10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2018.

OR

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

For the transition period from ________ to ________.

COMMISSION FILE NUMBER 0-14703

NBT BANCORP INC.

(Exact Name of Registrant as Specified in its Charter)

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

52 SOUTH BROAD STREET, NORWICH, NEW YORK 13815

(Address of Principal Executive Offices) (Zip Code)

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

None

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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes    No 

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. (Check One):

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 

As of October 31, 2018, there were 43,667,380 shares outstanding of the Registrant’s common stock, $0.01 par value per share.

NBT BANCORP INC.

FORM 10-Q - Quarter Ended September 30, 2018

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION

Item 1	Financial Statements
	Consolidated Balance Sheets at September 30, 2018 and December 31, 2017	3
	Consolidated Statements of Income for the three and nine month periods ended September 30, 2018 and 2017	4
	Consolidated Statements of Comprehensive Income for the three and nine month periods ended September 30, 2018 and 2017	5
	Consolidated Statements of Stockholders’ Equity for the nine month periods ended September 30, 2018 and 2017	6
	Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2018 and 2017	7
	Notes to Unaudited Interim Consolidated Financial Statements	9
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3	Quantitative and Qualitative Disclosures about Market Risk	48
Item 4	Controls and Procedures	48
PART II	OTHER INFORMATION
Item 1	Legal Proceedings	49
Item 1A	Risk Factors	49
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 3	Defaults Upon Senior Securities	49
Item 4	Mine Safety Disclosures	49
Item 5	Other Information	49
Item 6	Exhibits	50
SIGNATURES		51

Item 1 – FINANCIAL STATEMENTS

NBT Bancorp Inc. and Subsidiaries

Consolidated Balance Sheets (unaudited)

	September 30,			December 31,
	2018			2017
(In thousands, except share and per share data)
Assets
Cash and due from banks	$	171,525		$	156,852
Short-term interest bearing accounts		3,108			2,812
Equity securities, at fair value		24,722			-
Securities available for sale, at fair value		1,101,074			1,255,925
Securities held to maturity (fair value $645,732 and $481,871, respectively)		659,949			484,073
Trading securities		-			11,467
Federal Reserve and Federal Home Loan Bank stock		52,421			46,706
Loans held for sale		5,035			1,134
Loans		6,887,262			6,583,639
Less allowance for loan losses		72,805			69,500
Net loans	$	6,814,457		$	6,514,139
Premises and equipment, net		78,284			81,305
Goodwill		274,769			268,043
Intangible assets, net		16,576			13,420
Bank owned life insurance		176,240			172,388
Other assets		169,124			128,548
Total assets	$	9,547,284		$	9,136,812
Liabilities
Demand (noninterest bearing)	$	2,373,027		$	2,286,892
Savings, NOW and money market		4,199,694			4,076,978
Time		868,569			806,766
Total deposits	$	7,441,290		$	7,170,636
Short-term borrowings		811,709			719,123
Long-term debt		73,751			88,869
Junior subordinated debt		101,196			101,196
Other liabilities		125,183			98,811
Total liabilities	$	8,553,129		$	8,178,635
Stockholders’ equity
Preferred stock, $0.01 par value. Authorized 2,500,000 shares at September 30, 2018 and December 31, 2017	$	-		$	-
Common stock, $0.01 par value. Authorized 100,000,000 shares at September 30, 2018 and December 31, 2017; issued 49,651,493 at September 30, 2018 and December 31, 2017		497			497
Additional paid-in-capital		575,155			574,209
Retained earnings		603,921			543,713
Accumulated other comprehensive loss		(49,112	)		(22,077	)
Common stock in treasury, at cost, 5,990,174 and 6,108,684 shares at September 30, 2018 and December 31, 2017, respectively		(136,306	)		(138,165	)
Total stockholders’ equity	$	994,155		$	958,177
Total liabilities and stockholders’ equity	$	9,547,284		$	9,136,812

See accompanying notes to unaudited interim consolidated financial statements.

3

NBT Bancorp Inc. and Subsidiaries

Consolidated Statements of Income (unaudited)

	Three months ended September 30,					Nine months ended September 30,
	2018		2017			2018		2017
(In thousands, except per share data)
Interest, fee and dividend income
Interest and fees on loans	$	77,249	$	68,086		$	221,864	$	197,399
Securities available for sale		6,659		7,278			20,588		21,505
Securities held to maturity		3,462		2,746			8,898		8,263
Other		834		737			2,381		2,010
Total interest, fee and dividend income	$	88,204	$	78,847		$	253,731	$	229,177
Interest expense
Deposits	$	6,157	$	3,648		$	15,167	$	10,658
Short-term borrowings		3,000		1,870			7,421		4,375
Long-term debt		431		589			1,359		1,794
Junior subordinated debt		1,089		810			3,030		2,308
Total interest expense	$	10,677	$	6,917		$	26,977	$	19,135
Net interest income	$	77,527	$	71,930		$	226,754	$	210,042
Provision for loan losses		6,026		7,889			22,300		22,835
Net interest income after provision for loan losses	$	71,501	$	64,041		$	204,454	$	187,207
Noninterest income
Insurance and other financial services revenue	$	6,172	$	5,536		$	18,502	$	17,927
Service charges on deposit accounts		4,503		4,261			12,721		12,399
ATM and debit card fees		5,906		5,557			16,995		16,025
Retirement plan administration fees		7,244		5,272			19,879		14,881
Trust		4,808		4,927			14,951		14,620
Bank owned life insurance		1,288		1,284			3,852		3,913
Net securities gains (losses)		412		(4	)		575		(2	)
Other		3,048		3,945			11,341		10,069
Total noninterest income	$	33,381	$	30,778		$	98,816	$	89,832
Noninterest expense
Salaries and employee benefits	$	38,394	$	33,674		$	112,687	$	101,410
Occupancy		5,380		5,174			17,034		16,528
Data processing and communications		4,434		4,399			13,221		12,826
Professional fees and outside services		3,580		3,107			10,408		9,748
Equipment		4,319		3,733			12,508		11,224
Office supplies and postage		1,563		1,432			4,640		4,680
FDIC expenses		1,223		1,257			3,516		3,571
Advertising		739		665			1,776		1,711
Amortization of intangible assets		1,054		993			3,064		2,999
Loan collection and other real estate owned, net		1,234		1,684			3,479		3,627
Other		4,577		4,483			13,324		13,880
Total noninterest expense	$	66,497	$	60,601		$	195,657	$	182,204
Income before income tax expense	$	38,385	$	34,218		$	107,613	$	94,835
Income tax expense		8,578		11,342			23,699		30,321
Net income	$	29,807	$	22,876		$	83,914	$	64,514
Earnings per share
Basic	$	0.68	$	0.52		$	1.92	$	1.48
Diluted	$	0.68	$	0.52		$	1.91	$	1.47

See accompanying notes to unaudited interim consolidated financial statements.

4

NBT Bancorp Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2018			2017			2018			2017
(In thousands)
Net income	$	29,807		$	22,876		$	83,914		$	64,514
Other comprehensive (loss) income, net of tax:
Securities available for sale:
Unrealized net holding (losses) gains arising during the period, gross	$	(5,798	)	$	1,355		$	(26,605	)	$	4,719
Tax effect		1,449			(518	)		6,651			(1,823	)
Unrealized net holding (losses) gains arising during the period, net	$	(4,349	)	$	837		$	(19,954	)	$	2,896
Reclassification adjustment for net losses in net income, gross	$	-		$	4		$	-		$	2
Tax effect		-			(2	)		-			(1	)
Reclassification adjustment for net losses in net income, net	$	-		$	2		$	-		$	1
Amortization of unrealized net gains for the reclassification of available for sale securities to held to maturity, gross	$	168		$	212		$	533		$	675
Tax effect		(42	)		(81	)		(133	)		(258	)
Amortization of unrealized net gains for the reclassification of available for sale securities to held to maturity, net	$	126		$	131		$	400		$	417
Reclassification adjustment for an impairment write-down of equity security, gross	$	-		$	-		$	-		$	1,312
Tax effect		-			-			-			(501	)
Reclassification adjustment for an impairment write-down of equity security, net	$	-		$	-		$	-		$	811
Total securities available for sale, net	$	(4,223	)	$	970		$	(19,554	)	$	4,125
Cash flow hedges:
Unrealized gains (losses) on derivatives (cash flow hedges), gross	$	175		$	91		$	1,647		$	(71	)
Tax effect		(44	)		(35	)		(412	)		27
Unrealized gains (losses) on derivatives (cash flow hedges), net	$	131		$	56		$	1,235		$	(44	)
Reclassification of net unrealized (gains) on cash flow hedges to interest (income) expense, gross	$	(638	)	$	(155	)	$	(1,537	)	$	(96	)
Tax effect		159			59			384			37
Reclassification of net unrealized (gains) on cash flow hedges to interest (income) expense, net	$	(479	)	$	(96	)	$	(1,153	)	$	(59	)
Total cash flow hedges, net	$	(348	)	$	(40	)	$	82		$	(103	)
Pension and other benefits:
Amortization of prior service cost and actuarial gains, gross	$	286		$	480		$	876		$	1,350
Tax effect		(71	)		(183	)		(219	)		(516	)
Amortization of prior service cost and actuarial gains, net	$	215		$	297		$	657		$	834
Total pension and other benefits, net	$	215		$	297		$	657		$	834
Total other comprehensive (loss) income	$	(4,356	)	$	1,227		$	(18,815	)	$	4,856
Comprehensive income	$	25,451		$	24,103		$	65,099		$	69,370

See accompanying notes to unaudited interim consolidated financial statements.

5

NBT Bancorp Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity (unaudited)

	Common Stock		Additional Paid-in- Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Common Stock in Treasury			Total
(In thousands, except share and per share data)
Balance at December 31, 2016	$	497	$	575,078		$	501,761		$	(21,520	)	$	(142,500	)	$	913,316
Net income		-		-			64,514			-			-			64,514
Cash dividends - $0.69 per share		-		-			(30,073	)		-			-			(30,073	)
Net issuance of 271,148 shares to employee and other stock plans		-		(4,596	)		-			-			4,026			(570	)
Stock-based compensation		-		3,290			(95	)		-			-			3,195
Other comprehensive income		-		-			-			4,856			-			4,856
Balance at September 30, 2017	$	497	$	573,772		$	536,107		$	(16,664	)	$	(138,474	)	$	955,238
Balance at December 31, 2017	$	497	$	574,209		$	543,713		$	(22,077	)	$	(138,165	)	$	958,177
Net income		-		-			83,914			-			-			83,914
Cumulative effect adjustment for ASU 2016-01 implementation		-		-			2,618			(2,645	)		-			(27	)
Cumulative effect adjustment for ASU 2018-02 implementation		-		-			5,575			(5,575	)		-			-
Cash dividends - $0.73 per share		-		-			(31,899	)		-			-			(31,899	)
Net issuance of 118,510 shares to employee and other stock plans		-		(2,511	)		-			-			1,859			(652	)
Stock-based compensation		-		3,457			-			-			-			3,457
Other comprehensive (loss)		-		-			-			(18,815	)		-			(18,815	)
Balance at September 30, 2018	$	497	$	575,155		$	603,921		$	(49,112	)	$	(136,306	)	$	994,155

See accompanying notes to unaudited interim consolidated financial statements.

6

NBT Bancorp Inc. and Subsidiaries

Consolidated Statements of Cash Flows (unaudited)

	Nine months ended September 30,
	2018			2017
(In thousands)
Operating activities
Net income	$	83,914		$	64,514
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses		22,300			22,835
Depreciation and amortization of premises and equipment		6,957			6,759
Net amortization on securities		3,108			3,628
Amortization of intangible assets		3,064			2,999
Excess tax (benefit) on stock-based compensation		(507	)		(1,697	)
Stock-based compensation expense		3,457			3,195
Bank owned life insurance income		(3,852	)		(3,913	)
Trading security purchases		-			(1,470	)
Net unrealized losses on trading securities		-			(154	)
Proceeds from sales of loans held for sale		73,239			87,095
Originations and purchases of loans held for sale		(76,959	)		(87,246	)
Net gains on sales of loans held for sale		(181	)		(292	)
Net security (gains) losses		(575	)		2
Net losses (gains) on sales and write-down of other real estate owned		130			(189	)
Impairment write-down of equity security		-			1,312
Net change in other assets and other liabilities		(14,313	)		(810	)
Net cash provided by operating activities	$	99,782		$	96,568
Investing activities
Net cash used in acquisitions	$	(7,884	)	$	(4,000	)
Securities available for sale:
Proceeds from maturities, calls and principal paydowns		213,732			205,327
Proceeds from sales		-			9,997
Purchases		(102,004	)		(232,850	)
Securities held to maturity:
Proceeds from maturities, calls and principal paydowns		73,217			86,055
Proceeds from sales		-			764
Purchases		(249,300	)		(53,212	)
Equity securities:
Proceeds from sales		3,318			-
Purchases		(2	)		-
Other:
Net increase in loans		(323,614	)		(293,346	)
Proceeds from Federal Home Loan Bank stock redemption		186,869			177,803
Purchases of Federal Reserve and Federal Home Loan Bank stock		(192,584	)		(175,840	)
Proceeds from settlement of bank owned life insurance		-			800
Purchases of premises and equipment, net		(4,256	)		(4,177	)
Proceeds from the sales of other real estate owned		2,124			6,767
Net cash (used in) investing activities	$	(400,384	)	$	(275,912	)
Financing activities
Net increase in deposits	$	270,654		$	257,548
Net increase in short-term borrowings		92,585			248
Proceeds from issuance of long-term debt		25,000			-
Repayments of long-term debt		(40,117	)		(15,174	)
Proceeds from the issuance of shares to employee and other stock plans		1,140			3,012
Cash paid by employer for tax-withholdings on stock issuance		(1,792	)		(3,582	)
Cash dividends		(31,899	)		(30,073	)
Net cash provided by financing activities	$	315,571		$	211,979
Net increase in cash and cash equivalents	$	14,969		$	32,635
Cash and cash equivalents at beginning of period		159,664			149,181
Cash and cash equivalents at end of period	$	174,633		$	181,816

7

	Nine months ended September 30,
	2018		2017
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest expense	$	26,002	$	19,771
Income taxes paid, net of refund		31,077		22,230
Noncash investing activities:
Loans transferred to other real estate owned	$	996	$	5,227
Acquisitions:
Fair value of assets acquired	$	6,274	$	3,096

See accompanying notes to unaudited interim consolidated financial statements.

8

NBT Bancorp Inc. and Subsidiaries

Notes to Unaudited Interim Consolidated Financial Statements

September 30, 2018

1.          Description of Business

NBT Bancorp Inc. (the “Registrant” or the “Company”) is a registered financial holding company incorporated in the state of Delaware in 1986, with its principal headquarters located in Norwich, New York. The principal assets of the Registrant consist of all of the outstanding shares of common stock of its subsidiaries, including: NBT Bank, National Association (the “Bank”), NBT Financial Services, Inc. (“NBT Financial”), NBT Holdings, Inc. (“NBT Holdings”), Hathaway Agency, Inc. and CNBF Capital Trust I, NBT Statutory Trust I, 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 area of Maine. 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.

2.          Basis of Presentation

The accompanying unaudited interim consolidated financial statements include the accounts of the Registrant and its wholly owned subsidiaries, the Bank, NBT Financial and NBT Holdings. Collectively, the Registrant and its subsidiaries are referred to herein as “the Company.” The interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods in accordance with generally accepted accounting principles in the United States of America (“GAAP”). These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2017 Annual Report on Form 10-K. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period. All intercompany transactions have been eliminated in consolidation. Amounts in the prior period financial statements are reclassified whenever necessary to conform to current period presentation. The Company has evaluated subsequent events for potential recognition and/or disclosure. Refer to footnote 12, Subsequent Events, for more information.

3.          Securities

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

(In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
September 30, 2018
Federal agency	$	84,974	$	-	$	1,712	$	83,262
State & municipal		36,841		13		387		36,467
Mortgage-backed:
Government-sponsored enterprises		479,852		207		16,171		463,888
U.S. government agency securities		29,422		204		1,106		28,520
Collateralized mortgage obligations:
Government-sponsored enterprises		461,148		222		19,860		441,510
U.S. government agency securities		49,208		115		1,896		47,427
Total AFS securities	$	1,141,445	$	761	$	41,132	$	1,101,074
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
Equity securities		10,623		3,672		146		14,149
Total AFS securities	$	1,266,165	$	5,893	$	16,133	$	1,255,925

9

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

(In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
September 30, 2018
Federal agency	$	9,995	$	-	$	46	$	9,949
Mortgage-backed:
Government-sponsored enterprises		87,743		-		4,075		83,668
U.S. government agency securities		15,241		36		69		15,208
Collateralized mortgage obligations:
Government-sponsored enterprises		268,044		31		7,080		260,995
U.S. government agency securities		29,401		4		67		29,338
State & municipal		249,525		90		3,041		246,574
Total HTM securities	$	659,949	$	161	$	14,378	$	645,732
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

AFS and HTM securities with amortized costs totaling $1.6 billion at September 30, 2018 and $1.5 billion at December 31, 2017 were pledged to secure public deposits and for other purposes required or permitted by law. Additionally, at September 30, 2018 and December 31, 2017, AFS and HTM securities with an amortized cost of $196.4 million and $256.2 million, respectively, were pledged as collateral for securities sold under repurchase agreements.

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 September 30, 2018
AFS securities:
Federal agency	$	39,069	$	(916	)		4	$	44,193	$	(796	)		4	$	83,262	$	(1,712	)		8
State & municipal		12,347		(115	)		22		16,165		(272	)		25		28,512		(387	)		47
Mortgage-backed		297,802		(9,061	)		72		178,186		(8,215	)		48		475,988		(17,276	)		120
Collateralized mortgage obligations		83,566		(1,816	)		16		384,459		(19,941	)		70		468,025		(21,757	)		86
Total securities with unrealized losses	$	432,784	$	(11,908	)		114	$	623,003	$	(29,224	)		147	$	1,055,787	$	(41,132	)		261
HTM securities:
Federal agency	$	9,949	$	(46	)		2	$	-	$	-			-	$	9,949	$	(46	)		2
Mortgage-backed		55,712		(1,678	)		5		42,778		(2,466	)		4		98,490		(4,144	)		9
Collateralized mortgage obligations		153,768		(2,195	)		22		97,515		(4,952	)		16		251,283		(7,147	)		38
State & municipal		84,258		(1,276	)		134		27,384		(1,765	)		41		111,642		(3,041	)		175
Total securities with unrealized losses	$	303,687	$	(5,195	)		163	$	167,677	$	(9,183	)		61	$	471,364	$	(14,378	)		224
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		(1,187	)		24		375,946		(3,568	)		79
Collateralized mortgage obligations		227,917		(2,658	)		35		275,303		(8,521	)		42		503,220		(11,179	)		77
Equity securities		-		-			-		2,959		(146	)		1		2,959		(146	)		1
Total securities with unrealized losses	$	633,766	$	(5,481	)		134	$	386,818	$	(10,652	)		79	$	1,020,584	$	(16,133	)		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

10

Declines in the fair value of HTM securities below their amortized cost, less any current period credit loss, that are deemed to be other-than-temporary are reflected in earnings as realized losses or in other comprehensive income (“OCI”). This classification is dependent upon whether the Company intends to sell the security, or whether it is more likely than not, that the Company will be required to sell the security before recovery. The other-than-temporary impairment (“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 (i) the amount representing the credit loss and (ii) 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 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 bond approaches its maturity date or repricing date or if market yields for such investments declines.

Management also has the intent to hold and will not be required to sell, the debt 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 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 September 30, 2018 and December 31, 2017, management believes the impairments detailed in the table above are temporary. There were no OTTI losses realized in the Company’s unaudited interim consolidated statements of income for the three and nine months ended September 30, 2018 or in the three months ended September 30, 2017. For the nine months ended September 30, 2017, a $1.3 million impairment loss on an equity investment was realized in the Company’s unaudited interim consolidated statements of income.

There were no sales of HTM securities in the three and nine months ended September 30, 2018. During the three and nine months ended September 30, 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, the circumstances caused the Company to change its intent to hold the HTM securities sold to maturity, which did not affect the Company’s intent to hold the remainder of the HTM portfolio to maturity.

The following tables set forth information with regard to gains and losses on equity securities at September 30, 2018:

(In thousands)	Three months ended September 30, 2018			Nine months ended September 30, 2018
Net gains and losses recognized on equity securities	$	412		$	575
Less: Net gains and losses recognized during the period on equity securities sold during the period		511			555
Unrealized gains and losses recognized on equity securities still held	$	(99	)	$	20

11

As of September 30, 2018, the carrying value of equity securities without readily determinable fair values was $4.0 million. The Company performed a qualitative assessment to determine whether the investments were impaired and identified no areas of concern as of September 30, 2018. There were no impairments, downward or upward adjustments recognized for equity securities without readily determinable fair values during the three and nine months ended September 30, 2018.

The following tables set forth information with regard to contractual maturities of debt securities at September 30, 2018:

(In thousands)	AmortizedCost		EstimatedFair Value
AFS debt securities:
Within one year	$	46,641	$	46,521
From one to five years		86,348		84,188
From five to ten years		176,260		171,240
After ten years		832,196		799,125
Total AFS debt securities	$	1,141,445	$	1,101,074
HTM debt securities:
Within one year	$	89,011	$	89,011
From one to five years		53,217		53,177
From five to ten years		215,931		209,974
After ten years		301,790		293,570
Total HTM debt securities	$	659,949	$	645,732

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 September 30, 2018 and December 31, 2017.

4.          Allowance for Loan Losses and Credit Quality of Loans

Allowance for Loan Losses

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

During the first quarter of 2018, the Company made adjustments to the class segments within the portfolios to better align risk characteristics and reflect the monitoring and assessment of risks as the portfolios continue to evolve. Agricultural and Agricultural Real Estate were consolidated with Commercial and Industrial and Commercial Real Estate, respectively. Agricultural loans are a type of Commercial loan with some specific underwriting guidelines; however, as of March 31, 2018, the portfolio had decreased to less than 3% of the Commercial portfolio and separation was no longer warranted. The Indirect class segment was further separated into Dealer Finance and Specialty Lending class segments. The growth in our Specialty Lending portfolio to 21% of Consumer Loans as of March 31, 2018 warranted evaluation of this class separately due to different risk characteristics from Dealer Finance class segments. The Direct and Home Equity class segments were consolidated into Direct to reflect common management, similar underwriting and in-market focus. The change to the class segments in the allowance methodology did not have a significant impact on the allowance for loan losses. The following table illustrates the portfolio and class segments for the loan portfolio in 2018 compared to 2017:

Portfolio	Class - 2018	Class - 2017
Commercial Loans	Commercial and Industrial	Commercial
	Commercial Real Estate	Commercial Real Estate
	Business Banking	Agricultural
		Agricultural Real Estate
		Business Banking
Consumer Loans	Dealer Finance	Indirect
	Specialty Lending	Home Equity
	Direct	Direct
Residential Real Estate

12

Commercial Loans

The Company offers a variety of Commercial loan products including Commercial and Industrial, Commercial 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 and Industrial (“C&I”) – The Company offers a variety of loan options to meet the specific needs of our C&I 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, equipment purchases, livestock purchases and finance seasonal crop expenses. 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, accounts receivable and perishable agricultural products, which are generally less liquid than real estate and exposed to industry price volatility. To reduce these risks, management also attempts to obtain personal guarantees of the owners or obtain government loan guarantees to provide further support. In 2018, the Commercial and Agricultural class segments were combined to create the C&I class segment.

Commercial Real Estate (“CRE”) – The Company offers CRE loans to finance real estate purchases, refinancings, expansions and improvements to commercial and agricultural properties. CRE loans are made to finance the purchases and improvements of real property, which generally consists of real estate with completed structures. These CRE 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, health care facilities and other facilities. These loans are typically less risky than C&I loans, since they are secured by real estate. 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 and no more than 75% of the appraised value of the agricultural property. Government loan guarantees may be obtained to provide further support for agricultural property. In 2018, the Commercial Real Estate and Agricultural Real Estate class segments were combined to create the CRE segment.

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 assets owned by the borrower and can include real estate, equipment, inventory, receivables or other business assets. These loans carry a higher risk than C&I and CRE 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 Dealer Finance, Specialty Lending and Direct loans.

Dealer Finance – 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 95% of the Dealer Finance 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 Dealer Finance Consumer loans are underwritten on a secured basis using the underlying collateral being financed. In 2018, the Indirect class segment was further separated into Dealer Finance and Specialty Lending class segments (see above and below).

Specialty Lending –The Company offers unsecured Consumer loans across a national footprint originated through our relationships with national technology-driven consumer lending companies to finance such things as dental and medical procedures, K-12 tuition, solar energy installations and other consumer purpose loans. Advances of credit through this specialty lending business line are subject to the Company’s underwriting standards including criteria such as FICO score and debt to income thresholds. In 2018, the Indirect class segment has been further separated into Dealer Finance (see above) and Specialty Lending class segments.

13

Direct – The Company offers a variety of consumer installment loans to finance vehicle purchases, mobile home purchases and personal expenditures. In addition to installment loans, the Company also offers personal lines of credit, overdraft protection, home equity lines of credit and second mortgage loans (loans secured by a lien position on one-to-four family residential real estate) to finance home improvements, debt consolidation, education and other uses. Most of the consumer installment 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. For home equity loans, consumers are able to borrow up to 85% of the equity in their homes. These loans carry a higher risk than first mortgage residential loans as they are often in a second position with respect to collateral. Consumer installment loans are often secured with collateral consisting of a perfected lien on the asset being purchased or a perfected lien on a consumer’s deposit account. A minimal amount of consumer installment loans are unsecured, which carry a higher risk of loss. 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. In 2018, the Home Equity segment was consolidated into the Direct class segment.

Residential Real Estate

Residential real estate loans consist primarily of loans secured by a first or second mortgage 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 real estate 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 risk, 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. In addition, various regulatory agencies, as an integral component of their examination process, periodically review the Company’s allowance for loan losses. Such agencies may require the Company to make loan grade changes as well as recognize additions to the allowance based on their examinations.

After a thorough consideration of the factors discussed above, any required additions or reductions to the allowance for loan losses are made periodically by charges or credits to the provision for loan losses. These charges 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 or changes in management’s assessment of any or all of the determining factors discussed above.

14

The following tables illustrate the changes in the allowance for loan losses by our portfolio segments:

(In thousands)	Commercial Loans			Consumer Loans			Residential Real Estate			Total
Balance as of June 30, 2018	$	31,059		$	36,479		$	4,912		$	72,450
Charge-offs		(823	)		(6,818	)		(123	)		(7,764	)
Recoveries		410			1,602			81			2,093
Provision		1,086			6,044			(1,104	)		6,026
Ending Balance as of September 30, 2018	$	31,732		$	37,307		$	3,766		$	72,805
Balance as of June 30, 2017	$	24,428		$	35,523		$	6,649		$	66,600
Charge-offs		(574	)		(6,979	)		(421	)		(7,974	)
Recoveries		266			1,446			123			1,835
Provision		1,434			6,197			258			7,889
Ending Balance as of September 30, 2017	$	25,554		$	36,187		$	6,609		$	68,350

(In thousands)	Commercial Loans			Consumer Loans			Residential Real Estate			Total
Balance as of December 31, 2017	$	27,606		$	36,830		$	5,064		$	69,500
Charge-offs		(2,535	)		(21,947	)		(513	)		(24,995	)
Recoveries		780			4,946			274			6,000
Provision		5,881			17,478			(1,059	)		22,300
Ending Balance as of September 30, 2018	$	31,732		$	37,307		$	3,766		$	72,805
Balance as of December 31, 2016	$	25,444		$	33,375		$	6,381		$	65,200
Charge-offs		(2,991	)		(19,742	)		(1,717	)		(24,450	)
Recoveries		919			3,680			166			4,765
Provision		2,182			18,874			1,779			22,835
Ending Balance as of September 30, 2017	$	25,554		$	36,187		$	6,609		$	68,350

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 the acquisition of the loans, an allowance for loan losses is established based on our estimate of incurred losses at the balance sheet date. There was no allowance for loan losses for the acquired loan portfolio as of September 30, 2018 and December 31, 2017. There were no charge-offs of acquired loans for the three months ended September 30, 2018 and 2017, and approximately $0.1 million and $0.7 million during the nine months ended September 30, 2018 and 2017 of net charge-offs of acquired loans, respectively, which are included in the table above.

The following tables illustrate the allowance for loan losses and the recorded investment by portfolio segments:

(In thousands)	Commercial Loans		Consumer Loans		Residential Real Estate		Total
As of September 30, 2018
Allowance for loan losses	$	31,732	$	37,307	$	3,766	$	72,805
Allowance for loans individually evaluated for impairment		25		-		-		25
Allowance for loans collectively evaluated for impairment	$	31,707	$	37,307	$	3,766	$	72,780
Ending balance of loans	$	3,212,577	$	2,301,198	$	1,373,487	$	6,887,262
Ending balance of originated loans individually evaluated for impairment		5,077		7,760		6,445		19,282
Ending balance of acquired loans collectively evaluated for impairment		153,808		33,994		153,073		340,875
Ending balance of originated loans collectively evaluated for impairment	$	3,053,692	$	2,259,444	$	1,213,969	$	6,527,105
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	$	2,234,349	$	1,321,021	$	6,583,639
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	$	2,182,011	$	1,143,719	$	6,160,810

15

Credit Quality of Loans

For all loan classes within the Company’s loan portfolio, loans are placed on nonaccrual status when timely collection of principal and/or interest in accordance with contractual terms is in doubt. 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 or in part is improbable. For Commercial loans, management considers specific facts and circumstances relative to individual credits in making such a determination. For Consumer and Residential Real Estate loans, management uses specific guidance and thresholds from the Federal Financial Institutions Examination Council’s Uniform Retail Credit Classification and Account Management Policy.

The following tables set 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 September 30, 2018
Originated
Commercial Loans:
C&I	$	209	$	41	$	-	$	250	$	908	$	857,782	$	858,940
CRE		1,133		-		-		1,133		3,637		1,708,369		1,713,139
Business Banking		1,318		98		-		1,416		5,754		479,520		486,690
Total Commercial Loans	$	2,660	$	139	$	-	$	2,799	$	10,299	$	3,045,671	$	3,058,769
Consumer Loans:
Dealer Finance	$	14,364	$	2,039	$	1,252	$	17,655	$	2,062	$	1,209,880	$	1,229,597
Specialty Lending		3,037		2,155		1,544		6,736		-		514,660		521,396
Direct		3,313		949		434		4,696		2,541		508,974		516,211
Total Consumer Loans	$	20,714	$	5,143	$	3,230	$	29,087	$	4,603	$	2,233,514	$	2,267,204
Residential Real Estate	$	1,366	$	219	$	1,231	$	2,816	$	6,106	$	1,211,492	$	1,220,414
Total Originated Loans	$	24,740	$	5,501	$	4,461	$	34,702	$	21,008	$	6,490,677	$	6,546,387
Acquired
Commercial Loans:
C&I	$	-	$	-	$	-	$	-	$	-	$	30,871	$	30,871
CRE		-		-		-		-		2		87,827		87,829
Business Banking		425		-		240		665		611		33,832		35,108
Total Commercial Loans	$	425	$	-	$	240	$	665	$	613	$	152,530	$	153,808
Consumer Loans:
Dealer Finance	$	4	$	-	$	-	$	4	$	-	$	99	$	103
Direct		223		14		-		237		275		33,379		33,891
Total Consumer Loans	$	227	$	14	$	-	$	241	$	275	$	33,478	$	33,994
Residential Real Estate	$	839	$	39	$	33	$	911	$	1,405	$	150,757	$	153,073
Total Acquired Loans	$	1,491	$	53	$	273	$	1,817	$	2,293	$	336,765	$	340,875
Total Loans	$	26,231	$	5,554	$	4,734	$	36,519	$	23,301	$	6,827,442	$	6,887,262

16

(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	$	1,642,204	$	1,670,591
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	$	2,154,684	$	2,190,443
Residential Real Estate	$	3,730	$	667	$	1,262	$	5,659	$	5,987	$	1,138,903	$	1,150,549
Total Originated Loans	$	28,383	$	6,397	$	5,165	$	39,945	$	23,336	$	6,118,667	$	6,181,948
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	$	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	$	6,516,201	$	6,583,639

There were no material commitments to extend further credit to borrowers with nonperforming loans as of September 30, 2018 and December 31, 2017.

Impaired Loans

The methodology used to establish the allowance for loan losses on impaired loans incorporates specific allocations on loans analyzed individually. Classified loans, including all troubled debt restructured loans (“TDRs”) and nonaccrual Commercial loans that are graded Substandard, Doubtful or Loss, 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/or 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 level of impairment. Impaired amounts are charged off immediately if such amounts are determined by management to be uncollectable. Any change to the previously recognized impairment loss is recognized as a component of the provision for loan losses.

17

The following table provides information on loans specifically evaluated for impairment:

	September 30, 2018						December 31, 2017
(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:
C&I	$	404	$	676			$	-	$	-
CRE		3,629		5,616				-		-
Commercial		-		-				-		251
Commercial Real Estate		-		-				2,211		3,979
Agricultural		-		-				452		465
Agricultural Real Estate		-		-				2,250		2,423
Business Banking		1,019		2,099				860		1,730
Total Commercial Loans	$	5,052	$	8,391			$	5,773	$	8,848
Consumer Loans:
Dealer Finance	$	160	$	254			$	-	$	-
Direct		7,600		9,600				-		-
Indirect		-		-				131		143
Home Equity		-		-				8,027		9,966
Direct		-		-				274		274
Total Consumer Loans	$	7,760	$	9,854			$	8,432	$	10,383
Residential Real Estate	$	6,445	$	8,721			$	6,830	$	8,780
Total	$	19,257	$	26,966			$	21,035	$	28,011
With an allowance recorded:
Commercial Loans:
C&I	$	25	$	25	$	25	$	-	$	-	$	-
Commercial Real Estate		-		-		-		76		82		30
Agricultural		-		-		-		27		27		27
Total Commercial Loans	$	25	$	25	$	25	$	103	$	109	$	57
Total Loans	$	19,282	$	26,991	$	25	$	21,138	$	28,120	$	57

There were no acquired impaired loans specifically evaluated for impairment as of September 30, 2018 or December 31, 2017.

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

	For the three months ended
	September 30, 2018				September 30, 2017
(In thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Originated
Commercial Loans:
C&I	$	433	$	-	$	-	$	-
CRE		3,645		32		-		-
Commercial		-		-		1,000		-
Commercial Real Estate		-		-		2,415		48
Agricultural		-		-		115		-
Agricultural Real Estate		-		-		1,505		11
Business Banking		1,024		4		955		2
Total Commercial Loans	$	5,102	$	36	$	5,990	$	61
Consumer Loans:
Dealer Finance	$	177	$	4	$	-	$	-
Direct		7,730		102		-		-
Indirect		-		-		35		1
Home Equity		-		-		8,159		111
Direct		-		-		119		2
Total Consumer Loans	$	7,907	$	106	$	8,313	$	114
Residential Real Estate	$	6,519	$	68	$	6,633	$	82
Total Originated Loans	$	19,528	$	210	$	20,936	$	257
Total Loans	$	19,528	$	210	$	20,936	$	257

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	For the nine months ended
	September 30, 2018				September 30, 2017
(In thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Originated
Commercial Loans:
C&I	$	449	$	1	$	-	$	-
CRE		3,999		96		-		-
Commercial		-		-		2,393		-
Commercial Real Estate		-		-		3,906		93
Agricultural		-		-		147		1
Agricultural Real Estate		-		-		1,545		32
Business Banking		998		12		837		7
Total Commercial Loans	$	5,446	$	109	$	8,828	$	133
Consumer Loans:
Dealer Finance	$	187	$	8	$	-	$	-
Direct		7,953		317		-		-
Indirect		-		-		22		2
Home Equity		-		-		8,274		331
Direct		-		-		119		2
Total Consumer Loans	$	8,140	$	325	$	8,415	$	335
Residential Real Estate	$	6,719	$	212	$	6,425	$	211
Total Originated Loans	$	20,305	$	646	$	23,668	$	679
Acquired
Commercial Loans:
Commercial Real Estate	$	-	$	-	$	121	$	-
Total Commercial Loans	$	-	$	-	$	121	$	-
Total Acquired Loans	$	-	$	-	$	121	$	-
Total Loans	$	20,305	$	646	$	23,789	$	679

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 C&I and CRE 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. C&I and CRE 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.

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● 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 uncollectable 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 Real Estate Grading System

Consumer and Residential Real Estate 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 criteria are considered Performing.

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

(In thousands)	As of September 30, 2018
Originated
Commercial Credit Exposure By Internally Assigned Grade:			C&I		CRE		Total
Pass			$	805,333	$	1,660,900	$	2,466,233
Special Mention				33,557		16,762		50,319
Substandard				20,050		35,477		55,527
Total			$	858,940	$	1,713,139	$	2,572,079
Business Banking Credit Exposure By Internally Assigned Grade:					Business Banking		Total
Non-classified					$	474,252	$	474,252
Classified						12,438		12,438
Total					$	486,690	$	486,690
Consumer Credit Exposure By Payment Activity:	Dealer Finance		Specialty Lending		Direct		Total
Performing	$	1,226,283	$	519,852	$	513,236	$	2,259,371
Nonperforming		3,314		1,544		2,975		7,833
Total	$	1,229,597	$	521,396	$	516,211	$	2,267,204
Residential Real Estate Credit Exposure By Payment Activity:					Residential Real Estate		Total
Performing					$	1,213,077	$	1,213,077
Nonperforming						7,337		7,337
Total					$	1,220,414	$	1,220,414

Acquired
Commercial Credit Exposure By Internally Assigned Grade:	C&I		CRE		Total
Pass	$	27,046	$	87,091	$	114,137
Special Mention		3,825		93		3,918
Substandard		-		645		645
Total	$	30,871	$	87,829	$	118,700
Business Banking Credit Exposure By Internally Assigned Grade:			Business Banking		Total
Non-classified			$	32,098	$	32,098
Classified				3,010		3,010
Total			$	35,108	$	35,108
Consumer Credit Exposure By Payment Activity:	Dealer Finance		Direct		Total
Performing	$	103	$	33,616	$	33,719
Nonperforming		-		275		275
Total	$	103	$	33,891	$	33,994
Residential Real Estate Credit Exposure By Payment Activity:			Residential Real Estate		Total
Performing			$	151,635	$	151,635
Nonperforming				1,438		1,438
Total			$	153,073	$	153,073

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(In thousands)	As of 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			$	1,664,984	$	451,822	$	64,848	$	2,181,654
Nonperforming				5,607		3,077		105		8,789
Total			$	1,670,591	$	454,899	$	64,953	$	2,190,443
Residential Real Estate Credit Exposure By Payment Activity:							Residential Real Estate		Total
Performing							$	1,143,300	$	1,143,300
Nonperforming								7,249		7,249
Total							$	1,150,549	$	1,150,549

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

Troubled Debt Restructured Loans

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 Real Estate and Consumer TDRs occurring during 2018 and 2017 were due to the reduction in the interest rate or extension of the term. Commercial TDRs during 2018 and 2017 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 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. If management determines that the value of the modified loan is less than the recorded investment in the loan an impairment charge would be recognized.

22

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:

	Three months ended September 30, 2018
(Dollars in thousands)	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Consumer Loans:
Dealer Finance		8	$	90	$	89
Total Consumer Loans		8	$	90	$	89
Total Troubled Debt Restructurings		8	$	90	$	89

	Three months ended September 30, 2017
(Dollars in thousands)	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Consumer Loans:
Indirect		1	$	7	$	7
Home Equity		4		189		222
Total Consumer Loans		5	$	196	$	229
Residential Real Estate		1	$	518	$	518
Total Troubled Debt Restructurings		6	$	714	$	747

	Nine months ended September 30, 2018
(Dollars in thousands)	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial Loans:
Business Banking		3	$	369	$	371
Total Commercial Loans		3	$	369	$	371
Consumer Loans:
Dealer Finance		15	$	185	$	183
Direct		2		41		41
Total Consumer Loans		17	$	226	$	224
Residential Real Estate		5	$	323	$	323
Total Troubled Debt Restructurings		25	$	918	$	918

	Nine months ended September 30, 2017
(Dollars 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		1		337		333
Total Commercial Loans		2	$	3,637	$	3,572
Consumer Loans:
Indirect		4	$	39	$	37
Home Equity		8		373		414
Direct		1		120		120
Total Consumer Loans		13	$	532	$	571
Residential Real Estate		8	$	1,066	$	1,068
Total Troubled Debt Restructurings		23	$	5,235	$	5,211

23

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

	Three months ended September 30, 2018				Three months ended September 30, 2017
(Dollars in thousands)	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Consumer Loans:
Indirect		-	$	-		1	$	13
Home Equity		-		-		12		622
Direct		17		816		-		-
Total Consumer Loans		17	$	816		13	$	635
Residential Real Estate		5	$	398		6	$	546
Total Troubled Debt Restructurings		22	$	1,214		19	$	1,181

	Nine months ended September 30, 2018				Nine months ended September 30, 2017
(Dollars in thousands)	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Commercial Loans:
Commercial		-	$	-		1	$	145
Business Banking		2		258		1		329
Total Commercial Loans		2	$	258		2	$	474
Consumer Loans:
Indirect		-	$	-		2	$	19
Home Equity		-		-		30		1,381
Direct		35		1,740		-		-
Total Consumer Loans		35	$	1,740		32	$	1,400
Residential Real Estate		17	$	1,239		12	$	817
Total Troubled Debt Restructurings		54	$	3,237		46	$	2,691

5.          Defined Benefit Post-Retirement Plans

The Company has a qualified, noncontributory, defined benefit pension plan (“the Plan”) covering substantially all of its employees at September 30, 2018. 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. 

In addition to the Plan, the Company also provides supplemental employee retirement plans to certain current and former executives. The Company also assumed supplemental retirement plans for certain current and former executives of Alliance Financial Corporation (“Alliance”) when the Company acquired Alliance.

These supplemental employee retirement plans and the Plan are collectively referred to herein as “Pension Benefits.”

In addition, the Company provides certain health care benefits for retired employees. Benefits are accrued over the employees’ active service period. Only employees that were employed by the Company on or before January 1, 2000 are eligible to receive post-retirement health care benefits. 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.”

The Company made no voluntary contributions to the pension and other benefits plans during the three and nine months ended September 30, 2018 and 2017.

The components of expense for Pension Benefits and Other Benefits are set forth below:

	Pension Benefits						Other Benefits
	Three months ended September 30,						Three months ended September 30,
(In thousands)	2018			2017			2018		2017
Components of net periodic (benefit) cost
Service cost	$	415		$	329		$	3	$	3
Interest cost		912			1,043			82		88
Expected return on plan assets		(2,119	)		(1,976	)		-		-
Net amortization		242			454			44		26
Total net periodic (benefit) cost	$	(550	)	$	(150	)	$	129	$	117

	Pension Benefits						Other Benefits
	Nine months ended September 30,						Nine months ended September 30,
(In thousands)	2018			2017			2018		2017
Components of net periodic (benefit) cost
Service cost	$	1,256		$	1,133		$	8	$	9
Interest cost		2,752			3,127			245		259
Expected return on plan assets		(6,364	)		(5,946	)		-		-
Net amortization		745			1,284			131		66
Total net periodic (benefit) cost	$	(1,611	)	$	(402	)	$	384	$	334

The service cost component of the net periodic (benefit) cost is included in Salaries and Employee Benefits and the interest cost, expected return on plan assets and net amortization components are including in Other Noninterest Expense on the unaudited interim consolidated statements of income.

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6.          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 units).

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

	Three months ended September 30,
(In thousands, except per share data)	2018		2017
Basic EPS:
Weighted average common shares outstanding		43,714		43,595
Net income available to common stockholders	$	29,807	$	22,876
Basic EPS	$	0.68	$	0.52
Diluted EPS:
Weighted average common shares outstanding		43,714		43,595
Dilutive effect of common stock options and restricted stock		337		320
Weighted average common shares and common share equivalents		44,051		43,915
Net income available to common stockholders	$	29,807	$	22,876
Diluted EPS	$	0.68	$	0.52

	Nine months ended September 30,
(In thousands, except per share data)	2018		2017
Basic EPS:
Weighted average common shares outstanding		43,692		43,563
Net income available to common stockholders	$	83,914	$	64,514
Basic EPS	$	1.92	$	1.48
Diluted EPS:
Weighted average common shares outstanding		43,692		43,563
Dilutive effect of common stock options and restricted stock		317		329
Weighted average common shares and common share equivalents		44,009		43,892
Net income available to common stockholders	$	83,914	$	64,514
Diluted EPS	$	1.91	$	1.47

There were 1,500 and 3,250 stock options for the quarters ended September 30, 2018 and September 30, 2017, respectively that were not considered in the calculation of diluted EPS since the stock options’ exercise price was greater than the average market price during these periods.

There were 1,500 and 3,014 stock options for the nine months ended September 30, 2018 and September 30, 2017, respectively, that were not considered in the calculation of diluted EPS since the stock options’ exercise price was greater than the average market price during these periods.

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

The following table summarizes the reclassification adjustments out of accumulated other comprehensive income (loss) (“AOCI”):

Detail About AOCI Components	Amount Reclassified From AOCI						Affected Line Item in the Consolidated Statement of Comprehensive Income (Loss)
	Three months ended
(In thousands)	September 30, 2018			September 30, 2017
AFS securities:
Losses on AFS securities	$	-		$	4		Net securities losses
Amortization of unrealized gains related to securities transfer		168			212		Interest income
Tax effect	$	(42	)	$	(83	)	Income tax (expense) benefit
Net of tax	$	126		$	133
Cash flow hedges:
Net unrealized (gains) on cash flow hedges reclassified to interest (income)	$	(638	)	$	(155	)	Interest income
Tax effect	$	159		$	59		Income tax (expense) benefit
Net of tax	$	(479	)	$	(96	)
Pension and other benefits:
Amortization of net losses	$	263		$	481		Other noninterest expense
Amortization of prior service costs		23			(1	)	Other noninterest expense
Tax effect	$	(71	)	$	(183	)	Income tax (expense) benefit
Net of tax	$	215		$	297
Total reclassifications during the period, net of tax	$	(138	)	$	334

Detail About AOCI Components	Amount Reclassified From AOCI						Affected Line item in the Consolidated Statement of Comprehensive Income (Loss)
	Nine months ended
(In thousands)	September 30, 2018			September 30, 2017
AFS securities:
Losses on AFS securities	$	-		$	2		Net securities losses
Amortization of unrealized gains related to securities transfer		533			675		Interest income
Impairment write-down of equity security		-			1,312		Other noninterest income
Tax effect	$	(133	)	$	(760	)	Income tax (expense) benefit
Net of tax	$	400		$	1,229
Cash flow hedges:
Net unrealized (gains) on cash flow hedges reclassified to interest (income)	$	(1,537	)	$	(96	)	Interest income
Tax effect	$	384		$	37		Income tax (expense) benefit
Net of tax	$	(1,153	)	$	(59	)
Pension and other benefits:
Amortization of net losses	$	809		$	1,351		Other noninterest expense
Amortization of prior service costs		67			(1	)	Other noninterest expense
Tax effect	$	(219	)	$	(516	)	Income tax (expense) benefit
Net of tax	$	657		$	834
Total reclassifications during the period, net of tax	$	(96	)	$	2,004

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8.          Fair Value Measurements and Fair Value 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, among 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 three and nine months ended September 30, 2018, the Company made no transfers of assets from Level 1 to Level 2. For the three months ended September 30, 2018, the Company made no transfers of assets from Level 2 to Level 1. For the nine months ended September 30, 2018, the Company made a $4.0 million transfer from Level 2 to Level 1. For the year ended December 31, 2017, the Company made no transfer of assets between the levels of the fair value hierarchy.

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

(In thousands)	Level 1		Level 2		Level 3		September 30, 2018
Assets:
AFS securities
Federal Agency	$	-	$	83,262	$	-	$	83,262
State & municipal		-		36,467		-		36,467
Mortgage-backed		-		492,408		-		492,408
Collateralized mortgage obligations		-		488,937		-		488,937
Total AFS securities	$	-	$	1,101,074	$	-	$	1,101,074
Equity securities		20,722		4,000		-		24,722
Derivatives		-		23,682		-		23,682
Total	$	20,722	$	1,128,756	$	-	$	1,149,478
Liabilities:
Derivatives	$	-	$	20,054	$	-	$	20,054
Total	$	-	$	20,054	$	-	$	20,054

(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

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, other real estate owned, collateral-dependent impaired loans, mortgage servicing rights and HTM securities. The only non-recurring fair value measurements recorded during the three and nine month periods ended September 30, 2018 and the year ended December 31, 2017 were related to impaired loans, write-down of other real estate owned 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 September 30, 2018 and December 31, 2017, the Company had collateral dependent loans with a carrying value of $25 thousand and $0.1 million, respectively, which had specific reserves including in the allowance for loan losses of $25 thousand and $0.1 million, respectively.

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 unaudited interim 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 unaudited interim consolidated statement of income. At September 30, 2018 the notional amount of these customer derivative agreements and the offsetting derivative counterparty positions each totaled $630.2 million and the fair values included in other assets and other liabilities on the unaudited interim consolidated balance sheet applicable to these agreements amounted to $20.0 million. At December 31, 2017, the notional amount of these customer derivative agreements and the offsetting derivative counterparty positions each totaled $481.2 million and the fair values included in other assets and other liabilities on the unaudited interim consolidated balance sheet applicable to these agreements amounted to $0.2 million.

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 notional amount of these interest rate derivative agreements total $225.0 million at September 30, 2018 and $250.0 million at December 31, 2017. Fair values included in other assets on the unaudited interim consolidated balance sheet applicable to these agreements amounted to $3.6 million at September 30, 2018 and $3.5 million at December 31, 2017.

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For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in AOCI and subsequently reclassified into interest expense in the same period during which the hedge transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s short-term rate borrowings. The change in net unrealized gains (losses) on cash flow hedges reflects a reclassification of $0.6 million of net unrealized gains and $0.2 million of net unrealized (losses) for AOCI to interest expense during the three months ended September 30, 2018 and 2017, respectively. The change in net unrealized gains (losses) on cash flow hedges reflects a reclassification of $1.5 million and $0.1 million of net unrealized gains from AOCI to interest expense during the nine months ended September 30, 2018 and 2017, respectively. During the next twelve months, the Company estimates that an additional $3.0 million will be reclassified from AOCI as a reduction to interest expense.

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, equity securities, trading securities, accrued interest receivable, non-maturity deposits, short-term borrowings, accrued interest payable and interest rate swaps.

			September 30, 2018				December 31, 2017
(In thousands)	Fair Value Hierarchy		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
HTM securities		2	$	659,949	$	645,732	$	484,073	$	481,871
Net loans		3		6,819,492		6,762,901		6,515,273		6,651,931
Financial liabilities:
Time deposits		2	$	868,569	$	860,791	$	806,766	$	801,294
Long-term debt		2		73,751		72,152		88,869		88,346
Junior subordinated debt		2		101,196		102,979		101,196		104,593

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.

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, in accordance with the exit price notion as defined by Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 820, Fair Value Measurement (“ASC 820”). 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 and as a result of the adoption of Accounting Standard Update 2016-01, which also included credit risk, illiquidity risk and other market factors to calculate the exit price fair value in accordance with ASC 820. Upon adoption, Accounting Standard Update (“ASU”) 2016-01, Financial Instruments - Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), did not materially change the estimated fair value of loans.

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Time Deposits

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

Long-Term Debt

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

Junior Subordinated Debt

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

9.          Commitments and Contingencies

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, unused lines of credit, standby letters of credit and certain Commercial 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 amounts of those investments. 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. Commitments to extend credit and unused lines of credit totaled $1.7 billion at September 30, 2018 and $1.6 billion at December 31, 2017.

Since many loan commitments, standby letters of credit, 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 guarantee 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 standby letters of credit to third parties. These standby letters of credit are frequently issued in support of third party debt, such as corporate debt issuances, industrial revenue bonds and municipal securities. The risk involved in issuing standby letters of credit is essentially the same as the credit risk involved in extending loan facilities to customers and they are subject to the same credit origination guidelines, portfolio maintenance and management procedures 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 commitments. Standby letters of credit totaled $39.5 million at September 30, 2018 and $41.1 million at December 31, 2017. As of September 30, 2018 and December 31, 2017, the fair value of standby letters of credit was not significant.

10. Revenue from Contracts with Customers

Effective January 1, 2018, the Company adopted FASB ASU 2014-09, Revenue from Contracts with Customers (ASC Topic 606) (“ASC 606” and “ASU 2014-09”), and all subsequent ASUs that modified ASC 606. The implementation of ASC 606 did not have a material impact on the measurement or recognition of revenue; as such, a cumulative effect adjustment to opening retained earnings was not deemed necessary. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts were not adjusted and continue to be reported in accordance with our historic accounting under ASC 605. ASC 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities and certain noninterest income streams such as fees associated with mortgage servicing rights, financial guarantees, derivatives and certain credit card fees are also not in scope. ASC 606 is applicable to noninterest revenue streams such as trust and asset management income, deposit related fees and annuity and insurance commissions; however, the recognition of these revenue streams did not change significantly upon adoption of ASC 606.

Insurance and Other Financial Services Revenue

Insurance and other financial services revenue primarily consists of commissions received on insurance and brokered investment product sales. The Company acts as an intermediary between the Company’s customer and the insurance carrier. The Company’s performance obligation is generally satisfied upon the issuance of the annuity policy. Shortly after the policy is issued, the carrier remits the commission payment to the Company, and the Company recognizes the revenue. The Company does not earn a significant amount of trailing commission fees on insurance or brokered investment product sales. The majority of the trailing commission fees are calculated based on a percentage of market value of a period end and revenue is recognized when an investment product’s market value can be determined.

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Service Charges on Deposit Accounts

Service charges on deposit accounts consist of overdraft fees, monthly service fees, check orders and other deposit account related fees. Overdraft, monthly service, check orders and other deposit account related fees are transactional based, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts.

ATM and Debit Card Fees

ATM fees are primarily generated when a Company cardholder uses a non-Company ATM or a non-Company cardholder uses a Company ATM. Debit card income is primarily comprised of interchange fees earned whenever the Company’s debit cards are processed through card payment networks. The Company’s performance obligations for these revenue streams are satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month.

Retirement Plan Administration Fees

Retirement plan administration fees are primarily generated for services related to the recordkeeping, administration and plan design solutions of defined benefit, defined contribution and revenue sharing plans. Revenue is recognized in arrears for services already provided in accordance with fees established in contracts with customers or based on rates agreed to with investment trade platforms based on ending investment balances held. The Company’s performance obligation is satisfied, and related revenue recognized based on services completed or ending investment balances, for which receivables are recorded at the time of revenue recognition.

Trust

Trust and asset management income is primarily comprised of fees earned from the management and administration of trusts, pensions and other customer assets. The Company’s performance obligation is generally satisfied with the resulting fees recognized monthly, based upon services completed or the month-end market value of the assets under management and the applicable fee rate. Payment is generally received shortly after services are rendered or a few days after month end through a direct charge to customers’ accounts. The Company does not earn performance-based incentives.

Other

Other noninterest income consists of other recurring revenue streams such as account and loan fees, interest rate swap fees, safety deposit box rental fees and other miscellaneous revenue streams. These revenue streams are primarily transactional based and payment is received immediately or in the following month, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time.

The following table presents noninterest income, segregated by revenue streams in-scope and out-of-scope of ASC 606, for three and nine months ended September 30, 2018 and 2017:

	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2018		2017		2018		2017
Noninterest income
In-Scope of ASC 606:
Insurance and other financial services revenue	$	6,172	$	5,536	$	18,502	$	17,927
Service charges on deposit accounts		4,503		4,261		12,721		12,399
ATM and debit card fees		5,906		5,557		16,995		16,025
Retirement plan administration fees		7,244		5,272		19,879		14,881
Trust		4,808		4,927		14,951		14,620
Other		3,048		3,945		11,341		10,069
Total noninterest income in-scope of ASC 606	$	31,681	$	29,498	$	94,389	$	85,921
Total noninterest income out-of-scope of ASC 606	$	1,700	$	1,280	$	4,427	$	3,911
Total noninterest income	$	33,381	$	30,778	$	98,816	$	89,832

Contract Balances

A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration or before payment is due, which would result in contract receivables or assets, respectively. A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment or for which payment is due from the customer. The Company’s noninterest revenue streams are largely based on transactional activity, or standard month-end revenue accruals such as asset management fees based on month-end market values. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances. As of September 30, 2018 and December 31, 2017, the Company did not have any significant contract balances.

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Contract Acquisition Costs

ASC 606 requires the capitalization, and subsequently amortization into expense, certain incremental costs of obtaining a contract with a customer if these costs are expected to be recovered. The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained. The Company elected the practical expedient, which allows immediate expensing of contract acquisition costs when the asset that would have resulted from capitalizing these costs would have been amortized in one year or less, and did not capitalize any contract acquisition costs upon adoption of ASC 606 as of or during the three and nine months ended September 30, 2018.

11.          Recent Accounting Pronouncements

Recently Adopted Accounting Standards

Effective January 1, 2018, the Company early adopted the provisions of FASB ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which was issued in February 2018. ASU 2018-02 allows 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 is 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. The adoption of ASU 2018-02 did not have a significant impact on the consolidated financial statements and related disclosures and resulted in a reclassification that decreased AOCI and increased retained earnings by $5.6 million, with no net effect on total stockholders’ equity. The Company utilizes the individual securities approach when releasing income tax effects from AOCI for its investment securities.

Effective January 1, 2018, the Company early adopted the provisions of FASB ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which was issued in August 2017. ASU 2017-12 better aligns the accounting and reporting of hedging relationships with the economics of risk management activities. The amendments of ASU 2017-12 were applied on a modified retrospective basis and adoption did not have an impact on the consolidated financial statements and related disclosures.

Effective January 1, 2018, the Company adopted the provisions of FASB ASU 2017-09, Compensation-Stock Compensation (Topic 718), which was issued in May 2017. 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. The amendments of ASU 2017-09 were applied on a prospective basis and adoption did not have an impact on the consolidated financial statements and related disclosures.

Effective January 1, 2018, the Company adopted the provisions of FASB ASU 2017-07, Compensation – Retirement Benefits (Topic 715), which was issued in March 2017. 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 ASU 2017-07 were 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 for the capitalization of the service cost component of net periodic pension cost and net periodic post-retirement benefit in assets utilizing the practical expedient allowed for prior comparative period presentation permitted. The adoption of ASU 2017-07 did not have an impact on the consolidated financial statements and related disclosures.

Effective January 1, 2018, the Company adopted the provisions of FASB ASU 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20), which was issued in February 2017. ASU 2017-05 clarifies the scope of ASC Subtopic 610-20 and adds 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 the 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 of ASU 2017-05 were applied on a modified retrospective basis and adoption did not have a significant impact on the consolidated financial statements and related disclosures.

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Effective January 1, 2018, the Company adopted the provisions of FASB ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which was issued in January 2017. ASU 2017-01 provides a more robust framework to use in determining when a set of assets and activities 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. The amendments of ASU 2017-01 were applied on a prospective basis and adoption did not have an impact on the consolidated financial statements and related disclosures.

Effective January 1, 2018, the Company adopted the provisions of FASB ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments), issued in August 2016. 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. The amendments of ASU 2016-15 were applied on a retrospective basis and adoption did not have an impact on the consolidated financial statements and related disclosures.

Effective January 1, 2018, the Company adopted the provisions of FASB ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities, which was issued in January 2016. 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. The fair value measurement of loans was modified, with no significant impact, to incorporate illiquidity risk and other market factors in addition to credit risk in order to calculate the exit price fair value in accordance with ASC 820 as required by ASU 2016-01. The adoption of ASU 2016-01 did not have a significant impact on the consolidated financial statements and related disclosures and resulted in a reclassification that decreased AOCI and increased retained earnings by $2.6 million and had an immaterial effect on total stockholders’ equity, equity securities and other assets.

Effective January 1, 2018, the Company adopted the provisions of FASB ASU 2014-09, which was issued in May 2014. ASU 2014-09 is a comprehensive new revenue recognition standard that superseded nearly all previous 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 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. The adoption included ASU 2014-09 and all related updates to clarify ASU 2014-09, including ASU 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU 2016-10, Identifying Performance Obligations and Licensing, ASU 2016-12, Narrow-Scope Improvements and Practical Expedients, and ASU 2016-20, Technical Corrections and Improvements to Topic 606 - Revenue from Contract with Customers.

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. The amendments of ASU 2014-09 were applied on a modified retrospective basis. There was no cumulative effect adjustment as of January 1, 2018. The adoption of ASU 2014-09 and all related ASU updates to ASC 606 did not have a significant impact on the consolidated financial statements and related disclosures as of and for three and nine months ended September 30, 2018. Refer to footnote 10, Revenue from Contracts with Customers, for more information.

Accounting Standards Issued Not Yet Adopted

In August 2018, the FASB issued ASU 2018-13, Fair value Measurement (Topic 820) – Disclosure Framework – Changes to the Disclosure Requirements for Fair value Measurement. The provisions of ASU 2018-13 modify the disclosure requirements on fair value measurements in ASC 820. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. ASU 2018-13 is effective January 1, 2020 but may be early adopted in any interim period. 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 February 2018, the FASB issued ASU 2018-03, Technical Correction and Improvement to Financial Instruments – Overall (Subtopic 825-10), to clarify certain aspects of the guidance issued in ASU 2016-01. The provisions of ASU 2018-03 are effective July 1, 2018 for interim financial statements but may be early adopted in any interim period starting January 1, 2018 as long as ASU 2016-01 is also adopted. 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 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.

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In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“CECL”). ASU 2016-13 introduces new guidance that make substantive changes to the accounting for credit losses. ASU 2016-13 introduces the CECL model, which applies to financial assets subject to credit losses and measured at amortized cost, as well as certain off-balance sheet credit exposures. This includes loans, loan commitments, standby letters of credit, net investments in leases recognized by a lessor and HTM debt securities, The CECL model requires an entity to estimate credit losses expected over the life of an exposure, considering information about historical events, current conditions and reasonable and supportable forecasts and is generally expected to result in earlier recognition of credit losses. ASU 2016-13 also modifies certain provisions of the current OTTI model for AFS debt securities. Credit losses on AFS debt securities will be limited to the difference between the security’s amortized cost basis and its fair value and will be recognized through an allowance for credit losses rather than as a direct reduction in amortized cost basis. ASU 2016-13 also provides for a simplified accounting model for purchased financial assets with more than insignificant credit deterioration since their origination. ASU 2016-13 requires expanded disclosures including, but not limited to, (i) information about the methods and assumptions used to estimate expected credit losses, including changes in the factors that influenced management’s estimate and the reasons for those changes, (ii) for financing receivables and net investment in leases measured at amortized cost, further disaggregation of information about the credit quality of those assets and (iii) a rollforward of the allowance for credit losses for HTM and AFS securities. 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; however, the Company does not intend to early adopt this ASU. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures, processes and controls and is not currently able to reasonably estimate the impact of adoption on the Company’s consolidated financial statements; however, adoption is likely to lead to significant changes in accounting policies related to, and the methods employed in estimating, the allowance for loan and lease losses. It is possible that the impact will be material to the Company’s consolidated financial statements. To date, the Company has completed a gap analysis, adopted a detailed implementation plan, established a formal governance structure for the project, selected and is in the process of implementing a software solution to serve as its CECL platform.

In February 2016, the FASB issued ASU 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 reasonably certain to exercise an option to extend the lease, exercise a purchase option or not exercise an option to terminate the lease. In January 2018, the FASB issued ASU 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842. ASU 2018-01 was issued to address concerns about the cost and complexity of complying with the transition provisions of ASU 2016-02. Both ASU 2016-02 and ASU 2018-01 are effective for the Company on January 1, 2019. Early adoption is permitted in any interim or annual period. Lessees and lessors are required to apply the provisions of ASU 2016-02 at the beginning of the earliest period presented using a modified retrospective approach. Management is in the process of finalizing its evaluation of the impact of adoption of this ASU on its consolidated financial statements and related disclosures, processes and controls. The Company has acquired and is in the process of implementing software to facilitate calculation and reporting of the lease liability and right-of-use asset. The most significant impact of adoption is expected to be the recognition, as lessee, of new right-of-use assets and lease liabilities on the consolidated balance sheet for real estate leases currently classified as operating leases. At its November 29, 2017 meeting, the FASB proposed allowing entities the option of applying the provisions of ASU 2016-02 at the effective date without adjusting the comparative periods presented. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases. ASU 2018-10 was issued to provide more detailed guidance and additional clarification for implementing ASU 2016-02. Also in July 2018, the FASB issued ASU 2018-11, Targeted Improvements, which allows for an optional transition method in which the provisions of ASC Topic 842 would be applied upon the adoption date and would not have to be retroactively applied to the earliest reporting period presented in the consolidated financial statements. The Company is monitoring these and other proposed modifications to the requirements of this ASU.

12.          Subsequent Events

Subsequent to September 30, 2018, the Company received a letter ruling from the Internal Revenue Service National Office approving a change in tax accounting method, which resulted in a tax benefit of $4.7 million recorded in the fourth quarter of 2018.

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NBT BANCORP INC. AND SUBSIDIARIES

Item 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The purpose of this discussion and analysis is to provide a concise description of the financial condition and results of operations of NBT Bancorp Inc. (“NBT”) and its wholly owned consolidated subsidiaries, including NBT Bank, National Association (the “Bank”), NBT Financial Services, Inc. (“NBT Financial”) and NBT Holdings, Inc. (“NBT Holdings”) (collectively referred to herein as the “Company”). This discussion will focus on results of operations, financial condition, capital resources and asset/liability management. Reference should be made to the Company’s consolidated financial statements and footnotes thereto included in this Form 10‑Q as well as to the Company’s Annual Report on Form 10‑K for the year ended December 31, 2017 for an understanding of the following discussion and analysis. Operating results for the three and nine month periods ending September 30, 2018 are not necessarily indicative of the results of the full year ending December 31, 2018 or any future period.

Forward-looking Statements

Certain statements in this filing and future filings by the Company with the SEC, in the Company’s press releases or other public or stockholder 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 and other factors discussed in the Company’s annual and quarterly reports previously filed with the Securities and Exchange Commission, could affect the Company’s financial performance and could cause the Company’s actual results or circumstances for future periods to differ materially from those anticipated or projected.

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.

Non-GAAP Measures

This Quarterly Report on Form 10-Q contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These measures adjust GAAP measures to exclude the effects of acquisition-related intangible amortization expense on earnings and equity as well as providing a fully taxable equivalent (“FTE”) yields on securities and loans. Where non-GAAP disclosures are used in this Form 10-Q, the comparable GAAP measure, as well as a reconciliation to the comparable GAAP measure, is provided in the accompanying tables. Management believes that these non-GAAP measures provide useful information that is important to an understanding of the 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 substitutes for financial measures determined in accordance with GAAP and investors should consider the Company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company.

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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.

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 presented in our 2017 Annual Report on Form 10-K. All accounting policies are important and as such, the Company encourages the reader to review each of the policies included in Note 1 to the consolidated financial statements presented in our 2017 Annual Report on Form 10-K to obtain a better understanding of how the Company’s financial performance is reported.

Refer to Note 11 to the unaudited interim consolidated financial statements in this Quarterly Report on Form 10-Q for recently adopted accounting standards.

Overview

Significant factors management reviews to evaluate the Company’s operating results and financial condition include, but are not limited to: net income and earnings per share, return on average assets 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 three and nine months ended September 30, 2018:

● Third quarter earnings per share up 6.3% from prior quarter and up 30.8% from prior year

● 4% quarterly dividend increase to $0.26 per share

● Loan growth for the nine months ended September 30, 2018 of 6.2% (annualized)

● Average demand deposits for the nine months ended September 30, 2018 up 4.7% over 2017

● FTE net interest margin of 3.57% for the nine months ended September 30, 2018 up 11 bps from 2017

Results of Operations

Net income for the three months ended September 30, 2018 was $29.8 million, up 6.0% from $28.1 million for the second quarter of 2018 and up 30.3% from $22.9 million for the third quarter of 2017. Diluted earnings per share for the three months ended September 30, 2018 was $0.68, as compared with $0.64 for the prior quarter, an increase of 6.3%, and $0.52 for the third quarter of 2017, an increase of 30.8%. Return on average assets (annualized) was 1.25% for the three months ended September 30, 2018 as compared to 1.21% for the prior quarter and 1.00% for the same period last year. Return on average equity (annualized) was 11.96% for the three months ended September 30, 2018 as compared to 11.64% for the prior quarter and 9.55% for the three months ended September 30, 2017. Return on average tangible common equity (annualized) was 17.42% for the three months ended September 30, 2018 as compared to 17.08% for the prior quarter and 13.99% for the three months ended September 30, 2017.

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Net income for the nine months ended September 30, 2018 was $83.9 million, up 30.1% from $64.5 million for the same period last year. Diluted earnings per share for the nine months ended September 30, 2018 was $1.91, as compared with $1.47 for the same period in 2017, an increase of 30.1%. Return on average assets (annualized) was 1.20% for the nine months ended September 30, 2018 as compared to 0.96% for the same period last year. Return on average equity (annualized) was 11.54% for the nine months ended September 30, 2018 as compared to 9.20% for the nine months ended September 30, 2017. Return on average tangible common equity (annualized) was 16.83% for the nine months ended September 30, 2018 as compared to 13.57% for the nine months ended September 30, 2017.

Return on average tangible common equity is a non-GAAP measure and excludes amortization of intangible assets (net of tax) from net income and average tangible equity calculated as follows:

	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2018		2017		2018		2017
Net income	$	29,807	$	22,876	$	83,914	$	64,514
Amortization of intangible assets (net of tax)		791		613		2,298		1,852
Net income, excluding intangible amortization	$	30,598	$	23,489	$	86,212	$	66,366
Average stockholders’ equity	$	988,551	$	950,557	$	972,316	$	937,279
Less: average goodwill and other intangibles		291,814		284,536		287,403		283,580
Average tangible common equity	$	696,737	$	666,021	$	684,913	$	653,699

Net Interest Income

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

Net interest income was $77.5 million for the third quarter of 2018, up $1.8 million, or 2.4%, from the previous quarter. The FTE net interest margin was 3.57% for the three months ended September 30, 2018, comparable to the previous quarter, as higher rates on average earning assets were offset by higher funding costs. Interest income increased $3.4 million, or 4.1%, as the yield on average earning assets increased 6 basis points (“bps”) from the prior quarter to 4.05%, combined with an increase in average interest earning assets of $109.9 million, or 1.3%, driven by the increase in average loans of $88.9 million. Interest expense was up $1.7 million, or 18.3%, as the cost of interest bearing liabilities increased 10 bps to 0.71% for the quarter ended September 30, 2018, driven by increased short-term borrowings costs, with interest bearing deposit costs increasing 8 bps.

Net interest income was $77.5 million for the third quarter of 2018, up $5.6 million, or 7.8%, from the third quarter of 2017. The FTE net interest margin of 3.57% was up 10 bps from the third quarter of 2017. Interest income increased $9.4 million, or 11.9%, as the yield on average earning assets increased 25 bps from the same period in 2017, and average interest earning assets increased $341.9 million, or 4.1%, primarily due to a $439.3 million increase in average loans, which was partially offset by a $91.9 million decrease in securities. Interest expense increased $3.8 million, or 54.4%, as the cost of interest bearing liabilities increased 24 bps, driven by the increase in short-term borrowing costs, combined with interest bearing deposit costs increasing 18 bps.

Net interest income for the first nine months of 2018 was $226.8 million, up $16.7 million, or 8.0%, from the same period in 2017. The FTE net interest margin of 3.57% for the nine months ended September 30, 2018, was up from 3.46% for the same period in 2017 primarily due to asset yields increasing 22 bps, more than offsetting the 17 bp rise in in the cost of interest bearing liabilities. Average interest earning assets were up $314.0 million, or 3.8%, for the nine months ended September 30, 2018, as compared to the same period in 2017, driven by a $426.0 million increase in loans, which was partially offset by a $105.2 million decrease in securities. Interest income increased $24.6 million, or 10.7%, due to the increase in earning assets combined with a 21 bp improvement in loan yields. Interest expense was up $7.8 million, or 41.0%, for the nine months ended September 30, 2018 as compared to the same period in 2017 and resulted primarily from a 17 bp increase in rates driven by higher borrowing costs and an 11 bp increase in the cost of deposits, combined with an increase in average interest bearing liabilities of $169.8 million. The Federal Reserve has raised its target fed funds rate eight times from December 2015 through September 2018 for a total of 200 bps. During this same cycle of increasing rates, the Company’s deposit rates have increased by 11 bps, resulting in a full cycle deposit beta of 5.7%. The favorable deposit beta was influenced by a favorable loan to deposit ratio and deposit mix.

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Average Balances and Net Interest Income

The following tables include the condensed consolidated average balance sheet, an analysis of interest income/expense and average yield/rate for each major category of earning assets and interest bearing liabilities on a taxable equivalent basis. Interest income for tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory Federal income tax rate of 21% for 2018 and 35% for 2017.

Three months ended	September 30, 2018							September 30, 2017
(Dollars in thousands)	Average Balance		Interest		Yield/ Rates			Average Balance		Interest		Yield/ Rates
Assets:
Short-term interest bearing accounts	$	3,328	$	51		6.08	%	$	9,000	$	55		2.42	%
Securities available for sale (1)(3)		1,197,910		6,697		2.22	%		1,374,739		7,373		2.13	%
Securities held to maturity (1)		591,220		3,843		2.58	%		506,324		3,396		2.66	%
FRB and FHLB stock		50,107		783		6.20	%		49,902		682		5.42	%
Loans (2)		6,839,565		77,359		4.49	%		6,400,287		68,302		4.23	%
Total interest earning assets	$	8,682,130	$	88,733		4.05	%	$	8,340,252	$	79,808		3.80	%
Other assets (3)	$	776,219						$	759,636
Total assets	$	9,458,349						$	9,099,888
Liabilities and Stockholders’ Equity:
Money market deposit accounts	$	1,724,853	$	2,526		0.58	%	$	1,652,730	$	978		0.23	%
NOW deposit accounts		1,164,513		485		0.17	%		1,130,940		272		0.10	%
Savings deposits		1,279,520		188		0.06	%		1,232,823		180		0.06	%
Time deposits		881,792		2,958		1.33	%		805,435		2,218		1.09	%
Total interest bearing deposits	$	5,050,678	$	6,157		0.48	%	$	4,821,928	$	3,648		0.30	%
Short-term borrowings		766,372		3,000		1.55	%		773,074		1,870		0.96	%
Long-term debt		73,762		431		2.32	%		88,935		589		2.63	%
Junior subordinated debt		101,196		1,089		4.27	%		101,196		810		3.18	%
Total interest bearing liabilities	$	5,992,008	$	10,677		0.71	%	$	5,785,133	$	6,917		0.47	%
Demand deposits	$	2,356,216						$	2,260,973
Other liabilities		121,574							103,225
Stockholders’ equity		988,551							950,557
Total liabilities and stockholders’ equity	$	9,458,349						$	9,099,888
Net interest income (FTE)			$	78,056						$	72,891
Interest rate spread						3.34	%						3.27	%
Net interest margin (FTE)						3.57	%						3.47	%
Taxable equivalent adjustment			$	529						$	961
Net interest income			$	77,527						$	71,930

(1) Securities are shown at average amortized cost.

(2) For purposes of these computations, nonaccrual loans and loans held for sale are included in the average loan balances outstanding.

(3) For purposes of the average balance sheet presentation, equity securities amounts reclassified for the current period from securities available for sale to other assets, related to the adoption of Accounting Standard Update 2016-01, Financial Instruments - Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities, in the first quarter of 2018.

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Nine months ended	September 30, 2018							September 30, 2017
(Dollars in thousands)	Average Balance		Interest		Yield/ Rates			Average Balance		Interest		Yield/ Rates
Assets:
Short-term interest bearing accounts	$	3,242	$	133		5.48	%	$	10,927	$	144		1.76	%
Securities available for sale (1)(3)		1,245,672		20,714		2.22	%		1,363,506		21,815		2.14	%
Securities held to maturity (1)		526,097		9,924		2.52	%		513,447		10,178		2.65	%
FRB and FHLB stock		48,391		2,248		6.21	%		47,466		1,866		5.26	%
Loans (2)		6,728,479		222,184		4.41	%		6,302,494		198,027		4.20	%
Total interest earning assets	$	8,551,881	$	255,203		3.99	%	$	8,237,840	$	232,030		3.77	%
Other assets (2)	$	763,108						$	753,873
Total assets	$	9,314,989						$	8,991,713
Liabilities and Stockholders’ Equity:
Money market deposit accounts	$	1,693,627	$	5,459		0.43	%	$	1,687,998	$	2,791		0.22	%
NOW deposit accounts		1,199,306		1,366		0.15	%		1,137,424		682		0.08	%
Savings deposits		1,272,452		543		0.06	%		1,213,990		509		0.06	%
Time deposits		847,899		7,799		1.23	%		825,594		6,676		1.08	%
Total interest bearing deposits	$	5,013,284	$	15,167		0.40	%	$	4,865,006	$	10,658		0.29	%
Short-term borrowings		728,627		7,421		1.36	%		691,919		4,375		0.85	%
Long-term debt		82,372		1,359		2.21	%		97,561		1,794		2.46	%
Junior subordinated debt		101,196		3,030		4.00	%		101,196		2,308		3.05	%
Total interest bearing liabilities	$	5,925,479	$	26,977		0.61	%	$	5,755,682	$	19,135		0.44	%
Demand deposits	$	2,303,751						$	2,201,309
Other liabilities		113,443							97,443
Stockholders’ equity		972,316							937,279
Total liabilities and stockholders’ equity	$	9,314,989						$	8,991,713
Net interest income (FTE)			$	228,226						$	212,895
Interest rate spread						3.38	%						3.33	%
Net interest margin (FTE)						3.57	%						3.46	%
Taxable equivalent adjustment			$	1,472						$	2,853
Net interest income			$	226,754						$	210,042

(1) Securities are shown at average amortized cost less OTTI write-downs.

(2) For purposes of these computations, nonaccrual loans and loans held for sale are included in the average loan balances outstanding.

(3) For purposes of the average balance sheet presentation, equity securities amounts reclassified for the current period from securities available for sale to other assets, related to the adoption of Accounting Standard Update (“ASU”) 2016-01, Financial Instruments - Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), in the first quarter of 2018.

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

Three months ended September 30,	Increase (Decrease) 2018 over 2017
(In thousands)	Volume			Rate			Total
Short-term interest bearing accounts	$	(50	)	$	46		$	(4	)
Securities available for sale (1)		(979	)		303			(676	)
Securities held to maturity		555			(108	)		447
FRB and FHLB stock		3			98			101
Loans		4,838			4,219			9,057
Total interest income (FTE)	$	4,367		$	4,558		$	8,925
Money market deposit accounts	$	44		$	1,504		$	1,548
NOW deposit accounts		8			205			213
Savings deposits		7			1			8
Time deposits		224			516			740
Short-term borrowings		(16	)		1,146			1,130
Long-term debt		(93	)		(65	)		(158	)
Junior subordinated debt		-			279			279
Total interest expense (FTE)	$	174		$	3,586		$	3,760
Change in net interest income (FTE)	$	4,193		$	972		$	5,165

Nine months ended September 30,	Increase (Decrease) 2018 over 2017
(In thousands)	Volume			Rate			Total
Short-term interest bearing accounts	$	(155	)	$	144		$	(11	)
Securities available for sale (1)		(1,936	)		835			(1,101	)
Securities held to maturity		248			(502	)		(254	)
FRB and FHLB stock		37			345			382
Loans		13,812			10,345			24,157
Total interest income (FTE)	$	12,006		$	11,167		$	23,173
Money market deposit accounts	$	9		$	2,658		$	2,667
NOW deposit accounts		39			646			685
Savings deposits		25			9			34
Time deposits		184			939			1,123
Short-term borrowings		243			2,803			3,046
Long-term debt		(262	)		(173	)		(435	)
Junior subordinated debt		-			722			722
Total interest expense (FTE)	$	238		$	7,604		$	7,842
Change in net interest income (FTE)	$	11,768		$	3,563		$	15,331

(1) Equity securities amounts reclassified out of securities available for sale, related to the adoption of ASU 2016-01, in the first quarter of 2018.

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Noninterest Income

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

	Three months ended September 30,					Nine months ended September 30,
(In thousands)	2018		2017			2018		2017
Insurance and other financial services revenue	$	6,172	$	5,536		$	18,502	$	17,927
Service charges on deposit accounts		4,503		4,261			12,721		12,399
ATM and debit card fees		5,906		5,557			16,995		16,025
Retirement plan administration fees		7,244		5,272			19,879		14,881
Trust		4,808		4,927			14,951		14,620
Bank owned life insurance		1,288		1,284			3,852		3,913
Net securities gains (losses)		412		(4	)		575		(2	)
Other		3,048		3,945			11,341		10,069
Total noninterest income	$	33,381	$	30,778		$	98,816	$	89,832

Noninterest income for the three months ended September 30, 2018 was $33.4 million, down $0.8 million, or 2.3%, from the prior quarter and up $2.6 million, or 8.5%, from the third quarter of 2017. The decrease from the prior quarter was driven by lower trust income due to higher seasonal fees in the second quarter and other noninterest income due to lower swap fee income during the third quarter of 2018. The increase from the third quarter of 2017 was driven by higher retirement plan administration fees resulting from the acquisition of Retirement Plan Services, LLC (“RPS”) in the second quarter of 2018 and higher insurance and other financial services revenue due to account growth, which were partially offset by lower other noninterest income due primarily to lower swap fees.

Noninterest income for the nine months ended September 30, 2018 was $98.8 million, up $9.0 million, or 10.0%, from the same period in 2017. The increase from the prior year was driven by higher retirement plan administration fees due to the acquisitions of RPS in the second quarter of 2018 and of Downeast Pension Services in the second quarter of 2017. Other noninterest income in the first nine months of 2018 increased compared to the same period of 2017 due to non-recurring gains recognized in the first nine months of 2018 and ATM and debit card fees increased due to higher number of accounts and usage.

Noninterest Expense

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

	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2018		2017		2018		2017
Salaries and employee benefits	$	38,394	$	33,674	$	112,687	$	101,410
Occupancy		5,380		5,174		17,034		16,528
Data processing and communications		4,434		4,399		13,221		12,826
Professional fees and outside services		3,580		3,107		10,408		9,748
Equipment		4,319		3,733		12,508		11,224
Office supplies and postage		1,563		1,432		4,640		4,680
FDIC expenses		1,223		1,257		3,516		3,571
Advertising		739		665		1,776		1,711
Amortization of intangible assets		1,054		993		3,064		2,999
Loan collection and other real estate owned, net		1,234		1,684		3,479		3,627
Other		4,577		4,483		13,324		13,880
Total noninterest expense	$	66,497	$	60,601	$	195,657	$	182,204

Noninterest expense for the three months ended September 30, 2018 was $66.5 million, up $1.6 million, or 2.5%, from the prior quarter and up $5.9 million, or 9.7%, from the third quarter of 2017. The increase from the prior quarter and third quarter of 2017 was driven by an increase in salaries and employee benefits expenses primarily due to the RPS acquisition, wage increases related to tax reform initiatives and higher incentive compensation associated with business growth.

Noninterest expense for the nine months ended September 30, 2018 was $195.7 million, up $13.5 million, or 7.4%, from the same period in 2017. The increase from the prior year was driven by higher salaries and employee benefits due to the RPS acquisition in the second quarter of 2018, the acquisition of Downeast Pension Services in the second quarter of 2017, higher incentive compensation and wage increases related to tax reform initiatives.

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Income Taxes

Income tax expense for the three months ended September 30, 2018 was $8.6 million, up $0.5 million, or 5.7%, from the prior quarter and down $2.8 million, or 24.4%, from the third quarter of 2017. The effective tax rate of 22.3% for the third quarter of 2018 was down from 22.4% for the second quarter of 2018 and down from 33.1% for the third quarter of 2017. The increase in income tax expense from the prior quarter was due to a higher level of taxable income. The decrease in income tax expense from the third quarter of 2017 was due to the lower effective tax rate resulting from the Tax Cuts and Jobs Act partially offset by a higher level of taxable income.

Income tax expense for the nine months ended September 30, 2018 was $23.7 million, down $6.6 million, or 21.8%, from the same period of 2017. The effective tax rate of 22.0% for the first nine months of 2018 was down from 32.0% for the same period in the prior year. The decrease in income tax expense from the prior year was due to the lower effective tax rate resulting from the Tax Cuts and Jobs Act partially offset by a higher level of taxable income and lower tax benefit from equity-based transactions. Excluding the tax benefit from equity-based transactions, the effective tax rate was 22.5% and 33.8% for the nine months ending September 30, 2018 and 2017, respectively.

Subsequent to September 30, 2018, the Company received a letter ruling from the Internal Revenue Service National Office approving a change in tax accounting method, which resulted in a tax benefit of $4.7 million recorded in the fourth quarter of 2018.

ANALYSIS OF FINANCIAL CONDITION

Securities

Total securities increased $34.3 million, or 2.0%, from December 31, 2017 to September 30, 2018. The securities portfolio represents 18.7% of total assets as of September 30, 2018 as compared to 19.2% as of December 31, 2017.

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

	September 30, 2018			December 31, 2017
Mortgage-backed securities:
With maturities 15 years or less		26	%		28	%
With maturities greater than 15 years		5	%		5	%
Collateral mortgage obligations		44	%		42	%
Municipal securities		16	%		14	%
U.S. agency notes		8	%		10	%
Equity securities		1	%		1	%
Total		100	%		100	%

The Company’s mortgage-backed securities, U.S. agency notes and collateralized mortgage obligations are all “prime/conforming” and are guaranteed by Fannie Mae, Freddie Mac, Federal Home Loan Bank, Federal Farm Credit Banks or Ginnie Mae (“GNMA”). GNMA securities are considered equivalent to U.S. Treasury securities, as they are backed by the full faith and credit of the U.S. government. Currently, there are no subprime mortgages in our investment portfolio. Refer to Note 3 to the Company’s unaudited interim consolidated financial statements included in this Form 10-Q for information related to other-than-temporary impairment considerations.

Loans

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

(In thousands)	September 30, 2018		December 31, 2017
Commercial	$	1,310,262	$	1,258,212
Commercial Real Estate		1,902,315		1,769,620
Residential Real Estate		1,373,487		1,320,370
Dealer Finance		1,229,700		1,227,870
Specialty Lending		521,396		438,866
Home Equity		480,761		498,179
Other Consumer		69,341		70,522
Total loans	$	6,887,262	$	6,583,639

Total loans increased by $303.6 million, or 4.6%, at September 30, 2018 from December 31, 2017. Loan growth in the first nine months of 2018 resulted from growth in the Commercial Real Estate and Specialty Lending portfolios. Total loans represent approximately 72.1% of assets as of September 30, 2018, as compared to 72.1% as of December 31, 2017.

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

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

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

During the quarter ended March 31, 2018, the Company made adjustments to the class segments within the portfolios to better align risk characteristics and reflect the monitoring and assessment of risks. Agricultural and Agricultural Real Estate were consolidated with Commercial and Industrial and Commercial Real Estate, respectively. Agricultural loans are a type of Commercial loan with certain specific underwriting guidelines; however, as of March 31, 2018, the portfolio has decreased to less than 3% of the Commercial portfolio and separate classification was no longer warranted. The Indirect Lending class was further separated into Dealer Finance and Specialty Lending. The growth in our Specialty Lending portfolio to 21% of Consumer Loans as of March 31, 2018 warranted evaluation of this class segment separately due to different risk characteristics from the Dealer Finance segment. The Direct and Home Equity class segments were consolidated into Direct to reflect common management, similar underwriting and in-market focus. The change to the class segments in the allowance methodology did not have a significant impact on the allowance for loan losses.

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

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

The following table reflects changes to the allowance for loan losses for the periods presented:

Allowance For Loan Losses	Three months ended
(Dollars in thousands)	September 30, 2018					September 30, 2017
Balance, beginning of period	$	72,450				$	66,600
Recoveries		2,093					1,835
Charge-offs		(7,764	)				(7,974	)
Net charge-offs	$	(5,671	)			$	(6,139	)
Provision for loan losses		6,026					7,889
Balance, end of period	$	72,805				$	68,350
Composition of Net Charge-offs
Commercial	$	(413	)	7	%	$	(308	)	5	%
Residential Real Estate		(42	)	1	%		(298	)	5	%
Consumer		(5,216	)	92	%		(5,533	)	90	%
Net charge-offs	$	(5,671	)	100	%	$	(6,139	)	100	%
Annualized net charge-offs to average loans		0.33	%				0.38	%

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Allowance For Loan Losses	Nine months ended
(Dollars in thousands)	September 30, 2018					September 30, 2017
Balance, beginning of period	$	69,500				$	65,200
Recoveries		6,000					4,765
Charge-offs		(24,995	)				(24,450	)
Net charge-offs	$	(18,995	)			$	(19,685	)
Provision for loan losses		22,300					22,835
Balance, end of period	$	72,805				$	68,350
Composition of Net Charge-offs
Commercial	$	(1,755	)	9	%	$	(2,072	)	11	%
Residential Real Estate		(239	)	1	%		(1,551	)	8	%
Consumer		(17,001	)	90	%		(16,062	)	81	%
Net charge-offs	$	(18,995	)	100	%	$	(19,685	)	100	%
Annualized net charge-offs to average loans		0.38	%				0.42	%

Net charge-offs of $5.7 million for the three months ended September 30, 2018 were down as compared to $6.5 million for the prior quarter and $6.1 million for the third quarter of 2017. Provision expense was lower at $6.0 million for the three months ended September 30, 2018, as compared with $8.8 million for the prior quarter and $7.9 million for the third quarter of 2017. Annualized net charge-offs to average loans for the third quarter of 2018 was 0.33%, down from 0.39% for the prior quarter and from 0.38% for the third quarter of 2017.

Net charge-offs of $19.0 million for the nine months ended September 30, 2018 were down as compared to $19.7 million for the same period of 2017. Provision expense was $22.3 million for the nine months ended September 30, 2018, as compared with $22.8 million for the same period of 2017. Annualized net charge-offs to average loans for the first nine months of 2018 was 0.38% as compared with 0.42% for the first nine months of 2017.

The allowance for loan losses totaled $72.8 million at September 30, 2018, compared to $72.5 million at June 30, 2018 and $68.4 million at September 30, 2017. The allowance for loan losses as a percentage of loans was 1.06% (1.11% excluding acquired loans) at September 30, 2018 and June 30, 2018 compared to 1.06% (1.13% excluding acquired loans) at September 30, 2017.

Nonperforming assets consist of nonaccrual loans, loans 90 days or more past due and still accruing, restructured loans, other real estate owned (“OREO”) and nonperforming securities. Loans are generally placed on nonaccrual when principal or interest payments become 90 days past due, unless the loan is well secured and in the process of collection. Loans may also be placed on nonaccrual when circumstances indicate that the borrower may be unable to meet the contractual principal or interest payments. The threshold for evaluating classified and nonperforming loans specifically evaluated for impairment is $750 thousand. OREO represents property acquired through foreclosure and is valued at the lower of the carrying amount or fair value, less any estimated disposal costs. Nonperforming securities, which include securities which management believes are other-than-temporarily impaired, are carried at their estimated fair value and are not accruing interest.

	September 30, 2018						December 31, 2017
(Dollars in thousands)	Amount			%			Amount			%
Nonaccrual loans
Commercial	$	10,165			44	%	$	12,485			48	%
Residential Real Estate		6,275			27	%		5,919			23	%
Consumer		4,187			18	%		4,324			17	%
Troubled debt restructured loans		2,674			11	%		2,980			12	%
Total nonaccrual loans	$	23,301			100	%	$	25,708			100	%
Loans 90 days or more past due and still accruing
Commercial	$	239			5	%	$	-			-	%
Residential Real Estate		1,265			27	%		1,402			26	%
Consumer		3,230			68	%		4,008			74	%
Total loans 90 days or more past due and still accruing	$	4,734			100	%	$	5,410			100	%
Total nonperforming loans	$	28,035					$	31,118
OREO		3,271						4,529
Total nonperforming assets	$	31,306					$	35,647
Total nonperforming loans to total loans		0.41	%					0.47	%
Total nonperforming assets to total assets		0.33	%					0.39	%
Allowance for loan losses to total nonperforming loans		259.69	%					223.34	%

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Nonperforming loans to total loans was 0.41% at September 30, 2018, up 3 bps from 0.38% for the prior quarter and down 1 bp from 0.42% at September 30, 2017. Past due loans as a percentage of total loans were 0.53% at September 30, 2018, up from 0.50% at June 30, 2018 and down from 0.63% at September 30, 2017.

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 the acquisition, or comparable with other institutions. The credit metrics most impacted by our acquisitions were the allowance for loans losses to total loans and total allowance for loan losses to nonperforming loans. As of September 30, 2018, the allowance for loan losses to total originated loans and the total allowance for loan losses to originated nonperforming loans were 1.11% and 285.86%, respectively. 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.

In addition to nonperforming loans, the Company has also identified approximately $60.5 million in potential problem loans at September 30, 2018 as compared to $57.7 million at December 31, 2017. 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.” 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.

Deposits

Total deposits were $7.4 billion at September 30, 2018, up $270.7 million, or 3.8%, from December 31, 2017. Total average deposits increased $250.7 million, or 3.5%, from the same period last year driven primarily by growth in interest bearing deposits of $148.3 million, or 3.0%, due to growth in NOW deposit accounts, savings and time accounts, combined with a $102.4 million, or 4.7%, increase in demand deposits.

Borrowed Funds

The Company’s borrowed funds consist of short-term borrowings and long-term debt. Short-term borrowings totaled $811.7 million at September 30, 2018 compared to $719.1 million at December 31, 2017. The notional value of interest rate swaps hedging cash flows related to short-term borrowings totaled $225.0 million at September 30, 2018 and $250.0 million at December 31, 2017. Long-term debt was $73.8 million at September 30, 2018 compared to $88.9 million at December 31, 2017. Junior subordinated debt was $101.2 million at September 30, 2018 and December 31, 2017.

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

Capital Resources

Stockholders’ equity of $994.2 million represented 10.41% of total assets at September 30, 2018 compared with $958.2 million, or 10.49% as of December 31, 2017. The increase in stockholders’ equity resulted primarily from net income of $83.9 million for the nine months ending September 30, 2018, partially offset by dividends of $31.9 million during the period and a $18.8 million decrease in AOCI primarily due to the increase in unrealized gains on investment securities arising during the period.

The Company did not purchase shares of its common stock during the nine months ended September 30, 2018. As of September 30, 2018, there were 1,000,000 shares available for repurchase under a plan authorized on October 23, 2017, which expires on December 31, 2019.

The Board of Directors considers the Company’s earnings position and earnings potential when making dividend decisions. The Board of Directors approved a fourth-quarter 2018 cash dividend of $0.26 per share at a meeting held on October 22, 2018. The dividend, which represents a $0.01, or 4% increase, will be paid on December 14, 2018 to stockholders of record as of November 30, 2018. Combined with the increase in the second quarter, the quarterly dividend payable to our stockholders has increased 13% in 2018.

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As the capital ratios in the following table indicate, the Company remained “well capitalized” at September 30, 2018 under applicable bank regulatory requirements. Capital measurements are well in excess of regulatory minimum guidelines and meet the requirements to be considered well capitalized for all periods presented. To be considered well capitalized, tier 1 leverage, common equity tier 1 capital, tier 1 capital and total risk-based capital ratios must be 5%, 6.5%, 8% and 10%, respectively.

Capital Measurements	September 30, 2018			December 31, 2017
Tier 1 leverage ratio		9.36	%		9.14	%
Common equity tier 1 capital ratio		10.28	%		10.06	%
Tier 1 capital ratio		11.58	%		11.42	%
Total risk-based capital ratio		12.58	%		12.42	%
Cash dividends as a percentage of net income		38.01	%		49.20	%
Per common share:
Book value	$	22.77		$	22.01
Tangible book value (1)	$	16.10		$	15.54

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

Liquidity and Interest Rate Sensitivity Management

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 effect of changing interest rates is an uncertainty that can have an adverse effect on net income.

In adjusting the Company’s asset/liability position, the Board and management attempt to manage the Company’s interest rate risk while minimizing net interest margin compression. At times, depending on the level of general interest rates, the relationship between long and short-term interest rates, market conditions and competitive factors, the Board and management may determine to increase the Company’s interest rate risk position somewhat in order to increase its net interest margin. The Company’s results of operations and net portfolio values remain vulnerable to changes in interest rates and fluctuations in the difference between long and short-term interest rates. 

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 resulting changes in net interest income are then measured against the flat rate scenario.

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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 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 12 months in the +200 /-100 bp scenarios, as described above, is within the internal policy risk limits of not more than a 7.5% change in net interest income. The following table summarizes the percentage change in net interest income in the rising and declining rate scenarios over a 12-month period from the forecasted net interest income in the flat rate scenario using the September 30, 2018 balance sheet position:

Interest Rate Sensitivity Analysis
Change in interest rates	Percent change in
(in bps points)	net interest income
+200	(2.14%)
-100	(2.47%)

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. 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 the “Basic Surplus,” which captures the adequacy of its access to reliable sources of cash relative to the stability of its funding mix of average liabilities. 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 September 30, 2018, the Company’s Basic Surplus measurement was 9.9% of total assets or approximately $0.9 billion as compared to the December 31, 2017 Basic Surplus of 12.0% or $1.1 billion and was above the Company’s minimum of 5% (calculated at $477.4 million and $456.8 million, or period end total assets as September 30, 2018 and December 31, 2017, respectively) set forth in its liquidity policies.

At September 30, 2018 and December 31, 2017, Federal Home Loan Bank (“FHLB”) advances outstanding totaled approximately $854.8 million and $633.9 million, respectively. The Bank is a member of the FHLB system and had additional borrowing capacity from the FHLB of approximately $0.8 billion at September 30, 2018 and $0.9 billion at December 31, 2017. In addition, unpledged securities could have been used to increase borrowing capacity at the FHLB by an additional $567.1 million and $541.2 million at September 30, 2018 and December 31, 2017, respectively, or used to collateralize other borrowings, such as repurchase agreements. The Company also has the ability to purchase brokered time deposits and borrow against established borrowing facilities with other banks (Federal funds), which could provide additional liquidity of $1.4 billion at September 30, 2018 and $1.3 billion at December 31, 2017. In addition, the Bank has a “Borrower-in-Custody” program with the FRB with the addition of the ability to pledge automobile loans. At September 30, 2018 and December 31, 2017, the Bank had the capacity to borrow $869.3 million and $868.0 million, respectively, from this program. The Company’s internal policies authorize borrowing up to 25% of assets. Under this policy, remaining available borrowing capacity totaled $1.4 billion at September 30, 2018 and $1.6 billion at December 31, 2017.

This Basic Surplus approach enables the Company to appropriately manage liquidity from both operational and contingency perspectives. By tempering the need for cash flow liquidity with reliable borrowing facilities, the Company is able to operate with a more fully invested and, therefore, higher interest income generating securities portfolio. The makeup and term structure of the securities portfolio is, in part, impacted by the overall interest rate sensitivity of the balance sheet. Investment decisions and deposit pricing strategies are impacted by the liquidity position. The Company considered its Basic Surplus position to be strong. However, certain events may adversely impact the Company’s position in 2018. Increasing market interest rates 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%.

The Company’s primary source of funds is the Bank. 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 (“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 September 30, 2018, approximately $157.8 million of the total stockholders’ equity of the Bank was available for payment of dividends to the Company without approval by the OCC. The Bank’s ability to pay dividends is also subject to the Bank being in compliance with regulatory capital requirements. The Bank is currently in compliance with these requirements. Under the State of Delaware General Corporation Law, the Company may declare and pay dividends either out of accumulated net retained earnings or capital surplus.

47

Item 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Item 4 - CONTROLS AND PROCEDURES

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2018, the Company’s disclosure controls and procedures were effective.

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

48

PART II. OTHER INFORMATION

Item 1 – LEGAL PROCEEDINGS

There are no material legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or of which any of their property is subject, except as described in the Company’s 2017 Annual Report on Form 10-K.

Item 1A – RISK FACTORS

There are no material changes to the risk factors as previously discussed in Part I, Item 1A of our 2017 Annual Report on Form 10-K.

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

(a) Not applicable

(b) Not applicable

(c) None

Item 3 – DEFAULTS UPON SENIOR SECURITIES

None

Item 4 – MINE SAFETY DISCLOSURES

None

Item 5 – OTHER INFORMATION

None

49

Item 6 – EXHIBITS

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 May 22, 2018 (filed as Exhibit 3.1 to Registrant’s Form 8-K, filed on May 23, 2018 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).
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.

50

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, this 9th day of November 2018.

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

51

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 quarterly report on Form 10-Q of NBT Bancorp Inc.

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

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

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

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

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

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

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

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

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

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

Date:  November 9, 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 quarterly report on Form 10-Q of NBT Bancorp Inc.

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

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

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

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

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

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

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

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

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

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

Date:  November 9, 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-Q of the Company for the Quarterly Period Ended September 30, 2018, 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

November 9, 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-Q of the Company for the Quarterly Period Ended September 30, 2018,  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

November 9, 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 - shares	9 Months Ended
	Sep. 30, 2018	Oct. 31, 2018
Document And Entity Information [Abstract]
Entity Registrant Name	NBT BANCORP INC
Entity Central Index Key	0000790359
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Ex Transition Period	false
Entity Common Stock, Shares Outstanding		43,667,380
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3

XML

Consolidated Balance Sheets (unaudited) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Assets
Cash and due from banks	$ 171,525	$ 156,852
Short-term interest bearing accounts	3,108	2,812
Equity securities, at fair value	24,722	0
Securities available for sale, at fair value	1,101,074	1,255,925
Securities held to maturity (fair value $645,732 and $481,871, respectively)	659,949	484,073
Trading securities	0	11,467
Federal Reserve and Federal Home Loan Bank stock	52,421	46,706
Loans held for sale	5,035	1,134
Loans	6,887,262	6,583,639
Less allowance for loan losses	72,805	69,500
Net loans	6,814,457	6,514,139
Premises and equipment, net	78,284	81,305
Goodwill	274,769	268,043
Intangible assets, net	16,576	13,420
Bank owned life insurance	176,240	172,388
Other assets	169,124	128,548
Total assets	9,547,284	9,136,812
Liabilities
Demand (noninterest bearing)	2,373,027	2,286,892
Savings, NOW and money market	4,199,694	4,076,978
Time	868,569	806,766
Total deposits	7,441,290	7,170,636
Short-term borrowings	811,709	719,123
Long-term debt	73,751	88,869
Junior subordinated debt	101,196	101,196
Other liabilities	125,183	98,811
Total liabilities	8,553,129	8,178,635
Stockholders' equity
Preferred stock, $0.01 par value. Authorized 2,500,000 shares at September 30, 2018 and December 31, 2017	0	0
Common stock, $0.01 par value. Authorized 100,000,000 shares at September 30, 2018 and December 31, 2017; issued 49,651,493 at September 30, 2018 and December 31, 2017	497	497
Additional paid-in-capital	575,155	574,209
Retained earnings	603,921	543,713
Accumulated other comprehensive loss	(49,112)	(22,077)
Common stock in treasury, at cost, 5,990,174 and 6,108,684 shares at September 30, 2018 and December 31, 2017, respectively	(136,306)	(138,165)
Total stockholders' equity	994,155	958,177
Total liabilities and stockholders' equity	$ 9,547,284	$ 9,136,812

XML

Consolidated Balance Sheets (unaudited) (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Assets
Securities held to maturity fair value	$ 645,732	$ 481,871
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)	5,990,174	6,108,684

XML

Consolidated Statements of Income (unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Interest, fee and dividend income
Interest and fees on loans	$ 77,249	$ 68,086	$ 221,864	$ 197,399
Securities available for sale	6,659	7,278	20,588	21,505
Securities held to maturity	3,462	2,746	8,898	8,263
Other	834	737	2,381	2,010
Total interest, fee and dividend income	88,204	78,847	253,731	229,177
Interest expense
Deposits	6,157	3,648	15,167	10,658
Short-term borrowings	3,000	1,870	7,421	4,375
Long-term debt	431	589	1,359	1,794
Junior subordinated debt	1,089	810	3,030	2,308
Total interest expense	10,677	6,917	26,977	19,135
Net interest income	77,527	71,930	226,754	210,042
Provision for loan losses	6,026	7,889	22,300	22,835
Net interest income after provision for loan losses	71,501	64,041	204,454	187,207
Noninterest income
Insurance and other financial services revenue	6,172	5,536	18,502	17,927
Service charges on deposit accounts	4,503	4,261	12,721	12,399
ATM and debit card fees	5,906	5,557	16,995	16,025
Retirement plan administration fees	7,244	5,272	19,879	14,881
Trust	4,808	4,927	14,951	14,620
Bank owned life insurance	1,288	1,284	3,852	3,913
Net securities gains (losses)	412	(4)	575	(2)
Other	3,048	3,945	11,341	10,069
Total noninterest income	33,381	30,778	98,816	89,832
Noninterest expense
Salaries and employee benefits	38,394	33,674	112,687	101,410
Occupancy	5,380	5,174	17,034	16,528
Data processing and communications	4,434	4,399	13,221	12,826
Professional fees and outside services	3,580	3,107	10,408	9,748
Equipment	4,319	3,733	12,508	11,224
Office supplies and postage	1,563	1,432	4,640	4,680
FDIC expenses	1,223	1,257	3,516	3,571
Advertising	739	665	1,776	1,711
Amortization of intangible assets	1,054	993	3,064	2,999
Loan collection and other real estate owned, net	1,234	1,684	3,479	3,627
Other	4,577	4,483	13,324	13,880
Total noninterest expense	66,497	60,601	195,657	182,204
Income before income tax expense	38,385	34,218	107,613	94,835
Income tax expense	8,578	11,342	23,699	30,321
Net income	$ 29,807	$ 22,876	$ 83,914	$ 64,514
Earnings per share
Basic (in dollars per share)	$ 0.68	$ 0.52	$ 1.92	$ 1.48
Diluted (in dollars per share)	$ 0.68	$ 0.52	$ 1.91	$ 1.47

XML

Consolidated Statements of Comprehensive Income (unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Consolidated Statements of Comprehensive Income (unaudited) [Abstract]
Net income	$ 29,807	$ 22,876	$ 83,914	$ 64,514
Securities available for sale:
Unrealized net holding (losses) gains arising during the period, gross	(5,798)	1,355	(26,605)	4,719
Tax effect	1,449	(518)	6,651	(1,823)
Unrealized net holding (losses) gains arising during the period, net	(4,349)	837	(19,954)	2,896
Reclassification adjustment for net losses in net income, gross	0	4	0	2
Tax effect	0	(2)	0	(1)
Reclassification adjustment for net losses in net income, net	0	2	0	1
Amortization of unrealized net gains for the reclassification of available for sale securities to held to maturity, gross	168	212	533	675
Tax effect	(42)	(81)	(133)	(258)
Amortization of unrealized net gains for the reclassification of available for sale securities to held to maturity, net	126	131	400	417
Reclassification adjustment for an impairment write-down of equity security, gross	0	0	0	1,312
Tax effect	0	0	0	(501)
Reclassification adjustment for an impairment write-down of equity security, net	0	0	0	811
Total securities available for sale, net	(4,223)	970	(19,554)	4,125
Cash flow hedges:
Unrealized gains (losses) on derivatives (cash flow hedges), gross	175	91	1,647	(71)
Tax effect	(44)	(35)	(412)	27
Unrealized gains (losses) on derivatives (cash flow hedges), net	131	56	1,235	(44)
Reclassification of net unrealized (gains) on cash flow hedges to interest (income) expense, gross	(638)	(155)	(1,537)	(96)
Tax effect	159	59	384	37
Reclassification of net unrealized (gains) on cash flow hedges to interest (income) expense, net	(479)	(96)	(1,153)	(59)
Total cash flow hedges, net	(348)	(40)	82	(103)
Pension and other benefits:
Amortization of prior service cost and actuarial gains, gross	286	480	876	1,350
Tax effect	(71)	(183)	(219)	(516)
Amortization of prior service cost and actuarial gains, net	215	297	657	834
Total pension and other benefits, net	215	297	657	834
Total other comprehensive (loss) income	(4,356)	1,227	(18,815)	4,856
Comprehensive income	$ 25,451	$ 24,103	$ 65,099	$ 69,370

XML

Consolidated Statements of Stockholders' Equity (unaudited) - 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, 2016	$ 497	$ 575,078	$ 501,761	$ (21,520)	$ (142,500)	$ 913,316
Net income	0	0	64,514	0	0	64,514
Cash dividends	0	0	(30,073)	0	0	(30,073)
Net issuance of shares to employee and other stock plans	0	(4,596)	0	0	4,026	(570)
Stock-based compensation	0	3,290	(95)	0	0	3,195
Other comprehensive (loss) income	0	0	0	4,856	0	4,856
Balance at Sep. 30, 2017	497	573,772	536,107	(16,664)	(138,474)	955,238
ASU implementation | ASU 2016-01 [Member]	0	0	2,618	(2,645)	0	(27)
ASU implementation | ASU 2018-02 [Member]	0	0	5,575	(5,575)	0	0
Balance at Dec. 31, 2017	497	574,209	543,713	(22,077)	(138,165)	958,177
Net income	0	0	83,914	0	0	83,914
Cash dividends	0	0	(31,899)	0	0	(31,899)
Net issuance of shares to employee and other stock plans	0	(2,511)	0	0	1,859	(652)
Stock-based compensation	0	3,457	0	0	0	3,457
Other comprehensive (loss) income	0	0	0	(18,815)	0	(18,815)
Balance at Sep. 30, 2018	$ 497	$ 575,155	$ 603,921	$ (49,112)	$ (136,306)	$ 994,155

XML

Consolidated Statements of Stockholders' Equity (unaudited) (Parenthetical) - $ / shares	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Consolidated Statements of Stockholders' Equity (unaudited) [Abstract]
Cash dividends - per share (in dollars per share)	$ 0.73	$ 0.69
Net issuance of shares to employee benefit plans and other stock plans (in shares)	118,510	271,148

XML

Consolidated Statements of Cash Flows (unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Operating activities
Net income	$ 83,914	$ 64,514
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses	22,300	22,835
Depreciation and amortization of premises and equipment	6,957	6,759
Net amortization on securities	3,108	3,628
Amortization of intangible assets	3,064	2,999
Excess tax (benefit) on stock-based compensation	(507)	(1,697)
Stock-based compensation expense	3,457	3,195
Bank owned life insurance income	(3,852)	(3,913)
Trading security purchases	0	(1,470)
Net unrealized losses on trading securities	0	(154)
Proceeds from sales of loans held for sale	73,239	87,095
Originations and purchases of loans held for sale	(76,959)	(87,246)
Net gains on sales of loans held for sale	(181)	(292)
Net security (gains) losses	(575)	2
Net losses (gains) on sales and write-down of other real estate owned	130	(189)
Impairment write-down of equity security	0	1,312
Net change in other assets and other liabilities	(14,313)	(810)
Net cash provided by operating activities	99,782	96,568
Investing activities
Net cash used in acquisitions	(7,884)	(4,000)
Securities available for sale:
Proceeds from maturities, calls and principal paydowns	213,732	205,327
Proceeds from sales	0	9,997
Purchases	(102,004)	(232,850)
Securities held to maturity:
Proceeds from maturities, calls and principal paydowns	73,217	86,055
Proceeds from sales	0	764
Purchases	(249,300)	(53,212)
Equity securities:
Proceeds from sales	3,318	0
Purchases	(2)	0
Other:
Net increase in loans	(323,614)	(293,346)
Proceeds from Federal Home Loan Bank stock redemption	186,869	177,803
Purchases of Federal Reserve and Federal Home Loan Bank stock	(192,584)	(175,840)
Proceeds from settlement of bank owned life insurance	0	800
Purchases of premises and equipment, net	(4,256)	(4,177)
Proceeds from the sales of other real estate owned	2,124	6,767
Net cash (used in) investing activities	(400,384)	(275,912)
Financing activities
Net increase in deposits	270,654	257,548
Net increase in short-term borrowings	92,585	248
Proceeds from issuance of long-term debt	25,000	0
Repayments of long-term debt	(40,117)	(15,174)
Proceeds from the issuance of shares to employee and other stock plans	1,140	3,012
Cash paid by employer for tax-withholdings on stock issuance	(1,792)	(3,582)
Cash dividends	(31,899)	(30,073)
Net cash provided by financing activities	315,571	211,979
Net increase in cash and cash equivalents	14,969	32,635
Cash and cash equivalents at beginning of period	159,664	149,181
Cash and cash equivalents at end of period	174,633	181,816
Cash paid during the period for:
Interest expense	26,002	19,771
Income taxes paid, net of refund	31,077	22,230
Noncash investing activities:
Loans transferred to other real estate owned	996	5,227
Acquisitions:
Fair value of assets acquired	$ 6,274	$ 3,096

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Description of Business

9 Months Ended

Sep. 30, 2018

Description of Business [Abstract]

Description of Business

1.          Description of Business

NBT Bancorp Inc. (the “Registrant” or the “Company”) is a registered financial holding company incorporated in the state of Delaware in 1986, with its principal headquarters located in Norwich, New York. The principal assets of the Registrant consist of all of the outstanding shares of common stock of its subsidiaries, including: NBT Bank, National Association (the “Bank”), NBT Financial Services, Inc. (“NBT Financial”), NBT Holdings, Inc. (“NBT Holdings”), Hathaway Agency, Inc. and CNBF Capital Trust I, NBT Statutory Trust I, 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 area of Maine. 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.

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Basis of Presentation

9 Months Ended

Sep. 30, 2018

Basis of Presentation [Abstract]

Basis of Presentation

2.          Basis of Presentation

The accompanying unaudited interim consolidated financial statements include the accounts of the Registrant and its wholly owned subsidiaries, the Bank, NBT Financial and NBT Holdings. Collectively, the Registrant and its subsidiaries are referred to herein as “the Company.” The interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods in accordance with generally accepted accounting principles in the United States of America (“GAAP”). These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2017 Annual Report on Form 10-K. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period. All intercompany transactions have been eliminated in consolidation. Amounts in the prior period financial statements are reclassified whenever necessary to conform to current period presentation. The Company has evaluated subsequent events for potential recognition and/or disclosure. Refer to footnote 12, Subsequent Events, for more information.

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Securities

9 Months Ended

Sep. 30, 2018

Securities [Abstract]

Securities

3.          Securities

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

(In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
September 30, 2018
Federal agency	$	84,974	$	-	$	1,712	$	83,262
State & municipal		36,841		13		387		36,467
Mortgage-backed:
Government-sponsored enterprises		479,852		207		16,171		463,888
U.S. government agency securities		29,422		204		1,106		28,520
Collateralized mortgage obligations:
Government-sponsored enterprises		461,148		222		19,860		441,510
U.S. government agency securities		49,208		115		1,896		47,427
Total AFS securities	$	1,141,445	$	761	$	41,132	$	1,101,074
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
Equity securities		10,623		3,672		146		14,149
Total AFS securities	$	1,266,165	$	5,893	$	16,133	$	1,255,925

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

(In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
September 30, 2018
Federal agency	$	9,995	$	-	$	46	$	9,949
Mortgage-backed:
Government-sponsored enterprises		87,743		-		4,075		83,668
U.S. government agency securities		15,241		36		69		15,208
Collateralized mortgage obligations:
Government-sponsored enterprises		268,044		31		7,080		260,995
U.S. government agency securities		29,401		4		67		29,338
State & municipal		249,525		90		3,041		246,574
Total HTM securities	$	659,949	$	161	$	14,378	$	645,732
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

AFS and HTM securities with amortized costs totaling $1.6 billion at September 30, 2018 and $1.5 billion at December 31, 2017 were pledged to secure public deposits and for other purposes required or permitted by law. Additionally, at September 30, 2018 and December 31, 2017, AFS and HTM securities with an amortized cost of $196.4 million and $256.2 million, respectively, were pledged as collateral for securities sold under repurchase agreements.

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 September 30, 2018
AFS securities:
Federal agency	$	39,069	$	(916	)		4	$	44,193	$	(796	)		4	$	83,262	$	(1,712	)		8
State & municipal		12,347		(115	)		22		16,165		(272	)		25		28,512		(387	)		47
Mortgage-backed		297,802		(9,061	)		72		178,186		(8,215	)		48		475,988		(17,276	)		120
Collateralized mortgage obligations		83,566		(1,816	)		16		384,459		(19,941	)		70		468,025		(21,757	)		86
Total securities with unrealized losses	$	432,784	$	(11,908	)		114	$	623,003	$	(29,224	)		147	$	1,055,787	$	(41,132	)		261
HTM securities:
Federal agency	$	9,949	$	(46	)		2	$	-	$	-			-	$	9,949	$	(46	)		2
Mortgage-backed		55,712		(1,678	)		5		42,778		(2,466	)		4		98,490		(4,144	)		9
Collateralized mortgage obligations		153,768		(2,195	)		22		97,515		(4,952	)		16		251,283		(7,147	)		38
State & municipal		84,258		(1,276	)		134		27,384		(1,765	)		41		111,642		(3,041	)		175
Total securities with unrealized losses	$	303,687	$	(5,195	)		163	$	167,677	$	(9,183	)		61	$	471,364	$	(14,378	)		224
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		(1,187	)		24		375,946		(3,568	)		79
Collateralized mortgage obligations		227,917		(2,658	)		35		275,303		(8,521	)		42		503,220		(11,179	)		77
Equity securities		-		-			-		2,959		(146	)		1		2,959		(146	)		1
Total securities with unrealized losses	$	633,766	$	(5,481	)		134	$	386,818	$	(10,652	)		79	$	1,020,584	$	(16,133	)		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

Declines in the fair value of HTM securities below their amortized cost, less any current period credit loss, that are deemed to be other-than-temporary are reflected in earnings as realized losses or in other comprehensive income (“OCI”). This classification is dependent upon whether the Company intends to sell the security, or whether it is more likely than not, that the Company will be required to sell the security before recovery. The other-than-temporary impairment (“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 (i) the amount representing the credit loss and (ii) 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 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 bond approaches its maturity date or repricing date or if market yields for such investments declines.

Management also has the intent to hold and will not be required to sell, the debt 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 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 September 30, 2018 and December 31, 2017, management believes the impairments detailed in the table above are temporary. There were no OTTI losses realized in the Company’s unaudited interim consolidated statements of income for the three and nine months ended September 30, 2018 or in the three months ended September 30, 2017. For the nine months ended September 30, 2017, a $1.3 million impairment loss on an equity investment was realized in the Company’s unaudited interim consolidated statements of income.

There were no sales of HTM securities in the three and nine months ended September 30, 2018. During the three and nine months ended September 30, 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, the circumstances caused the Company to change its intent to hold the HTM securities sold to maturity, which did not affect the Company’s intent to hold the remainder of the HTM portfolio to maturity.

The following tables set forth information with regard to gains and losses on equity securities at September 30, 2018:

(In thousands)	Three months ended September 30, 2018			Nine months ended September 30, 2018
Net gains and losses recognized on equity securities	$	412		$	575
Less: Net gains and losses recognized during the period on equity securities sold during the period		511			555
Unrealized gains and losses recognized on equity securities still held	$	(99	)	$	20

As of September 30, 2018, the carrying value of equity securities without readily determinable fair values was $4.0 million. The Company performed a qualitative assessment to determine whether the investments were impaired and identified no areas of concern as of September 30, 2018. There were no impairments, downward or upward adjustments recognized for equity securities without readily determinable fair values during the three and nine months ended September 30, 2018.

The following tables set forth information with regard to contractual maturities of debt securities at September 30, 2018:

(In thousands)	Amortized Cost		Estimated Fair Value
AFS debt securities:
Within one year	$	46,641	$	46,521
From one to five years		86,348		84,188
From five to ten years		176,260		171,240
After ten years		832,196		799,125
Total AFS debt securities	$	1,141,445	$	1,101,074
HTM debt securities:
Within one year	$	89,011	$	89,011
From one to five years		53,217		53,177
From five to ten years		215,931		209,974
After ten years		301,790		293,570
Total HTM debt securities	$	659,949	$	645,732

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 September 30, 2018 and December 31, 2017.

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Allowance for Loan Losses and Credit Quality of Loans

9 Months Ended

Sep. 30, 2018

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

Allowance for Loan Losses and Credit Quality of Loans

4.          Allowance for Loan Losses and Credit Quality of Loans

Allowance for Loan Losses

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

During the first quarter of 2018, the Company made adjustments to the class segments within the portfolios to better align risk characteristics and reflect the monitoring and assessment of risks as the portfolios continue to evolve. Agricultural and Agricultural Real Estate were consolidated with Commercial and Industrial and Commercial Real Estate, respectively. Agricultural loans are a type of Commercial loan with some specific underwriting guidelines; however, as of March 31, 2018, the portfolio had decreased to less than 3% of the Commercial portfolio and separation was no longer warranted. The Indirect class segment was further separated into Dealer Finance and Specialty Lending class segments. The growth in our Specialty Lending portfolio to 21% of Consumer Loans as of March 31, 2018 warranted evaluation of this class separately due to different risk characteristics from Dealer Finance class segments. The Direct and Home Equity class segments were consolidated into Direct to reflect common management, similar underwriting and in-market focus. The change to the class segments in the allowance methodology did not have a significant impact on the allowance for loan losses. The following table illustrates the portfolio and class segments for the loan portfolio in 2018 compared to 2017:

Portfolio	Class - 2018	Class - 2017
Commercial Loans	Commercial and Industrial	Commercial
	Commercial Real Estate	Commercial Real Estate
	Business Banking	Agricultural
		Agricultural Real Estate
		Business Banking
Consumer Loans	Dealer Finance	Indirect
	Specialty Lending	Home Equity
	Direct	Direct
Residential Real Estate

Commercial Loans

The Company offers a variety of Commercial loan products including Commercial and Industrial, Commercial 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 and Industrial (“C&I”) – The Company offers a variety of loan options to meet the specific needs of our C&I 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, equipment purchases, livestock purchases and finance seasonal crop expenses. 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, accounts receivable and perishable agricultural products, which are generally less liquid than real estate and exposed to industry price volatility. To reduce these risks, management also attempts to obtain personal guarantees of the owners or obtain government loan guarantees to provide further support. In 2018, the Commercial and Agricultural class segments were combined to create the C&I class segment.

Commercial Real Estate (“CRE”) – The Company offers CRE loans to finance real estate purchases, refinancings, expansions and improvements to commercial and agricultural properties. CRE loans are made to finance the purchases and improvements of real property, which generally consists of real estate with completed structures. These CRE 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, health care facilities and other facilities. These loans are typically less risky than C&I loans, since they are secured by real estate. 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 and no more than 75% of the appraised value of the agricultural property. Government loan guarantees may be obtained to provide further support for agricultural property. In 2018, the Commercial Real Estate and Agricultural Real Estate class segments were combined to create the CRE segment.

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 assets owned by the borrower and can include real estate, equipment, inventory, receivables or other business assets. These loans carry a higher risk than C&I and CRE 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 Dealer Finance, Specialty Lending and Direct loans.

Dealer Finance – 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 95% of the Dealer Finance 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 Dealer Finance Consumer loans are underwritten on a secured basis using the underlying collateral being financed. In 2018, the Indirect class segment was further separated into Dealer Finance and Specialty Lending class segments (see above and below).

Specialty Lending –The Company offers unsecured Consumer loans across a national footprint originated through our relationships with national technology-driven consumer lending companies to finance such things as dental and medical procedures, K-12 tuition, solar energy installations and other consumer purpose loans. Advances of credit through this specialty lending business line are subject to the Company’s underwriting standards including criteria such as FICO score and debt to income thresholds. In 2018, the Indirect class segment has been further separated into Dealer Finance (see above) and Specialty Lending class segments.

Direct – The Company offers a variety of consumer installment loans to finance vehicle purchases, mobile home purchases and personal expenditures. In addition to installment loans, the Company also offers personal lines of credit, overdraft protection, home equity lines of credit and second mortgage loans (loans secured by a lien position on one-to-four family residential real estate) to finance home improvements, debt consolidation, education and other uses. Most of the consumer installment 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. For home equity loans, consumers are able to borrow up to 85% of the equity in their homes. These loans carry a higher risk than first mortgage residential loans as they are often in a second position with respect to collateral. Consumer installment loans are often secured with collateral consisting of a perfected lien on the asset being purchased or a perfected lien on a consumer’s deposit account. A minimal amount of consumer installment loans are unsecured, which carry a higher risk of loss. 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. In 2018, the Home Equity segment was consolidated into the Direct class segment.

Residential Real Estate

Residential real estate loans consist primarily of loans secured by a first or second mortgage 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 real estate 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 risk, 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. In addition, various regulatory agencies, as an integral component of their examination process, periodically review the Company’s allowance for loan losses. Such agencies may require the Company to make loan grade changes as well as recognize additions to the allowance based on their examinations.

After a thorough consideration of the factors discussed above, any required additions or reductions to the allowance for loan losses are made periodically by charges or credits to the provision for loan losses. These charges 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 or changes in management’s assessment of any or all of the determining factors discussed above.

The following tables illustrate the changes in the allowance for loan losses by our portfolio segments:

(In thousands)	Commercial Loans			Consumer Loans			Residential Real Estate			Total
Balance as of June 30, 2018	$	31,059		$	36,479		$	4,912		$	72,450
Charge-offs		(823	)		(6,818	)		(123	)		(7,764	)
Recoveries		410			1,602			81			2,093
Provision		1,086			6,044			(1,104	)		6,026
Ending Balance as of September 30, 2018	$	31,732		$	37,307		$	3,766		$	72,805
Balance as of June 30, 2017	$	24,428		$	35,523		$	6,649		$	66,600
Charge-offs		(574	)		(6,979	)		(421	)		(7,974	)
Recoveries		266			1,446			123			1,835
Provision		1,434			6,197			258			7,889
Ending Balance as of September 30, 2017	$	25,554		$	36,187		$	6,609		$	68,350

(In thousands)	Commercial Loans			Consumer Loans			Residential Real Estate			Total
Balance as of December 31, 2017	$	27,606		$	36,830		$	5,064		$	69,500
Charge-offs		(2,535	)		(21,947	)		(513	)		(24,995	)
Recoveries		780			4,946			274			6,000
Provision		5,881			17,478			(1,059	)		22,300
Ending Balance as of September 30, 2018	$	31,732		$	37,307		$	3,766		$	72,805
Balance as of December 31, 2016	$	25,444		$	33,375		$	6,381		$	65,200
Charge-offs		(2,991	)		(19,742	)		(1,717	)		(24,450	)
Recoveries		919			3,680			166			4,765
Provision		2,182			18,874			1,779			22,835
Ending Balance as of September 30, 2017	$	25,554		$	36,187		$	6,609		$	68,350

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 the acquisition of the loans, an allowance for loan losses is established based on our estimate of incurred losses at the balance sheet date. There was no allowance for loan losses for the acquired loan portfolio as of September 30, 2018 and December 31, 2017. There were no charge-offs of acquired loans for the three months ended September 30, 2018 and 2017, and approximately $0.1 million and $0.7 million during the nine months ended September 30, 2018 and 2017 of net charge-offs of acquired loans, respectively, which are included in the table above.

The following tables illustrate the allowance for loan losses and the recorded investment by portfolio segments:

(In thousands)	Commercial Loans		Consumer Loans		Residential Real Estate		Total
As of September 30, 2018
Allowance for loan losses	$	31,732	$	37,307	$	3,766	$	72,805
Allowance for loans individually evaluated for impairment		25		-		-		25
Allowance for loans collectively evaluated for impairment	$	31,707	$	37,307	$	3,766	$	72,780
Ending balance of loans	$	3,212,577	$	2,301,198	$	1,373,487	$	6,887,262
Ending balance of originated loans individually evaluated for impairment		5,077		7,760		6,445		19,282
Ending balance of acquired loans collectively evaluated for impairment		153,808		33,994		153,073		340,875
Ending balance of originated loans collectively evaluated for impairment	$	3,053,692	$	2,259,444	$	1,213,969	$	6,527,105
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	$	2,234,349	$	1,321,021	$	6,583,639
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	$	2,182,011	$	1,143,719	$	6,160,810

Credit Quality of Loans

For all loan classes within the Company’s loan portfolio, loans are placed on nonaccrual status when timely collection of principal and/or interest in accordance with contractual terms is in doubt. 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 or in part is improbable. For Commercial loans, management considers specific facts and circumstances relative to individual credits in making such a determination. For Consumer and Residential Real Estate loans, management uses specific guidance and thresholds from the Federal Financial Institutions Examination Council’s Uniform Retail Credit Classification and Account Management Policy.

The following tables set 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 September 30, 2018
Originated
Commercial Loans:
C&I	$	209	$	41	$	-	$	250	$	908	$	857,782	$	858,940
CRE		1,133		-		-		1,133		3,637		1,708,369		1,713,139
Business Banking		1,318		98		-		1,416		5,754		479,520		486,690
Total Commercial Loans	$	2,660	$	139	$	-	$	2,799	$	10,299	$	3,045,671	$	3,058,769
Consumer Loans:
Dealer Finance	$	14,364	$	2,039	$	1,252	$	17,655	$	2,062	$	1,209,880	$	1,229,597
Specialty Lending		3,037		2,155		1,544		6,736		-		514,660		521,396
Direct		3,313		949		434		4,696		2,541		508,974		516,211
Total Consumer Loans	$	20,714	$	5,143	$	3,230	$	29,087	$	4,603	$	2,233,514	$	2,267,204
Residential Real Estate	$	1,366	$	219	$	1,231	$	2,816	$	6,106	$	1,211,492	$	1,220,414
Total Originated Loans	$	24,740	$	5,501	$	4,461	$	34,702	$	21,008	$	6,490,677	$	6,546,387
Acquired
Commercial Loans:
C&I	$	-	$	-	$	-	$	-	$	-	$	30,871	$	30,871
CRE		-		-		-		-		2		87,827		87,829
Business Banking		425		-		240		665		611		33,832		35,108
Total Commercial Loans	$	425	$	-	$	240	$	665	$	613	$	152,530	$	153,808
Consumer Loans:
Dealer Finance	$	4	$	-	$	-	$	4	$	-	$	99	$	103
Direct		223		14		-		237		275		33,379		33,891
Total Consumer Loans	$	227	$	14	$	-	$	241	$	275	$	33,478	$	33,994
Residential Real Estate	$	839	$	39	$	33	$	911	$	1,405	$	150,757	$	153,073
Total Acquired Loans	$	1,491	$	53	$	273	$	1,817	$	2,293	$	336,765	$	340,875
Total Loans	$	26,231	$	5,554	$	4,734	$	36,519	$	23,301	$	6,827,442	$	6,887,262

(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	$	1,642,204	$	1,670,591
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	$	2,154,684	$	2,190,443
Residential Real Estate	$	3,730	$	667	$	1,262	$	5,659	$	5,987	$	1,138,903	$	1,150,549
Total Originated Loans	$	28,383	$	6,397	$	5,165	$	39,945	$	23,336	$	6,118,667	$	6,181,948
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	$	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	$	6,516,201	$	6,583,639

There were no material commitments to extend further credit to borrowers with nonperforming loans as of September 30, 2018 and December 31, 2017.

Impaired Loans

The methodology used to establish the allowance for loan losses on impaired loans incorporates specific allocations on loans analyzed individually. Classified loans, including all troubled debt restructured loans (“TDRs”) and nonaccrual Commercial loans that are graded Substandard, Doubtful or Loss, 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/or 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 level of impairment. Impaired amounts are charged off immediately if such amounts are determined by management to be uncollectable. Any change to the previously recognized impairment loss is recognized as a component of the provision for loan losses.

The following table provides information on loans specifically evaluated for impairment:

	September 30, 2018						December 31, 2017
(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:
C&I	$	404	$	676			$	-	$	-
CRE		3,629		5,616				-		-
Commercial		-		-				-		251
Commercial Real Estate		-		-				2,211		3,979
Agricultural		-		-				452		465
Agricultural Real Estate		-		-				2,250		2,423
Business Banking		1,019		2,099				860		1,730
Total Commercial Loans	$	5,052	$	8,391			$	5,773	$	8,848
Consumer Loans:
Dealer Finance	$	160	$	254			$	-	$	-
Direct		7,600		9,600				-		-
Indirect		-		-				131		143
Home Equity		-		-				8,027		9,966
Direct		-		-				274		274
Total Consumer Loans	$	7,760	$	9,854			$	8,432	$	10,383
Residential Real Estate	$	6,445	$	8,721			$	6,830	$	8,780
Total	$	19,257	$	26,966			$	21,035	$	28,011
With an allowance recorded:
Commercial Loans:
C&I	$	25	$	25	$	25	$	-	$	-	$	-
Commercial Real Estate		-		-		-		76		82		30
Agricultural		-		-		-		27		27		27
Total Commercial Loans	$	25	$	25	$	25	$	103	$	109	$	57
Total Loans	$	19,282	$	26,991	$	25	$	21,138	$	28,120	$	57

There were no acquired impaired loans specifically evaluated for impairment as of September 30, 2018 or December 31, 2017.

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

	For the three months ended
	September 30, 2018				September 30, 2017
(In thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Originated
Commercial Loans:
C&I	$	433	$	-	$	-	$	-
CRE		3,645		32		-		-
Commercial		-		-		1,000		-
Commercial Real Estate		-		-		2,415		48
Agricultural		-		-		115		-
Agricultural Real Estate		-		-		1,505		11
Business Banking		1,024		4		955		2
Total Commercial Loans	$	5,102	$	36	$	5,990	$	61
Consumer Loans:
Dealer Finance	$	177	$	4	$	-	$	-
Direct		7,730		102		-		-
Indirect		-		-		35		1
Home Equity		-		-		8,159		111
Direct		-		-		119		2
Total Consumer Loans	$	7,907	$	106	$	8,313	$	114
Residential Real Estate	$	6,519	$	68	$	6,633	$	82
Total Originated Loans	$	19,528	$	210	$	20,936	$	257
Total Loans	$	19,528	$	210	$	20,936	$	257

	For the nine months ended
	September 30, 2018				September 30, 2017
(In thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Originated
Commercial Loans:
C&I	$	449	$	1	$	-	$	-
CRE		3,999		96		-		-
Commercial		-		-		2,393		-
Commercial Real Estate		-		-		3,906		93
Agricultural		-		-		147		1
Agricultural Real Estate		-		-		1,545		32
Business Banking		998		12		837		7
Total Commercial Loans	$	5,446	$	109	$	8,828	$	133
Consumer Loans:
Dealer Finance	$	187	$	8	$	-	$	-
Direct		7,953		317		-		-
Indirect		-		-		22		2
Home Equity		-		-		8,274		331
Direct		-		-		119		2
Total Consumer Loans	$	8,140	$	325	$	8,415	$	335
Residential Real Estate	$	6,719	$	212	$	6,425	$	211
Total Originated Loans	$	20,305	$	646	$	23,668	$	679
Acquired
Commercial Loans:
Commercial Real Estate	$	-	$	-	$	121	$	-
Total Commercial Loans	$	-	$	-	$	121	$	-
Total Acquired Loans	$	-	$	-	$	121	$	-
Total Loans	$	20,305	$	646	$	23,789	$	679

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 C&I and CRE 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. C&I and CRE 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 uncollectable 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 Real Estate Grading System

Consumer and Residential Real Estate 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 criteria are considered Performing.

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

(In thousands)	As of September 30, 2018
Originated
Commercial Credit Exposure By Internally Assigned Grade:			C&I		CRE		Total
Pass			$	805,333	$	1,660,900	$	2,466,233
Special Mention				33,557		16,762		50,319
Substandard				20,050		35,477		55,527
Total			$	858,940	$	1,713,139	$	2,572,079
Business Banking Credit Exposure By Internally Assigned Grade:					Business Banking		Total
Non-classified					$	474,252	$	474,252
Classified						12,438		12,438
Total					$	486,690	$	486,690
Consumer Credit Exposure By Payment Activity:	Dealer Finance		Specialty Lending		Direct		Total
Performing	$	1,226,283	$	519,852	$	513,236	$	2,259,371
Nonperforming		3,314		1,544		2,975		7,833
Total	$	1,229,597	$	521,396	$	516,211	$	2,267,204
Residential Real Estate Credit Exposure By Payment Activity:					Residential Real Estate		Total
Performing					$	1,213,077	$	1,213,077
Nonperforming						7,337		7,337
Total					$	1,220,414	$	1,220,414

Acquired
Commercial Credit Exposure By Internally Assigned Grade:	C&I		CRE		Total
Pass	$	27,046	$	87,091	$	114,137
Special Mention		3,825		93		3,918
Substandard		-		645		645
Total	$	30,871	$	87,829	$	118,700
Business Banking Credit Exposure By Internally Assigned Grade:			Business Banking		Total
Non-classified			$	32,098	$	32,098
Classified				3,010		3,010
Total			$	35,108	$	35,108
Consumer Credit Exposure By Payment Activity:	Dealer Finance		Direct		Total
Performing	$	103	$	33,616	$	33,719
Nonperforming		-		275		275
Total	$	103	$	33,891	$	33,994
Residential Real Estate Credit Exposure By Payment Activity:			Residential Real Estate		Total
Performing			$	151,635	$	151,635
Nonperforming				1,438		1,438
Total			$	153,073	$	153,073

(In thousands)	As of 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			$	1,664,984	$	451,822	$	64,848	$	2,181,654
Nonperforming				5,607		3,077		105		8,789
Total			$	1,670,591	$	454,899	$	64,953	$	2,190,443
Residential Real Estate Credit Exposure By Payment Activity:							Residential Real Estate		Total
Performing							$	1,143,300	$	1,143,300
Nonperforming								7,249		7,249
Total							$	1,150,549	$	1,150,549

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

Troubled Debt Restructured Loans

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 Real Estate and Consumer TDRs occurring during 2018 and 2017 were due to the reduction in the interest rate or extension of the term. Commercial TDRs during 2018 and 2017 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 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. If management determines that the value of the modified loan is less than the recorded investment in the loan an impairment charge would be recognized.

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:

	Three months ended September 30, 2018
(Dollars in thousands)	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Consumer Loans:
Dealer Finance		8	$	90	$	89
Total Consumer Loans		8	$	90	$	89
Total Troubled Debt Restructurings		8	$	90	$	89

	Three months ended September 30, 2017
(Dollars in thousands)	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Consumer Loans:
Indirect		1	$	7	$	7
Home Equity		4		189		222
Total Consumer Loans		5	$	196	$	229
Residential Real Estate		1	$	518	$	518
Total Troubled Debt Restructurings		6	$	714	$	747

	Nine months ended September 30, 2018
(Dollars in thousands)	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial Loans:
Business Banking		3	$	369	$	371
Total Commercial Loans		3	$	369	$	371
Consumer Loans:
Dealer Finance		15	$	185	$	183
Direct		2		41		41
Total Consumer Loans		17	$	226	$	224
Residential Real Estate		5	$	323	$	323
Total Troubled Debt Restructurings		25	$	918	$	918

	Nine months ended September 30, 2017
(Dollars 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		1		337		333
Total Commercial Loans		2	$	3,637	$	3,572
Consumer Loans:
Indirect		4	$	39	$	37
Home Equity		8		373		414
Direct		1		120		120
Total Consumer Loans		13	$	532	$	571
Residential Real Estate		8	$	1,066	$	1,068
Total Troubled Debt Restructurings		23	$	5,235	$	5,211

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

	Three months ended September 30, 2018				Three months ended September 30, 2017
(Dollars in thousands)	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Consumer Loans:
Indirect		-	$	-		1	$	13
Home Equity		-		-		12		622
Direct		17		816		-		-
Total Consumer Loans		17	$	816		13	$	635
Residential Real Estate		5	$	398		6	$	546
Total Troubled Debt Restructurings		22	$	1,214		19	$	1,181

	Nine months ended September 30, 2018				Nine months ended September 30, 2017
(Dollars in thousands)	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Commercial Loans:
Commercial		-	$	-		1	$	145
Business Banking		2		258		1		329
Total Commercial Loans		2	$	258		2	$	474
Consumer Loans:
Indirect		-	$	-		2	$	19
Home Equity		-		-		30		1,381
Direct		35		1,740		-		-
Total Consumer Loans		35	$	1,740		32	$	1,400
Residential Real Estate		17	$	1,239		12	$	817
Total Troubled Debt Restructurings		54	$	3,237		46	$	2,691

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Defined Benefit Post-Retirement Plans

9 Months Ended

Sep. 30, 2018

Defined Benefit Post-Retirement Plans [Abstract]

Defined Benefit Post-Retirement Plans

5.          Defined Benefit Post-Retirement Plans

The Company has a qualified, noncontributory, defined benefit pension plan (“the Plan”) covering substantially all of its employees at September 30, 2018. 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. 

In addition to the Plan, the Company also provides supplemental employee retirement plans to certain current and former executives. The Company also assumed supplemental retirement plans for certain current and former executives of Alliance Financial Corporation (“Alliance”) when the Company acquired Alliance.

These supplemental employee retirement plans and the Plan are collectively referred to herein as “Pension Benefits.”

In addition, the Company provides certain health care benefits for retired employees. Benefits are accrued over the employees’ active service period. Only employees that were employed by the Company on or before January 1, 2000 are eligible to receive post-retirement health care benefits. 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.”

The Company made no voluntary contributions to the pension and other benefits plans during the three and nine months ended September 30, 2018 and 2017.

The components of expense for Pension Benefits and Other Benefits are set forth below:

	Pension Benefits						Other Benefits
	Three months ended September 30,						Three months ended September 30,
(In thousands)	2018			2017			2018		2017
Components of net periodic (benefit) cost
Service cost	$	415		$	329		$	3	$	3
Interest cost		912			1,043			82		88
Expected return on plan assets		(2,119	)		(1,976	)		-		-
Net amortization		242			454			44		26
Total net periodic (benefit) cost	$	(550	)	$	(150	)	$	129	$	117

	Pension Benefits						Other Benefits
	Nine months ended September 30,						Nine months ended September 30,
(In thousands)	2018			2017			2018		2017
Components of net periodic (benefit) cost
Service cost	$	1,256		$	1,133		$	8	$	9
Interest cost		2,752			3,127			245		259
Expected return on plan assets		(6,364	)		(5,946	)		-		-
Net amortization		745			1,284			131		66
Total net periodic (benefit) cost	$	(1,611	)	$	(402	)	$	384	$	334

The service cost component of the net periodic (benefit) cost is included in Salaries and Employee Benefits and the interest cost, expected return on plan assets and net amortization components are including in Other Noninterest Expense on the unaudited interim consolidated statements of income.

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Earnings Per Share

9 Months Ended

Sep. 30, 2018

Earnings Per Share [Abstract]

Earnings Per Share

6.          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 units).

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

	Three months ended September 30,
(In thousands, except per share data)	2018		2017
Basic EPS:
Weighted average common shares outstanding		43,714		43,595
Net income available to common stockholders	$	29,807	$	22,876
Basic EPS	$	0.68	$	0.52
Diluted EPS:
Weighted average common shares outstanding		43,714		43,595
Dilutive effect of common stock options and restricted stock		337		320
Weighted average common shares and common share equivalents		44,051		43,915
Net income available to common stockholders	$	29,807	$	22,876
Diluted EPS	$	0.68	$	0.52

	Nine months ended September 30,
(In thousands, except per share data)	2018		2017
Basic EPS:
Weighted average common shares outstanding		43,692		43,563
Net income available to common stockholders	$	83,914	$	64,514
Basic EPS	$	1.92	$	1.48
Diluted EPS:
Weighted average common shares outstanding		43,692		43,563
Dilutive effect of common stock options and restricted stock		317		329
Weighted average common shares and common share equivalents		44,009		43,892
Net income available to common stockholders	$	83,914	$	64,514
Diluted EPS	$	1.91	$	1.47

There were 1,500 and 3,250 stock options for the quarters ended September 30, 2018 and September 30, 2017, respectively that were not considered in the calculation of diluted EPS since the stock options’ exercise price was greater than the average market price during these periods.

There were 1,500 and 3,014 stock options for the nine months ended September 30, 2018 and September 30, 2017, respectively, that were not considered in the calculation of diluted EPS since the stock options’ exercise price was greater than the average market price during these periods.

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Reclassification Adjustments Out of Other Comprehensive Income (Loss)

9 Months Ended

Sep. 30, 2018

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

Reclassification Adjustments Out of Other Comprehensive Income (Loss)

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

The following table summarizes the reclassification adjustments out of accumulated other comprehensive income (loss) (“AOCI”):

Detail About AOCI Components	Amount Reclassified From AOCI						Affected Line Item in the Consolidated Statement of Comprehensive Income (Loss)
	Three months ended
(In thousands)	September 30, 2018			September 30, 2017
AFS securities:
Losses on AFS securities	$	-		$	4		Net securities losses
Amortization of unrealized gains related to securities transfer		168			212		Interest income
Tax effect	$	(42	)	$	(83	)	Income tax (expense) benefit
Net of tax	$	126		$	133
Cash flow hedges:
Net unrealized (gains) on cash flow hedges reclassified to interest (income)	$	(638	)	$	(155	)	Interest income
Tax effect	$	159		$	59		Income tax (expense) benefit
Net of tax	$	(479	)	$	(96	)
Pension and other benefits:
Amortization of net losses	$	263		$	481		Other noninterest expense
Amortization of prior service costs		23			(1	)	Other noninterest expense
Tax effect	$	(71	)	$	(183	)	Income tax (expense) benefit
Net of tax	$	215		$	297
Total reclassifications during the period, net of tax	$	(138	)	$	334

Detail About AOCI Components	Amount Reclassified From AOCI						Affected Line item in the Consolidated Statement of Comprehensive Income (Loss)
	Nine months ended
(In thousands)	September 30, 2018			September 30, 2017
AFS securities:
Losses on AFS securities	$	-		$	2		Net securities losses
Amortization of unrealized gains related to securities transfer		533			675		Interest income
Impairment write-down of equity security		-			1,312		Other noninterest income
Tax effect	$	(133	)	$	(760	)	Income tax (expense) benefit
Net of tax	$	400		$	1,229
Cash flow hedges:
Net unrealized (gains) on cash flow hedges reclassified to interest (income)	$	(1,537	)	$	(96	)	Interest income
Tax effect	$	384		$	37		Income tax (expense) benefit
Net of tax	$	(1,153	)	$	(59	)
Pension and other benefits:
Amortization of net losses	$	809		$	1,351		Other noninterest expense
Amortization of prior service costs		67			(1	)	Other noninterest expense
Tax effect	$	(219	)	$	(516	)	Income tax (expense) benefit
Net of tax	$	657		$	834
Total reclassifications during the period, net of tax	$	(96	)	$	2,004

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Fair Value Measurements and Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2018

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

Fair Value Measurements and Fair Value of Financial Instruments

8.          Fair Value Measurements and Fair Value 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, among 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 three and nine months ended September 30, 2018, the Company made no transfers of assets from Level 1 to Level 2. For the three months ended September 30, 2018, the Company made no transfers of assets from Level 2 to Level 1. For the nine months ended September 30, 2018, the Company made a $4.0 million transfer from Level 2 to Level 1. For the year ended December 31, 2017, the Company made no transfer of assets between the levels of the fair value hierarchy.

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

(In thousands)	Level 1		Level 2		Level 3		September 30, 2018
Assets:
AFS securities
Federal Agency	$	-	$	83,262	$	-	$	83,262
State & municipal		-		36,467		-		36,467
Mortgage-backed		-		492,408		-		492,408
Collateralized mortgage obligations		-		488,937		-		488,937
Total AFS securities	$	-	$	1,101,074	$	-	$	1,101,074
Equity securities		20,722		4,000		-		24,722
Derivatives		-		23,682		-		23,682
Total	$	20,722	$	1,128,756	$	-	$	1,149,478
Liabilities:
Derivatives	$	-	$	20,054	$	-	$	20,054
Total	$	-	$	20,054	$	-	$	20,054

(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

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, other real estate owned, collateral-dependent impaired loans, mortgage servicing rights and HTM securities. The only non-recurring fair value measurements recorded during the three and nine month periods ended September 30, 2018 and the year ended December 31, 2017 were related to impaired loans, write-down of other real estate owned 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 September 30, 2018 and December 31, 2017, the Company had collateral dependent loans with a carrying value of $25 thousand and $0.1 million, respectively, which had specific reserves including in the allowance for loan losses of $25 thousand and $0.1 million, respectively.

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 unaudited interim 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 unaudited interim consolidated statement of income. At September 30, 2018 the notional amount of these customer derivative agreements and the offsetting derivative counterparty positions each totaled $630.2 million and the fair values included in other assets and other liabilities on the unaudited interim consolidated balance sheet applicable to these agreements amounted to $20.0 million. At December 31, 2017, the notional amount of these customer derivative agreements and the offsetting derivative counterparty positions each totaled $481.2 million and the fair values included in other assets and other liabilities on the unaudited interim consolidated balance sheet applicable to these agreements amounted to $0.2 million.

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 notional amount of these interest rate derivative agreements total $225.0 million at September 30, 2018 and $250.0 million at December 31, 2017. Fair values included in other assets on the unaudited interim consolidated balance sheet applicable to these agreements amounted to $3.6 million at September 30, 2018 and $3.5 million at December 31, 2017.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in AOCI and subsequently reclassified into interest expense in the same period during which the hedge transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s short-term rate borrowings. The change in net unrealized gains (losses) on cash flow hedges reflects a reclassification of $0.6 million of net unrealized gains and $0.2 million of net unrealized (losses) for AOCI to interest expense during the three months ended September 30, 2018 and 2017, respectively. The change in net unrealized gains (losses) on cash flow hedges reflects a reclassification of $1.5 million and $0.1 million of net unrealized gains from AOCI to interest expense during the nine months ended September 30, 2018 and 2017, respectively. During the next twelve months, the Company estimates that an additional $3.0 million will be reclassified from AOCI as a reduction to interest expense.

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, equity securities, trading securities, accrued interest receivable, non-maturity deposits, short-term borrowings, accrued interest payable and interest rate swaps.

			September 30, 2018				December 31, 2017
(In thousands)	Fair Value Hierarchy		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
HTM securities		2	$	659,949	$	645,732	$	484,073	$	481,871
Net loans		3		6,819,492		6,762,901		6,515,273		6,651,931
Financial liabilities:
Time deposits		2	$	868,569	$	860,791	$	806,766	$	801,294
Long-term debt		2		73,751		72,152		88,869		88,346
Junior subordinated debt		2		101,196		102,979		101,196		104,593

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.

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, in accordance with the exit price notion as defined by Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 820, Fair Value Measurement (“ASC 820”). 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 and as a result of the adoption of Accounting Standard Update 2016-01, which also included credit risk, illiquidity risk and other market factors to calculate the exit price fair value in accordance with ASC 820. Upon adoption, Accounting Standard Update (“ASU”) 2016-01, Financial Instruments - Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), did not materially change the estimated fair value of loans.

Time Deposits

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

Long-Term Debt

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

Junior Subordinated Debt

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

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2018

Commitments and Contingencies [Abstract]

Commitments and Contingencies

9.          Commitments and Contingencies

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, unused lines of credit, standby letters of credit and certain Commercial 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 amounts of those investments. 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. Commitments to extend credit and unused lines of credit totaled $1.7 billion at September 30, 2018 and $1.6 billion at December 31, 2017.

Since many loan commitments, standby letters of credit, 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 guarantee 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 standby letters of credit to third parties. These standby letters of credit are frequently issued in support of third party debt, such as corporate debt issuances, industrial revenue bonds and municipal securities. The risk involved in issuing standby letters of credit is essentially the same as the credit risk involved in extending loan facilities to customers and they are subject to the same credit origination guidelines, portfolio maintenance and management procedures 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 commitments. Standby letters of credit totaled $39.5 million at September 30, 2018 and $41.1 million at December 31, 2017. As of September 30, 2018 and December 31, 2017, the fair value of standby letters of credit was not significant.

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Revenue from Contracts with Customers

9 Months Ended

Sep. 30, 2018

Revenue from Contracts with Customers [Abstract]

Revenue from Contracts with Customers

10. Revenue from Contracts with Customers

Effective January 1, 2018, the Company adopted FASB ASU 2014-09, Revenue from Contracts with Customers (ASC Topic 606) (“ASC 606” and “ASU 2014-09”), and all subsequent ASUs that modified ASC 606. The implementation of ASC 606 did not have a material impact on the measurement or recognition of revenue; as such, a cumulative effect adjustment to opening retained earnings was not deemed necessary. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts were not adjusted and continue to be reported in accordance with our historic accounting under ASC 605. ASC 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities and certain noninterest income streams such as fees associated with mortgage servicing rights, financial guarantees, derivatives and certain credit card fees are also not in scope. ASC 606 is applicable to noninterest revenue streams such as trust and asset management income, deposit related fees and annuity and insurance commissions; however, the recognition of these revenue streams did not change significantly upon adoption of ASC 606.

Insurance and Other Financial Services Revenue

Insurance and other financial services revenue primarily consists of commissions received on insurance and brokered investment product sales. The Company acts as an intermediary between the Company’s customer and the insurance carrier. The Company’s performance obligation is generally satisfied upon the issuance of the annuity policy. Shortly after the policy is issued, the carrier remits the commission payment to the Company, and the Company recognizes the revenue. The Company does not earn a significant amount of trailing commission fees on insurance or brokered investment product sales. The majority of the trailing commission fees are calculated based on a percentage of market value of a period end and revenue is recognized when an investment product’s market value can be determined.

Service Charges on Deposit Accounts

Service charges on deposit accounts consist of overdraft fees, monthly service fees, check orders and other deposit account related fees. Overdraft, monthly service, check orders and other deposit account related fees are transactional based, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts.

ATM and Debit Card Fees

ATM fees are primarily generated when a Company cardholder uses a non-Company ATM or a non-Company cardholder uses a Company ATM. Debit card income is primarily comprised of interchange fees earned whenever the Company’s debit cards are processed through card payment networks. The Company’s performance obligations for these revenue streams are satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month.

Retirement Plan Administration Fees

Retirement plan administration fees are primarily generated for services related to the recordkeeping, administration and plan design solutions of defined benefit, defined contribution and revenue sharing plans. Revenue is recognized in arrears for services already provided in accordance with fees established in contracts with customers or based on rates agreed to with investment trade platforms based on ending investment balances held. The Company’s performance obligation is satisfied, and related revenue recognized based on services completed or ending investment balances, for which receivables are recorded at the time of revenue recognition.

Trust

Trust and asset management income is primarily comprised of fees earned from the management and administration of trusts, pensions and other customer assets. The Company’s performance obligation is generally satisfied with the resulting fees recognized monthly, based upon services completed or the month-end market value of the assets under management and the applicable fee rate. Payment is generally received shortly after services are rendered or a few days after month end through a direct charge to customers’ accounts. The Company does not earn performance-based incentives.

Other

Other noninterest income consists of other recurring revenue streams such as account and loan fees, interest rate swap fees, safety deposit box rental fees and other miscellaneous revenue streams. These revenue streams are primarily transactional based and payment is received immediately or in the following month, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time.

The following table presents noninterest income, segregated by revenue streams in-scope and out-of-scope of ASC 606, for three and nine months ended September 30, 2018 and 2017:

	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2018		2017		2018		2017
Noninterest income
In-Scope of ASC 606:
Insurance and other financial services revenue	$	6,172	$	5,536	$	18,502	$	17,927
Service charges on deposit accounts		4,503		4,261		12,721		12,399
ATM and debit card fees		5,906		5,557		16,995		16,025
Retirement plan administration fees		7,244		5,272		19,879		14,881
Trust		4,808		4,927		14,951		14,620
Other		3,048		3,945		11,341		10,069
Total noninterest income in-scope of ASC 606	$	31,681	$	29,498	$	94,389	$	85,921
Total noninterest income out-of-scope of ASC 606	$	1,700	$	1,280	$	4,427	$	3,911
Total noninterest income	$	33,381	$	30,778	$	98,816	$	89,832

Contract Balances

A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration or before payment is due, which would result in contract receivables or assets, respectively. A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment or for which payment is due from the customer. The Company’s noninterest revenue streams are largely based on transactional activity, or standard month-end revenue accruals such as asset management fees based on month-end market values. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances. As of September 30, 2018 and December 31, 2017, the Company did not have any significant contract balances.

Contract Acquisition Costs

ASC 606 requires the capitalization, and subsequently amortization into expense, certain incremental costs of obtaining a contract with a customer if these costs are expected to be recovered. The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained. The Company elected the practical expedient, which allows immediate expensing of contract acquisition costs when the asset that would have resulted from capitalizing these costs would have been amortized in one year or less, and did not capitalize any contract acquisition costs upon adoption of ASC 606 as of or during the three and nine months ended September 30, 2018.

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Recent Accounting Pronouncements

9 Months Ended

Sep. 30, 2018

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

11.          Recent Accounting Pronouncements

Recently Adopted Accounting Standards

Effective January 1, 2018, the Company early adopted the provisions of FASB ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which was issued in February 2018. ASU 2018-02 allows 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 is 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. The adoption of ASU 2018-02 did not have a significant impact on the consolidated financial statements and related disclosures and resulted in a reclassification that decreased AOCI and increased retained earnings by $5.6 million, with no net effect on total stockholders’ equity. The Company utilizes the individual securities approach when releasing income tax effects from AOCI for its investment securities.

Effective January 1, 2018, the Company early adopted the provisions of FASB ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which was issued in August 2017. ASU 2017-12 better aligns the accounting and reporting of hedging relationships with the economics of risk management activities. The amendments of ASU 2017-12 were applied on a modified retrospective basis and adoption did not have an impact on the consolidated financial statements and related disclosures.

Effective January 1, 2018, the Company adopted the provisions of FASB ASU 2017-09, Compensation-Stock Compensation (Topic 718), which was issued in May 2017. 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. The amendments of ASU 2017-09 were applied on a prospective basis and adoption did not have an impact on the consolidated financial statements and related disclosures.

Effective January 1, 2018, the Company adopted the provisions of FASB ASU 2017-07, Compensation – Retirement Benefits (Topic 715), which was issued in March 2017. 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 ASU 2017-07 were 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 for the capitalization of the service cost component of net periodic pension cost and net periodic post-retirement benefit in assets utilizing the practical expedient allowed for prior comparative period presentation permitted. The adoption of ASU 2017-07 did not have an impact on the consolidated financial statements and related disclosures.

Effective January 1, 2018, the Company adopted the provisions of FASB ASU 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20), which was issued in February 2017. ASU 2017-05 clarifies the scope of ASC Subtopic 610-20 and adds 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 the 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 of ASU 2017-05 were applied on a modified retrospective basis and adoption did not have a significant impact on the consolidated financial statements and related disclosures.

Effective January 1, 2018, the Company adopted the provisions of FASB ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which was issued in January 2017. ASU 2017-01 provides a more robust framework to use in determining when a set of assets and activities 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. The amendments of ASU 2017-01 were applied on a prospective basis and adoption did not have an impact on the consolidated financial statements and related disclosures.

Effective January 1, 2018, the Company adopted the provisions of FASB ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments), issued in August 2016. 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. The amendments of ASU 2016-15 were applied on a retrospective basis and adoption did not have an impact on the consolidated financial statements and related disclosures.

Effective January 1, 2018, the Company adopted the provisions of FASB ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities, which was issued in January 2016. 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. The fair value measurement of loans was modified, with no significant impact, to incorporate illiquidity risk and other market factors in addition to credit risk in order to calculate the exit price fair value in accordance with ASC 820 as required by ASU 2016-01. The adoption of ASU 2016-01 did not have a significant impact on the consolidated financial statements and related disclosures and resulted in a reclassification that decreased AOCI and increased retained earnings by $2.6 million and had an immaterial effect on total stockholders’ equity, equity securities and other assets.

Effective January 1, 2018, the Company adopted the provisions of FASB ASU 2014-09, which was issued in May 2014. ASU 2014-09 is a comprehensive new revenue recognition standard that superseded nearly all previous 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 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. The adoption included ASU 2014-09 and all related updates to clarify ASU 2014-09, including ASU 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU 2016-10, Identifying Performance Obligations and Licensing, ASU 2016-12, Narrow-Scope Improvements and Practical Expedients, and ASU 2016-20, Technical Corrections and Improvements to Topic 606 - Revenue from Contract with Customers.

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. The amendments of ASU 2014-09 were applied on a modified retrospective basis. There was no cumulative effect adjustment as of January 1, 2018. The adoption of ASU 2014-09 and all related ASU updates to ASC 606 did not have a significant impact on the consolidated financial statements and related disclosures as of and for three and nine months ended September 30, 2018. Refer to footnote 10, Revenue from Contracts with Customers, for more information.

Accounting Standards Issued Not Yet Adopted

In August 2018, the FASB issued ASU 2018-13, Fair value Measurement (Topic 820) – Disclosure Framework – Changes to the Disclosure Requirements for Fair value Measurement. The provisions of ASU 2018-13 modify the disclosure requirements on fair value measurements in ASC 820. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. ASU 2018-13 is effective January 1, 2020 but may be early adopted in any interim period. 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 February 2018, the FASB issued ASU 2018-03, Technical Correction and Improvement to Financial Instruments – Overall (Subtopic 825-10), to clarify certain aspects of the guidance issued in ASU 2016-01. The provisions of ASU 2018-03 are effective July 1, 2018 for interim financial statements but may be early adopted in any interim period starting January 1, 2018 as long as ASU 2016-01 is also adopted. 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 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 June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“CECL”). ASU 2016-13 introduces new guidance that make substantive changes to the accounting for credit losses. ASU 2016-13 introduces the CECL model, which applies to financial assets subject to credit losses and measured at amortized cost, as well as certain off-balance sheet credit exposures. This includes loans, loan commitments, standby letters of credit, net investments in leases recognized by a lessor and HTM debt securities, The CECL model requires an entity to estimate credit losses expected over the life of an exposure, considering information about historical events, current conditions and reasonable and supportable forecasts and is generally expected to result in earlier recognition of credit losses. ASU 2016-13 also modifies certain provisions of the current OTTI model for AFS debt securities. Credit losses on AFS debt securities will be limited to the difference between the security’s amortized cost basis and its fair value and will be recognized through an allowance for credit losses rather than as a direct reduction in amortized cost basis. ASU 2016-13 also provides for a simplified accounting model for purchased financial assets with more than insignificant credit deterioration since their origination. ASU 2016-13 requires expanded disclosures including, but not limited to, (i) information about the methods and assumptions used to estimate expected credit losses, including changes in the factors that influenced management’s estimate and the reasons for those changes, (ii) for financing receivables and net investment in leases measured at amortized cost, further disaggregation of information about the credit quality of those assets and (iii) a rollforward of the allowance for credit losses for HTM and AFS securities. 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; however, the Company does not intend to early adopt this ASU. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures, processes and controls and is not currently able to reasonably estimate the impact of adoption on the Company’s consolidated financial statements; however, adoption is likely to lead to significant changes in accounting policies related to, and the methods employed in estimating, the allowance for loan and lease losses. It is possible that the impact will be material to the Company’s consolidated financial statements. To date, the Company has completed a gap analysis, adopted a detailed implementation plan, established a formal governance structure for the project, selected and is in the process of implementing a software solution to serve as its CECL platform.

In February 2016, the FASB issued ASU 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 reasonably certain to exercise an option to extend the lease, exercise a purchase option or not exercise an option to terminate the lease. In January 2018, the FASB issued ASU 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842. ASU 2018-01 was issued to address concerns about the cost and complexity of complying with the transition provisions of ASU 2016-02. Both ASU 2016-02 and ASU 2018-01 are effective for the Company on January 1, 2019. Early adoption is permitted in any interim or annual period. Lessees and lessors are required to apply the provisions of ASU 2016-02 at the beginning of the earliest period presented using a modified retrospective approach. Management is in the process of finalizing its evaluation of the impact of adoption of this ASU on its consolidated financial statements and related disclosures, processes and controls. The Company has acquired and is in the process of implementing software to facilitate calculation and reporting of the lease liability and right-of-use asset. The most significant impact of adoption is expected to be the recognition, as lessee, of new right-of-use assets and lease liabilities on the consolidated balance sheet for real estate leases currently classified as operating leases. At its November 29, 2017 meeting, the FASB proposed allowing entities the option of applying the provisions of ASU 2016-02 at the effective date without adjusting the comparative periods presented. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases. ASU 2018-10 was issued to provide more detailed guidance and additional clarification for implementing ASU 2016-02. Also in July 2018, the FASB issued ASU 2018-11, Targeted Improvements, which allows for an optional transition method in which the provisions of ASC Topic 842 would be applied upon the adoption date and would not have to be retroactively applied to the earliest reporting period presented in the consolidated financial statements. The Company is monitoring these and other proposed modifications to the requirements of this ASU.

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Subsequent Events

9 Months Ended

Sep. 30, 2018

Subsequent Events [Abstract]

Subsequent Events

12.          Subsequent Events

Subsequent to September 30, 2018, the Company received a letter ruling from the Internal Revenue Service National Office approving a change in tax accounting method, which resulted in a tax benefit of $4.7 million recorded in the fourth quarter of 2018.

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Description of Business (Policies)

9 Months Ended

Sep. 30, 2018

Description of Business [Abstract]

Nature of Operations

NBT Bancorp Inc. (the “Registrant” or the “Company”) is a registered financial holding company incorporated in the state of Delaware in 1986, with its principal headquarters located in Norwich, New York. The principal assets of the Registrant consist of all of the outstanding shares of common stock of its subsidiaries, including: NBT Bank, National Association (the “Bank”), NBT Financial Services, Inc. (“NBT Financial”), NBT Holdings, Inc. (“NBT Holdings”), Hathaway Agency, Inc. and CNBF Capital Trust I, NBT Statutory Trust I, 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 area of Maine. 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.

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Basis of Presentation (Policies)

9 Months Ended

Sep. 30, 2018

Basis of Presentation [Abstract]

Basis of Presentation

The accompanying unaudited interim consolidated financial statements include the accounts of the Registrant and its wholly owned subsidiaries, the Bank, NBT Financial and NBT Holdings. Collectively, the Registrant and its subsidiaries are referred to herein as “the Company.” The interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods in accordance with generally accepted accounting principles in the United States of America (“GAAP”). These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2017 Annual Report on Form 10-K. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period. All intercompany transactions have been eliminated in consolidation. Amounts in the prior period financial statements are reclassified whenever necessary to conform to current period presentation. The Company has evaluated subsequent events for potential recognition and/or disclosure. Refer to footnote 12, Subsequent Events, for more information.

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Securities (Policies)

9 Months Ended

Sep. 30, 2018

Securities [Abstract]

Investment, Policy

Declines in the fair value of HTM securities below their amortized cost, less any current period credit loss, that are deemed to be other-than-temporary are reflected in earnings as realized losses or in other comprehensive income (“OCI”). This classification is dependent upon whether the Company intends to sell the security, or whether it is more likely than not, that the Company will be required to sell the security before recovery. The other-than-temporary impairment (“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 (i) the amount representing the credit loss and (ii) 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 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 bond approaches its maturity date or repricing date or if market yields for such investments declines.

Management also has the intent to hold and will not be required to sell, the debt 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 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.

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.

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

9 Months Ended

Sep. 30, 2018

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

Portfolio and Class Segments

Portfolio	Class - 2018	Class - 2017
Commercial Loans	Commercial and Industrial	Commercial
	Commercial Real Estate	Commercial Real Estate
	Business Banking	Agricultural
		Agricultural Real Estate
		Business Banking
Consumer Loans	Dealer Finance	Indirect
	Specialty Lending	Home Equity
	Direct	Direct
Residential Real Estate

Allowance for Loan Losses

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. 

During the first quarter of 2018, the Company made adjustments to the class segments within the portfolios to better align risk characteristics and reflect the monitoring and assessment of risks as the portfolios continue to evolve. Agricultural and Agricultural Real Estate were consolidated with Commercial and Industrial and Commercial Real Estate, respectively. Agricultural loans are a type of Commercial loan with some specific underwriting guidelines; however, as of March 31, 2018, the portfolio had decreased to less than 3% of the Commercial portfolio and separation was no longer warranted. The Indirect class segment was further separated into Dealer Finance and Specialty Lending class segments. The growth in our Specialty Lending portfolio to 21% of Consumer Loans as of March 31, 2018 warranted evaluation of this class separately due to different risk characteristics from Dealer Finance class segments. The Direct and Home Equity class segments were consolidated into Direct to reflect common management, similar underwriting and in-market focus. The change to the class segments in the allowance methodology did not have a significant impact on the allowance for loan losses.

Commercial Loans

The Company offers a variety of Commercial loan products including Commercial and Industrial, Commercial 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 and Industrial (“C&I”) – The Company offers a variety of loan options to meet the specific needs of our C&I 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, equipment purchases, livestock purchases and finance seasonal crop expenses. 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, accounts receivable and perishable agricultural products, which are generally less liquid than real estate and exposed to industry price volatility. To reduce these risks, management also attempts to obtain personal guarantees of the owners or obtain government loan guarantees to provide further support. In 2018, the Commercial and Agricultural class segments were combined to create the C&I class segment.

Commercial Real Estate (“CRE”) – The Company offers CRE loans to finance real estate purchases, refinancings, expansions and improvements to commercial and agricultural properties. CRE loans are made to finance the purchases and improvements of real property, which generally consists of real estate with completed structures. These CRE 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, health care facilities and other facilities. These loans are typically less risky than C&I loans, since they are secured by real estate. 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 and no more than 75% of the appraised value of the agricultural property. Government loan guarantees may be obtained to provide further support for agricultural property. In 2018, the Commercial Real Estate and Agricultural Real Estate class segments were combined to create the CRE segment.

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 assets owned by the borrower and can include real estate, equipment, inventory, receivables or other business assets. These loans carry a higher risk than C&I and CRE 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 Dealer Finance, Specialty Lending and Direct loans.

Dealer Finance – 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 95% of the Dealer Finance 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 Dealer Finance Consumer loans are underwritten on a secured basis using the underlying collateral being financed. In 2018, the Indirect class segment was further separated into Dealer Finance and Specialty Lending class segments (see above and below).

Specialty Lending –The Company offers unsecured Consumer loans across a national footprint originated through our relationships with national technology-driven consumer lending companies to finance such things as dental and medical procedures, K-12 tuition, solar energy installations and other consumer purpose loans. Advances of credit through this specialty lending business line are subject to the Company’s underwriting standards including criteria such as FICO score and debt to income thresholds. In 2018, the Indirect class segment has been further separated into Dealer Finance (see above) and Specialty Lending class segments.

Direct – The Company offers a variety of consumer installment loans to finance vehicle purchases, mobile home purchases and personal expenditures. In addition to installment loans, the Company also offers personal lines of credit, overdraft protection, home equity lines of credit and second mortgage loans (loans secured by a lien position on one-to-four family residential real estate) to finance home improvements, debt consolidation, education and other uses. Most of the consumer installment 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. For home equity loans, consumers are able to borrow up to 85% of the equity in their homes. These loans carry a higher risk than first mortgage residential loans as they are often in a second position with respect to collateral. Consumer installment loans are often secured with collateral consisting of a perfected lien on the asset being purchased or a perfected lien on a consumer’s deposit account. A minimal amount of consumer installment loans are unsecured, which carry a higher risk of loss. 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. In 2018, the Home Equity segment was consolidated into the Direct class segment.

Residential Real Estate

Residential real estate loans consist primarily of loans secured by a first or second mortgage 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 real estate 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 risk, 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. In addition, various regulatory agencies, as an integral component of their examination process, periodically review the Company’s allowance for loan losses. Such agencies may require the Company to make loan grade changes as well as recognize additions to the allowance based on their examinations.

After a thorough consideration of the factors discussed above, any required additions or reductions to the allowance for loan losses are made periodically by charges or credits to the provision for loan losses. These charges 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 or changes in management’s assessment of any or all of the determining factors discussed above.

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 the acquisition of the loans, an allowance for loan losses is established based on our estimate of incurred losses at the balance sheet date.

Credit Quality of Loans

For all loan classes within the Company’s loan portfolio, loans are placed on nonaccrual status when timely collection of principal and/or interest in accordance with contractual terms is in doubt. 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 or in part is improbable. For Commercial loans, management considers specific facts and circumstances relative to individual credits in making such a determination. For Consumer and Residential Real Estate loans, management uses specific guidance and thresholds from the Federal Financial Institutions Examination Council’s Uniform Retail Credit Classification and Account Management Policy.

Impaired Loans

The methodology used to establish the allowance for loan losses on impaired loans incorporates specific allocations on loans analyzed individually. Classified loans, including all troubled debt restructured loans (“TDRs”) and nonaccrual Commercial loans that are graded Substandard, Doubtful or Loss, 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/or 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 level of impairment. Impaired amounts are charged off immediately if such amounts are determined by management to be uncollectable. Any change to the previously recognized impairment loss is recognized as a component of the provision for loan losses.

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 C&I and CRE 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. C&I and CRE 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 uncollectable 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 Real Estate Grading System

Consumer and Residential Real Estate 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 criteria are considered Performing.

Troubled Debt Restructuring

Troubled Debt Restructured Loans

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 Real Estate and Consumer TDRs occurring during 2018 and 2017 were due to the reduction in the interest rate or extension of the term. Commercial TDRs during 2018 and 2017 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 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. If management determines that the value of the modified loan is less than the recorded investment in the loan an impairment charge would be recognized.

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Defined Benefit Post-Retirement Plans (Policies)

9 Months Ended

Sep. 30, 2018

Defined Benefit Post-Retirement Plans [Abstract]

Postemployment Benefit Plans, Policy

The Company has a qualified, noncontributory, defined benefit pension plan (“the Plan”) covering substantially all of its employees at September 30, 2018. 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. 

In addition to the Plan, the Company also provides supplemental employee retirement plans to certain current and former executives. The Company also assumed supplemental retirement plans for certain current and former executives of Alliance Financial Corporation (“Alliance”) when the Company acquired Alliance.

These supplemental employee retirement plans and the Plan are collectively referred to herein as “Pension Benefits.”

In addition, the Company provides certain health care benefits for retired employees. Benefits are accrued over the employees’ active service period. Only employees that were employed by the Company on or before January 1, 2000 are eligible to receive post-retirement health care benefits. 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.”

The Company made no voluntary contributions to the pension and other benefits plans during the three and nine months ended September 30, 2018 and 2017.

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Earnings Per Share (Policies)

9 Months Ended

Sep. 30, 2018

Earnings Per Share [Abstract]

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 units).

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

9 Months Ended

Sep. 30, 2018

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

Fair Value of Financial Instruments, Policy

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, among 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. 

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, other real estate owned, collateral-dependent impaired loans, mortgage servicing rights and HTM securities. The only non-recurring fair value measurements recorded during the three and nine month periods ended September 30, 2018 and the year ended December 31, 2017 were related to impaired loans, write-down of other real estate owned 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.

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 unaudited interim 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 unaudited interim consolidated statement of income. At September 30, 2018 the notional amount of these customer derivative agreements and the offsetting derivative counterparty positions each totaled $630.2 million and the fair values included in other assets and other liabilities on the unaudited interim consolidated balance sheet applicable to these agreements amounted to $20.0 million. At December 31, 2017, the notional amount of these customer derivative agreements and the offsetting derivative counterparty positions each totaled $481.2 million and the fair values included in other assets and other liabilities on the unaudited interim consolidated balance sheet applicable to these agreements amounted to $0.2 million.

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.

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, in accordance with the exit price notion as defined by Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 820, Fair Value Measurement (“ASC 820”). 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 and as a result of the adoption of Accounting Standard Update 2016-01, which also included credit risk, illiquidity risk and other market factors to calculate the exit price fair value in accordance with ASC 820. Upon adoption, Accounting Standard Update (“ASU”) 2016-01, Financial Instruments - Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), did not materially change the estimated fair value of loans.

Time Deposits

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

Long-Term Debt

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

Junior Subordinated Debt

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

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Revenue from Contracts with Customers (Policies)

9 Months Ended

Sep. 30, 2018

Revenue from Contracts with Customers [Abstract]

Revenue Recognition

Effective January 1, 2018, the Company adopted FASB ASU 2014-09, Revenue from Contracts with Customers (ASC Topic 606) (“ASC 606” and “ASU 2014-09”), and all subsequent ASUs that modified ASC 606. The implementation of ASC 606 did not have a material impact on the measurement or recognition of revenue; as such, a cumulative effect adjustment to opening retained earnings was not deemed necessary. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts were not adjusted and continue to be reported in accordance with our historic accounting under ASC 605. ASC 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities and certain noninterest income streams such as fees associated with mortgage servicing rights, financial guarantees, derivatives and certain credit card fees are also not in scope. ASC 606 is applicable to noninterest revenue streams such as trust and asset management income, deposit related fees and annuity and insurance commissions; however, the recognition of these revenue streams did not change significantly upon adoption of ASC 606.

Insurance and Other Financial Services Revenue

Insurance and other financial services revenue primarily consists of commissions received on insurance and brokered investment product sales. The Company acts as an intermediary between the Company’s customer and the insurance carrier. The Company’s performance obligation is generally satisfied upon the issuance of the annuity policy. Shortly after the policy is issued, the carrier remits the commission payment to the Company, and the Company recognizes the revenue. The Company does not earn a significant amount of trailing commission fees on insurance or brokered investment product sales. The majority of the trailing commission fees are calculated based on a percentage of market value of a period end and revenue is recognized when an investment product’s market value can be determined.

Service Charges on Deposit Accounts

Service charges on deposit accounts consist of overdraft fees, monthly service fees, check orders and other deposit account related fees. Overdraft, monthly service, check orders and other deposit account related fees are transactional based, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts.

ATM and Debit Card Fees

ATM fees are primarily generated when a Company cardholder uses a non-Company ATM or a non-Company cardholder uses a Company ATM. Debit card income is primarily comprised of interchange fees earned whenever the Company’s debit cards are processed through card payment networks. The Company’s performance obligations for these revenue streams are satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month.

Retirement Plan Administration Fees

Retirement plan administration fees are primarily generated for services related to the recordkeeping, administration and plan design solutions of defined benefit, defined contribution and revenue sharing plans. Revenue is recognized in arrears for services already provided in accordance with fees established in contracts with customers or based on rates agreed to with investment trade platforms based on ending investment balances held. The Company’s performance obligation is satisfied, and related revenue recognized based on services completed or ending investment balances, for which receivables are recorded at the time of revenue recognition.

Trust

Trust and asset management income is primarily comprised of fees earned from the management and administration of trusts, pensions and other customer assets. The Company’s performance obligation is generally satisfied with the resulting fees recognized monthly, based upon services completed or the month-end market value of the assets under management and the applicable fee rate. Payment is generally received shortly after services are rendered or a few days after month end through a direct charge to customers’ accounts. The Company does not earn performance-based incentives.

Other

Other noninterest income consists of other recurring revenue streams such as account and loan fees, interest rate swap fees, safety deposit box rental fees and other miscellaneous revenue streams. These revenue streams are primarily transactional based and payment is received immediately or in the following month, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time.

Contract Balances

A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration or before payment is due, which would result in contract receivables or assets, respectively. A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment or for which payment is due from the customer. The Company’s noninterest revenue streams are largely based on transactional activity, or standard month-end revenue accruals such as asset management fees based on month-end market values. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances. As of September 30, 2018 and December 31, 2017, the Company did not have any significant contract balances.

Contract Acquisition Costs

ASC 606 requires the capitalization, and subsequently amortization into expense, certain incremental costs of obtaining a contract with a customer if these costs are expected to be recovered. The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained. The Company elected the practical expedient, which allows immediate expensing of contract acquisition costs when the asset that would have resulted from capitalizing these costs would have been amortized in one year or less, and did not capitalize any contract acquisition costs upon adoption of ASC 606 as of or during the three and nine months ended September 30, 2018.

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Recent Accounting Pronouncements (Policies)

9 Months Ended

Sep. 30, 2018

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

Recently Adopted Accounting Standards

Effective January 1, 2018, the Company early adopted the provisions of FASB ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which was issued in February 2018. ASU 2018-02 allows 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 is 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. The adoption of ASU 2018-02 did not have a significant impact on the consolidated financial statements and related disclosures and resulted in a reclassification that decreased AOCI and increased retained earnings by $5.6 million, with no net effect on total stockholders’ equity. The Company utilizes the individual securities approach when releasing income tax effects from AOCI for its investment securities.

Effective January 1, 2018, the Company early adopted the provisions of FASB ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which was issued in August 2017. ASU 2017-12 better aligns the accounting and reporting of hedging relationships with the economics of risk management activities. The amendments of ASU 2017-12 were applied on a modified retrospective basis and adoption did not have an impact on the consolidated financial statements and related disclosures.

Effective January 1, 2018, the Company adopted the provisions of FASB ASU 2017-09, Compensation-Stock Compensation (Topic 718), which was issued in May 2017. 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. The amendments of ASU 2017-09 were applied on a prospective basis and adoption did not have an impact on the consolidated financial statements and related disclosures.

Effective January 1, 2018, the Company adopted the provisions of FASB ASU 2017-07, Compensation – Retirement Benefits (Topic 715), which was issued in March 2017. 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 ASU 2017-07 were 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 for the capitalization of the service cost component of net periodic pension cost and net periodic post-retirement benefit in assets utilizing the practical expedient allowed for prior comparative period presentation permitted. The adoption of ASU 2017-07 did not have an impact on the consolidated financial statements and related disclosures.

Effective January 1, 2018, the Company adopted the provisions of FASB ASU 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20), which was issued in February 2017. ASU 2017-05 clarifies the scope of ASC Subtopic 610-20 and adds 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 the 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 of ASU 2017-05 were applied on a modified retrospective basis and adoption did not have a significant impact on the consolidated financial statements and related disclosures.

Effective January 1, 2018, the Company adopted the provisions of FASB ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which was issued in January 2017. ASU 2017-01 provides a more robust framework to use in determining when a set of assets and activities 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. The amendments of ASU 2017-01 were applied on a prospective basis and adoption did not have an impact on the consolidated financial statements and related disclosures.

Effective January 1, 2018, the Company adopted the provisions of FASB ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments), issued in August 2016. 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. The amendments of ASU 2016-15 were applied on a retrospective basis and adoption did not have an impact on the consolidated financial statements and related disclosures.

Effective January 1, 2018, the Company adopted the provisions of FASB ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities, which was issued in January 2016. 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. The fair value measurement of loans was modified, with no significant impact, to incorporate illiquidity risk and other market factors in addition to credit risk in order to calculate the exit price fair value in accordance with ASC 820 as required by ASU 2016-01. The adoption of ASU 2016-01 did not have a significant impact on the consolidated financial statements and related disclosures and resulted in a reclassification that decreased AOCI and increased retained earnings by $2.6 million and had an immaterial effect on total stockholders’ equity, equity securities and other assets.

Effective January 1, 2018, the Company adopted the provisions of FASB ASU 2014-09, which was issued in May 2014. ASU 2014-09 is a comprehensive new revenue recognition standard that superseded nearly all previous 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 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. The adoption included ASU 2014-09 and all related updates to clarify ASU 2014-09, including ASU 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU 2016-10, Identifying Performance Obligations and Licensing, ASU 2016-12, Narrow-Scope Improvements and Practical Expedients, and ASU 2016-20, Technical Corrections and Improvements to Topic 606 - Revenue from Contract with Customers.

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. The amendments of ASU 2014-09 were applied on a modified retrospective basis. There was no cumulative effect adjustment as of January 1, 2018. The adoption of ASU 2014-09 and all related ASU updates to ASC 606 did not have a significant impact on the consolidated financial statements and related disclosures as of and for three and nine months ended September 30, 2018. Refer to footnote 10, Revenue from Contracts with Customers, for more information.

Accounting Standards Issued Not Yet Adopted

Accounting Standards Issued Not Yet Adopted

In August 2018, the FASB issued ASU 2018-13, Fair value Measurement (Topic 820) – Disclosure Framework – Changes to the Disclosure Requirements for Fair value Measurement. The provisions of ASU 2018-13 modify the disclosure requirements on fair value measurements in ASC 820. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. ASU 2018-13 is effective January 1, 2020 but may be early adopted in any interim period. 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 February 2018, the FASB issued ASU 2018-03, Technical Correction and Improvement to Financial Instruments – Overall (Subtopic 825-10), to clarify certain aspects of the guidance issued in ASU 2016-01. The provisions of ASU 2018-03 are effective July 1, 2018 for interim financial statements but may be early adopted in any interim period starting January 1, 2018 as long as ASU 2016-01 is also adopted. 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 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 June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“CECL”). ASU 2016-13 introduces new guidance that make substantive changes to the accounting for credit losses. ASU 2016-13 introduces the CECL model, which applies to financial assets subject to credit losses and measured at amortized cost, as well as certain off-balance sheet credit exposures. This includes loans, loan commitments, standby letters of credit, net investments in leases recognized by a lessor and HTM debt securities, The CECL model requires an entity to estimate credit losses expected over the life of an exposure, considering information about historical events, current conditions and reasonable and supportable forecasts and is generally expected to result in earlier recognition of credit losses. ASU 2016-13 also modifies certain provisions of the current OTTI model for AFS debt securities. Credit losses on AFS debt securities will be limited to the difference between the security’s amortized cost basis and its fair value and will be recognized through an allowance for credit losses rather than as a direct reduction in amortized cost basis. ASU 2016-13 also provides for a simplified accounting model for purchased financial assets with more than insignificant credit deterioration since their origination. ASU 2016-13 requires expanded disclosures including, but not limited to, (i) information about the methods and assumptions used to estimate expected credit losses, including changes in the factors that influenced management’s estimate and the reasons for those changes, (ii) for financing receivables and net investment in leases measured at amortized cost, further disaggregation of information about the credit quality of those assets and (iii) a rollforward of the allowance for credit losses for HTM and AFS securities. 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; however, the Company does not intend to early adopt this ASU. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures, processes and controls and is not currently able to reasonably estimate the impact of adoption on the Company’s consolidated financial statements; however, adoption is likely to lead to significant changes in accounting policies related to, and the methods employed in estimating, the allowance for loan and lease losses. It is possible that the impact will be material to the Company’s consolidated financial statements. To date, the Company has completed a gap analysis, adopted a detailed implementation plan, established a formal governance structure for the project, selected and is in the process of implementing a software solution to serve as its CECL platform.

In February 2016, the FASB issued ASU 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 reasonably certain to exercise an option to extend the lease, exercise a purchase option or not exercise an option to terminate the lease. In January 2018, the FASB issued ASU 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842. ASU 2018-01 was issued to address concerns about the cost and complexity of complying with the transition provisions of ASU 2016-02. Both ASU 2016-02 and ASU 2018-01 are effective for the Company on January 1, 2019. Early adoption is permitted in any interim or annual period. Lessees and lessors are required to apply the provisions of ASU 2016-02 at the beginning of the earliest period presented using a modified retrospective approach. Management is in the process of finalizing its evaluation of the impact of adoption of this ASU on its consolidated financial statements and related disclosures, processes and controls. The Company has acquired and is in the process of implementing software to facilitate calculation and reporting of the lease liability and right-of-use asset. The most significant impact of adoption is expected to be the recognition, as lessee, of new right-of-use assets and lease liabilities on the consolidated balance sheet for real estate leases currently classified as operating leases. At its November 29, 2017 meeting, the FASB proposed allowing entities the option of applying the provisions of ASU 2016-02 at the effective date without adjusting the comparative periods presented. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases. ASU 2018-10 was issued to provide more detailed guidance and additional clarification for implementing ASU 2016-02. Also in July 2018, the FASB issued ASU 2018-11, Targeted Improvements, which allows for an optional transition method in which the provisions of ASC Topic 842 would be applied upon the adoption date and would not have to be retroactively applied to the earliest reporting period presented in the consolidated financial statements. The Company is monitoring these and other proposed modifications to the requirements of this ASU.

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Securities (Tables)

9 Months Ended

Sep. 30, 2018

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 available for sale (“AFS”) securities are as follows:

(In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
September 30, 2018
Federal agency	$	84,974	$	-	$	1,712	$	83,262
State & municipal		36,841		13		387		36,467
Mortgage-backed:
Government-sponsored enterprises		479,852		207		16,171		463,888
U.S. government agency securities		29,422		204		1,106		28,520
Collateralized mortgage obligations:
Government-sponsored enterprises		461,148		222		19,860		441,510
U.S. government agency securities		49,208		115		1,896		47,427
Total AFS securities	$	1,141,445	$	761	$	41,132	$	1,101,074
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
Equity securities		10,623		3,672		146		14,149
Total AFS securities	$	1,266,165	$	5,893	$	16,133	$	1,255,925

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 held to maturity (“HTM”) securities are as follows:

(In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
September 30, 2018
Federal agency	$	9,995	$	-	$	46	$	9,949
Mortgage-backed:
Government-sponsored enterprises		87,743		-		4,075		83,668
U.S. government agency securities		15,241		36		69		15,208
Collateralized mortgage obligations:
Government-sponsored enterprises		268,044		31		7,080		260,995
U.S. government agency securities		29,401		4		67		29,338
State & municipal		249,525		90		3,041		246,574
Total HTM securities	$	659,949	$	161	$	14,378	$	645,732
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

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 September 30, 2018
AFS securities:
Federal agency	$	39,069	$	(916	)		4	$	44,193	$	(796	)		4	$	83,262	$	(1,712	)		8
State & municipal		12,347		(115	)		22		16,165		(272	)		25		28,512		(387	)		47
Mortgage-backed		297,802		(9,061	)		72		178,186		(8,215	)		48		475,988		(17,276	)		120
Collateralized mortgage obligations		83,566		(1,816	)		16		384,459		(19,941	)		70		468,025		(21,757	)		86
Total securities with unrealized losses	$	432,784	$	(11,908	)		114	$	623,003	$	(29,224	)		147	$	1,055,787	$	(41,132	)		261
HTM securities:
Federal agency	$	9,949	$	(46	)		2	$	-	$	-			-	$	9,949	$	(46	)		2
Mortgage-backed		55,712		(1,678	)		5		42,778		(2,466	)		4		98,490		(4,144	)		9
Collateralized mortgage obligations		153,768		(2,195	)		22		97,515		(4,952	)		16		251,283		(7,147	)		38
State & municipal		84,258		(1,276	)		134		27,384		(1,765	)		41		111,642		(3,041	)		175
Total securities with unrealized losses	$	303,687	$	(5,195	)		163	$	167,677	$	(9,183	)		61	$	471,364	$	(14,378	)		224
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		(1,187	)		24		375,946		(3,568	)		79
Collateralized mortgage obligations		227,917		(2,658	)		35		275,303		(8,521	)		42		503,220		(11,179	)		77
Equity securities		-		-			-		2,959		(146	)		1		2,959		(146	)		1
Total securities with unrealized losses	$	633,766	$	(5,481	)		134	$	386,818	$	(10,652	)		79	$	1,020,584	$	(16,133	)		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

Gains and Losses on Equity Securities

The following tables set forth information with regard to gains and losses on equity securities at September 30, 2018:

(In thousands)	Three months ended September 30, 2018			Nine months ended September 30, 2018
Net gains and losses recognized on equity securities	$	412		$	575
Less: Net gains and losses recognized during the period on equity securities sold during the period		511			555
Unrealized gains and losses recognized on equity securities still held	$	(99	)	$	20

Contractual Maturities of Debt Securities

The following tables set forth information with regard to contractual maturities of debt securities at September 30, 2018:

(In thousands)	Amortized Cost		Estimated Fair Value
AFS debt securities:
Within one year	$	46,641	$	46,521
From one to five years		86,348		84,188
From five to ten years		176,260		171,240
After ten years		832,196		799,125
Total AFS debt securities	$	1,141,445	$	1,101,074
HTM debt securities:
Within one year	$	89,011	$	89,011
From one to five years		53,217		53,177
From five to ten years		215,931		209,974
After ten years		301,790		293,570
Total HTM debt securities	$	659,949	$	645,732

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

9 Months Ended

Sep. 30, 2018

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

Portfolio and Class Segments

Portfolio	Class - 2018	Class - 2017
Commercial Loans	Commercial and Industrial	Commercial
	Commercial Real Estate	Commercial Real Estate
	Business Banking	Agricultural
		Agricultural Real Estate
		Business Banking
Consumer Loans	Dealer Finance	Indirect
	Specialty Lending	Home Equity
	Direct	Direct
Residential Real Estate

Allowance for Loan Losses by Portfolio

The following tables illustrate the changes in the allowance for loan losses by our portfolio segments:

(In thousands)	Commercial Loans			Consumer Loans			Residential Real Estate			Total
Balance as of June 30, 2018	$	31,059		$	36,479		$	4,912		$	72,450
Charge-offs		(823	)		(6,818	)		(123	)		(7,764	)
Recoveries		410			1,602			81			2,093
Provision		1,086			6,044			(1,104	)		6,026
Ending Balance as of September 30, 2018	$	31,732		$	37,307		$	3,766		$	72,805
Balance as of June 30, 2017	$	24,428		$	35,523		$	6,649		$	66,600
Charge-offs		(574	)		(6,979	)		(421	)		(7,974	)
Recoveries		266			1,446			123			1,835
Provision		1,434			6,197			258			7,889
Ending Balance as of September 30, 2017	$	25,554		$	36,187		$	6,609		$	68,350

(In thousands)	Commercial Loans			Consumer Loans			Residential Real Estate			Total
Balance as of December 31, 2017	$	27,606		$	36,830		$	5,064		$	69,500
Charge-offs		(2,535	)		(21,947	)		(513	)		(24,995	)
Recoveries		780			4,946			274			6,000
Provision		5,881			17,478			(1,059	)		22,300
Ending Balance as of September 30, 2018	$	31,732		$	37,307		$	3,766		$	72,805
Balance as of December 31, 2016	$	25,444		$	33,375		$	6,381		$	65,200
Charge-offs		(2,991	)		(19,742	)		(1,717	)		(24,450	)
Recoveries		919			3,680			166			4,765
Provision		2,182			18,874			1,779			22,835
Ending Balance as of September 30, 2017	$	25,554		$	36,187		$	6,609		$	68,350

The following tables illustrate the allowance for loan losses and the recorded investment by portfolio segments:

(In thousands)	Commercial Loans		Consumer Loans		Residential Real Estate		Total
As of September 30, 2018
Allowance for loan losses	$	31,732	$	37,307	$	3,766	$	72,805
Allowance for loans individually evaluated for impairment		25		-		-		25
Allowance for loans collectively evaluated for impairment	$	31,707	$	37,307	$	3,766	$	72,780
Ending balance of loans	$	3,212,577	$	2,301,198	$	1,373,487	$	6,887,262
Ending balance of originated loans individually evaluated for impairment		5,077		7,760		6,445		19,282
Ending balance of acquired loans collectively evaluated for impairment		153,808		33,994		153,073		340,875
Ending balance of originated loans collectively evaluated for impairment	$	3,053,692	$	2,259,444	$	1,213,969	$	6,527,105
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	$	2,234,349	$	1,321,021	$	6,583,639
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	$	2,182,011	$	1,143,719	$	6,160,810

Past Due and Nonperforming Loans by Loan Class

The following tables set 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 September 30, 2018
Originated
Commercial Loans:
C&I	$	209	$	41	$	-	$	250	$	908	$	857,782	$	858,940
CRE		1,133		-		-		1,133		3,637		1,708,369		1,713,139
Business Banking		1,318		98		-		1,416		5,754		479,520		486,690
Total Commercial Loans	$	2,660	$	139	$	-	$	2,799	$	10,299	$	3,045,671	$	3,058,769
Consumer Loans:
Dealer Finance	$	14,364	$	2,039	$	1,252	$	17,655	$	2,062	$	1,209,880	$	1,229,597
Specialty Lending		3,037		2,155		1,544		6,736		-		514,660		521,396
Direct		3,313		949		434		4,696		2,541		508,974		516,211
Total Consumer Loans	$	20,714	$	5,143	$	3,230	$	29,087	$	4,603	$	2,233,514	$	2,267,204
Residential Real Estate	$	1,366	$	219	$	1,231	$	2,816	$	6,106	$	1,211,492	$	1,220,414
Total Originated Loans	$	24,740	$	5,501	$	4,461	$	34,702	$	21,008	$	6,490,677	$	6,546,387
Acquired
Commercial Loans:
C&I	$	-	$	-	$	-	$	-	$	-	$	30,871	$	30,871
CRE		-		-		-		-		2		87,827		87,829
Business Banking		425		-		240		665		611		33,832		35,108
Total Commercial Loans	$	425	$	-	$	240	$	665	$	613	$	152,530	$	153,808
Consumer Loans:
Dealer Finance	$	4	$	-	$	-	$	4	$	-	$	99	$	103
Direct		223		14		-		237		275		33,379		33,891
Total Consumer Loans	$	227	$	14	$	-	$	241	$	275	$	33,478	$	33,994
Residential Real Estate	$	839	$	39	$	33	$	911	$	1,405	$	150,757	$	153,073
Total Acquired Loans	$	1,491	$	53	$	273	$	1,817	$	2,293	$	336,765	$	340,875
Total Loans	$	26,231	$	5,554	$	4,734	$	36,519	$	23,301	$	6,827,442	$	6,887,262

(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	$	1,642,204	$	1,670,591
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	$	2,154,684	$	2,190,443
Residential Real Estate	$	3,730	$	667	$	1,262	$	5,659	$	5,987	$	1,138,903	$	1,150,549
Total Originated Loans	$	28,383	$	6,397	$	5,165	$	39,945	$	23,336	$	6,118,667	$	6,181,948
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	$	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	$	6,516,201	$	6,583,639

Impaired Loans and Specific Reserve Allocations

The following table provides information on loans specifically evaluated for impairment:

	September 30, 2018						December 31, 2017
(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:
C&I	$	404	$	676			$	-	$	-
CRE		3,629		5,616				-		-
Commercial		-		-				-		251
Commercial Real Estate		-		-				2,211		3,979
Agricultural		-		-				452		465
Agricultural Real Estate		-		-				2,250		2,423
Business Banking		1,019		2,099				860		1,730
Total Commercial Loans	$	5,052	$	8,391			$	5,773	$	8,848
Consumer Loans:
Dealer Finance	$	160	$	254			$	-	$	-
Direct		7,600		9,600				-		-
Indirect		-		-				131		143
Home Equity		-		-				8,027		9,966
Direct		-		-				274		274
Total Consumer Loans	$	7,760	$	9,854			$	8,432	$	10,383
Residential Real Estate	$	6,445	$	8,721			$	6,830	$	8,780
Total	$	19,257	$	26,966			$	21,035	$	28,011
With an allowance recorded:
Commercial Loans:
C&I	$	25	$	25	$	25	$	-	$	-	$	-
Commercial Real Estate		-		-		-		76		82		30
Agricultural		-		-		-		27		27		27
Total Commercial Loans	$	25	$	25	$	25	$	103	$	109	$	57
Total Loans	$	19,282	$	26,991	$	25	$	21,138	$	28,120	$	57

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

	For the three months ended
	September 30, 2018				September 30, 2017
(In thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Originated
Commercial Loans:
C&I	$	433	$	-	$	-	$	-
CRE		3,645		32		-		-
Commercial		-		-		1,000		-
Commercial Real Estate		-		-		2,415		48
Agricultural		-		-		115		-
Agricultural Real Estate		-		-		1,505		11
Business Banking		1,024		4		955		2
Total Commercial Loans	$	5,102	$	36	$	5,990	$	61
Consumer Loans:
Dealer Finance	$	177	$	4	$	-	$	-
Direct		7,730		102		-		-
Indirect		-		-		35		1
Home Equity		-		-		8,159		111
Direct		-		-		119		2
Total Consumer Loans	$	7,907	$	106	$	8,313	$	114
Residential Real Estate	$	6,519	$	68	$	6,633	$	82
Total Originated Loans	$	19,528	$	210	$	20,936	$	257
Total Loans	$	19,528	$	210	$	20,936	$	257

	For the nine months ended
	September 30, 2018				September 30, 2017
(In thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Originated
Commercial Loans:
C&I	$	449	$	1	$	-	$	-
CRE		3,999		96		-		-
Commercial		-		-		2,393		-
Commercial Real Estate		-		-		3,906		93
Agricultural		-		-		147		1
Agricultural Real Estate		-		-		1,545		32
Business Banking		998		12		837		7
Total Commercial Loans	$	5,446	$	109	$	8,828	$	133
Consumer Loans:
Dealer Finance	$	187	$	8	$	-	$	-
Direct		7,953		317		-		-
Indirect		-		-		22		2
Home Equity		-		-		8,274		331
Direct		-		-		119		2
Total Consumer Loans	$	8,140	$	325	$	8,415	$	335
Residential Real Estate	$	6,719	$	212	$	6,425	$	211
Total Originated Loans	$	20,305	$	646	$	23,668	$	679
Acquired
Commercial Loans:
Commercial Real Estate	$	-	$	-	$	121	$	-
Total Commercial Loans	$	-	$	-	$	121	$	-
Total Acquired Loans	$	-	$	-	$	121	$	-
Total Loans	$	20,305	$	646	$	23,789	$	679

Financing Receivable Credit Quality by Loan Class

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

(In thousands)	As of September 30, 2018
Originated
Commercial Credit Exposure By Internally Assigned Grade:			C&I		CRE		Total
Pass			$	805,333	$	1,660,900	$	2,466,233
Special Mention				33,557		16,762		50,319
Substandard				20,050		35,477		55,527
Total			$	858,940	$	1,713,139	$	2,572,079
Business Banking Credit Exposure By Internally Assigned Grade:					Business Banking		Total
Non-classified					$	474,252	$	474,252
Classified						12,438		12,438
Total					$	486,690	$	486,690
Consumer Credit Exposure By Payment Activity:	Dealer Finance		Specialty Lending		Direct		Total
Performing	$	1,226,283	$	519,852	$	513,236	$	2,259,371
Nonperforming		3,314		1,544		2,975		7,833
Total	$	1,229,597	$	521,396	$	516,211	$	2,267,204
Residential Real Estate Credit Exposure By Payment Activity:					Residential Real Estate		Total
Performing					$	1,213,077	$	1,213,077
Nonperforming						7,337		7,337
Total					$	1,220,414	$	1,220,414

Acquired
Commercial Credit Exposure By Internally Assigned Grade:	C&I		CRE		Total
Pass	$	27,046	$	87,091	$	114,137
Special Mention		3,825		93		3,918
Substandard		-		645		645
Total	$	30,871	$	87,829	$	118,700
Business Banking Credit Exposure By Internally Assigned Grade:			Business Banking		Total
Non-classified			$	32,098	$	32,098
Classified				3,010		3,010
Total			$	35,108	$	35,108
Consumer Credit Exposure By Payment Activity:	Dealer Finance		Direct		Total
Performing	$	103	$	33,616	$	33,719
Nonperforming		-		275		275
Total	$	103	$	33,891	$	33,994
Residential Real Estate Credit Exposure By Payment Activity:			Residential Real Estate		Total
Performing			$	151,635	$	151,635
Nonperforming				1,438		1,438
Total			$	153,073	$	153,073

(In thousands)	As of 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			$	1,664,984	$	451,822	$	64,848	$	2,181,654
Nonperforming				5,607		3,077		105		8,789
Total			$	1,670,591	$	454,899	$	64,953	$	2,190,443
Residential Real Estate Credit Exposure By Payment Activity:							Residential Real Estate		Total
Performing							$	1,143,300	$	1,143,300
Nonperforming								7,249		7,249
Total							$	1,150,549	$	1,150,549

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

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:

	Three months ended September 30, 2018
(Dollars in thousands)	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Consumer Loans:
Dealer Finance		8	$	90	$	89
Total Consumer Loans		8	$	90	$	89
Total Troubled Debt Restructurings		8	$	90	$	89

	Three months ended September 30, 2017
(Dollars in thousands)	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Consumer Loans:
Indirect		1	$	7	$	7
Home Equity		4		189		222
Total Consumer Loans		5	$	196	$	229
Residential Real Estate		1	$	518	$	518
Total Troubled Debt Restructurings		6	$	714	$	747

	Nine months ended September 30, 2018
(Dollars in thousands)	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial Loans:
Business Banking		3	$	369	$	371
Total Commercial Loans		3	$	369	$	371
Consumer Loans:
Dealer Finance		15	$	185	$	183
Direct		2		41		41
Total Consumer Loans		17	$	226	$	224
Residential Real Estate		5	$	323	$	323
Total Troubled Debt Restructurings		25	$	918	$	918

	Nine months ended September 30, 2017
(Dollars 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		1		337		333
Total Commercial Loans		2	$	3,637	$	3,572
Consumer Loans:
Indirect		4	$	39	$	37
Home Equity		8		373		414
Direct		1		120		120
Total Consumer Loans		13	$	532	$	571
Residential Real Estate		8	$	1,066	$	1,068
Total Troubled Debt Restructurings		23	$	5,235	$	5,211

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

	Three months ended September 30, 2018				Three months ended September 30, 2017
(Dollars in thousands)	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Consumer Loans:
Indirect		-	$	-		1	$	13
Home Equity		-		-		12		622
Direct		17		816		-		-
Total Consumer Loans		17	$	816		13	$	635
Residential Real Estate		5	$	398		6	$	546
Total Troubled Debt Restructurings		22	$	1,214		19	$	1,181

	Nine months ended September 30, 2018				Nine months ended September 30, 2017
(Dollars in thousands)	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Commercial Loans:
Commercial		-	$	-		1	$	145
Business Banking		2		258		1		329
Total Commercial Loans		2	$	258		2	$	474
Consumer Loans:
Indirect		-	$	-		2	$	19
Home Equity		-		-		30		1,381
Direct		35		1,740		-		-
Total Consumer Loans		35	$	1,740		32	$	1,400
Residential Real Estate		17	$	1,239		12	$	817
Total Troubled Debt Restructurings		54	$	3,237		46	$	2,691

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Defined Benefit Post-Retirement Plans (Tables)

9 Months Ended

Sep. 30, 2018

Defined Benefit Post-Retirement Plans [Abstract]

Net Periodic Pension Benefits and Other Benefit Costs

The components of expense for Pension Benefits and Other Benefits are set forth below:

	Pension Benefits						Other Benefits
	Three months ended September 30,						Three months ended September 30,
(In thousands)	2018			2017			2018		2017
Components of net periodic (benefit) cost
Service cost	$	415		$	329		$	3	$	3
Interest cost		912			1,043			82		88
Expected return on plan assets		(2,119	)		(1,976	)		-		-
Net amortization		242			454			44		26
Total net periodic (benefit) cost	$	(550	)	$	(150	)	$	129	$	117

	Pension Benefits						Other Benefits
	Nine months ended September 30,						Nine months ended September 30,
(In thousands)	2018			2017			2018		2017
Components of net periodic (benefit) cost
Service cost	$	1,256		$	1,133		$	8	$	9
Interest cost		2,752			3,127			245		259
Expected return on plan assets		(6,364	)		(5,946	)		-		-
Net amortization		745			1,284			131		66
Total net periodic (benefit) cost	$	(1,611	)	$	(402	)	$	384	$	334

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Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2018

Earnings Per Share [Abstract]

Reconciliation of Basic and Diluted Earnings per Share

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

	Three months ended September 30,
(In thousands, except per share data)	2018		2017
Basic EPS:
Weighted average common shares outstanding		43,714		43,595
Net income available to common stockholders	$	29,807	$	22,876
Basic EPS	$	0.68	$	0.52
Diluted EPS:
Weighted average common shares outstanding		43,714		43,595
Dilutive effect of common stock options and restricted stock		337		320
Weighted average common shares and common share equivalents		44,051		43,915
Net income available to common stockholders	$	29,807	$	22,876
Diluted EPS	$	0.68	$	0.52

	Nine months ended September 30,
(In thousands, except per share data)	2018		2017
Basic EPS:
Weighted average common shares outstanding		43,692		43,563
Net income available to common stockholders	$	83,914	$	64,514
Basic EPS	$	1.92	$	1.48
Diluted EPS:
Weighted average common shares outstanding		43,692		43,563
Dilutive effect of common stock options and restricted stock		317		329
Weighted average common shares and common share equivalents		44,009		43,892
Net income available to common stockholders	$	83,914	$	64,514
Diluted EPS	$	1.91	$	1.47

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

9 Months Ended

Sep. 30, 2018

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

Reclassification Out of Accumulated Other Comprehensive Income

The following table summarizes the reclassification adjustments out of accumulated other comprehensive income (loss) (“AOCI”):

Detail About AOCI Components	Amount Reclassified From AOCI						Affected Line Item in the Consolidated Statement of Comprehensive Income (Loss)
	Three months ended
(In thousands)	September 30, 2018			September 30, 2017
AFS securities:
Losses on AFS securities	$	-		$	4		Net securities losses
Amortization of unrealized gains related to securities transfer		168			212		Interest income
Tax effect	$	(42	)	$	(83	)	Income tax (expense) benefit
Net of tax	$	126		$	133
Cash flow hedges:
Net unrealized (gains) on cash flow hedges reclassified to interest (income)	$	(638	)	$	(155	)	Interest income
Tax effect	$	159		$	59		Income tax (expense) benefit
Net of tax	$	(479	)	$	(96	)
Pension and other benefits:
Amortization of net losses	$	263		$	481		Other noninterest expense
Amortization of prior service costs		23			(1	)	Other noninterest expense
Tax effect	$	(71	)	$	(183	)	Income tax (expense) benefit
Net of tax	$	215		$	297
Total reclassifications during the period, net of tax	$	(138	)	$	334

Detail About AOCI Components	Amount Reclassified From AOCI						Affected Line item in the Consolidated Statement of Comprehensive Income (Loss)
	Nine months ended
(In thousands)	September 30, 2018			September 30, 2017
AFS securities:
Losses on AFS securities	$	-		$	2		Net securities losses
Amortization of unrealized gains related to securities transfer		533			675		Interest income
Impairment write-down of equity security		-			1,312		Other noninterest income
Tax effect	$	(133	)	$	(760	)	Income tax (expense) benefit
Net of tax	$	400		$	1,229
Cash flow hedges:
Net unrealized (gains) on cash flow hedges reclassified to interest (income)	$	(1,537	)	$	(96	)	Interest income
Tax effect	$	384		$	37		Income tax (expense) benefit
Net of tax	$	(1,153	)	$	(59	)
Pension and other benefits:
Amortization of net losses	$	809		$	1,351		Other noninterest expense
Amortization of prior service costs		67			(1	)	Other noninterest expense
Tax effect	$	(219	)	$	(516	)	Income tax (expense) benefit
Net of tax	$	657		$	834
Total reclassifications during the period, net of tax	$	(96	)	$	2,004

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

9 Months Ended

Sep. 30, 2018

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

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

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

(In thousands)	Level 1		Level 2		Level 3		September 30, 2018
Assets:
AFS securities
Federal Agency	$	-	$	83,262	$	-	$	83,262
State & municipal		-		36,467		-		36,467
Mortgage-backed		-		492,408		-		492,408
Collateralized mortgage obligations		-		488,937		-		488,937
Total AFS securities	$	-	$	1,101,074	$	-	$	1,101,074
Equity securities		20,722		4,000		-		24,722
Derivatives		-		23,682		-		23,682
Total	$	20,722	$	1,128,756	$	-	$	1,149,478
Liabilities:
Derivatives	$	-	$	20,054	$	-	$	20,054
Total	$	-	$	20,054	$	-	$	20,054

(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

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, equity securities, trading securities, accrued interest receivable, non-maturity deposits, short-term borrowings, accrued interest payable and interest rate swaps.

			September 30, 2018				December 31, 2017
(In thousands)	Fair Value Hierarchy		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
HTM securities		2	$	659,949	$	645,732	$	484,073	$	481,871
Net loans		3		6,819,492		6,762,901		6,515,273		6,651,931
Financial liabilities:
Time deposits		2	$	868,569	$	860,791	$	806,766	$	801,294
Long-term debt		2		73,751		72,152		88,869		88,346
Junior subordinated debt		2		101,196		102,979		101,196		104,593

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Revenue from Contracts with Customers (Tables)

9 Months Ended

Sep. 30, 2018

Revenue from Contracts with Customers [Abstract]

Non-interest Income

The following table presents noninterest income, segregated by revenue streams in-scope and out-of-scope of ASC 606, for three and nine months ended September 30, 2018 and 2017:

	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2018		2017		2018		2017
Noninterest income
In-Scope of ASC 606:
Insurance and other financial services revenue	$	6,172	$	5,536	$	18,502	$	17,927
Service charges on deposit accounts		4,503		4,261		12,721		12,399
ATM and debit card fees		5,906		5,557		16,995		16,025
Retirement plan administration fees		7,244		5,272		19,879		14,881
Trust		4,808		4,927		14,951		14,620
Other		3,048		3,945		11,341		10,069
Total noninterest income in-scope of ASC 606	$	31,681	$	29,498	$	94,389	$	85,921
Total noninterest income out-of-scope of ASC 606	$	1,700	$	1,280	$	4,427	$	3,911
Total noninterest income	$	33,381	$	30,778	$	98,816	$	89,832

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Securities, Available for Sale (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Debt securities, available-for-sale [Abstract]
Amortized cost	$ 1,141,445		$ 1,141,445
Unrealized gains	761		761
Unrealized losses	41,132		41,132
Estimated fair value	1,101,074		1,101,074
Total available-for-sale securities [Abstract]
Amortized cost					$ 1,266,165
Unrealized gains					5,893
Unrealized losses					16,133
Estimated fair value	1,101,074		1,101,074		1,255,925
OTTI loss realized on equity investment	0	$ 0	0	$ 1,300
Federal Agency [Member]
Debt securities, available-for-sale [Abstract]
Amortized cost	84,974		84,974		109,862
Unrealized gains	0		0		0
Unrealized losses	1,712		1,712		963
Estimated fair value	83,262		83,262		108,899
State & Municipal [Member]
Debt securities, available-for-sale [Abstract]
Amortized cost	36,841		36,841		42,171
Unrealized gains	13		13		62
Unrealized losses	387		387		277
Estimated fair value	36,467		36,467		41,956
Mortgage-Backed, Government Sponsored Enterprises [Member]
Debt securities, available-for-sale [Abstract]
Amortized cost	479,852		479,852		530,392
Unrealized gains	207		207		1,406
Unrealized losses	16,171		16,171		3,345
Estimated fair value	463,888		463,888		528,453
Mortgage-Backed, U.S. Government Agency Securities [Member]
Debt securities, available-for-sale [Abstract]
Amortized cost	29,422		29,422		26,363
Unrealized gains	204		204		334
Unrealized losses	1,106		1,106		223
Estimated fair value	28,520		28,520		26,474
Collateralized Mortgage Obligations, Government-Sponsored Enterprises [Member]
Debt securities, available-for-sale [Abstract]
Amortized cost	461,148		461,148		496,033
Unrealized gains	222		222		254
Unrealized losses	19,860		19,860		10,114
Estimated fair value	441,510		441,510		486,173
Collateralized Mortgage Obligations, U.S. Government Agency Securities [Member]
Debt securities, available-for-sale [Abstract]
Amortized cost	49,208		49,208		50,721
Unrealized gains	115		115		165
Unrealized losses	1,896		1,896		1,065
Estimated fair value	$ 47,427		$ 47,427		49,821
Equity Securities [Member]
Equity securities, available-for-sale [Abstract]
Amortized cost					10,623
Unrealized gains					3,672
Unrealized losses					146
Estimated fair value					$ 14,149

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Securities, Held to Maturity (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Held-to-maturity securities, fair value to amortized cost [Abstract]
Amortized cost	$ 659,949		$ 659,949		$ 484,073
Unrealized gains	161		161		1,805
Unrealized losses	14,378		14,378		4,007
Estimated fair value	645,732		645,732		481,871
Held-to-maturity securities sold, amortized cost	0	$ 800	0	$ 800
Held-to-maturity securities sold, unrealized loss	0	$ 2	0	$ 2
Amortized costs of securities available for sale and held to maturity pledged to secure public deposits	1,600,000		1,600,000		1,500,000
Amortized costs of securities AFS and HTM pledged as collateral for repurchase agreements	196,400		196,400		256,200
Federal Agency [Member]
Held-to-maturity securities, fair value to amortized cost [Abstract]
Amortized cost	9,995		9,995
Unrealized gains	0		0
Unrealized losses	46		46
Estimated fair value	9,949		9,949
Mortgage-Backed, Government Sponsored Enterprises [Member]
Held-to-maturity securities, fair value to amortized cost [Abstract]
Amortized cost	87,743		87,743		96,357
Unrealized gains	0		0		85
Unrealized losses	4,075		4,075		810
Estimated fair value	83,668		83,668		95,632
Mortgage-Backed, U.S. Government Agency Securities [Member]
Held-to-maturity securities, fair value to amortized cost [Abstract]
Amortized cost	15,241		15,241		418
Unrealized gains	36		36		57
Unrealized losses	69		69		0
Estimated fair value	15,208		15,208		475
Collateralized Mortgage Obligations, Government-Sponsored Enterprises [Member]
Held-to-maturity securities, fair value to amortized cost [Abstract]
Amortized cost	268,044		268,044		186,327
Unrealized gains	31		31		224
Unrealized losses	7,080		7,080		2,577
Estimated fair value	260,995		260,995		183,974
Collateralized Mortgage Obligations, U.S. Government Agency Securities [Member]
Held-to-maturity securities, fair value to amortized cost [Abstract]
Amortized cost	29,401		29,401
Unrealized gains	4		4
Unrealized losses	67		67
Estimated fair value	29,338		29,338
State & Municipal [Member]
Held-to-maturity securities, fair value to amortized cost [Abstract]
Amortized cost	249,525		249,525		200,971
Unrealized gains	90		90		1,439
Unrealized losses	3,041		3,041		620
Estimated fair value	$ 246,574		$ 246,574		$ 201,790

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Securities, AFS Securities in Continuous Unrealized Loss Position (Details) $ in Thousands	Sep. 30, 2018 USD ($) Position	Dec. 31, 2017 USD ($) Position
Unrealized Loss Position, Fair Value [Abstract]
Less than 12 months	$ 432,784	$ 633,766
12 months or longer	623,003	386,818
Total	1,055,787	1,020,584
Unrealized Loss Position, Unrealized Losses [Abstract]
Less than 12 months	(11,908)	(5,481)
12 months or longer	(29,224)	(10,652)
Total	$ (41,132)	$ (16,133)
Unrealized Loss Position, Number of Positions [Abstract]
Less than 12 months | Position	114	134
12 months or longer | Position	147	79
Total | Position	261	213
Federal Agency [Member]
Unrealized Loss Position, Fair Value [Abstract]
Less than 12 months	$ 39,069	$ 64,653
12 months or longer	44,193	44,246
Total	83,262	108,899
Unrealized Loss Position, Unrealized Losses [Abstract]
Less than 12 months	(916)	(242)
12 months or longer	(796)	(721)
Total	$ (1,712)	$ (963)
Unrealized Loss Position, Number of Positions [Abstract]
Less than 12 months | Position	4	5
12 months or longer | Position	4	4
Total | Position	8	9
State & Municipal [Member]
Unrealized Loss Position, Fair Value [Abstract]
Less than 12 months	$ 12,347	$ 23,566
12 months or longer	16,165	5,994
Total	28,512	29,560
Unrealized Loss Position, Unrealized Losses [Abstract]
Less than 12 months	(115)	(200)
12 months or longer	(272)	(77)
Total	$ (387)	$ (277)
Unrealized Loss Position, Number of Positions [Abstract]
Less than 12 months | Position	22	39
12 months or longer | Position	25	8
Total | Position	47	47
Mortgage-Backed [Member]
Unrealized Loss Position, Fair Value [Abstract]
Less than 12 months	$ 297,802	$ 317,630
12 months or longer	178,186	58,316
Total	475,988	375,946
Unrealized Loss Position, Unrealized Losses [Abstract]
Less than 12 months	(9,061)	(2,381)
12 months or longer	(8,215)	(1,187)
Total	$ (17,276)	$ (3,568)
Unrealized Loss Position, Number of Positions [Abstract]
Less than 12 months | Position	72	55
12 months or longer | Position	48	24
Total | Position	120	79
Collateralized Mortgage Obligations [Member]
Unrealized Loss Position, Fair Value [Abstract]
Less than 12 months	$ 83,566	$ 227,917
12 months or longer	384,459	275,303
Total	468,025	503,220
Unrealized Loss Position, Unrealized Losses [Abstract]
Less than 12 months	(1,816)	(2,658)
12 months or longer	(19,941)	(8,521)
Total	$ (21,757)	$ (11,179)
Unrealized Loss Position, Number of Positions [Abstract]
Less than 12 months | Position	16	35
12 months or longer | Position	70	42
Total | Position	86	77
Equity Securities [Member]
Unrealized Loss Position, Fair Value [Abstract]
Less than 12 months		$ 0
12 months or longer		2,959
Total		2,959
Unrealized Loss Position, Unrealized Losses [Abstract]
Less than 12 months		0
12 months or longer		(146)
Total		$ (146)
Unrealized Loss Position, Number of Positions [Abstract]
Less than 12 months | Position		0
12 months or longer | Position		1
Total | Position		1

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Securities, HTM Securities in Continuous Unrealized Loss Position (Details) $ in Thousands	Sep. 30, 2018 USD ($) Position	Dec. 31, 2017 USD ($) Position
Unrealized Loss Position, Fair Value [Abstract]
Less than 12 months	$ 303,687	$ 156,340
12 months or longer	167,677	87,037
Total	471,364	243,377
Unrealized Loss Position, Unrealized Losses [Abstract]
Less than 12 months	(5,195)	(1,336)
12 months or longer	(9,183)	(2,671)
Total	$ (14,378)	$ (4,007)
Unrealized Loss Position, Number of Positions [Abstract]
Less than 12 months | Position	163	59
12 months or longer | Position	61	32
Total | Position	224	91
Federal Agency [Member]
Unrealized Loss Position, Fair Value [Abstract]
Less than 12 months	$ 9,949
12 months or longer	0
Total	9,949
Unrealized Loss Position, Unrealized Losses [Abstract]
Less than 12 months	(46)
12 months or longer	0
Total	$ (46)
Unrealized Loss Position, Number of Positions [Abstract]
Less than 12 months | Position	2
12 months or longer | Position	0
Total | Position	2
Mortgage-Backed [Member]
Unrealized Loss Position, Fair Value [Abstract]
Less than 12 months	$ 55,712	$ 15,477
12 months or longer	42,778	33,703
Total	98,490	49,180
Unrealized Loss Position, Unrealized Losses [Abstract]
Less than 12 months	(1,678)	(140)
12 months or longer	(2,466)	(670)
Total	$ (4,144)	$ (810)
Unrealized Loss Position, Number of Positions [Abstract]
Less than 12 months | Position	5	2
12 months or longer | Position	4	2
Total | Position	9	4
Collateralized Mortgage Obligations [Member]
Unrealized Loss Position, Fair Value [Abstract]
Less than 12 months	$ 153,768	$ 118,476
12 months or longer	97,515	37,614
Total	251,283	156,090
Unrealized Loss Position, Unrealized Losses [Abstract]
Less than 12 months	(2,195)	(1,064)
12 months or longer	(4,952)	(1,513)
Total	$ (7,147)	$ (2,577)
Unrealized Loss Position, Number of Positions [Abstract]
Less than 12 months | Position	22	17
12 months or longer | Position	16	6
Total | Position	38	23
State & Municipal [Member]
Unrealized Loss Position, Fair Value [Abstract]
Less than 12 months	$ 84,258	$ 22,387
12 months or longer	27,384	15,720
Total	111,642	38,107
Unrealized Loss Position, Unrealized Losses [Abstract]
Less than 12 months	(1,276)	(132)
12 months or longer	(1,765)	(488)
Total	$ (3,041)	$ (620)
Unrealized Loss Position, Number of Positions [Abstract]
Less than 12 months | Position	134	40
12 months or longer | Position	41	24
Total | Position	175	64

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Securities, Unrealized Gains (Losses) Related to Equity Securities (Details) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2018 USD ($) Issuer	Sep. 30, 2018 USD ($) Issuer	Dec. 31, 2017 Issuer
Gains and losses on equity securities [Abstract]
Net gains and losses recognized on equity securities	$ 412	$ 575
Less: Net gains and losses recognized during the period on equity securities sold during the period	511	555
Unrealized gains and losses recognized on equity securities still held	(99)	20
Carrying amount of equity securities without readily determinable fair values	4,000	4,000
Impairment adjustments of equity securities without readily determinable fair values	0	0
Downward adjustments of equity securities without readily determinable fair values	0	0
Upward adjustments of equity securities without readily determinable fair values	$ 0	$ 0
Number of issuers whose holdings exceeded 10% of consolidated stockholders' equity, excluding U.S. Government securities | Issuer	0	0	0

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Securities, AFS Debt Securities, Contractual Maturities (Details) $ in Thousands	Sep. 30, 2018 USD ($)
Available-for-sale Securities, Debt Maturities, Amortized Cost [Abstract]
Within one year	$ 46,641
From one to five years	86,348
From five to ten years	176,260
After ten years	832,196
Amortized cost	1,141,445
Available-for-sale Securities, Debt Maturities, Estimated Fair Value [Abstract]
Within one year	46,521
From one to five years	84,188
From five to ten years	171,240
After ten years	799,125
Fair value	$ 1,101,074

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Securities, HTM Debt Securities, Contractual Maturities (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Held-to-maturity Securities, Debt Maturities, Amortized Cost [Abstract]
Within one year	$ 89,011
From one to five years	53,217
From five to ten years	215,931
After ten years	301,790
Amortized cost	659,949	$ 484,073
Held-to-maturity Securities, Debt Maturities, Estimated Fair Value [Abstract]
Within one year	89,011
From one to five years	53,177
From five to ten years	209,974
After ten years	293,570
Fair value	$ 645,732	$ 481,871

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Allowance for Loan Losses and Credit Quality of Loans (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2018 USD ($) Segment	Mar. 31, 2018
Allowance for Loan Losses [Abstract]
Loan portfolio segments | Segment	3
Agricultural [Member] | Maximum [Member]
Allowance for Loan Losses [Abstract]
Loan amount, percentage of commercial portfolio		3.00%
Specialty Lending [Member]
Allowance for Loan Losses [Abstract]
Loan amount, percentage of consumer portfolio		21.00%
Commercial Loans [Member] | Commercial Real Estate [Member] | Maximum [Member]
Allowance for Loan Losses [Abstract]
Loan amount, percentage of appraised value or purchase price of the property	80.00%
Commercial Loans [Member] | Agricultural Real Estate [Member] | Maximum [Member]
Allowance for Loan Losses [Abstract]
Loan amount, percentage of appraised value or purchase price of the property	75.00%
Commercial Loans [Member] | Business Banking [Member] | Maximum [Member]
Allowance for Loan Losses [Abstract]
Business banking loans, amount available | $	$ 750
Consumer Loans [Member] | Dealer Finance [Member]
Allowance for Loan Losses [Abstract]
Percentage of automobile financing to indirect relationships with dealers	95.00%
Consumer Loans [Member] | Dealer Finance [Member] | Minimum [Member]
Allowance for Loan Losses [Abstract]
Principal repayment term of loan	3 years
Consumer Loans [Member] | Dealer Finance [Member] | Maximum [Member]
Allowance for Loan Losses [Abstract]
Principal repayment term of loan	6 years
Consumer Loans [Member] | Direct [Member] | Minimum [Member]
Allowance for Loan Losses [Abstract]
Principal repayment term of loan	1 year
Consumer Loans [Member] | Direct [Member] | Maximum [Member]
Allowance for Loan Losses [Abstract]
Principal repayment term of loan	10 years
Consumer Loans [Member] | Home Equity [Member] | Maximum [Member]
Allowance for Loan Losses [Abstract]
Loan amount, percentage of appraised value or purchase price of the property	85.00%
Loan amount, percentage of equity in property	85.00%
Residential Real Estate [Member] | Maximum [Member]
Allowance for Loan Losses [Abstract]
Loan amount, percentage of appraised value or purchase price of the property	85.00%

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Allowance for Loan Losses and Credit Quality of Loans, Allowance for Loan Losses by Portfolio Segments (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Changes in allowance for loan losses by portfolio segment [Roll Forward]
Balance, beginning of period	$ 72,450	$ 66,600	$ 69,500	$ 65,200
Charge-offs	(7,764)	(7,974)	(24,995)	(24,450)
Recoveries	2,093	1,835	6,000	4,765
Provision	6,026	7,889	22,300	22,835
Balance, end of period	72,805	68,350	72,805	68,350
Commercial Loans [Member]
Changes in allowance for loan losses by portfolio segment [Roll Forward]
Balance, beginning of period	31,059	24,428	27,606	25,444
Charge-offs	(823)	(574)	(2,535)	(2,991)
Recoveries	410	266	780	919
Provision	1,086	1,434	5,881	2,182
Balance, end of period	31,732	25,554	31,732	25,554
Consumer Loans [Member]
Changes in allowance for loan losses by portfolio segment [Roll Forward]
Balance, beginning of period	36,479	35,523	36,830	33,375
Charge-offs	(6,818)	(6,979)	(21,947)	(19,742)
Recoveries	1,602	1,446	4,946	3,680
Provision	6,044	6,197	17,478	18,874
Balance, end of period	37,307	36,187	37,307	36,187
Residential Real Estate [Member]
Changes in allowance for loan losses by portfolio segment [Roll Forward]
Balance, beginning of period	4,912	6,649	5,064	6,381
Charge-offs	(123)	(421)	(513)	(1,717)
Recoveries	81	123	274	166
Provision	(1,104)	258	(1,059)	1,779
Balance, end of period	3,766	6,609	3,766	6,609
Acquired Loans [Member]
Changes in allowance for loan losses by portfolio segment [Roll Forward]
Balance, beginning of period			0
Charge-offs	0	$ 0	100	$ 700
Balance, end of period	$ 0		$ 0

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Allowance for Loan Losses and Credit Quality of Loans, Allowance for Loan Losses and Recorded Investment in Loans (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Jun. 30, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Dec. 31, 2016
Allowance for loan losses and recorded investment by portfolio segment [Abstract]
Allowance for loan losses	$ 72,805	$ 72,450	$ 69,500	$ 68,350	$ 66,600	$ 65,200
Allowance for loans individually evaluated for impairment	25		57
Allowance for loans collectively evaluated for impairment	72,780		69,443
Ending balance of loans	6,887,262		6,583,639
Commercial Loans [Member]
Allowance for loan losses and recorded investment by portfolio segment [Abstract]
Allowance for loan losses	31,732	31,059	27,606	25,554	24,428	25,444
Allowance for loans individually evaluated for impairment	25		57
Allowance for loans collectively evaluated for impairment	31,707		27,549
Ending balance of loans	3,212,577		3,028,269
Consumer Loans [Member]
Allowance for loan losses and recorded investment by portfolio segment [Abstract]
Allowance for loan losses	37,307	36,479	36,830	36,187	35,523	33,375
Allowance for loans individually evaluated for impairment	0		0
Allowance for loans collectively evaluated for impairment	37,307		36,830
Ending balance of loans	2,301,198		2,234,349
Residential Real Estate [Member]
Allowance for loan losses and recorded investment by portfolio segment [Abstract]
Allowance for loan losses	3,766	$ 4,912	5,064	$ 6,609	$ 6,649	$ 6,381
Allowance for loans individually evaluated for impairment	0		0
Allowance for loans collectively evaluated for impairment	3,766		5,064
Ending balance of loans	1,373,487		1,321,021
Originated Loans [Member]
Allowance for loan losses and recorded investment by portfolio segment [Abstract]
Ending balance of loans	6,546,387		6,181,948
Ending balance of loans individually evaluated for impairment	19,282		21,138
Ending balance of loans collectively evaluated for impairment	6,527,105		6,160,810
Originated Loans [Member] | Commercial Loans [Member]
Allowance for loan losses and recorded investment by portfolio segment [Abstract]
Ending balance of loans	3,058,769		2,840,956
Ending balance of loans individually evaluated for impairment	5,077		5,876
Ending balance of loans collectively evaluated for impairment	3,053,692		2,835,080
Originated Loans [Member] | Consumer Loans [Member]
Allowance for loan losses and recorded investment by portfolio segment [Abstract]
Ending balance of loans	2,267,204		2,190,443
Ending balance of loans individually evaluated for impairment	7,760		8,432
Ending balance of loans collectively evaluated for impairment	2,259,444		2,182,011
Originated Loans [Member] | Residential Real Estate [Member]
Allowance for loan losses and recorded investment by portfolio segment [Abstract]
Ending balance of loans	1,220,414		1,150,549
Ending balance of loans individually evaluated for impairment	6,445		6,830
Ending balance of loans collectively evaluated for impairment	1,213,969		1,143,719
Acquired Loans [Member]
Allowance for loan losses and recorded investment by portfolio segment [Abstract]
Allowance for loan losses	0		0
Ending balance of loans	340,875		401,691
Ending balance of loans collectively evaluated for impairment	340,875		401,691
Acquired Loans [Member] | Commercial Loans [Member]
Allowance for loan losses and recorded investment by portfolio segment [Abstract]
Ending balance of loans	153,808		187,313
Ending balance of loans collectively evaluated for impairment	153,808		187,313
Acquired Loans [Member] | Consumer Loans [Member]
Allowance for loan losses and recorded investment by portfolio segment [Abstract]
Ending balance of loans	33,994		43,906
Ending balance of loans collectively evaluated for impairment	33,994		43,906
Acquired Loans [Member] | Residential Real Estate [Member]
Allowance for loan losses and recorded investment by portfolio segment [Abstract]
Ending balance of loans	153,073		170,472
Ending balance of loans collectively evaluated for impairment	$ 153,073		$ 170,472

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Allowance for Loan Losses and Credit Quality of Loans, Past Due Loans (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Financing Receivable, Recorded Investment, Aging [Abstract]
Minimum number of days past due for nonaccrual loan status	90 days
Total past due accruing	$ 36,519	$ 41,730
Nonaccrual	23,301	25,708
Current	6,827,442	6,516,201
Recorded total loans	6,887,262	6,583,639
31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	26,231	29,662
61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	5,554	6,658
Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	4,734	5,410
Commercial Loans [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded total loans	3,212,577	3,028,269
Consumer Loans [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded total loans	2,301,198	2,234,349
Residential Real Estate [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded total loans	1,373,487	1,321,021
Originated Loans [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	34,702	39,945
Nonaccrual	21,008	23,336
Current	6,490,677	6,118,667
Recorded total loans	6,546,387	6,181,948
Originated Loans [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	24,740	28,383
Originated Loans [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	5,501	6,397
Originated Loans [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	4,461	5,165
Originated Loans [Member] | Commercial Loans [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	2,799	3,413
Nonaccrual	10,299	12,463
Current	3,045,671	2,825,080
Recorded total loans	3,058,769	2,840,956
Originated Loans [Member] | Commercial Loans [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	2,660	2,678
Originated Loans [Member] | Commercial Loans [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	139	735
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] | C&I [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	250
Nonaccrual	908
Current	857,782
Recorded total loans	858,940
Originated Loans [Member] | Commercial Loans [Member] | C&I [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	209
Originated Loans [Member] | Commercial Loans [Member] | C&I [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	41
Originated Loans [Member] | Commercial Loans [Member] | C&I [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0
Originated Loans [Member] | Commercial Loans [Member] | CRE [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	1,133
Nonaccrual	3,637
Current	1,708,369
Recorded total loans	1,713,139
Originated Loans [Member] | Commercial Loans [Member] | CRE [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	1,133
Originated Loans [Member] | Commercial Loans [Member] | CRE [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0
Originated Loans [Member] | Commercial Loans [Member] | CRE [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0
Originated Loans [Member] | Commercial Loans [Member] | Commercial [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing		0
Nonaccrual		202
Current		753,577
Recorded total loans		753,779
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
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
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
Originated Loans [Member] | Commercial Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing		299
Nonaccrual		3,178
Current		1,533,065
Recorded total loans		1,536,542
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
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
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
Originated Loans [Member] | Commercial Loans [Member] | Agricultural [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing		117
Nonaccrual		1,043
Current		34,386
Recorded total loans		35,546
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
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
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
Originated Loans [Member] | Commercial Loans [Member] | Agricultural Real Estate [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing		493
Nonaccrual		2,736
Current		30,905
Recorded total loans		34,134
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
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
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
Originated Loans [Member] | Commercial Loans [Member] | Business Banking [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	1,416	2,504
Nonaccrual	5,754	5,304
Current	479,520	473,147
Recorded total loans	486,690	480,955
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	1,318	1,907
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	98	597
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	29,087	30,873
Nonaccrual	4,603	4,886
Current	2,233,514	2,154,684
Recorded total loans	2,267,204	2,190,443
Originated Loans [Member] | Consumer Loans [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	20,714	21,975
Originated Loans [Member] | Consumer Loans [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	5,143	4,995
Originated Loans [Member] | Consumer Loans [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	3,230	3,903
Originated Loans [Member] | Consumer Loans [Member] | Indirect [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing		26,272
Nonaccrual		2,115
Current		1,642,204
Recorded total loans		1,670,591
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
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
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
Originated Loans [Member] | Consumer Loans [Member] | Dealer Finance [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	17,655
Nonaccrual	2,062
Current	1,209,880
Recorded total loans	1,229,597
Originated Loans [Member] | Consumer Loans [Member] | Dealer Finance [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	14,364
Originated Loans [Member] | Consumer Loans [Member] | Dealer Finance [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	2,039
Originated Loans [Member] | Consumer Loans [Member] | Dealer Finance [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	1,252
Originated Loans [Member] | Consumer Loans [Member] | Direct [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	4,696
Nonaccrual	2,541
Current	508,974
Recorded total loans	516,211
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	3,313
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	949
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	434
Originated Loans [Member] | Consumer Loans [Member] | Specialty Lending [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	6,736
Nonaccrual	0
Current	514,660
Recorded total loans	521,396
Originated Loans [Member] | Consumer Loans [Member] | Specialty Lending [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	3,037
Originated Loans [Member] | Consumer Loans [Member] | Specialty Lending [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	2,155
Originated Loans [Member] | Consumer Loans [Member] | Specialty Lending [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	1,544
Originated Loans [Member] | Consumer Loans [Member] | Home Equity [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing		4,082
Nonaccrual		2,736
Current		448,081
Recorded total loans		454,899
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
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
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
Originated Loans [Member] | Consumer Loans [Member] | Direct [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing		519
Nonaccrual		35
Current		64,399
Recorded total loans		64,953
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
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
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
Originated Loans [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	2,816	5,659
Nonaccrual	6,106	5,987
Current	1,211,492	1,138,903
Recorded total loans	1,220,414	1,150,549
Originated Loans [Member] | Residential Real Estate [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	1,366	3,730
Originated Loans [Member] | Residential Real Estate [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	219	667
Originated Loans [Member] | Residential Real Estate [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	1,231	1,262
Acquired Loans [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	1,817	1,785
Nonaccrual	2,293	2,372
Current	336,765	397,534
Recorded total loans	340,875	401,691
Acquired Loans [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	1,491	1,279
Acquired Loans [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	53	261
Acquired Loans [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	273	245
Acquired Loans [Member] | Commercial Loans [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	665	354
Nonaccrual	613	671
Current	152,530	186,288
Recorded total loans	153,808	187,313
Acquired Loans [Member] | Commercial Loans [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	425	354
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	240	0
Acquired Loans [Member] | Commercial Loans [Member] | C&I [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0
Nonaccrual	0
Current	30,871
Recorded total loans	30,871
Acquired Loans [Member] | Commercial Loans [Member] | C&I [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0
Acquired Loans [Member] | Commercial Loans [Member] | C&I [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0
Acquired Loans [Member] | Commercial Loans [Member] | C&I [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0
Acquired Loans [Member] | Commercial Loans [Member] | CRE [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0
Nonaccrual	2
Current	87,827
Recorded total loans	87,829
Acquired Loans [Member] | Commercial Loans [Member] | CRE [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0
Acquired Loans [Member] | Commercial Loans [Member] | CRE [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0
Acquired Loans [Member] | Commercial Loans [Member] | CRE [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0
Acquired Loans [Member] | Commercial Loans [Member] | Commercial [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing		0
Nonaccrual		0
Current		39,575
Recorded total loans		39,575
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
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
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
Acquired Loans [Member] | Commercial Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing		0
Nonaccrual		2
Current		106,632
Recorded total loans		106,634
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
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
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
Acquired Loans [Member] | Commercial Loans [Member] | Business Banking [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	665	354
Nonaccrual	611	669
Current	33,832	40,081
Recorded total loans	35,108	41,104
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	425	354
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	240	0
Acquired Loans [Member] | Consumer Loans [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	241	438
Nonaccrual	275	270
Current	33,478	43,198
Recorded total loans	33,994	43,906
Acquired Loans [Member] | Consumer Loans [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	227	298
Acquired Loans [Member] | Consumer Loans [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	14	35
Acquired Loans [Member] | Consumer Loans [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0	105
Acquired Loans [Member] | Consumer Loans [Member] | Indirect [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing		39
Nonaccrual		22
Current		1,157
Recorded total loans		1,218
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
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
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
Acquired Loans [Member] | Consumer Loans [Member] | Dealer Finance [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	4
Nonaccrual	0
Current	99
Recorded total loans	103
Acquired Loans [Member] | Consumer Loans [Member] | Dealer Finance [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	4
Acquired Loans [Member] | Consumer Loans [Member] | Dealer Finance [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0
Acquired Loans [Member] | Consumer Loans [Member] | Dealer Finance [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	0
Acquired Loans [Member] | Consumer Loans [Member] | Direct [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	237	8
Nonaccrual	275	23
Current	33,379	2,785
Recorded total loans	33,891	2,816
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	223	6
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	14	1
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	0	1
Acquired Loans [Member] | Consumer Loans [Member] | Home Equity [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing		391
Nonaccrual		225
Current		39,256
Recorded total loans		39,872
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
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
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
Acquired Loans [Member] | Consumer Loans [Member] | Direct [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded total loans		2,816
Acquired Loans [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	911	993
Nonaccrual	1,405	1,431
Current	150,757	168,048
Recorded total loans	153,073	170,472
Acquired Loans [Member] | Residential Real Estate [Member] | 31-60 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	839	627
Acquired Loans [Member] | Residential Real Estate [Member] | 61-90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	39	226
Acquired Loans [Member] | Residential Real Estate [Member] | Greater Than 90 Days Past Due Accruing [Member]
Financing Receivable, Recorded Investment, Aging [Abstract]
Total past due accruing	$ 33	$ 140

XML

Allowance for Loan Losses and Credit Quality of Loans, Impaired Loans (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Allowance for Loan Losses and Credit Quality of Loans [Abstract]
Threshold balance for classified loans to be evaluated individually for impairment	$ 750
Total Loans [Abstract]
Recorded investment balance (book)	19,282	$ 21,138
Unpaid principal balance (legal)	26,991	28,120
Related allowance	25	57
Acquired impaired loans specifically evaluated for impairment	0	0
Originated Loans [Member]
With an allowance recorded [Abstract]
Recorded investment balance (book)	19,257	21,035
Unpaid principal balance (legal)	26,966	28,011
Originated Loans [Member] | Commercial Loans [Member]
With no related allowance recorded [Abstract]
Recorded investment balance (book)	5,052	5,773
Unpaid principal balance (legal)	8,391	8,848
With an allowance recorded [Abstract]
Recorded investment balance (book)	25	103
Unpaid principal balance (legal)	25	109
Total Loans [Abstract]
Related allowance	25	57
Originated Loans [Member] | Commercial Loans [Member] | C&I [Member]
With no related allowance recorded [Abstract]
Recorded investment balance (book)	404
Unpaid principal balance (legal)	676
With an allowance recorded [Abstract]
Recorded investment balance (book)	25
Unpaid principal balance (legal)	25
Total Loans [Abstract]
Related allowance	25
Originated Loans [Member] | Commercial Loans [Member] | CRE [Member]
With no related allowance recorded [Abstract]
Recorded investment balance (book)	3,629
Unpaid principal balance (legal)	5,616
Originated Loans [Member] | Commercial Loans [Member] | Commercial [Member]
With no related allowance recorded [Abstract]
Recorded investment balance (book)		0
Unpaid principal balance (legal)		251
Originated Loans [Member] | Commercial Loans [Member] | Commercial Real Estate [Member]
With no related allowance recorded [Abstract]
Recorded investment balance (book)		2,211
Unpaid principal balance (legal)		3,979
With an allowance recorded [Abstract]
Recorded investment balance (book)		76
Unpaid principal balance (legal)		82
Total Loans [Abstract]
Related allowance		30
Originated Loans [Member] | Commercial Loans [Member] | Agricultural [Member]
With no related allowance recorded [Abstract]
Recorded investment balance (book)		452
Unpaid principal balance (legal)		465
With an allowance recorded [Abstract]
Recorded investment balance (book)		27
Unpaid principal balance (legal)		27
Total Loans [Abstract]
Related allowance		27
Originated Loans [Member] | Commercial Loans [Member] | Agricultural Real Estate [Member]
With no related allowance recorded [Abstract]
Recorded investment balance (book)		2,250
Unpaid principal balance (legal)		2,423
Originated Loans [Member] | Commercial Loans [Member] | Business Banking [Member]
With no related allowance recorded [Abstract]
Recorded investment balance (book)	1,019	860
Unpaid principal balance (legal)	2,099	1,730
Originated Loans [Member] | Consumer Loans [Member]
With no related allowance recorded [Abstract]
Recorded investment balance (book)	7,760	8,432
Unpaid principal balance (legal)	9,854	10,383
Originated Loans [Member] | Consumer Loans [Member] | Dealer Finance [Member]
With no related allowance recorded [Abstract]
Recorded investment balance (book)	160
Unpaid principal balance (legal)	254
Originated Loans [Member] | Consumer Loans [Member] | Direct [Member]
With no related allowance recorded [Abstract]
Recorded investment balance (book)	7,600
Unpaid principal balance (legal)	9,600
Originated Loans [Member] | Consumer Loans [Member] | Indirect [Member]
With no related allowance recorded [Abstract]
Recorded investment balance (book)		131
Unpaid principal balance (legal)		143
Originated Loans [Member] | Consumer Loans [Member] | Home Equity [Member]
With no related allowance recorded [Abstract]
Recorded investment balance (book)		8,027
Unpaid principal balance (legal)		9,966
Originated Loans [Member] | Consumer Loans [Member] | Direct [Member]
With no related allowance recorded [Abstract]
Recorded investment balance (book)		274
Unpaid principal balance (legal)		274
Originated Loans [Member] | Residential Real Estate [Member]
With an allowance recorded [Abstract]
Recorded investment balance (book)	6,445	6,830
Unpaid principal balance (legal)	$ 8,721	$ 8,780

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	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Average Recorded Investment and Interest Income Recognized [Abstract]
Average recorded investment	$ 19,528	$ 20,936	$ 20,305	$ 23,789
Interest income recognized	210	257	646	679
Originated Loans [Member]
Average Recorded Investment and Interest Income Recognized [Abstract]
Average recorded investment	19,528	20,936	20,305	23,668
Interest income recognized	210	257	646	679
Originated Loans [Member] | Commercial Loans [Member]
Average Recorded Investment and Interest Income Recognized [Abstract]
Average recorded investment	5,102	5,990	5,446	8,828
Interest income recognized	36	61	109	133
Originated Loans [Member] | Commercial Loans [Member] | C&I [Member]
Average Recorded Investment and Interest Income Recognized [Abstract]
Average recorded investment	433		449
Interest income recognized	0		1
Originated Loans [Member] | Commercial Loans [Member] | CRE [Member]
Average Recorded Investment and Interest Income Recognized [Abstract]
Average recorded investment	3,645		3,999
Interest income recognized	32		96
Originated Loans [Member] | Commercial Loans [Member] | Commercial [Member]
Average Recorded Investment and Interest Income Recognized [Abstract]
Average recorded investment		1,000		2,393
Interest income recognized		0		0
Originated Loans [Member] | Commercial Loans [Member] | Commercial Real Estate [Member]
Average Recorded Investment and Interest Income Recognized [Abstract]
Average recorded investment		2,415		3,906
Interest income recognized		48		93
Originated Loans [Member] | Commercial Loans [Member] | Agricultural [Member]
Average Recorded Investment and Interest Income Recognized [Abstract]
Average recorded investment		115		147
Interest income recognized		0		1
Originated Loans [Member] | Commercial Loans [Member] | Agricultural Real Estate [Member]
Average Recorded Investment and Interest Income Recognized [Abstract]
Average recorded investment		1,505		1,545
Interest income recognized		11		32
Originated Loans [Member] | Commercial Loans [Member] | Business Banking [Member]
Average Recorded Investment and Interest Income Recognized [Abstract]
Average recorded investment	1,024	955	998	837
Interest income recognized	4	2	12	7
Originated Loans [Member] | Consumer Loans [Member]
Average Recorded Investment and Interest Income Recognized [Abstract]
Average recorded investment	7,907	8,313	8,140	8,415
Interest income recognized	106	114	325	335
Originated Loans [Member] | Consumer Loans [Member] | Dealer Finance [Member]
Average Recorded Investment and Interest Income Recognized [Abstract]
Average recorded investment	177		187
Interest income recognized	4		8
Originated Loans [Member] | Consumer Loans [Member] | Direct Lending [Member]
Average Recorded Investment and Interest Income Recognized [Abstract]
Average recorded investment	7,730		7,953
Interest income recognized	102		317
Originated Loans [Member] | Consumer Loans [Member] | Indirect [Member]
Average Recorded Investment and Interest Income Recognized [Abstract]
Average recorded investment		35		22
Interest income recognized		1		2
Originated Loans [Member] | Consumer Loans [Member] | Home Equity [Member]
Average Recorded Investment and Interest Income Recognized [Abstract]
Average recorded investment		8,159		8,274
Interest income recognized		111		331
Originated Loans [Member] | Consumer Loans [Member] | Direct [Member]
Average Recorded Investment and Interest Income Recognized [Abstract]
Average recorded investment		119		119
Interest income recognized		2		2
Originated Loans [Member] | Residential Real Estate [Member]
Average Recorded Investment and Interest Income Recognized [Abstract]
Average recorded investment	6,519	6,633	6,719	6,425
Interest income recognized	$ 68	$ 82	212	211
Acquired Loans [Member]
Average Recorded Investment and Interest Income Recognized [Abstract]
Average recorded investment			0	121
Interest income recognized			0	0
Acquired Loans [Member] | Commercial Loans [Member]
Average Recorded Investment and Interest Income Recognized [Abstract]
Average recorded investment			0	121
Interest income recognized			0	0
Acquired Loans [Member] | Commercial Loans [Member] | Commercial Real Estate [Member]
Average Recorded Investment and Interest Income Recognized [Abstract]
Average recorded investment			0	121
Interest income recognized			$ 0	$ 0

XML

Allowance for Loan Losses and Credit Quality of Loans, Credit Quality by Loan Class (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Credit Quality by Loan Class [Abstract]
Net loans	$ 6,887,262	$ 6,583,639
Consumer Credit Exposure [Member]
Credit Quality by Loan Class [Abstract]
Net loans	2,301,198	2,234,349
Residential Real Estate Mortgage Credit Exposure [Member]
Credit Quality by Loan Class [Abstract]
Net loans	1,373,487	1,321,021
Originated Loans [Member]
Credit Quality by Loan Class [Abstract]
Net loans	6,546,387	6,181,948
Originated Loans [Member] | Commercial Credit Exposure [Member] | Total Commercial, Industrial and Commercial Real Estate [Member]
Credit Quality by Loan Class [Abstract]
Net loans	2,572,079
Originated Loans [Member] | Commercial Credit Exposure [Member] | Total Commercial, Industrial and Commercial Real Estate [Member] | Pass [Member]
Credit Quality by Loan Class [Abstract]
Net loans	2,466,233
Originated Loans [Member] | Commercial Credit Exposure [Member] | Total Commercial, Industrial and Commercial Real Estate [Member] | Special Mention [Member]
Credit Quality by Loan Class [Abstract]
Net loans	50,319
Originated Loans [Member] | Commercial Credit Exposure [Member] | Total Commercial, Industrial and Commercial Real Estate [Member] | Substandard [Member]
Credit Quality by Loan Class [Abstract]
Net loans	55,527
Originated Loans [Member] | Commercial Credit Exposure [Member] | C&I [Member]
Credit Quality by Loan Class [Abstract]
Net loans	858,940
Originated Loans [Member] | Commercial Credit Exposure [Member] | C&I [Member] | Pass [Member]
Credit Quality by Loan Class [Abstract]
Net loans	805,333
Originated Loans [Member] | Commercial Credit Exposure [Member] | C&I [Member] | Special Mention [Member]
Credit Quality by Loan Class [Abstract]
Net loans	33,557
Originated Loans [Member] | Commercial Credit Exposure [Member] | C&I [Member] | Substandard [Member]
Credit Quality by Loan Class [Abstract]
Net loans	20,050
Originated Loans [Member] | Commercial Credit Exposure [Member] | CRE [Member]
Credit Quality by Loan Class [Abstract]
Net loans	1,713,139
Originated Loans [Member] | Commercial Credit Exposure [Member] | CRE [Member] | Pass [Member]
Credit Quality by Loan Class [Abstract]
Net loans	1,660,900
Originated Loans [Member] | Commercial Credit Exposure [Member] | CRE [Member] | Special Mention [Member]
Credit Quality by Loan Class [Abstract]
Net loans	16,762
Originated Loans [Member] | Commercial Credit Exposure [Member] | CRE [Member] | Substandard [Member]
Credit Quality by Loan Class [Abstract]
Net loans	35,477
Originated Loans [Member] | Commercial Credit Exposure [Member] | Total Commercial and Agricultural [Member]
Credit Quality by Loan Class [Abstract]
Net loans		2,360,001
Originated Loans [Member] | Commercial Credit Exposure [Member] | Total Commercial and Agricultural [Member] | Pass [Member]
Credit Quality by Loan Class [Abstract]
Net loans		2,245,016
Originated Loans [Member] | Commercial Credit Exposure [Member] | Total Commercial and Agricultural [Member] | Special Mention [Member]
Credit Quality by Loan Class [Abstract]
Net loans		63,336
Originated Loans [Member] | Commercial Credit Exposure [Member] | Total Commercial and Agricultural [Member] | Substandard [Member]
Credit Quality by Loan Class [Abstract]
Net loans		51,649
Originated Loans [Member] | Commercial Credit Exposure [Member] | Commercial [Member]
Credit Quality by Loan Class [Abstract]
Net loans		753,779
Originated Loans [Member] | Commercial Credit Exposure [Member] | Commercial [Member] | Pass [Member]
Credit Quality by Loan Class [Abstract]
Net loans		708,567
Originated Loans [Member] | Commercial Credit Exposure [Member] | Commercial [Member] | Special Mention [Member]
Credit Quality by Loan Class [Abstract]
Net loans		30,337
Originated Loans [Member] | Commercial Credit Exposure [Member] | Commercial [Member] | Substandard [Member]
Credit Quality by Loan Class [Abstract]
Net loans		14,875
Originated Loans [Member] | Commercial Credit Exposure [Member] | Commercial Real Estate [Member]
Credit Quality by Loan Class [Abstract]
Net loans		1,536,542
Originated Loans [Member] | Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Pass [Member]
Credit Quality by Loan Class [Abstract]
Net loans		1,481,926
Originated Loans [Member] | Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Special Mention [Member]
Credit Quality by Loan Class [Abstract]
Net loans		28,264
Originated Loans [Member] | Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Substandard [Member]
Credit Quality by Loan Class [Abstract]
Net loans		26,352
Originated Loans [Member] | Commercial Credit Exposure [Member] | Agricultural [Member]
Credit Quality by Loan Class [Abstract]
Net loans		35,546
Originated Loans [Member] | Commercial Credit Exposure [Member] | Agricultural [Member] | Pass [Member]
Credit Quality by Loan Class [Abstract]
Net loans		31,142
Originated Loans [Member] | Commercial Credit Exposure [Member] | Agricultural [Member] | Special Mention [Member]
Credit Quality by Loan Class [Abstract]
Net loans		2,294
Originated Loans [Member] | Commercial Credit Exposure [Member] | Agricultural [Member] | Substandard [Member]
Credit Quality by Loan Class [Abstract]
Net loans		2,110
Originated Loans [Member] | Commercial Credit Exposure [Member] | Agricultural Real Estate [Member]
Credit Quality by Loan Class [Abstract]
Net loans		34,134
Originated Loans [Member] | Commercial Credit Exposure [Member] | Agricultural Real Estate [Member] | Pass [Member]
Credit Quality by Loan Class [Abstract]
Net loans		23,381
Originated Loans [Member] | Commercial Credit Exposure [Member] | Agricultural Real Estate [Member] | Special Mention [Member]
Credit Quality by Loan Class [Abstract]
Net loans		2,441
Originated Loans [Member] | Commercial Credit Exposure [Member] | Agricultural Real Estate [Member] | Substandard [Member]
Credit Quality by Loan Class [Abstract]
Net loans		8,312
Originated Loans [Member] | Business Banking Credit Exposure [Member]
Credit Quality by Loan Class [Abstract]
Net loans	486,690	480,955
Originated Loans [Member] | Business Banking Credit Exposure [Member] | Non-classified [Member]
Credit Quality by Loan Class [Abstract]
Net loans	474,252	468,898
Originated Loans [Member] | Business Banking Credit Exposure [Member] | Classified [Member]
Credit Quality by Loan Class [Abstract]
Net loans	12,438	12,057
Originated Loans [Member] | Business Banking Credit Exposure [Member] | Business Banking [Member]
Credit Quality by Loan Class [Abstract]
Net loans	486,690	480,955
Originated Loans [Member] | Business Banking Credit Exposure [Member] | Business Banking [Member] | Non-classified [Member]
Credit Quality by Loan Class [Abstract]
Net loans	474,252	468,898
Originated Loans [Member] | Business Banking Credit Exposure [Member] | Business Banking [Member] | Classified [Member]
Credit Quality by Loan Class [Abstract]
Net loans	12,438	12,057
Originated Loans [Member] | Consumer Credit Exposure [Member]
Credit Quality by Loan Class [Abstract]
Net loans	2,267,204	2,190,443
Originated Loans [Member] | Consumer Credit Exposure [Member] | Performing [Member]
Credit Quality by Loan Class [Abstract]
Net loans	2,259,371	2,181,654
Originated Loans [Member] | Consumer Credit Exposure [Member] | Nonperforming [Member]
Credit Quality by Loan Class [Abstract]
Net loans	7,833	8,789
Originated Loans [Member] | Consumer Credit Exposure [Member] | Dealer Finance [Member]
Credit Quality by Loan Class [Abstract]
Net loans	1,229,597
Originated Loans [Member] | Consumer Credit Exposure [Member] | Dealer Finance [Member] | Performing [Member]
Credit Quality by Loan Class [Abstract]
Net loans	1,226,283
Originated Loans [Member] | Consumer Credit Exposure [Member] | Dealer Finance [Member] | Nonperforming [Member]
Credit Quality by Loan Class [Abstract]
Net loans	3,314
Originated Loans [Member] | Consumer Credit Exposure [Member] | Direct [Member]
Credit Quality by Loan Class [Abstract]
Net loans	516,211
Originated Loans [Member] | Consumer Credit Exposure [Member] | Direct [Member] | Performing [Member]
Credit Quality by Loan Class [Abstract]
Net loans	513,236
Originated Loans [Member] | Consumer Credit Exposure [Member] | Direct [Member] | Nonperforming [Member]
Credit Quality by Loan Class [Abstract]
Net loans	2,975
Originated Loans [Member] | Consumer Credit Exposure [Member] | Specialty Lending [Member]
Credit Quality by Loan Class [Abstract]
Net loans	521,396
Originated Loans [Member] | Consumer Credit Exposure [Member] | Specialty Lending [Member] | Performing [Member]
Credit Quality by Loan Class [Abstract]
Net loans	519,852
Originated Loans [Member] | Consumer Credit Exposure [Member] | Specialty Lending [Member] | Nonperforming [Member]
Credit Quality by Loan Class [Abstract]
Net loans	1,544
Originated Loans [Member] | Consumer Credit Exposure [Member] | Indirect [Member]
Credit Quality by Loan Class [Abstract]
Net loans		1,670,591
Originated Loans [Member] | Consumer Credit Exposure [Member] | Indirect [Member] | Performing [Member]
Credit Quality by Loan Class [Abstract]
Net loans		1,664,984
Originated Loans [Member] | Consumer Credit Exposure [Member] | Indirect [Member] | Nonperforming [Member]
Credit Quality by Loan Class [Abstract]
Net loans		5,607
Originated Loans [Member] | Consumer Credit Exposure [Member] | Home Equity [Member]
Credit Quality by Loan Class [Abstract]
Net loans		454,899
Originated Loans [Member] | Consumer Credit Exposure [Member] | Home Equity [Member] | Performing [Member]
Credit Quality by Loan Class [Abstract]
Net loans		451,822
Originated Loans [Member] | Consumer Credit Exposure [Member] | Home Equity [Member] | Nonperforming [Member]
Credit Quality by Loan Class [Abstract]
Net loans		3,077
Originated Loans [Member] | Consumer Credit Exposure [Member] | Direct [Member]
Credit Quality by Loan Class [Abstract]
Net loans		64,953
Originated Loans [Member] | Consumer Credit Exposure [Member] | Direct [Member] | Performing [Member]
Credit Quality by Loan Class [Abstract]
Net loans		64,848
Originated Loans [Member] | Consumer Credit Exposure [Member] | Direct [Member] | Nonperforming [Member]
Credit Quality by Loan Class [Abstract]
Net loans		105
Originated Loans [Member] | Residential Real Estate Mortgage Credit Exposure [Member]
Credit Quality by Loan Class [Abstract]
Net loans	1,220,414	1,150,549
Originated Loans [Member] | Residential Real Estate Mortgage Credit Exposure [Member] | Performing [Member]
Credit Quality by Loan Class [Abstract]
Net loans	1,213,077	1,143,300
Originated Loans [Member] | Residential Real Estate Mortgage Credit Exposure [Member] | Nonperforming [Member]
Credit Quality by Loan Class [Abstract]
Net loans	7,337	7,249
Originated Loans [Member] | Residential Real Estate Mortgage Credit Exposure [Member] | Residential Real Estate Mortgage [Member]
Credit Quality by Loan Class [Abstract]
Net loans	1,220,414	1,150,549
Originated Loans [Member] | Residential Real Estate Mortgage Credit Exposure [Member] | Residential Real Estate Mortgage [Member] | Performing [Member]
Credit Quality by Loan Class [Abstract]
Net loans	1,213,077	1,143,300
Originated Loans [Member] | Residential Real Estate Mortgage Credit Exposure [Member] | Residential Real Estate Mortgage [Member] | Nonperforming [Member]
Credit Quality by Loan Class [Abstract]
Net loans	7,337	7,249
Acquired Loans [Member]
Credit Quality by Loan Class [Abstract]
Net loans	340,875	401,691
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Total Commercial, Industrial and Commercial Real Estate [Member]
Credit Quality by Loan Class [Abstract]
Net loans	118,700
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Total Commercial, Industrial and Commercial Real Estate [Member] | Pass [Member]
Credit Quality by Loan Class [Abstract]
Net loans	114,137
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Total Commercial, Industrial and Commercial Real Estate [Member] | Special Mention [Member]
Credit Quality by Loan Class [Abstract]
Net loans	3,918
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Total Commercial, Industrial and Commercial Real Estate [Member] | Substandard [Member]
Credit Quality by Loan Class [Abstract]
Net loans	645
Acquired Loans [Member] | Commercial Credit Exposure [Member] | C&I [Member]
Credit Quality by Loan Class [Abstract]
Net loans	30,871
Acquired Loans [Member] | Commercial Credit Exposure [Member] | C&I [Member] | Pass [Member]
Credit Quality by Loan Class [Abstract]
Net loans	27,046
Acquired Loans [Member] | Commercial Credit Exposure [Member] | C&I [Member] | Special Mention [Member]
Credit Quality by Loan Class [Abstract]
Net loans	3,825
Acquired Loans [Member] | Commercial Credit Exposure [Member] | C&I [Member] | Substandard [Member]
Credit Quality by Loan Class [Abstract]
Net loans	0
Acquired Loans [Member] | Commercial Credit Exposure [Member] | CRE [Member]
Credit Quality by Loan Class [Abstract]
Net loans	87,829
Acquired Loans [Member] | Commercial Credit Exposure [Member] | CRE [Member] | Pass [Member]
Credit Quality by Loan Class [Abstract]
Net loans	87,091
Acquired Loans [Member] | Commercial Credit Exposure [Member] | CRE [Member] | Special Mention [Member]
Credit Quality by Loan Class [Abstract]
Net loans	93
Acquired Loans [Member] | Commercial Credit Exposure [Member] | CRE [Member] | Substandard [Member]
Credit Quality by Loan Class [Abstract]
Net loans	645
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Total Commercial and Agricultural [Member]
Credit Quality by Loan Class [Abstract]
Net loans		146,209
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Total Commercial and Agricultural [Member] | Pass [Member]
Credit Quality by Loan Class [Abstract]
Net loans		141,073
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Total Commercial and Agricultural [Member] | Special Mention [Member]
Credit Quality by Loan Class [Abstract]
Net loans		923
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Total Commercial and Agricultural [Member] | Substandard [Member]
Credit Quality by Loan Class [Abstract]
Net loans		4,213
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Commercial [Member]
Credit Quality by Loan Class [Abstract]
Net loans		39,575
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Commercial [Member] | Pass [Member]
Credit Quality by Loan Class [Abstract]
Net loans		37,825
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Commercial [Member] | Special Mention [Member]
Credit Quality by Loan Class [Abstract]
Net loans		425
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Commercial [Member] | Substandard [Member]
Credit Quality by Loan Class [Abstract]
Net loans		1,325
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Commercial Real Estate [Member]
Credit Quality by Loan Class [Abstract]
Net loans		106,634
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Pass [Member]
Credit Quality by Loan Class [Abstract]
Net loans		103,248
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Special Mention [Member]
Credit Quality by Loan Class [Abstract]
Net loans		498
Acquired Loans [Member] | Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Substandard [Member]
Credit Quality by Loan Class [Abstract]
Net loans		2,888
Acquired Loans [Member] | Business Banking Credit Exposure [Member]
Credit Quality by Loan Class [Abstract]
Net loans	35,108	41,104
Acquired Loans [Member] | Business Banking Credit Exposure [Member] | Non-classified [Member]
Credit Quality by Loan Class [Abstract]
Net loans	32,098	38,236
Acquired Loans [Member] | Business Banking Credit Exposure [Member] | Classified [Member]
Credit Quality by Loan Class [Abstract]
Net loans	3,010	2,868
Acquired Loans [Member] | Business Banking Credit Exposure [Member] | Business Banking [Member]
Credit Quality by Loan Class [Abstract]
Net loans	35,108	41,104
Acquired Loans [Member] | Business Banking Credit Exposure [Member] | Business Banking [Member] | Non-classified [Member]
Credit Quality by Loan Class [Abstract]
Net loans	32,098	38,236
Acquired Loans [Member] | Business Banking Credit Exposure [Member] | Business Banking [Member] | Classified [Member]
Credit Quality by Loan Class [Abstract]
Net loans	3,010	2,868
Acquired Loans [Member] | Consumer Credit Exposure [Member]
Credit Quality by Loan Class [Abstract]
Net loans	33,994	43,906
Acquired Loans [Member] | Consumer Credit Exposure [Member] | Performing [Member]
Credit Quality by Loan Class [Abstract]
Net loans	33,719	43,531
Acquired Loans [Member] | Consumer Credit Exposure [Member] | Nonperforming [Member]
Credit Quality by Loan Class [Abstract]
Net loans	275	375
Acquired Loans [Member] | Consumer Credit Exposure [Member] | Dealer Finance [Member]
Credit Quality by Loan Class [Abstract]
Net loans	103
Acquired Loans [Member] | Consumer Credit Exposure [Member] | Dealer Finance [Member] | Performing [Member]
Credit Quality by Loan Class [Abstract]
Net loans	103
Acquired Loans [Member] | Consumer Credit Exposure [Member] | Dealer Finance [Member] | Nonperforming [Member]
Credit Quality by Loan Class [Abstract]
Net loans	0
Acquired Loans [Member] | Consumer Credit Exposure [Member] | Direct [Member]
Credit Quality by Loan Class [Abstract]
Net loans	33,891	2,816
Acquired Loans [Member] | Consumer Credit Exposure [Member] | Direct [Member] | Performing [Member]
Credit Quality by Loan Class [Abstract]
Net loans	33,616
Acquired Loans [Member] | Consumer Credit Exposure [Member] | Direct [Member] | Nonperforming [Member]
Credit Quality by Loan Class [Abstract]
Net loans	275
Acquired Loans [Member] | Consumer Credit Exposure [Member] | Indirect [Member]
Credit Quality by Loan Class [Abstract]
Net loans		1,218
Acquired Loans [Member] | Consumer Credit Exposure [Member] | Indirect [Member] | Performing [Member]
Credit Quality by Loan Class [Abstract]
Net loans		1,195
Acquired Loans [Member] | Consumer Credit Exposure [Member] | Indirect [Member] | Nonperforming [Member]
Credit Quality by Loan Class [Abstract]
Net loans		23
Acquired Loans [Member] | Consumer Credit Exposure [Member] | Home Equity [Member]
Credit Quality by Loan Class [Abstract]
Net loans		39,872
Acquired Loans [Member] | Consumer Credit Exposure [Member] | Home Equity [Member] | Performing [Member]
Credit Quality by Loan Class [Abstract]
Net loans		39,544
Acquired Loans [Member] | Consumer Credit Exposure [Member] | Home Equity [Member] | Nonperforming [Member]
Credit Quality by Loan Class [Abstract]
Net loans		328
Acquired Loans [Member] | Consumer Credit Exposure [Member] | Direct [Member]
Credit Quality by Loan Class [Abstract]
Net loans		2,816
Acquired Loans [Member] | Consumer Credit Exposure [Member] | Direct [Member] | Performing [Member]
Credit Quality by Loan Class [Abstract]
Net loans		2,792
Acquired Loans [Member] | Consumer Credit Exposure [Member] | Direct [Member] | Nonperforming [Member]
Credit Quality by Loan Class [Abstract]
Net loans		24
Acquired Loans [Member] | Residential Real Estate Mortgage Credit Exposure [Member]
Credit Quality by Loan Class [Abstract]
Net loans	153,073	170,472
Acquired Loans [Member] | Residential Real Estate Mortgage Credit Exposure [Member] | Performing [Member]
Credit Quality by Loan Class [Abstract]
Net loans	151,635	168,901
Acquired Loans [Member] | Residential Real Estate Mortgage Credit Exposure [Member] | Nonperforming [Member]
Credit Quality by Loan Class [Abstract]
Net loans	1,438	1,571
Acquired Loans [Member] | Residential Real Estate Mortgage Credit Exposure [Member] | Residential Real Estate Mortgage [Member]
Credit Quality by Loan Class [Abstract]
Net loans	153,073	170,472
Acquired Loans [Member] | Residential Real Estate Mortgage Credit Exposure [Member] | Residential Real Estate Mortgage [Member] | Performing [Member]
Credit Quality by Loan Class [Abstract]
Net loans	151,635	168,901
Acquired Loans [Member] | Residential Real Estate Mortgage Credit Exposure [Member] | Residential Real Estate Mortgage [Member] | Nonperforming [Member]
Credit Quality by Loan Class [Abstract]
Net loans	$ 1,438	$ 1,571

XML

Allowance for Loan Losses and Credit Quality of Loans, Troubled Debt Restructured Loans (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018 USD ($) Contract	Sep. 30, 2017 USD ($) Contract	Sep. 30, 2018 USD ($) Contract	Sep. 30, 2017 USD ($) Contract
Troubled Debt Restructured Loans [Abstract]
Number of contracts | Contract	8	6	25	23
Pre-modification outstanding recorded investment	$ 90	$ 714	$ 918	$ 5,235
Post-modification outstanding recorded investment	$ 89	$ 747	$ 918	$ 5,211
Number of contracts | Contract	22	19	54	46
Recorded Investment	$ 1,214	$ 1,181	$ 3,237	$ 2,691
Commercial Loans [Member]
Troubled Debt Restructured Loans [Abstract]
Number of contracts | Contract			3	2
Pre-modification outstanding recorded investment			$ 369	$ 3,637
Post-modification outstanding recorded investment			$ 371	$ 3,572
Number of contracts | Contract			2	2
Recorded Investment			$ 258	$ 474
Commercial Loans [Member] | Commercial [Member]
Troubled Debt Restructured Loans [Abstract]
Number of contracts | Contract				1
Pre-modification outstanding recorded investment				$ 3,300
Post-modification outstanding recorded investment				$ 3,239
Number of contracts | Contract			0	1
Recorded Investment			$ 0	$ 145
Commercial Loans [Member] | Business Banking [Member]
Troubled Debt Restructured Loans [Abstract]
Number of contracts | Contract			3	1
Pre-modification outstanding recorded investment			$ 369	$ 337
Post-modification outstanding recorded investment			$ 371	$ 333
Number of contracts | Contract			2	1
Recorded Investment			$ 258	$ 329
Consumer Loans [Member]
Troubled Debt Restructured Loans [Abstract]
Number of contracts | Contract	8	5	17	13
Pre-modification outstanding recorded investment	$ 90	$ 196	$ 226	$ 532
Post-modification outstanding recorded investment	$ 89	$ 229	$ 224	$ 571
Number of contracts | Contract	17	13	35	32
Recorded Investment	$ 816	$ 635	$ 1,740	$ 1,400
Consumer Loans [Member] | Indirect [Member]
Troubled Debt Restructured Loans [Abstract]
Number of contracts | Contract		1		4
Pre-modification outstanding recorded investment		$ 7		$ 39
Post-modification outstanding recorded investment		$ 7		$ 37
Number of contracts | Contract	0	1	0	2
Recorded Investment	$ 0	$ 13	$ 0	$ 19
Consumer Loans [Member] | Dealer Finance [Member]
Troubled Debt Restructured Loans [Abstract]
Number of contracts | Contract	8		15
Pre-modification outstanding recorded investment	$ 90		$ 185
Post-modification outstanding recorded investment	$ 89		$ 183
Consumer Loans [Member] | Home Equity [Member]
Troubled Debt Restructured Loans [Abstract]
Number of contracts | Contract		4		8
Pre-modification outstanding recorded investment		$ 189		$ 373
Post-modification outstanding recorded investment		$ 222		$ 414
Number of contracts | Contract	0	12	0	30
Recorded Investment	$ 0	$ 622	$ 0	$ 1,381
Consumer Loans [Member] | Direct [Member]
Troubled Debt Restructured Loans [Abstract]
Number of contracts | Contract			2	1
Pre-modification outstanding recorded investment			$ 41	$ 120
Post-modification outstanding recorded investment			$ 41	$ 120
Number of contracts | Contract	17	0	35	0
Recorded Investment	$ 816	$ 0	$ 1,740	$ 0
Residential Real Estate [Member]
Troubled Debt Restructured Loans [Abstract]
Number of contracts | Contract		1	5	8
Pre-modification outstanding recorded investment		$ 518	$ 323	$ 1,066
Post-modification outstanding recorded investment		$ 518	$ 323	$ 1,068
Number of contracts | Contract	5	6	17	12
Recorded Investment	$ 398	$ 546	$ 1,239	$ 817

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Defined Benefit Post-Retirement Plans (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Defined Benefit Post-Retirement Plans [Abstract]
Employer contributions	$ 0	$ 0	$ 0	$ 0
Pension Benefits [Member]
Components of net periodic (benefit) cost [Abstract]
Service cost	415	329	1,256	1,133
Interest cost	912	1,043	2,752	3,127
Expected return on plan assets	(2,119)	(1,976)	(6,364)	(5,946)
Net amortization	242	454	745	1,284
Total net periodic (benefit) cost	(550)	(150)	(1,611)	(402)
Other Benefits [Member]
Components of net periodic (benefit) cost [Abstract]
Service cost	3	3	8	9
Interest cost	82	88	245	259
Expected return on plan assets	0	0	0	0
Net amortization	44	26	131	66
Total net periodic (benefit) cost	$ 129	$ 117	$ 384	$ 334

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Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Basic EPS [Abstract]
Weighted average common shares outstanding (in shares)	43,714,000	43,595,000	43,692,000	43,563,000
Net income available to common stockholders	$ 29,807	$ 22,876	$ 83,914	$ 64,514
Basic EPS (in dollars per share)	$ 0.68	$ 0.52	$ 1.92	$ 1.48
Diluted EPS [Abstract]
Weighted average common shares outstanding (in shares)	43,714,000	43,595,000	43,692,000	43,563,000
Dilutive effect of common stock options and restricted stock (in shares)	337,000	320,000	317,000	329,000
Weighted average common shares and common share equivalents (in shares)	44,051,000	43,915,000	44,009,000	43,892,000
Net income available to common stockholders	$ 29,807	$ 22,876	$ 83,914	$ 64,514
Diluted EPS (in dollars per share)	$ 0.68	$ 0.52	$ 1.91	$ 1.47
Stock Options [Member]
Earnings Per Share [Abstract]
Stock options excluded from calculation of diluted EPS (in shares)	1,500	3,250	1,500	3,014

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Reclassification Adjustments Out of Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Reclassification Adjustment out of Accumulated Other Comprehensive Income (Loss) [Abstract]
Net securities losses	$ 412	$ (4)	$ 575	$ (2)
Interest income	77,527	71,930	226,754	210,042
Other noninterest income	3,048	3,945	11,341	10,069
Other noninterest expense	4,577	4,483	13,324	13,880
Interest expense	10,677	6,917	26,977	19,135
Income tax (expense) benefit	8,578	11,342	23,699	30,321
Net income	29,807	22,876	83,914	64,514
Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income (Loss) [Abstract]
Total reclassifications during the period, net of tax	(138)	334	(96)	2,004
Accumulated Net Unrealized Investment Gain (Loss) [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income (Loss) [Abstract]
Income tax (expense) benefit	(42)	(83)	(133)	(760)
Net income	126	133	400	1,229
Losses on AFS Securities [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income (Loss) [Abstract]
Net securities losses	0	4	0	2
Amortization of Unrealized Gains Related to Securities Transfer [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income (Loss) [Abstract]
Interest income	168	212	533	675
Impairment Write-Down of Equity Security [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income (Loss) [Abstract]
Other noninterest income			0	1,312
Net Unrealized (Gains) on Cash Flow hedges Reclassified to Interest (Income) [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income (Loss) [Abstract]
Interest expense	(638)	(155)	(1,537)	(96)
Income tax (expense) benefit	159	59	384	37
Net income	(479)	(96)	(1,153)	(59)
Accumulated Defined Benefit Plans Adjustment [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income (Loss) [Abstract]
Income tax (expense) benefit	(71)	(183)	(219)	(516)
Net income	215	297	657	834
Amortization of Net Losses [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income (Loss) [Abstract]
Other noninterest expense	263	481	809	1,351
Amortization of Prior Service Costs [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income (Loss) [Abstract]
Other noninterest expense	$ 23	$ (1)	$ 67	$ (1)

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Fair Value Measurements and Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Transfers between Levels [Abstract]
Transfers from Level 1 to Level 2	$ 0	$ 0
Transfers from Level 2 to Level 1	4,000	0
Transfers into Level 3		0
Transfers out of Level 3		0
AFS securities [Abstract]
AFS securities	1,101,074
Total AFS securities	1,101,074	1,255,925
Equity securities	24,722	0
Trading securities	0	11,467
Liabilities [Abstract]
Collateral dependent loans	25	100
Collateral dependent loans, specific reserves	$ 25	100
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	$ 83,262	108,899
State & Municipal [Member]
AFS securities [Abstract]
AFS securities	36,467	41,956
Recurring Basis [Member]
AFS securities [Abstract]
AFS securities	1,101,074
Other securities		14,149
Total AFS securities		1,255,925
Equity securities	24,722
Trading securities		11,467
Derivatives	23,682	3,732
Total	1,149,478	1,271,124
Liabilities [Abstract]
Derivatives	20,054	324
Total	20,054	324
Recurring Basis [Member] | Level 1 [Member]
AFS securities [Abstract]
AFS securities	0
Other securities		5,845
Total AFS securities		5,845
Equity securities	20,722
Trading securities		11,467
Derivatives	0	0
Total	20,722	17,312
Liabilities [Abstract]
Derivatives	0	0
Total	0	0
Recurring Basis [Member] | Level 2 [Member]
AFS securities [Abstract]
AFS securities	1,101,074
Other securities		8,304
Total AFS securities		1,250,080
Equity securities	4,000
Trading securities		0
Derivatives	23,682	3,732
Total	1,128,756	1,253,812
Liabilities [Abstract]
Derivatives	20,054	324
Total	20,054	324
Recurring Basis [Member] | Level 3 [Member]
AFS securities [Abstract]
AFS securities	0
Other securities		0
Total AFS securities		0
Equity securities	0
Trading securities		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	83,262	108,899
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	83,262	108,899
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	36,467	41,956
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	36,467	41,956
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	492,408	554,927
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	492,408	554,927
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	488,937	535,994
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	488,937	535,994
Recurring Basis [Member] | Collateralized Mortgage Obligations [Member] | Level 3 [Member]
AFS securities [Abstract]
AFS securities	$ 0	$ 0

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Fair Value Measurements and Fair Value of Financial Instruments, Estimated Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Interest Rate Swaps [Abstract]
Reclassification of net unrealized gains (losses) on cash flow hedges from AOCI to interest expense	$ 479	$ 96	$ 1,153	$ 59
Financial assets [Abstract]
HTM securities	645,732		645,732		$ 481,871
Financial liabilities [Abstract]
Time deposits	868,569		868,569		806,766
Long-term debt	73,751		73,751		88,869
Junior subordinated debt	101,196		101,196		101,196
Carrying Amount [Member] | Level 2 [Member]
Financial assets [Abstract]
HTM securities	659,949		659,949		484,073
Financial liabilities [Abstract]
Time deposits	868,569		868,569		806,766
Long-term debt	73,751		73,751		88,869
Junior subordinated debt	101,196		101,196		101,196
Carrying Amount [Member] | Level 3 [Member]
Financial assets [Abstract]
Net loans	6,819,492		6,819,492		6,515,273
Estimated Fair Value [Member] | Level 2 [Member]
Financial assets [Abstract]
HTM securities	645,732		645,732		481,871
Financial liabilities [Abstract]
Time deposits	860,791		860,791		801,294
Long-term debt	72,152		72,152		88,346
Junior subordinated debt	102,979		102,979		104,593
Estimated Fair Value [Member] | Level 3 [Member]
Financial assets [Abstract]
Net loans	6,762,901		6,762,901		6,651,931
Not Designated as Hedging Instrument [Member] | Interest Rate Swaps [Member] | Other Assets [Member]
Interest Rate Swaps [Abstract]
Derivative asset, notional amount	630,200		630,200		481,200
Fair value of derivative asset	20,000		20,000		200
Not Designated as Hedging Instrument [Member] | Interest Rate Swaps [Member] | Other Liabilities [Member]
Interest Rate Swaps [Abstract]
Derivative liability, notional amount	630,200		630,200		481,200
Fair value of derivative liability	20,000		20,000		200
Designated as Hedging Instrument [Member] | Cash Flow Hedging [Member] | Interest Rate Swaps [Member]
Interest Rate Swaps [Abstract]
Notional amount	225,000		225,000		250,000
Designated as Hedging Instrument [Member] | Cash Flow Hedging [Member] | Interest Rate Swaps [Member] | Interest Expense [Member]
Interest Rate Swaps [Abstract]
Reclassification of net unrealized gains (losses) on cash flow hedges from AOCI to interest expense	600	$ 200	1,500	$ 100
Amount expected to be reclassified as a reduction to interest expense for CF hedges	3,000		3,000
Designated as Hedging Instrument [Member] | Cash Flow Hedging [Member] | Interest Rate Swaps [Member] | Other Assets [Member]
Interest Rate Swaps [Abstract]
Fair value of derivative asset	$ 3,600		$ 3,600		$ 3,500

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Commitments and Contingencies (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Commitment to Extend Credits and Unused Lines of Credit [Member]
Guarantor Obligations [Abstract]
Commitments - maximum potential obligation	$ 1,700.0	$ 1,600.0
Standby Letters of Credit [Member]
Guarantor Obligations [Abstract]
Obligation instrument term	5 years
Commitments - maximum potential obligation	$ 39.5	$ 41.1

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Revenue from Contracts with Customers (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Noninterest Income [Abstract]
Total noninterest income in-scope of ASC 606	$ 31,681	$ 29,498	$ 94,389	$ 85,921
Total noninterest income out-of-scope of ASC 606	1,700	1,280	4,427	3,911
Total noninterest income	33,381	30,778	98,816	89,832
Insurance and Other Financial Services Revenue [Member]
Noninterest Income [Abstract]
Total noninterest income in-scope of ASC 606	6,172	5,536	18,502	17,927
Service Charges on Deposit Accounts [Member]
Noninterest Income [Abstract]
Total noninterest income in-scope of ASC 606	4,503	4,261	12,721	12,399
ATM and Debit Card Fees [Member]
Noninterest Income [Abstract]
Total noninterest income in-scope of ASC 606	5,906	5,557	16,995	16,025
Retirement Plan Administration Fees [Member]
Noninterest Income [Abstract]
Total noninterest income in-scope of ASC 606	7,244	5,272	19,879	14,881
Trust [Member]
Noninterest Income [Abstract]
Total noninterest income in-scope of ASC 606	4,808	4,927	14,951	14,620
Other [Member]
Noninterest Income [Abstract]
Total noninterest income in-scope of ASC 606	$ 3,048	$ 3,945	$ 11,341	$ 10,069

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Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Recent Accounting Pronouncements [Abstract]
Federal corporate tax rate	21.00%	35.00%
ASU 2018-02 [Member]
Recent Accounting Pronouncements [Abstract]
Reclassification upon ASU implementation		$ 0
AOCI [Member] | ASU 2016-01 [Member]
Recent Accounting Pronouncements [Abstract]
Reclassification upon ASU implementation		(2,600)
Retained Earnings [Member] | ASU 2016-01 [Member]
Recent Accounting Pronouncements [Abstract]
Reclassification upon ASU implementation		2,600
AOCI [Member] | ASU 2018-02 [Member]
Recent Accounting Pronouncements [Abstract]
Reclassification upon ASU implementation		(5,575)
Retained Earnings [Member] | ASU 2018-02 [Member]
Recent Accounting Pronouncements [Abstract]
Reclassification upon ASU implementation		$ 5,575

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Subsequent Events (Details) $ in Millions	3 Months Ended
	Dec. 31, 2018 USD ($)
Subsequent Event [Member]
Subsequent Event [Line Items]
Tax benefit resulting from letter ruling from the IRS	$ 4.7