14,149
Total AFS securities	$	5,845	$	1,250,080	$	-	$	1,255,925
Trading securities		11,467		-		-		11,467
Derivatives		-		3,732		-		3,732
Total	$	17,312	$	1,253,812	$	-	$	1,271,124
Liabilities:
Derivatives	$	-	$	324	$	-	$	324
Total	$	-	$	324	$	-	$	324

(In thousands)	Level 1		Level 2		Level 3		December 31, 2016
Assets:
AFS securities:
Federal agency	$	-	$	174,408	$	-	$	174,408
State & municipal		-		46,726		-		46,726
Mortgage-backed		-		529,844		-		529,844
Collateralized mortgage obligations		-		566,573		-		566,573
Other securities		11,493		9,246		-		20,739
Total AFS securities	$	11,493	$	1,326,797	$	-	$	1,338,290
Trading securities		9,259		-		-		9,259
Derivatives		-		3,210		-		3,210
Total	$	20,752	$	1,330,007	$	-	$	1,350,759
Liabilities:
Derivatives	$	-	$	506	$	-	$	506
Total	$	-	$	506	$	-	$	506

Fair Value of Financial Instruments by Balance Sheet Grouping

The following table sets forth information with regard to estimated fair values of financial instruments. 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, AFS securities, trading securities, accrued interest receivable, non-maturity deposits, short-term borrowings, accrued interest payable and interest rate swaps.

			December 31, 2017				December 31, 2016
(In thousands)	Fair Value Hierarchy		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
HTM securities		2	$	484,073	$	481,871	$	527,948	$	525,050
Net loans		3		6,515,273		6,651,931		6,132,857		6,273,233
Financial liabilities:
Time deposits		2	$	806,766	$	801,294	$	872,411	$	868,153
Long-term debt		2		88,869		88,346		104,087		104,113
Junior subordinated debt		2		101,196		104,593		101,196		102,262

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Parent Company Financial Information (Tables)

12 Months Ended

Dec. 31, 2017

Parent Company Financial Information [Abstract]

Parent company financial information

Condensed Balance Sheets

	December 31,
(In thousands)	2017		2016
Assets
Cash and cash equivalents	$	7,572	$	4,152
AFS securities, at estimated fair value		10,065		15,273
Trading securities		11,245		8,968
Investment in subsidiaries, on equity basis		1,048,908		1,006,444
Other assets		40,461		44,178
Total assets	$	1,118,251	$	1,079,015
Liabilities and Stockholders’ Equity
Total liabilities	$	160,074	$	165,699
Stockholders’ equity		958,177		913,316
Total liabilities and stockholders’ equity	$	1,118,251	$	1,079,015

Condensed Statements of Income

	Years ended December 31,
(In thousands)	2017		2016			2015
Dividends from subsidiaries	$	38,300	$	10,200		$	78,200
Management fee from subsidiaries		99,319		95,244			92,629
Net securities gains		2,237		652			3,034
Interest, dividends and other income		928		976			693
Total revenue	$	140,784	$	107,072		$	174,556
Operating expenses		100,667		97,977			94,332
Income before income tax benefit and equity in undistributed income of subsidiaries		40,117		9,095			80,224
Income tax expense (benefit)		2,233		(321	)		515
Dividends in excess of income (equity in undistributed income) of subsidiaries		44,267		68,993			(3,284	)
Net income	$	82,151	$	78,409		$	76,425

Condensed Statements of Cash Flow

	Years ended December 31,
(In thousands)	2017			2016			2015
Operating activities
Net income	$	82,151		$	78,409		$	76,425
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization of premises and equipment		2,974			2,805			2,522
Excess tax benefit on stock-based compensation		1,769			1,055			(43	)
Stock-based compensation expense		3,644			4,378			4,086
Net (gain) on sales of AFS securities		(2,238	)		(652	)		(3,034	)
Re-evaluation of deferred tax amounts from Tax Act		3,339			-			-
Equity in undistributed income of subsidiaries		(82,567	)		(79,193	)		(74,916	)
Cash dividend from subsidiaries		38,300			10,200			78,200
Bank owned life insurance income		(328	)		(356	)		(292	)
Net change in other liabilities		(5,624	)		(8,596	)		6,770
Net change in other assets		(368	)		22,728			(6,652	)
Net cash provided by operating activities	$	41,052		$	30,778		$	83,066
Investing activities
Proceeds on sales and maturities of AFS securities	$	4,710		$	1,783		$	5,297
Purchases of AFS securities		(9	)		(580	)		(3,083	)
Proceeds from settlement of bank owned life insurance		308			-			-
Net purchases of premises and equipment		(2,264	)		(3,083	)		(2,930	)
Net cash provided by (used in) investing activities	$	2,745		$	(1,880	)	$	(716	)
Financing activities
Proceeds from the issuance of shares to employee benefit plans and other stock plans	$	3,309		$	6,032		$	8,856
Cash paid by employer for tax-withholding on stock issuance		(3,582	)		(3,387	)		(1,164	)
Purchases of treasury shares		-			(17,193	)		(26,797	)
Cash dividends and payments for fractional shares		(40,104	)		(38,880	)		(38,149	)
Net cash (used in) financing activities	$	(40,377	)	$	(53,428	)	$	(57,254	)
Net increase (decrease) in cash and cash equivalents	$	3,420		$	(24,530	)	$	25,096
Cash and cash equivalents at beginning of year		4,152			28,682			3,586
Cash and cash equivalents at end of year	$	7,572		$	4,152		$	28,682

A statement of changes in stockholders’ equity has not been presented since it is the same as the consolidated statement of changes in stockholders’ equity previously presented.

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Summary of Significant Accounting Policies (Details)	12 Months Ended
	Dec. 31, 2017
Summary of Significant Accounting Policies [Abstract]
Minimum number of days past due for nonaccrual loan status	90 days
Period of sustained repayment performance for nonperforming TDRs to be returned to performing status	6 months
Standby letters of credit expiration period	1 year

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Acquisitions (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Business Acquisition [Line Items]
Goodwill acquired	$ 2,604	$ 2,047
Downeast Pension Services, Inc.[Member]
Business Acquisition [Line Items]
Total consideration paid	5,700
Goodwill acquired	2,600
Contingent consideration, liability	$ 1,700
Actuarial Designs & Solutions, Inc. [Member]
Business Acquisition [Line Items]
Total consideration paid		3,000
Goodwill acquired		1,300
Columbia Ridge Capital Management, Inc. [Member]
Business Acquisition [Line Items]
Total consideration paid		1,300
Goodwill acquired		$ 800
Third Party Administrators, Inc. [Member]
Business Acquisition [Line Items]
Total consideration paid			$ 4,100
Goodwill acquired			$ 2,300

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Securities, Available for Sale (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($) Position	Dec. 31, 2016 USD ($) Position	Dec. 31, 2015 USD ($)
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	$ 1,266,165	$ 1,341,059
Unrealized gains	5,893	11,097
Unrealized losses	16,133	13,866
Estimated fair value	1,255,925	1,338,290
Amortized costs of securities available for sale pledged to secure public deposits	1,500,000	1,500,000
Amortized costs of securities available for sale pledged as collateral for repurchase agreements	231,300	235,600
Unrealized Loss Position, Fair Value [Abstract]
Less than 12 months	633,766	902,506
12 months or longer	386,818	5,831
Total	1,020,584	908,337
Unrealized Loss Position, Unrealized Losses [Abstract]
Less than 12 months	(5,481)	(12,347)
12 months or longer	(10,653)	(1,519)
Total	$ (16,134)	$ (13,866)
Unrealized Loss Position, Number of Positions [Abstract]
Less than 12 months | Position	134	171
12 months or longer | Position	79	7
Total | Position	213	178
Sales transactions of securities available for sale [Abstract]
Gross realized gains	$ 2,241	$ 683	$ 3,099
Gross realized (losses)	(372)	(1,327)	(12)
Net AFS realized gains (losses)	1,869	(644)	3,087
Gains from calls on securities available for sale	100	100	$ 100
Held-to-maturity securities sold, unrealized loss	(2)	$ 0
Available-for-sale Securities, Debt Maturities, Amortized Cost [Abstract]
Within one year	63,309
From one to five years	90,119
From five to ten years	178,128
After ten years	923,987
Amortized cost	1,255,543
Available-for-sale Securities, Debt Maturities, Estimated Fair Value [Abstract]
Within one year	63,186
From one to five years	89,275
From five to ten years	177,961
After ten years	911,354
Fair value	$ 1,241,776
Consolidated stockholders' equity threshold percentage that no single issuer of securities exceeded except for U.S. Government securities	10.00%	10.00%
Realized OTTI impairment loss on AFS equity investment	$ 1,300
Held-to-maturity securities sold, amortized cost	800
Federal Agency [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	109,862	$ 175,135
Unrealized gains	0	78
Unrealized losses	963	805
Estimated fair value	108,899	174,408
Unrealized Loss Position, Fair Value [Abstract]
Less than 12 months	64,653	119,363
12 months or longer	44,246	0
Total	108,899	119,363
Unrealized Loss Position, Unrealized Losses [Abstract]
Less than 12 months	(242)	(805)
12 months or longer	(721)	0
Total	$ (963)	$ (805)
Unrealized Loss Position, Number of Positions [Abstract]
Less than 12 months | Position	5	10
12 months or longer | Position	4	0
Total | Position	9	10
State & Municipal [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	$ 42,171	$ 47,053
Unrealized gains	62	153
Unrealized losses	277	480
Estimated fair value	41,956	46,726
Unrealized Loss Position, Fair Value [Abstract]
Less than 12 months	23,566	31,873
12 months or longer	5,994	483
Total	29,560	32,356
Unrealized Loss Position, Unrealized Losses [Abstract]
Less than 12 months	(200)	(478)
12 months or longer	(77)	(2)
Total	$ (277)	$ (480)
Unrealized Loss Position, Number of Positions [Abstract]
Less than 12 months | Position	39	55
12 months or longer | Position	8	1
Total | Position	47	56
Mortgage-Backed [Member]
Unrealized Loss Position, Fair Value [Abstract]
Less than 12 months	$ 317,630	$ 277,524
12 months or longer	58,316	985
Total	375,946	278,509
Unrealized Loss Position, Unrealized Losses [Abstract]
Less than 12 months	(2,381)	(2,668)
12 months or longer	(1,188)	(13)
Total	$ (3,569)	$ (2,681)
Unrealized Loss Position, Number of Positions [Abstract]
Less than 12 months | Position	55	49
12 months or longer | Position	24	4
Total | Position	79	53
Mortgage-Backed, Government Sponsored Enterprises [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	$ 530,392	$ 513,814
Unrealized gains	1,406	3,345
Unrealized losses	3,345	2,492
Estimated fair value	528,453	514,667
Mortgage-backed Securities, U.S. Government Agency Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	26,363	14,955
Unrealized gains	334	411
Unrealized losses	223	189
Estimated fair value	26,474	15,177
Collateralized Mortgage Obligations [Member]
Unrealized Loss Position, Fair Value [Abstract]
Less than 12 months	227,917	473,746
12 months or longer	275,303	0
Total	503,220	473,746
Unrealized Loss Position, Unrealized Losses [Abstract]
Less than 12 months	(2,658)	(8,396)
12 months or longer	(8,521)	0
Total	$ (11,179)	$ (8,396)
Unrealized Loss Position, Number of Positions [Abstract]
Less than 12 months | Position	35	57
12 months or longer | Position	42	0
Total | Position	77	57
Collateralized Mortgage Obligations, Government-Sponsored Enterprises [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	$ 496,033	$ 513,431
Unrealized gains	254	532
Unrealized losses	10,114	7,688
Estimated fair value	486,173	506,275
Collateralized Mortgage Obligations, U.S. Government Agency Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	50,721	60,822
Unrealized gains	165	184
Unrealized losses	1,065	708
Estimated fair value	49,821	60,298
Other Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	10,623	15,849
Unrealized gains	3,672	6,394
Unrealized losses	146	1,504
Estimated fair value	14,149	20,739
Unrealized Loss Position, Fair Value [Abstract]
Less than 12 months	0	0
12 months or longer	2,959	4,363
Total	2,959	4,363
Unrealized Loss Position, Unrealized Losses [Abstract]
Less than 12 months	0	0
12 months or longer	(146)	(1,504)
Total	$ (146)	$ (1,504)
Unrealized Loss Position, Number of Positions [Abstract]
Less than 12 months | Position	0	0
12 months or longer | Position	1	2
Total | Position	1	2

XML

Securities, Held to Maturity (Details) $ in Thousands	Dec. 31, 2017 USD ($) Position	Dec. 31, 2016 USD ($) Position
Schedule of Held-to-maturity Securities [Line Items]
Amortized cost	$ 484,073	$ 527,948
Unrealized gains	1,805	1,581
Unrealized losses	4,007	4,479
Estimated fair value	481,871	525,050
Unrealized Loss Position, Fair Value [Abstract]
Less than 12 months	156,340	286,063
12 months or longer	87,037	35,209
Total	243,377	321,272
Unrealized Loss Position, Unrealized Losses [Abstract]
Less than 12 months	(1,336)	(3,290)
12 months or longer	(2,671)	(1,189)
Total	$ (4,007)	$ (4,479)
Unrealized Loss Position, Number of Positions [Abstract]
Less than 12 months | Position	59	172
12 months or longer | Position	32	4
Total | Position	91	176
Held-to-maturity Securities, Debt Maturities, Amortized Cost [Abstract]
Within one year	$ 31,412
From one to five years	42,363
From five to ten years	174,950
After ten years	235,348
Amortized cost	484,073	$ 527,948
Held-to-maturity Securities, Debt Maturities, Estimated Fair Value [Abstract]
Within one year	31,413
From one to five years	42,588
From five to ten years	174,937
After ten years	232,933
Fair value	481,871	525,050
Mortgage-Backed [Member]
Unrealized Loss Position, Fair Value [Abstract]
Less than 12 months	15,477	95,492
12 months or longer	33,703	0
Total	49,180	95,492
Unrealized Loss Position, Unrealized Losses [Abstract]
Less than 12 months	(140)	(1,176)
12 months or longer	(670)	0
Total	$ (810)	$ (1,176)
Unrealized Loss Position, Number of Positions [Abstract]
Less than 12 months | Position	2	5
12 months or longer | Position	2	0
Total | Position	4	5
Mortgage-backed Securities, Issued by US Government-Sponsored Enterprises [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized cost	$ 96,357	$ 96,668
Unrealized gains	85	0
Unrealized losses	810	1,176
Estimated fair value	95,632	95,492
Held-to-maturity Securities, Debt Maturities, Amortized Cost [Abstract]
Amortized cost	96,357	96,668
Held-to-maturity Securities, Debt Maturities, Estimated Fair Value [Abstract]
Fair value	95,632	95,492
Mortgage-Backed, U.S. Government Agency Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized cost	418	533
Unrealized gains	57	87
Unrealized losses	0	0
Estimated fair value	475	620
Held-to-maturity Securities, Debt Maturities, Amortized Cost [Abstract]
Amortized cost	418	533
Held-to-maturity Securities, Debt Maturities, Estimated Fair Value [Abstract]
Fair value	475	620
Collateralized Mortgage Obligations [Member]
Unrealized Loss Position, Fair Value [Abstract]
Less than 12 months	118,476	108,587
12 months or longer	37,614	35,209
Total	156,090	143,796
Unrealized Loss Position, Unrealized Losses [Abstract]
Less than 12 months	(1,064)	(319)
12 months or longer	(1,513)	(1,189)
Total	$ (2,577)	$ (1,508)
Unrealized Loss Position, Number of Positions [Abstract]
Less than 12 months | Position	17	12
12 months or longer | Position	6	4
Total | Position	23	16
Collateralized Mortgage Obligations, Government-Sponsored Enterprises [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized cost	$ 186,327	$ 225,213
Unrealized gains	224	1,060
Unrealized losses	2,577	1,508
Estimated fair value	183,974	224,765
Held-to-maturity Securities, Debt Maturities, Amortized Cost [Abstract]
Amortized cost	186,327	225,213
Held-to-maturity Securities, Debt Maturities, Estimated Fair Value [Abstract]
Fair value	183,974	224,765
State & Municipal [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized cost	200,971	205,534
Unrealized gains	1,439	434
Unrealized losses	620	1,795
Estimated fair value	201,790	204,173
Unrealized Loss Position, Fair Value [Abstract]
Less than 12 months	22,387	81,984
12 months or longer	15,720	0
Total	38,107	81,984
Unrealized Loss Position, Unrealized Losses [Abstract]
Less than 12 months	(132)	(1,795)
12 months or longer	(488)	0
Total	$ (620)	$ (1,795)
Unrealized Loss Position, Number of Positions [Abstract]
Less than 12 months | Position	40	155
12 months or longer | Position	24	0
Total | Position	64	155
Held-to-maturity Securities, Debt Maturities, Amortized Cost [Abstract]
Amortized cost	$ 200,971	$ 205,534
Held-to-maturity Securities, Debt Maturities, Estimated Fair Value [Abstract]
Fair value	$ 201,790	$ 204,173

XML

Loans (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
Net Loans	$ 6,584,773	$ 6,198,057
Deferred loan origination costs, net	42,600	40,300
Residential loans held for sale	700	600
Loans serviced for unrelated third parties	586,700	604,000
Mortgage servicing rights	600	900
Loans and Leases Receivable, Related Parties [Roll Forward]
Balance at January 1	2,050	2,346
New loans	297	936
Adjustment due to change in composition of related parties	198	(406)
Repayments	(968)	(826)
Balance at December 31	1,577	2,050
Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Net Loans	1,317,174	1,242,701
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Net Loans	1,711,095	1,543,301
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Net Loans	1,740,038	1,641,657
Home Equity [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Net Loans	494,771	507,784
Residential Real Estate Mortgages [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Net Loans	1,321,695	1,262,614
Commercial Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Net Loans	3,028,269	2,786,002
Commercial Loans [Member] | Agricultural and Agricultural Real Estate Mortgages [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans serviced for unrelated third parties	29,100	28,500
Consumer Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Net Loans	$ 2,234,809	$ 2,149,441

XML

Allowance for Loan Losses and Credit Quality of Loans (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($) Segment	Dec. 31, 2016 USD ($)
Financing Receivable, Allowance for Credit Losses [Line Items]
Loan portfolio segments | Segment	3
Commercial Loans [Member] | Commercial Real Estate [Member] | Maximum [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loan amount, percentage of appraised value or purchase price of the property	80.00%
Commercial Loans [Member] | Agricultural Real Estate [Member] | Maximum [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loan amount, percentage of appraised value or purchase price of the property	75.00%
Commercial Loans [Member] | Business Banking [Member] | Maximum [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Business banking loans, amount available	$ 750
Consumer Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Unsecured consumer loans originated through relationship with leading national technology-driven consumer lending company	$ 403,600	$ 374,900
Consumer Loans [Member] | Indirect [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Percentage of automobile financing to indirect relationships with dealers	70.00%
Consumer Loans [Member] | Indirect [Member] | Minimum [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Principal repayment term of loan	3 years
Consumer Loans [Member] | Indirect [Member] | Maximum [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Principal repayment term of loan	6 years
Consumer Loans [Member] | Home Equity [Member] | Maximum [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Home equity loan amount, percentage of equity in home	85.00%
Consumer Loans [Member] | Direct [Member] | Minimum [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Principal repayment term of loan	1 year
Consumer Loans [Member] | Direct [Member] | Maximum [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Principal repayment term of loan	10 years
Residential Real Estate Mortgages [Member] | Maximum [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loan amount, percentage of appraised value or purchase price of the property	85.00%

XML

Allowance for Loan Losses and Credit Quality of Loans, Changes in Allowance for Loan Losses (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Changes in allowance for loan losses by portfolio segment [Roll Forward]
Balance, beginning of period	$ 65,200	$ 63,018	$ 66,359
Charge-offs	(33,087)	(29,299)	(26,087)
Recoveries	6,399	6,050	4,461
Provision	30,988	25,431	18,285
Balance, end of period	69,500	65,200	63,018
Commercial Loans [Member]
Changes in allowance for loan losses by portfolio segment [Roll Forward]
Balance, beginning of period	25,444	25,545	32,433
Charge-offs	(4,169)	(4,592)	(5,718)
Recoveries	1,077	1,887	1,014
Provision	5,254	2,604	(2,184)
Balance, end of period	27,606	25,444	25,545
Consumer Loans [Member]
Changes in allowance for loan losses by portfolio segment [Roll Forward]
Balance, beginning of period	33,375	29,253	26,720
Charge-offs	(27,072)	(23,364)	(18,140)
Recoveries	5,142	3,870	3,127
Provision	25,385	23,616	17,546
Balance, end of period	36,830	33,375	29,253
Residential Real Estate Mortgages [Member]
Changes in allowance for loan losses by portfolio segment [Roll Forward]
Balance, beginning of period	6,381	7,960	7,130
Charge-offs	(1,846)	(1,343)	(2,229)
Recoveries	180	293	320
Provision	349	(529)	2,739
Balance, end of period	5,064	6,381	7,960
Unallocated [Member]
Changes in allowance for loan losses by portfolio segment [Roll Forward]
Balance, beginning of period	0	260	76
Charge-offs	0	0	0
Recoveries	0	0	0
Provision	0	(260)	184
Balance, end of period	0	0	260
Acquired Loans [Member]
Changes in allowance for loan losses by portfolio segment [Roll Forward]
Balance, beginning of period	700
Charge-offs	(700)	(500)	$ (2,700)
Balance, end of period	$ 0	$ 700

XML

Allowance for Loan Losses and Credit Quality of Loans, Allowance for Loan Losses and Recorded Investment (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Allowance for loan losses and recorded investment by portfolio segment [Abstract]
Allowance for loan losses	$ 69,500	$ 65,200	$ 63,018	$ 66,359
Allowance for loans individually evaluated for impairment	57	1,517
Allowance for loans collectively evaluated for impairment	69,443	63,683
Ending balance of loans	6,584,773	6,198,057
Commercial Loans [Member]
Allowance for loan losses and recorded investment by portfolio segment [Abstract]
Allowance for loan losses	27,606	25,444	25,545	32,433
Allowance for loans individually evaluated for impairment	57	1,517
Allowance for loans collectively evaluated for impairment	27,549	23,927
Ending balance of loans	3,028,269	2,786,002
Consumer Loans [Member]
Allowance for loan losses and recorded investment by portfolio segment [Abstract]
Allowance for loan losses	36,830	33,375	29,253	26,720
Allowance for loans individually evaluated for impairment	0	0
Allowance for loans collectively evaluated for impairment	36,830	33,375
Ending balance of loans	2,234,809	2,149,441
Residential Real Estate Mortgages [Member]
Allowance for loan losses and recorded investment by portfolio segment [Abstract]
Allowance for loan losses	5,064	6,381	7,960	7,130
Allowance for loans individually evaluated for impairment	0	0
Allowance for loans collectively evaluated for impairment	5,064	6,381
Ending balance of loans	1,321,695	1,262,614
Unallocated [Member]
Allowance for loan losses and recorded investment by portfolio segment [Abstract]
Allowance for loan losses	0	0	$ 260	$ 76
Originated Loans [Member]
Allowance for loan losses and recorded investment by portfolio segment [Abstract]
Ending balance of loans	6,183,082	5,697,963
Ending balance of loans individually evaluated for impairment	21,138	27,669
Ending balance of loans collectively evaluated for impairment	6,161,944	5,670,294
Originated Loans [Member] | Commercial Loans [Member]
Allowance for loan losses and recorded investment by portfolio segment [Abstract]
Ending balance of loans	2,840,956	2,548,384
Ending balance of loans individually evaluated for impairment	5,876	13,070
Ending balance of loans collectively evaluated for impairment	2,835,080	2,535,314
Originated Loans [Member] | Consumer Loans [Member]
Allowance for loan losses and recorded investment by portfolio segment [Abstract]
Ending balance of loans	2,190,903	2,086,436
Ending balance of loans individually evaluated for impairment	8,432	8,488
Ending balance of loans collectively evaluated for impairment	2,182,471	2,077,948
Originated Loans [Member] | Residential Real Estate Mortgages [Member]
Allowance for loan losses and recorded investment by portfolio segment [Abstract]
Ending balance of loans	1,151,223	1,063,143
Ending balance of loans individually evaluated for impairment	6,830	6,111
Ending balance of loans collectively evaluated for impairment	1,144,393	1,057,032
Acquired Loans [Member]
Allowance for loan losses and recorded investment by portfolio segment [Abstract]
Allowance for loan losses	0	700
Ending balance of loans	401,691	500,094
Ending balance of loans individually evaluated for impairment		1,205
Ending balance of loans collectively evaluated for impairment	401,691	498,889
Acquired Loans [Member] | Commercial Loans [Member]
Allowance for loan losses and recorded investment by portfolio segment [Abstract]
Ending balance of loans	187,313	237,618
Ending balance of loans individually evaluated for impairment		1,205
Ending balance of loans collectively evaluated for impairment	187,313	236,413
Acquired Loans [Member] | Consumer Loans [Member]
Allowance for loan losses and recorded investment by portfolio segment [Abstract]
Ending balance of loans	43,906	63,005
Ending balance of loans individually evaluated for impairment		0
Ending balance of loans collectively evaluated for impairment	43,906	63,005
Acquired Loans [Member] | Residential Real Estate Mortgages [Member]
Allowance for loan losses and recorded investment by portfolio segment [Abstract]
Ending balance of loans	170,472	199,471
Ending balance of loans individually evaluated for impairment		0
Ending balance of loans collectively evaluated for impairment	$ 170,472	$ 199,471

XML

Allowance for Loan Losses and Credit Quality of Loans, Past Due Loans (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Financing Receivable, Recorded Investment, Aging [Abstract]
Minimum number of days past due for nonaccrual loan status	90 days
Total past due accruing	$ 41,730	$ 39,485
Nonaccrual	25,708	35,712
Current	6,517,335	6,122,860
Recorded total loans	6,584,773	6,198,057
31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	29,662	28,717
61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	6,658	5,958
Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	5,410	4,810
Commercial [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded total loans	1,317,174	1,242,701
Home Equity [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded total loans	494,771	507,784
Commercial Loans [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded total loans	3,028,269	2,786,002
Consumer Loans [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded total loans	2,234,809	2,149,441
Residential Real Estate Mortgages [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded total loans	1,321,695	1,262,614
Originated Loans [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	39,945	37,811
Nonaccrual	23,336	30,077
Current	6,119,801	5,630,075
Recorded total loans	6,183,082	5,697,963
Originated Loans [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	28,383	27,488
Originated Loans [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	6,397	5,870
Originated Loans [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	5,165	4,453
Originated Loans [Member] | Commercial Loans [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	3,413	1,965
Nonaccrual	12,463	18,292
Current	2,825,080	2,528,127
Recorded total loans	2,840,956	2,548,384
Originated Loans [Member] | Commercial Loans [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	2,678	1,642
Originated Loans [Member] | Commercial Loans [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	735	323
Originated Loans [Member] | Commercial Loans [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0	0
Originated Loans [Member] | Commercial Loans [Member] | Commercial [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0	38
Nonaccrual	202	2,964
Current	753,577	650,568
Recorded total loans	753,779	653,570
Originated Loans [Member] | Commercial Loans [Member] | Commercial [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0	33
Originated Loans [Member] | Commercial Loans [Member] | Commercial [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0	5
Originated Loans [Member] | Commercial Loans [Member] | Commercial [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0	0
Originated Loans [Member] | Commercial Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	299	0
Nonaccrual	3,178	7,935
Current	1,533,065	1,343,854
Recorded total loans	1,536,542	1,351,789
Originated Loans [Member] | Commercial Loans [Member] | Commercial Real Estate [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	161	0
Originated Loans [Member] | Commercial Loans [Member] | Commercial Real Estate [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	138	0
Originated Loans [Member] | Commercial Loans [Member] | Commercial Real Estate [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0	0
Originated Loans [Member] | Commercial Loans [Member] | Agricultural [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	117	0
Nonaccrual	1,043	730
Current	34,386	37,186
Recorded total loans	35,546	37,916
Originated Loans [Member] | Commercial Loans [Member] | Agricultural [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	117	0
Originated Loans [Member] | Commercial Loans [Member] | Agricultural [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0	0
Originated Loans [Member] | Commercial Loans [Member] | Agricultural [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0	0
Originated Loans [Member] | Commercial Loans [Member] | Agricultural Real Estate [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	493	0
Nonaccrual	2,736	1,803
Current	30,905	30,619
Recorded total loans	34,134	32,422
Originated Loans [Member] | Commercial Loans [Member] | Agricultural Real Estate [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	493	0
Originated Loans [Member] | Commercial Loans [Member] | Agricultural Real Estate [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0	0
Originated Loans [Member] | Commercial Loans [Member] | Agricultural Real Estate [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0	0
Originated Loans [Member] | Commercial Loans [Member] | Business Banking [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	2,504	1,927
Nonaccrual	5,304	4,860
Current	473,147	465,900
Recorded total loans	480,955	472,687
Originated Loans [Member] | Commercial Loans [Member] | Business Banking [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	1,907	1,609
Originated Loans [Member] | Commercial Loans [Member] | Business Banking [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	597	318
Originated Loans [Member] | Commercial Loans [Member] | Business Banking [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0	0
Originated Loans [Member] | Consumer Loans [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	30,873	31,543
Nonaccrual	4,886	5,103
Current	2,155,144	2,049,790
Recorded total loans	2,190,903	2,086,436
Originated Loans [Member] | Consumer Loans [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	21,975	23,121
Originated Loans [Member] | Consumer Loans [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	4,995	5,375
Originated Loans [Member] | Consumer Loans [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	3,903	3,047
Originated Loans [Member] | Consumer Loans [Member] | Indirect [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	26,272	25,937
Nonaccrual	2,115	2,145
Current	1,642,664	1,538,593
Recorded total loans	1,671,051	1,566,675
Originated Loans [Member] | Consumer Loans [Member] | Indirect [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	18,747	19,253
Originated Loans [Member] | Consumer Loans [Member] | Indirect [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	4,033	4,185
Originated Loans [Member] | Consumer Loans [Member] | Indirect [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	3,492	2,499
Originated Loans [Member] | Consumer Loans [Member] | Home Equity [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	4,082	5,009
Nonaccrual	2,736	2,851
Current	448,081	448,797
Recorded total loans	454,899	456,657
Originated Loans [Member] | Consumer Loans [Member] | Home Equity [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	2,887	3,416
Originated Loans [Member] | Consumer Loans [Member] | Home Equity [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	854	1,065
Originated Loans [Member] | Consumer Loans [Member] | Home Equity [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	341	528
Originated Loans [Member] | Consumer Loans [Member] | Direct [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	519	597
Nonaccrual	35	107
Current	64,399	62,400
Recorded total loans	64,953	63,104
Originated Loans [Member] | Consumer Loans [Member] | Direct [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	341	452
Originated Loans [Member] | Consumer Loans [Member] | Direct [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	108	125
Originated Loans [Member] | Consumer Loans [Member] | Direct [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	70	20
Originated Loans [Member] | Residential Real Estate Mortgages [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	5,659	4,303
Nonaccrual	5,987	6,682
Current	1,139,577	1,052,158
Recorded total loans	1,151,223	1,063,143
Originated Loans [Member] | Residential Real Estate Mortgages [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	3,730	2,725
Originated Loans [Member] | Residential Real Estate Mortgages [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	667	172
Originated Loans [Member] | Residential Real Estate Mortgages [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	1,262	1,406
Acquired Loans [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	1,785	1,674
Nonaccrual	2,372	5,635
Current	397,534	492,785
Recorded total loans	401,691	500,094
Acquired Loans [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	1,279	1,229
Acquired Loans [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	261	88
Acquired Loans [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	245	357
Acquired Loans [Member] | Commercial Loans [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	354	236
Nonaccrual	671	2,695
Current	186,288	234,687
Recorded total loans	187,313	237,618
Acquired Loans [Member] | Commercial Loans [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	354	236
Acquired Loans [Member] | Commercial Loans [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0	0
Acquired Loans [Member] | Commercial Loans [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0	0
Acquired Loans [Member] | Commercial Loans [Member] | Commercial [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0	0
Nonaccrual	0	0
Current	39,575	49,447
Recorded total loans	39,575	49,447
Acquired Loans [Member] | Commercial Loans [Member] | Commercial [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0	0
Acquired Loans [Member] | Commercial Loans [Member] | Commercial [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0	0
Acquired Loans [Member] | Commercial Loans [Member] | Commercial [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0	0
Acquired Loans [Member] | Commercial Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0	0
Nonaccrual	2	1,891
Current	106,632	135,398
Recorded total loans	106,634	137,289
Acquired Loans [Member] | Commercial Loans [Member] | Commercial Real Estate [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0	0
Acquired Loans [Member] | Commercial Loans [Member] | Commercial Real Estate [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0	0
Acquired Loans [Member] | Commercial Loans [Member] | Commercial Real Estate [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0	0
Acquired Loans [Member] | Commercial Loans [Member] | Business Banking [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	354	236
Nonaccrual	669	804
Current	40,081	49,842
Recorded total loans	41,104	50,882
Acquired Loans [Member] | Commercial Loans [Member] | Business Banking [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	354	236
Acquired Loans [Member] | Commercial Loans [Member] | Business Banking [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0	0
Acquired Loans [Member] | Commercial Loans [Member] | Business Banking [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0	0
Acquired Loans [Member] | Consumer Loans [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	438	474
Nonaccrual	270	304
Current	43,198	62,227
Recorded total loans	43,906	63,005
Acquired Loans [Member] | Consumer Loans [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	298	384
Acquired Loans [Member] | Consumer Loans [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	35	60
Acquired Loans [Member] | Consumer Loans [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	105	30
Acquired Loans [Member] | Consumer Loans [Member] | Indirect [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	39	105
Nonaccrual	22	47
Current	1,157	8,541
Recorded total loans	1,218	8,693
Acquired Loans [Member] | Consumer Loans [Member] | Indirect [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	38	100
Acquired Loans [Member] | Consumer Loans [Member] | Indirect [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0	5
Acquired Loans [Member] | Consumer Loans [Member] | Indirect [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	1	0
Acquired Loans [Member] | Consumer Loans [Member] | Home Equity [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	391	337
Nonaccrual	225	237
Current	39,256	50,553
Recorded total loans	39,872	51,127
Acquired Loans [Member] | Consumer Loans [Member] | Home Equity [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	254	254
Acquired Loans [Member] | Consumer Loans [Member] | Home Equity [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	34	53
Acquired Loans [Member] | Consumer Loans [Member] | Home Equity [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	103	30
Acquired Loans [Member] | Consumer Loans [Member] | Direct [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	8	32
Nonaccrual	23	20
Current	2,785	3,133
Recorded total loans	2,816	3,185
Acquired Loans [Member] | Consumer Loans [Member] | Direct [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	6	30
Acquired Loans [Member] | Consumer Loans [Member] | Direct [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	1	2
Acquired Loans [Member] | Consumer Loans [Member] | Direct [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	1	0
Acquired Loans [Member] | Residential Real Estate Mortgages [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	993	964
Nonaccrual	1,431	2,636
Current	168,048	195,871
Recorded total loans	170,472	199,471
Acquired Loans [Member] | Residential Real Estate Mortgages [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	627	609
Acquired Loans [Member] | Residential Real Estate Mortgages [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	226	28
Acquired Loans [Member] | Residential Real Estate Mortgages [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	$ 140	$ 327

XML

Allowance for Loan Losses and Credit Quality of Loans, Additional Information on Loans Specifically Evaluated for Impairment (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Allowance for Loan Losses and Credit Quality of Loans [Abstract]
Threshold balance for classified loans to be evaluated individually for impairment	$ 750
Total [Abstract]
Recorded investment balance (book)	21,138	$ 28,874
Unpaid principal balance (legal)	28,120	31,582
Related allowance	57	1,517
Originated Loans [Member]
With no related allowance recorded [Abstract]
Recorded investment balance (book)	21,035	21,912
Unpaid principal balance (legal)	28,011	24,321
Originated Loans [Member] | Commercial Loans [Member]
With no related allowance recorded [Abstract]
Recorded investment balance (book)	5,773	7,313
Unpaid principal balance (legal)	8,848	7,970
With an allowance recorded [Abstract]
Recorded investment balance (book)	103	5,757
Unpaid principal balance (legal)	109	5,940
Total [Abstract]
Related allowance	57	826
Originated Loans [Member] | Commercial Loans [Member] | Commercial [Member]
With no related allowance recorded [Abstract]
Recorded investment balance (book)	0	1,278
Unpaid principal balance (legal)	251	1,697
Originated Loans [Member] | Commercial Loans [Member] | Commercial Real Estate [Member]
With no related allowance recorded [Abstract]
Recorded investment balance (book)	2,211	3,816
Unpaid principal balance (legal)	3,979	3,841
With an allowance recorded [Abstract]
Recorded investment balance (book)	76	5,553
Unpaid principal balance (legal)	82	5,736
Total [Abstract]
Related allowance	30	735
Originated Loans [Member] | Commercial Loans [Member] | Agricultural [Member]
With no related allowance recorded [Abstract]
Recorded investment balance (book)	452	130
Unpaid principal balance (legal)	465	137
With an allowance recorded [Abstract]
Recorded investment balance (book)	27	49
Unpaid principal balance (legal)	27	49
Total [Abstract]
Related allowance	27	37
Originated Loans [Member] | Commercial Loans [Member] | Agricultural Real Estate [Member]
With no related allowance recorded [Abstract]
Recorded investment balance (book)	2,250	1,434
Unpaid principal balance (legal)	2,423	1,567
With an allowance recorded [Abstract]
Recorded investment balance (book)	0	155
Unpaid principal balance (legal)	0	155
Total [Abstract]
Related allowance	0	54
Originated Loans [Member] | Commercial Loans [Member] | Business Banking [Member]
With no related allowance recorded [Abstract]
Recorded investment balance (book)	860	655
Unpaid principal balance (legal)	1,730	728
Originated Loans [Member] | Consumer Loans [Member]
With no related allowance recorded [Abstract]
Recorded investment balance (book)	8,432	8,488
Unpaid principal balance (legal)	10,383	9,445
Originated Loans [Member] | Consumer Loans [Member] | Indirect [Member]
With no related allowance recorded [Abstract]
Recorded investment balance (book)	131	5
Unpaid principal balance (legal)	143	16
Originated Loans [Member] | Consumer Loans [Member] | Home Equity [Member]
With no related allowance recorded [Abstract]
Recorded investment balance (book)	8,027	8,483
Unpaid principal balance (legal)	9,966	9,429
Originated Loans [Member] | Consumer Loans [Member] | Direct [Member]
With no related allowance recorded [Abstract]
Recorded investment balance (book)	274	0
Unpaid principal balance (legal)	274	0
Originated Loans [Member] | Residential Real Estate Mortgages [Member]
With no related allowance recorded [Abstract]
Recorded investment balance (book)	6,830	6,111
Unpaid principal balance (legal)	8,780	6,906
Acquired Loans [Member] | Commercial [Member]
With an allowance recorded [Abstract]
Recorded investment balance (book)	0	1,205
Unpaid principal balance (legal)	0	1,321
Total [Abstract]
Related allowance	0	691
Acquired Loans [Member] | Commercial Loans [Member] | Commercial Real Estate [Member]
With an allowance recorded [Abstract]
Recorded investment balance (book)	0	1,205
Unpaid principal balance (legal)	0	1,321
Total [Abstract]
Related allowance	$ 0	$ 691

XML

Allowance for Loan Losses and Credit Quality of Loans, Average Recorded Investments on Loans Specifically Evaluated for Impairment and Interest Income Recognized (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Financing Receivable, Impaired [Line Items]
Average recorded investment	$ 23,238	$ 30,132	$ 32,470
Interest income recognized accrual	924	970	895
Originated Loans [Member]
Financing Receivable, Impaired [Line Items]
Average recorded investment	23,145	28,927	24,691
Interest income recognized accrual	924	970	895
Originated Loans [Member] | Commercial Loans [Member]
Financing Receivable, Impaired [Line Items]
Average recorded investment	8,183	14,498	12,493
Interest income recognized accrual	171	221	302
Originated Loans [Member] | Commercial Loans [Member] | Commercial [Member]
Financing Receivable, Impaired [Line Items]
Average recorded investment	1,841	6,217	2,219
Interest income recognized accrual	0	0	71
Originated Loans [Member] | Commercial Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Average recorded investment	3,534	5,828	8,538
Interest income recognized accrual	115	167	164
Originated Loans [Member] | Commercial Loans [Member] | Agricultural [Member]
Financing Receivable, Impaired [Line Items]
Average recorded investment	224	715	148
Interest income recognized accrual	1	1	1
Originated Loans [Member] | Commercial Loans [Member] | Agricultural Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Average recorded investment	1,709	908	628
Interest income recognized accrual	43	44	45
Originated Loans [Member] | Commercial Loans [Member] | Business Banking [Member]
Financing Receivable, Impaired [Line Items]
Average recorded investment	875	830	960
Interest income recognized accrual	12	9	21
Originated Loans [Member] | Consumer Loans [Member]
Financing Receivable, Impaired [Line Items]
Average recorded investment	8,439	8,286	7,070
Interest income recognized accrual	457	480	374
Originated Loans [Member] | Consumer Loans [Member] | Indirect [Member]
Financing Receivable, Impaired [Line Items]
Average recorded investment	35	8	0
Interest income recognized accrual	3	0	0
Originated Loans [Member] | Consumer Loans [Member] | Home Equity [Member]
Financing Receivable, Impaired [Line Items]
Average recorded investment	8,226	8,278	7,070
Interest income recognized accrual	446	480	374
Originated Loans [Member] | Consumer Loans [Member] | Direct [Member]
Financing Receivable, Impaired [Line Items]
Average recorded investment	178	0	0
Interest income recognized accrual	8	0	0
Originated Loans [Member] | Residential Real Estate Mortgages [Member]
Financing Receivable, Impaired [Line Items]
Average recorded investment	6,523	6,143	5,128
Interest income recognized accrual	296	269	219
Acquired Loans [Member]
Financing Receivable, Impaired [Line Items]
Average recorded investment	93	1,205	7,779
Interest income recognized accrual	0	0	0
Acquired Loans [Member] | Commercial Loans [Member]
Financing Receivable, Impaired [Line Items]
Average recorded investment	93	1,205	7,779
Interest income recognized accrual	0	0	0
Acquired Loans [Member] | Commercial Loans [Member] | Commercial [Member]
Financing Receivable, Impaired [Line Items]
Average recorded investment	0	0	2,045
Interest income recognized accrual	0	0	0
Acquired Loans [Member] | Commercial Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Average recorded investment	93	1,205	5,734
Interest income recognized accrual	$ 0	$ 0	$ 0

XML

Allowance for Loan Losses and Credit Quality of Loans, Credit Quality by Loan Class (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Financing Receivable, Recorded Investment [Line Items]
Net Loans	$ 6,584,773	$ 6,198,057
Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	1,317,174	1,242,701
Home Equity [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	494,771	507,784
Consumer Credit Exposure [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	2,234,809	2,149,441
Residential Mortgage Credit Exposure [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	1,321,695	1,262,614
Originated Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	6,183,082	5,697,963
Originated Loans [Member] | Commercial Credit Exposure [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	2,360,001	2,075,697
Originated Loans [Member] | Commercial Credit Exposure [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	2,245,016	1,970,912
Originated Loans [Member] | Commercial Credit Exposure [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	63,336	40,724
Originated Loans [Member] | Commercial Credit Exposure [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	51,649	64,056
Originated Loans [Member] | Commercial Credit Exposure [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans		5
Originated Loans [Member] | Commercial Credit Exposure [Member] | Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	753,779	653,570
Originated Loans [Member] | Commercial Credit Exposure [Member] | Commercial [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	708,567	616,829
Originated Loans [Member] | Commercial Credit Exposure [Member] | Commercial [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	30,337	7,750
Originated Loans [Member] | Commercial Credit Exposure [Member] | Commercial [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	14,875	28,991
Originated Loans [Member] | Commercial Credit Exposure [Member] | Commercial [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans		0
Originated Loans [Member] | Commercial Credit Exposure [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	1,536,542	1,351,789
Originated Loans [Member] | Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	1,481,926	1,288,409
Originated Loans [Member] | Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	28,264	31,053
Originated Loans [Member] | Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	26,352	32,327
Originated Loans [Member] | Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans		0
Originated Loans [Member] | Commercial Credit Exposure [Member] | Agricultural [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	35,546	37,916
Originated Loans [Member] | Commercial Credit Exposure [Member] | Agricultural [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	31,142	36,762
Originated Loans [Member] | Commercial Credit Exposure [Member] | Agricultural [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	2,294	25
Originated Loans [Member] | Commercial Credit Exposure [Member] | Agricultural [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	2,110	1,124
Originated Loans [Member] | Commercial Credit Exposure [Member] | Agricultural [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans		5
Originated Loans [Member] | Commercial Credit Exposure [Member] | Agricultural Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	34,134	32,422
Originated Loans [Member] | Commercial Credit Exposure [Member] | Agricultural Real Estate [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	23,381	28,912
Originated Loans [Member] | Commercial Credit Exposure [Member] | Agricultural Real Estate [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	2,441	1,896
Originated Loans [Member] | Commercial Credit Exposure [Member] | Agricultural Real Estate [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	8,312	1,614
Originated Loans [Member] | Commercial Credit Exposure [Member] | Agricultural Real Estate [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans		0
Originated Loans [Member] | Business Banking Credit Exposure [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	480,955	472,687
Originated Loans [Member] | Business Banking Credit Exposure [Member] | Non-classified [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	468,898	458,864
Originated Loans [Member] | Business Banking Credit Exposure [Member] | Classified [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	12,057	13,823
Originated Loans [Member] | Business Banking Credit Exposure [Member] | Business Banking [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	480,955	472,687
Originated Loans [Member] | Business Banking Credit Exposure [Member] | Business Banking [Member] | Non-classified [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	468,898	458,864
Originated Loans [Member] | Business Banking Credit Exposure [Member] | Business Banking [Member] | Classified [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	12,057	13,823
Originated Loans [Member] | Consumer Credit Exposure [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	2,190,903	2,086,436
Originated Loans [Member] | Consumer Credit Exposure [Member] | Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	2,182,114	2,078,286
Originated Loans [Member] | Consumer Credit Exposure [Member] | Nonperforming [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	8,789	8,150
Originated Loans [Member] | Consumer Credit Exposure [Member] | Indirect [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	1,671,051	1,566,675
Originated Loans [Member] | Consumer Credit Exposure [Member] | Indirect [Member] | Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	1,665,444	1,562,031
Originated Loans [Member] | Consumer Credit Exposure [Member] | Indirect [Member] | Nonperforming [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	5,607	4,644
Originated Loans [Member] | Consumer Credit Exposure [Member] | Home Equity [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	454,899	456,657
Originated Loans [Member] | Consumer Credit Exposure [Member] | Home Equity [Member] | Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	451,822	453,278
Originated Loans [Member] | Consumer Credit Exposure [Member] | Home Equity [Member] | Nonperforming [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	3,077	3,379
Originated Loans [Member] | Consumer Credit Exposure [Member] | Direct [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	64,953	63,104
Originated Loans [Member] | Consumer Credit Exposure [Member] | Direct [Member] | Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	64,848	62,977
Originated Loans [Member] | Consumer Credit Exposure [Member] | Direct [Member] | Nonperforming [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	105	127
Originated Loans [Member] | Residential Mortgage Credit Exposure [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	1,151,223	1,063,143
Originated Loans [Member] | Residential Mortgage Credit Exposure [Member] | Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	1,143,974	1,055,055
Originated Loans [Member] | Residential Mortgage Credit Exposure [Member] | Nonperforming [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	7,249	8,088
Originated Loans [Member] | Residential Mortgage Credit Exposure [Member] | Residential Mortgage [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	1,151,223	1,063,143
Originated Loans [Member] | Residential Mortgage Credit Exposure [Member] | Residential Mortgage [Member] | Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	1,143,974	1,055,055
Originated Loans [Member] | Residential Mortgage Credit Exposure [Member] | Residential Mortgage [Member] | Nonperforming [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	7,249	8,088
Acquired Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	401,691	500,094
Acquired Loans [Member] | Commercial Credit Exposure [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	146,209	186,736
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	141,073	175,854
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	923	1,307
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	4,213	8,370
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans		1,205
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	39,575	49,447
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Commercial [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	37,825	48,194
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Commercial [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	425	76
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Commercial [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	1,325	1,177
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Commercial [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans		0
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	106,634	137,289
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	103,248	127,660
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	498	1,231
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	2,888	7,193
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans		1,205
Acquired Loans [Member] | Business Banking Credit Exposure [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	41,104	50,882
Acquired Loans [Member] | Business Banking Credit Exposure [Member] | Non-classified [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	38,236	47,347
Acquired Loans [Member] | Business Banking Credit Exposure [Member] | Classified [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	2,868	3,535
Acquired Loans [Member] | Business Banking Credit Exposure [Member] | Business Banking [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	41,104	50,882
Acquired Loans [Member] | Business Banking Credit Exposure [Member] | Business Banking [Member] | Non-classified [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	38,236	47,347
Acquired Loans [Member] | Business Banking Credit Exposure [Member] | Business Banking [Member] | Classified [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	2,868	3,535
Acquired Loans [Member] | Consumer Credit Exposure [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	43,906	63,005
Acquired Loans [Member] | Consumer Credit Exposure [Member] | Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	43,531	62,671
Acquired Loans [Member] | Consumer Credit Exposure [Member] | Nonperforming [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	375	334
Acquired Loans [Member] | Consumer Credit Exposure [Member] | Indirect [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	1,218	8,693
Acquired Loans [Member] | Consumer Credit Exposure [Member] | Indirect [Member] | Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	1,195	8,646
Acquired Loans [Member] | Consumer Credit Exposure [Member] | Indirect [Member] | Nonperforming [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	23	47
Acquired Loans [Member] | Consumer Credit Exposure [Member] | Home Equity [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	39,872	51,127
Acquired Loans [Member] | Consumer Credit Exposure [Member] | Home Equity [Member] | Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	39,544	50,860
Acquired Loans [Member] | Consumer Credit Exposure [Member] | Home Equity [Member] | Nonperforming [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	328	267
Acquired Loans [Member] | Consumer Credit Exposure [Member] | Direct [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	2,816	3,185
Acquired Loans [Member] | Consumer Credit Exposure [Member] | Direct [Member] | Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	2,792	3,165
Acquired Loans [Member] | Consumer Credit Exposure [Member] | Direct [Member] | Nonperforming [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	24	20
Acquired Loans [Member] | Residential Mortgage Credit Exposure [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	170,472	199,471
Acquired Loans [Member] | Residential Mortgage Credit Exposure [Member] | Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	168,901	196,508
Acquired Loans [Member] | Residential Mortgage Credit Exposure [Member] | Nonperforming [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	1,571	2,963
Acquired Loans [Member] | Residential Mortgage Credit Exposure [Member] | Residential Mortgage [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	170,472	199,471
Acquired Loans [Member] | Residential Mortgage Credit Exposure [Member] | Residential Mortgage [Member] | Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	168,901	196,508
Acquired Loans [Member] | Residential Mortgage Credit Exposure [Member] | Residential Mortgage [Member] | Nonperforming [Member]
Financing Receivable, Recorded Investment [Line Items]
Net Loans	$ 1,571	$ 2,963

XML

Allowance for Loan Losses and Credit Quality of Loans, Troubled Debt Restructurings (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($) Contract	Dec. 31, 2016 USD ($) Contract
Financing Receivable, Modifications [Line Items]
Number of contracts | Contract	42	41
Pre-modification outstanding recorded investment	$ 6,115	$ 2,970
Post-modification outstanding recorded investment	$ 6,116	$ 2,586
Number of TDR loans with subsequent default | Contract	57	53
Outstanding recorded investment on TDR loans with subsequent default	$ 3,515	$ 4,688
Commercial Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts | Contract	4
Pre-modification outstanding recorded investment	$ 3,685
Post-modification outstanding recorded investment	$ 3,620
Number of TDR loans with subsequent default | Contract	2	3
Outstanding recorded investment on TDR loans with subsequent default	$ 474	$ 1,809
Commercial Loans [Member] | Commercial [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts | Contract	1
Pre-modification outstanding recorded investment	$ 3,300
Post-modification outstanding recorded investment	$ 3,239
Number of TDR loans with subsequent default | Contract	1	1
Outstanding recorded investment on TDR loans with subsequent default	$ 145	$ 169
Commercial Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Number of TDR loans with subsequent default | Contract	0	1
Outstanding recorded investment on TDR loans with subsequent default	$ 0	$ 1,573
Commercial Loans [Member] | Business Banking [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts | Contract	3
Pre-modification outstanding recorded investment	$ 385
Post-modification outstanding recorded investment	$ 381
Number of TDR loans with subsequent default | Contract	1	1
Outstanding recorded investment on TDR loans with subsequent default	$ 329	$ 67
Consumer Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts | Contract	23	28
Pre-modification outstanding recorded investment	$ 976	$ 1,886
Post-modification outstanding recorded investment	$ 1,022	$ 1,743
Number of TDR loans with subsequent default | Contract	36	34
Outstanding recorded investment on TDR loans with subsequent default	$ 1,739	$ 1,770
Consumer Loans [Member] | Indirect [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts | Contract	8
Pre-modification outstanding recorded investment	$ 145
Post-modification outstanding recorded investment	$ 143
Number of TDR loans with subsequent default | Contract	2	0
Outstanding recorded investment on TDR loans with subsequent default	$ 19	$ 0
Consumer Loans [Member] | Home Equity [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts | Contract	13	28
Pre-modification outstanding recorded investment	$ 552	$ 1,886
Post-modification outstanding recorded investment	$ 600	$ 1,743
Number of TDR loans with subsequent default | Contract	34	34
Outstanding recorded investment on TDR loans with subsequent default	$ 1,720	$ 1,770
Consumer Loans [Member] | Direct [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts | Contract	2
Pre-modification outstanding recorded investment	$ 279
Post-modification outstanding recorded investment	$ 279
Residential Real Estate Mortgages [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts | Contract	15	13
Pre-modification outstanding recorded investment	$ 1,454	$ 1,084
Post-modification outstanding recorded investment	$ 1,474	$ 843
Number of TDR loans with subsequent default | Contract	19	16
Outstanding recorded investment on TDR loans with subsequent default	$ 1,302	$ 1,109

XML

Premises and Equipment, Net (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Property, Plant and Equipment [Line Items]
Premises and equipment before accumulated depreciation	$ 178,851	$ 177,280
Accumulated depreciation	97,546	93,093
Total premises and equipment	81,305	84,187
Rental expense	8,500	7,800	$ 7,900
Future Minimum Rental Payments [Abstract]
2018	7,910
2019	7,227
2020	6,547
2021	5,352
2022	4,646
Thereafter	16,660
Total	48,342
Land, Buildings and Improvements [Member]
Property, Plant and Equipment [Line Items]
Premises and equipment before accumulated depreciation	121,771	121,037
Equipment [Member]
Property, Plant and Equipment [Line Items]
Premises and equipment before accumulated depreciation	$ 57,080	$ 56,243
Equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	3 years
Equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	10 years
Building and Improvements [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	15 years
Building and Improvements [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	40 years

XML

Goodwill and Other Intangible Assets (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Goodwill [Roll Forward]
Beginning balance	$ 265,439	$ 265,957
Goodwill acquired	2,604	2,047
Goodwill adjustments		(2,565)
Ending balance	268,043	265,439	$ 265,957
Finite-Lived Intangible Assets [Line Items]
Gross carrying amount	42,607	41,313
Less: accumulated amortization	29,187	25,498
Net carrying amount	13,420	15,815
Impairment of intangible assets	1,500	0
Impairment of goodwill	0	2,565
Amortization Expense [Abstract]
Amortization of intangible assets	3,960	3,928	$ 4,864
Future Amortization Expense [Abstract]
2018	3,300
2019	2,700
2020	2,200
2021	1,600
2022	1,100
Thereafter	$ 2,500
Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible asset useful life	1 year
Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible asset useful life	20 years
Core Deposits Intangibles [Member]
Finite-Lived Intangible Assets [Line Items]
Gross carrying amount	$ 8,975	8,975
Less: accumulated amortization	6,581	5,626
Net carrying amount	2,394	3,349
Identified Intangible Assets [Member]
Finite-Lived Intangible Assets [Line Items]
Gross carrying amount	33,632	32,338
Less: accumulated amortization	22,606	19,872
Net carrying amount	$ 11,026	$ 12,466

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Deposits (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Maturities of Time Deposits [Abstract]
Within one year	$ 394,674
After one but within two years	259,710
After two but within three years	62,536
After three but within four years	40,151
After four but within five years	28,525
After five years	21,170
Total	806,766	$ 872,411
Time Deposits, $250,000 or More [Abstract]
Time deposits of $250,000 or more	$ 92,800	$ 84,300

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Short-Term Borrowings (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Short-term Debt [Line Items]
Balance at year-end	$ 719,123	$ 681,703
FHLB, unused lines of credit available for short-term financing	2,000,000	1,900,000
Federal Funds Purchased [Member]
Short-term Debt [Line Items]
Balance at year-end	60,000	50,000	$ 99,500
Average during the year	54,162	65,257	97,424
Maximum month end balance	$ 80,000	$ 85,000	$ 159,000
Weighted average rate during the year	2.16%	0.98%	0.36%
Weighted average rate at December 31	2.41%	1.19%	0.51%
Securities Sold Under Repurchase Agreements [Member]
Short-term Debt [Line Items]
Balance at year-end	$ 182,123	$ 173,703	$ 167,981
Average during the year	175,539	168,821	162,201
Maximum month end balance	$ 190,326	$ 189,875	$ 178,326
Weighted average rate during the year	0.07%	0.06%	0.06%
Weighted average rate at December 31	0.07%	0.07%	0.06%
Other Short-Term Borrowings [Member]
Short-term Debt [Line Items]
Balance at year-end	$ 477,000	$ 458,000	$ 175,000
Average during the year	460,334	263,575	80,260
Maximum month end balance	$ 591,000	$ 424,000	$ 175,000
Weighted average rate during the year	1.02%	0.59%	0.42%
Weighted average rate at December 31	1.18%	0.70%	0.56%

XML

Long-Term Debt (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Federal Home Loan Bank, Advances, Fiscal Year Maturity, Amount [Abstract]
Due in next 12 months	$ 40,037	$ 40,150
Due in year two	20,000	40,000
Due in year three	25,000	20,000
Due in year four	56	0
Due in year five		72
Due in year fourteen	3,776
Due in year fifteen		3,865
Total	$ 88,869	$ 104,087
Federal Home Loan Bank, Advances, Maturities Summary, Average Interest Rate of Amounts Due [Abstract]
Due in next 12 months	2.57%	2.67%
Due in year two	1.96%	2.57%
Due in year three	2.34%	1.96%
Due in year four	4.00%	0.00%
Due in year five		4.00%
Due in year fourteen	2.45%
Due in year fifteen		2.45%
Callable [Member]
Federal Home Loan Bank, Advances, Fiscal Year Maturity, Amount [Abstract]
Due in next 12 months	$ 25,000	$ 25,000
Due in year two	0	25,000
Due in year three	0	0
Due in year four	0	0
Due in year five		0
Due in year fourteen	0
Due in year fifteen		0
Total	$ 25,000	$ 50,000
Federal Home Loan Bank, Advances, Maturities Summary, Average Interest Rate of Amounts Due [Abstract]
Due in next 12 months	3.15%	3.48%
Due in year two	0.00%	3.15%
Due in year three	0.00%	0.00%
Due in year four	0.00%	0.00%
Due in year five		0.00%
Due in year fourteen	0.00%
Due in year fifteen		0.00%

XML

Junior Subordinated Debt (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($) Trust Period
Debt Instrument [Line Items]
Number of statutory business trusts included in the Trusts | Trust	5
Minimum assets for bank holding companies to be subject to the same capital requirements as insured depository institutions	$ 500,000
CNBF Capital Trust I [Member]
Debt Instrument [Line Items]
Number of wholly owned Delaware statutory business trusts	1
CNBF Capital Trust I [Member] | LIBOR [Member]
Debt Instrument [Line Items]
Issuance Date	Aug. 01, 1999
Trust Preferred Securities Outstanding	$ 18,000
Variable rate basis	3-month LIBOR
Basis spread on variable rate	2.75%
Trust Preferred Debt Owed To Trust	$ 18,720
Final Maturity Date	Aug. 01, 2029
NBT Statutory Trust I [Member] | LIBOR [Member]
Debt Instrument [Line Items]
Issuance Date	Nov. 01, 2005
Trust Preferred Securities Outstanding	$ 5,000
Variable rate basis	3-month LIBOR
Basis spread on variable rate	1.40%
Trust Preferred Debt Owed To Trust	$ 5,155
Final Maturity Date	Dec. 01, 2035
NBT Statutory Trust II [Member] | LIBOR [Member]
Debt Instrument [Line Items]
Issuance Date	Feb. 01, 2006
Trust Preferred Securities Outstanding	$ 50,000
Variable rate basis	3-month LIBOR
Basis spread on variable rate	1.40%
Trust Preferred Debt Owed To Trust	$ 51,547
Final Maturity Date	Mar. 01, 2036
Alliance Financial Capital Trust I [Member] | LIBOR [Member]
Debt Instrument [Line Items]
Issuance Date	Dec. 01, 2003
Trust Preferred Securities Outstanding	$ 10,000
Variable rate basis	3-month LIBOR
Basis spread on variable rate	2.85%
Trust Preferred Debt Owed To Trust	$ 10,310
Final Maturity Date	Jan. 01, 2034
Alliance Financial Capital Trust II [Member] | LIBOR [Member]
Debt Instrument [Line Items]
Issuance Date	Sep. 01, 2006
Trust Preferred Securities Outstanding	$ 15,000
Variable rate basis	3-month LIBOR
Basis spread on variable rate	1.65%
Trust Preferred Debt Owed To Trust	$ 15,464
Final Maturity Date	Sep. 01, 2036
Alliance Financial Capital [Member]
Debt Instrument [Line Items]
Number of wholly owned Delaware statutory business trusts	2
Trusts [Member]
Debt Instrument [Line Items]
Trust Preferred Securities Outstanding	$ 98,000
Trust Preferred Debt Owed To Trust	101,000
Trust equity method investment	$ 3,200
Debentures period semi-annual deferral periods | Period	10
Trust preferred securities included in Tier I capital	$ 97,000
NBT Bancorp Inc [Member]
Debt Instrument [Line Items]
Trust equity method investment	$ 1,000

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Income Taxes (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Current [Abstract]
Federal		$ 35,839	$ 30,492	$ 32,871
State		6,599	5,628	4,329
Current tax expense		42,438	36,120	37,200
Deferred [Abstract]
Federal		3,850	3,994	2,521
State		(278)	278	482
Deferred tax expense		3,572	4,272	3,003
Total income tax expense		$ 46,010	40,392	40,203
Income Tax Disclosure [Line Items]
Federal statutory income tax rate		35.00%
Deferred tax assets [Abstract]
Allowance for loan losses		$ 17,390	24,925
Deferred compensation		7,230	11,578
Postretirement benefit obligation		2,159	2,929
Fair value adjustments from acquisitions		919	1,883
Unrealized losses on securities		3,715	3,259
Accrued liabilities		769	1,775
Stock-based compensation expense		2,642	4,817
Other		711	1,148
Total deferred tax assets		35,535	52,314
Deferred tax liabilities [Abstract]
Pension benefits		12,439	17,303
Amortization of intangible assets		11,110	17,557
Premises and equipment, primarily due to accelerated depreciation		2,792	4,375
Deferred loan costs		634	1,759
Cash flow hedge		877	1,129
Other		390	501
Total deferred tax liabilities		28,242	42,624
Net deferred tax asset at year-end		7,293	9,690	14,940
Net deferred tax asset at beginning of year	$ 7,293	9,690	14,940
(Decrease) in net deferred tax asset		(2,397)	(5,250)
Income tax reconciliation [Abstract]
Federal income tax at statutory rate		44,857	41,581	40,820
Tax exempt income		(2,303)	(2,205)	(2,037)
Net increase in cash surrender value of life insurance		(1,780)	(1,712)	(1,373)
Federal tax credits		(1,343)	(1,323)	(939)
State taxes, net of federal tax benefit		4,107	3,838	3,127
Federal tax reform (Tax Act)		4,407	0	0
Stock-based compensation, excess tax benefit		(1,619)	0	0
Other, net		(316)	213	605
Total income tax expense		46,010	40,392	40,203
Reconciliation of gross unrecognized tax benefits [Roll Forward]
Beginning balance	$ 665	559	0
Additions for tax positions of prior years		0	425
Reduction for tax positions of prior years		(31)	0
Current period tax positions		137	134
Ending balance		665	559	$ 0
Amount that would affect the effective tax rate if recognized, gross of tax		525	$ 363
Accounting Standards Update 2016-09 [Member]
Income Tax Disclosure [Line Items]
Tax benefit associated with equity-based compensation		$ 1,800
Plan [Member]
Income Tax Disclosure [Line Items]
Federal statutory income tax rate	21.00%
New York State [Member]
Income Tax Examination [Line Items]
Open tax year		2013

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Employee Benefit Plans (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Defined Benefit Plan Disclosure [Line Items]
Transition obligation period of recognition	20 years
Change in plan assets [Roll Forward]
Employer contributions	$ 0	$ 5,600
Assumptions used to determine benefit obligations [Abstract]
Expected long-term return on plan assets	7.00%	7.00%	7.00%
Rate of compensation increase	3.00%	3.00%	3.00%
Assumptions used to determine net periodic pension cost [Abstract]
Expected long-term return on plan assets	7.00%	7.00%	7.50%
Rate of compensation increase	3.00%	3.00%
Other changes in plan assets and benefit obligation recognized in OCI (pre-tax) [Abstract]
Amortization of unrecognized net (loss)	$ 2,401	$ 3,154	$ (6,144)
Net actuarial loss and prior service costs that will be amortized from Accumulated other comprehensive income (loss) in next fiscal year	$ 1,200
Estimate future benefit payments [Abstract]
Ultimate health care cost trend rate	3.90%
Effect of one-percentage point change in assumed health care cost trend rates [Abstract]
One-percentage point increase on total service and interest cost components	$ 40
One-percentage point (decrease) on total service and interest cost components	(34)
One-percentage point increase on post-retirement accumulated benefit obligation	855
One-percentage point (decrease) on post-retirement accumulated benefit obligation	$ (738)
Actual plan asset allocations [Abstract]
Actual plan asset allocations	100.00%	100.00%
Minimum [Member]
Assumptions used to determine benefit obligations [Abstract]
Discount rate	4.20%	4.76%	4.69%
Assumptions used to determine net periodic pension cost [Abstract]
Discount rate	4.76%	4.69%	4.19%
Rate of compensation increase			3.00%
Estimate future benefit payments [Abstract]
Annual rates of increase in the per capita cost of covered medical and prescription drug benefits,	6.30%
Maximum [Member]
Assumptions used to determine benefit obligations [Abstract]
Discount rate	4.21%	4.84%	4.71%
Assumptions used to determine net periodic pension cost [Abstract]
Discount rate	4.84%	4.71%	4.30%
Rate of compensation increase			3.75%
Estimate future benefit payments [Abstract]
Annual rates of increase in the per capita cost of covered medical and prescription drug benefits,	10.50%
Pension Benefits [Member]
Accumulated other comprehensive income (loss), before tax [Abstract]
Net actuarial loss	$ 23,585	$ 28,328
Prior service cost (credit)	94	140
Total amounts recognized in AOCI (pre-tax)	23,679	28,468
Change in benefit obligation [Roll Forward]
Benefit obligation at beginning of year	90,477	92,445
Service cost	1,511	2,162	$ 2,677
Interest cost	4,168	4,223	3,977
Plan participants' contributions	0	0
Actuarial loss (gain)	4,028	(1,635)
Curtailments/ settlement	0	(715)
Benefits paid	(9,234)	(6,003)
Projected benefit obligation at end of year	90,950	90,477	92,445
Change in plan assets [Roll Forward]
Fair value of plan assets at beginning of year	116,216	107,529
Actual return on plan assets	15,032	8,259
Employer contributions	2,212	6,431
Plan participants' contributions	0	0
Benefits paid	(9,234)	(6,003)
Fair value of plan assets at end of year	124,226	116,216	107,529
Funded (unfunded) status at year end	33,276	25,739
Accumulated benefit obligation	91,000	90,500
Amounts recognized in Balance Sheet [Abstract]
Funded (unfunded) status at year end	33,276	25,739
Components of net periodic benefit cost [Abstract]
Service cost	1,511	2,162	2,677
Interest cost	4,168	4,223	3,977
Expected return on plan assets	(7,929)	(7,430)	(8,589)
Amortization of gain due to curtailment	0	(768)	(154)
Amortization of prior service cost (credit)	46	32	21
Amortization of unrecognized net loss	1,668	2,235	2,174
Total (benefit) cost	(536)	454	106
Other changes in plan assets and benefit obligation recognized in OCI (pre-tax) [Abstract]
Net (gain) loss	(3,075)	(2,464)	6,523
Prior service cost	0	96	0
Amortization of gain due to settlement	0	(43)	(46)
Amortization of prior service (cost) credit	(46)	(32)	(21)
Amortization of unrecognized net (loss)	(1,668)	(2,235)	(2,174)
Total recognized in other comprehensive income	(4,789)	(4,678)	4,282
Total recognized in net periodic benefit cost and OCI pre-tax	(5,325)	(4,224)	4,388
Estimate future benefit payments [Abstract]
2018	7,256
2019	7,087
2020	6,997
2021	6,728
2022	6,666
2023 - 2027	37,688
Pension Benefits [Member] | Other Assets [Member]
Amounts recognized in Balance Sheet [Abstract]
Assets recognized	52,775	45,344
Pension Benefits [Member] | Other Liabilities [Member]
Amounts recognized in Balance Sheet [Abstract]
Liabilities recognized	$ (19,499)	$ (19,605)
Pension Benefits [Member] | Cash and Cash Equivalents [Member]
Actual plan asset allocations [Abstract]
Actual plan asset allocations	3.00%	2.00%
Pension Benefits [Member] | Cash and Cash Equivalents [Member] | Minimum [Member]
Target asset allocations [Abstract]
Target allocation percentage of assets	0.00%
Pension Benefits [Member] | Cash and Cash Equivalents [Member] | Maximum [Member]
Target asset allocations [Abstract]
Target allocation percentage of assets	20.00%
Pension Benefits [Member] | Fixed Income Securities [Member]
Actual plan asset allocations [Abstract]
Actual plan asset allocations	45.00%	46.00%
Pension Benefits [Member] | Fixed Income Securities [Member] | Minimum [Member]
Target asset allocations [Abstract]
Target allocation percentage of assets	25.00%
Pension Benefits [Member] | Fixed Income Securities [Member] | Maximum [Member]
Target asset allocations [Abstract]
Target allocation percentage of assets	55.00%
Pension Benefits [Member] | Equities [Member]
Actual plan asset allocations [Abstract]
Actual plan asset allocations	52.00%	52.00%
Pension Benefits [Member] | Equities [Member] | Minimum [Member]
Target asset allocations [Abstract]
Target allocation percentage of assets	40.00%
Pension Benefits [Member] | Equities [Member] | Maximum [Member]
Target asset allocations [Abstract]
Target allocation percentage of assets	65.00%
Other Benefits [Member]
Accumulated other comprehensive income (loss), before tax [Abstract]
Net actuarial loss	$ 1,731	$ 1,430
Prior service cost (credit)	196	(38)
Total amounts recognized in AOCI (pre-tax)	1,927	1,392
Change in benefit obligation [Roll Forward]
Benefit obligation at beginning of year	7,478	8,322
Service cost	12	14	17
Interest cost	357	353	374
Plan participants' contributions	218	234
Actuarial loss (gain)	388	(786)
Curtailments/ settlement	286	0
Benefits paid	(689)	(659)
Projected benefit obligation at end of year	8,050	7,478	8,322
Change in plan assets [Roll Forward]
Fair value of plan assets at beginning of year	0	0
Actual return on plan assets	0	0
Employer contributions	471	425
Plan participants' contributions	218	234
Benefits paid	(689)	(659)
Fair value of plan assets at end of year	0	0	0
Funded (unfunded) status at year end	(8,050)	(7,478)
Accumulated benefit obligation	8,050	7,500
Amounts recognized in Balance Sheet [Abstract]
Funded (unfunded) status at year end	(8,050)	(7,478)
Components of net periodic benefit cost [Abstract]
Service cost	12	14	17
Interest cost	357	353	374
Expected return on plan assets	0	0	0
Amortization of gain due to curtailment	0	0	0
Amortization of prior service cost (credit)	51	(57)	(219)
Amortization of unrecognized net loss	87	117	263
Total (benefit) cost	507	427	435
Other changes in plan assets and benefit obligation recognized in OCI (pre-tax) [Abstract]
Net (gain) loss	388	(786)	(333)
Prior service cost	286	0	0
Amortization of gain due to settlement	0	0	0
Amortization of prior service (cost) credit	(51)	57	219
Amortization of unrecognized net (loss)	(87)	(117)	(263)
Total recognized in other comprehensive income	536	(846)	(377)
Total recognized in net periodic benefit cost and OCI pre-tax	1,043	(419)	$ 58
Estimate future benefit payments [Abstract]
2018	606
2019	598
2020	583
2021	559
2022	566
2023 - 2027	2,818
Other Benefits [Member] | Other Assets [Member]
Amounts recognized in Balance Sheet [Abstract]
Assets recognized	0	0
Other Benefits [Member] | Other Liabilities [Member]
Amounts recognized in Balance Sheet [Abstract]
Liabilities recognized	$ (8,050)	$ (7,478)

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Employee Benefit Plans, Financial Instruments Recorded At Fair Value On A Recurring Basis By The Plan (Details) - Pension Benefits [Member] - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Defined Benefit Plan, Information about Plan Assets [Abstract]
Fair value of plan assets	$ 124,226	$ 116,216	$ 107,529
Recurring Basis [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Fair value of plan assets	124,226	116,216
Recurring Basis [Member] | Level 1 [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Fair value of plan assets	74,939	65,443
Recurring Basis [Member] | Level 2 [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Fair value of plan assets	49,287	50,773
Recurring Basis [Member] | Cash and Cash Equivalents [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Fair value of plan assets	3,684	3,500
Recurring Basis [Member] | Cash and Cash Equivalents [Member] | Level 1 [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Fair value of plan assets	3,684	3,500
Recurring Basis [Member] | Cash and Cash Equivalents [Member] | Level 2 [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Fair value of plan assets	0	0
Recurring Basis [Member] | Foreign Equity Mutual Funds [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Fair value of plan assets	44,508	33,687
Recurring Basis [Member] | Foreign Equity Mutual Funds [Member] | Level 1 [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Fair value of plan assets	44,508	33,687
Recurring Basis [Member] | Foreign Equity Mutual Funds [Member] | Level 2 [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Fair value of plan assets	0	0
Recurring Basis [Member] | Equity Mutual Funds [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Fair value of plan assets	26,747	28,256
Recurring Basis [Member] | Equity Mutual Funds [Member] | Level 1 [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Fair value of plan assets	26,747	28,256
Recurring Basis [Member] | Equity Mutual Funds [Member] | Level 2 [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Fair value of plan assets	0	0
Recurring Basis [Member] | US Government Bonds [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Fair value of plan assets	99	1,283
Recurring Basis [Member] | US Government Bonds [Member] | Level 1 [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Fair value of plan assets	0	0
Recurring Basis [Member] | US Government Bonds [Member] | Level 2 [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Fair value of plan assets	99	1,283
Recurring Basis [Member] | Corporate Bonds [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Fair value of plan assets	49,188	49,490
Recurring Basis [Member] | Corporate Bonds [Member] | Level 1 [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Fair value of plan assets	0	0
Recurring Basis [Member] | Corporate Bonds [Member] | Level 2 [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Fair value of plan assets	$ 49,188	$ 49,490

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Employee Benefit Plans, 401(k) Plan and Other Retirement Benefits (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Other Retirement Benefits [Abstract]
Supplemental retirement benefits for retired executives under other retirement benefits plan	$ 2.4	$ 2.6
Expense related to other retirement benefits plan	0.1	0.2	$ 0.3
401(K) Plan [Member]
Defined Contribution Plan Disclosure [Line Items]
Employer contribution to plan	$ 2.8	$ 2.7	$ 2.5

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Stock-Based Compensation (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Additional disclosures [Abstract]
Stock-based compensation expense	$ 3,644	$ 4,378	$ 4,086
Restricted stock and restricted stock units, weighted average grant date fair value [Abstract]
Number of shares available for future grant (in shares)	2,813,597
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock awards vesting period	4 years
Stock awards termination period	10 years
Stock options [Roll Forward]
Outstanding, beginning of period (in shares)	230,174
Granted (in shares)	1,500
Exercised (in shares)	(118,844)
Expired (in shares)	(800)
Outstanding, end of period (in shares)	112,030	230,174
Exercisable, end of period (in shares)	107,280
Expected to vest (in shares)	4,750
Stock options, weighted average exercise price [Abstract]
Outstanding, beginning of period (in dollars per share)	$ 24.35
Granted (in dollars per share)	40.63
Exercised (in dollars per share)	25.94
Expired (in dollars per share)	24.46
Outstanding, end of period (in dollars per share)	22.88	$ 24.35
Exercisable, end of period (in dollars per share)	22.41
Expected to vest (in dollars per share)	$ 33.52
Additional disclosures [Abstract]
Weighted average remaining contractual term, outstanding, end of period	2 years 1 month 17 days
Weighted average remaining contractual term, exercisable, end of period	1 year 10 months 2 days
Weighted average remaining contractual term, expected to vest	8 years 8 months 5 days
Aggregate intrinsic value, outstanding, end of period	$ 15,656
Aggregate intrinsic value, exercisable, end of period	1,544
Aggregate intrinsic value, expected to vest	22
Stock-based compensation expense	100	$ 200	200
Proceeds from stock options exercised	3,083	8,398	12,044
Tax benefits related to stock options exercised	650	1,223	952
Intrinsic value of stock options exercised	1,699	3,143	2,446
Fair value of shares vested during the year	329	105	63
Restricted Stock [Member]
Additional disclosures [Abstract]
Stock-based compensation expense	$ 3,500	$ 4,200	3,900
Restricted Stock [Member] | Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock awards vesting period	5 years
Restricted Stock [Member] | Non-employee Directors [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock awards vesting period	3 years
Restricted Stock Units (RSUs) [Member]
Restricted stock and restricted stock units [Roll Forward]
Unvested, beginning of period (in shares)	613,163
Forfeited (in shares)	(5,545)
Vested (in shares)	(198,652)
Granted (in shares)	125,772
Unvested, end of period (in shares)	534,738	613,163
Restricted stock and restricted stock units, weighted average grant date fair value [Abstract]
Unvested, beginning of period (in dollars per share)	$ 22.62
Forfeited (in dollars per share)	23.18
Vested (in dollars per share)	22.34
Granted (in dollars per share)	36.15
Unvested, end of period (in dollars per share)	$ 25.77	$ 22.62
Restricted Stock Awards and Stock Units [Member]
Additional disclosures [Abstract]
Tax benefit on restricted stock awards	$ 2,500	$ 2,900	$ 1,500
Unrecognized compensation cost	$ 4,800
Unrecognized compensation cost, weighted average period of recognition	2 years 1 month 6 days

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Stockholders' Equity (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Stockholders' Equity [Abstract]
Unrecognized prior service cost and net actuarial (losses) on pension plans	$ (15,284)	$ (18,227)	$ (21,557)
Unrealized gains on derivatives (cash flow hedges)	2,144	1,772	0
Unrealized net holding (losses) on AFS securities	(8,937)	(5,065)	(861)
Accumulated other comprehensive (loss)	$ (22,077)	$ (21,520)	$ (22,418)
Class of Warrant or Right [Line Items]
Preceding period of retained net profits for approval of Office of Comptroller of the Currency	2 years
Statutory amount available for dividend payments	$ 107,500
Common stock repurchased during period (in shares)	0	675,535	1,047,152
Number of shares available for repurchase under stock repurchase program (in shares)	1,000,000

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Regulatory Capital Requirements (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Tier I Capital (to average assets) [Abstract]
Tier I capital to average assets	$ 810,445	$ 773,111
Tier I capital to average assets ratio	9.14%	9.11%
Minimum Tier I leverage capital required for capital adequacy to average assets	4.00%	4.00%
Tier I leverage capital required for classification as well capitalized to average assets	5.00%	5.00%
Common Equity Tier I Capital [Abstract]
Common equity Tier I capital	$ 713,445	$ 676,111
Common equity Tier I capital ratio	10.06%	9.98%
Minimum Tier I capital required for capital adequacy	4.50%	4.50%
Minimum Tier I capital required for capital adequacy plus buffer	5.75%	5.125%
Tier I capital required for classification as well capitalized	6.50%	6.50%
Tier I Capital (to risk weighted assets) [Abstract]
Tier I capital to risk weighted assets	$ 810,445	$ 773,111
Tier I capital to risk weighted assets ratio	11.42%	11.42%
Minimum Tier I capital required for capital adequacy to risk weighted assets	6.00%	6.00%
Minimum Tier I capital required for capital adequacy plus buffer to risk weighted assets	7.25%	6.625%
Tier I capital required for classification as well capitalized to risk weighted assets	6.00%	8.00%
Total Capital (to risk weighted assets) [Abstract]
Total capital to risk weighted assets	$ 880,874	$ 839,152
Total capital to risk weighted assets ratio	12.42%	12.39%
Minimum capital required for capital adequacy to risk weighted assets	8.00%	8.00%
Total capital required for capital adequacy plus buffer to average assets	9.25%	8.625%
Capital required for classification as well capitalized to risk weighted assets	10.00%	10.00%
NBT Bank [Member]
Tier I Capital (to average assets) [Abstract]
Tier I capital to average assets	$ 756,521	$ 723,992
Tier I capital to average assets ratio	8.59%	8.59%
Minimum Tier I leverage capital required for capital adequacy to average assets	4.00%	4.00%
Tier I leverage capital required for classification as well capitalized to average assets	5.00%	5.00%
Common Equity Tier I Capital [Abstract]
Common equity Tier I capital	$ 756,521	$ 723,992
Common equity Tier I capital ratio	10.74%	10.76%
Minimum Tier I capital required for capital adequacy	4.50%	4.50%
Minimum Tier I capital required for capital adequacy plus buffer	5.75%	5.125%
Tier I capital required for classification as well capitalized	6.50%	6.50%
Tier I Capital (to risk weighted assets) [Abstract]
Tier I capital to risk weighted assets	$ 756,521	$ 723,992
Tier I capital to risk weighted assets ratio	10.74%	10.76%
Minimum Tier I capital required for capital adequacy to risk weighted assets	6.00%	6.00%
Minimum Tier I capital required for capital adequacy plus buffer to risk weighted assets	7.25%	6.625%
Tier I capital required for classification as well capitalized to risk weighted assets	6.00%	8.00%
Total Capital (to risk weighted assets) [Abstract]
Total capital to risk weighted assets	$ 826,950	$ 790,034
Total capital to risk weighted assets ratio	11.74%	11.75%
Minimum capital required for capital adequacy to risk weighted assets	8.00%	8.00%
Total capital required for capital adequacy plus buffer to average assets	9.25%	8.625%
Capital required for classification as well capitalized to risk weighted assets	10.00%	10.00%

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Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Basic earnings per share [Abstract]
Net income	$ 82,151	$ 78,409	$ 76,425
Weighted average shares, basic (in shares)	43,575	43,244	43,836
Basic EPS (in dollars per share)	$ 1.89	$ 1.81	$ 1.74
Diluted earnings per share [Abstract]
Net income	$ 82,151	$ 78,409	$ 76,425
Dilutive effect of stock based compensation (in shares)	330	378	553
Weighted average shares, diluted (in shares)	43,905	43,622	44,389
Diluted EPS (in dollars per share)	$ 1.87	$ 1.80	$ 1.72

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Reclassification Adjustments Out of Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net securities (gains) losses	$ (1,867)	$ 644	$ (3,087)
Interest income	283,493	264,441	252,608
Other noninterest income	11,991	15,961	14,194
Salaries and employee benefits	133,610	131,284	125,633
Income tax (expense) benefit	46,010	40,392	40,203
Net Income	82,151	78,409	76,425
Total reclassifications, net of tax	1,310	2,482	286
Accumulated Other Comprehensive (Loss) Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net Income	0	0	0
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]
Income tax (expense) benefit	(120)	(677)	691
Net Income	198	1,061	(1,085)
Gains (Losses) on Available for Sale Securities [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net securities (gains) losses	(1,869)	644	(3,087)
Amortization of Unrealized Gains and Losses Related to Securities Transfer [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Interest income	875	1,094	1,311
Impairment Write-Down of Equity Security [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Other noninterest income	1,312	0	0
Accumulated Defined Benefit Plans Adjustment [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Income tax (expense) benefit	(740)	(949)	(868)
Net Income	1,112	1,421	1,371
Amortization of Net Losses [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Salaries and employee benefits	1,755	2,395	2,437
Amortization of Prior Service Costs [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Salaries and employee benefits	$ 97	$ (25)	$ (198)

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Commitments and Contingent Liabilities (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Commitments and Contingent Liabilities [Abstract]
Percentage of the Company's loans secured by real estate	59.00%
Federal Reserve Bank Requirement [Abstract]
Federal Reserve Bank maintenance period	14 days
Average reserve at Federal Reserve Bank for maintenance period	$ 59,000
Maximum [Member]
Guarantor Obligations [Line Items]
Obligation instrument term	5 years
Unused lines of Credit [Member]
Guarantor Obligations [Line Items]
Commitments - maximum potential obligation	$ 351,227	$ 292,140
Commitment to Extend Credits, Primarily Variable Rate [Member]
Guarantor Obligations [Line Items]
Commitments - maximum potential obligation	1,215,187	1,177,842
Standby Letters of Credit [Member]
Guarantor Obligations [Line Items]
Commitments - maximum potential obligation	41,135	36,815
Loans Sold with Recourse [Member]
Guarantor Obligations [Line Items]
Commitments - maximum potential obligation	$ 29,120	$ 28,463

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Derivative Instruments and Hedging Activities (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($) Agreement	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Amount reclassified from AOCI, before tax	$ 609	$ 2,901	$ 0
Amount reclassified from AOCI, net of tax	372	1,772	0
Derivatives Not Designated as Hedging Instruments [Member]
Credit value adjustment recorded related to notional amount of derivatives outstanding and notional amount of risk participation agreements [Abstract]
Fair value adjustment	210	309
Derivatives Not Designated as Hedging Instruments [Member] | Interest Income [Member]
Gain or loss recognized in income on derivatives [Abstract]
Gain (loss) recognized in income on derivatives	179	95	33
Derivatives Not Designated as Hedging Instruments [Member] | Other Income [Member]
Gain or loss recognized in income on derivatives [Abstract]
Gain (loss) recognized in income on derivatives	$ 2,945	3,480	684
Derivatives Not Designated as Hedging Instruments [Member] | Interest Rate Derivatives [Member]
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Number of risk participation agreements held | Agreement	7
Credit value adjustment recorded related to notional amount of derivatives outstanding and notional amount of risk participation agreements [Abstract]
Notional amount	$ 481,185	371,101
Derivatives Not Designated as Hedging Instruments [Member] | Risk Participation Agreements [Member]
Credit value adjustment recorded related to notional amount of derivatives outstanding and notional amount of risk participation agreements [Abstract]
Notional amount	35,628	11,421
Derivatives Designated as Hedging Instruments [Member] | Interest Expense [Member]
Gain or loss recognized in income on derivatives [Abstract]
Gain (loss) recognized in income on derivatives	289	(70)	$ 0
Derivatives Designated as Hedging Instruments [Member] | Interest Rate Derivatives [Member]
Credit value adjustment recorded related to notional amount of derivatives outstanding and notional amount of risk participation agreements [Abstract]
Fair value adjustment	3,510	2,704
Notional amount	$ 250,000	$ 250,000

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Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Transfers from Level 1 to Level 2	$ 0	$ 0
Transfers from Level 2 to Level 1	0	0
Transfers into Level 3	0	0
Transfers out of Level 3	0	0
AFS securities [Abstract]
AFS Securities	1,255,925	1,338,290
Trading securities	11,467	9,259
Liabilities [Abstract]
Collateral dependent impaired financing receivable with specific reserves	100	7,000
Reserves on collateral dependent impaired loans	$ 100	1,500
Minimum [Member]
Liabilities [Abstract]
Liquidation expense ratio on impaired collateral	10.00%
Maximum [Member]
Liabilities [Abstract]
Liquidation expense ratio on impaired collateral	35.00%
Federal Agency [Member]
AFS securities [Abstract]
AFS Securities	$ 108,899	174,408
State & Municipal [Member]
AFS securities [Abstract]
AFS Securities	41,956	46,726
Other Securities [Member]
AFS securities [Abstract]
AFS Securities	14,149	20,739
Recurring Basis [Member]
AFS securities [Abstract]
AFS Securities	1,255,925	1,338,290
Trading securities	11,467	9,259
Derivatives	3,732	3,210
Total	1,271,124	1,350,759
Liabilities [Abstract]
Derivatives	324	506
Total	324	506
Recurring Basis [Member] | Level 1 [Member]
AFS securities [Abstract]
AFS Securities	5,845	11,493
Trading securities	11,467	9,259
Derivatives	0	0
Total	17,312	20,752
Liabilities [Abstract]
Derivatives	0	0
Total	0	0
Recurring Basis [Member] | Level 2 [Member]
AFS securities [Abstract]
AFS Securities	1,250,080	1,326,797
Trading securities	0	0
Derivatives	3,732	3,210
Total	1,253,812	1,330,007
Liabilities [Abstract]
Derivatives	324	506
Total	324	506
Recurring Basis [Member] | Level 3 [Member]
AFS securities [Abstract]
AFS Securities	0	0
Trading securities	0	0
Derivatives	0	0
Total	0	0
Liabilities [Abstract]
Derivatives	0	0
Total	0	0
Recurring Basis [Member] | Federal Agency [Member]
AFS securities [Abstract]
AFS Securities	108,899	174,408
Recurring Basis [Member] | Federal Agency [Member] | Level 1 [Member]
AFS securities [Abstract]
AFS Securities	0	0
Recurring Basis [Member] | Federal Agency [Member] | Level 2 [Member]
AFS securities [Abstract]
AFS Securities	108,899	174,408
Recurring Basis [Member] | Federal Agency [Member] | Level 3 [Member]
AFS securities [Abstract]
AFS Securities	0	0
Recurring Basis [Member] | State & Municipal [Member]
AFS securities [Abstract]
AFS Securities	41,956	46,726
Recurring Basis [Member] | State & Municipal [Member] | Level 1 [Member]
AFS securities [Abstract]
AFS Securities	0	0
Recurring Basis [Member] | State & Municipal [Member] | Level 2 [Member]
AFS securities [Abstract]
AFS Securities	41,956	46,726
Recurring Basis [Member] | State & Municipal [Member] | Level 3 [Member]
AFS securities [Abstract]
AFS Securities	0	0
Recurring Basis [Member] | Mortgage-Backed [Member]
AFS securities [Abstract]
AFS Securities	554,927	529,844
Recurring Basis [Member] | Mortgage-Backed [Member] | Level 1 [Member]
AFS securities [Abstract]
AFS Securities	0	0
Recurring Basis [Member] | Mortgage-Backed [Member] | Level 2 [Member]
AFS securities [Abstract]
AFS Securities	554,927	529,844
Recurring Basis [Member] | Mortgage-Backed [Member] | Level 3 [Member]
AFS securities [Abstract]
AFS Securities	0	0
Recurring Basis [Member] | Collateralized Mortgage Obligations [Member]
AFS securities [Abstract]
AFS Securities	535,994	566,573
Recurring Basis [Member] | Collateralized Mortgage Obligations [Member] | Level 1 [Member]
AFS securities [Abstract]
AFS Securities	0	0
Recurring Basis [Member] | Collateralized Mortgage Obligations [Member] | Level 2 [Member]
AFS securities [Abstract]
AFS Securities	535,994	566,573
Recurring Basis [Member] | Collateralized Mortgage Obligations [Member] | Level 3 [Member]
AFS securities [Abstract]
AFS Securities	0	0
Recurring Basis [Member] | Other Securities [Member]
AFS securities [Abstract]
AFS Securities	14,149	20,739
Recurring Basis [Member] | Other Securities [Member] | Level 1 [Member]
AFS securities [Abstract]
AFS Securities	5,845	11,493
Recurring Basis [Member] | Other Securities [Member] | Level 2 [Member]
AFS securities [Abstract]
AFS Securities	8,304	9,246
Recurring Basis [Member] | Other Securities [Member] | Level 3 [Member]
AFS securities [Abstract]
AFS Securities	$ 0	$ 0

XML

Fair Values of Financial Instruments, Estimated Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Financial assets [Abstract]
HTM securities	$ 481,871	$ 525,050
Financial liabilities [Abstract]
Time deposits	806,766	872,411
Long-term debt	88,869	104,087
Junior subordinated debt	101,196	101,196
Carrying Amount [Member] | Level 2 [Member]
Financial assets [Abstract]
HTM securities	484,073	527,948
Financial liabilities [Abstract]
Time deposits	806,766	872,411
Long-term debt	88,869	104,087
Junior subordinated debt	101,196	101,196
Carrying Amount [Member] | Level 3 [Member]
Financial assets [Abstract]
Net Loans	6,515,273	6,132,857
Estimated Fair Value [Member] | Level 2 [Member]
Financial assets [Abstract]
HTM securities	481,871	525,050
Financial liabilities [Abstract]
Time deposits	801,294	868,153
Long-term debt	88,346	104,113
Junior subordinated debt	104,593	102,262
Estimated Fair Value [Member] | Level 3 [Member]
Financial assets [Abstract]
Net Loans	$ 6,651,931	$ 6,273,233

XML

Parent Company Financial Information, Condensed Balance Sheets (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Assets [Abstract]
Cash and cash equivalents	$ 159,664	$ 149,181	$ 140,297	$ 146,636
Securities available for sale, at fair value	1,255,925	1,338,290
Trading securities	11,467	9,259
Other assets	128,548	129,247
Total assets	9,136,812	8,867,268
Liabilities and Stockholders' Equity [Abstract]
Total liabilities	8,178,635	7,953,952
Stockholders' equity	958,177	913,316	882,004	864,181
Total liabilities and stockholders' equity	9,136,812	8,867,268
NBT Bancorp Inc [Member]
Assets [Abstract]
Cash and cash equivalents	7,572	4,152	$ 28,682	$ 3,586
Securities available for sale, at fair value	10,065	15,273
Trading securities	11,245	8,968
Investment in subsidiaries, on equity basis	1,048,908	1,006,444
Other assets	40,461	44,178
Total assets	1,118,251	1,079,015
Liabilities and Stockholders' Equity [Abstract]
Total liabilities	160,074	165,699
Stockholders' equity	958,177	913,316
Total liabilities and stockholders' equity	$ 1,118,251	$ 1,079,015

XML

Parent Company Financial Information, Condensed Income Statements (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Condensed Income Statements [Abstract]
Net securities gains	$ 1,867	$ (644)	$ 3,087
Interest, dividends and other income	309,407	286,947	273,224
Income before income tax benefit and equity in undistributed income of subsidiaries	128,161	118,801	116,628
Income tax expense (benefit)	46,010	40,392	40,203
Net income	82,151	78,409	76,425
NBT Bancorp Inc [Member]
Condensed Income Statements [Abstract]
Dividends from subsidiaries	38,300	10,200	78,200
Management fee from subsidiaries	99,319	95,244	92,629
Net securities gains	2,237	652	3,034
Interest, dividends and other income	928	976	693
Total revenue	140,784	107,072	174,556
Operating expenses	100,667	97,977	94,332
Income before income tax benefit and equity in undistributed income of subsidiaries	40,117	9,095	80,224
Income tax expense (benefit)	2,233	(321)	515
Dividends in excess of income (equity in undistributed income) of subsidiaries	44,267	68,993	(3,284)
Net income	$ 82,151	$ 78,409	$ 76,425

XML

Parent Company Financial Information, Condensed Statement of Cash Flows (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Operating activities [Abstract]
Net income	$ 82,151	$ 78,409	$ 76,425
Adjustments to reconcile net income to net cash provided by operating activities [Abstract]
Depreciation and amortization of premises and equipment	9,056	9,023	8,646
Excess tax benefit on stock-based compensation	1,769	1,055	(43)
Stock-based compensation expense	3,644	4,378	4,086
Net (gain) on sales of AFS securities	(1,869)	644	(3,087)
Re-evaluation of deferred tax amounts from Tax Act	4,407	0	0
Bank owned life insurance income	(5,175)	(5,195)	(4,334)
Net change in other liabilities	3,834	(10,697)	5,236
Net change in other assets	28	364	15,386
Net cash provided by operating activities	136,904	110,565	124,500
Investing activities [Abstract]
Proceeds on sales and maturities of AFS securities	290,613	324,781	299,302
Purchases of AFS securities	(233,804)	(597,428)	(481,262)
Proceeds from settlement of bank owned life insurance	799	1,477	1,541
Net purchases of premises and equipment	(6,691)	(3,308)	(8,193)
Net cash provided by (used in) investing activities	(305,193)	(629,960)	(504,004)
Financing activities [Abstract]
Proceeds from the issuance of shares to employee benefit plans and other stock plans	3,309	6,032	9,356
Cash paid by employer for tax-withholding on stock issuance	(3,582)	(3,387)	(1,664)
Purchases of treasury shares	0	(17,193)	(26,797)
Cash dividends and payments for fractional shares	(40,104)	(38,880)	(38,149)
Net cash provided by (used in) financing activities	178,772	528,279	373,165
Net increase (decrease) in cash and cash equivalents	10,483	8,884	(6,339)
Cash and cash equivalents at beginning of year	149,181	140,297	146,636
Cash and cash equivalents at end of year	159,664	149,181	140,297
NBT Bancorp Inc [Member]
Operating activities [Abstract]
Net income	82,151	78,409	76,425
Adjustments to reconcile net income to net cash provided by operating activities [Abstract]
Depreciation and amortization of premises and equipment	2,974	2,805	2,522
Excess tax benefit on stock-based compensation	1,769	1,055	(43)
Stock-based compensation expense	3,644	4,378	4,086
Net (gain) on sales of AFS securities	(2,238)	(652)	(3,034)
Re-evaluation of deferred tax amounts from Tax Act	3,339	0	0
Equity in undistributed income of subsidiaries	(82,567)	(79,193)	(74,916)
Cash dividend from subsidiaries	38,300	10,200	78,200
Bank owned life insurance income	(328)	(356)	(292)
Net change in other liabilities	(5,624)	(8,596)	6,770
Net change in other assets	(368)	22,728	(6,652)
Net cash provided by operating activities	41,052	30,778	83,066
Investing activities [Abstract]
Proceeds on sales and maturities of AFS securities	4,710	1,783	5,297
Purchases of AFS securities	(9)	(580)	(3,083)
Proceeds from settlement of bank owned life insurance	308	0	0
Net purchases of premises and equipment	(2,264)	(3,083)	(2,930)
Net cash provided by (used in) investing activities	2,745	(1,880)	(716)
Financing activities [Abstract]
Proceeds from the issuance of shares to employee benefit plans and other stock plans	3,309	6,032	8,856
Cash paid by employer for tax-withholding on stock issuance	(3,582)	(3,387)	(1,164)
Purchases of treasury shares	0	(17,193)	(26,797)
Cash dividends and payments for fractional shares	(40,104)	(38,880)	(38,149)
Net cash provided by (used in) financing activities	(40,377)	(53,428)	(57,254)
Net increase (decrease) in cash and cash equivalents	3,420	(24,530)	25,096
Cash and cash equivalents at beginning of year	4,152	28,682	3,586
Cash and cash equivalents at end of year	$ 7,572	$ 4,152	$ 28,682