LOANS (Tables)

12 Months Ended

Dec. 31, 2012

The balance of these classes at December 31 are summarized as follows:

(000's omitted)	2012			2011
Consumer mortgage	$	1,448,415		$	1,214,621
Business lending		1,233,944			1,226,439
Consumer indirect		647,518			556,955
Consumer direct		171,474			149,170
Home equity		364,225			323,840
Gross loans, including net deferred origination costs		3,865,576			3,471,025
Allowance for loan losses		(42,888	)		(42,213	)
Loans, net of allowance for loan losses	$	3,822,688		$	3,428,812

Summary of aggregate amounts loaned to related parties of the company

Certain directors and executive officers of the Company, as well as associates of such persons, are loan customers. Loans to these individuals were made in the ordinary course of business under normal credit terms and do not have more than a normal risk of collection. Following is a summary of the aggregate amount of such loans during 2012 and 2011.

(000's omitted)	2012			2011
Balance at beginning of year	$	11,550		$	18,765
New loans		2,259			2,690
Payments		(5,517	)		(9,905	)
Balance at end of year	$	8,292		$	11,550

Outstanding principal balance and related carrying amount of acquired loans

Acquired loans are recorded at fair value as of the date of purchase with no allowance for loan loss. As discussed in Note B (Acquisitions), the company acquired loans of $54 million on September 7, 2012 in its acquisition of First Niagara branches, $106 million on July 20, 2012 in its HSBC branch acquisition and $462 million on April 8, 2011 in its acquisition of Wilber. The outstanding principal balance and the related carrying amount of acquired loans included in the Consolidated Statement of Condition at December 31 are as follows:

(000's omitted)	2012		2011
Credit impaired acquired loans:
Outstanding principal balance	$	19,940	$	24,819
Carrying amount		13,761		17,428

Non-impaired acquired loans:
Outstanding principal balance		449,739		396,014
Carrying amount		433,594		378,118

Total acquired loans:
Outstanding principal balance		469,679		420,833
Carrying amount		447,355		395,546

Schedule of accretable discount related to credit impaired acquired loans

The outstanding balance, including contractual principal and interest, related to credit impaired acquired loans was $22.4 million and $25.9 million at December 31, 2012 and 2011, respectively. The changes in the accretable discount related to the credit impaired acquired loans are as follows:

(000's omitted)	2012			2011
Balance at beginning of year	$	2,610		$	0
Acquisition		0			2,509
Accretion recognized, to-date		(1,418	)		(844	)
Net reclassification to accretable from nonaccretable		578			945
Balance at end of year	$	1,770		$	2,610

Aged analysis of the company's past due loans by class

Management monitors the credit quality of its loan portfolio on an ongoing basis. Measurement of delinquency and past due status are based on the contractual terms of each loan. Past due loans are reviewed on a monthly basis to identify loans for non-accrual status. The following is an aged analysis of the Company's past due loans by class as of December 31, 2012:

Legacy Loans (excludes loans acquired after January 1, 2009)

(000's omitted)	Past Due 30 - 89 days		90+ Days Past Due and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans
Consumer mortgage	$	16,334	$	1,553	$	8,866	$	26,753	$	1,318,534	$	1,345,287
Business lending		6,012		167		12,010		18,189		984,665		1,002,854
Consumer indirect		9,743		73		0		9,816		627,541		637,357
Consumer direct		1,725		71		8		1,804		154,462		156,266
Home equity		4,124		491		1,044		5,659		270,798		276,457
Total	$	37,938	$	2,355	$	21,928	$	62,221	$	3,356,000	$	3,418,221

Loans (includes loans acquired after January 1, 2009)

(000's omitted)	Past Due 30 - 89 days		90+ Days Past Due and Still Accruing		Nonaccrual		Total Past Due		Acquired Impaired(1)		Current		Total Loans
Consumer mortgage	$	1,726	$	265	$	2,420	$	4,411	$	0	$	98,717	$	103,128
Business lending		3,665		80		1,681		5,426		13,761		211,903		231,090
Consumer indirect		434		0		0		434		0		9,727		10,161
Consumer direct		470		0		0		470		0		14,378		15,208
Home equity		959		48		331		1,338		0		86,430		87,768
Total	$	7,254	$	393	$	4,432	$	12,079	$	13,761	$	421,155	$	447,355

(1)

Acquired impaired loans were not classified as nonperforming assets as the loans are considered to be performing under ASC 310-30. As a result interest income, through the accretion of the difference between the carrying amount of the loans and the expected cashflows, is being recognized on acquired impaired loans.

The following is an aged analysis of the Company's past due loans by class as of December 31, 2011:

Legacy Loans (excludes loans acquired after January 1, 2009)

(000's omitted)	Past Due 30 - 89 days		90+ Days Past Due and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans
Consumer mortgage	$	16,026	$	2,144	$	5,755	$	23,925	$	1,111,795	$	1,135,720
Business lending		4,799		389		10,966		16,154		953,745		969,899
Consumer indirect		8,847		32		0		8,879		527,030		535,909
Consumer direct		1,912		95		0		2,007		138,500		140,507
Home equity		2,269		218		864		3,351		290,093		293,444
Total	$	33,853	$	2,878	$	17,585	$	54,316	$	3,021,163	$	3,075,479

Acquired Loans (includes loans acquired after January 1, 2009)

(000's omitted)	Past Due 30 - 89 days		90+ Days Past Due and Still Accruing		Nonaccrual		Total Past Due		Acquired Impaired(1)		Current		Total Loans
Consumer mortgage	$	985	$	27	$	765	$	1,777	$	0	$	77,124	$	78,901
Business lending		3,473		10		9,592		13,075		17,428		226,037		256,540
Consumer indirect		737		0		2		739		0		20,307		21,046
Consumer direct		167		0		0		167		0		8,496		8,663
Home equity		465		175		341		981		0		29,415		30,396
Total	$	5,827	$	212	$	10,700	$	16,739	$	17,428	$	361,379	$	395,546

(1)

Schedule of business lending loans by credit quality category

The following table shows the amount of business lending loans by credit quality category:

	December 31, 2012						December 31, 2011
(000's omitted)	Legacy		Acquired		Total		Legacy		Acquired		Total
Pass	$	818,469	$	144,869	$	963,338	$	732,873	$	157,494	$	890,367
Special mention		92,739		32,328		125,067		118,800		47,890		166,690
Classified		90,035		40,132		130,167		118,226		33,728		151,954
Doubtful		1,611		0		1,611		0		0		0
Acquired impaired		0		13,761		13,761		0		17,428		17,428
Total		1,002,854	$	231,090	$	1,233,944	$	969,899	$	256,540	$	1,226,439

Schedule of loans by credit quality indicator

The following tables detail the balances in all loan categories except for business lending at December 31, 2012:

Legacy loans (excludes loans acquired after January 1, 2009)

(000's omitted)	Consumer Mortgage		Consumer Indirect		Consumer Direct		Home Equity		Total
Performing	$	1,334,868	$	637,284	$	156,187	$	274,922	$	2,403,261
Nonperforming		10,419		73		79		1,535		12,106
Total	$	1,345,287	$	637,357	$	156,266	$	276,457	$	2,415,367

Acquired loans (includes loans acquired after January 1, 2009

(000's omitted)	Consumer Mortgage		Consumer Indirect		Consumer Direct		Home Equity		Total
Performing	$	100,443	$	10,161	$	15,208	$	87,389	$	213,201
Nonperforming		2,685		0		0		379		3,064
Total	$	103,128	$	10,161	$	15,208	$	87,768	$	216,265

The following table details the balances in all other loan categories at December 31, 2011:

Legacy loans (excludes loans acquired after January 1, 2009)

(000's omitted)	Consumer Mortgage		Consumer Indirect		Consumer Direct		Home Equity		Total
Performing	$	1,127,821	$	535,877	$	140,412	$	292,362	$	2,096,472
Nonperforming		7,899		32		95		1,082		9,108
Total	$	1,135,720	$	535,909	$	140,507	$	293,444	$	2,105,580

Acquired loans (includes loans acquired after January 1, 2009

(000's omitted)	Consumer Mortgage		Consumer Indirect		Consumer Direct		Home Equity		Total
Performing	$	78,109	$	21,044	$	8,663	$	29,880	$	137,696
Nonperforming		792		2		0		516		1,310
Total	$	78,901	$	21,046	$	8,663	$	30,396	$	139,006

Summary of non-business impaired loans

All loan classes are collectively evaluated for impairment except business lending, as described in Note A. A summary of impaired loans, excluding purchased impaired, as of December 31, 2012 and 2011 are summarized as follows:

(000's omitted)	2012		2011
Loans with reserve	$	1,611	$	4,118
Loans without reserve		7,798		2,308
Carrying balance		9,409		6,426
Contractual balance		12,804		8,527
Specifically allocated allowance		800		895
Average impaired loans		19,787		5,652
Interest income recognized		185		314

Troubled debt restructurings on financing receivables

As stated above, prior periods have not been restated for TDRs related to Chapter 7 bankruptcy. Information regarding troubled debt restructurings as of December 31, 2012 is as follows:

	December 31, 2012
(000's omitted)	Nonaccrual				Accruing(1)				Total
		#	Amount			#	Amount			#	Amount
Consumer mortgage		3	$	160		45	$	2,074		48	$	2,234
Business lending		10		3,046		0		0		10		3,046
Consumer indirect		0		0		106		718		106		718
Consumer direct		0		0		19		116		19		116
Home equity		5		70		19		266		24		336
Total		18	$	3,276		189	$	3,174		207	$	6,450

(1)Accruing loans have demonstrated a period of at least six months of payment performance under the restructured terms and are excluded from nonperforming loans.

The following table presents information related to loans modified in a TDR during the year ended December 31, 2012. The table does not include loans that became a TDR in years prior to 2012 because of a Chapter 7 bankruptcy discharge.

	December 31, 2012
(000's omitted)		#	Amount
Consumer mortgage		23	$	1,176
Business lending		9		2,709
Consumer indirect		47		281
Consumer direct		13		95
Home equity		12		126
Total		104	$	4,387

Schedule of allowance for loan losses by class

The allowance for loan losses is general in nature and is available to absorb losses from any loan type despite the analysis below. The following presents by class the activity in the allowance for loan losses:

	Consumer			Business			Home			Consumer			Consumer						Acquired
(000's omitted)	Mortgage			Lending			Equity			Indirect			Direct			Unallocated			Impaired		Total
Balance at December 31, 2010	$	2,451		$	22,326		$	689		$	9,922		$	3,977		$	3,145		$	0	$	42,510
Charge-offs		(748	)		(2,964	)		(265	)		(4,464	)		(1,273	)		0			0		(9,714	)
Recoveries		30			692			85			3,200			674			0			0		4,681
Provision		2,918			520			621			302			(88	)		77			386		4,736
Balance at December 31, 2011		4,651			20,574			1,130			8,960			3,290			3,222			386		42,213
Charge-offs		(1,004	)		(5,654	)		(423	)		(5,407	)		(1,694	)		0			0		(14,182	)
Recoveries		59			1,295			23			3,551			821			0			0		5,749
Provision		3,364			1,798			721			2,502			886			(556	)		393		9,108
Balance at December 31, 2012	$	7,070		$	18,013		$	1,451		$	9,606		$	3,303		$	2,666		$	779	$	42,888