LOANS AND ALLOWANCE FOR LOAN LOSSES (Tables)

3 Months Ended

Mar. 31, 2013

LOANS AND ALLOWANCE FOR LOAN LOSSES [Abstract]

Composition of the loan portfolio by type

The composition of the loan portfolio, net of deferred origination fees and cost, and unearned income is summarized as follows:

	March 31, 2013						December 31,2012
	Originated Loans		Acquired Loans		Total Loans		Originated Loans		Acquired Loans		Total Loans
Commercial and agricultural:
Commercial and industrial	$	131,700,539	$	8,546,599	$	140,247,138	$	121,660,755	$	11,493,860	$	133,154,615
Agricultural		816,452		-		816,452		696,666		-		696,666
Commercial mortgages:  Construction		38,184,636		4,602,846		42,787,4822		36,893,367		6,375,936		43,269,303
Commercial mortgages		245,542,922		51,669,742		297,212,664		222,161,130		54,766,993		276,928,123
Residential mortgages		189,888,106		12,225,963		202,114,069		187,820,984		12,654,113		200,475,097
Consumer loans:
Credit cards		1,733,411		-		1,733,411		1,851,145		-		1,851,145
Home equity lines and loans		81,969,483		4,426,562		86,396,045		82,216,284		4,829,137		87,045,421
Indirect consumer loans		132,063,809		-		132,063,809		130,573,200		-		130,573,200
Direct consumer loans		17,987,749		73,800		18,061,549		19,440,549		82,822		19,523,371
Total loans, net		839,887,107		81,545,512		921,432,619		803,314,080		90,202,861		893,516,941
Interest receivable on loans		2,178,063		324,450		2,502,513		1,989,271		394,727		2,383,998
Total recorded investment  in loans	$	842,065,170	$	81,869,962	$	923,935,132	$	805,303,351	$	90,597,588	$	895,900,939

Allowance for loan losses by portfolio segment

The following tables present the activity in the allowance for loan losses by portfolio segment for the three-month periods ending March 31, 2013 and 2012.  Loans originated by the Corporation are referred to as "Originated" loans and loans acquired in the merger with Fort Orange Financial Corp. ("FOFC"), which are referred to as "Acquired" loans.  

	Three Months Ended
Originated Loans	March 31, 2013
Allowance for loan losses	Commercial and Agricultural			Commercial Mortgages		Residential Mortgages			Consumer Loans			Unallocated			Total
Beginning balance:	$	1,592,869		$	3,592,566	$	1,565,571		$	2,705,639		$	26,146		$	9,482,791
Charge Offs:		(16,612	)		-		(44,360	)		(196,392	)		-			(257,364	)
Recoveries:		142,425			8,975		-			67,719			-			219,119
Net recoveries (charge offs)		125,813			8,975		(44,360	)		(128,673	)		-			(38,245	)
Provision		48,088			216,758		35,887			25,108			(26,146	)		299,695
Ending balance	$	1,766,770		$	3,818,299	$	1,557,098		$	2,602,074		$	-		$	9,744,241

	Three Months Ended
Acquired Loans	March 31, 2013
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans			Unallocated		Total
Beginning balance:	$	114,727	$	835,132	$	-	$	-		$	-	$	949,859
Charge Offs:		-		-		-		(972	)		-		(972	)
Recoveries:		-		-		-		250			-		250
Net charge-offs		-		-		-		(722	)		-		(722	)
Provision		111,387		19,206		-		722			-		131,315
Ending balance	$	226,114	$	854,338	$	-	$	-		$	-	$	1,080,452

Originated Loans	Three Months Ended March 31, 2012
Allowance for loan losses	Commercial and Agricultural			Commercial Mortgages		Residential Mortgages			Consumer Loans			Unallocated			Total
Beginning balance:	$	3,143,373		$	2,570,149	$	1,309,649		$	2,192,729		$	443,420		$	9,659,320
Charge Offs:		-			-		(14,340	)		(158,319	)		-			(172,659	)
Recoveries:		172,603			10,235		-			61,983			-			244,821
Net charge offs		172,603			10,235		(14,340	)		(96,336	)		-			72,162
Provision		(179,519	)		373,248		121,943			4,040			(69,712	)		250,000
Ending balance	$	3,136,457		$	2,953,632	$	1,417,252		$	2,100,433		$	373,708		$	9,981,482

Acquired loans	Three Months Ended March 31, 2012
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages			Residential Mortgages		Consumer Loans		Unallocated		Total
Beginning balance:	$	-	$	-		$	-	$	-	$	-	$	-
Reclassification of acquired loan Discount		73,228		50,332			-		-		-		123,560
Charge Offs:		-		(49,057	)		-		-		-		(49,057	)
Recoveries:		-		-			-		-		-		-
Net charge offs		-		(49,057	)		-		-		-		(49,057	)
Provision		151,708		75,597			-		-		-		227,305
Ending balance	$	224,936	$	76,872		$	-	$	-	$	-	$	301,808

Allowance for loan losses and the recorded investment in loans based on impairment method

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of March 31, 2013 and December 31, 2012:

	March 31, 2013
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Unallocated		Total
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	168,383	$	88,327	$	-	$	19,167	$	-	$	275,877
Collectively evaluated for impairment		1,598,387		3,729,972		1,557,098		2,582,907		-		9,468,364
Acquired		226,114		854,338		-		-		-		1,080,452
Total ending allowance balance	$	1,992,884	$	4,672,637	$	1,557,098	$	2,602,074	$	-	$	10,824,693

	December 31, 2012
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Unallocated		Total
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	133,437	$	59,201	$	-	$	-	$	-	$	192,638
Collectively evaluated for impairment		1,459,432		3,533,365		1,565,571		2,705,639		26,146		9,290,153
Acquired		114,727		835,132		-		-		-		949,859
Total ending allowance balance	$	1,707,596	$	4,427,698	$	1,565,571	$	2,705,639	$	26,146	$	10,432,650

	March 31, 2013
Loans:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Originated loans individually evaluated for impairment	$	1,858,702	$	7,121,372	$	128,348	$	118,837	$	9,227,259
Acquired loans individually evaluated for impairment		73,257		3,716,618		-		-		3,789,875
Originated loans collectively evaluated for  impairment		131,021,951		277,358,620		190,187,599		234,269,741		832,837,911
Acquired loans collectively evaluated for impairment		7,443,334		44,472,388		12,068,746		4,515,625		68,500,093
Acquired loans with deteriorated credit quality		1,057,510		8,273,955		248,529		-		9,579,994
Total ending loans balance	$	141,454,754	$	340,942,953	$	202,633,222	$	238,904,203	$	923,935,132

	December 31, 2012
Loans:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Originated loans individually evaluated for impairment	$	1,831,095	$	5,715,324	$	131,909	$	-	$	7,678,328
Acquired loans individually evaluated for impairment		76,300		4,904,950		-		-		4,981,250
Originated loans collectively evaluated for  impairment		120,828,451		253,918,786		188,117,526		234,760,260		797,625,023
Acquired loans collectively evaluated for impairment		10,331,884		48,088,509		12,505,074		4,929,195		75,854,662
Acquired loans with deteriorated credit quality		1,126,692		8,390,716		244,268		-		9,761,676
Total ending loans balance	$	134,194,422	$	321,018,285	$	200,998,777	$	239,689,455	$	895,900,939

Summary of impaired financing receivables

The following tables present originated loans individually evaluated for impairment recognized by class of loans as of March 31, 2013 and December 31, 2012, the average recorded investment and interest income recognized by class of loans as of the three-month periods ending March 31, 2013 and 2012:

	March 31, 2013						December 31, 2012
With no related allowance recorded:	Unpaid  Principal Balance		Recorded Investment		Allowance for  Loan Losses Allocated		Unpaid Principal  Balance		Recorded Investment		Allowance for  Loan Losses Allocated
Commercial and agricultural:
Commercial & industrial	$	2,050,222	$	1,453,334	$	-	$	2,059,027	$	1,462,157	$	-
Commercial mortgages:
Construction		686,918		685,752		-		261,102		261,903		-
Other		6,659,845		6,076,523		-		5,678,565		5,090,399		-
Residential mortgages		128,348		128,348		-		131,909		131,909		-
Consumer loans:
Home equity lines & loans		44,694		45,540		-		-		-		-
With an allowance recorded:
Commercial and agricultural:
Commercial & industrial		405,827		405,368		168,383		368,938		368,938		133,437
Commercial mortgages:
Construction		-		-		-		-		-		-
Other		358,902		359,097		88,327		364,423		363,022		59,201
Consumer loans:
Home equity lines & loans		57,876		58,047		4,020		-		-		-
Other		15,147		15,250		15,147		-		-		-
Total	$	10,407,779	$	9,227,259	$	275,877	$	8,863,964	$	7,678,328	$	192,638

	Three Months Ended March 31, 2013				Three Months Ended March 31, 2012
With no related allowance recorded:	Average Recorded Investment		Interest Income Recognized (1)		Average Recorded Investment		Interest Income Recognized (1)
Commercial and agricultural:
Commercial & industrial	$	1,457,745	$	17,153	$	1,510,362	$	-
Commercial mortgages:
Construction		473,827		-		10,454		-
Other		5,583,461		52,542		783,410		-
Residential mortgages		130,128		-		161,034		-
Consumer loans:
Home equity lines & loans		22,770		252		29,784		1,166
With an allowance recorded:
Commercial and agricultural:
Commercial & industrial		387,153		-		2,362,453		-
Commercial mortgages:
Construction		-		-		8,295		-
Other		361,059		-		2,595,105		-
Consumer loans:						-		-
Home equity lines & loans		29,023		166		-		-
Other		7,625		-		-		-
Total	$	8,452,791	$	70,113	$	7,460,897	$	1,166

(1)   Cash basis interest income approximates interest income recognized.

Recorded investment in non accrual and loans past due

The following table presents the recorded investment in non- accrual and loans past due over 90 days still on accrual by class of loans as of the periods ending March 31, 2013 and December 31, 2012.  This table includes acquired loans except for those loans with evidence of credit deterioration at the time of the FOFC merger:

	March 31, 2013				December 31, 2012
	Non-Accrual		Loans Past Due Over 90 Days Still Accruing		Non-Accrual		Loans Past Due Over 90 Days Still Accruing
Commercial and agricultural:
Commercial & industrial	$	633,595	$	1,805	$	666,912	$	-
Commercial mortgages:
Construction		974,349		3,208,674		434,338		4,481,067
Other		1,759,626		-		1,581,643		-
Residential mortgages		2,993,186		-		2,423,024		-
Consumer loans:
Credit cards		-		8,216		-		3,307
Home equity lines & loans		576,656		-		571,365		-
Indirect consumer loans		298,930		-		335,285		-
Other direct consumer loans		46,104		-		19,338		-
Total	$	7,282,446	$	3,218,695	$	6,031,905	$	4,484,374

Recorded investment in loans past due

The following tables present the aging of the recorded investment in loans past due (including non-accrual loans) by class of loans as of March 31, 2013 and December 31, 2012 and by Originated loans and Acquired loans:

	March 31, 2013
Originated Loans:	30-59 Days Past Due		60-89 Days Past Due		Greater than 89 Days Past Due		Total Past Due			Loans Acquired with deteriorated credit quality	Loans Not Past Due			Total
Commercial and agricultural:
Commercial & industrial	$	45,686	$	-	$	156,774	$	202,460	$	-	$	131,859,479	$	132,061,939
Agricultural		-		-		-		-		-		818,714		818,714
Commercial mortgages:
Construction		327,065		1,439,960		434,338		2,201,363		-		36,114,635		38,315,998
Other		134,887		-		448,439		583,326		-		245,580,668		246,163,994
Residential mortgages		1,535,821		46,469		602,604		2,184,894		-		188,131,053		190,315,947
Consumer loans:
Credit cards		13,623		5,976		8,216		27,815		-		1,705,596		1,733,411
Home equity lines & loans		211,946		-		256,654		468,600		-		81,718,039		82,186,639
Indirect consumer loans		656,957		152,053		203,721		1,012,731		-		131,409,349		132,422,080
Other direct consumer loans		38,811		8,093		36,904		83,808		-		17,962,640		18,046,448
Total	$	2,964,796	$	1,652,551	$	2,147,650	$	6,764,997	$	-	$	835,300,173	$	842,065,170

	March 31, 2013
Acquired Loans:	30-59 Days Past Due		60-89 Days Past Due		Greater than 89 Days Past Due		Total Past Due		Loans Acquired with deteriorated credit quality		Loans Not Past Due		Total
Commercial and agricultural:
Commercial & industrial	$	335,355	$	-	$	73,257	$	408,612	$	1,057,510	$	7,107,979	$	8,574,101
Commercial mortgages:
Construction		-		-		3,497,271		3,497,271		1,092,861		-		4,590,132
Other		698,182		-		219,348		917,530		7,181,094		43,774,205		51,872,829
Residential mortgages		532,408		313,692		199,245		1,045,345		248,529		11,023,401		12,317,275
Consumer loans:
Home equity lines & loans		6,980		-		-		6,980		-		4,434,395		4,441,375
Other direct consumer loans		-		-		-		-		-		74,250		74,250
Total	$	1,572,925	$	313,692	$	3,989,121	$	5,875,738	$	9,579,994	$	66,414,230	$	81,869,962

	December 31, 2012
Originated Loans:	30-59 Days Past Due		60-89 Days Past Due		Greater than 89 Days Past Due		Total Past Due		Loans Acquired with deteriorated  credit quality		Loans Not Past Due		Total
Commercial and agricultural:
Commercial & industrial	$	157,903	$	-	$	154,969	$	312,872	$	-	$	121,648,222	$	121,961,094
Agricultural		-		-		-		-		-		698,452		698,452
Commercial mortgages:
Construction		-		-		10,454		10,454		-		36,988,238		36,998,692
Other		84,573		42,418		272,403		399,394		-		222,236,024		222,635.418
Residential mortgages		2,347,927		707,386		536,169		3,591,482		-		184,657,953		188,249,435
Consumer loans:
Credit cards		5,947		5,074		3,307		14,328		-		1,836,817		1,851,145
Home equity lines & loans		200,640		102,028		297,657		600,325		-		81,823,908		82,424,233
Indirect consumer loans		798,155		79,268		267,864		1,145,287		-		129,832,488		130,977,775
Other direct consumer loans		48,306		25,556		12,351		86,213		-		19,420,894		19,507,107
Total	$	3,643,451	$	961,730	$	1,555,174	$	6,160,355	$	-	$	799,142,996	$	805,303,351

	December 31, 2012
Acquired Loans:	30-59 Days Past Due		60-89 Days Past Due		Greater than 89 Days Past Due		Total Past Due		Loans Acquired  with deteriorated credit quality		Loans Not Past Due		Total
Commercial and agricultural:
Commercial & industrial	$	100,399	$	-	$	242,927	$	343,326	$	1,126,692	$	10,064,858	$	11,534,876
Commercial mortgages:
Construction		-		294,565		4,904,950		5,199,515		1,182,020		-		6,381,535
Other		1,046,302		647,701		-		1,694,003		7,208,696		46,099,941		55,002,640
Residential mortgages		1,348,203		329,502		467,748		2,145,453		244,268		10,359,621		12,749,342
Consumer loans:
Home equity lines & loans		-		-		-		-		-		4,845,652		4,845,652
Other direct consumer loans		-		-		-		-		-		83,543		83,543
Total	$	2,494,904	$	1,271,768	$	5,615,625	$	9,382,297	$	9,761,676	$	71,453,615	$	90,597,588

Loans by class modified as troubled debt restructurings

The following table presents loans by class modified as troubled debt restructurings that occurred during the three months ended March 31, 2013 and March 31, 2012:

March 31, 2013	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
Commercial and agricultural:
Commercial & industrial		2	$	431,293	$	431,293
Consumer loans:
Home equity lines & loans		2		103,587		103,587
Total		4	$	534,880	$	534,880
March 31,2012
Troubled debt restructurings:
Consumer loans:
Home equity lines & loans		1		58,823		58,823
Total		1	$	58,823	$	58,823

Risk category of the recorded investment of loans by class of loans

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be not rated loans.  Based on the analysises performed as of March 31, 2013 and December 31, 2012, the risk category of the recorded investment of loans by class of loans is as follows:

	March 31, 2013
Originated Loans:	Not Rated		Pass		Special Mention		Substandard		Doubtful
Commercial and agricultural:
Commercial & industrial	$	-	$	119,188,696	$	7,936,795	$	4,523,351	$	413,097
Agricultural		-		818,714		-		-		-
Commercial mortgages:
Construction		-		35,529,324		1,629,655		1,157,019		-
Other		-		223,161,425		13,586,936		9,415,633		-
Residential mortgages		187,572,423		-		-		2,743,524
Consumer loans:
Credit cards		1,733,411		-		-		-		-
Home equity lines & loans		81,509,198		-		-		677,441		-
Indirect consumer loans		132,135,256		-		-		286,824		-
Other direct consumer loans		17,992,755		-		-		53,693		-
Total	$	420,943,043	$	378,698,159	$	23,153,386	$	18,857,485	$	413,097

	March 31, 2013
Acquired Loans:		Not Rated		Pass		Loans Acquired with deteriorated credit quality		Special Mention		Substandard		Doubtful
Commercial, and agricultural:
Commercial & industrial		$	-	$	6,823,714	$	1,057,510	$	432,320	$	187,300	$	73,257
Commercial mortgages:
Construction			-		-		1,092,861		3,208,674		288,597		-
Other			-		41,839,853		7,181,094		2,632,534		219,348		-
Residential mortgages			11,819,084		-		248,529		-		249,662		-
Consumer loans:
Home equity lines & loans			4,415,413		-		-		-		25,962		-
Other direct consumer loans			74,250		-		-		-		-		-
Total		$	16,308,747	$	48,663,567	$	9,579,994	$	6,273,528	$	970,869	$	73,257

	December 31, 2012
Originated Loans:	Not Rated		Pass		Special Mention		Substandard		Doubtful
Commercial and agricultural:
Commercial & industrial	$	-	$	111,131,147	$	7,805,458	$	2,606,529	$	417,960
Agricultural		-		698,452		-		-		-
Commercial mortgages:
Construction		-		34,588,347		1,671,195		739,150		-
Other		-		202,157,249		10,651,788		9,826,381		-
Residential mortgages		186,084,001		-		-		2,165,434		-
Consumer loans:
Credit cards		1,851,145		-		-		-		-
Home equity lines & loans		81,796,116		-		-		628,117		-
Indirect consumer loans		130,642,490		-		-		335,285		-
Other direct consumer loans		19,487,769		-		-		19,338		-
Total	$	419,861,521	$	348,575,195	$	20,128,441	$	16,320,234	$	417,960

	December 31, 2012
Acquired Loans:	Not Rated		Pass		Loans Acquired  with deteriorated  credit quality		Special Mention		Substandard		Doubtful
Commercial and agricultural:
Commercial & industrial	$	-	$	10,129,340	$	1,126,692	$	202,544	$	-	$	76,300
Commercial mortgages:
Construction		-		294,565		1,182,020		3,482,723		1,422,227		-
Other		-		46,471,016		7,208,696		1,322,928		-		-
Residential mortgages		12,252,640		-		244,268		-		252,434		-
Consumer loans
Home equity lines & loans		4,819,276		-		-		-		26,376		-
Other direct consumer loans		83,543		-		-		-		-		-
Total	$	17,155,459	$	56,894,921	$	9,761,676	$	5,008,195	$	1,701,037	$	76,300

Recorded investment in residential and consumer loans based on payment activity

The Corporation considers the performance of the loan portfolio and its impact on the allowance for loan losses. For residential and consumer loan classes, the Corporation also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity.  The following table presents the recorded investment in residential and consumer loans based on payment activity as of March 31, 2013 and December 31, 2012:

	March 31, 2013
			Consumer Loans
Originated Loans:	Residential Mortgages		Credit Card		Home Equity Lines & Loans		Indirect Consumer Loans		Other Direct Consumer Loans
Performing	$	187,572,423	$	1,725,195	$	81,635,945	$	132,123,150	$	18,000,344
Non-Performing		2,743,524		8,216		550,694		298,930		46,104
Total	$	190,315,947	$	1,733,411	$	82,186,639	$	132,422,080	$	18,046,448

Acquired Loans:
Performing	$	12,067,613		-	$	4,415,413	$	-	$	74,250
Non-Performing		249,662		-		25,962		-		-
Total	$	12,317,275	$	-	$	4,441,375	$	-	$	74,250

	December 31, 2012
			Consumer Loans
Originated Loans:	Residential Mortgages		Credit Card		Home Equity Lines & Loans		Indirect Consumer Loans		Other Direct Consumer Loans
Performing	$	186,078,845	$	1,847,838	$	81,879,244	$	130,642,490	$	19,487,769
Non-Performing		2,170,590		3,307		544,989		335,285		19,338
	$	188,249,435	$	1,851,145	$	82,424,233	$	130,977,775	$	19,507,107

Acquired Loans:
Performing	$	12,496,908	$	-	$	4,819,276	$	-	$	83,543
Non-Performing		252,434		-		26,376		-		-
Total	$	12,749,342	$	-	$	4,845,652	$	-	$	83,543

Summary of changes in contractually required principal and interest on loans acquired

	Balance at  December 31, 2012			Income Accretion		All Other  Adjustments			Balance at  March 31, 2013
Contractually required principal and interest	$	16,896,078		$	-	$	(1,640,666	)	$	15,255,412
Contractual cash flows not expected to be collected (nonaccretable discount)		(4,605,358	)		-		1,306,583			(3,298,775	)
Cash flows expected to be collected		12,290,720			-		(334,083	)		11,956,637
Interest component of expected cash flows (accretable yield)		(2,529,044	)		493,820		(341,419	)		(2,376,643	)
Fair value of loans acquired with deteriorating credit quality	$	9,761,676		$	493,820	$	(675,502	)	$	9,579,994